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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
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 80206
(Address of principal executive offices) (Zip code)
Stephanie Grauerholz-Lofton, 151 Detroit Street, Denver, Colorado 80206
(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: 12/31/13
Table of Contents
Item 1 — Reports to Shareholders
Table of Contents
annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
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 20.15% and 19.80%, respectively, for the 12-month period ended December 31, 2013, compared with 15.81% by the Balanced Index, an internally-calculated benchmark that combines the total returns from the S&P 500 Index (55%) and the Barclays U.S. Aggregate Bond Index (45%). The S&P 500 Index returned 32.39% and the Barclays U.S. Aggregate Bond Index returned -2.02%.
INVESTMENT ENVIRONMENT
Equity and corporate credit markets rallied in 2013, supported by global central banks’ continued accommodative monetary policy, signs of global economic improvement and progress on resolving fiscal issues in the U.S., Europe and Japan. Longer-term Treasury rates rose as improving U.S. economic data encouraged speculation that the Federal Reserve (Fed) would begin to taper its quantitative easing (QE) program; in December, the Fed confirmed that it would do so beginning in January 2014. Nevertheless, the central bank reiterated its commitment to keeping short-term interest rates low and continuing accommodative monetary policy until the economy was on stronger footing, which lent confidence to both equity and credit markets.
PORTFOLIO OVERVIEW
The equity-to-fixed-income allocation ended the period with an equity weighting in the mid-50% range and fixed income in the mid-40% range. This relatively conservative posture seemed prudent given uncertainties in the fourth quarter surrounding Fed policy and the strength of the economy. However, at period end we were reviewing the allocation, and may increase the equity weighting if circumstances warrant.
The Portfolio’s equity sleeve outperformed the S&P 500 Index during the period, benefiting particularly from stock selection in consumer discretionary and information technology companies. Sector detractors were led by consumer staples and telecommunications services.
Aerospace leader Boeing was a top contributor. Earlier issues with Boeing’s new 787 Dreamliner wide-body jet appeared to be resolved and the plane was put back in service during the period. The strong order book for the Boeing 787 and the newest version of the Boeing 747 gave the market renewed confidence that Boeing’s years-long production backlog will continue to grow, boosting the stock’s price. We believe the company’s cash-flow generation will increase as it reduces capital expenditures and working capital, which should lead to returning more capital to shareholders.
Multimedia company CBS performed well following its decision to spin off its billboard business into a real estate investment trust (REIT), using the proceeds to buy back stock and repurchase debt. It also effectively won its contract dispute with Time Warner Cable. The victory reinforced our view of the power of content, which CBS certainly has with its ownership of prime sports coverage and other popular programming.
Asset manager Blackstone Group also contributed. Blackstone’s stock has benefited from strong equity markets, growth in its asset management business and successful exits from some of its private equity investments (including Hilton Worldwide, which went public during the period). It also has continued to pay a relatively high distribution to shareholders.
Equity detractors were led by telecommunications provider CenturyLink, whose stock slid after the company announced a 25% dividend cut in February 2013. For the market, this signaled potential weakness and raised questions about the sustainability of CenturyLink’s dividend going forward. We trimmed our exposure to CenturyLink during the period, while monitoring the risk of further dividend reductions.
UK-based bank Standard Chartered also detracted. Heavy exposure to emerging markets, particularly India, weighed on near-term results, given those markets’
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Table of Contents
Janus Aspen Balanced Portfolio (unaudited)
weaker-than-expected economic growth during 2013. Additionally, continuing regulatory hurdles in the UK have hampered Standard Chartered’s earnings potential. We believed these factors created too many obstacles for the stock to move higher over the short- to medium-term horizon, so we sold our position.
Ventas, a health care REIT, also detracted. In general, rising rates hurt REITs, and health care REITs tend to be especially vulnerable because their long-duration leases are slower to reset. However, we think Ventas will benefit from an improving economy. A significant portion of its profitability is derived from senior housing; a more robust housing market should make it easier for elderly potential residents to sell their current homes and fund their stays at Ventas properties.
The fixed income sleeve outperformed the Barclays U.S. Aggregate Bond Index during the period, largely due to our security selection and overweight to corporate credit. From an industry sector standpoint, top credit contributors included wireline communications, banking and non-captive diversified financial names. Sector detractors were led by consumer services, property and casualty insurers and integrated energy companies.
Individual credit contributors were led by telecommunications company Verizon. We invested in Verizon’s record-breaking $49 billion corporate bond issuance in September. It debuted to robust demand, and credit spreads continued to tighten through the end of the year.
Automaker Ford Motor also contributed. Ford has benefited from strong year-over-year U.S. auto sales. The housing recovery has been particularly good for pickup-truck sales, including Ford’s F-150 Series, as building contractors tend to buy trucks when business rises.
Financial services company CIT Group also contributed. We added to our position in CIT Group amid weakness over the summer, during a broad market sell-off that enhanced valuations, in our opinion. This is a liquid name that bounced back strongly later in the year.
Individual credit detractors were led by ADT Corp. The home security monitoring company underperformed after its management team abruptly chose to give up ADT’s investment-grade ratings by pursuing a policy of returning cash to shareholders in the form of debt-funded dividends, which took balance sheet leverage higher. We sold the credit during the period.
Royal Dutch Shell also detracted, partly due to pressure from rising interest rates. We invested in discounted new-issue bonds during the period, attracted by their relative value compared with other securities, and exited the investment later in the period.
Diversified holding company Loews Corp. also detracted. We held longer-duration securities during the period, which were pressured by rising interest rates.
Meanwhile, security selection in mortgage-backed securities (MBS) was beneficial, particularly our preference for prepayment-resistant, higher-coupon MBS. We have sought to avoid the lower-coupon MBS that the Fed has been buying, which has provided some buffer against the volatility surrounding Fed tapering.
Please see “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
OUTLOOK
We expect a moderate acceleration in economic growth in the coming year. The Fed has announced it will taper quantitative easing by $10 billion per month beginning in January, and we believe there will be additional tapering as the year progresses. However, we expect tapering to be gradual and still in the context of very accommodative monetary policy; the Fed is unlikely to raise short-term interest rates before 2015.
U.S. fiscal policy also seems to be headed in the right direction, as Congress sealed a budget deal in December that may avert the last-minute budget dramatics the markets have endured in recent years. We believe growth in developed markets is likely to accelerate in 2014, as the global economy enters a new stage of increased capital expenditure and hiring.
For fixed income investors, the greatest focus in the coming year will be interest rates and the shape of the yield curve. Market consensus is that longer-term interest rates will move higher, and we share that view. However, we believe the Fed will keep short-term interest rates anchored throughout 2014. This means the yield curve, or the difference between 2-year and 30-year Treasury yields, likely will continue to steepen. The risk to our views remains a very benign global inflation outlook, and we are closely monitoring the economy and the markets in case the situation changes.
On behalf of every member of our investment team, thank you for your investment in Janus Aspen Balanced Portfolio. We appreciate your entrusting your assets with us, and we look forward to continuing to serve your investment needs.
2 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Janus Aspen Balanced Portfolio At A Glance
5 Top Performers – Equity Holdings
Contribution | ||||
CBS Corp. – Class B | 2.45% | |||
Boeing Co. | 2.44% | |||
Blackstone Group L.P. | 2.18% | |||
MasterCard, Inc. – Class A | 1.50% | |||
E.I. du Pont de Nemours & Co. | 1.45% |
5 Bottom Performers – Equity Holdings
Contribution | ||||
CenturyLink, Inc. | –0.17% | |||
Standard Chartered PLC | –0.13% | |||
Ventas, Inc. | –0.13% | |||
Unilever PLC | –0.04% | |||
Noble Corp. PLC | –0.03% |
5 Top Performers – Sectors*
Portfolio | Portfolio Weighting | S&P 500® | ||||||||||
Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Consumer Discretionary | 2.21% | 20.54% | 12.04% | |||||||||
Information Technology | 1.45% | 14.81% | 18.03% | |||||||||
Industrials | 1.24% | 9.41% | 10.35% | |||||||||
Health Care | 1.19% | 16.61% | 12.74% | |||||||||
Materials | 0.77% | 7.24% | 3.44% |
5 Bottom Performers – Sectors*
Portfolio | Portfolio Weighting | S&P 500® | ||||||||||
Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Other** | –1.41% | 3.17% | 0.00% | |||||||||
Consumer Staples | –0.45% | 7.70% | 10.49% | |||||||||
Telecommunication Services | –0.06% | 1.40% | 2.72% | |||||||||
Financials | 0.36% | 12.42% | 16.25% | |||||||||
Energy | 0.66% | 6.69% | 10.66% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
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Janus Aspen Balanced Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Boeing Co. Aerospace & Defense | 2.2% | |||
CBS Corp. – Class B Media | 2.2% | |||
E.I. du Pont de Nemours & Co. Chemicals | 1.9% | |||
LyondellBasell Industries N.V. – Class A Chemicals | 1.7% | |||
NIKE, Inc. – Class B Textiles, Apparel & Luxury Goods | 1.7% | |||
9.7% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas01p01.gif)
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
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4 | DECEMBER 31, 2013
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(unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas01m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Balanced Portfolio – Institutional Shares | 20.15% | 13.62% | 8.61% | 10.36% | 0.60% | ||||||
Janus Aspen Balanced Portfolio – Service Shares | 19.80% | 13.33% | 8.34% | 10.20% | 0.85% | ||||||
S&P 500® Index | 32.39% | 17.94% | 7.41% | 9.17% | |||||||
Barclays U.S. Aggregate Bond Index | –2.02% | 4.44% | 4.55% | 5.63% | |||||||
Balanced Index | 15.81% | 11.90% | 6.34% | 7.85% | |||||||
Morningstar Quartile – Institutional Shares | 1st | 2nd | 1st | 1st | |||||||
Morningstar Ranking – based on total returns for Moderate Allocation Funds | 156/903 | 250/750 | 17/587 | 9/276 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
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.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on 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.
See important disclosures on the next page.
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Janus Aspen Balanced Portfolio (unaudited)
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
* | The Portfolio’s inception date – September 13, 1993 |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,109.10 | $ | 3.14 | $ | 1,000.00 | $ | 1,022.23 | $ | 3.01 | 0.59% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,107.70 | $ | 4.46 | $ | 1,000.00 | $ | 1,020.97 | $ | 4.28 | 0.84% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
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Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Asset-Backed/Commercial Mortgage-Backed Securities – 1.4% | ||||||||||
$663,000 | AmeriCredit Automobile Receivables Trust 3.3800%, 4/9/18 | $ | 686,710 | |||||||
1,092,000 | AmeriCredit Automobile Receivables Trust 2.6800%, 10/9/18 | 1,101,327 | ||||||||
351,000 | AmeriCredit Automobile Receivables Trust 3.3100%, 10/8/19 | 355,923 | ||||||||
1,280,000 | Aventura Mall Trust 2013-AVM 3.7427%, 12/5/20 (144A) | 1,159,585 | ||||||||
700,367 | Beacon Container Finance LLC 3.7200%, 9/20/27 (144A) | 701,536 | ||||||||
600,000 | Boca Hotel Portfolio Trust 3.2166%, 8/15/26 (144A),‡ | 600,719 | ||||||||
476,000 | Commercial Mortgage Pass Through Certificates 3.3674%, 10/13/28 (144A),‡ | 476,940 | ||||||||
322,000 | Commercial Mortgage Pass Through Certificates 3.4244%, 3/10/31 (144A) | 306,166 | ||||||||
236,000 | Commercial Mortgage Trust 5.6500%, 12/10/49 | 245,996 | ||||||||
2,077,000 | Commercial Mortgage Trust 5.8670%, 12/10/49‡ | 2,275,827 | ||||||||
1,282,813 | FREMF 2010 K-SCT Mortgage Trust 2.0000%, 1/25/20§ | 1,091,674 | ||||||||
1,041,000 | GS Mortgage Securities Corp. II 3.4350%, 12/10/27 (144A),‡ | 905,830 | ||||||||
804,000 | GS Mortgage Securities Corp. II 2.7679%, 11/8/29 (144A),‡ | 799,040 | ||||||||
367,000 | GS Mortgage Securities Corp. II 3.7679%, 11/8/29 (144A),‡ | 365,721 | ||||||||
422,000 | GS Mortgage Securities Corp. Trust 3.6490%, 1/10/18 (144A),‡ | 415,221 | ||||||||
584,000 | GS Mortgage Securities Corp. Trust 3.5510%, 4/10/34 (144A),‡ | 574,197 | ||||||||
889,000 | Hilton USA Trust 2013-HLT 4.4065%, 11/5/30 (144A) | 889,725 | ||||||||
636,904 | JPMorgan Chase Commercial Mortgage Securities Corp. 3.9166%, 8/15/29 (144A),‡ | 643,586 | ||||||||
730,000 | JPMorgan Chase Commercial Mortgage Securities Trust 3.1566%, 4/15/30 (144A),‡ | 726,789 | ||||||||
292,000 | JPMorgan Chase Commercial Mortgage Securities Trust 3.9066%, 4/15/30 (144A),‡ | 290,955 | ||||||||
806,000 | LB-UBS Commercial Mortgage Trust 2007-C2 5.4930%, 2/15/40‡ | 850,529 | ||||||||
418,000 | Santander Drive Auto Receivables Trust 2.5200%, 9/17/18 | 419,270 | ||||||||
446,000 | Santander Drive Auto Receivables Trust 3.3000%, 9/17/18 | 459,175 | ||||||||
1,746,000 | Wachovia Bank Commercial Mortgage Trust 5.3830%, 12/15/43 | 1,878,684 | ||||||||
793,000 | Wachovia Bank Commercial Mortgage Trust 5.5910%, 4/15/47‡ | 863,407 | ||||||||
Total Asset-Backed/Commercial Mortgage-Backed Securities (cost $19,203,298) | 19,084,532 | |||||||||
Bank Loans and Mezzanine Loans – 0.3% | ||||||||||
Basic Industry – 0.1% | ||||||||||
887,645 | FMG Resources August 2006 Pty, Ltd. 4.2500%, 6/28/19‡ | 898,466 | ||||||||
Communications – 0.1% | ||||||||||
1,303,000 | Tribune Co. 0%, 12/27/20(a),‡ | 1,294,856 | ||||||||
Consumer Cyclical – 0.1% | ||||||||||
1,403,820 | MGM Resorts International 3.5000%, 12/20/19‡ | 1,406,459 | ||||||||
Consumer Non-Cyclical – 0% | ||||||||||
696,057 | Quintiles Transnational Corp. 3.7500%, 6/8/18‡ | 695,187 | ||||||||
Total Bank Loans and Mezzanine Loans (cost $4,275,800) | 4,294,968 | |||||||||
Common Stock – 54.3% | ||||||||||
Aerospace & Defense – 3.6% | ||||||||||
220,133 | Boeing Co. | 30,045,953 | ||||||||
122,098 | Honeywell International, Inc. | 11,156,094 | ||||||||
24,743 | Precision Castparts Corp. | 6,663,290 | ||||||||
47,865,337 | ||||||||||
Beverages – 0.5% | ||||||||||
192,514 | Diageo PLC** | 6,374,952 | ||||||||
Capital Markets – 1.9% | ||||||||||
719,791 | Blackstone Group L.P. | 22,673,416 | ||||||||
38,102 | Greenhill & Co., Inc. | 2,207,630 | ||||||||
24,881,046 | ||||||||||
Chemicals – 4.0% | ||||||||||
384,581 | E.I. du Pont de Nemours & Co. | 24,986,228 | ||||||||
286,585 | LyondellBasell Industries N.V. – Class A | 23,007,044 | ||||||||
71,341 | Syngenta A.G. (ADR) | 5,702,999 | ||||||||
53,696,271 | ||||||||||
Commercial Banks – 2.5% | ||||||||||
232,241 | CIT Group, Inc. | 12,106,724 | ||||||||
514,408 | U.S. Bancorp | 20,782,083 | ||||||||
32,888,807 | ||||||||||
Communications Equipment – 0.5% | ||||||||||
99,900 | Motorola Solutions, Inc. | 6,743,250 | ||||||||
Computers & Peripherals – 1.6% | ||||||||||
37,694 | Apple, Inc. | 21,150,480 | ||||||||
Consumer Finance – 0.4% | ||||||||||
56,110 | American Express Co. | 5,090,860 | ||||||||
Diversified Financial Services – 0.8% | ||||||||||
187,013 | JPMorgan Chase & Co. | 10,936,520 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
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Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Diversified Telecommunication Services – 0.7% | ||||||||||
202,000 | CenturyLink, Inc. | $ | 6,433,700 | |||||||
48,599 | Verizon Communications, Inc. | 2,388,155 | ||||||||
8,821,855 | ||||||||||
Electronic Equipment, Instruments & Components – 1.7% | ||||||||||
39,352 | Amphenol Corp. – Class A | 3,509,411 | ||||||||
356,981 | TE Connectivity, Ltd. (U.S. Shares) | 19,673,223 | ||||||||
23,182,634 | ||||||||||
Energy Equipment & Services – 0.2% | ||||||||||
70,079 | Noble Corp. PLC | 2,625,860 | ||||||||
Food Products – 1.3% | ||||||||||
113,225 | Hershey Co. | 11,008,867 | ||||||||
164,479 | Unilever PLC** | 6,759,224 | ||||||||
17,768,091 | ||||||||||
Health Care Equipment & Supplies – 0.7% | ||||||||||
240,018 | Abbott Laboratories | 9,199,890 | ||||||||
Health Care Providers & Services – 3.1% | ||||||||||
278,350 | Aetna, Inc. | 19,092,027 | ||||||||
122,713 | AmerisourceBergen Corp. | 8,627,951 | ||||||||
196,510 | Express Scripts Holding Co.* | 13,802,862 | ||||||||
41,522,840 | ||||||||||
Hotels, Restaurants & Leisure – 1.6% | ||||||||||
218,966 | Las Vegas Sands Corp. | 17,269,849 | ||||||||
96,454 | Six Flags Entertainment Corp. | 3,551,436 | ||||||||
20,821,285 | ||||||||||
Household Durables – 0.2% | ||||||||||
57,130 | Garmin, Ltd. | 2,640,549 | ||||||||
Industrial Conglomerates – 0.6% | ||||||||||
59,515 | 3M Co. | 8,346,979 | ||||||||
Information Technology Services – 1.8% | ||||||||||
48,181 | Automatic Data Processing, Inc. | 3,893,507 | ||||||||
24,176 | MasterCard, Inc. – Class A | 20,198,081 | ||||||||
24,091,588 | ||||||||||
Insurance – 0.6% | ||||||||||
391,087 | Prudential PLC** | 8,676,864 | ||||||||
Internet & Catalog Retail – 0.8% | ||||||||||
9,656 | priceline.com, Inc.* | 11,224,134 | ||||||||
Internet Software & Services – 1.0% | ||||||||||
12,070 | Google, Inc. – Class A* | 13,526,970 | ||||||||
Leisure Equipment & Products – 1.5% | ||||||||||
434,717 | Mattel, Inc. | 20,683,835 | ||||||||
Machinery – 0.3% | ||||||||||
48,469 | Dover Corp. | 4,679,197 | ||||||||
Media – 3.6% | ||||||||||
471,370 | CBS Corp. – Class B | 30,045,124 | ||||||||
56,268 | Time Warner Cable, Inc. | 7,624,314 | ||||||||
116,611 | Viacom, Inc. – Class B | 10,184,805 | ||||||||
47,854,243 | ||||||||||
Metals & Mining – 0.2% | ||||||||||
48,485 | Rio Tinto PLC (ADR)** | 2,736,009 | ||||||||
Oil, Gas & Consumable Fuels – 2.8% | ||||||||||
158,529 | Chevron Corp. | 19,801,857 | ||||||||
271,812 | Enterprise Products Partners L.P. | 18,021,136 | ||||||||
37,822,993 | ||||||||||
Pharmaceuticals – 5.9% | ||||||||||
338,413 | AbbVie, Inc. | 17,871,591 | ||||||||
127,668 | Allergan, Inc. | 14,181,361 | ||||||||
170,066 | Bristol-Myers Squibb Co. | 9,039,008 | ||||||||
144,822 | Johnson & Johnson | 13,264,247 | ||||||||
211,755 | Mylan, Inc.* | 9,190,167 | ||||||||
75,633 | Shire PLC (ADR)** | 10,686,187 | ||||||||
140,344 | Zoetis, Inc. | 4,587,845 | ||||||||
78,820,406 | ||||||||||
Real Estate Investment Trusts (REITs) – 1.1% | ||||||||||
6,399,631 | Colony American Homes Holdings III L.P. – Private Placement§ | 6,472,587 | ||||||||
134,534 | Ventas, Inc. | 7,706,107 | ||||||||
14,178,694 | ||||||||||
Road & Rail – 1.8% | ||||||||||
50,667 | Canadian Pacific Railway, Ltd. (U.S. Shares) | 7,666,930 | ||||||||
100,269 | Union Pacific Corp. | 16,845,192 | ||||||||
24,512,122 | ||||||||||
Software – 2.2% | ||||||||||
81,880 | Intuit, Inc. | 6,249,081 | ||||||||
362,484 | Microsoft Corp. | 13,567,776 | ||||||||
240,664 | Oracle Corp. | 9,207,805 | ||||||||
29,024,662 | ||||||||||
Specialty Retail – 0.9% | ||||||||||
12,171 | AutoZone, Inc.* | 5,817,008 | ||||||||
74,897 | Home Depot, Inc. | 6,167,019 | ||||||||
11,984,027 | ||||||||||
Textiles, Apparel & Luxury Goods – 1.7% | ||||||||||
289,915 | NIKE, Inc. – Class B | 22,798,916 | ||||||||
Tobacco – 2.2% | ||||||||||
240,085 | Altria Group, Inc. | 9,216,863 | ||||||||
235,041 | Philip Morris International, Inc.** | 20,479,123 | ||||||||
29,695,986 | ||||||||||
Total Common Stock (cost $465,541,341) | 726,868,152 | |||||||||
Corporate Bonds – 20.9% | ||||||||||
Banking – 2.6% | ||||||||||
$1,618,000 | American Express Co. 6.8000%, 9/1/66‡ | 1,723,979 | ||||||||
792,000 | American Express Credit Corp. 1.7500%, 6/12/15 | 804,780 | ||||||||
319,000 | Bank of America Corp. 4.5000%, 4/1/15 | 333,730 | ||||||||
1,190,000 | Bank of America Corp. 1.5000%, 10/9/15 | 1,201,982 | ||||||||
1,373,000 | Bank of America Corp. 3.6250%, 3/17/16 | 1,444,487 | ||||||||
1,569,000 | Bank of America Corp. 3.7500%, 7/12/16 | 1,668,031 | ||||||||
1,202,000 | Bank of America Corp. 8.0000%, 7/30/99‡ | 1,331,816 | ||||||||
3,158,000 | Citigroup, Inc. 5.0000%, 9/15/14 | 3,247,956 | ||||||||
1,384,000 | Citigroup, Inc. 5.9000%, 12/29/49 | 1,294,040 | ||||||||
161,000 | Citigroup, Inc. 5.3500%, 11/15/99‡ | 141,358 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Banking – (continued) | ||||||||||
$555,000 | Goldman Sachs Group, Inc. 5.6250%, 1/15/17 | $ | 611,576 | |||||||
1,941,000 | Goldman Sachs Group, Inc. 2.3750%, 1/22/18 | 1,948,378 | ||||||||
1,303,000 | HSBC Bank USA N.A. 4.8750%, 8/24/20 | 1,406,238 | ||||||||
714,000 | Morgan Stanley 4.0000%, 7/24/15 | 745,518 | ||||||||
1,485,000 | Morgan Stanley 3.4500%, 11/2/15 | 1,545,745 | ||||||||
502,000 | Morgan Stanley 4.7500%, 3/22/17 | 547,842 | ||||||||
2,646,000 | Morgan Stanley 4.1000%, 5/22/23 | 2,560,669 | ||||||||
3,068,000 | Morgan Stanley 5.0000%, 11/24/25 | 3,077,173 | ||||||||
352,000 | Royal Bank of Scotland Group PLC 2.5500%, 9/18/15** | 360,010 | ||||||||
2,083,000 | Royal Bank of Scotland Group PLC 6.1000%, 6/10/23** | 2,099,864 | ||||||||
1,047,000 | Royal Bank of Scotland Group PLC 6.0000%, 12/19/23** | 1,054,455 | ||||||||
1,290,000 | Santander UK PLC 5.0000%, 11/7/23 (144A),** | 1,294,799 | ||||||||
1,496,000 | SVB Financial Group 5.3750%, 9/15/20 | 1,647,534 | ||||||||
889,000 | Zions Bancorp 4.5000%, 3/27/17 | 941,295 | ||||||||
1,862,000 | Zions Bancorp 5.8000%, 12/15/99‡ | 1,694,420 | ||||||||
34,727,675 | ||||||||||
Basic Industry – 1.2% | ||||||||||
757,000 | ArcelorMittal 5.0000%, 2/25/17 | 811,882 | ||||||||
799,000 | Ashland, Inc. 3.8750%, 4/15/18 | 808,987 | ||||||||
813,000 | Ashland, Inc. 4.7500%, 8/15/22 | 772,350 | ||||||||
1,085,000 | Ashland, Inc. 6.8750%, 5/15/43 | 1,025,325 | ||||||||
605,000 | FMG Resources August 2006 Pty, Ltd. 7.0000%, 11/1/15 (144A) | 627,688 | ||||||||
1,134,000 | FMG Resources August 2006 Pty, Ltd. 8.2500%, 11/1/19 (144A) | 1,272,915 | ||||||||
5,314,000 | LyondellBasell Industries N.V. 5.0000%, 4/15/19 | 5,901,840 | ||||||||
592,000 | Plains Exploration & Production Co. 6.5000%, 11/15/20 | 653,793 | ||||||||
232,000 | Plains Exploration & Production Co. 6.6250%, 5/1/21 | 254,399 | ||||||||
614,000 | Plains Exploration & Production Co. 6.7500%, 2/1/22 | 676,336 | ||||||||
2,557,000 | Plains Exploration & Production Co. 6.8750%, 2/15/23 | 2,851,055 | ||||||||
563,000 | Reliance Steel & Aluminum Co. 4.5000%, 4/15/23 | 552,257 | ||||||||
16,208,827 | ||||||||||
Brokerage – 1.2% | ||||||||||
1,917,000 | Ameriprise Financial, Inc. 7.5180%, 6/1/66‡ | 2,123,077 | ||||||||
864,000 | Carlyle Holdings Finance LLC 3.8750%, 2/1/23 (144A) | 823,738 | ||||||||
627,000 | E*TRADE Financial Corp. 6.0000%, 11/15/17 | 666,187 | ||||||||
399,000 | Lazard Group LLC 6.8500%, 6/15/17 | 449,875 | ||||||||
1,659,000 | Lazard Group LLC 4.2500%, 11/14/20 | 1,655,400 | ||||||||
2,158,000 | Neuberger Berman Group LLC / Neuberger Berman Finance Corp. 5.6250%, 3/15/20 (144A) | 2,265,900 | ||||||||
1,376,000 | Neuberger Berman Group LLC / Neuberger Berman Finance Corp. 5.8750%, 3/15/22 (144A) | 1,417,280 | ||||||||
1,963,000 | Raymond James Financial, Inc. 4.2500%, 4/15/16 | 2,076,522 | ||||||||
3,687,000 | Raymond James Financial, Inc. 5.6250%, 4/1/24 | 3,867,936 | ||||||||
696,000 | TD Ameritrade Holding Corp. 5.6000%, 12/1/19 | 803,405 | ||||||||
16,149,320 | ||||||||||
Capital Goods – 0.6% | ||||||||||
850,000 | CNH Capital LLC 3.6250%, 4/15/18 | 861,687 | ||||||||
1,181,000 | Exelis, Inc. 4.2500%, 10/1/16 | 1,247,222 | ||||||||
533,000 | Exelis, Inc. 5.5500%, 10/1/21 | 536,089 | ||||||||
1,470,000 | FLIR Systems, Inc. 3.7500%, 9/1/16 | 1,533,028 | ||||||||
1,363,000 | Hanson, Ltd. 6.1250%, 8/15/16** | 1,495,892 | ||||||||
1,275,000 | Ingersoll-Rand Global Holding Co., Ltd. 4.2500%, 6/15/23 (144A) | 1,245,307 | ||||||||
265,000 | Interface, Inc. 7.6250%, 12/1/18 | 284,875 | ||||||||
882,000 | TransDigm, Inc. 7.7500%, 12/15/18 | 945,945 | ||||||||
254,000 | Vulcan Materials Co. 7.0000%, 6/15/18 | 288,925 | ||||||||
8,438,970 | ||||||||||
Communications – 1.5% | ||||||||||
158,000 | Gannett Co., Inc. 6.3750%, 9/1/15 | 169,455 | ||||||||
801,000 | SBA Tower Trust 2.9330%, 12/15/17 (144A) | 815,263 | ||||||||
566,000 | Sprint Capital Corp. 6.9000%, 5/1/19 | 618,355 | ||||||||
1,298,000 | Sprint Communications, Inc. 7.0000%, 8/15/20 | 1,405,085 | ||||||||
1,210,000 | Sprint Corp. 7.2500%, 9/15/21 (144A) | 1,299,237 | ||||||||
1,573,000 | UBM PLC 5.7500%, 11/3/20 (144A),** | 1,635,314 | ||||||||
1,135,000 | Verizon Communications, Inc. 2.5000%, 9/15/16 | 1,173,631 | ||||||||
1,869,000 | Verizon Communications, Inc. 3.6500%, 9/14/18 | 1,978,456 | ||||||||
6,277,000 | Verizon Communications, Inc. 5.1500%, 9/15/23 | 6,739,565 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Communications – (continued) | ||||||||||
$2,393,000 | Verizon Communications, Inc. 6.4000%, 9/15/33 | $ | 2,752,239 | |||||||
1,202,000 | Verizon Communications, Inc. 6.5500%, 9/15/43 | 1,406,291 | ||||||||
19,992,891 | ||||||||||
Consumer Cyclical – 3.2% | ||||||||||
1,593,000 | ADT Corp. 4.1250%, 6/15/23 | 1,413,807 | ||||||||
2,304,000 | Brinker International, Inc. 3.8750%, 5/15/23 | 2,074,095 | ||||||||
291,000 | Continental Rubber of America Corp. 4.5000%, 9/15/19 (144A) | 308,402 | ||||||||
1,238,000 | CVS Caremark Corp. 2.2500%, 12/5/18 | 1,237,639 | ||||||||
1,548,000 | CVS Caremark Corp. 4.0000%, 12/5/23 | 1,544,724 | ||||||||
3,557,000 | Ford Motor Credit Co. LLC 3.8750%, 1/15/15 | 3,670,305 | ||||||||
429,000 | Ford Motor Credit Co. LLC 4.2500%, 2/3/17 | 461,504 | ||||||||
838,000 | Ford Motor Credit Co. LLC 3.0000%, 6/12/17 | 870,948 | ||||||||
1,227,000 | Ford Motor Credit Co. LLC 6.6250%, 8/15/17 | 1,421,397 | ||||||||
1,541,000 | Ford Motor Credit Co. LLC 5.0000%, 5/15/18 | 1,716,534 | ||||||||
3,682,000 | Ford Motor Credit Co. LLC 5.8750%, 8/2/21 | 4,174,317 | ||||||||
1,853,000 | Ford Motor Credit Co. LLC 4.2500%, 9/20/22 | 1,861,516 | ||||||||
2,257,000 | General Motors Co. 3.5000%, 10/2/18 (144A) | 2,307,782 | ||||||||
7,214,000 | General Motors Co. 4.8750%, 10/2/23 (144A) | 7,304,175 | ||||||||
1,729,000 | General Motors Co. 6.2500%, 10/2/43 (144A) | 1,795,999 | ||||||||
594,000 | General Motors Financial Co., Inc. 3.2500%, 5/15/18 (144A) | 594,000 | ||||||||
2,256,000 | General Motors Financial Co., Inc. 4.2500%, 5/15/23 (144A) | 2,146,020 | ||||||||
319,000 | Host Hotels & Resorts L.P. 6.7500%, 6/1/16 | 323,598 | ||||||||
424,000 | Jaguar Land Rover Automotive PLC 5.6250%, 2/1/23 (144A),** | 424,000 | ||||||||
761,000 | M.D.C. Holdings, Inc. 5.3750%, 12/15/14 | 790,060 | ||||||||
1,826,000 | Macy’s Retail Holdings, Inc. 5.7500%, 7/15/14 | 1,874,860 | ||||||||
755,000 | Macy’s Retail Holdings, Inc. 5.9000%, 12/1/16 | 846,867 | ||||||||
441,000 | MGM Resorts International 6.6250%, 7/15/15 | 472,973 | ||||||||
629,000 | MGM Resorts International 7.5000%, 6/1/16 | 704,480 | ||||||||
628,000 | MGM Resorts International 8.6250%, 2/1/19 | 736,330 | ||||||||
460,000 | Toll Brothers Finance Corp. 4.0000%, 12/31/18 | 468,050 | ||||||||
420,000 | Toll Brothers Finance Corp. 5.8750%, 2/15/22 | 434,700 | ||||||||
235,000 | Toll Brothers Finance Corp. 4.3750%, 4/15/23 | 217,963 | ||||||||
734,000 | Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. 4.2500%, 5/30/23 (144A) | 688,125 | ||||||||
42,885,170 | ||||||||||
Consumer Non-Cyclical – 1.9% | ||||||||||
939,000 | AbbVie, Inc. 1.7500%, 11/6/17 | 937,391 | ||||||||
933,000 | Actavis, Inc. 1.8750%, 10/1/17 | 923,270 | ||||||||
207,000 | Constellation Brands, Inc. 3.7500%, 5/1/21 | 194,580 | ||||||||
682,000 | Fresenius Medical Care U.S. Finance II, Inc. 5.8750%, 1/31/22 (144A) | 719,510 | ||||||||
1,719,000 | Life Technologies Corp. 6.0000%, 3/1/20 | 1,975,167 | ||||||||
356,000 | Life Technologies Corp. 5.0000%, 1/15/21 | 385,439 | ||||||||
313,000 | Perrigo Co., Ltd. 2.3000%, 11/8/18 (144A) | 308,940 | ||||||||
944,000 | Perrigo Co., Ltd. 4.0000%, 11/15/23 (144A) | 926,154 | ||||||||
1,499,000 | SABMiller Holdings, Inc. 2.2000%, 8/1/18 (144A),** | 1,496,647 | ||||||||
345,000 | Safeway, Inc. 3.9500%, 8/15/20 | 344,873 | ||||||||
1,598,000 | Safeway, Inc. 4.7500%, 12/1/21 | 1,604,657 | ||||||||
369,000 | Sun Merger Sub, Inc. 5.2500%, 8/1/18 (144A) | 386,528 | ||||||||
1,191,000 | Tenet Healthcare Corp. 8.1250%, 4/1/22 | 1,283,302 | ||||||||
362,000 | Thermo Fisher Scientific, Inc. 2.4000%, 2/1/19 | 358,630 | ||||||||
281,000 | Thermo Fisher Scientific, Inc. 3.6000%, 8/15/21 | 278,483 | ||||||||
300,000 | Thermo Fisher Scientific, Inc. 3.1500%, 1/15/23 | 279,184 | ||||||||
772,000 | Thermo Fisher Scientific, Inc. 4.1500%, 2/1/24 | 764,664 | ||||||||
220,000 | Thermo Fisher Scientific, Inc. 5.3000%, 2/1/44 | 222,459 | ||||||||
4,481,000 | Tyson Foods, Inc. 6.6000%, 4/1/16 | 5,001,948 | ||||||||
1,988,000 | VPII Escrow Corp. 6.7500%, 8/15/18 (144A) | 2,184,315 | ||||||||
2,470,000 | WM Wrigley Jr. Co. 2.4000%, 10/21/18 (144A) | 2,454,851 | ||||||||
2,468,000 | WM Wrigley Jr. Co. 3.3750%, 10/21/20 (144A) | 2,439,660 | ||||||||
25,470,652 | ||||||||||
Electric – 0.2% | ||||||||||
143,000 | AES Corp. 7.7500%, 10/15/15 | 158,015 | ||||||||
1,465,000 | CMS Energy Corp. 4.2500%, 9/30/15 | 1,543,489 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
10 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Electric – (continued) | ||||||||||
$977,000 | PPL WEM Holdings PLC 3.9000%, 5/1/16 (144A) | $ | 1,020,974 | |||||||
543,000 | PPL WEM Holdings PLC 5.3750%, 5/1/21 (144A) | 577,367 | ||||||||
3,299,845 | ||||||||||
Energy – 1.4% | ||||||||||
4,018,000 | Chesapeake Energy Corp. 5.3750%, 6/15/21 | 4,158,630 | ||||||||
2,072,000 | Chesapeake Energy Corp. 5.7500%, 3/15/23 | 2,134,160 | ||||||||
1,297,000 | Cimarex Energy Co. 5.8750%, 5/1/22 | 1,371,578 | ||||||||
157,000 | Continental Resources, Inc. 7.1250%, 4/1/21 | 177,999 | ||||||||
2,646,000 | Continental Resources, Inc. 5.0000%, 9/15/22 | 2,748,533 | ||||||||
1,238,000 | Devon Energy Corp. 2.2500%, 12/15/18 | 1,225,029 | ||||||||
1,093,000 | Motiva Enterprises LLC 5.7500%, 1/15/20 (144A) | 1,241,229 | ||||||||
2,705,000 | Nabors Industries, Inc. 5.0000%, 9/15/20 | 2,814,720 | ||||||||
159,000 | Nabors Industries, Inc. 4.6250%, 9/15/21 | 159,186 | ||||||||
1,152,000 | Petrohawk Energy Corp. 6.2500%, 6/1/19 | 1,269,504 | ||||||||
1,661,000 | Whiting Petroleum Corp. 5.0000%, 3/15/19 | 1,698,373 | ||||||||
18,998,941 | ||||||||||
Finance Companies – 1.2% | ||||||||||
1,154,000 | Charles Schwab Corp. 7.0000%, 8/1/99‡ | 1,278,632 | ||||||||
3,152,000 | CIT Group, Inc. 4.2500%, 8/15/17 | 3,282,020 | ||||||||
443,000 | CIT Group, Inc. 6.6250%, 4/1/18 (144A) | 497,821 | ||||||||
3,418,000 | CIT Group, Inc. 5.5000%, 2/15/19 (144A) | 3,665,805 | ||||||||
2,622,000 | CIT Group, Inc. 5.0000%, 8/1/23 | 2,523,675 | ||||||||
592,000 | GE Capital Trust I 6.3750%, 11/15/67‡ | 639,360 | ||||||||
134,000 | General Electric Capital Corp. 6.3750%, 11/15/67‡ | 145,390 | ||||||||
1,500,000 | General Electric Capital Corp. 7.1250%, 12/15/99‡ | 1,676,250 | ||||||||
1,700,000 | General Electric Capital Corp. 6.2500%, 12/15/99‡ | 1,755,250 | ||||||||
15,464,203 | ||||||||||
Financial – 0.3% | ||||||||||
1,663,000 | Jones Lang LaSalle, Inc. 4.4000%, 11/15/22 | 1,597,244 | ||||||||
2,946,000 | LeasePlan Corp. N.V. 2.5000%, 5/16/18 (144A) | 2,864,101 | ||||||||
4,461,345 | ||||||||||
Industrial – 0.3% | ||||||||||
529,000 | CBRE Services, Inc. 6.6250%, 10/15/20 | 566,030 | ||||||||
676,000 | Cintas Corp. No. 2 2.8500%, 6/1/16 | 697,291 | ||||||||
708,000 | Cintas Corp. No. 2 4.3000%, 6/1/21 | 735,027 | ||||||||
1,080,000 | URS Corp. 4.3500%, 4/1/17 (144A) | 1,100,223 | ||||||||
1,033,000 | URS Corp. 5.5000%, 4/1/22 (144A) | 1,017,456 | ||||||||
4,116,027 | ||||||||||
Insurance – 0.7% | ||||||||||
1,851,000 | American International Group, Inc. 4.2500%, 9/15/14 | 1,897,266 | ||||||||
430,000 | American International Group, Inc. 5.6000%, 10/18/16 | 479,084 | ||||||||
682,000 | American International Group, Inc. 6.2500%, 3/15/37 | 682,000 | ||||||||
2,185,000 | American International Group, Inc. 8.1750%, 5/15/58‡ | 2,643,850 | ||||||||
894,000 | ING U.S., Inc. 5.6500%, 5/15/53‡ | 869,415 | ||||||||
2,514,000 | Primerica, Inc. 4.7500%, 7/15/22 | 2,589,392 | ||||||||
9,161,007 | ||||||||||
Mortgage Assets – 0.1% | ||||||||||
1,734,000 | Northern Rock Asset Management PLC 5.6250%, 6/22/17 (144A),** | 1,954,201 | ||||||||
Natural Gas – 1.3% | ||||||||||
986,000 | DCP Midstream Operating L.P. 3.2500%, 10/1/15 | 1,018,632 | ||||||||
2,058,000 | DCP Midstream Operating L.P. 4.9500%, 4/1/22 | 2,089,062 | ||||||||
74,000 | El Paso LLC 6.5000%, 9/15/20 | 79,352 | ||||||||
268,000 | El Paso Pipeline Partners Operating Co. LLC 6.5000%, 4/1/20 | 307,776 | ||||||||
770,000 | El Paso Pipeline Partners Operating Co. LLC 5.0000%, 10/1/21 | 806,431 | ||||||||
761,000 | Energy Transfer Partners L.P. 4.1500%, 10/1/20 | 772,096 | ||||||||
2,588,000 | Enterprise Products Operating LLC 3.3500%, 3/15/23 | 2,458,372 | ||||||||
2,162,000 | Kinder Morgan Finance Co. LLC 5.7000%, 1/5/16 | 2,322,273 | ||||||||
549,000 | Kinder Morgan, Inc. 5.0000%, 2/15/21 (144A) | 540,757 | ||||||||
974,000 | Kinder Morgan, Inc. 5.6250%, 11/15/23 (144A) | 943,063 | ||||||||
285,000 | Spectra Energy Partners L.P. 2.9500%, 9/25/18 | 288,883 | ||||||||
1,468,000 | Spectra Energy Partners L.P. 4.7500%, 3/15/24 | 1,496,484 | ||||||||
2,938,000 | Western Gas Partners L.P. 5.3750%, 6/1/21 | 3,147,477 | ||||||||
988,000 | Williams Cos., Inc. 3.7000%, 1/15/23 | 862,334 | ||||||||
17,132,992 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Real Estate Investment Trusts (REITs) – 1.0% | ||||||||||
$2,059,000 | Alexandria Real Estate Equities, Inc. 4.6000%, 4/1/22 | $ | 2,071,867 | |||||||
1,439,000 | American Tower Trust I 1.5510%, 3/15/18 (144A) | 1,404,435 | ||||||||
1,202,000 | American Tower Trust I 3.0700%, 3/15/23 (144A) | 1,124,540 | ||||||||
1,185,000 | Goodman Funding Pty, Ltd. 6.3750%, 11/12/20 (144A) | 1,306,921 | ||||||||
957,000 | Post Apartment Homes L.P. 4.7500%, 10/15/17 | 1,034,736 | ||||||||
538,000 | Reckson Operating Partnership L.P. 6.0000%, 3/31/16 | 582,969 | ||||||||
309,000 | Retail Opportunity Investments Partnership L.P. 5.0000%, 12/15/23 | 307,651 | ||||||||
471,000 | Senior Housing Properties Trust 6.7500%, 4/15/20 | 522,984 | ||||||||
520,000 | Senior Housing Properties Trust 6.7500%, 12/15/21 | 574,110 | ||||||||
1,143,000 | SL Green Realty Corp. / SL Green Operating Partnership / Reckson Operating Partnership 5.0000%, 8/15/18 | 1,218,614 | ||||||||
2,205,000 | SL Green Realty Corp. / SL Green Operating Partnership / Reckson Operating Partnership 7.7500%, 3/15/20 | 2,590,606 | ||||||||
12,739,433 | ||||||||||
Technology – 1.7% | ||||||||||
2,274,000 | Amphenol Corp. 4.7500%, 11/15/14 | 2,349,713 | ||||||||
613,000 | Autodesk, Inc. 1.9500%, 12/15/17 | 606,402 | ||||||||
928,000 | Autodesk, Inc. 3.6000%, 12/15/22 | 856,935 | ||||||||
973,000 | Fiserv, Inc. 3.1250%, 10/1/15 | 1,007,390 | ||||||||
572,000 | Fiserv, Inc. 3.1250%, 6/15/16 | 596,885 | ||||||||
1,474,000 | National Semiconductor Corp. 6.6000%, 6/15/17 | 1,722,600 | ||||||||
3,804,000 | Samsung Electronics America, Inc. 1.7500%, 4/10/17 (144A) | 3,779,639 | ||||||||
3,990,000 | TSMC Global, Ltd. 1.6250%, 4/3/18 (144A) | 3,820,967 | ||||||||
947,000 | Verisk Analytics, Inc. 4.8750%, 1/15/19 | 1,002,742 | ||||||||
4,561,000 | Verisk Analytics, Inc. 5.8000%, 5/1/21 | 4,925,611 | ||||||||
1,462,000 | Verisk Analytics, Inc. 4.1250%, 9/12/22 | 1,415,095 | ||||||||
22,083,979 | ||||||||||
Transportation – 0.5% | ||||||||||
267,000 | Asciano Finance, Ltd. 3.1250%, 9/23/15 (144A) | 273,042 | ||||||||
635,324 | CSX Transportation, Inc. 8.3750%, 10/15/14 | 670,569 | ||||||||
1,482,000 | JB Hunt Transport Services, Inc. 3.3750%, 9/15/15 | 1,535,202 | ||||||||
186,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 2.5000%, 3/15/16 (144A) | 190,560 | ||||||||
1,556,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 3.3750%, 3/15/18 (144A) | 1,595,148 | ||||||||
159,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 4.8750%, 7/11/22 (144A) | 163,115 | ||||||||
861,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 4.2500%, 1/17/23 (144A) | 838,546 | ||||||||
1,010,000 | Southwest Airlines Co. 5.1250%, 3/1/17 | 1,096,930 | ||||||||
6,363,112 | ||||||||||
Total Corporate Bonds (cost $273,247,491) | 279,648,590 | |||||||||
Mortgage-Backed Securities – 6.6% | ||||||||||
Fannie Mae: | ||||||||||
347,925 | 5.5000%, 1/1/25 | 380,139 | ||||||||
544,023 | 5.5000%, 7/1/25 | 596,394 | ||||||||
730,384 | 5.0000%, 9/1/29 | 796,291 | ||||||||
309,631 | 5.0000%, 1/1/30 | 339,689 | ||||||||
213,063 | 5.5000%, 1/1/33 | 236,102 | ||||||||
165,351 | 5.0000%, 11/1/33 | 180,133 | ||||||||
325,124 | 5.0000%, 12/1/33 | 354,322 | ||||||||
938,437 | 6.0000%, 10/1/35 | 1,052,356 | ||||||||
1,067,105 | 6.0000%, 12/1/35 | 1,196,830 | ||||||||
150,900 | 6.0000%, 2/1/37 | 169,875 | ||||||||
914,825 | 6.0000%, 9/1/37 | 987,311 | ||||||||
747,667 | 6.0000%, 10/1/38 | 856,174 | ||||||||
312,154 | 7.0000%, 2/1/39 | 334,127 | ||||||||
5,815,706 | 5.5000%, 12/1/39 | 6,419,101 | ||||||||
722,181 | 5.0000%, 6/1/40 | 787,742 | ||||||||
846,881 | 5.0000%, 6/1/40 | 921,454 | ||||||||
308,728 | 4.5000%, 10/1/40 | 328,774 | ||||||||
2,077,770 | 5.0000%, 2/1/41 | 2,271,431 | ||||||||
316,235 | 5.0000%, 3/1/41 | 345,932 | ||||||||
333,672 | 4.5000%, 4/1/41 | 355,484 | ||||||||
612,038 | 4.5000%, 4/1/41 | 650,906 | ||||||||
639,648 | 5.0000%, 4/1/41 | 698,439 | ||||||||
629,368 | 4.5000%, 5/1/41 | 670,734 | ||||||||
446,722 | 5.0000%, 5/1/41 | 488,061 | ||||||||
1,107,975 | 5.0000%, 5/1/41 | 1,213,683 | ||||||||
615,763 | 5.0000%, 6/1/41 | 671,549 | ||||||||
302,666 | 5.0000%, 7/1/41 | 330,211 | ||||||||
977,646 | 5.0000%, 7/1/41 | 1,069,821 | ||||||||
815,559 | 4.5000%, 8/1/41 | 867,575 | ||||||||
16,055 | 5.0000%, 9/1/41 | 17,532 | ||||||||
3,243,670 | 5.0000%, 2/1/42 | 3,644,152 | ||||||||
2,844,586 | 4.5000%, 6/1/42 | 3,015,852 | ||||||||
2,450,700 | 4.0000%, 9/1/42 | 2,500,230 | ||||||||
1,191,225 | 4.5000%, 11/1/42 | 1,265,297 | ||||||||
2,916,798 | 4.5000%, 2/1/43 | 3,091,145 | ||||||||
4,225,714 | 4.5000%, 2/1/43 | 4,510,594 | ||||||||
1,842,526 | 4.0000%, 5/1/43 | 1,879,781 | ||||||||
Freddie Mac: | ||||||||||
338,881 | 5.0000%, 1/1/19 | 358,783 | ||||||||
216,788 | 5.0000%, 2/1/19 | 229,579 | ||||||||
293,871 | 5.5000%, 8/1/19 | 313,500 | ||||||||
339,192 | 5.0000%, 6/1/20 | 360,027 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
12 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Freddie Mac: (continued) | ||||||||||
$769,185 | 5.5000%, 12/1/28 | $ | 851,207 | |||||||
1,117,542 | 5.0000%, 1/1/36 | 1,224,893 | ||||||||
576,358 | 5.5000%, 10/1/36 | 643,641 | ||||||||
916,603 | 5.0000%, 5/1/39 | 994,244 | ||||||||
2,501,237 | 6.0000%, 4/1/40 | 2,814,469 | ||||||||
788,560 | 4.5000%, 1/1/41 | 839,356 | ||||||||
1,832,974 | 5.0000%, 3/1/41 | 1,983,950 | ||||||||
1,766,454 | 5.0000%, 5/1/41 | 1,931,136 | ||||||||
886,994 | 5.5000%, 5/1/41 | 990,947 | ||||||||
395,910 | 5.0000%, 9/1/41 | 428,580 | ||||||||
4,429,432 | 5.5000%, 9/1/41 | 4,846,845 | ||||||||
Ginnie Mae: | ||||||||||
765,643 | 5.1000%, 1/15/32 | 855,935 | ||||||||
810,191 | 4.9000%, 10/15/34 | 884,696 | ||||||||
518,627 | 6.0000%, 11/20/34 | 579,553 | ||||||||
115,349 | 5.5000%, 9/15/35 | 130,265 | ||||||||
610,669 | 5.5000%, 3/15/36 | 678,565 | ||||||||
259,740 | 6.0000%, 1/20/39 | 292,585 | ||||||||
681,805 | 5.5000%, 8/15/39 | 797,802 | ||||||||
2,044,068 | 5.5000%, 8/15/39 | 2,324,865 | ||||||||
543,247 | 5.0000%, 10/15/39 | 602,444 | ||||||||
747,235 | 5.5000%, 10/15/39 | 848,822 | ||||||||
883,560 | 5.0000%, 11/15/39 | 975,502 | ||||||||
257,203 | 5.0000%, 1/15/40 | 284,994 | ||||||||
207,052 | 5.0000%, 4/15/40 | 229,466 | ||||||||
302,062 | 5.0000%, 5/15/40 | 330,514 | ||||||||
265,173 | 5.0000%, 7/15/40 | 293,757 | ||||||||
842,211 | 5.0000%, 7/15/40 | 933,042 | ||||||||
927,026 | 5.0000%, 2/15/41 | 1,020,624 | ||||||||
380,458 | 5.0000%, 5/15/41 | 423,499 | ||||||||
234,091 | 4.5000%, 7/15/41 | 252,407 | ||||||||
1,663,768 | 4.5000%, 8/15/41 | 1,817,443 | ||||||||
197,394 | 5.0000%, 9/15/41 | 216,004 | ||||||||
101,000 | 5.5000%, 9/20/41 | 111,200 | ||||||||
1,114,226 | 4.5000%, 10/20/41 | 1,193,961 | ||||||||
112,816 | 6.0000%, 10/20/41 | 127,101 | ||||||||
308,356 | 6.0000%, 12/20/41 | 346,492 | ||||||||
650,202 | 5.5000%, 1/20/42 | 716,887 | ||||||||
333,237 | 6.0000%, 1/20/42 | 374,933 | ||||||||
286,245 | 6.0000%, 2/20/42 | 322,383 | ||||||||
204,331 | 6.0000%, 3/20/42 | 229,898 | ||||||||
522,211 | 6.0000%, 4/20/42 | 587,558 | ||||||||
365,032 | 3.5000%, 5/20/42 | 369,749 | ||||||||
423,202 | 6.0000%, 5/20/42 | 476,201 | ||||||||
1,258,185 | 5.5000%, 7/20/42 | 1,390,414 | ||||||||
276,217 | 6.0000%, 7/20/42 | 311,050 | ||||||||
292,628 | 6.0000%, 8/20/42 | 329,605 | ||||||||
630,388 | 6.0000%, 9/20/42 | 709,362 | ||||||||
284,077 | 6.0000%, 11/20/42 | 318,850 | ||||||||
335,178 | 6.0000%, 2/20/43 | 377,497 | ||||||||
Total Mortgage-Backed Securities (cost $88,019,274) | 87,372,305 | |||||||||
Preferred Stock – 0.6% | ||||||||||
Capital Markets – 0% | ||||||||||
7,150 | Charles Schwab Corp., 6.0000% | 157,228 | ||||||||
Commercial Banks – 0.2% | ||||||||||
116,200 | Wells Fargo & Co., 6.6250% | 2,988,664 | ||||||||
Construction & Engineering – 0.1% | ||||||||||
23,000 | Citigroup Capital XIII, 7.8750% | 626,750 | ||||||||
Consumer Finance – 0.1% | ||||||||||
63,650 | Discover Financial Services, 6.5000% | 1,466,496 | ||||||||
Household Products – 0.2% | ||||||||||
56,050 | Morgan Stanley, 6.8750% | 1,402,932 | ||||||||
60,780 | Morgan Stanley, 7.1250% | 1,588,789 | ||||||||
2,991,721 | ||||||||||
Total Preferred Stock (cost $8,224,665) | 8,230,859 | |||||||||
U.S. Treasury Notes/Bonds – 15.0% | ||||||||||
U.S. Treasury Notes/Bonds: | ||||||||||
$2,554,000 | 0.1250%, 4/30/15 | 2,551,007 | ||||||||
9,118,000 | 0.2500%, 5/31/15 | 9,122,276 | ||||||||
565,000 | 0.3750%, 6/15/15 | 566,192 | ||||||||
4,923,000 | 0.2500%, 7/15/15 | 4,923,192 | ||||||||
688,000 | 0.3750%, 8/31/15 | 689,048 | ||||||||
4,885,000 | 0.2500%, 9/30/15 | 4,880,613 | ||||||||
17,756,000 | 0.2500%, 10/31/15 | 17,731,035 | ||||||||
34,249,000 | 0.2500%, 11/30/15 | 34,180,776 | ||||||||
4,020,000 | 0.2500%, 12/31/15 | 4,009,323 | ||||||||
968,000 | 0.3750%, 2/15/16 | 967,092 | ||||||||
3,726,000 | 0.8750%, 1/31/17 | 3,729,495 | ||||||||
313,000 | 0.8750%, 2/28/17 | 312,976 | ||||||||
8,052,000 | 0.7500%, 6/30/17 | 7,967,075 | ||||||||
727,000 | 0.7500%, 10/31/17 | 713,823 | ||||||||
420,000 | 0.8750%, 1/31/18 | 411,994 | ||||||||
1,667,000 | 0.7500%, 3/31/18 | 1,619,594 | ||||||||
9,709,000 | 1.3750%, 7/31/18 | 9,621,774 | ||||||||
27,261,000 | 1.5000%, 8/31/18 | 27,122,569 | ||||||||
38,726,000 | 1.3750%, 9/30/18 | 38,254,007 | ||||||||
17,258,000 | 1.2500%, 10/31/18 | 16,919,588 | ||||||||
1,785,000 | 1.0000%, 9/30/19 | 1,685,151 | ||||||||
998,000 | 1.7500%, 5/15/23 | 899,525 | ||||||||
7,574,000 | 2.5000%, 8/15/23 | 7,273,403 | ||||||||
2,406,000 | 3.6250%, 8/15/43 | 2,272,166 | ||||||||
2,233,000 | 3.7500%, 11/15/43 | 2,158,333 | ||||||||
Total U.S. Treasury Notes/Bonds (cost $201,866,207) | 200,582,027 | |||||||||
Money Market – 0.8% | ||||||||||
10,478,159 | Janus Cash Liquidity Fund LLC, 0%£ (cost $10,478,159) | 10,478,159 | ||||||||
Total Investments (total cost $1,070,856,235) – 99.9% | 1,336,559,592 | |||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.1% | 1,799,870 | |||||||||
Net Assets – 100% | $ | 1,338,359,462 | ||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Janus Aspen Balanced Portfolio
Schedule of Investments
As of December 31, 2013
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 4,379,032 | 0.3% | |||||
Canada | 7,666,930 | 0.6% | ||||||
Germany | 1,027,912 | 0.1% | ||||||
Luxembourg | 811,882 | 0.1% | ||||||
Netherlands | 2,864,101 | 0.2% | ||||||
South Korea | 3,779,639 | 0.3% | ||||||
Switzerland | 5,702,999 | 0.4% | ||||||
Taiwan | 3,820,967 | 0.3% | ||||||
United Kingdom | 47,048,418 | 3.5% | ||||||
United States†† | 1,259,457,712 | 94.2% | ||||||
Total | $ | 1,336,559,592 | 100.0% |
†† | Includes Cash Equivalents of 0.8%. |
Forward Currency Contracts, Open
Currency Units | Currency | Unrealized | ||||||||||
Counterparty/Currency and Settlement Date | Sold | Value U.S. $ | Depreciation | |||||||||
Credit Suisse International: British Pound 1/9/14 | 2,780,000 | $ | 4,602,665 | $ | (112,980) | |||||||
HSBC Securities (USA), Inc.: British Pound 1/16/14 | 2,480,000 | 4,105,754 | (49,205) | |||||||||
JPMorgan Chase & Co.: British Pound 1/23/14 | 3,480,000 | 5,760,990 | (99,343) | |||||||||
RBC Capital Markets Corp.: British Pound 1/16/14 | 3,175,000 | 5,256,358 | (64,535) | |||||||||
Total | $ | 19,725,767 | $ | (326,063) | ||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
14 | DECEMBER 31, 2013
Table of Contents
Notes to Schedule of Investments and Other Information
Balanced Index | A hypothetical combination of unmanaged indices. This internally calculated index combines the total returns from the S&P 500® Index (55%) and the Barclays U.S. Aggregate Bond Index (45%). Prior to 7/1/09, the index was calculated using the Barclays U.S. Government/Credit Bond Index instead of the Barclays U.S. Aggregate Bond Index. | |
Barclays U.S. Aggregate Bond Index | Made up of the Barclays U.S. Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million. | |
S&P 500® Index | A commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. | |
ADR | American Depositary Receipt | |
L.P. | Limited Partnership | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust | |
U.S. Shares | Securities of foreign companies trading on an American stock exchange. |
144A | Securities sold under Rule 144A of the Securities Act of 1933, as amended, are subject to legal and/or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total value of 144A securities as of the year ended December 31, 2013 is indicated in the table below: |
Value as a % | ||||||||||
Portfolio | Value | of Net Assets | ||||||||
Janus Aspen Balanced Portfolio | $ | 77,958,469 | 5.8 | % | ||||||
(a) | All or a portion of this position has not settled. Upon settlement date, interest rates for unsettled amounts will be determined. Interest and dividends will not be accrued until time of settlement. | |
* | Non-income producing security. | |
** | A portion of this security or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Balanced Portfolio | $ | 60,117,918 | |||
‡ | The interest rate on floating rate notes is based on an index or market interest rates and is subject to change. Rate in the security description is as of year end. |
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2013) |
Acquisition | Acquisition | Value as a | ||||||||||
Date | Cost | Value | % of Net Assets | |||||||||
Janus Aspen Balanced Portfolio | ||||||||||||
Colony American Homes Holdings III L.P. – Private Placement | 1/30/13 | $ | 6,407,653 | $ | 6,472,587 | 0.5% | ||||||
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20 | 4/29/13 | 1,088,888 | 1,091,674 | 0.1% | ||||||||
$ | 7,496,541 | $ | 7,564,261 | 0.6% | ||||||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2013. The issuer incurs all registration costs.
Janus Aspen Series | 15
Table of Contents
Notes to Schedule of Investments and Other Information (continued)
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Balanced Portfolio | |||||||||||||||||||||
Janus Cash Liquidity Fund LLC | 584,676,462 | $ | 584,676,462 | (586,578,000) | $ | (586,578,000) | $ | – | $ | 22,135 | $ | 10,478,159 | |||||||||
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Balanced Portfolio | |||||||||||
Asset-Backed/Commercial Mortgage-Backed Securities | $ | – | $ | 19,084,532 | $ | – | |||||
Bank Loans and Mezzanine Loans | – | 4,294,968 | – | ||||||||
Common Stock | |||||||||||
Real Estate Investment Trusts (REITs) | 7,706,107 | – | 6,472,587 | ||||||||
All Other | 712,689,458 | – | – | ||||||||
Corporate Bonds | – | 279,648,590 | – | ||||||||
Mortgage-Backed Securities | – | 87,372,305 | – | ||||||||
Preferred Stock | – | 8,230,859 | – | ||||||||
U.S. Treasury Notes/Bonds | – | 200,582,027 | – | ||||||||
Money Market | – | 10,478,159 | – | ||||||||
Total Investments in Securities | $ | 720,395,565 | $ | 609,691,440 | $ | 6,472,587 | |||||
Other Financial Instruments(a) – Liabilities: | |||||||||||
Forward Currency Contracts | $ | – | $ | 326,063 | $ | – | |||||
(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. |
16 | DECEMBER 31, 2013
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||||||
As of December 31, 2013 | Balanced | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 1,070,856 | ||||||||
Unaffiliated investments at value | $ | 1,326,082 | ||||||||
Affiliated investments at value | 10,478 | |||||||||
Receivables: | ||||||||||
Investments sold | 4,320 | |||||||||
Portfolio shares sold | 798 | |||||||||
Dividends | 840 | |||||||||
Foreign dividend tax reclaim | 35 | |||||||||
Interest | 4,166 | |||||||||
Non-interested Trustees’ deferred compensation | 26 | |||||||||
Other assets | 124 | |||||||||
Total Assets | 1,346,869 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Due to custodian | 954 | |||||||||
Investments purchased | 5,309 | |||||||||
Portfolio shares repurchased | 965 | |||||||||
Advisory fees | 633 | |||||||||
Fund administration fees | 12 | |||||||||
Internal servicing cost | 1 | |||||||||
Distribution fees and shareholder servicing fees | 185 | |||||||||
Non-interested Trustees’ fees and expenses | 5 | |||||||||
Non-interested Trustees’ deferred compensation fees | 26 | |||||||||
Accrued expenses and other payables | 94 | |||||||||
Forward currency contracts | 326 | |||||||||
Total Liabilities | 8,510 | |||||||||
Net Assets | $ | 1,338,359 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 1,023,433 | ||||||||
Undistributed net investment income* | 8,631 | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 40,913 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 265,382 | |||||||||
Total Net Assets | $ | 1,338,359 | ||||||||
Net Assets - Institutional Shares | $ | 475,100 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 15,698 | |||||||||
Net Asset Value Per Share | $ | 30.26 | ||||||||
Net Assets - Service Shares | $ | 863,259 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 27,214 | |||||||||
Net Asset Value Per Share | $ | 31.72 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 17
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the year ended December 31, 2013 | Balanced | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 13,107 | ||||
Dividends | 12,725 | |||||
Dividends from affiliates | 22 | |||||
Fee income | 1 | |||||
Other Income | 83 | |||||
Foreign tax withheld | (92) | |||||
Total Investment Income | 25,846 | |||||
Expenses: | ||||||
Advisory fees | 5,803 | |||||
Internal servicing expense - Institutional Shares | 4 | |||||
Internal servicing expense - Service Shares | 4 | |||||
Shareholder reports expense | 66 | |||||
Transfer agent fees and expenses | 2 | |||||
Registration fees | 21 | |||||
Custodian fees | 21 | |||||
Professional fees | 70 | |||||
Non-interested Trustees’ fees and expenses | 22 | |||||
Fund administration fees | 106 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 1,496 | |||||
Other expenses | 34 | |||||
Total Expenses | 7,649 | |||||
Net Expenses after Waivers and Expense Offsets | 7,649 | |||||
Net Investment Income | 18,197 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 40,111 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 133,018 | |||||
Net Gain on Investments | 173,129 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 191,326 |
See Notes to Financial Statements.
18 | DECEMBER 31, 2013
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Balanced | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 18,197 | $ | 22,073 | ||||||
Net realized gain from investment and foreign currency transactions | 40,111 | 172,588 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 133,018 | (25,233) | ||||||||
Net Increase in Net Assets Resulting from Operations | 191,326 | 169,428 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (6,960) | (12,496) | ||||||||
Service Shares | (8,327) | (12,378) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | (25,781) | (32,321) | ||||||||
Service Shares | (30,435) | (33,711) | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (71,503) | (90,906) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 25,258 | 17,439 | ||||||||
Service Shares | 363,391 | 73,716 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 32,741 | 44,817 | ||||||||
Service Shares | 38,762 | 46,089 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares(1) | (69,174) | (512,164) | ||||||||
Service Shares(1) | (102,853) | (424,662) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | 288,125 | (754,765) | ||||||||
Net Increase/(Decrease) in Net Assets | 407,948 | (676,243) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 930,411 | 1,606,654 | ||||||||
End of period | $ | 1,338,359 | $ | 930,411 | ||||||
Undistributed Net Investment Income* | $ | 8,631 | $ | 6,161 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | During the year ended December 31, 2012, Janus Aspen Balanced Portfolio disbursed to a redeeming shareholder portfolio securities and cash valued at $723,952,515 and $12,910,862, respectively, at the date of redemption. |
See Notes to Financial Statements.
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Financial Highlights
Institutional Shares
Janus Aspen Balanced Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $27.17 | $26.62 | $28.30 | $26.88 | $22.90 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.56 | 1.14 | 0.73 | 0.81 | 0.78 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 4.67 | 2.30 | (0.22) | 1.39 | 4.91 | |||||||||||||||||
Total from Investment Operations | 5.23 | 3.44 | 0.51 | 2.20 | 5.69 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.45) | (0.80) | (0.69) | (0.78) | (0.75) | |||||||||||||||||
Distributions (from capital gains)* | (1.69) | (2.09) | (1.50) | – | (0.96) | |||||||||||||||||
Total Distributions | (2.14) | (2.89) | (2.19) | (0.78) | (1.71) | |||||||||||||||||
Net Asset Value, End of Period | $30.26 | $27.17 | $26.62 | $28.30 | $26.88 | |||||||||||||||||
Total Return | 20.11% | 13.66% | 1.60% | 8.39% | 25.89% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $475,100 | $435,689 | $843,446 | $955,585 | $1,020,287 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $455,356 | $509,335 | $906,725 | $970,582 | $946,559 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.58% | 0.60% | 0.57% | 0.58% | 0.57% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.58% | 0.60% | 0.57% | 0.58% | 0.57% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 1.87% | 2.23% | 2.50% | 2.74% | 3.03% | |||||||||||||||||
Portfolio Turnover Rate | 76% | 77% | 108% | 90% | 169% |
Service Shares
Janus Aspen Balanced Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $28.42 | $27.74 | $29.42 | $27.93 | $23.76 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.58 | 0.57 | 0.66 | 0.71 | 0.73 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 4.82 | 2.94 | (0.20) | 1.51 | 5.11 | |||||||||||||||||
Total from Investment Operations | 5.40 | 3.51 | 0.46 | 2.22 | 5.84 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.41) | (0.74) | (0.64) | (0.73) | (0.71) | |||||||||||||||||
Distributions (from capital gains)* | (1.69) | (2.09) | (1.50) | – | (0.96) | |||||||||||||||||
Total Distributions | (2.10) | (2.83) | (2.14) | (0.73) | (1.67) | |||||||||||||||||
Net Asset Value, End of Period | $31.72 | $28.42 | $27.74 | $29.42 | $27.93 | |||||||||||||||||
Total Return | 19.80% | 13.37% | 1.35% | 8.12% | 25.53% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $863,259 | $494,722 | $763,208 | $764,603 | $666,112 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $596,154 | $533,254 | $770,420 | $705,784 | $554,206 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.84% | 0.85% | 0.82% | 0.83% | 0.82% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.84% | 0.85% | 0.82% | 0.83% | 0.82% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 1.62% | 2.00% | 2.25% | 2.49% | 2.77% | |||||||||||||||||
Portfolio Turnover Rate | 76% | 77% | 108% | 90% | 169% |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
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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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests in a combination of equity securities selected for growth potential and securities selected for income potential. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
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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 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 translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy.
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Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold a material amount of Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out of | ||||||
Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Balanced Portfolio | $ | 21,140,223 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year. Financial assets were transferred out of Level 2 to Level 1 as the current market for the securities with quoted prices are considered active.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative
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Table of Contents
Notes to Financial Statements (continued)
exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. | |
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. |
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• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a contract is included in “Net realized gain/(loss) from investment and foreign currency transactions” on the Statement of Operations (if applicable).
The following table, grouped by derivative type, provides information about the fair value and location of derivatives within the Statement of Assets and Liabilities as of December 31, 2013.
Fair Value of Derivative Instruments as of December 31, 2013
Derivatives not accounted | Liability Derivatives | |||||||
for as hedging instruments | Statement of Assets and Liabilities Location | Fair Value | ||||||
Janus Aspen Balanced Portfolio | ||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 326,063 | |||||
The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as | Investment and foreign | |||
hedging instruments | currency transactions | |||
Janus Aspen Balanced Portfolio | ||||
Foreign Exchange Contracts | $ | (561,642 | ) | |
Change in Unrealized Net Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||
Investments, foreign | ||||
currency translations and | ||||
Derivatives not accounted for as | non-interested Trustees’ | |||
hedging instruments | deferred compensation | |||
Janus Aspen Balanced Portfolio | ||||
Foreign Exchange Contracts | $ | (193,728 | ) | |
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.
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not
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Table of Contents
Notes to Financial Statements (continued)
succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Loans
The Portfolio may invest in various commercial loans, including bank loans, bridge loans, debtor-in-possession (“DIP”) loans, mezzanine loans, and other fixed and floating rate loans. These loans may be acquired through loan participations and assignments or on a when-issued basis. Commercial loans will comprise no more than 20% of the Portfolio’s total assets. Below are descriptions of the types of loans held by the Portfolio at year end.
• | Bank Loans – Bank loans are obligations of companies or other entities entered into in connection with recapitalizations, acquisitions, and refinancings. A Portfolio’s investments in bank loans are generally acquired as a participation |
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interest in, or assignment of, loans originated by a lender or other financial institution. These investments may include institutionally-traded floating and fixed-rate debt securities. |
• | Floating Rate Loans – Floating rate loans are debt securities that have floating interest rates, that adjust periodically, and are tied to a benchmark lending rate, such as the London Interbank Offered Rate. 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. While the Portfolio generally expects to invest in fully funded term loans, certain of the loans in which the Portfolio may invest include revolving loans, bridge loans, and delayed draw term loans. |
Purchasers of floating rate loans may pay and/or receive certain fees. The Portfolio may receive fees such as covenant waiver fees or prepayment penalty fees. The Portfolio may pay fees such as facility fees. Such fees may affect the Portfolio’s return. |
• | Mezzanine Loans – Mezzanine loans are secured by the stock of the company that owns the assets. Mezzanine loans are a hybrid of debt and equity financing that is typically used to fund the expansion of existing companies. A mezzanine loan is composed of debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. Mezzanine loans typically are the most subordinated debt obligation in an issuer’s capital structure. |
Mortgage- and Asset-Backed Securities
The Portfolio may purchase fixed or variable rate mortgage-backed securities issued by the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or other governmental or government-related entities. Ginnie Mae’s guarantees are backed by the full faith and credit of the U.S. Government. Historically, Fannie Maes and Freddie Macs were not backed by the full faith and credit of the U.S. Government, and may not be in the future. In September 2008, the Federal Housing Finance Agency (“FHFA”), an agency of the U.S. Government, placed Fannie Mae and Freddie Mac under conservatorship. Under the conservatorship, the management of Fannie Mae and Freddie Mac was replaced. Since 2008, Fannie Mae and Freddie Mac have received capital support through U.S. Treasury preferred stock purchases, and Treasury and Federal Reserve purchases of their mortgage-backed securities. The FHFA and the U.S. Treasury have imposed strict limits on the size of these entities’ mortgage portfolios. The FHFA has the power to cancel any contract entered into by Fannie Mae and Freddie Mac prior to FHFA’s appointment as conservator or receiver, including the guarantee obligations of Fannie Mae and Freddie Mac.
The Portfolio may purchase other mortgage- and asset-backed securities through single- and multi-seller conduits, collateralized debt obligations, structured investment vehicles, and other similar securities. Asset-backed securities may be backed by automobile loans, equipment leases, credit card receivables, or other collateral. In the event the underlying assets fail to perform, these investment vehicles could be forced to sell the assets and recognize losses on such assets, which could impact the Portfolio’s return and your return.
Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Prepayment risk, which results from prepayments of the principal of underlying loans at a faster pace than expected, may shorten the effective maturities of these securities and may result in the Portfolio having to reinvest proceeds at a lower interest rate.
In addition to prepayment risk, investments in mortgage-backed securities, including those comprised of subprime mortgages, and investments in other asset-backed securities comprised of under-performing assets may be subject to a higher degree of credit risk, valuation risk, and
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Notes to Financial Statements (continued)
liquidity risk. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.
Mortgage- and asset-backed securities are also subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying these securities to be paid more slowly than expected, increasing the Portfolio’s sensitivity to interest rate changes and causing its price to decline.
Offsetting Assets and Liabilities
The Portfolio has recently adopted guidance requiring entities to present gross and net information about transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. Note that for financial reporting purposes, the Portfolio does not offset certain derivative financial instrument’s payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following tables present gross amounts of recognized assets and liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable).
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts Offset in the | ||||||||||||||
Statement of | ||||||||||||||
Counterparty | Gross Amounts of Recognized Liabilities | Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 112,980 | $ | – | $ | – | $ | 112,980 | ||||||
HSBC Securities (USA), Inc. | 49,205 | – | – | 49,205 | ||||||||||
JPMorgan Chase & Co. | 99,343 | – | – | 99,343 | ||||||||||
RBC Capital Markets Corp. | 64,535 | – | – | 64,535 | ||||||||||
Total | $ | 326,063 | $ | – | $ | – | $ | 326,063 | ||||||
* | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
The Portfolio does not require the counterparty to post collateral for forward currency contracts; however, the Portfolio will segregate cash or high-grade securities with its custodian in an amount at all times equal to or greater than the Portfolio’s commitment with respect to these contracts. Such segregated assets are denoted on the accompanying Schedule of Investments and are evaluated daily to ensure their market value equals or exceeds the current market value of the Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities as collateral daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized gain on OTC derivative contracts with a particular counterparty. The Portfolio may deposit cash as collateral with the counterparty and/or custodian daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized loss on OTC derivative contacts with a particular counterparty. The collateral amounts are subject to minimum exposure requirements and initial margin requirements. Collateral amounts are monitored and subsequently adjusted up or down as valuations fluctuate by at least the minimum exposure requirement. Collateral reduces the risk of loss.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
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Restricted Security Transactions
Restricted securities held by the Portfolio may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933, as amended. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of the Portfolio to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist.
Sovereign Debt
The Portfolio may invest in U.S. and foreign government debt securities (“sovereign debt”). Investments in U.S. sovereign debt are considered low risk. However, investments in non-U.S. sovereign debt can involve a high degree of risk, including the risk that the governmental entity that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or to pay the interest on its sovereign debt in a timely manner. A sovereign debtor’s willingness or ability to satisfy its debt obligation may be affected by various factors, including its cash flow situation, the extent of its foreign currency reserves, the availability of foreign exchange when a payment is due, the relative size of its debt position in relation to its economy as a whole, the sovereign debtor’s policy toward international lenders, and local political constraints to which the governmental entity may be subject. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies, and other entities. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance, or repay principal or interest when due may result in the cancellation of third party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to timely service its debts. The Portfolio may be requested to participate in the rescheduling of such sovereign debt and to extend further loans to governmental entities, which may adversely affect the Portfolio’s holdings. In the event of default, there may be limited or no legal remedies for collecting sovereign debt and there may be no bankruptcy proceedings through which the Portfolio may collect all or part of the sovereign debt that a governmental entity has not repaid.
When-Issued Securities
The Portfolio may purchase or sell securities on a when-issued or delayed delivery basis. When-issued and delayed delivery securities in which the Portfolio may invest include U.S. Treasury Securities, municipal bonds, bank loans, and other similar instruments. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolio may hold liquid assets as collateral with the Portfolio’s custodian sufficient to cover the purchase price.
4. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s contractual investment advisory fee rate (expressed as an annual rate).
Contractual | ||||||||
Average Daily | Investment | |||||||
Net Assets | Advisory Fee (%) | |||||||
Portfolio | of the Portfolio | (annual rate) | ||||||
Janus Aspen Balanced Portfolio | All Asset Levels | 0.55 | ||||||
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
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Notes to Financial Statements (continued)
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
5. | Federal Income Tax |
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 primarily consist of deferred compensation 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. 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.
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Undistributed | Undistributed | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Balanced Portfolio | $ | 8,652,811 | $ | 36,994,900 | $ | – | $ | – | $ | – | $ | (21,865) | $ | 269,300,551 | |||||||||
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, 2013 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/(depreciation) on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in partnerships.
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Balanced Portfolio | $ | 1,067,259,041 | $ | 271,416,977 | $ | (2,116,426) | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Balanced Portfolio | $ | 22,565,797 | $ | 48,937,675 | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Balanced Portfolio | $ | 24,834,510 | $ | 66,071,061 | $ | – | $ | – | |||||||||
6. | Capital Share Transactions |
For the years ended December 31 | Janus Aspen Balanced Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 875 | 630 | ||||||||
Reinvested dividends and distributions | 1,196 | 1,745 | ||||||||
Shares repurchased | (2,408) | (18,021) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (337) | (15,646) | ||||||||
Shares Outstanding, Beginning of Period | 16,035 | 31,681 | ||||||||
Shares Outstanding, End of Period | 15,698 | 16,035 |
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Notes to Financial Statements (continued)
For the years ended December 31 | Janus Aspen Balanced Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 11,870 | 2,562 | ||||||||
Reinvested dividends and distributions | 1,348 | 1,717 | ||||||||
Shares repurchased | (3,414) | (14,382) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 9,804 | (10,103) | ||||||||
Shares Outstanding, Beginning of Period | 17,410 | 27,513 | ||||||||
Shares Outstanding, End of Period | 27,214 | 17,410 |
7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Balanced Portfolio | $ | 529,156,709 | $ | 459,746,402 | $ | 488,703,648 | $ | 328,119,584 | ||||||
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of 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, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September��30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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Additional Information (unaudited) (continued)
charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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Additional Information (unaudited) (continued)
• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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Additional Information (unaudited) (continued)
conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s managers as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s managers may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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Useful Information About Your Portfolio Report (unaudited) (continued)
such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
46 | DECEMBER 31, 2013
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Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio managers. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Balanced Portfolio | $ | 48,937,675 | ||||||||
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Balanced Portfolio | 44% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office* and | Principal Occupations During the | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | 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 | Chief Investment Officer Fixed Income and Executive Vice President of Janus Capital; Director of Perkins Investment Management LLC; and Portfolio Manager for other Janus accounts. Formerly, Executive Vice President of Janus Distributors LLC and Janus Services LLC (2007-2013). | |||
Robin C. Beery** 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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OFFICERS (continued)
Term of Office* and | Principal Occupations During the | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Past Five Years | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
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Notes
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
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Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55425 | 109-02-81113 02-14 |
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annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen Enterprise Portfolio (unaudited)
PORTFOLIO SNAPSHOT We believe that investing in companies with sustainable growth and high return on invested capital can drive consistent returns and allow us to outperform our benchmark and peers over time with moderate risk. We seek to identify mid-cap companies with high-quality management teams that wisely allocate capital to fund and drive growth over time. | ![]() Brian Demain portfolio manager |
PERFORMANCE OVERVIEW
During the 12 months ended December 31, 2013, Janus Aspen Enterprise Portfolio’s Institutional Shares and Service Shares returned 32.38% and 32.04%, respectively. Meanwhile, the Portfolio’s benchmark, the Russell Midcap Growth Index, returned 35.74%.
INVESTMENT ENVIRONMENT
Mid-cap equities enjoyed a significant climb during the year, driven by an economic recovery in the U.S. and signs of a recovery in Europe. While equities rose higher during the period, the market also experienced bouts of volatility due to concerns the Federal Reserve (Fed) might taper its quantitative easing program. However, markets responded favorably in late December when the Fed’s announcement about tapering was more gradual than many expected.
PERFORMANCE DISCUSSION
The Portfolio had significant gains this year, but underperformed its benchmark, the Russell Midcap Growth Index. Given the companies we tend to emphasize in the Portfolio, our relative performance was in line with our expectations. Our Portfolio tends to emphasize companies with more predictable business models, recurring revenue streams and strong competitive positioning that can allow the companies to take market share and experience sustainable, long-term growth. We believe this focus should help the Portfolio outperform when markets are down and drive relative outperformance over full market cycles. In sharp rising markets like the one experienced this year, we would still expect our companies to put up positive results (and we generally saw that play out during the period), but we would not always expect to keep up with the benchmark in that type of market environment.
Our stock selection in the industrials sector was a large detractor from relative performance this year. Within the sector, we tend to focus on business services, industrial distributors and non-asset based transportation companies. These companies tend to have higher returns on invested capital, and should produce more steady revenue over the long term, in our view. But as the economy rebounded this year, those stocks did not enjoy as strong a rebound as more economically sensitive industrial companies. C.H. Robinson Worldwide was our largest detractor within the sector. The stock fell in part due to concerns about competitive pressure leading to lower prices for its truck freight forwarding business. Our long-term view, however, is that C.H. Robinson has the lowest cost structure among its competitors, which will allow it to better withstand lower prices.
In addition to our industrials holdings, a couple of other holdings were large detractors from performance. Li & Fung was our largest detractor. We continue to like the long-term outlook for the company, which we believe has an incredibly unique business model. Li & Fung’s main business line, its sourcing business, links a fragmented retail industry with a fragmented network of factories across the globe. Linking these two fragmented industries requires tremendous scale, which we believe is an important competitive advantage for Li & Fung. With a wider network of factories, we believe Li & Fung can help retailers find the best factories to procure their goods within the right price range, according to the right specifications and within the right time frame. Retailers generally cannot align those needs with factories on their own.
Potash Corporation of Saskatchewan was also a leading detractor. Potash stocks fell in the third quarter, after a breakup of a marketing consortium of potash suppliers in Belarus and Russia created fear that pricing dynamics for the industry could break down, affecting all potash companies. Over the long term, we think market participants will act rationally and there will not be downward pressure on potash prices. We also think long-term demand for potash will increase. Potash is a key ingredient in fertilizer and more potash will be needed as it starts being used more frequently in emerging market crops.
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Table of Contents
Janus Aspen Enterprise Portfolio (unaudited)
While the aforementioned stocks negatively impacted performance, we would highlight that it has been a good year for most companies we own. Several health care companies were among our top performers. Celgene was up 114% and was our largest contributor. During the year, a global study pointed to the benefits of using Celgene’s drug Revlimid as a first-line treatment for multiple myeloma. Currently, the drug is only approved as a second-line treatment for the disease, and using Revlimid earlier in the treatment cycle could meaningfully expand its addressable market, especially outside the United States. Other drugs in Celgene’s pipeline also offer promising potential. We think the company is in the early stages of a major new product cycle, with other potential meaningful contributors including Abraxane for pancreatic cancer, Pomalyst for refractory multiple myeloma, and Apremilast, an oral drug to treat psoriatic arthritis and psoriasis. The stock rose as management has explained to the market that multiyear growth will be driven by four different drug franchises, and that Celgene is much more than a one-product company.
Athenahealth was another top contributor from the health care sector. The company is a large holding in our Portfolio because we believe it is significantly transforming the utilization of information in health care. Athenahealth helps physician groups become more efficient by providing technology solutions around practice management, electronic recordkeeping and care-coordination services. As more focus is put on wringing costs from the health care industry, we think the value proposition of athenahealth’s solutions will continue to be in greater demand. The stock rose significantly this year as the company signed a number of deals that add large groups of health care providers to its customer base, further validating the value athenahealth provides to the industry.
Outside the health care sector, VistaPrint was our largest contributor. The company designs and produces marketing collateral for small businesses and consumers. The company uses its scale and high-volume printing presses to manage and produce small-volume printing orders from a wide range of small businesses and consumers. The ability to produce these small orders profitably requires tremendous scale, which gives VistaPrint a competitive advantage, in our view. A few years ago, the stock fell when the company announced it would enter a reinvestment cycle that would cut margins in the near term, but allow the company to grow its business over a multiyear period. We added to the position at the time, and we believe we are seeing evidence that VistaPrint is translating its business plan into revenue growth.
Please see the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
OUTLOOK
The economy has shown signs of strengthening, but many of the positives about the economy are already reflected in stock prices. We’ve experienced back-to-back years of strong returns in equity markets, and for many companies, earnings growth has not kept up with stock-price appreciation. After multiple expansion for most stocks, we believe the mix between more risky, potentially overvalued stocks and those that still offer more reward is more balanced than a year ago. As we head toward what we believe are the later phases of a bull market, we feel positive about the positioning of our Portfolio. Going forward, we believe individual companies will need to put up reasonable earnings growth for further stock appreciation, and we believe this favors the types of high-quality, durable growth companies we seek to invest in.
We also like how the Portfolio is positioned as we likely experience higher interest rates. We focus on companies with high return on invested capital. In a rising rate environment, we feel these companies are in a favorable position because rising rates will have less impact on their ability to carry out long-term growth initiatives and business plans than they will have for a number of mid-cap companies with more speculative business models that have previously had easy access to cheap funding.
Thank you for your investment in Janus Aspen Enterprise Portfolio.
2 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Janus Aspen Enterprise Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Celgene Corp. | 1.49% | |||
athenahealth, Inc. | 1.45% | |||
VistaPrint N.V. (U.S. Shares) | 1.44% | |||
Incyte Corp., Ltd. | 1.40% | |||
HEICO Corp. – Class A | 1.33% |
5 Bottom Performers – Holdings
Contribution | ||||
Li & Fung, Ltd. | –0.56% | |||
Potash Corp. of Saskatchewan, Inc. (U.S. Shares) | –0.31% | |||
C.H. Robinson Worldwide, Inc. | –0.09% | |||
Teradata Corp. | –0.07% | |||
Coty, Inc. – Class A | 0.00% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell Midcap® Growth | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Health Care | 2.70% | 19.00% | 13.07% | |||||||||
Information Technology | 1.81% | 32.15% | 16.37% | |||||||||
Financials | 1.10% | 5.43% | 8.21% | |||||||||
Utilities | 0.03% | 0.00% | 0.71% | |||||||||
Materials | –0.20% | 2.16% | 6.09% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell Midcap® Growth | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Consumer Discretionary | –2.85% | 6.58% | 24.96% | |||||||||
Industrials | –2.00% | 24.84% | 15.01% | |||||||||
Energy | –1.44% | 4.72% | 5.87% | |||||||||
Other** | –0.87% | 2.04% | 0.00% | |||||||||
Telecommunication Services | –0.45% | 2.38% | 1.65% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
Janus Aspen Series | 3
Table of Contents
Janus Aspen Enterprise Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Solera Holdings, Inc. Software | 3.1% | |||
Verisk Analytics, Inc. – Class A Professional Services | 2.9% | |||
Dresser-Rand Group, Inc. Energy Equipment & Services | 2.9% | |||
Varian Medical Systems, Inc. Health Care Equipment & Supplies | 2.8% | |||
VistaPrint N.V. (U.S. Shares) Internet Software & Services | 2.6% | |||
14.3% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas13p01.gif)
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas13t01.gif)
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas13c01.gif)
4 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas13m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Enterprise Portfolio – Institutional Shares | 32.38% | 22.78% | 11.43% | 10.54% | 0.69% | ||||||
Janus Aspen Enterprise Portfolio – Service Shares | 32.04% | 22.46% | 11.15% | 10.26% | 0.94% | ||||||
Russell Midcap® Growth Index | 35.74% | 23.37% | 9.77% | 9.68% | |||||||
Morningstar Quartile – Institutional Shares | 3rd | 1st | 1st | 2nd | |||||||
Morningstar Ranking – based on total returns for Mid-Cap Growth Funds | 496/736 | 135/678 | 46/600 | 77/224 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on 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.
See important disclosures on the next page.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Enterprise Portfolio (unaudited)
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
* | The Portfolio’s inception date – September 13, 1993 |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,176.10 | $ | 3.78 | $ | 1,000.00 | $ | 1,021.73 | $ | 3.52 | 0.69% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,174.40 | $ | 5.15 | $ | 1,000.00 | $ | 1,020.47 | $ | 4.79 | 0.94% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
6 | DECEMBER 31, 2013
Table of Contents
Janus Aspen Enterprise Portfolio
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Common Stock – 99.1% | ||||||||||
Aerospace & Defense – 5.7% | ||||||||||
405,632 | HEICO Corp. – Class A | $ | 17,085,220 | |||||||
42,243 | Precision Castparts Corp. | 11,376,040 | ||||||||
60,175 | TransDigm Group, Inc. | 9,689,378 | ||||||||
38,150,638 | ||||||||||
Air Freight & Logistics – 2.7% | ||||||||||
135,294 | C.H. Robinson Worldwide, Inc. | 7,893,052 | ||||||||
227,666 | Expeditors International of Washington, Inc. | 10,074,220 | ||||||||
17,967,272 | ||||||||||
Airlines – 1.3% | ||||||||||
186,797 | Ryanair Holdings PLC (ADR)** | 8,766,383 | ||||||||
Biotechnology – 4.8% | ||||||||||
78,340 | Celgene Corp.* | 13,236,327 | ||||||||
213,575 | Incyte Corp., Ltd.* | 10,813,302 | ||||||||
82,745 | Medivation, Inc.* | 5,280,786 | ||||||||
85,973 | NPS Pharmaceuticals, Inc.* | 2,610,140 | ||||||||
31,940,555 | ||||||||||
Capital Markets – 2.8% | ||||||||||
249,996 | LPL Financial Holdings, Inc. | 11,757,312 | ||||||||
84,730 | T. Rowe Price Group, Inc. | 7,097,832 | ||||||||
18,855,144 | ||||||||||
Chemicals – 1.2% | ||||||||||
249,420 | Potash Corp. of Saskatchewan, Inc. (U.S. Shares)** | 8,220,883 | ||||||||
Commercial Services & Supplies – 0.7% | ||||||||||
197,076 | Ritchie Bros. Auctioneers, Inc. (U.S. Shares)** | 4,518,953 | ||||||||
Communications Equipment – 1.1% | ||||||||||
103,820 | Motorola Solutions, Inc. | 7,007,850 | ||||||||
Computers & Peripherals – 0.4% | ||||||||||
4,871 | Apple, Inc. | 2,733,167 | ||||||||
Containers & Packaging – 0.6% | ||||||||||
81,066 | Ball Corp. | 4,187,870 | ||||||||
Diversified Financial Services – 2.0% | ||||||||||
311,413 | MSCI, Inc.* | 13,614,976 | ||||||||
Electrical Equipment – 4.1% | ||||||||||
76,108 | AMETEK, Inc. | 4,008,608 | ||||||||
45,537 | Roper Industries, Inc. | 6,315,071 | ||||||||
440,207 | Sensata Technologies Holding N.V.* | 17,066,826 | ||||||||
27,390,505 | ||||||||||
Electronic Equipment, Instruments & Components – 5.5% | ||||||||||
142,446 | Amphenol Corp. – Class A | 12,703,334 | ||||||||
638,200 | Flextronics International, Ltd.* | 4,958,814 | ||||||||
102,861 | National Instruments Corp. | 3,293,609 | ||||||||
287,267 | TE Connectivity, Ltd. (U.S. Shares) | 15,831,285 | ||||||||
36,787,042 | ||||||||||
Energy Equipment & Services – 2.9% | ||||||||||
321,355 | Dresser-Rand Group, Inc.* | 19,162,399 | ||||||||
Food Products – 0.6% | ||||||||||
46,066 | Mead Johnson Nutrition Co. | 3,858,488 | ||||||||
Health Care Equipment & Supplies – 4.8% | ||||||||||
48,578 | IDEXX Laboratories, Inc.* | 5,167,242 | ||||||||
279,193 | Masimo Corp. | 8,160,812 | ||||||||
238,970 | Varian Medical Systems, Inc.* | 18,565,579 | ||||||||
31,893,633 | ||||||||||
Health Care Providers & Services – 2.1% | ||||||||||
104,928 | Henry Schein, Inc.* | 11,989,073 | ||||||||
52,818 | Premier, Inc. – Class A* | 1,941,590 | ||||||||
13,930,663 | ||||||||||
Health Care Technology – 2.2% | ||||||||||
110,311 | athenahealth, Inc.* | 14,836,829 | ||||||||
Hotels, Restaurants & Leisure – 0.4% | ||||||||||
56,194 | Dunkin’ Brands Group, Inc. | 2,708,551 | ||||||||
Information Technology Services – 8.3% | ||||||||||
377,514 | Amdocs, Ltd. (U.S. Shares) | 15,568,678 | ||||||||
127,118 | Fidelity National Information Services, Inc. | 6,823,694 | ||||||||
130,561 | Gartner, Inc.* | 9,276,359 | ||||||||
68,413 | Global Payments, Inc. | 4,446,161 | ||||||||
156,635 | Jack Henry & Associates, Inc. | 9,274,358 | ||||||||
137,431 | Teradata Corp.* | 6,251,736 | ||||||||
40,333 | WEX, Inc.* | 3,994,177 | ||||||||
55,635,163 | ||||||||||
Insurance – 1.0% | ||||||||||
78,153 | Aon PLC | 6,556,255 | ||||||||
Internet Software & Services – 3.3% | ||||||||||
14,299 | CoStar Group, Inc.* | 2,639,309 | ||||||||
309,280 | VistaPrint N.V. (U.S. Shares)* | 17,582,568 | ||||||||
69,350 | Youku Tudou, Inc. (ADR)* | 2,101,305 | ||||||||
22,323,182 | ||||||||||
Life Sciences Tools & Services – 4.9% | ||||||||||
85,073 | Life Technologies Corp.* | 6,448,533 | ||||||||
18,680 | Mettler-Toledo International, Inc.* | 4,531,581 | ||||||||
110,580 | PerkinElmer, Inc. | 4,559,213 | ||||||||
60,786 | Techne Corp. | 5,754,611 | ||||||||
42,376 | Thermo Fisher Scientific, Inc. | 4,718,568 | ||||||||
68,245 | Waters Corp.* | 6,824,500 | ||||||||
32,837,006 | ||||||||||
Machinery – 1.9% | ||||||||||
108,901 | Colfax Corp.* | 6,935,904 | ||||||||
78,688 | Wabtec Corp. | 5,844,158 | ||||||||
12,780,062 | ||||||||||
Media – 2.7% | ||||||||||
69,050 | Discovery Communications, Inc. – Class C* | 5,790,533 | ||||||||
77,177 | Lamar Advertising Co. – Class A* | 4,032,498 | ||||||||
110,071 | Omnicom Group, Inc. | 8,185,981 | ||||||||
18,009,012 | ||||||||||
Oil, Gas & Consumable Fuels – 1.2% | ||||||||||
189,480 | World Fuel Services Corp. | 8,177,957 | ||||||||
Pharmaceuticals – 0.4% | ||||||||||
39,197 | Endo Health Solutions, Inc.* | 2,644,230 | ||||||||
Professional Services – 2.9% | ||||||||||
296,841 | Verisk Analytics, Inc. – Class A*,** | 19,508,390 | ||||||||
Road & Rail – 2.1% | ||||||||||
46,260 | Canadian Pacific Railway, Ltd. (U.S. Shares)** | 7,000,063 | ||||||||
123,453 | Landstar System, Inc. | 7,092,375 | ||||||||
14,092,438 | ||||||||||
Semiconductor & Semiconductor Equipment – 6.8% | ||||||||||
1,270,630 | Atmel Corp.* | 9,949,033 | ||||||||
187,776 | KLA-Tencor Corp. | 12,104,041 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Enterprise Portfolio
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Semiconductor & Semiconductor Equipment – (continued) | ||||||||||
1,316,106 | ON Semiconductor Corp.* | $ | 10,844,713 | |||||||
265,614 | Xilinx, Inc. | 12,196,995 | ||||||||
45,094,782 | ||||||||||
Software – 7.9% | ||||||||||
646,871 | Cadence Design Systems, Inc.* | 9,069,131 | ||||||||
29,579 | FactSet Research Systems, Inc. | 3,211,688 | ||||||||
131,419 | Intuit, Inc. | 10,029,898 | ||||||||
110,280 | NICE Systems, Ltd. (ADR) | 4,517,069 | ||||||||
295,041 | Solera Holdings, Inc. | 20,877,101 | ||||||||
119,233 | SS&C Technologies Holdings, Inc.* | 5,277,253 | ||||||||
52,982,140 | ||||||||||
Specialty Retail – 0.6% | ||||||||||
61,998 | L Brands, Inc. | 3,834,576 | ||||||||
Textiles, Apparel & Luxury Goods – 4.4% | ||||||||||
55,545 | Carter’s, Inc. | 3,987,576 | ||||||||
150,334 | Gildan Activewear, Inc.** | 8,014,306 | ||||||||
7,049,720 | Li & Fung, Ltd. | 9,091,720 | ||||||||
241,124 | Wolverine World Wide, Inc. | 8,188,571 | ||||||||
29,282,173 | ||||||||||
Trading Companies & Distributors – 2.8% | ||||||||||
82,537 | Fastenal Co. | 3,921,333 | ||||||||
94,045 | MSC Industrial Direct Co., Inc. – Class A | 7,605,419 | ||||||||
27,653 | W.W. Grainger, Inc. | 7,063,129 | ||||||||
18,589,881 | ||||||||||
Wireless Telecommunication Services – 2.0% | ||||||||||
178,099 | Crown Castle International Corp.* | 13,077,810 | ||||||||
Total Common Stock (cost $371,893,754) | 661,956,858 | |||||||||
Money Market – 0.9% | ||||||||||
5,999,739 | Janus Cash Liquidity Fund LLC, 0%£ (cost $5,999,739) | 5,999,739 | ||||||||
Total Investments (total cost $377,893,493) – 100.0% | 667,956,597 | |||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.0)% | (237,729) | |||||||||
Net Assets – 100% | $ | 667,718,868 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Canada | $ | 27,754,205 | 4.1% | |||||
China | 2,101,305 | 0.3% | ||||||
Hong Kong | 9,091,720 | 1.4% | ||||||
Ireland | 8,766,383 | 1.3% | ||||||
Israel | 4,517,069 | 0.7% | ||||||
United States†† | 615,725,915 | 92.2% | ||||||
Total | $ | 667,956,597 | 100.0% |
†† | Includes Cash Equivalents of 0.9%. |
Forward Currency Contracts, Open
Unrealized | ||||||||||||
Currency Units | Currency | Appreciation/ | ||||||||||
Counterparty/Currency and Settlement Date | Sold | Value U.S. $ | (Depreciation) | |||||||||
Credit Suisse International: | ||||||||||||
Canadian Dollar 1/9/14 | 6,500,000 | $ | 6,118,964 | $ | 109,536 | |||||||
Euro 1/9/14 | 1,450,000 | 1,994,602 | (32,101) | |||||||||
8,113,566 | 77,435 | |||||||||||
HSBC Securities (USA), Inc.: | ||||||||||||
Canadian Dollar 1/16/14 | 530,000 | 498,837 | (2,085) | |||||||||
Euro 1/16/14 | 1,720,000 | 2,366,002 | (6,420) | |||||||||
2,864,839 | (8,505) | |||||||||||
JPMorgan Chase & Co.: Euro 1/23/14 | 1,535,000 | 2,111,512 | (3,789) | |||||||||
RBC Capital Markets Corp.: Euro 1/16/14 | 1,340,000 | 1,843,281 | 1,487 | |||||||||
Total | $ | 14,933,198 | $ | 66,628 | ||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Notes to Schedule of Investments and Other Information
Russell Midcap® Growth Index | Measures the performance of those Russell Midcap® Index companies with higher price-to-book ratios and higher forecasted growth values. | |
ADR | American Depositary Receipt | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
U.S. Shares | Securities of foreign companies trading on an American stock exchange. |
* | Non-income producing security. | |
** | A portion of this security or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Enterprise Portfolio | $ | 47,035,788 | |||
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Enterprise Portfolio | |||||||||||||||||||||
Janus Cash Liquidity Fund LLC | 89,259,142 | $ | 89,259,142 | (95,870,000) | $ | (95,870,000) | $ | – | $ | 13,180 | $ | 5,999,739 | |||||||||
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Enterprise Portfolio | |||||||||||
Common Stock | $ | 661,956,858 | $ | – | $ | – | |||||
Money Market | – | 5,999,739 | – | ||||||||
Total Investments in Securities | $ | 661,956,858 | $ | 5,999,739 | $ | – | |||||
Other Financial Instruments(a)- Assets: | |||||||||||
Forward Currency Contracts | $ | – | $ | 111,023 | $ | – | |||||
Other Financial Instruments(a) – Liabilities: | |||||||||||
Forward Currency Contracts | $ | – | $ | 44,395 | $ | – | |||||
(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. |
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Statement of Assets and Liabilities
Janus Aspen | ||||||||||
As of December 31, 2013 | Enterprise | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 377,893 | ||||||||
Unaffiliated investments at value | $ | 661,957 | ||||||||
Affiliated investments at value | 6,000 | |||||||||
Cash | 1 | |||||||||
Receivables: | ||||||||||
Closed foreign currency contracts | 1 | |||||||||
Portfolio shares sold | 156 | |||||||||
Dividends | 438 | |||||||||
Non-interested Trustees’ deferred compensation | 13 | |||||||||
Other assets | 7 | |||||||||
Forward currency contracts | 111 | |||||||||
Total Assets | 668,684 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Investments purchased | 2 | |||||||||
Portfolio shares repurchased | 408 | |||||||||
Advisory fees | 367 | |||||||||
Fund administration fees | 6 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 56 | |||||||||
Non-interested Trustees’ fees and expenses | 3 | |||||||||
Non-interested Trustees’ deferred compensation fees | 13 | |||||||||
Accrued expenses and other payables | 66 | |||||||||
Forward currency contracts | 44 | |||||||||
Total Liabilities | 965 | |||||||||
Net Assets | $ | 667,719 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 331,148 | ||||||||
Undistributed net investment income* | 717 | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 45,722 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 290,132 | |||||||||
Total Net Assets | $ | 667,719 | ||||||||
Net Assets - Institutional Shares | $ | 407,049 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 6,904 | |||||||||
Net Asset Value Per Share | $ | 58.96 | ||||||||
Net Assets - Service Shares | $ | 260,670 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 4,589 | |||||||||
Net Asset Value Per Share | $ | 56.80 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
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Statement of Operations
Janus Aspen | ||||||
For the year ended December 31, 2013 | Enterprise | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Dividends | $ | 5,954 | ||||
Dividends from affiliates | 13 | |||||
Other Income | – | |||||
Foreign tax withheld | (87) | |||||
Total Investment Income | 5,880 | |||||
Expenses: | ||||||
Advisory fees | 3,908 | |||||
Internal servicing expense - Institutional Shares | 3 | |||||
Internal servicing expense - Service Shares | 2 | |||||
Shareholder reports expense | 81 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | 26 | |||||
Custodian fees | 18 | |||||
Professional fees | 37 | |||||
Non-interested Trustees’ fees and expenses | 16 | |||||
Fund administration fees | 61 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 589 | |||||
Other expenses | 34 | |||||
Total Expenses | 4,776 | |||||
Net Expenses after Waivers and Expense Offsets | 4,776 | |||||
Net Investment Income | 1,104 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 57,080 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 111,693 | |||||
Net Gain on Investments | 168,773 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 169,877 |
See Notes to Financial Statements.
Janus Aspen Series | 11
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Statements of Changes in Net Assets
�� | Janus Aspen | |||||||||
Enterprise | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 1,104 | $ | 2,348 | ||||||
Net realized gain from investment and foreign currency transactions | 57,080 | 56,095 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 111,693 | 26,793 | ||||||||
Net Increase in Net Assets Resulting from Operations | 169,877 | 85,236 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (1,886) | – | ||||||||
Service Shares | (856) | – | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (2,742) | – | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 22,797 | 18,805 | ||||||||
Service Shares | 36,588 | 44,824 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 1,886 | – | ||||||||
Service Shares | 856 | – | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (62,152) | (64,792) | ||||||||
Service Shares | (54,061) | (53,285) | ||||||||
Net Decrease from Capital Share Transactions | (54,086) | (54,448) | ||||||||
Net Increase in Net Assets | 113,049 | 30,788 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 554,670 | 523,882 | ||||||||
End of period | $ | 667,719 | $ | 554,670 | ||||||
Undistributed Net Investment Income* | $ | 717 | $ | 2,355 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2013
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Financial Highlights
Institutional Shares
Janus Aspen Enterprise Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $44.77 | $38.17 | $38.72 | $30.79 | $21.26 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.22 | 0.30 | 0.10 | 0.09 | 0.05 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 14.23 | 6.30 | (0.65) | 7.86 | 9.48 | |||||||||||||||||
Total from Investment Operations | 14.45 | 6.60 | (0.55) | 7.95 | 9.53 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.26) | – | – | (0.02) | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (0.26) | – | – | (0.02) | – | |||||||||||||||||
Net Asset Value, End of Period | $58.96 | $44.77 | $38.17 | $38.72 | $30.79 | |||||||||||||||||
Total Return | 32.38% | 17.29% | (1.42)% | 25.85% | 44.83% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $407,049 | $341,699 | $333,094 | $394,500 | $371,092 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $373,893 | $344,014 | $367,307 | $359,669 | $311,752 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.69% | 0.69% | 0.68% | 0.68% | 0.70% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.69% | 0.69% | 0.68% | 0.68% | 0.70% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.28% | 0.52% | (0.17)% | (0.01)% | 0.02% | |||||||||||||||||
Portfolio Turnover Rate | 15% | 15% | 15% | 24% | 36% |
Service Shares
Janus Aspen Enterprise Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $43.18 | $36.91 | $37.53 | $29.90 | $20.70 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | (0.03) | 0.09 | (0.17) | (0.10) | (0.09) | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 13.83 | 6.18 | (0.45) | 7.73 | 9.29 | |||||||||||||||||
Total from Investment Operations | 13.80 | 6.27 | (0.62) | 7.63 | 9.20 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.18) | – | – | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (0.18) | – | – | – | – | |||||||||||||||||
Net Asset Value, End of Period | $56.80 | $43.18 | $36.91 | $37.53 | $29.90 | |||||||||||||||||
Total Return | 32.04% | 16.99% | (1.65)% | 25.52% | 44.44% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $260,670 | $212,971 | $190,788 | $243,756 | $221,824 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $234,925 | $206,153 | $223,285 | $220,145 | $196,683 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.94% | 0.94% | 0.93% | 0.93% | 0.95% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.94% | 0.94% | 0.93% | 0.93% | 0.95% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.03% | 0.28% | (0.41)% | (0.26)% | (0.25)% | |||||||||||||||||
Portfolio Turnover Rate | 15% | 15% | 15% | 24% | 36% |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 13
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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 (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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in common stocks. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which
14 | DECEMBER 31, 2013
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may be allocated pro rata to the Portfolio. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American
Janus Aspen Series | 15
Table of Contents
Notes to Financial Statements (continued)
Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold any Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out | ||||||
of Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Enterprise Portfolio | $ | 20,734,863 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year. Financial assets were transferred out of Level 2 to Level 1 as the current market for the securities with quoted prices are considered active.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek
16 | DECEMBER 31, 2013
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to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. | |
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. | |
• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar
Janus Aspen Series | 17
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Notes to Financial Statements (continued)
cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a contract is included in “Net realized gain/(loss) from investment and foreign currency transactions” on the Statement of Operations (if applicable).
The following table, grouped by derivative type, provides information about the fair value and location of derivatives within the Statement of Assets and Liabilities as of December 31, 2013.
Fair Value of Derivative Instruments as of December 31, 2013
Derivatives not accounted | Asset Derivatives | Liability Derivatives | ||||||||||
for as hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Janus Aspen Enterprise Portfolio | ||||||||||||
Foreign Exchange Contracts | Forward currency contracts | $ | 111,023 | Forward currency contracts | $ | 44,395 | ||||||
The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as | Investment and foreign | |||
hedging instruments | currency transactions | |||
Janus Aspen Enterprise Portfolio | ||||
Foreign Exchange Contracts | $ | (301,389 | ) | |
Change in Unrealized Net Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||
Investments, foreign | ||||
currency translations and | ||||
Derivatives not accounted for as | non-interested Trustees’ | |||
hedging instruments | deferred compensation | |||
Janus Aspen Enterprise Portfolio | ||||
Foreign Exchange Contracts | $ | 192,753 | ||
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 financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment
18 | DECEMBER 31, 2013
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advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Offsetting Assets and Liabilities
The Portfolio has recently adopted guidance requiring entities to present gross and net information about transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. Note that for financial reporting purposes, the Portfolio does not offset certain derivative financial instrument’s payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following tables present gross amounts of recognized assets and liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable).
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Notes to Financial Statements (continued)
Offsetting of Financial Assets and Derivative Assets
Gross Amounts Offset in the | ||||||||||||||
Counterparty | Gross Amounts of Recognized Assets | Statement of Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 109,536 | $ | (32,101) | $ | – | $ | 77,435 | ||||||
RBC Capital Markets Corp. | 1,487 | – | – | 1,487 | ||||||||||
Total | $ | 111,023 | $ | (32,101) | $ | – | $ | 78,922 | ||||||
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts Offset in the | ||||||||||||||
Counterparty | Gross Amounts of Recognized Liabilities | Statement of Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 32,101 | $ | (32,101) | $ | – | $ | – | ||||||
HSBC Securities (USA), Inc. | 8,505 | – | – | 8,505 | ||||||||||
JPMorgan Chase & Co. | 3,789 | – | – | 3,789 | ||||||||||
Total | $ | 44,395 | $ | (32,101) | $ | – | $ | 12,294 | ||||||
* | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
The Portfolio does not require the counterparty to post collateral for forward currency contracts; however, the Portfolio will segregate cash or high-grade securities with its custodian in an amount at all times equal to or greater than the Portfolio’s commitment with respect to these contracts. Such segregated assets are denoted on the accompanying Schedule of Investments and are evaluated daily to ensure their market value equals or exceeds the current market value of the Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities as collateral daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized gain on OTC derivative contracts with a particular counterparty. The Portfolio may deposit cash as collateral with the counterparty and/or custodian daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized loss on OTC derivative contacts with a particular counterparty. The collateral amounts are subject to minimum exposure requirements and initial margin requirements. Collateral amounts are monitored and subsequently adjusted up or down as valuations fluctuate by at least the minimum exposure requirement. Collateral reduces the risk of loss.
4. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s contractual investment advisory fee rate (expressed as an annual rate).
Contractual | ||||||||
Average Daily | Investment | |||||||
Net Assets | Advisory Fee (%) | |||||||
Portfolio | of the Portfolio | (annual rate) | ||||||
Janus Aspen Enterprise Portfolio | All Asset Levels | 0.64 | ||||||
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one
20 | DECEMBER 31, 2013
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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, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
5. | Federal Income Tax |
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 primarily consist of deferred compensation 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. 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 | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Enterprise Portfolio | $ | 730,498 | $ | 45,995,444 | $ | – | $ | – | $ | – | $ | (11,132) | $ | 289,855,895 | |||||||||
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Notes to Financial Statements (continued)
During the year ended December 31, 2013, the following capital loss carryovers were utilized by the Portfolio:
Capital Loss | ||||||||||||||
Portfolio | Carryover Utilized | |||||||||||||
Janus Aspen Enterprise Portfolio | $ | 11,277,505 | ||||||||||||
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, 2013 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 Enterprise Portfolio | $ | 378,100,702 | $ | 292,764,802 | $ | (2,908,907) | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Enterprise Portfolio | $ | 2,741,391 | $ | – | $ | – | $ | – | |||||||||
6. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Enterprise Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 444 | 446 | ||||||||
Reinvested dividends and distributions | 37 | – | ||||||||
Shares repurchased | (1,210) | (1,540) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (729) | (1,094) | ||||||||
Shares Outstanding, Beginning of Period | 7,633 | 8,727 | ||||||||
Shares Outstanding, End of Period | 6,904 | 7,633 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 736 | 1,076 | ||||||||
Reinvested dividends and distributions | 18 | – | ||||||||
Shares repurchased | (1,097) | (1,313) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (343) | (237) | ||||||||
Shares Outstanding, Beginning of Period | 4,932 | 5,169 | ||||||||
Shares Outstanding, End of Period | 4,589 | 4,932 |
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7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Enterprise Portfolio | $ | 92,067,531 | $ | 135,586,560 | $ | – | $ | – | ||||||
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of 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 (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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Additional Information (unaudited) (continued)
including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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Additional Information (unaudited) (continued)
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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Additional Information (unaudited) (continued)
to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Useful Information About Your Portfolio Report (unaudited) (continued)
Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Enterprise Portfolio | 100% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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OFFICERS
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations 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 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 | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55331 | 109-02-81116 02-14 |
Table of Contents
annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen Flexible Bond Portfolio (unaudited)
PORTFOLIO SNAPSHOT We believe a bottom-up, fundamentally driven investment process that focuses on credit-oriented investments can generate risk-adjusted outperformance relative to our 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, 2013, Janus Aspen Flexible Bond Portfolio’s Institutional Shares and Service Shares returned -0.14% and -0.32%, respectively, compared with -2.02% for the Portfolio’s benchmark, the Barclays U.S. Aggregate Bond Index.
INVESTMENT ENVIRONMENT
Credit spreads tightened in 2013, supported by global central banks’ continued accommodative monetary policy, signs of global economic improvement, and progress on resolving fiscal issues in the U.S., Europe and Japan. Longer-term Treasury rates rose as improving U.S. economic data encouraged speculation that the Federal Reserve (Fed) would begin to taper its quantitative-easing (QE) program; in December, the Fed confirmed that it would do so beginning in January 2014. Nevertheless, the central bank reiterated its commitment to keeping short-term interest rates low and continuing accommodative monetary policy until the economy was on stronger footing, which lent confidence to risk-asset markets, including corporate credit.
PERFORMANCE DISCUSSION
Security selection and an overweight to corporate credit drove Portfolio outperformance compared with the benchmark, the Barclays U.S. Aggregate Bond Index, in 2013. From an industry sector standpoint, top credit contributors included wireline communications, non-captive diversified financial and banking names. Sector detractors were led by consumer services, property and casualty insurers, and restaurants.
Individual credit contributors were led by telecommunications company Verizon. We invested in Verizon’s record-breaking $49 billion corporate bond issuance in September. It debuted to robust demand, and credit spreads continued to tighten through the end of the year.
Oil and gas producer Chesapeake Energy also contributed. Since the retirement of its former CEO, Aubrey McClendon, in April 2013, Chesapeake’s management team has shown spending discipline and a commitment to developing assets it already owns (as opposed to acquiring more acreage). This was reassuring to credit markets. Non-Executive Chairman of the Board Archie Dunham also has stated that the board wants Chesapeake to become an investment-grade company by paying down debt.
Financial services company CIT Group also contributed. We added to our position in CIT Group amid weakness over the summer, during a broad market sell-off that enhanced valuations, in our opinion. This is a liquid name that bounced back strongly later in the year.
Individual credit detractors were led by ADT Corp. The home security monitoring company underperformed after its management team abruptly chose to give up ADT’s investment-grade ratings by pursuing a policy of returning cash to shareholders in the form of debt-funded dividends, which took balance sheet leverage higher. We sold the credit during the period.
Food company Kraft Foods detracted. We held longer-duration securities compared with the index, which were negatively affected by the sharp rise in longer-term interest rates in May and June. Credit spreads also were relatively tight following the credit’s strong performance to that date. We sold our Kraft holdings during the period.
Brinker International, which owns the Chili’s Grill & Bar and Maggiano’s Little Italy restaurant chains, also detracted. Industry trends were challenging for casual-dining restaurants in the latter half of 2013, as consumers seemed to be buying big-ticket items, such as cars or appliances, instead of dining out. However, we like the company’s strong free cash flow and conservative balance sheet, and believe dining trends will pick up as the economy improves.
Meanwhile, security selection in mortgage-backed securities (MBS) was beneficial, particularly our
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Janus Aspen Flexible Bond Portfolio (unaudited)
preference for prepayment-resistant, higher-coupon MBS. We have sought to avoid the lower-coupon MBS that the Fed has been buying, which provided some buffer against the volatility surrounding Fed tapering during 2013. The Portfolio’s underweight to MBS also contributed to positive relative performance versus the benchmark. Given the market’s relatively rich valuations, we have been gradually reducing our MBS exposure as we wait to see how rapidly the Fed continues to taper QE and how the market deals with rising rates and regulatory uncertainty.
While the Portfolio’s Treasury yield curve positioning detracted on a relative basis, this was countered by our underweight to Treasurys, making our Treasury holdings a net contributor to positive performance.
OUTLOOK
We believe a key theme for 2014 is caution, as fixed income markets will transition to a more normalized interest rate environment and adjust for new policy. We believe growth in developed markets is likely to accelerate in 2014, as the global economy enters a new stage of increased capital expenditure and hiring.
The Fed has announced it will taper quantitative easing by $10 billion per month beginning in January, and we believe there will be additional tapering as 2014 progresses. The greatest focus for fixed-income investors in the coming year will be interest rates and the shape of the yield curve. Market consensus is that longer-term interest rates will move higher, and we share that view. However, we believe the Fed will keep short-term interest rates anchored throughout 2014. This means the yield curve, or the difference between 2-year and 30-year Treasury yields, likely will continue to steepen. The risk to our views remains a very benign global inflation outlook.
As we enter the late stages of the credit cycle, with credit spreads over Treasury yields exceedingly tight, security selection remains important. As the economy improves, corporate management teams should be in a good position to take on more risk. They have significantly deleveraged their balance sheets and capital structures over the last four years and put themselves in a much better position to take advantage of an improving economy.
However, we already are beginning to see the re-emergence of shareholder-friendly activity, such as stock buybacks, increased dividends, mergers and acquisitions. These actions tend to be bad for bondholders. As much as we expect credit security selection to drive performance over the coming year, knowing which securities not to own may be just as important. While keeping a close eye on the interest rate cycle, we will be focused on companies that are transforming and improving their balance sheets. On behalf of every member of our investment team, thank you for your investment in Janus Aspen Flexible Bond Portfolio. We appreciate your entrusting your assets with us, and we look forward to continuing to serve your investment needs.
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(unaudited)
Janus Aspen Flexible Bond Portfolio At A Glance
Portfolio Profile
December 31, 2013
Weighted Average Maturity | 8.0 Years | |
Average Effective Duration* | 5.0 Years | |
30-day Current Yield** | ||
Institutional Shares | ||
Without Reimbursement | 2.62% | |
With Reimbursement | 2.67% | |
Service Shares | ||
Without Reimbursement | 2.38% | |
With Reimbursement | 2.42% | |
Number of Bonds/Notes | 345 |
* | A theoretical measure of price volatility | |
** | Yield will fluctuate |
Ratings†Summary – (% of Fixed Income Securities)
December 31, 2013
AAA | 0.5% | |
AA | 41.0% | |
A | 6.4% | |
BBB | 32.4% | |
BB | 15.3% | |
B | 1.7% | |
CCC | 0.2% | |
Other | 2.5% |
† | Bond ratings provided by Standard & Poor’s (S&P). Not rated securities are not rated by S&P but may be rated by other rating agencies. Bond ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). |
Significant Areas of Investment – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas02b01.gif)
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas02p01.gif)
Janus Aspen Series | 3
Table of Contents
Janus Aspen Flexible Bond Portfolio (unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas02m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||||
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 | –0.14% | 7.14% | 5.88% | 7.05% | 0.57% | 0.55% | |||||||
Janus Aspen Flexible Bond Portfolio – Service Shares | –0.32% | 6.88% | 5.61% | 6.82% | 0.82% | 0.80% | |||||||
Barclays U.S. Aggregate Bond Index | –2.02% | 4.44% | 4.55% | 5.63% | |||||||||
Morningstar Quartile – Institutional Shares | 1st | 2nd | 1st | 1st | |||||||||
Morningstar Ranking – based on total returns for Intermediate-Term Bond Funds | 160/1,105 | 309/961 | 40/865 | 4/440 | |||||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month–end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
Net expense ratios reflect the expense waiver, if any, Janus Capital has contractually agreed to through May 1, 2014.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
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.
High-yield/high-risk bonds, also known as “junk” bonds, involve a greater risk of default and price volatility than investment grade bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which will affect net asset value.
The Portfolio will normally invest at least 80% of its net assets, measured at the time of purchase, in the type of securities described by its name.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
See important disclosures on the next page.
4 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Returns shown for Service Shares for periods prior to December 31, 1999 are derived from the historical performance of Institutional Shares, adjusted to reflect the higher operating expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics. When an expense waiver is in effect, it may have a material effect on the total return or yield, and therefore the ranking for the period.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
* | The Portfolio’s inception date – September 13, 1993 |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,014.20 | $ | 2.79 | $ | 1,000.00 | $ | 1,022.43 | $ | 2.80 | 0.55% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,013.80 | $ | 4.06 | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | 0.80% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
Janus Aspen Series | 5
Table of Contents
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Asset-Backed/Commercial Mortgage-Backed Securities – 4.6% | ||||||||||
$800,000 | AmeriCredit Automobile Receivables Trust 3.3800%, 4/9/18 | $ | 828,610 | |||||||
1,271,000 | AmeriCredit Automobile Receivables Trust 2.6800%, 10/9/18 | 1,281,856 | ||||||||
411,000 | AmeriCredit Automobile Receivables Trust 3.3100%, 10/8/19 | 416,765 | ||||||||
1,152,000 | Aventura Mall Trust 2013-AVM 3.7427%, 12/5/20 (144A) | 1,043,627 | ||||||||
894,328 | Beacon Container Finance LLC 3.7200%, 9/20/27 (144A) | 895,821 | ||||||||
650,000 | Boca Hotel Portfolio Trust 3.2166%, 8/15/26 (144A),‡ | 650,779 | ||||||||
477,000 | Commercial Mortgage Pass Through Certificates 3.3674%, 10/13/28 (144A),‡ | 477,942 | ||||||||
572,000 | Commercial Mortgage Pass Through Certificates 3.4244%, 3/10/31 (144A) | 543,872 | ||||||||
289,000 | Commercial Mortgage Trust 5.6500%, 12/10/49 | 301,241 | ||||||||
2,132,000 | Commercial Mortgage Trust 5.8670%, 12/10/49‡ | 2,336,092 | ||||||||
1,575,956 | FREMF 2010 K-SCT Mortgage Trust 2.0000%, 1/25/20§ | 1,341,138 | ||||||||
1,121,000 | GS Mortgage Securities Corp. II 3.4350%, 12/10/27 (144A),‡ | 975,443 | ||||||||
1,045,000 | GS Mortgage Securities Corp. II 2.7679%, 11/8/29 (144A),‡ | 1,038,553 | ||||||||
483,000 | GS Mortgage Securities Corp. II 3.7679%, 11/8/29 (144A),‡ | 481,316 | ||||||||
524,000 | GS Mortgage Securities Corp. Trust 3.6490%, 1/10/18 (144A),‡ | 515,582 | ||||||||
538,000 | GS Mortgage Securities Corp. Trust 3.5510%, 4/10/34 (144A),‡ | 528,969 | ||||||||
792,000 | Hilton USA Trust 2013-HLT 4.4065%, 11/5/30 (144A) | 792,646 | ||||||||
510,384 | JPMorgan Chase Commercial Mortgage Securities Corp. 3.9166%, 8/15/29 (144A),‡ | 515,738 | ||||||||
800,000 | JPMorgan Chase Commercial Mortgage Securities Trust 3.1566%, 4/15/30 (144A),‡ | 796,482 | ||||||||
380,000 | JPMorgan Chase Commercial Mortgage Securities Trust 3.9066%, 4/15/30 (144A),‡ | 378,640 | ||||||||
869,000 | LB-UBS Commercial Mortgage Trust 2007-C2 5.4930%, 2/15/40‡ | 917,010 | ||||||||
546,000 | Santander Drive Auto Receivables Trust 2.5200%, 9/17/18 | 547,658 | ||||||||
566,000 | Santander Drive Auto Receivables Trust 3.3000%, 9/17/18 | 582,720 | ||||||||
1,931,000 | Wachovia Bank Commercial Mortgage Trust 5.3830%, 12/15/43 | 2,077,742 | ||||||||
964,000 | Wachovia Bank Commercial Mortgage Trust 5.5910%, 4/15/47‡ | 1,049,590 | ||||||||
Total Asset-Backed/Commercial Mortgage-Backed Securities (cost $21,444,458) | 21,315,832 | |||||||||
Bank Loans and Mezzanine Loans – 1.1% | ||||||||||
Basic Industry – 0.2% | ||||||||||
1,001,171 | FMG Resources August 2006 Pty, Ltd. 4.2500%, 6/28/19‡ | 1,013,375 | ||||||||
Communications – 0.3% | ||||||||||
1,211,000 | Tribune Co. 0%, 12/27/20(a),‡ | 1,203,432 | ||||||||
Consumer Cyclical – 0.4% | ||||||||||
1,881,990 | MGM Resorts International 3.5000%, 12/20/19‡ | 1,885,528 | ||||||||
Consumer Non-Cyclical – 0.2% | ||||||||||
930,693 | Quintiles Transnational Corp. 3.7500%, 6/8/18‡ | 929,530 | ||||||||
Total Bank Loans and Mezzanine Loans (cost $5,006,843) | 5,031,865 | |||||||||
Corporate Bonds – 52.3% | ||||||||||
Banking – 6.3% | ||||||||||
1,145,000 | American Express Co. 6.8000%, 9/1/66‡ | 1,219,998 | ||||||||
230,000 | Bank of America Corp. 4.5000%, 4/1/15 | 240,620 | ||||||||
1,299,000 | Bank of America Corp. 1.5000%, 10/9/15 | 1,312,080 | ||||||||
1,589,000 | Bank of America Corp. 3.7500%, 7/12/16 | 1,689,293 | ||||||||
2,294,000 | Bank of America Corp. 8.0000%, 7/30/99‡ | 2,541,752 | ||||||||
652,000 | Citigroup, Inc. 5.0000%, 9/15/14 | 670,572 | ||||||||
1,538,000 | Citigroup, Inc. 5.9000%, 12/29/49 | 1,438,030 | ||||||||
197,000 | Citigroup, Inc. 5.3500%, 11/15/99‡ | 172,966 | ||||||||
655,000 | Goldman Sachs Group, Inc. 5.6250%, 1/15/17 | 721,769 | ||||||||
1,474,000 | Goldman Sachs Group, Inc. 2.3750%, 1/22/18 | 1,479,603 | ||||||||
967,000 | HSBC Bank USA N.A. 4.8750%, 8/24/20 | 1,043,616 | ||||||||
922,000 | Morgan Stanley 4.0000%, 7/24/15 | 962,700 | ||||||||
3,034,000 | Morgan Stanley 3.4500%, 11/2/15 | 3,158,109 | ||||||||
556,000 | Morgan Stanley 4.7500%, 3/22/17 | 606,773 | ||||||||
2,786,000 | Morgan Stanley 5.0000%, 11/24/25 | 2,794,330 | ||||||||
314,000 | Royal Bank of Scotland Group PLC 2.5500%, 9/18/15 | 321,146 | ||||||||
2,126,000 | Royal Bank of Scotland Group PLC 6.1000%, 6/10/23 | 2,143,212 | ||||||||
1,004,000 | Royal Bank of Scotland Group PLC 6.0000%, 12/19/23 | 1,011,149 | ||||||||
1,213,000 | Santander UK PLC 5.0000%, 11/7/23 (144A) | 1,217,512 | ||||||||
1,264,000 | SVB Financial Group 5.3750%, 9/15/20 | 1,392,034 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
6 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Banking – (continued) | ||||||||||
$844,000 | Zions Bancorp 4.5000%, 3/27/17 | $ | 893,648 | |||||||
2,277,000 | Zions Bancorp 5.8000%, 12/15/99‡ | 2,072,070 | ||||||||
29,102,982 | ||||||||||
Basic Industry – 2.8% | ||||||||||
840,000 | ArcelorMittal 5.0000%, 2/25/17 | 900,900 | ||||||||
880,000 | Ashland, Inc. 3.8750%, 4/15/18 | 891,000 | ||||||||
887,000 | Ashland, Inc. 4.7500%, 8/15/22 | 842,650 | ||||||||
1,216,000 | Ashland, Inc. 6.8750%, 5/15/43 | 1,149,120 | ||||||||
595,000 | FMG Resources August 2006 Pty, Ltd. 7.0000%, 11/1/15 (144A) | 617,313 | ||||||||
1,076,000 | FMG Resources August 2006 Pty, Ltd. 8.2500%, 11/1/19 (144A) | 1,207,810 | ||||||||
1,927,000 | LyondellBasell Industries N.V. 5.0000%, 4/15/19 | 2,140,167 | ||||||||
669,000 | Plains Exploration & Production Co. 6.5000%, 11/15/20 | 738,830 | ||||||||
246,000 | Plains Exploration & Production Co. 6.6250%, 5/1/21 | 269,750 | ||||||||
577,000 | Plains Exploration & Production Co. 6.7500%, 2/1/22 | 635,579 | ||||||||
2,646,000 | Plains Exploration & Production Co. 6.8750%, 2/15/23 | 2,950,290 | ||||||||
625,000 | Reliance Steel & Aluminum Co. 4.5000%, 4/15/23 | 613,074 | ||||||||
12,956,483 | ||||||||||
Brokerage – 2.7% | ||||||||||
1,147,000 | Ameriprise Financial, Inc. 7.5180%, 6/1/66‡ | 1,270,303 | ||||||||
1,048,000 | Carlyle Holdings Finance LLC 3.8750%, 2/1/23 (144A) | 999,163 | ||||||||
598,000 | E*TRADE Financial Corp. 6.0000%, 11/15/17 | 635,375 | ||||||||
193,000 | Lazard Group LLC 6.8500%, 6/15/17 | 217,608 | ||||||||
1,561,000 | Lazard Group LLC 4.2500%, 11/14/20 | 1,557,613 | ||||||||
2,195,000 | Neuberger Berman Group LLC / Neuberger Berman Finance Corp. 5.6250%, 3/15/20 (144A) | 2,304,750 | ||||||||
1,475,000 | Neuberger Berman Group LLC / Neuberger Berman Finance Corp. 5.8750%, 3/15/22 (144A) | 1,519,250 | ||||||||
3,393,000 | Raymond James Financial, Inc. 5.6250%, 4/1/24 | 3,559,508 | ||||||||
463,000 | TD Ameritrade Holding Corp. 5.6000%, 12/1/19 | 534,449 | ||||||||
12,598,019 | ||||||||||
Capital Goods – 1.7% | ||||||||||
953,000 | CNH Capital LLC 3.6250%, 4/15/18 | 966,104 | ||||||||
966,000 | Exelis, Inc. 4.2500%, 10/1/16 | 1,020,166 | ||||||||
417,000 | Exelis, Inc. 5.5500%, 10/1/21 | 419,417 | ||||||||
1,365,000 | FLIR Systems, Inc. 3.7500%, 9/1/16 | 1,423,526 | ||||||||
938,000 | Hanson, Ltd. 6.1250%, 8/15/16 | 1,029,455 | ||||||||
1,433,000 | Ingersoll-Rand Global Holding Co., Ltd. 4.2500%, 6/15/23 (144A) | 1,399,627 | ||||||||
322,000 | Interface, Inc. 7.6250%, 12/1/18 | 346,150 | ||||||||
181,000 | Timken Co. 6.0000%, 9/15/14 | 187,445 | ||||||||
825,000 | TransDigm, Inc. 7.7500%, 12/15/18 | 884,812 | ||||||||
262,000 | Vulcan Materials Co. 7.0000%, 6/15/18 | 298,025 | ||||||||
7,974,727 | ||||||||||
Communications – 3.5% | ||||||||||
138,000 | Gannett Co., Inc. 6.3750%, 9/1/15 | 148,005 | ||||||||
867,000 | SBA Tower Trust 2.9330%, 12/15/17 (144A) | 882,438 | ||||||||
632,000 | Sprint Capital Corp. 6.9000%, 5/1/19 | 690,460 | ||||||||
1,369,000 | Sprint Communications, Inc. 7.0000%, 8/15/20 | 1,481,943 | ||||||||
1,318,000 | UBM PLC 5.7500%, 11/3/20 (144A) | 1,370,213 | ||||||||
1,836,000 | Verizon Communications, Inc. 3.6500%, 9/14/18 | 1,943,523 | ||||||||
5,075,000 | Verizon Communications, Inc.** 5.1500%, 9/15/23 | 5,448,987 | ||||||||
2,370,000 | Verizon Communications, Inc. 6.4000%, 9/15/33 | 2,725,787 | ||||||||
1,185,000 | Verizon Communications, Inc. 6.5500%, 9/15/43 | 1,386,401 | ||||||||
16,077,757 | ||||||||||
Consumer Cyclical – 6.6% | ||||||||||
2,966,000 | ADT Corp. 4.1250%, 6/15/23 | 2,632,361 | ||||||||
2,494,000 | Brinker International, Inc. 3.8750%, 5/15/23 | 2,245,136 | ||||||||
376,000 | Continental Rubber of America Corp. 4.5000%, 9/15/19 (144A) | 398,485 | ||||||||
1,109,000 | CVS Caremark Corp. 2.2500%, 12/5/18 | 1,108,676 | ||||||||
1,386,000 | CVS Caremark Corp. 4.0000%, 12/5/23 | 1,383,067 | ||||||||
530,000 | D.R. Horton, Inc. 4.7500%, 5/15/17 | 560,475 | ||||||||
743,000 | Ford Motor Credit Co. LLC 3.0000%, 6/12/17 | 772,213 | ||||||||
836,000 | Ford Motor Credit Co. LLC 6.6250%, 8/15/17 | 968,450 | ||||||||
942,000 | Ford Motor Credit Co. LLC 5.0000%, 5/15/18 | 1,049,302 | ||||||||
2,670,000 | Ford Motor Credit Co. LLC 5.8750%, 8/2/21 | 3,027,003 | ||||||||
1,735,000 | Ford Motor Credit Co. LLC 4.2500%, 9/20/22 | 1,742,974 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Consumer Cyclical – (continued) | ||||||||||
$1,191,000 | General Motors Co. 3.5000%, 10/2/18 (144A) | $ | 1,217,798 | |||||||
3,900,000 | General Motors Co. 4.8750%, 10/2/23 (144A) | 3,948,750 | ||||||||
1,640,000 | General Motors Co. 6.2500%, 10/2/43 (144A) | 1,703,550 | ||||||||
677,000 | General Motors Financial Co., Inc. 3.2500%, 5/15/18 (144A) | 677,000 | ||||||||
919,000 | General Motors Financial Co., Inc. 4.2500%, 5/15/23 (144A) | 874,199 | ||||||||
238,000 | Host Hotels & Resorts L.P. 6.7500%, 6/1/16 | 241,431 | ||||||||
469,000 | Jaguar Land Rover Automotive PLC 5.6250%, 2/1/23 (144A) | 469,000 | ||||||||
390,000 | M.D.C. Holdings, Inc. 5.3750%, 12/15/14 | 404,893 | ||||||||
375,000 | Macy’s Retail Holdings, Inc. 5.9000%, 12/1/16 | 420,629 | ||||||||
516,000 | MGM Resorts International 6.6250%, 7/15/15 | 553,410 | ||||||||
673,000 | MGM Resorts International 7.5000%, 6/1/16 | 753,760 | ||||||||
544,000 | MGM Resorts International 8.6250%, 2/1/19 | 637,840 | ||||||||
846,000 | Starwood Hotels & Resorts Worldwide, Inc. 7.1500%, 12/1/19 | 1,010,253 | ||||||||
442,000 | Toll Brothers Finance Corp. 4.0000%, 12/31/18 | 449,735 | ||||||||
371,000 | Toll Brothers Finance Corp. 5.8750%, 2/15/22 | 383,985 | ||||||||
254,000 | Toll Brothers Finance Corp. 4.3750%, 4/15/23 | 235,585 | ||||||||
788,000 | Wynn Las Vegas LLC / Wynn Las Vegas Capital Corp. 4.2500%, 5/30/23 (144A) | 738,750 | ||||||||
30,608,710 | ||||||||||
Consumer Non-Cyclical – 5.0% | ||||||||||
1,206,000 | AbbVie, Inc. 1.7500%, 11/6/17 | 1,203,934 | ||||||||
1,198,000 | Actavis, Inc. 1.8750%, 10/1/17 | 1,185,506 | ||||||||
223,000 | Constellation Brands, Inc. 3.7500%, 5/1/21 | 209,620 | ||||||||
761,000 | Fresenius Medical Care U.S. Finance II, Inc. 5.8750%, 1/31/22 (144A) | 802,855 | ||||||||
1,840,000 | Life Technologies Corp. 6.0000%, 3/1/20 | 2,114,199 | ||||||||
325,000 | Life Technologies Corp. 5.0000%, 1/15/21 | 351,875 | ||||||||
290,000 | Perrigo Co., Ltd. 2.3000%, 11/8/18 (144A) | 286,238 | ||||||||
870,000 | Perrigo Co., Ltd. 4.0000%, 11/15/23 (144A) | 853,553 | ||||||||
1,521,000 | SABMiller Holdings, Inc. 2.2000%, 8/1/18 (144A) | 1,518,612 | ||||||||
390,000 | Safeway, Inc. 3.9500%, 8/15/20 | 389,857 | ||||||||
1,811,000 | Safeway, Inc. 4.7500%, 12/1/21 | 1,818,545 | ||||||||
383,000 | Sun Merger Sub, Inc. 5.2500%, 8/1/18 (144A) | 401,192 | ||||||||
324,000 | Thermo Fisher Scientific, Inc. 2.4000%, 2/1/19 | 320,984 | ||||||||
246,000 | Thermo Fisher Scientific, Inc. 3.6000%, 8/15/21 | 243,797 | ||||||||
284,000 | Thermo Fisher Scientific, Inc. 3.1500%, 1/15/23 | 264,294 | ||||||||
691,000 | Thermo Fisher Scientific, Inc. 4.1500%, 2/1/24 | 684,434 | ||||||||
195,000 | Thermo Fisher Scientific, Inc. 5.3000%, 2/1/44 | 197,179 | ||||||||
2,926,000 | Tyson Foods, Inc. 6.6000%, 4/1/16 | 3,266,168 | ||||||||
2,119,000 | VPII Escrow Corp. 6.7500%, 8/15/18 (144A) | 2,328,251 | ||||||||
2,386,000 | WM Wrigley Jr. Co. 2.4000%, 10/21/18 (144A) | 2,371,367 | ||||||||
2,384,000 | WM Wrigley Jr. Co. 3.3750%, 10/21/20 (144A) | 2,356,624 | ||||||||
23,169,084 | ||||||||||
Electric – 0.6% | ||||||||||
118,000 | AES Corp. 7.7500%, 10/15/15 | 130,390 | ||||||||
1,096,000 | CMS Energy Corp. 4.2500%, 9/30/15 | 1,154,719 | ||||||||
832,000 | PPL WEM Holdings PLC 3.9000%, 5/1/16 (144A) | 869,447 | ||||||||
543,000 | PPL WEM Holdings PLC 5.3750%, 5/1/21 (144A) | 577,368 | ||||||||
2,731,924 | ||||||||||
Energy – 3.6% | ||||||||||
4,373,000 | Chesapeake Energy Corp. 5.3750%, 6/15/21 | 4,526,055 | ||||||||
1,391,000 | Cimarex Energy Co. 5.8750%, 5/1/22 | 1,470,983 | ||||||||
204,000 | Continental Resources, Inc. 7.1250%, 4/1/21 | 231,285 | ||||||||
2,884,000 | Continental Resources, Inc. 5.0000%, 9/15/22 | 2,995,755 | ||||||||
1,084,000 | Devon Energy Corp. 2.2500%, 12/15/18 | 1,072,643 | ||||||||
619,000 | Motiva Enterprises LLC 5.7500%, 1/15/20 (144A) | 702,947 | ||||||||
1,993,000 | Nabors Industries, Inc. 5.0000%, 9/15/20 | 2,073,840 | ||||||||
153,000 | Nabors Industries, Inc. 4.6250%, 9/15/21 | 153,179 | ||||||||
201,000 | Petrohawk Energy Corp. 7.2500%, 8/15/18 | 216,678 | ||||||||
955,000 | Petrohawk Energy Corp. 6.2500%, 6/1/19 | 1,052,410 | ||||||||
480,000 | Whiting Petroleum Corp. 6.5000%, 10/1/18 | 510,000 | ||||||||
1,650,000 | Whiting Petroleum Corp. 5.0000%, 3/15/19 | 1,687,125 | ||||||||
16,692,900 | ||||||||||
Finance Companies – 3.1% | ||||||||||
1,202,000 | Charles Schwab Corp. 7.0000%, 8/1/99‡ | 1,331,816 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Finance Companies – (continued) | ||||||||||
$3,308,000 | CIT Group, Inc. 4.2500%, 8/15/17 | $ | 3,444,455 | |||||||
497,000 | CIT Group, Inc. 6.6250%, 4/1/18 (144A) | 558,504 | ||||||||
2,063,000 | CIT Group, Inc. 5.5000%, 2/15/19 (144A) | 2,212,567 | ||||||||
1,264,000 | CIT Group, Inc. 5.0000%, 8/1/23 | 1,216,600 | ||||||||
614,000 | GE Capital Trust I 6.3750%, 11/15/67‡ | 663,120 | ||||||||
147,000 | General Electric Capital Corp. 6.3750%, 11/15/67‡ | 159,495 | ||||||||
2,100,000 | General Electric Capital Corp. 7.1250%, 12/15/99‡ | 2,346,750 | ||||||||
2,300,000 | General Electric Capital Corp. 6.2500%, 12/15/99‡ | 2,374,750 | ||||||||
14,308,057 | ||||||||||
Financial – 1.1% | ||||||||||
1,906,000 | Jones Lang LaSalle, Inc. 4.4000%, 11/15/22 | 1,830,635 | ||||||||
3,239,000 | LeasePlan Corp. N.V. 2.5000%, 5/16/18 (144A) | 3,148,956 | ||||||||
4,979,591 | ||||||||||
Industrial – 0.7% | ||||||||||
474,000 | CBRE Services, Inc. 6.6250%, 10/15/20 | 507,180 | ||||||||
470,000 | Cintas Corp. No. 2 2.8500%, 6/1/16 | 484,803 | ||||||||
520,000 | Cintas Corp. No. 2 4.3000%, 6/1/21 | 539,850 | ||||||||
970,000 | URS Corp. 4.3500%, 4/1/17 (144A) | 988,163 | ||||||||
940,000 | URS Corp. 5.5000%, 4/1/22 (144A) | 925,856 | ||||||||
3,445,852 | ||||||||||
Insurance – 2.1% | ||||||||||
1,517,000 | American International Group, Inc. 4.2500%, 9/15/14 | 1,554,917 | ||||||||
456,000 | American International Group, Inc. 5.6000%, 10/18/16 | 508,052 | ||||||||
795,000 | American International Group, Inc. 6.2500%, 3/15/37 | 795,000 | ||||||||
2,494,000 | American International Group, Inc. 8.1750%, 5/15/58‡ | 3,017,740 | ||||||||
973,000 | ING U.S., Inc. 5.6500%, 5/15/53‡ | 946,243 | ||||||||
2,672,000 | Primerica, Inc. 4.7500%, 7/15/22 | 2,752,131 | ||||||||
9,574,083 | ||||||||||
Mortgage Assets – 0.4% | ||||||||||
1,494,000 | Northern Rock Asset Management PLC 5.6250%, 6/22/17 (144A) | 1,683,723 | ||||||||
Natural Gas – 3.8% | ||||||||||
872,000 | DCP Midstream Operating L.P. 3.2500%, 10/1/15 | 900,859 | ||||||||
2,028,000 | DCP Midstream Operating L.P. 4.9500%, 4/1/22 | 2,058,609 | ||||||||
72,000 | El Paso LLC 6.5000%, 9/15/20 | 77,207 | ||||||||
155,000 | El Paso Pipeline Partners Operating Co. LLC 6.5000%, 4/1/20 | 178,005 | ||||||||
665,000 | El Paso Pipeline Partners Operating Co. LLC 5.0000%, 10/1/21 | 696,463 | ||||||||
702,000 | Energy Transfer Partners L.P. 4.1500%, 10/1/20 | 712,236 | ||||||||
2,528,000 | Enterprise Products Operating LLC 3.3500%, 3/15/23 | 2,401,378 | ||||||||
1,428,000 | Kinder Morgan Finance Co. LLC 5.7000%, 1/5/16 | 1,533,861 | ||||||||
495,000 | Kinder Morgan, Inc. 5.0000%, 2/15/21 (144A) | 487,568 | ||||||||
879,000 | Kinder Morgan, Inc. 5.6250%, 11/15/23 (144A) | 851,080 | ||||||||
1,162,000 | Plains All American Pipeline L.P. / PAA Finance Corp. 3.9500%, 9/15/15 | 1,221,973 | ||||||||
151,000 | Southern Star Central Gas Pipeline, Inc. 6.0000%, 6/1/16 (144A) | 165,278 | ||||||||
291,000 | Spectra Energy Partners L.P. 2.9500%, 9/25/18 | 294,965 | ||||||||
1,445,000 | Spectra Energy Partners L.P. 4.7500%, 3/15/24 | 1,473,037 | ||||||||
3,137,000 | Western Gas Partners L.P. 5.3750%, 6/1/21 | 3,360,665 | ||||||||
1,167,000 | Williams Cos., Inc. 3.7000%, 1/15/23 | 1,018,567 | ||||||||
17,431,751 | ||||||||||
Owned No Guarantee – 0.2% | ||||||||||
856,000 | Korea National Oil Corp. 4.0000%, 10/27/16 (144A) | 911,520 | ||||||||
Real Estate Investment Trusts (REITs) – 2.8% | ||||||||||
1,964,000 | Alexandria Real Estate Equities, Inc. 4.6000%, 4/1/22 | 1,976,273 | ||||||||
1,566,000 | American Tower Trust I 1.5510%, 3/15/18 (144A) | 1,528,385 | ||||||||
1,486,000 | American Tower Trust I 3.0700%, 3/15/23 (144A) | 1,390,238 | ||||||||
754,000 | Goodman Funding Pty, Ltd. 6.3750%, 11/12/20 (144A) | 831,577 | ||||||||
2,036,000 | Goodman Funding Pty, Ltd. 6.3750%, 4/15/21 (144A) | 2,249,774 | ||||||||
874,000 | Post Apartment Homes L.P. 4.7500%, 10/15/17 | 944,994 | ||||||||
310,000 | Reckson Operating Partnership L.P. 6.0000%, 3/31/16 | 335,911 | ||||||||
276,000 | Retail Opportunity Investments Partnership L.P. 5.0000%, 12/15/23 | 274,795 | ||||||||
387,000 | Senior Housing Properties Trust 6.7500%, 4/15/20 | 429,713 | ||||||||
453,000 | Senior Housing Properties Trust 6.7500%, 12/15/21 | 500,138 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Flexible Bond Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Real Estate Investment Trusts (REITs) – (continued) | ||||||||||
$855,000 | SL Green Realty Corp. / SL Green Operating Partnership / Reckson Operating Partnership 5.0000%, 8/15/18 | $ | 911,562 | |||||||
1,487,000 | SL Green Realty Corp. / SL Green Operating Partnership / Reckson Operating Partnership 7.7500%, 3/15/20 | 1,747,043 | ||||||||
13,120,403 | ||||||||||
Technology – 3.9% | ||||||||||
1,263,000 | Amphenol Corp. 4.7500%, 11/15/14 | 1,305,052 | ||||||||
719,000 | Autodesk, Inc. 1.9500%, 12/15/17 | 711,261 | ||||||||
1,112,000 | Autodesk, Inc. 3.6000%, 12/15/22 | 1,026,844 | ||||||||
879,000 | Fiserv, Inc. 3.1250%, 10/1/15 | 910,067 | ||||||||
446,000 | Fiserv, Inc. 3.1250%, 6/15/16 | 465,404 | ||||||||
3,559,000 | Samsung Electronics America, Inc. 1.7500%, 4/10/17 (144A) | 3,536,208 | ||||||||
4,316,000 | TSMC Global, Ltd. 1.6250%, 4/3/18 (144A) | 4,133,157 | ||||||||
816,000 | Verisk Analytics, Inc. 4.8750%, 1/15/19 | 864,031 | ||||||||
3,231,000 | Verisk Analytics, Inc. 5.8000%, 5/1/21 | 3,489,289 | ||||||||
1,520,000 | Verisk Analytics, Inc. 4.1250%, 9/12/22 | 1,471,234 | ||||||||
17,912,547 | ||||||||||
Transportation – 1.4% | ||||||||||
187,000 | Asciano Finance, Ltd. 3.1250%, 9/23/15 (144A) | 191,232 | ||||||||
546,043 | CSX Transportation, Inc. 8.3750%, 10/15/14 | 576,335 | ||||||||
1,315,000 | JB Hunt Transport Services, Inc. 3.3750%, 9/15/15 | 1,362,207 | ||||||||
235,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 2.5000%, 3/15/16 (144A) | 240,762 | ||||||||
1,724,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 3.3750%, 3/15/18 (144A) | 1,767,374 | ||||||||
142,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 4.8750%, 7/11/22 (144A) | 145,675 | ||||||||
850,000 | Penske Truck Leasing Co. L.P. / PTL Finance Corp. 4.2500%, 1/17/23 (144A) | 827,833 | ||||||||
300,000 | Southwest Airlines Co. 5.2500%, 10/1/14 | 309,579 | ||||||||
828,000 | Southwest Airlines Co. 5.1250%, 3/1/17 | 899,265 | ||||||||
6,320,262 | ||||||||||
Total Corporate Bonds (cost $236,306,289) | 241,600,375 | |||||||||
Mortgage-Backed Securities – 21.3% | ||||||||||
Fannie Mae: | ||||||||||
338,663 | 5.5000%, 1/1/25 | 370,019 | ||||||||
679,206 | 5.5000%, 7/1/25 | 744,591 | ||||||||
990,987 | 5.0000%, 9/1/29 | 1,080,410 | ||||||||
394,020 | 5.0000%, 1/1/30 | 432,270 | ||||||||
203,808 | 5.5000%, 1/1/33 | 225,846 | ||||||||
131,715 | 5.0000%, 11/1/33 | 143,490 | ||||||||
259,309 | 5.0000%, 12/1/33 | 282,597 | ||||||||
1,046,473 | 6.0000%, 12/1/35 | 1,173,689 | ||||||||
339,282 | 6.0000%, 2/1/37 | 381,946 | ||||||||
1,217,184 | 6.0000%, 9/1/37 | 1,313,628 | ||||||||
1,018,800 | 6.0000%, 10/1/38 | 1,166,656 | ||||||||
371,185 | 7.0000%, 2/1/39 | 397,312 | ||||||||
576,057 | 5.0000%, 5/1/39 | 630,387 | ||||||||
1,512,030 | 5.5000%, 12/1/39 | 1,668,907 | ||||||||
931,639 | 5.0000%, 6/1/40 | 1,016,215 | ||||||||
1,059,573 | 5.0000%, 6/1/40 | 1,152,874 | ||||||||
245,586 | 4.5000%, 10/1/40 | 261,531 | ||||||||
307,561 | 4.0000%, 12/1/40 | 317,290 | ||||||||
253,084 | 5.0000%, 3/1/41 | 276,851 | ||||||||
466,940 | 4.5000%, 4/1/41 | 497,464 | ||||||||
765,394 | 4.5000%, 4/1/41 | 814,000 | ||||||||
511,045 | 5.0000%, 4/1/41 | 558,017 | ||||||||
756,213 | 4.5000%, 5/1/41 | 805,917 | ||||||||
422,772 | 5.0000%, 5/1/41 | 463,107 | ||||||||
560,461 | 5.0000%, 5/1/41 | 612,325 | ||||||||
837,223 | 5.0000%, 6/1/41 | 913,073 | ||||||||
370,447 | 5.0000%, 7/1/41 | 404,160 | ||||||||
1,070,311 | 5.0000%, 7/1/41 | 1,171,223 | ||||||||
1,022,232 | 4.5000%, 8/1/41 | 1,087,429 | ||||||||
16,175 | 5.0000%, 9/1/41 | 17,664 | ||||||||
885,687 | 4.5000%, 10/1/41 | 940,387 | ||||||||
583,938 | 5.0000%, 10/1/41 | 637,127 | ||||||||
1,951,169 | 5.0000%, 2/1/42 | 2,192,071 | ||||||||
736,375 | 4.0000%, 9/1/42 | 751,258 | ||||||||
5,343,121 | 4.5000%, 9/1/42 | 5,660,064 | ||||||||
1,449,773 | 4.5000%, 11/1/42 | 1,539,921 | ||||||||
3,459,021 | 4.5000%, 2/1/43 | 3,665,778 | ||||||||
5,141,487 | 4.5000%, 2/1/43 | 5,488,105 | ||||||||
Freddie Mac: | ||||||||||
269,909 | 5.0000%, 1/1/19 | 285,760 | ||||||||
207,218 | 5.0000%, 2/1/19 | 219,444 | ||||||||
288,441 | 5.5000%, 8/1/19 | 307,707 | ||||||||
429,355 | 5.0000%, 6/1/20 | 455,728 | ||||||||
964,203 | 5.5000%, 12/1/28 | 1,067,021 | ||||||||
1,401,175 | 5.0000%, 1/1/36 | 1,535,772 | ||||||||
716,325 | 5.5000%, 10/1/36 | 799,948 | ||||||||
1,173,399 | 5.0000%, 5/1/39 | 1,272,793 | ||||||||
3,263,373 | 6.0000%, 4/1/40 | 3,672,048 | ||||||||
646,979 | 4.5000%, 1/1/41 | 688,655 | ||||||||
2,095,997 | 5.0000%, 3/1/41 | 2,268,637 | ||||||||
1,406,551 | 5.0000%, 5/1/41 | 1,537,681 | ||||||||
3,114,488 | 5.5000%, 5/1/41 | 3,479,493 | ||||||||
181,917 | 4.5000%, 9/1/41 | 193,116 | ||||||||
497,745 | 5.0000%, 9/1/41 | 538,818 | ||||||||
2,814,280 | 5.5000%, 9/1/41 | 3,079,487 | ||||||||
Ginnie Mae: | ||||||||||
555,954 | 4.0000%, 8/15/24 | 588,149 | ||||||||
884,087 | 5.1000%, 1/15/32 | 988,348 | ||||||||
976,499 | 4.9000%, 10/15/34 | 1,066,297 | ||||||||
510,803 | 6.0000%, 11/20/34 | 570,810 | ||||||||
2,170,442 | 5.5000%, 3/20/35 | 2,412,013 | ||||||||
329,165 | 5.5000%, 9/15/35 | 371,731 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
10 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Ginnie Mae: (continued) | ||||||||||
$569,982 | 5.5000%, 3/15/36 | $ | 633,355 | |||||||
643,536 | 5.5000%, 3/20/36 | 712,020 | ||||||||
338,203 | 6.0000%, 1/20/39 | 380,970 | ||||||||
827,240 | 5.5000%, 8/15/39 | 967,980 | ||||||||
1,233,166 | 5.5000%, 8/15/39 | 1,402,569 | ||||||||
915,845 | 5.0000%, 9/15/39 | 1,015,415 | ||||||||
1,884,857 | 5.0000%, 9/15/39 | 2,089,855 | ||||||||
538,797 | 5.0000%, 10/15/39 | 597,509 | ||||||||
970,554 | 5.0000%, 11/15/39 | 1,071,549 | ||||||||
287,288 | 5.0000%, 1/15/40 | 318,329 | ||||||||
212,935 | 5.0000%, 4/15/40 | 235,986 | ||||||||
327,777 | 5.0000%, 5/15/40 | 358,652 | ||||||||
334,568 | 5.0000%, 7/15/40 | 370,632 | ||||||||
934,070 | 5.0000%, 7/15/40 | 1,034,808 | ||||||||
941,813 | 5.0000%, 2/15/41 | 1,036,904 | ||||||||
1,082,698 | 4.5000%, 5/15/41 | 1,169,832 | ||||||||
375,333 | 5.0000%, 5/15/41 | 417,795 | ||||||||
238,629 | 5.0000%, 6/20/41 | 260,193 | ||||||||
997,809 | 5.0000%, 6/20/41 | 1,111,188 | ||||||||
244,452 | 4.5000%, 7/15/41 | 263,579 | ||||||||
890,183 | 4.5000%, 7/15/41 | 957,141 | ||||||||
2,086,208 | 4.5000%, 8/15/41 | 2,278,903 | ||||||||
314,211 | 5.0000%, 9/15/41 | 343,835 | ||||||||
287,233 | 5.5000%, 9/20/41 | 316,242 | ||||||||
126,176 | 6.0000%, 10/20/41 | 142,152 | ||||||||
430,286 | 6.0000%, 12/20/41 | 483,502 | ||||||||
873,353 | 5.5000%, 1/20/42 | 962,925 | ||||||||
412,012 | 6.0000%, 1/20/42 | 463,564 | ||||||||
437,819 | 6.0000%, 2/20/42 | 493,093 | ||||||||
304,357 | 6.0000%, 3/20/42 | 342,440 | ||||||||
1,412,421 | 6.0000%, 4/20/42 | 1,589,164 | ||||||||
477,235 | 3.5000%, 5/20/42 | 483,403 | ||||||||
961,540 | 6.0000%, 5/20/42 | 1,081,956 | ||||||||
1,639,129 | 5.5000%, 7/20/42 | 1,811,394 | ||||||||
380,034 | 6.0000%, 7/20/42 | 427,959 | ||||||||
374,176 | 6.0000%, 8/20/42 | 421,457 | ||||||||
419,190 | 6.0000%, 9/20/42 | 471,706 | ||||||||
373,064 | 6.0000%, 11/20/42 | 418,729 | ||||||||
421,409 | 6.0000%, 2/20/43 | 474,615 | ||||||||
Total Mortgage-Backed Securities (cost $98,855,795) | 98,068,355 | |||||||||
Preferred Stock – 1.8% | ||||||||||
Capital Markets – 0% | ||||||||||
6,300 | Charles Schwab Corp., 6.0000% | 138,537 | ||||||||
Commercial Banks – 0.6% | ||||||||||
103,875 | Wells Fargo & Co., 6.6250% | 2,671,665 | ||||||||
Construction & Engineering – 0.1% | ||||||||||
21,000 | Citigroup Capital XIII, 7.8750% | 572,250 | ||||||||
Consumer Finance – 0.4% | ||||||||||
83,625 | Discover Financial Services, 6.5000% | 1,926,720 | ||||||||
Household Products – 0.7% | ||||||||||
48,475 | Morgan Stanley, 6.8750% | 1,213,329 | ||||||||
67,350 | Morgan Stanley, 7.1250% | 1,760,529 | ||||||||
2,973,858 | ||||||||||
Total Preferred Stock (cost $8,317,836) | 8,283,030 | |||||||||
U.S. Treasury Notes/Bonds – 16.9% | ||||||||||
U.S. Treasury Notes/Bonds: | ||||||||||
$20,242,000 | 0.2500%, 11/30/15 | 20,201,678 | ||||||||
1,843,000 | 0.2500%, 12/31/15 | 1,838,105 | ||||||||
715,000 | 1.0000%, 10/31/16 | 720,418 | ||||||||
103,000 | 0.8750%, 11/30/16 | 103,330 | ||||||||
5,063,000 | 0.8750%, 1/31/17 | 5,067,749 | ||||||||
1,557,000 | 0.8750%, 2/28/17 | 1,556,879 | ||||||||
2,378,000 | 0.7500%, 6/30/17 | 2,352,919 | ||||||||
810,000 | 0.7500%, 10/31/17 | 795,319 | ||||||||
940,000 | 0.7500%, 12/31/17 | 919,143 | ||||||||
1,525,000 | 0.8750%, 1/31/18 | 1,495,930 | ||||||||
1,210,000 | 0.7500%, 3/31/18 | 1,175,590 | ||||||||
1,508,000 | 2.3750%, 5/31/18 | 1,565,375 | ||||||||
5,030,000 | 1.3750%, 7/31/18 | 4,984,810 | ||||||||
23,089,000 | 1.5000%, 8/31/18 | 22,971,754 | ||||||||
4,715,000 | 1.3750%, 9/30/18 | 4,657,534 | ||||||||
4,357,000 | 1.2500%, 10/31/18 | 4,271,564 | ||||||||
334,000 | 1.7500%, 10/31/18 | 335,461 | ||||||||
940,000 | 1.0000%, 9/30/19 | 887,418 | ||||||||
2,244,000 | 3.6250%, 8/15/43 | 2,119,178 | ||||||||
Total U.S. Treasury Notes/Bonds (cost $78,383,286) | 78,020,154 | |||||||||
Money Market – 1.6% | ||||||||||
7,446,236 | Janus Cash Liquidity Fund LLC, 0%£ (cost $7,446,236) | 7,446,236 | ||||||||
Total Investments (total cost $455,760,743) – 99.6% | 459,765,847 | |||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.4% | 1,800,793 | |||||||||
Net Assets – 100% | $ | 461,566,640 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 6,111,081 | 1.3% | |||||
Germany | 1,201,340 | 0.3% | ||||||
Luxembourg | 900,900 | 0.2% | ||||||
Netherlands | 3,148,956 | 0.7% | ||||||
South Korea | 4,447,728 | 1.0% | ||||||
Taiwan | 4,133,157 | 0.9% | ||||||
United Kingdom | 10,764,022 | 2.3% | ||||||
United States†† | 429,058,663 | 93.3% | ||||||
Total | $ | 459,765,847 | 100.0% |
†† | Includes Cash Equivalents of 1.6%. |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Notes to Schedule of Investments and Other Information
Barclays U.S. Aggregate Bond Index | Made up of the Barclays U.S. Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million. | |
L.P. | Limited Partnership | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust |
144A | Securities sold under Rule 144A of the Securities Act of 1933, as amended, are subject to legal and/or contractual restrictions on resale and may not be publicly sold without registration under the 1933 Act. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total value of 144A securities as of the year ended December 31, 2013 is indicated in the table below: |
Value as a % | ||||||||||
Portfolio | Value | of Net Assets | ||||||||
Janus Aspen Flexible Bond Portfolio | $ | 73,024,902 | 15.8 | % | ||||||
(a) | All or a portion of this position has not settled. Upon settlement date, interest rates for unsettled amounts will be determined. Interest and dividends will not be accrued until time of settlement. | |
** | A portion of this security or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Flexible Bond Portfolio | $ | 2,362,122 | |||
‡ | The interest rate on floating rate notes is based on an index or market interest rates and is subject to change. Rate in the security description is as of year end. |
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2013) |
Acquisition | Acquisition | Value as a | ||||||||||
Date | Cost | Value | % of Net Assets | |||||||||
Janus Aspen Flexible Bond Portfolio | ||||||||||||
FREMF 2010 K-SCT Mortgage Trust, 2.0000%, 1/25/20 | 4/29/13 | $ | 1,337,716 | $ | 1,341,138 | 0.3% | ||||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2013. The issuer incurs all registration costs.
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Flexible Bond Portfolio | |||||||||||||||||||||
Janus Cash Liquidity Fund LLC | 331,940,993 | $ | 331,940,993 | (347,774,618) | $ | (347,774,618) | $ | – | $ | 13,304 | $ | 7,446,236 | |||||||||
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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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Flexible Bond Portfolio | |||||||||||
Asset-Backed/Commercial Mortgage-Backed Securities | $ | – | $ | 21,315,832 | $ | – | |||||
Bank Loans and Mezzanine Loans | – | 5,031,865 | – | ||||||||
Corporate Bonds | – | 241,600,375 | – | ||||||||
Mortgage-Backed Securities | – | 98,068,355 | – | ||||||||
Preferred Stock | – | 8,283,030 | – | ||||||||
U.S. Treasury Notes/Bonds | – | 78,020,154 | – | ||||||||
Money Market | – | 7,446,236 | – | ||||||||
Total Investments in Securities | $ | – | $ | 459,765,847 | $ | – | |||||
Janus Aspen Series | 13
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Statement of Assets and Liabilities
Janus Aspen | ||||||||||
Flexible | ||||||||||
As of December 31, 2013 | Bond | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 455,761 | ||||||||
Unaffiliated investments at value | $ | 452,320 | ||||||||
Affiliated investments at value | 7,446 | |||||||||
Cash | 15 | |||||||||
Receivables: | ||||||||||
Portfolio shares sold | 1,755 | |||||||||
Dividends | 44 | |||||||||
Interest | 3,384 | |||||||||
Non-interested Trustees’ deferred compensation | 9 | |||||||||
Other assets | 6 | |||||||||
Total Assets | 464,979 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Investments purchased | 3,046 | |||||||||
Portfolio shares repurchased | 91 | |||||||||
Advisory fees | 189 | |||||||||
Fund administration fees | 4 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 26 | |||||||||
Non-interested Trustees’ fees and expenses | 3 | |||||||||
Non-interested Trustees’ deferred compensation fees | 9 | |||||||||
Accrued expenses and other payables | 44 | |||||||||
Total Liabilities | 3,412 | |||||||||
Net Assets | $ | 461,567 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 454,388 | ||||||||
Undistributed net investment income* | 5,091 | |||||||||
Undistributed net realized loss from investment and foreign currency transactions* | (1,918) | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 4,006 | |||||||||
Total Net Assets | $ | 461,567 | ||||||||
Net Assets - Institutional Shares | $ | 344,028 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 29,103 | |||||||||
Net Asset Value Per Share | $ | 11.82 | ||||||||
Net Assets - Service Shares | $ | 117,539 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 9,198 | |||||||||
Net Asset Value Per Share | $ | 12.78 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
14 | DECEMBER 31, 2013
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Statement of Operations
Janus Aspen | ||||||
Flexible | ||||||
For the year ended December 31, 2013 | Bond | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 13,734 | ||||
Dividends | 247 | |||||
Dividends from affiliates | 13 | |||||
Fee income | 2 | |||||
Other Income | 90 | |||||
Total Investment Income | 14,086 | |||||
Expenses: | ||||||
Advisory fees | 2,489 | |||||
Internal servicing expense - Institutional Shares | 3 | |||||
Internal servicing expense - Service Shares | 1 | |||||
Shareholder reports expense | 39 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | 20 | |||||
Custodian fees | 17 | |||||
Professional fees | 52 | |||||
Non-interested Trustees’ fees and expenses | 15 | |||||
Fund administration fees | 49 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 312 | |||||
Other expenses | 50 | |||||
Total Expenses | 3,048 | |||||
Less: Excess Expense Reimbursement | (60) | |||||
Net Expenses after Waivers and Expense Offsets | 2,988 | |||||
Net Investment Income | 11,098 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 2,066 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | (14,095) | |||||
Net Loss on Investments | (12,029) | |||||
Net Decrease in Net Assets Resulting from Operations | $ | (931) |
See Notes to Financial Statements.
Janus Aspen Series | 15
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Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Flexible Bond | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 11,098 | $ | 13,698 | ||||||
Net realized gain from investment and foreign currency transactions | 2,066 | 20,551 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | (14,095) | 4,237 | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | (931) | 38,486 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (8,656) | (12,994) | ||||||||
Service Shares | (2,541) | (3,430) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | (13,123) | (7,038) | ||||||||
Service Shares | (4,138) | (1,939) | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (28,458) | (25,401) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 30,612 | 42,167 | ||||||||
Service Shares | 28,561 | 58,634 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 21,779 | 20,032 | ||||||||
Service Shares | 6,679 | 5,369 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (67,704) | (67,125) | ||||||||
Service Shares | (39,229) | (36,261) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (19,302) | 22,816 | ||||||||
Net Increase/(Decrease) in Net Assets | (48,691) | 35,901 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 510,258 | 474,357 | ||||||||
End of period | $ | 461,567 | $ | 510,258 | ||||||
Undistributed Net Investment Income* | $ | 5,091 | $ | 1,787 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
16 | DECEMBER 31, 2013
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Financial Highlights
Institutional Shares
Janus Aspen Flexible Bond Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $12.59 | $12.27 | $12.70 | $12.56 | $11.61 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.38 | 0.43 | 0.49 | 0.49 | 0.57 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | (0.40) | 0.57 | 0.32 | 0.51 | 0.94 | |||||||||||||||||
Total from Investment Operations | (0.02) | 1.00 | 0.81 | 1.00 | 1.51 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.30) | (0.44) | (0.49) | (0.50) | (0.55) | |||||||||||||||||
Distributions (from capital gains)* | (0.45) | (0.24) | (0.75) | (0.36) | (0.01) | |||||||||||||||||
Total Distributions | (0.75) | (0.68) | (1.24) | (0.86) | (0.56) | |||||||||||||||||
Net Asset Value, End of Period | $11.82 | $12.59 | $12.27 | $12.70 | $12.56 | |||||||||||||||||
Total Return | (0.06)% | 8.34% | 6.66% | 8.06% | 13.22% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $344,028 | $381,593 | $376,299 | $368,544 | $304,204 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $360,706 | $378,140 | $364,656 | $351,717 | $302,033 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.56% | 0.57% | 0.57% | 0.56% | 0.59% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.55% | 0.55% | 0.55% | 0.56% | 0.59% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 2.35% | 2.87% | 3.82% | 4.04% | 4.65% | |||||||||||||||||
Portfolio Turnover Rate | 138% | 140% | 164% | 169% | 271% |
Service Shares
Janus Aspen Flexible Bond Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $13.56 | $13.17 | $13.54 | $13.35 | $12.32 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.38 | 0.40 | 0.48 | 0.51 | 0.55 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | (0.44) | 0.65 | 0.36 | 0.51 | 1.01 | |||||||||||||||||
Total from Investment Operations | (0.06) | 1.05 | 0.84 | 1.02 | 1.56 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.27) | (0.42) | (0.46) | (0.47) | (0.52) | |||||||||||||||||
Distributions (from capital gains)* | (0.45) | (0.24) | (0.75) | (0.36) | (0.01) | |||||||||||||||||
Total Distributions | (0.72) | (0.66) | (1.21) | (0.83) | (0.53) | |||||||||||||||||
Net Asset Value, End of Period | $12.78 | $13.56 | $13.17 | $13.54 | $13.35 | |||||||||||||||||
Total Return | (0.32)% | 8.09% | 6.47% | 7.73% | 12.89% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $117,539 | $128,665 | $98,058 | $91,870 | $73,555 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $124,401 | $109,071 | $90,661 | $83,557 | $55,100 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.81% | 0.82% | 0.82% | 0.81% | 0.84% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.80% | 0.80% | 0.80% | 0.81% | 0.84% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 2.10% | 2.60% | 3.57% | 3.79% | 4.42% | |||||||||||||||||
Portfolio Turnover Rate | 138% | 140% | 164% | 169% | 271% |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 17
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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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in income-producing securities. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which
18 | DECEMBER 31, 2013
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may be allocated pro rata to the Portfolio. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a
Janus Aspen Series | 19
Table of Contents
Notes to Financial Statements (continued)
market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold any Level 3 securities as of December 31, 2013.
There were no transfers in or out of Level 1, Level 2 and Level 3 during the year.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Other Investments and Strategies |
Additional Investment Risk
The Portfolio may be invested in lower-rated debt securities that have a higher risk of default or loss of value since these securities may be sensitive to economic changes, political changes or adverse developments specific to the issuer.
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these
20 | DECEMBER 31, 2013
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changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Loans
The Portfolio may invest in various commercial loans, including bank loans, bridge loans, debtor-in-possession (“DIP”) loans, mezzanine loans, and other fixed and floating rate loans. These loans may be acquired through loan participations and assignments or on a when-issued basis. Commercial loans will comprise no more than 20% of the Portfolio’s total assets. Below are descriptions of the types of loans held by the Portfolio at year end.
• | Bank Loans – Bank loans are obligations of companies or other entities entered into in connection with recapitalizations, acquisitions, and refinancings. A Portfolio’s investments in bank loans are generally acquired as a participation interest in, or assignment of, loans originated by a lender or other financial institution. These investments may include institutionally-traded floating and fixed-rate debt securities. |
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Notes to Financial Statements (continued)
• | Floating Rate Loans – Floating rate loans are debt securities that have floating interest rates, that adjust periodically, and are tied to a benchmark lending rate, such as the London Interbank Offered Rate. 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. While the Portfolio generally expects to invest in fully funded term loans, certain of the loans in which the Portfolio may invest include revolving loans, bridge loans, and delayed draw term loans. |
Purchasers of floating rate loans may pay and/or receive certain fees. The Portfolio may receive fees such as covenant waiver fees or prepayment penalty fees. The Portfolio may pay fees such as facility fees. Such fees may affect the Portfolio’s return. |
• | Mezzanine Loans – Mezzanine loans are secured by the stock of the company that owns the assets. Mezzanine loans are a hybrid of debt and equity financing that is typically used to fund the expansion of existing companies. A mezzanine loan is composed of debt capital that gives the lender the right to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. Mezzanine loans typically are the most subordinated debt obligation in an issuer’s capital structure. |
Mortgage- and Asset-Backed Securities
The Portfolio may purchase fixed or variable rate mortgage-backed securities issued by the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”), or other governmental or government-related entities. Ginnie Mae’s guarantees are backed by the full faith and credit of the U.S. Government. Historically, Fannie Maes and Freddie Macs were not backed by the full faith and credit of the U.S. Government, and may not be in the future. In September 2008, the Federal Housing Finance Agency (“FHFA”), an agency of the U.S. Government, placed Fannie Mae and Freddie Mac under conservatorship. Under the conservatorship, the management of Fannie Mae and Freddie Mac was replaced. Since 2008, Fannie Mae and Freddie Mac have received capital support through U.S. Treasury preferred stock purchases, and Treasury and Federal Reserve purchases of their mortgage-backed securities. The FHFA and the U.S. Treasury have imposed strict limits on the size of these entities’ mortgage portfolios. The FHFA has the power to cancel any contract entered into by Fannie Mae and Freddie Mac prior to FHFA’s appointment as conservator or receiver, including the guarantee obligations of Fannie Mae and Freddie Mac.
The Portfolio may purchase other mortgage- and asset-backed securities through single- and multi-seller conduits, collateralized debt obligations, structured investment vehicles, and other similar securities. Asset-backed securities may be backed by automobile loans, equipment leases, credit card receivables, or other collateral. In the event the underlying assets fail to perform, these investment vehicles could be forced to sell the assets and recognize losses on such assets, which could impact the Portfolio’s yield and your return.
Unlike traditional debt instruments, payments on these securities include both interest and a partial payment of principal. Prepayment risk, which results from prepayments of the principal of underlying loans at a faster pace than expected, may shorten the effective maturities of these securities and may result in the Portfolio having to reinvest proceeds at a lower interest rate.
In addition to prepayment risk, investments in mortgage-backed securities, including those comprised of subprime mortgages, and investments in other asset-backed securities comprised of under-performing assets may be subject to a higher degree of credit risk, valuation risk, and liquidity risk. Additionally, although mortgages and mortgage-related securities are generally supported by some form of government or private guarantee and/or insurance, there is no assurance that private guarantors or insurers will meet their obligations.
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Mortgage- and asset-backed securities are also subject to extension risk, which is the risk that rising interest rates could cause mortgages or other obligations underlying these securities to be paid more slowly than expected, increasing the Portfolio’s sensitivity to interest rate changes and causing its price to decline.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include corporate bonds, preferred stocks, and other securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
Restricted Security Transactions
Restricted securities held by the Portfolio may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933, as amended. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of the Portfolio to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist.
Sovereign Debt
The Portfolio may invest in U.S. and foreign government debt securities (“sovereign debt”). Investments in U.S. sovereign debt are considered low risk. However, investments in non-U.S. sovereign debt can involve a high degree of risk, including the risk that the governmental entity that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or to pay the interest on its sovereign debt in a timely manner. A sovereign debtor’s willingness or ability to satisfy its debt obligation may be affected by various factors, including its cash flow situation, the extent of its foreign currency reserves, the availability of foreign exchange when a payment is due, the relative size of its debt position in relation to its economy as a whole, the sovereign debtor’s policy toward international lenders, and local political constraints to which the governmental entity may be subject. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies, and other entities. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance, or repay principal or interest when due may result in the cancellation of third party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to timely service its debts. The Portfolio may be requested to participate in the rescheduling of such sovereign debt and to extend further loans to governmental entities, which may adversely affect the Portfolio’s holdings. In the event of default, there may be limited or no legal remedies for collecting sovereign debt and there may be no bankruptcy proceedings through which the Portfolio may collect all or part of the sovereign debt that a governmental entity has not repaid.
When-Issued Securities
The Portfolio may purchase or sell securities on a when-issued or delayed delivery basis. When-issued and delayed delivery securities in which the Portfolio may invest include U.S. Treasury Securities, municipal bonds, bank loans, and other similar instruments. The price of the underlying securities and date when the securities will be delivered and paid for are fixed at the time the transaction is negotiated. Losses may arise due to changes in the market value of the securities or from the inability of counterparties to meet the terms of the contract. In connection with such purchases, the Portfolio may hold liquid assets as collateral with the Portfolio’s custodian sufficient to cover the purchase price.
3. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s contractual investment advisory fee rate (expressed as an annual rate).
Contractual | ||||||||
Average Daily | Investment | |||||||
Net Assets | Advisory Fee (%) | |||||||
Portfolio | of the Portfolio | (annual rate) | ||||||
Janus Aspen Flexible Bond Portfolio | First $ | 300 Million | 0.55 | |||||
Over $ | 300 Million | 0.45 | ||||||
Janus Capital has contractually agreed to waive the advisory fee payable by the Portfolio in an amount equal to the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing fees (applicable to Service Shares), administrative services fees payable pursuant to the Transfer Agency Agreement, brokerage commissions, interest, dividends, taxes, acquired fund fees and expenses, and extraordinary expenses, exceed the annual
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Notes to Financial Statements (continued)
rate shown below. Janus Capital has agreed to continue the waiver until at least May 1, 2014. If applicable, amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations.
Portfolio | Expense Limit (%) | ||||
Janus Aspen Flexible Bond Portfolio | 0.55 | ||||
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a
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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 year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
4. | Federal Income Tax |
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 primarily consist of deferred compensation. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Undistributed | Undistributed | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 5,099,731 | $ | – | $ | (1,631,922) | $ | – | $ | – | $ | (7,663) | $ | 3,718,553 | |||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2013, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. The following table shows these capital loss carryovers.
Capital Loss Carryover Schedule
For the year ended December 31, 2013
No Expiration | |||||||||||
Portfolio | Short-Term | Long-Term | Accumulated Capital Losses | ||||||||
Janus Aspen Flexible Bond Portfolio | $ | (1,631,922) | $ | – | $ | (1,631,922) | |||||
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, 2013 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 | $ | 456,047,294 | $ | 7,902,203 | $ | (4,183,650) | |||||
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Notes to Financial Statements (continued)
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 19,282,643 | $ | 9,175,321 | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 18,219,374 | $ | 7,182,011 | $ | – | $ | – | |||||||||
5. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Flexible Bond Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 2,499 | 3,340 | ||||||||
Reinvested dividends and distributions | 1,856 | 1,610 | ||||||||
Shares repurchased | (5,550) | (5,309) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,195) | (359) | ||||||||
Shares Outstanding, Beginning of Period | 30,298 | 30,657 | ||||||||
Shares Outstanding, End of Period | 29,103 | 30,298 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 2,174 | 4,326 | ||||||||
Reinvested dividends and distributions | 526 | 401 | ||||||||
Shares repurchased | (2,991) | (2,682) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (291) | 2,045 | ||||||||
Shares Outstanding, Beginning of Period | 9,489 | 7,444 | ||||||||
Shares Outstanding, End of Period | 9,198 | 9,489 |
6. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 313,367,528 | $ | 319,953,683 | $ | 337,216,860 | $ | 346,214,351 | ||||||
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7. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of 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, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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Additional Information (unaudited) (continued)
including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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Additional Information (unaudited) (continued)
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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Additional Information (unaudited) (continued)
to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s managers as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s managers may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
40 | DECEMBER 31, 2013
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such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Useful Information About Your Portfolio Report (unaudited) (continued)
Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio managers. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Flexible Bond Portfolio | $ | 9,175,321 | ||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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OFFICERS
Principal Occupations During the | ||||||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | 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 | Chief Investment Officer Fixed Income and Executive Vice President of Janus Capital; Director of Perkins Investment Management LLC; and Portfolio Manager for other Janus accounts. Formerly, Executive Vice President of Janus Distributors LLC and Janus Services LLC (2007-2013). | |||
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 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 | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Trustees and Officers (unaudited) (continued)
OFFICERS (continued)
Principal Occupations During the | ||||||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Past Five Years | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
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Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55232 | 109-02-81114 02-14 |
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annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen Forty Portfolio (unaudited)
PORTFOLIO SNAPSHOT We believe constructing a concentrated portfolio of quality growth companies will allow us to outperform our benchmark over time. We define quality as companies that enjoy sustainable “moats” around their businesses, potentially allowing companies to grow faster, with higher returns, than their competitors. We believe the market often underestimates these companies’ sustainable competitive advantage periods. | ![]() Doug Rao portfolio manager |
PERFORMANCE OVERVIEW
For the 12-month period ended December 31, 2013, Janus Aspen Forty Portfolio’s Institutional Shares and Service Shares returned 31.23% and 30.89%, respectively, versus a return of 33.48% for the Portfolio’s primary benchmark, the Russell 1000 Growth Index. The Portfolio’s secondary benchmark, the S&P 500 Index, returned 32.39% for the period.
INVESTMENT ENVIRONMENT
Equities enjoyed strong gains during the year, as markets received clear indicators that the U.S. economy turned the corner from the financial crisis and Europe finally showed signs of a recovery. Stock correlations fell during the period as macroeconomic fears such as a showdown over the U.S. budget and debt ceiling subsided.
Loose monetary policy also provided a supportive backdrop for equities during the year, though fears about how and when the Federal Reserve (Fed) would taper its quantitative easing program caused bouts of volatility. However, stocks climbed at the end of December when the Fed announced that tapering would be more gradual than expected.
OVERVIEW
The Portfolio enjoyed significant gains during the year, but underperformed its benchmark. Much of the underperformance came during the first quarter of the year, however, and we were pleased to see our Portfolio gain ground on the benchmark over the last six months. We have focused on building a portfolio of companies that are well positioned to grow market share within their respective industries and that have built clear and sustainable competitive moats around their businesses. Important competitive moats could include a strong brand, patent protection over valuable intellectual property, network effects from a product or service that would be hard for a competitor to replicate, or a lower cost structure than competitors in the industry. We think focusing on such sustainable competitive advantages can be a meaningful driver of outperformance over time because the market may underestimate the duration of growth opportunities and long-term potential return to shareholders inherent in these companies. Over the course of the year, we’ve been pleased to see a number of companies in our Portfolio put up impressive results, further validating our view that they are well positioned to grow in excess of the market.
While pleased with the performance of most companies in our Portfolio, we did hold some stocks that fell during the year. Some of those positions were exited as we transitioned the Portfolio to a new portfolio manager. Apple was our largest detractor. While Apple has dominated the high-end smartphone market for some time now, we feel growth in that market is slowing. Meanwhile, despite the new smartphone launches, we think Apple still lacks a phone with a low enough price point to attract most first-time smartphone users in emerging markets. We also believe innovation has slowed for the company, making Apple’s risk/reward opportunity less attractive than it was earlier in the company’s product cycle, so we sold the position during the year to pursue investment opportunities we believe have more long-term growth potential.
FANUC was another large detractor. The company makes industrial automation equipment. We exited the position because we felt the company’s future was too dependent on demand from China’s manufacturing sector.
Turquoise Hill Resources was another large detractor. The company owns and operates a large Mongolian copper mine. We felt geopolitical risk was a headwind for the company, and that the Mongolian government would ultimately limit the profit the company could get from its copper mine, so we exited the position during the year.
While the aforementioned companies detracted from performance, we were pleased by the results of many companies held by the Portfolio. Celgene was up 114% and was the top contributor to the Portfolio’s performance.
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Janus Aspen Forty Portfolio (unaudited)
During the year, a global study pointed to the benefits of using Celgene’s drug Revlimid as a first-line treatment for multiple myeloma. Currently, the drug is only approved as a second-line treatment for the disease, and using Revlimid earlier in the treatment cycle could meaningfully expand its addressable market, especially outside the United States. Other drugs in Celgene’s pipeline also offer promising potential. We think the company is in the early stages of a major new product cycle, with other potential meaningful contributors including Abraxane for pancreatic cancer, Pomalyst for refractory multiple myeloma, and Apremilast, an oral drug to treat psoriatic arthritis and psoriasis. The stock has risen as management has explained to the market that multi-year growth will be driven by four different drug franchises, and that Celgene is much more than a one-product company.
Twenty-First Century Fox was another top contributor. The stock rose after the company announced multi-year earnings growth guidance that was well above market expectations. We think Fox has one of the broadest global content libraries of any studio, and much of its unique programming resonates strongly with its customer base. We also think the value of some of that content is poised to increase as it spreads internationally and as new digital platforms offer expanded viewing opportunities.
Finally, MGM Resorts was another top contributor to performance. The company is using much of its free cash flow to pay down debt, and as that happens it transfers some of the value of the company to equity holders. Going forward, we think that value could be significant. The 2014 convention calendar has improved, and should drive higher rates for many of MGM’s Las Vegas properties, resulting in meaningful revenue growth. Meanwhile, the company has a property in Macau, China, that should benefit from strong growth in gaming in the region.
OUTLOOK
We are optimistic that the global economy will continue to improve in 2014. We believe the housing market will remain strong even if rates rise slowly, and also expect unemployment levels to tick down during the year. We also believe earnings can grow for many companies as macroeconomic headwinds such as austerity programs in Europe and the threat of another round of sequester cuts has abated.
While we believe the economy will strengthen, we expect volatility for equities as the market adjusts to a scaling back of the easy monetary policies that have played a large role in boosting equities over most of the last five years. We will generally look past short-term volatility and use those periods to add to competitively advantaged companies we believe can grow in excess of the market over longer time horizons.
Thank you for your investment in Janus Aspen Forty Portfolio.
2 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Janus Aspen Forty Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Celgene Corp. | 5.66% | |||
Twenty-First Century Fox, Inc. | 3.37% | |||
MGM Resorts International | 2.19% | |||
Gilead Sciences, Inc. | 1.84% | |||
Google, Inc. – Class A | 1.80% |
5 Bottom Performers – Holdings
Contribution | ||||
Apple, Inc. | –1.48% | |||
FANUC Corp. | –0.90% | |||
Intuitive Surgical, Inc. | –0.59% | |||
Turquoise Hill Resources, Ltd. (U.S. Shares) | –0.34% | |||
Teradata Corp. | –0.23% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell 1000® | |||||||||||
Portfolio Contribution | (Average % of Equity) | Growth Index Weighting | ||||||||||
Health Care | 3.09% | 22.03% | 12.43% | |||||||||
Consumer Discretionary | 2.47% | 25.63% | 18.42% | |||||||||
Consumer Staples | 0.54% | 1.69% | 12.65% | |||||||||
Energy | 0.09% | 0.00% | 4.43% | |||||||||
Utilities | 0.00% | 0.00% | 0.22% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell 1000® | |||||||||||
Portfolio Contribution | (Average % of Equity) | Growth Index Weighting | ||||||||||
Industrials | –2.84% | 9.88% | 12.53% | |||||||||
Information Technology | –2.53% | 25.74% | 27.80% | |||||||||
Other** | –1.11% | 3.24% | 0.00% | |||||||||
Telecommunication Services | –0.61% | 3.38% | 2.19% | |||||||||
Materials | –0.55% | 2.03% | 4.23% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
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Table of Contents
Janus Aspen Forty Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Google, Inc. – Class A Internet Software & Services | 6.3% | |||
Celgene Corp. Biotechnology | 5.0% | |||
Twenty-First Century Fox, Inc. Media | 4.5% | |||
Canadian Pacific Railway, Ltd. (U.S. Shares) Road & Rail | 3.9% | |||
Monsanto Co. Chemicals | 3.6% | |||
23.3% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas04p01.gif)
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas04t01.gif)
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas04c01.gif)
4 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas04m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Forty Portfolio – Institutional Shares | 31.23% | 18.88% | 10.24% | 11.09% | 0.55% | ||||||
Janus Aspen Forty Portfolio – Service Shares | 30.89% | 18.59% | 9.97% | 10.77% | 0.80% | ||||||
Russell 1000® Growth Index | 33.48% | 20.39% | 7.83% | 6.29% | |||||||
S&P 500® Index | 32.39% | 17.94% | 7.41% | 7.10% | |||||||
Morningstar Quartile – Institutional Shares | 3rd | 2nd | 1st | 1st | |||||||
Morningstar Ranking – based on total returns for Large Growth Funds | 1,275/1,770 | 730/1,547 | 82/1,333 | 23/807 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
This Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period. See the Portfolio’s Prospectus or Statement of Additional Information for more details.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
Returns shown for Service Shares for periods prior to December 31, 1999 are derived from the historical performance of Institutional Shares, adjusted to reflect the higher operating expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See important disclosures on the next page.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Forty Portfolio (unaudited)
See “Useful Information About Your Portfolio Report.”
Effective June 3, 2013, Douglas Rao is Portfolio Manager of the Portfolio.
* | The Portfolio’s inception date – May 1, 1997 |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,217.70 | $ | 3.19 | $ | 1,000.00 | $ | 1,022.33 | $ | 2.91 | 0.57% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,216.00 | $ | 4.64 | $ | 1,000.00 | $ | 1,021.02 | $ | 4.23 | 0.83% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
6 | DECEMBER 31, 2013
Table of Contents
Janus Aspen Forty Portfolio
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Common Stock – 99.2% | ||||||||||
Aerospace & Defense – 3.3% | ||||||||||
107,029 | Precision Castparts Corp. | $ | 28,822,910 | |||||||
Auto Components – 3.0% | ||||||||||
440,061 | Delphi Automotive PLC | 26,460,868 | ||||||||
Beverages – 1.0% | ||||||||||
76,223 | Pernod-Ricard S.A. | 8,682,770 | ||||||||
Biotechnology – 9.2% | ||||||||||
23,555 | Biogen Idec, Inc.* | 6,589,511 | ||||||||
261,220 | Celgene Corp.* | 44,135,731 | ||||||||
400,267 | Gilead Sciences, Inc.* | 30,080,065 | ||||||||
80,805,307 | ||||||||||
Chemicals – 3.6% | ||||||||||
269,138 | Monsanto Co. | 31,368,034 | ||||||||
Commercial Banks – 3.3% | ||||||||||
714,792 | U.S. Bancorp | 28,877,597 | ||||||||
Diversified Financial Services – 3.0% | ||||||||||
501,445 | Citigroup, Inc. | 26,130,299 | ||||||||
Electronic Equipment, Instruments & Components – 3.5% | ||||||||||
175,430 | Amphenol Corp. – Class A | 15,644,847 | ||||||||
282,304 | TE Connectivity, Ltd. (U.S. Shares) | 15,557,774 | ||||||||
31,202,621 | ||||||||||
Health Care Providers & Services – 3.1% | ||||||||||
392,942 | Express Scripts Holding Co.* | 27,600,246 | ||||||||
Health Care Technology – 0.8% | ||||||||||
51,740 | athenahealth, Inc.* | 6,959,030 | ||||||||
Hotels, Restaurants & Leisure – 5.6% | ||||||||||
1,084,883 | MGM Resorts International* | 25,516,448 | ||||||||
80,660 | Panera Bread Co. – Class A* | 14,251,815 | ||||||||
124,622 | Starbucks Corp. | 9,769,119 | ||||||||
49,537,382 | ||||||||||
Information Technology Services – 4.9% | ||||||||||
35,229 | MasterCard, Inc. – Class A | 29,432,420 | ||||||||
300,122 | Teradata Corp.* | 13,652,550 | ||||||||
43,084,970 | ||||||||||
Insurance – 1.9% | ||||||||||
3,397,000 | AIA Group, Ltd. | 17,041,952 | ||||||||
Internet & Catalog Retail – 5.6% | ||||||||||
63,758 | Amazon.com, Inc.* | 25,426,053 | ||||||||
20,788 | priceline.com, Inc.* | 24,163,971 | ||||||||
49,590,024 | ||||||||||
Internet Software & Services – 10.2% | ||||||||||
505,997 | eBay, Inc.* | 27,774,175 | ||||||||
49,494 | Google, Inc. – Class A* | 55,468,421 | ||||||||
33,396 | LinkedIn Corp. – Class A* | 7,241,255 | ||||||||
90,483,851 | ||||||||||
Machinery – 1.5% | ||||||||||
92,079 | Cummins, Inc. | 12,980,377 | ||||||||
Media – 4.5% | ||||||||||
1,137,075 | Twenty-First Century Fox, Inc. | 40,002,298 | ||||||||
Pharmaceuticals – 8.2% | ||||||||||
231,984 | Endo Health Solutions, Inc.* | 15,649,641 | ||||||||
240,289 | Valeant Pharmaceuticals International, Inc. (U.S. Shares) | 28,209,929 | ||||||||
883,544 | Zoetis, Inc. | 28,883,053 | ||||||||
72,742,623 | ||||||||||
Professional Services – 1.2% | ||||||||||
226,796 | Nielsen Holdings N.V. | 10,407,668 | ||||||||
Road & Rail – 3.9% | ||||||||||
227,407 | Canadian Pacific Railway, Ltd. (U.S. Shares) | 34,411,227 | ||||||||
Semiconductor & Semiconductor Equipment – 1.2% | ||||||||||
198,094 | ARM Holdings PLC (ADR) | 10,843,666 | ||||||||
Software – 2.8% | ||||||||||
548,815 | Oracle Corp. | 20,997,662 | ||||||||
66,124 | Salesforce.com, Inc.* | 3,649,383 | ||||||||
24,647,045 | ||||||||||
Specialty Retail – 8.2% | ||||||||||
398,432 | L Brands, Inc. | 24,643,019 | ||||||||
449,736 | Lowe’s Cos., Inc. | 22,284,419 | ||||||||
406,559 | TJX Cos., Inc. | 25,910,005 | ||||||||
72,837,443 | ||||||||||
Textiles, Apparel & Luxury Goods – 1.8% | ||||||||||
1,807,000 | Prada SpA | 16,079,830 | ||||||||
Wireless Telecommunication Services – 3.9% | ||||||||||
286,002 | Crown Castle International Corp.* | 21,001,127 | ||||||||
397,731 | T-Mobile U.S., Inc. | 13,379,671 | ||||||||
34,380,798 | ||||||||||
Total Common Stock (cost $598,175,709) | 875,980,836 | |||||||||
Money Market – 1.6% | ||||||||||
13,728,000 | Janus Cash Liquidity Fund LLC, 0%£ (cost $13,728,000) | 13,728,000 | ||||||||
Total Investments (total cost $611,903,709) – 100.8% | 889,708,836 | |||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.8)% | (7,309,106) | |||||||||
Net Assets – 100% | $ | 882,399,730 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Canada | $ | 62,621,156 | 7.0% | |||||
France | 8,682,770 | 1.0% | ||||||
Hong Kong | 17,041,952 | 1.9% | ||||||
Italy | 16,079,830 | 1.8% | ||||||
United Kingdom | 10,843,666 | 1.2% | ||||||
United States†† | 774,439,462 | 87.1% | ||||||
Total | $ | 889,708,836 | 100.0% |
†† | Includes Cash Equivalents of 1.5%. |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 7
Table of Contents
Notes to Schedule of Investments and Other Information
Russell 1000® Growth Index | Measures the performance of those Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values. | |
S&P 500® Index | A commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. | |
ADR | American Depositary Receipt | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
U.S. Shares | Securities of foreign companies trading on an American stock exchange. |
* | Non-income producing security. |
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | ||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | ||||||||||
Janus Aspen Forty Portfolio | ||||||||||||||||
Janus Cash Liquidity Fund LLC | 406,638,898 | $406,638,898 | (417,393,701) | $(417,393,701) | $– | $31,215 | $13,728,000 | |||||||||
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Forty Portfolio | |||||||||||
Common Stock | $ | 875,980,836 | $ | – | $ | – | |||||
Money Market | – | 13,728,000 | – | ||||||||
Total Investments in Securities | $ | 875,980,836 | $ | 13,728,000 | $ | – | |||||
8 | DECEMBER 31, 2013
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||||||
As of December 31, 2013 | Forty | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 611,904 | ||||||||
Unaffiliated investments at value | $ | 875,981 | ||||||||
Affiliated investments at value | 13,728 | |||||||||
Cash | – | |||||||||
Receivables: | ||||||||||
Portfolio shares sold | 45 | |||||||||
Dividends | 310 | |||||||||
Foreign dividend tax reclaim | 114 | |||||||||
Non-interested Trustees’ deferred compensation | 17 | |||||||||
Other assets | 17 | |||||||||
Total Assets | 890,212 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Investments purchased | 5,374 | |||||||||
Portfolio shares repurchased | 1,571 | |||||||||
Advisory fees | 390 | |||||||||
Fund administration fees | 8 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 113 | |||||||||
Non-interested Trustees’ fees and expenses | 5 | |||||||||
Non-interested Trustees’ deferred compensation fees | 17 | |||||||||
Accrued expenses and other payables | 334 | |||||||||
Total Liabilities | 7,812 | |||||||||
Net Assets | $ | 882,400 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 358,082 | ||||||||
Undistributed net investment income* | 643 | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 245,861 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 277,814 | |||||||||
Total Net Assets | $ | 882,400 | ||||||||
Net Assets - Institutional Shares | $ | 355,429 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 6,664 | |||||||||
Net Asset Value Per Share | $ | 53.34 | ||||||||
Net Assets - Service Shares | $ | 526,971 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 10,056 | |||||||||
Net Asset Value Per Share | $ | 52.40 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the year ended December 31, 2013 | Forty | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Dividends | $ | 8,481 | ||||
Dividends from affiliates | 31 | |||||
Other Income | 4 | |||||
Foreign tax withheld | (179) | |||||
Total Investment Income | 8,337 | |||||
Expenses: | ||||||
Advisory fees | 4,806 | |||||
Internal servicing expense - Institutional Shares | 4 | |||||
Internal servicing expense - Service Shares | 4 | |||||
Shareholder reports expense | 348 | |||||
Transfer agent fees and expenses | 2 | |||||
Registration fees | 30 | |||||
Custodian fees | 25 | |||||
Professional fees | 48 | |||||
Non-interested Trustees’ fees and expenses | 23 | |||||
Fund administration fees | 98 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 1,221 | |||||
Other expenses | 51 | |||||
Total Expenses | 6,660 | |||||
Net Expenses after Waivers and Expense Offsets | 6,660 | |||||
Net Investment Income | 1,677 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 311,910 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | (50,019) | |||||
Net Gain on Investments | 261,891 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 263,568 |
See Notes to Financial Statements.
10 | DECEMBER 31, 2013
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Forty | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 1,677 | $ | 9,061 | ||||||
Net realized gain from investment and foreign currency transactions | 311,910 | 7,888 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | (50,019) | 188,516 | ||||||||
Net Increase in Net Assets Resulting from Operations | 263,568 | 205,465 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (3,545) | (3,542) | ||||||||
Service Shares | (2,839) | (2,681) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (6,384) | (6,223) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 40,696 | 66,699 | ||||||||
Service Shares | 32,866 | 64,127 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 3,545 | 3,542 | ||||||||
Service Shares | 2,839 | 2,681 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (305,138) | (146,389) | ||||||||
Service Shares | (108,968) | (107,393) | ||||||||
Net Decrease from Capital Share Transactions | (334,160) | (116,733) | ||||||||
Net Increase/(Decrease) in Net Assets | (76,976) | 82,509 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 959,376 | 876,867 | ||||||||
End of period | $ | 882,400 | $ | 959,376 | ||||||
Undistributed Net Investment Income* | $ | 643 | $ | 5,361 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
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Financial Highlights
Institutional Shares
Janus Aspen Forty Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $40.95 | $33.22 | $35.74 | $33.61 | $22.97 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.38 | 0.47 | 0.23 | 0.19 | 0.08 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 12.34 | 7.54 | (2.62) | 2.06 | 10.57 | |||||||||||||||||
Total from Investment Operations | 12.72 | 8.01 | (2.39) | 2.25 | 10.65 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.33) | (0.28) | (0.13) | (0.12) | –(1) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Return of capital | N/A | N/A | N/A | N/A | (0.01) | |||||||||||||||||
Total Distributions and Other | (0.33) | (0.28) | (0.13) | (0.12) | (0.01) | |||||||||||||||||
Net Asset Value, End of Period | $53.34 | $40.95 | $33.22 | $35.74 | $33.61 | |||||||||||||||||
Total Return | 31.23% | 24.16% | (6.69)% | 6.72% | 46.38% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $355,429 | $488,374 | $459,459 | $567,322 | $582,511 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $491,231 | $512,799 | $518,818 | $553,994 | $482,572 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.55% | 0.55% | 0.70% | 0.67% | 0.68% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.55% | 0.55% | 0.70% | 0.67% | 0.68% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 0.31% | 1.03% | 0.56% | 0.52% | 0.05% | |||||||||||||||||
Portfolio Turnover Rate | 61% | 10% | 46% | 36% | 32% |
Service Shares
Janus Aspen Forty Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $40.28 | $32.72 | $35.24 | $33.17 | $22.73 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | –(1) | 0.31 | 0.09 | 0.07 | –(1) | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 12.38 | 7.47 | (2.52) | 2.08 | 10.44 | |||||||||||||||||
Total from Investment Operations | 12.38 | 7.78 | (2.43) | 2.15 | 10.44 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.26) | (0.22) | (0.09) | (0.08) | –(1) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Return of capital | N/A | N/A | N/A | N/A | –(1) | |||||||||||||||||
Total Distributions and Other | (0.26) | (0.22) | (0.09) | (0.08) | – | |||||||||||||||||
Net Asset Value, End of Period | $52.40 | $40.28 | $32.72 | $35.24 | $33.17 | |||||||||||||||||
Total Return | 30.89% | 23.82% | (6.91)% | 6.48% | 45.95% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $526,971 | $471,002 | $417,408 | $532,645 | $639,979 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $486,845 | $468,967 | $475,743 | $567,062 | $520,592 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.81% | 0.80% | 0.95% | 0.92% | 0.93% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.81% | 0.80% | 0.95% | 0.92% | 0.93% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.04% | 0.81% | 0.31% | 0.25% | (0.22)% | |||||||||||||||||
Portfolio Turnover Rate | 61% | 10% | 46% | 36% | 32% |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Less than $0.01 on a per share basis. |
See Notes to Financial Statements.
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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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in common stocks. The Portfolio is classified as nondiversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which
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Notes to Financial Statements (continued)
may be allocated pro rata to the Portfolio. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American
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Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold any Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out | ||||||
of Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Forty Portfolio | $ | 40,696,368 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will
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Notes to Financial Statements (continued)
be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. | |
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. | |
• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar
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cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a contract is included in “Net realized gain/(loss) from investment and foreign currency transactions” on the Statement of Operations (if applicable).
The following table provides information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||
Derivatives not accounted for as | Investment and foreign | |||
hedging instruments | currency transactions | |||
Janus Aspen Forty Portfolio | ||||
Foreign Exchange Contracts | $ | 516,828 | ||
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
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their
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Notes to Financial Statements (continued)
businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
4. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Base Fee | |||||
Rate (%) | |||||
Portfolio | (annual rate) | ||||
Janus Aspen Forty Portfolio | 0.64 | ||||
For the Portfolio, the investment advisory fee rate is determined by calculating a base fee and applying a performance adjustment. The base fee rate is the same as the contractual investment advisory fee rate shown in the table above. The performance adjustment either increases or decreases the base fee depending on how well the Portfolio has performed relative to its benchmark index, as shown below:
Portfolio | Benchmark Index | ||||
Janus Aspen Forty Portfolio | Russell 1000® Growth Index | ||||
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance Adjustment
The investment advisory fee rate paid to Janus Capital by the Portfolio consists of two components: (1) a base fee calculated by applying the contractual fixed rate of the advisory fee to the Portfolio’s average daily net assets during the previous month (“Base Fee Rate”), plus or minus (2) a performance-fee adjustment (“Performance Adjustment”) calculated by applying a variable rate of up to 0.15% (positive or negative) to the Portfolio’s average daily net assets during the applicable performance measurement period. The performance measurement period generally is the previous 36 months, although no Performance Adjustment is made until the Portfolio’s performance-based fee structure has been in effect for at least 18 months. When the Portfolio’s performance-based fee structure has been in effect for at least 18 months, but less than 36 months, the performance measurement period will be equal to the time that has elapsed since the performance-based fee structure took effect. Any applicable Performance Adjustment began January 2012 for the Portfolio.
No Performance Adjustment is applied unless the difference between the Portfolio’s investment performance and the cumulative investment record of the Portfolio’s benchmark index is 0.50% or greater (positive or negative) during the applicable performance measurement period. The Base Fee Rate is subject to an upward or downward Performance Adjustment for every full 0.50% increment by which the Portfolio outperforms or underperforms its benchmark index. Because the Performance Adjustment is tied to the Portfolio’s relative performance compared to its benchmark index (and not its absolute performance), the Performance Adjustment could increase Janus Capital’s fee even if the Portfolio’s Shares lose value during the performance measurement period and could decrease Janus Capital’s fee even if the Portfolio’s Shares increase in value during the performance measurement period. For purposes of computing the Base Fee Rate and the Performance
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Adjustment, net assets are averaged over different periods (average daily net assets during the previous month for the Base Fee Rate, versus average daily net assets during the performance measurement period for the Performance Adjustment). Performance of the Portfolio is calculated net of expenses, whereas the Portfolio’s benchmark index does not have any fees or expenses. Reinvestment of dividends and distributions is included in calculating both the performance of the Portfolio and the Portfolio’s benchmark index. The Base Fee Rate is calculated and accrued daily. The Performance Adjustment is calculated monthly in arrears and is accrued throughout the month. The investment fee is paid monthly in arrears. Under extreme circumstances involving underperformance by a rapidly shrinking Portfolio, the dollar amount of the Performance Adjustment could be more than the dollar amount of the Base Fee Rate. In such circumstances, Janus Capital would reimburse the Portfolio.
The investment performance of the Portfolio’s Service Shares for the performance measurement period is used to calculate the Performance Adjustment. After Janus Capital determines whether the Portfolio’s performance was above or below its benchmark index by comparing the investment performance of the Portfolio’s Service Shares against the cumulative investment record of the Portfolio’s benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance Adjustment on future overall compensation to Janus Capital since it depends on the performance of the Portfolio relative to the record of the Portfolio’s benchmark index and future changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional information contain additional information about performance-based fees. The amount shown as advisory fees on the Statement of Operations reflects the Base Fee Rate plus/minus any Performance Adjustment. During the year ended December 31, 2013, the Portfolio recorded a Performance Adjustment of $(1,469,346).
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to
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Notes to Financial Statements (continued)
certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
5. | Federal Income Tax |
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 primarily consist of deferred compensation 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. 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 | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Forty Portfolio | $ | 660,521 | $ | 246,020,642 | $ | – | $ | – | $ | – | $ | (9,199) | $ | 277,645,594 | |||||||||
During the year ended December 31, 2013, the following capital loss carryovers were utilized by the Portfolio:
Capital Loss | |||||||||||||||||||||||
Portfolio | Carryover Utilized | ||||||||||||||||||||||
Janus Aspen Forty Portfolio | $ | 65,292,832 | |||||||||||||||||||||
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, 2013 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 | $ | 612,063,242 | $ | 280,253,717 | $ | (2,608,123) | |||||
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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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Forty Portfolio | $ | 6,383,582 | $ | – | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Forty Portfolio | $ | 6,222,614 | $ | – | $ | – | $ | – | |||||||||
6. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Forty Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 909 | 1,703 | ||||||||
Reinvested dividends and distributions | 80 | 90 | ||||||||
Shares repurchased | (6,252) | (3,696) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (5,263) | (1,903) | ||||||||
Shares Outstanding, Beginning of Period | 11,927 | 13,830 | ||||||||
Shares Outstanding, End of Period | 6,664 | 11,927 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 726 | 1,678 | ||||||||
Reinvested dividends and distributions | 66 | 69 | ||||||||
Shares repurchased | (2,429) | (2,813) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,637) | (1,066) | ||||||||
Shares Outstanding, Beginning of Period | 11,693 | 12,759 | ||||||||
Shares Outstanding, End of Period | 10,056 | 11,693 |
7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Forty Portfolio | $ | 575,052,070 | $ | 896,738,469 | $ | – | $ | – | ||||||
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Notes to Financial Statements (continued)
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of 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, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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Additional Information (unaudited) (continued)
charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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Additional Information (unaudited) (continued)
• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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Additional Information (unaudited) (continued)
conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Forty Portfolio | 100% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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Trustees and Officers (unaudited) (continued)
OFFICERS
Principal Occupations During the | ||||||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Past Five Years | |||
A. Douglas Rao 151 Detroit Street Denver, CO 80206 DOB: 1974 | Executive Vice President and Portfolio Manager Janus Aspen Forty Portfolio | 6/13-Present | Portfolio Manager for other Janus accounts. Formerly, Partner and Portfolio Manager for Chautauqua Capital Management (2012-2013) and Portfolio Manager for Marsico Capital Management, LLC (2007-2012). | |||
Robin C. Beery** 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Notes
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55427 | 109-02-81115 02-14 |
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annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
PORTFOLIO SNAPSHOT We believe broad global diversification allows flexibility to capture the best-performing asset classes regardless of geographies. In addition, we seek to dampen the funds’ overall volatility through the use of alternatives. This coupled with access to Janus Capital Group’s innovative investment expertise and solutions should provide superior risk-adjusted returns over the long term. | ![]() Dan Scherman portfolio manager |
PERFORMANCE OVERVIEW
For the 12 months ended December 31, 2013, Janus Aspen Global Allocation Portfolio – Moderate’s Institutional Shares and Service Shares returned 14.81% and 14.69%, respectively. This compares with a return of 22.80% for its primary benchmark, the MSCI All Country World Index, and a 12.05% return for its secondary benchmark, the Global Moderate Allocation Index, an internally calculated, hypothetical combination of total returns from the MSCI All Country World Index (60%) and the Barclays Global Aggregate Bond Index (40%).
MARKET ENVIRONMENT
The year produced strong returns for riskier assets, particularly equities. Markets reacted to slow but steady improvement in the macroeconomic environment, led by the U.S. and other developed markets. The global economy was strong enough to allow company fundamentals to improve, but not too strong to force central banks to move to tightening policies. Muted inflation also enabled central banks to remain in an easing posture. Emerging markets, however, were the exception, as they lagged significantly. Skepticism over China’s ability to resume its high growth rates was among factors that weighed on emerging markets.
Interest rates rose during the period, reflecting improvement in the global economy and the onset of the Federal Reserve’s gradual reduction (i.e., tapering) of its stimulative bond buying program. Most fixed income indices suffered losses as a result, although the high-yield segment achieved moderate gains. Real estate investment trusts also managed only modest returns in the face of rising rates.
INVESTMENT PROCESS
Janus Aspen Global Allocation Portfolio – Moderate invests across a broad set of Janus, INTECH and Perkins funds that span a wide range of global asset categories with a base allocation of 45% to 60% equity investments, 30% to 45% fixed income investments and 5% to 20% alternative investments that are rebalanced quarterly. The Portfolio is structured as a “fund of funds” portfolio that provides investors with broad, diversified exposure to various types of investments with an emphasis on managing investment risk. The Portfolio is also designed to blend the three core competencies that Janus practices as an organization: mathematically-driven, risk-managed strategies and fundamentally-driven, growth and value-oriented investments. We believe that combining these very different approaches in a single investment can potentially produce a portfolio with a unique and powerful performance profile.
The investment process involves setting return expectations for a broad range of Janus mutual funds that we believe best represent the full opportunity set available to today’s investor. Then, acting in conjunction with an outside consultant, we establish an ideal “model” portfolio based upon the specific risk/return objective of Janus Aspen Global Allocation Portfolio – Moderate. The Janus Asset Allocation Committee also provides input on the overall allocation. Finally, we select the appropriate Janus, Perkins and INTECH funds that replicate our desired exposure. The allocations assigned to each selected underlying fund are consistent with our view of current market conditions and the long-term trade-off between risk and reward potential that each of these investment types represent. However, as a result of changing market conditions, both the mix of underlying funds and the allocations to these funds will change from time to time.
DETRACTORS AND CONTRIBUTORS
Given its exposure to fixed income and alternatives, the Portfolio underperformed its primary benchmark, the MSCI All Country World Index. The Portfolio outperformed its secondary benchmark, Global Moderate Allocation Index.
Unsurprisingly, our equity investments, led by INTECH U.S. Value Fund, Janus International Equity Fund and Perkins Large Cap Value Fund, were our top contributors. Detractors were led by Janus Global Bond Fund, Janus Diversified Alternatives Fund and Janus Emerging
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Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Markets Fund, reflecting the weakness in their respective asset classes.
POSITIONING
Along with modifications resulting from the strategy and name change we detailed in our semiannual letter, we added to our positions in Janus Contrarian Fund and Janus Global Real Estate Fund. The latter was the result of our asset allocation committee’s determination that real estate was attractively valued even though the short-term headwind from rising rates remains.
OUTLOOK
Our base case is for a gradual rise in interest rates. A sudden spike could significantly weaken investor confidence and, in turn, equities and the economy broadly. We view the steepening yield curve as a positive sign that the U.S. economic fundamentals are improving.
Along with a strengthening U.S. economy, positive macroeconomic data from Europe should also offer support for equities and global economic fundamentals. Given their lengthy relative underperformance, emerging markets are becoming more attractive to us. Historically, recoveries in developed markets, such as we’re experiencing, have led to strong performance in emerging markets.
Despite our generally positive outlook, the strong equity rally makes us mindful of the importance of diversification, which we maintain in the Portfolio while letting our investment views express themselves at the margin.
Thank you for investing in Janus Aspen Global Allocation Portfolio – Moderate.
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(unaudited)
Janus Aspen Global Allocation Portfolio – Moderate (% of Net Assets)
Janus Global Bond Fund – Class N Shares | 26.6% | |||
Janus International Equity Fund – Class N Shares | 12.7% | |||
Janus Diversified Alternatives Fund – Class N Shares | 8.2% | |||
INTECH U.S. Value Fund – Class I Shares | 8.1% | |||
INTECH International Fund – Class I Shares | 8.0% | |||
Perkins Large Cap Value Fund – Class N Shares | 5.1% | |||
INTECH U.S. Growth Fund – Class I Shares | 4.3% | |||
Janus Overseas Fund – Class N Shares | 4.2% | |||
Janus Short-Term Bond Fund – Class N Shares | 3.9% | |||
Janus Aspen Global Research Portfolio(1) – Institutional Shares | 3.2% | |||
Janus Global Real Estate Fund – Class I Shares | 2.3% | |||
Janus Triton Fund – Class N Shares | 2.2% | |||
Janus Global Select Fund – Class I Shares | 2.2% | |||
Perkins Small Cap Value Fund – Class N Shares | 2.1% | |||
Janus Emerging Markets Fund – Class I Shares | 1.9% | |||
Janus Twenty Fund – Class D Shares | 1.6% | |||
Janus Fund – Class N Shares | 1.6% | |||
Janus Forty Fund – Class N Shares | 1.1% | |||
Janus Contrarian Fund – Class I Shares | 1.1% | |||
(1) | Formerly named Janus Aspen Worldwide Portfolio. |
Janus Aspen Global Allocation Portfolio - Moderate At A Glance
Asset Allocation – (% of Net Assets)
As of December 31, 2013
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*Includes Cash and Other of (0.4)%.
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Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Performance
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Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||
One | Since | Total Annual Fund | Net Annual Fund | ||||||
Year | Inception* | Operating Expenses | Operating Expenses | ||||||
Janus Aspen Global Allocation Portfolio – Moderate – Institutional Shares | 14.81% | 12.71% | 25.37% | 1.43% | |||||
Janus Aspen Global Allocation Portfolio – Moderate – Service Shares | 14.69% | 12.58% | 27.62% | 1.59% | |||||
MSCI All Country World IndexSM | 22.80% | 14.95% | |||||||
Global Moderate Allocation Index | 12.05% | 8.83% | |||||||
S&P 500® Index | 32.39% | 22.19% | |||||||
Moderate Allocation Index | 15.86% | 12.11% | |||||||
Morningstar Quartile – Institutional Shares | 2nd | 1st | |||||||
Morningstar Ranking – based on total returns for World Allocation Funds | 181/486 | 52/366 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
Net expense ratios reflect the expense waiver, if any, Janus Capital has contractually agreed to through May 1, 2014.
The expense ratios shown are estimated.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, portfolio holdings and other details.
Because Janus Capital is the adviser to the Portfolio and to the underlying affiliated funds held within the Portfolio, it is subject to certain potential conflicts of interest.
Performance of the Janus Global Allocation Portfolios depends on that of the underlying funds. They are subject to the volatility of the financial markets.
For a period of three years subsequent to the Portfolio’s commencement of operations, Janus Capital may recover from the Portfolio fees and expenses previously waived or reimbursed, which could be considered a deferral, if the Portfolio’s expense ratio, including recovered expenses, falls below the expense limit.
See important disclosures on the next page.
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(unaudited)
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
Ranking is for the share class shown only; other classes may have different performance characteristics. When an expense waiver is in effect, it may have a material effect on the total return, and therefore the ranking for the period.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
The Portfolio’s holdings may differ significantly from the securities held in the indices. The indices are unmanaged and are not available for direct investment; therefore, their performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective May 1, 2013, Janus Aspen Moderate Allocation Portfolio changed its name to Janus Aspen Global Allocation Portfolio – Moderate and its primary benchmark from the S&P 500® Index to the Morgan Stanley Capital International (“MSCI”) All Country World IndexSM. In addition, the Portfolio changed its secondary benchmark from the Moderate Allocation Index to the Global Moderate Allocation Index. Janus Capital believes that these changes provide a more appropriate representation of the Portfolio’s investment strategy that includes an increased focus on global investments, including emerging markets.
* | The Portfolio’s inception date – August 31, 2011 |
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Janus Aspen Global Allocation Portfolio - Moderate (unaudited)
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,109.50 | $ | 2.66 | $ | 1,000.00 | $ | 1,022.68 | $ | 2.55 | 0.50% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,107.70 | $ | 3.51 | $ | 1,000.00 | $ | 1,021.88 | $ | 3.36 | 0.66% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
6 | DECEMBER 31, 2013
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Janus Aspen Global Allocation Portfolio – Moderate(1)
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Mutual Funds(2),£ – 100.4% | ||||||||||
Alternative Funds – 10.5% | ||||||||||
81,360 | Janus Diversified Alternatives Fund* - Class N Shares | $ | 807,909 | |||||||
22,114 | Janus Global Real Estate Fund – Class I Shares | 226,005 | ||||||||
1,033,914 | ||||||||||
Equity Funds – 59.3% | ||||||||||
85,176 | INTECH International Fund – Class I Shares | 786,177 | ||||||||
21,345 | INTECH U.S. Growth Fund – Class I Shares | 422,424 | ||||||||
64,536 | INTECH U.S. Value Fund – Class I Shares | 797,023 | ||||||||
8,018 | Janus Aspen Global Research Portfolio(3) - Institutional Shares | 312,625 | ||||||||
5,228 | Janus Contrarian Fund – Class I Shares | 109,313 | ||||||||
21,840 | Janus Emerging Markets Fund – Class I Shares | 183,018 | ||||||||
2,688 | Janus Forty Fund – Class N Shares | 111,241 | ||||||||
3,799 | Janus Fund – Class N Shares | 155,814 | ||||||||
17,391 | Janus Global Select Fund – Class I Shares | 220,347 | ||||||||
90,886 | Janus International Equity Fund – Class N Shares | 1,246,948 | ||||||||
11,243 | Janus Overseas Fund – Class N Shares | 414,428 | ||||||||
9,297 | Janus Triton Fund – Class N Shares | 221,539 | ||||||||
2,510 | Janus Twenty Fund – Class D Shares | 159,338 | ||||||||
31,829 | Perkins Large Cap Value Fund – Class N Shares | 501,625 | ||||||||
8,068 | Perkins Small Cap Value Fund – Class N Shares | 207,578 | ||||||||
5,849,438 | ||||||||||
Fixed Income Funds – 30.6% | ||||||||||
262,060 | Janus Global Bond Fund – Class N Shares | 2,623,217 | ||||||||
126,183 | Janus Short-Term Bond Fund – Class N Shares | 387,381 | ||||||||
3,010,598 | ||||||||||
Total Investments (total cost $9,613,889) – 100.4% | 9,893,950 | |||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.4)% | (34,814) | |||||||||
Net Assets – 100% | $ | 9,859,136 | ||||||||
(1) | Formerly named Janus Aspen Moderate Allocation Portfolio. | |
(2) | The Portfolio invests in mutual funds within the Janus family of funds and they may be deemed to be under common control because they share the same Board of Trustees. | |
(3) | Formerly named Janus Aspen Worldwide Portfolio. |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 7
Table of Contents
Notes to Schedule of Investments and Other Information
Barclays Global Aggregate Bond Index | Provides a broad-based measure of the global investment grade fixed-rate debt markets. It is comprised of the U.S. Aggregate, Pan-European Aggregate, and the Asian-Pacific Aggregate Indexes. It also includes a wide range of standard and customized subindices by liquidity constraint, sector, quality and maturity. | |
Barclays U.S. Aggregate Bond Index | Made up of the Barclays U.S. Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million. | |
Dow Jones Wilshire 5000 Index | Measures the performance of all U.S. headquartered equity securities with readily available price data. Over 5,000 capitalization-weighted security returns are used and the Dow Jones Wilshire 5000 Index is considered one of the premier measures of the entire U.S. stock market. | |
Global Moderate Allocation Index | An internally calculated, hypothetical combination of total returns from the MSCI All Country World IndexSM (60%) and Barclays Global Aggregate Bond Index (40%). | |
Moderate Allocation Index | An internally calculated, hypothetical combination of total returns from the Dow Jones Wilshire 5000 Index (40%), the Barclays U.S. Aggregate Bond Index (40%), the MSCI EAFE® Index (18%) and the MSCI Emerging Markets IndexSM (2%). | |
MSCI All Country World IndexSM | An unmanaged, free float-adjusted market capitalization weighted index composed of stocks of companies located in countries throughout the world. It is designed to measure equity market performance in global developed and emerging markets. The index includes reinvestment of dividends, net of foreign withholding taxes. | |
MSCI EAFE® Index | A free float-adjusted market capitalization weighted index designed to measure developed market equity performance. The MSCI EAFE® Index is composed of companies representative of the market structure of developed market countries. The index includes reinvestment of dividends, net of foreign withholding taxes. | |
MSCI Emerging Markets IndexSM | A free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. | |
S&P 500® Index | A commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. |
* | Non-income producing security. |
8 | DECEMBER 31, 2013
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£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Global Allocation Portfolio – Moderate | |||||||||||||||||||||
INTECH International Fund- Class I Shares | 86,682 | $ | 748,948 | (6,203) | $ | (51,570) | $ | 2,774 | $ | 20,144 | $ | 786,177 | |||||||||
INTECH U.S. Growth Fund – Class I Shares | 27,301 | 464,013 | (9,678) | (152,775) | 14,772 | 3,030 | 422,424 | ||||||||||||||
INTECH U.S. Value Fund – Class I Shares | 70,957 | 896,343 | (13,894) | (157,920) | 21,952 | 34,549 | 797,023 | ||||||||||||||
Janus Aspen Flexible Bond Portfolio – Institutional Shares | 92,588 | 1,172,081 | (113,520) | (1,433,936) | 13,330 | – | – | ||||||||||||||
Janus Aspen Global Research Portfolio(1) – Institutional Shares | 8,657 | 308,120 | (639) | (23,438) | 1 | 2,291 | 312,625 | ||||||||||||||
Janus Aspen Overseas Portfolio – Institutional Shares | 4,590 | 177,291 | (5,612) | (215,050) | 14,876 | – | – | ||||||||||||||
Janus Contrarian Fund – Class I Shares | 5,578 | 101,908 | (350) | (6,687) | (1) | 336 | 109,313 | ||||||||||||||
Janus Diversified Alternatives Fund – Class N Shares | 88,370 | 878,309 | (7,010) | (70,026) | (434) | – | 807,909 | ||||||||||||||
Janus Emerging Markets Fund – Class I Shares | 23,234 | 197,263 | (2,151) | (18,499) | (240) | 5,106 | 183,018 | ||||||||||||||
Janus Forty Fund – Class N Shares | 2,791 | 129,527 | (103) | (5,000) | (49) | 1,264 | 111,241 | ||||||||||||||
Janus Fund – Class N Shares | 4,615 | 165,047 | (1,325) | (46,646) | 4,456 | 521 | 155,814 | ||||||||||||||
Janus Global Bond Fund – Class I Shares | 229,871 | 2,343,150 | (229,871) | (2,343,150) | (8,179) | 21,468 | – | ||||||||||||||
Janus Global Bond Fund – Class N Shares | 268,441 | 2,723,437 | (6,381) | (66,489) | (2,700) | 17,727 | 2,623,217 | ||||||||||||||
Janus Global Real Estate Fund – Class I Shares | 22,311 | 238,774 | (1,611) | (17,998) | (814) | 4,632 | 226,005 | ||||||||||||||
Janus Global Research Fund(2) – Class I Shares | 1,528 | 79,820 | (2,477) | (131,594) | 6,846 | – | – | ||||||||||||||
Janus Global Select Fund – Class I Shares | 18,518 | 214,833 | (1,127) | (13,413) | (41) | 1,390 | 220,347 | ||||||||||||||
Janus International Equity Fund – Class N Shares | 91,362 | 1,154,147 | (6,510) | (80,485) | 4,144 | 12,316 | 1,246,948 | ||||||||||||||
Janus Overseas Fund – Class N Shares | 11,957 | 435,885 | (714) | (26,734) | (690) | 16,427 | 414,428 | ||||||||||||||
Janus Research Fund – Class N Shares | 2,938 | 103,066 | (3,859) | (130,468) | 11,210 | – | – | ||||||||||||||
Janus Short-Term Bond Fund – Class N Shares | 146,187 | 449,987 | (32,838) | (101,421) | (81) | 3,076 | 387,381 | ||||||||||||||
Janus Triton Fund – Class N Shares | 9,047 | 191,900 | (667) | (13,780) | 1,118 | 364 | 221,539 | ||||||||||||||
Janus Twenty Fund – Class D Shares | 2,942 | 199,111 | (685) | (47,645) | 4,644 | 1,094 | 159,338 | ||||||||||||||
Perkins Large Cap Value Fund – Class N Shares | 42,915 | 670,535 | (16,847) | (250,893) | 17,314 | 10,221 | 501,625 | ||||||||||||||
Perkins Small Cap Value Fund – Class N Shares | 8,120 | 197,283 | (802) | (18,356) | 2,152 | 2,606 | 207,578 | ||||||||||||||
$ | 14,240,778 | $ | (5,423,973) | $ | 106,360 | $ | 158,562 | $ | 9,893,950 | ||||||||||||
(1) | Formerly named Janus Aspen Worldwide Portfolio. | |
(2) | Effective March 15, 2013, Janus Global Research Fund merged with and into Janus Worldwide Fund. Following the merger, Janus Worldwide Fund was renamed Janus Global Research Fund. |
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Global Allocation Portfolio – Moderate | |||||||||||
Mutual Funds | |||||||||||
Alternative Funds | $ | – | $ | 1,033,914 | $ | – | |||||
Equity Funds | – | 5,849,438 | – | ||||||||
Fixed Income Funds | – | 3,010,598 | – | ||||||||
Total Investments in Securities | $ | – | $ | 9,893,950 | $ | – | |||||
Janus Aspen Series | 9
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Statement of Assets and Liabilities
Janus Aspen Global | ||||||||||
As of December 31, 2013 | Allocation Portfolio - | |||||||||
(all numbers in thousands except net asset value per share) | Moderate(1) | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 9,614 | ||||||||
Affiliated investments at value | 9,894 | |||||||||
Cash | – | |||||||||
Receivables: | ||||||||||
Portfolio shares sold | 49 | |||||||||
Dividends | 12 | |||||||||
Due from adviser | 12 | |||||||||
Non-interested Trustees’ deferred compensation | – | |||||||||
Other assets | – | |||||||||
Total Assets | 9,967 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Investments purchased | 18 | |||||||||
Portfolio shares repurchased | 52 | |||||||||
Advisory fees | – | |||||||||
Fund administration fees | – | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 2 | |||||||||
Non-interested Trustees’ fees and expenses | – | |||||||||
Non-interested Trustees’ deferred compensation fees | – | |||||||||
Accrued expenses and other payables | 36 | |||||||||
Total Liabilities | 108 | |||||||||
Net Assets | $ | 9,859 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 9,372 | ||||||||
Undistributed net investment income* | 9 | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 198 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 280 | |||||||||
Total Net Assets | $ | 9,859 | ||||||||
Net Assets - Institutional Shares | $ | 165 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 13 | |||||||||
Net Asset Value Per Share | $ | 12.28 | ||||||||
Net Assets - Service Shares | $ | 9,694 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 789 | |||||||||
Net Asset Value Per Share | $ | 12.28 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Moderate Allocation Portfolio. |
See Notes to Financial Statements.
10 | DECEMBER 31, 2013
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Statement of Operations
Janus Aspen Global | ||||||
For the year ended December 31, 2013 | Allocation Portfolio - | |||||
(all numbers in thousands) | Moderate(1) | |||||
Investment Income: | ||||||
Dividends from affiliates | $ | 159 | ||||
Total Investment Income | 159 | |||||
Expenses: | ||||||
Advisory fees | 2 | |||||
Internal servicing expense - Institutional Shares | – | |||||
Internal servicing expense - Service Shares | – | |||||
Shareholder reports expense | 54 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | 6 | |||||
Professional fees | 37 | |||||
Non-interested Trustees’ fees and expenses | – | |||||
Fund administration fees | 1 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 12 | |||||
Other expenses | 8 | |||||
Total Expenses | 121 | |||||
Less: Excess Expense Reimbursement | (88) | |||||
Net Expenses after Waivers and Expense Offsets | 33 | |||||
Net Investment Income | 126 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investments in affiliates | 106 | |||||
Capital gain distributions from Underlying Funds | 205 | |||||
Change in unrealized net appreciation/(depreciation) of investments and non-interested Trustees’ deferred compensation | 249 | |||||
Net Gain on Investments | 560 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 686 |
(1) | Formerly named Janus Aspen Moderate Allocation Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Global Allocation | ||||||||||
For each year ended December 31 | Portfolio - Moderate(1) | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 126 | $ | 11 | ||||||
Net realized gain from investments in affiliates | 106 | 2 | ||||||||
Capital gain distributions from Underlying Funds | 205 | 7 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments and non-interested Trustees’ deferred compensation | 249 | 38 | ||||||||
Net Increase in Net Assets Resulting from Operations | 686 | 58 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (3) | (2) | ||||||||
Service Shares | (115) | (9) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | (2) | (2) | ||||||||
Service Shares | (115) | (5) | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (235) | (18) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | 9,182 | 478 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 5 | 4 | ||||||||
Service Shares | 230 | 14 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | (756) | (38) | ||||||||
Net Increase from Capital Share Transactions | 8,661 | 458 | ||||||||
Net Increase in Net Assets | 9,112 | 498 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 747 | 249 | ||||||||
End of period | $ | 9,859 | $ | 747 | ||||||
Undistributed Net Investment Income* | $ | 9 | $ | – |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Moderate Allocation Portfolio. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2013
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Financial Highlights
Institutional Shares
Janus Aspen Global Allocation Portfolio – Moderate(1) | ||||||||||||||
For a share outstanding during each year or period ended December 31 | 2013 | 2012 | 2011(2) | |||||||||||
Net Asset Value, Beginning of Period | $11.00 | $9.79 | $10.00 | |||||||||||
Income from Investment Operations: | ||||||||||||||
Net investment income | 0.17 | 0.20 | 0.17 | |||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 1.47 | 1.32 | (0.21) | |||||||||||
Total from Investment Operations | 1.64 | 1.52 | (0.04) | |||||||||||
Less Distributions: | ||||||||||||||
Dividends (from net investment income)* | (0.20) | (0.18) | (0.17) | |||||||||||
Distributions (from capital gains)* | (0.16) | (0.13) | – | |||||||||||
Total Distributions | (0.36) | (0.31) | (0.17) | |||||||||||
Net Asset Value, End of Period | $12.28 | $11.00 | $9.79 | |||||||||||
Total Return** | 14.90% | 15.63% | (0.38)% | |||||||||||
Net Assets, End of Period (in thousands) | $165 | $144 | $125 | |||||||||||
Average Net Assets for the Period (in thousands) | $154 | $137 | $123 | |||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets***(3) | 2.92% | 24.54% | 69.84% | |||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets***(3) | 0.49% | 0.60% | 1.00% | |||||||||||
Ratio of Net Investment Income to Average Net Assets*** | 1.45% | 1.87% | 5.27% | |||||||||||
Portfolio Turnover Rate | 68% | 42% | 7% |
Service Shares
Janus Aspen Global Allocation Portfolio – Moderate(1) | ||||||||||||||
For a share outstanding during each year or period ended December 31 | 2013 | 2012 | 2011(2) | |||||||||||
Net Asset Value, Beginning of Period | $10.98 | $9.79 | $10.00 | |||||||||||
Income from Investment Operations: | ||||||||||||||
Net investment income | 0.16 | 0.17 | 0.17 | |||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 1.45 | 1.33 | (0.21) | |||||||||||
Total from Investment Operations | 1.61 | 1.50 | (0.04) | |||||||||||
Less Distributions: | ||||||||||||||
Dividends (from net investment income)* | (0.15) | (0.18) | (0.17) | |||||||||||
Distributions (from capital gains)* | (0.16) | (0.13) | – | |||||||||||
Total Distributions | (0.31) | (0.31) | (0.17) | |||||||||||
Net Asset Value, End of Period | $12.28 | $10.98 | $9.79 | |||||||||||
Total Return** | 14.69% | 15.44% | (0.38)% | |||||||||||
Net Assets, End of Period (in thousands) | $9,694 | $603 | $124 | |||||||||||
Average Net Assets for the Period (in thousands) | $4,800 | $316 | $123 | |||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets***(3) | 2.42% | 26.76% | 70.08% | |||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets***(3) | 0.66% | 0.73% | 1.00%(4) | |||||||||||
Ratio of Net Investment Income to Average Net Assets*** | 2.58% | 2.78% | 5.28% | |||||||||||
Portfolio Turnover Rate | 68% | 42% | 7% |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
** | Total return not annualized for periods of less than one full year. | |
*** | Annualized for periods of less than one full year. | |
(1) | Formerly named Janus Aspen Moderate Allocation Portfolio. | |
(2) | Period from August 31, 2011 (inception date) through December 31, 2011. | |
(3) | Ratios do not include indirect expenses of the underlying funds and/or investment companies in which the Portfolio invests. | |
(4) | Pursuant to a contractual agreement, Janus waived certain fees and expenses during the period. The Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets would be 1.25% without the waiver of these fees and expenses. |
See Notes to Financial Statements.
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 Global Allocation Portfolio – Moderate (formerly named Janus Aspen Moderate Allocation Portfolio) (the “Portfolio”) is a series fund. The Portfolio operates as a “fund of funds,” meaning substantially all of the Portfolio’s assets will be invested in other Janus funds (the “underlying funds”). The Portfolio is part of Janus Aspen Series (the “Trust”), which is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Underlying Funds
The Portfolio invests in a variety of underlying funds to pursue its target allocation of equity investments, fixed-income securities, and alternative investments and may also invest in money market instruments or cash/cash equivalents. The Portfolio has a target allocation, which is how the Portfolio’s investments generally will be allocated among the major asset classes over the long term, as well as normal ranges, under normal market conditions, within which the Portfolio’s asset class allocations generally will vary over short-term periods. The Portfolio’s long-term expected average asset allocation is as follows: 55% to equity investments, 35% to fixed-income securities and money market instruments, and 10% to alternative investments. Additional details and descriptions of the investment objectives and strategies of each of the underlying funds are available in the Portfolio’s and underlying funds’ prospectuses. The Trustees of the underlying Janus funds may change the investment objectives or strategies of the underlying funds at any time without prior notice to fund shareholders.
The following accounting policies have been followed by the Portfolio and are in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation
The Portfolio’s net asset value (“NAV”) is calculated based upon the NAV of each of the underlying funds in which the Portfolio invests on the day of valuation. The NAV for each class of the underlying funds is computed by dividing the total value of securities and other assets allocated to the class, less liabilities allocated to that class, by the total number of shares outstanding for the class.
Securities held by the underlying funds are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the
14 | DECEMBER 31, 2013
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securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities held by the underlying funds will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income of the underlying funds is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which may be allocated pro rata to the Portfolio. Additionally, the Portfolio, as a shareholder in the underlying funds, will also indirectly bear its pro rata share of the expenses incurred by the underlying funds. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The underlying funds may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the underlying funds distribute such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on
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Notes to Financial Statements (continued)
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.
The Portfolio classifies each of its investments in underlying funds as Level 2, without consideration as to the classification level of the specific investments held by the underlying funds.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold any Level 3 securities as of December 31, 2013.
There were no transfers in or out of Level 1, Level 2 and Level 3 during the year.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s contractual investment advisory fee rate (expressed as an annual rate).
Contractual | ||||||||
Average | Investment | |||||||
Daily Net | Advisory | |||||||
Assets | Fee (%) | |||||||
Portfolio | of the Portfolio | (annual rate) | ||||||
Janus Aspen Global Allocation Portfolio - Moderate | All Asset Levels | 0.05 | ||||||
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s and the underlying funds’ transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee in connection with the distribution of
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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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
Janus Capital has contractually agreed to waive the advisory fee payable by the Portfolio in an amount equal to the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding any expenses of an underlying fund (acquired fund fees and expenses), the distribution and shareholder servicing fees (applicable to Service Shares), administrative services fees payable pursuant to the Transfer Agency Agreement, brokerage commissions, interest, dividends, taxes, and extraordinary expenses, exceed the annual rate noted below. Janus Capital has agreed to continue the waiver until at least May 1, 2014. If applicable, amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations.
Expense | |||||
Portfolio | Limit (%) | ||||
Janus Aspen Global Allocation Portfolio - Moderate | 0.39 | ||||
For a period of three years subsequent to the Portfolio’s commencement of operations, Janus Capital may recover from the Portfolio fees and expenses previously waived or reimbursed, which could be then considered a deferral, if the Portfolio’s expense ratio, including recovered expenses, fails below the expense limit. The recoupment for such reimbursement expires August 31, 2014. For the year ended December 31, 2013, total reimbursement by Janus Capital was $88,477 for the Portfolio. As of December 31, 2013, the aggregate amount of recoupment that may potentially be made to Janus Capital is $260,672.
Janus Capital has entered into an agreement with Wilshire Associates Inc. (“Wilshire”), a global investment technology, investment consulting, and investment management firm, to act as a consultant to Janus Capital. Wilshire provides research and advice regarding asset allocation methodologies, which Janus Capital may use when determining asset class allocations for the Portfolio. For its consulting services, Janus Capital pays Wilshire an annual fee, payable monthly, that is comprised of a combination of an initial program establishment fee, fixed fee, and an asset-based fee.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to each Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The transfer agent fee offsets
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Notes to Financial Statements (continued)
received during the period reduce “Transfer agent fees and expenses” on the Statement of Operations. The Portfolio could have employed the assets used by the transfer agent to produce income if it had not entered into an expense offset arrangement.
The seed capital contribution by Janus Capital or an affiliate as of December 31, 2013 is indicated in the following table.
Seed | |||||
Capital at | |||||
Portfolio | 12/31/13 | ||||
Janus Aspen Global Allocation Portfolio - Moderate - Institutional Shares | $ | 125,000 | |||
Janus Aspen Global Allocation Portfolio - Moderate - Service Shares | 125,000 | ||||
3. | 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 primarily consist of deferred compensation. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Undistributed | Undistributed | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Global Allocation Portfolio - Moderate | $ | 9,165 | $ | 207,316 | $ | – | $ | – | $ | – | $ | (165) | $ | 270,955 | |||||||||
The aggregate cost of investments and the composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/(depreciation) on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments is wash sale loss deferrals.
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Global Allocation Portfolio - Moderate | $ | 9,622,995 | $ | 356,979 | $ | (86,024) | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Allocation Portfolio - Moderate | $ | 158,561 | $ | 76,529 | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Allocation Portfolio - Moderate | $ | 13,794 | $ | 4,239 | $ | – | $ | – | |||||||||
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4. | Capital Share Transactions |
Janus Aspen Global | ||||||||||
For each year ended December 31 | Allocation Portfolio- Moderate | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares: | ||||||||||
Shares sold | – | – | ||||||||
Reinvested dividends and distributions | – | – | ||||||||
Shares repurchased | – | – | ||||||||
Net Increase/(Decrease) in Portfolio Shares | – | – | ||||||||
Shares Outstanding, Beginning of Period | 13 | 13 | ||||||||
Shares Outstanding, End of Period | 13 | 13 | ||||||||
Transactions in Portfolio Shares – Service Shares: | ||||||||||
Shares sold | 778 | 44 | ||||||||
Reinvested dividends and distributions | 19 | 1 | ||||||||
Shares repurchased | (63) | (3) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 734 | 42 | ||||||||
Shares Outstanding, Beginning of Period | 55 | 13 | ||||||||
Shares Outstanding, End of Period | 789 | 55 |
5. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Global Allocation Portfolio - Moderate | $ | 12,137,870 | $ | 3,390,222 | $ | – | $ | – | ||||||
6. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Janus Aspen Global Allocation Portfolio – Moderate
(formerly Janus Aspen Moderate Allocation Portfolio):
of Janus Aspen Global Allocation Portfolio – Moderate
(formerly Janus Aspen Moderate Allocation 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 Allocation Portfolio – Moderate (formerly Janus Aspen Moderate Allocation Portfolio) (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2013, 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 periods presented, 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, 2013 by correspondence with the transfer agent, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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Additional Information (unaudited) (continued)
including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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Additional Information (unaudited) (continued)
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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Additional Information (unaudited) (continued)
to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Useful Information About Your Portfolio Report (unaudited) (continued)
Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Capital Gains Distributions
Portfolio | ||||||||||
Janus Aspen Global Allocation Portfolio - Moderate | $ | 76,529 | ||||||||
Foreign Taxes Paid and Foreign Source Income
Portfolio | Foreign Taxes Paid | Foreign Source Income | ||||||||
Janus Aspen Global Allocation Portfolio - Moderate | $ | 3,159 | $ | 29,714 | ||||||
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Global Allocation Portfolio - Moderate | 15% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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OFFICERS
Principal Occupations During the | ||||||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Past Five Years | |||
Enrique Chang 151 Detroit Street Denver, CO 80206 DOB: 1962 | Executive Vice President and Co-Portfolio Manager Janus Aspen Global Allocation Portfolio - Moderate | 1/14-Present | Chief Investment Officer Equities and Asset Allocation of Janus Capital and Portfolio Manager for other Janus accounts. | |||
Daniel G. Scherman 151 Detroit Street Denver, CO 80206 DOB: 1961 | Executive Vice President and Co-Portfolio Manager Janus Aspen Global Allocation Portfolio - Moderate | 5/09-Present | Senior Vice President and Chief Risk Officer 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 | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
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Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55527 | 109-02-81125 02-14 |
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annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen Global Research Portfolio (unaudited)
PORTFOLIO SNAPSHOT We are bottom-up, fundamental investors. We believe a deep, independent research process and high conviction investing will deliver exceptional results. | Team-Based Approach Led by Jim Goff, Director of Research |
PERFORMANCE SUMMARY
Janus Aspen Global Research Portfolio’s Institutional Shares and Service Shares returned 28.43% and 28.08%, respectively, over the 12-month period ended December 31, 2013, while its primary benchmark, the MSCI World Index, returned 26.68%. The Portfolio’s secondary benchmark, the MSCI All Country World Index, returned 22.80%.
DIRECTOR OF RESEARCH COMMENTS ON ENVIRONMENT
While once uneasy during the depths of the global financial crisis, now investors may fret that markets have bounced back too far, too fast. In part, we think they are forgetting how far we fell and how cheap markets were two years ago. The bigger picture, however, is that the concerns over record levels in the U.S. ignore pockets of opportunity within the country.
For example, the shift to mobile computing is opening up areas in communications. Health care innovation and stepped-up Food and Drug Administration approvals mean a wave of drug launches with the promise of better and more effective treatments for some of the world’s most threatening diseases. Our technology sector team also sees opportunity in a broader trend called the “Internet of Things,” the concept that the electronic devices consumers use in their daily lives will interact with each other. We think these pockets of growth and others we have found are investment opportunities. It will be a good environment for companies in the right positions.
We think that with interest rates low – even if the yield curve steepens with Federal Reserve tapering – the broad valuation of equities is not extreme. Price-to-earnings multiples are always foggy lenses to use to evaluate a market, but the view is especially obscured this time around. We see data that shows a clustering on multiples within sectors, meaning investors are not distinguishing between growth prospects. The opportunities we see bring collateral damage. Mobile shopping pressures mall-based retailers; biotechnology innovation is wonderful but a generic wave will pressure some big pharmaceutical companies; China’s restructuring hurts industries with excess capacity; and on and on. It drives the need to be a stock picker.
SECTOR VIEWS
In communications, the big change in consumer media behavior is the shift to “on-demand” viewing. As more consumers take advantage of the opportunity to watch shows outside prime-time hours, it is growing the audience for TV networks’ biggest shows. As these audiences grow, the next important step is to build advertising models around on-demand viewing.
The consumer sector team found the recent holiday season provided a glimpse of how quickly shopping is moving from physical stores to online and mobile channels. While most brands made large investments in recent years to prepare for the shift and create a better multi-channel shopping experience, the change is still a headwind for those mall-based retailers that rely on strong in-store sales to support rent and occupancy costs.
Heading into 2014, several factors could shift oil prices downward, according to our energy sector team. New completion techniques for oil wells are driving better productivity and recovery rates at U.S. horizontal-drilling sites. Pad drilling is also driving greater efficiency. It allows rig operators to house a number of horizontally drilled wells at the same location, instead of having to move a drilling rig to different wells across multiple sites.
In financials, European banks are poised to benefit from more clarity about their regulatory environment. Banks will soon get more details about the European Central Bank’s Single Supervisory Mechanism (SSM) – which will be tasked with central oversight of all the banks in various European countries. Details will emerge about who will lead the SSM and also about the asset quality reviews and the stress tests the SSM will conduct on banks.
Our health care team is focused on new drugs being launched to address some of the world’s largest unmet medical needs, including new treatments for hepatitis C and a variety of cancers. New studies suggest as many as 9% of all baby boomers may be affected with hepatitis C while unaware of their infection. The launch of new, more effective and tolerable treatments should encourage increased awareness and testing for the disease, leading to many people seeking therapy.
Management teams for many large U.S. industrial companies, meanwhile, are more optimistic than at any
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Janus Aspen Global Research Portfolio (unaudited)
point since 2010. A recovering economy, improving order data and the manufacturing renaissance taking place in the U.S. – due to cheap natural gas prices and more competitive wages – have each played a role in boosting sentiment.
Finally, technology companies are operating in a challenging environment. Enterprise IT spending remains tepid. The bulk of the spending taking place is on projects that help move companies from dependence on IT infrastructure to cloud-based services.
PERFORMANCE OVERVIEW
Our health care holdings, led by Gilead Sciences, were our most significant contributors. Gilead rose after its hepatitis C drug, Sovaldi, was approved by the Food and Drug Administration. The company also announced impressive late-stage clinical data for its once-daily combination hepatitis C pill, which demonstrated cure rates well in excess of 90% with as little as eight weeks of treatment for some patients. The data verified our thesis that Gilead has the best offering among hepatitis C treatments and is poised to have one of the strongest drug launches in pharmaceutical industry history. We believe Sovaldi will accelerate Gilead’s earnings growth significantly over the next few years.
Canadian Pacific, the Portfolio’s largest holding, benefited from stronger-than-expected earnings and the naming of a chief financial officer, who previously worked for Canadian integrated energy leader Suncor. We believe the executive could accelerate the railroad company’s plans for share repurchases and his expertise should help with building out Canadian Pacific’s crude-by-rail franchise. The potential for better-than-average industry revenue growth and capital returns to shareholders via share repurchases and a significant increase in dividends are future catalysts for the stock, in our view.
Delta Air Lines was also a top contributor. Delta benefited from general strength in its industry early in the period due to continued record strong operating results as airlines maintained capacity discipline. Consolidation, the latest being American Airlines’ merger with U.S. Airways, also aided the industry. We think investors are beginning to believe airlines will generate higher and more consistent profits than they have historically. Delta has also indicated the possibility of returning cash to shareholders via dividends. We sold our holdings based on the stock’s increased valuation.
Among individual detractors, potash supplier Israel Chemicals led the list. The industry suffered late in July when Uralkali, the world’s largest potash producer, announced it was breaking up a cartel that controlled a significant percentage of world exports, driving prices lower. We sold our position due to the near-term uncertainty. We like Israel Chemicals as a low-cost producer of the soil nutrient used in fertilizer as well as the company’s high dividend yield, but neither attribute offsets the price decline in the commodity.
Turkey-based bank Turkiye Halk Bankasi (also known as Halkbank), another top detractor, suffered from political turmoil in Turkey that involved the arrest of the bank’s CEO. While we continue to monitor the situation, we do not believe it will negatively impact the bank long term, since it is partly owned by the government and systematically important to the development of the Turkish economy.
Cobalt International Energy, a U.S. oil and gas exploration and production (E&P) company, also weighed on performance. The stock declined on a disappointing exploratory well result in the Gulf of Mexico as well as a drilling prospect offshore Angola, which produced significant natural gas but less oil than expected. While the results were disappointing and reflect the risky nature of exploration, we continue to believe the company’s production portfolio is undervalued.
Please see the Derivatives Instruments section in the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
OUTLOOK
We remain positive on economic progress in the U.S. and believe growth emerging in Europe and Japan will be incrementally beneficial. Europe is recovering, while companies there drive profit growth through corporate restructurings. Japan, meanwhile, will not see a straight line in economic improvement, but it is moving in the right direction, in our view. In China, the economy is slowing, we think, but we are encouraged about the pace and trajectory of reform.
Thank you for your investment in Janus Aspen Global Research Portfolio.
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(unaudited)
Janus Aspen Global Research Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Gilead Sciences, Inc. | 0.87% | |||
Canadian Pacific Railway, Ltd. | 0.86% | |||
Delta Air Lines, Inc. | 0.82% | |||
A.P. Moeller – Maersk A/S – Class B | 0.78% | |||
Celgene Corp. | 0.76% |
5 Bottom Performers – Holdings
Contribution | ||||
Israel Chemicals, Ltd. | –0.28% | |||
Turkiye Halk Bankasi A/S | –0.27% | |||
Cobalt International Energy, Inc. | –0.21% | |||
FANUC Corp. | –0.21% | |||
American Eagle Outfitters, Inc. | –0.20% |
5 Top Performers – Sectors*
Portfolio Weighting | MSCI | |||||||||||
Portfolio Contribution | (Average % of Equity) | World IndexSM Weighting | ||||||||||
Health Care | 2.25% | 11.85% | 11.12% | |||||||||
Utilities | 0.50% | 1.83% | 3.34% | |||||||||
Materials | 0.42% | 3.84% | 6.01% | |||||||||
Industrials | 0.37% | 12.52% | 11.11% | |||||||||
Information Technology | 0.33% | 14.37% | 11.71% |
5 Bottom Performers – Sectors*
Portfolio Weighting | MSCI | |||||||||||
Portfolio Contribution | (Average % of Equity) | World IndexSM Weighting | ||||||||||
Consumer Discretionary | –0.76% | 12.74% | 11.79% | |||||||||
Consumer Staples | –0.51% | 9.54% | 10.52% | |||||||||
Other** | –0.29% | 1.10% | 0.00% | |||||||||
Financials | –0.28% | 19.53% | 20.81% | |||||||||
Energy | –0.14% | 11.26% | 9.81% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
Janus Aspen Series | 3
Table of Contents
Janus Aspen Global Research Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Canadian Pacific Railway, Ltd. Road & Rail | 2.2% | |||
A.P. Moeller – Maersk A/S – Class B Marine | 1.9% | |||
AIA Group, Ltd. Insurance | 1.8% | |||
Keyence Corp. Electronic Equipment, Instruments & Components | 1.7% | |||
Apple, Inc. Computers & Peripherals | 1.6% | |||
9.2% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas17p01.gif)
Emerging markets comprised 5.8% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas17t01.gif)
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas17c01.gif)
4 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas17m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Global Research Portfolio – Institutional Shares | 28.43% | 16.24% | 5.37% | 8.51% | 0.55% | ||||||
Janus Aspen Global Research Portfolio – Service Shares | 28.08% | 15.95% | 5.11% | 8.23% | 0.80% | ||||||
MSCI World IndexSM | 26.68% | 15.02% | 6.98% | 6.98% | |||||||
MSCI All Country World IndexSM | 22.80% | 14.92% | 7.17% | N/A** | |||||||
Morningstar Quartile – Institutional Shares | 2nd | 2nd | 4th | 3rd | |||||||
Morningstar Ranking – based on total returns for World Stock Funds | 325/1,080 | 306/757 | 431/473 | 107/202 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
This Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period. See the Portfolio’s Prospectus or Statement of Additional Information for more details.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
Foreign securities have additional risks including exchange rate changes, political and economic upheaval, the relative lack of information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. These risks are magnified in emerging markets. The prices of foreign securities held by the fund, and therefore a fund’s performance, may decline in response to such risks.
See important disclosures on the next page.
Janus Aspen Series | 5
Table of Contents
Janus Aspen Global Research Portfolio (unaudited)
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
Returns shown for Service Shares for periods prior to December 31, 1999 are derived from the historical performance of Institutional Shares, adjusted to reflect the higher operating expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective May 1, 2013, Janus Aspen Worldwide Portfolio changed its name to Janus Aspen Global Research Portfolio.
* | The Portfolio’s inception date – September 13, 1993 | |
** | Since inception return is not shown for the index because the index’s inception date differs significantly from the Portfolio’s inception date. |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,180.70 | $ | 2.80 | $ | 1,000.00 | $ | 1,022.63 | $ | 2.60 | 0.51% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,179.30 | $ | 4.17 | $ | 1,000.00 | $ | 1,021.37 | $ | 3.87 | 0.76% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
6 | DECEMBER 31, 2013
Table of Contents
Janus Aspen Global Research Portfolio(1)
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Common Stock – 98.5% | ||||||||||
Aerospace & Defense – 0.6% | ||||||||||
18,224 | Precision Castparts Corp. | $ | 4,907,723 | |||||||
Air Freight & Logistics – 0.6% | ||||||||||
26,479 | Panalpina Welttransport Holding A.G. | 4,438,899 | ||||||||
Airlines – 1.1% | ||||||||||
232,079 | United Continental Holdings, Inc.* | 8,779,549 | ||||||||
Auto Components – 1.2% | ||||||||||
407,000 | NGK Spark Plug Co., Ltd. | 9,625,131 | ||||||||
Automobiles – 1.6% | ||||||||||
23,146 | Hyundai Motor Co. | 5,187,670 | ||||||||
493,000 | Isuzu Motors, Ltd. | 3,062,228 | ||||||||
154,712 | Maruti Suzuki India, Ltd. | 4,412,231 | ||||||||
12,662,129 | ||||||||||
Beverages – 2.6% | ||||||||||
65,714 | PepsiCo, Inc. | 5,450,319 | ||||||||
64,148 | Pernod-Ricard S.A. | 7,307,274 | ||||||||
149,074 | SABMiller PLC | 7,653,997 | ||||||||
20,411,590 | ||||||||||
Biotechnology – 4.4% | ||||||||||
36,916 | Alexion Pharmaceuticals, Inc.* | 4,912,043 | ||||||||
69,447 | Alkermes PLC* | 2,823,715 | ||||||||
37,323 | Celgene Corp.* | 6,306,094 | ||||||||
107,326 | Gilead Sciences, Inc.* | 8,065,549 | ||||||||
72,234 | Medivation, Inc.* | 4,609,974 | ||||||||
133,306 | NPS Pharmaceuticals, Inc.* | 4,047,170 | ||||||||
381,392 | Swedish Orphan Biovitrum A.B.* | 3,959,302 | ||||||||
34,723,847 | ||||||||||
Capital Markets – 3.4% | ||||||||||
211,074 | Blackstone Group L.P. | 6,648,831 | ||||||||
146,218 | Deutsche Bank A.G. | 6,974,399 | ||||||||
69,742 | T. Rowe Price Group, Inc. | 5,842,287 | ||||||||
374,423 | UBS A.G. | 7,103,877 | ||||||||
26,569,394 | ||||||||||
Chemicals – 2.2% | ||||||||||
835,065 | Alent PLC | 4,908,324 | ||||||||
65,002 | LyondellBasell Industries N.V. – Class A | 5,218,361 | ||||||||
60,450 | Monsanto Co. | 7,045,447 | ||||||||
17,172,132 | ||||||||||
Commercial Banks – 5.8% | ||||||||||
103,420 | BNP Paribas S.A. | 8,059,237 | ||||||||
6,871,000 | China Construction Bank Corp. | 5,183,821 | ||||||||
803,080 | HSBC Holdings PLC | 8,807,725 | ||||||||
95,891 | Qatar National Bank SAQ* | 4,529,620 | ||||||||
512,956 | Sberbank of Russia (ADR) | 6,452,987 | ||||||||
1,431,700 | Seven Bank, Ltd. | 5,588,648 | ||||||||
477,135 | Turkiye Halk Bankasi A/S | 2,701,393 | ||||||||
120,993 | U.S. Bancorp | 4,888,117 | ||||||||
46,211,548 | ||||||||||
Commercial Services & Supplies – 0.4% | ||||||||||
81,224 | Tyco International, Ltd. (U.S. Shares) | 3,333,433 | ||||||||
Communications Equipment – 1.6% | ||||||||||
161,362 | CommScope Holding Co., Inc.* | 3,052,969 | ||||||||
51,068 | Motorola Solutions, Inc. | 3,447,090 | ||||||||
498,532 | Telefonaktiebolaget L.M. Ericsson – Class B | 6,086,372 | ||||||||
12,586,431 | ||||||||||
Computers & Peripherals – 1.6% | ||||||||||
22,282 | Apple, Inc.** | 12,502,653 | ||||||||
Consumer Finance – 0.7% | ||||||||||
63,620 | American Express Co. | 5,772,243 | ||||||||
Containers & Packaging – 0.8% | ||||||||||
144,023 | Crown Holdings, Inc.* | 6,419,105 | ||||||||
Diversified Financial Services – 3.0% | ||||||||||
132,424 | Citigroup, Inc. | 6,900,615 | ||||||||
395,779 | ING Groep N.V.* | 5,498,745 | ||||||||
17,453 | IntercontinentalExchange Group, Inc. | 3,925,529 | ||||||||
122,275 | JPMorgan Chase & Co. | 7,150,642 | ||||||||
23,475,531 | ||||||||||
Electric Utilities – 1.0% | ||||||||||
198,516 | Brookfield Infrastructure Partners L.P. | 7,785,797 | ||||||||
Electrical Equipment – 0.7% | ||||||||||
141,888 | Sensata Technologies Holding N.V.* | 5,500,998 | ||||||||
Electronic Equipment, Instruments & Components – 2.8% | ||||||||||
50,954 | Amphenol Corp. – Class A | 4,544,078 | ||||||||
30,700 | Keyence Corp. | 13,120,904 | ||||||||
79,247 | TE Connectivity, Ltd. (U.S. Shares) | 4,367,302 | ||||||||
22,032,284 | ||||||||||
Energy Equipment & Services – 2.8% | ||||||||||
25,829 | Core Laboratories N.V. | 4,932,048 | ||||||||
56,426 | Helmerich & Payne, Inc. | 4,744,298 | ||||||||
71,840 | National Oilwell Varco, Inc. | 5,713,435 | ||||||||
347,060 | Petrofac, Ltd. | 7,033,486 | ||||||||
22,423,267 | ||||||||||
Food & Staples Retailing – 1.6% | ||||||||||
34,448 | Costco Wholesale Corp. | 4,099,656 | ||||||||
114,539 | Shoprite Holdings, Ltd. | 1,797,550 | ||||||||
123,158 | Whole Foods Market, Inc. | 7,122,227 | ||||||||
13,019,433 | ||||||||||
Food Products – 2.0% | ||||||||||
84,704 | Hershey Co. | 8,235,770 | ||||||||
108,451 | Nestle S.A. | 7,941,074 | ||||||||
16,176,844 | ||||||||||
Health Care Equipment & Supplies – 0.5% | ||||||||||
113,208 | Abbott Laboratories | 4,339,263 | ||||||||
Health Care Providers & Services – 2.2% | ||||||||||
71,356 | Aetna, Inc. | 4,894,308 | ||||||||
102,123 | Express Scripts Holding Co.* | 7,173,119 | ||||||||
91,722 | Omnicare, Inc. | 5,536,340 | ||||||||
17,603,767 | ||||||||||
Hotels, Restaurants & Leisure – 0.5% | ||||||||||
1,197,150 | Bwin.Party Digital Entertainment PLC | 2,440,008 | ||||||||
676,000 | Shangri-La Asia, Ltd. | 1,318,174 | ||||||||
3,758,182 | ||||||||||
Household Products – 1.1% | ||||||||||
133,931 | Colgate-Palmolive Co. | 8,733,640 | ||||||||
Industrial Conglomerates – 1.0% | ||||||||||
62,460 | Danaher Corp. | 4,821,912 | ||||||||
4,832,000 | Shun Tak Holdings, Ltd. | 2,841,620 | ||||||||
7,663,532 | ||||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Global Research Portfolio(1)
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Information Technology Services – 2.7% | ||||||||||
159,470 | Amdocs, Ltd. (U.S. Shares) | $ | 6,576,543 | |||||||
9,275 | MasterCard, Inc. – Class A | 7,748,892 | ||||||||
34,451 | Teradata Corp.* | 1,567,176 | ||||||||
23,546 | Visa, Inc. – Class A | 5,243,223 | ||||||||
21,135,834 | ||||||||||
Insurance – 2.8% | ||||||||||
2,893,800 | AIA Group, Ltd. | 14,517,516 | ||||||||
353,374 | Prudential PLC | 7,840,144 | ||||||||
22,357,660 | ||||||||||
Internet & Catalog Retail – 1.6% | ||||||||||
10,211 | Amazon.com, Inc.* | 4,072,045 | ||||||||
3,253 | priceline.com, Inc.* | 3,781,287 | ||||||||
337,600 | Rakuten, Inc. | 5,014,782 | ||||||||
12,868,114 | ||||||||||
Internet Software & Services – 2.3% | ||||||||||
82,266 | eBay, Inc.* | 4,515,581 | ||||||||
9,505 | Google, Inc. – Class A* | 10,652,349 | ||||||||
107,528 | Youku Tudou, Inc. (ADR)* | 3,258,098 | ||||||||
18,426,028 | ||||||||||
Leisure Equipment & Products – 0.5% | ||||||||||
85,010 | Mattel, Inc. | 4,044,776 | ||||||||
Machinery – 1.0% | ||||||||||
47,451 | Dover Corp. | 4,580,920 | ||||||||
61,309 | Vallourec S.A. | 3,339,711 | ||||||||
7,920,631 | ||||||||||
Marine – 2.3% | ||||||||||
1,383 | A.P. Moeller – Maersk A/S – Class B | 15,010,429 | ||||||||
24,941 | Kuehne + Nagel International A.G. | 3,274,940 | ||||||||
18,285,369 | ||||||||||
Media – 3.6% | ||||||||||
65,244 | CBS Corp. – Class B | 4,158,653 | ||||||||
114,457 | Comcast Corp. – Class A | 5,947,758 | ||||||||
17,126 | Liberty Global PLC* | 1,444,064 | ||||||||
42,573 | Liberty Global PLC – Class A* | 3,788,571 | ||||||||
17,550 | Time Warner Cable, Inc. | 2,378,025 | ||||||||
176,506 | Twenty-First Century Fox, Inc. | 6,209,481 | ||||||||
58,865 | Walt Disney Co. | 4,497,286 | ||||||||
28,423,838 | ||||||||||
Metals & Mining – 0.6% | ||||||||||
193,481 | ThyssenKrupp A.G. | 4,708,208 | ||||||||
Oil, Gas & Consumable Fuels – 9.7% | ||||||||||
78,879 | Anadarko Petroleum Corp. | 6,256,682 | ||||||||
169,246 | Cobalt International Energy, Inc.* | 2,784,097 | ||||||||
134,297 | Enterprise Products Partners L.P. | 8,903,891 | ||||||||
47,897 | EOG Resources, Inc. | 8,039,033 | ||||||||
160,915 | Genel Energy PLC* | 2,864,110 | ||||||||
192,136 | Koninklijke Vopak N.V. | 11,238,064 | ||||||||
106,563 | Noble Energy, Inc.** | 7,258,006 | ||||||||
852,606 | Ophir Energy PLC* | 4,627,452 | ||||||||
98,880 | Phillips 66 | 7,626,614 | ||||||||
117,085 | Royal Dutch Shell PLC (ADR) | 8,344,648 | ||||||||
295,616 | Tullow Oil PLC | 4,184,838 | ||||||||
92,438 | Valero Energy Corp. | 4,658,875 | ||||||||
76,786,310 | ||||||||||
Pharmaceuticals – 5.0% | ||||||||||
100,231 | AstraZeneca PLC (ADR) | 5,950,715 | ||||||||
80,531 | Endo Health Solutions, Inc.* | 5,432,621 | ||||||||
37,585 | Jazz Pharmaceuticals PLC* | 4,756,758 | ||||||||
25,158 | Roche Holding A.G. | 7,030,022 | ||||||||
115,068 | Shire PLC | 5,433,613 | ||||||||
43,985 | Valeant Pharmaceuticals International, Inc. (U.S. Shares) | 5,163,839 | ||||||||
178,225 | Zoetis, Inc. | 5,826,175 | ||||||||
39,593,743 | ||||||||||
Professional Services – 0.6% | ||||||||||
73,823 | Verisk Analytics, Inc. – Class A* | 4,851,647 | ||||||||
Real Estate Investment Trusts (REITs) – 1.6% | ||||||||||
64,615 | American Tower Corp. | 5,157,569 | ||||||||
162,531 | Lexington Realty Trust | 1,659,442 | ||||||||
25,836 | Simon Property Group, Inc. | 3,931,206 | ||||||||
38,275 | Ventas, Inc. | 2,192,392 | ||||||||
12,940,609 | ||||||||||
Real Estate Management & Development – 2.1% | ||||||||||
138,635 | Brookfield Asset Management, Inc. – Class A (U.S. Shares) | 5,383,197 | ||||||||
56,906 | Jones Lang LaSalle, Inc. | 5,826,605 | ||||||||
183,000 | Mitsubishi Estate Co., Ltd. | 5,466,189 | ||||||||
16,675,991 | ||||||||||
Road & Rail – 2.6% | ||||||||||
115,251 | Canadian Pacific Railway, Ltd. | 17,432,514 | ||||||||
22,438 | Kansas City Southern | 2,778,498 | ||||||||
20,211,012 | ||||||||||
Semiconductor & Semiconductor Equipment – 2.5% | ||||||||||
318,998 | ARM Holdings PLC | 5,804,573 | ||||||||
461,875 | Atmel Corp.* | 3,616,481 | ||||||||
325,146 | ON Semiconductor Corp.* | 2,679,203 | ||||||||
1,899 | Samsung Electronics Co., Ltd. | 2,469,132 | ||||||||
1,524,000 | Taiwan Semiconductor Manufacturing Co., Ltd. | 5,395,369 | ||||||||
19,964,758 | ||||||||||
Software – 2.0% | ||||||||||
26,201 | ANSYS, Inc.* | 2,284,727 | ||||||||
24,307 | Intuit, Inc. | 1,855,110 | ||||||||
140,100 | Nexon Co., Ltd. | 1,293,354 | ||||||||
26,600 | Nintendo Co., Ltd. | 3,539,424 | ||||||||
82,214 | Oracle Corp. | 3,145,508 | ||||||||
48,381 | Solera Holdings, Inc. | 3,423,440 | ||||||||
15,541,563 | ||||||||||
Specialty Retail – 2.1% | ||||||||||
1,465,400 | Chow Tai Fook Jewellery Group, Ltd. | 2,184,682 | ||||||||
90,544 | Lowe’s Cos., Inc. | 4,486,455 | ||||||||
45,771 | PetSmart, Inc. | 3,329,840 | ||||||||
42,874 | Tiffany & Co. | 3,977,850 | ||||||||
40,474 | Williams-Sonoma, Inc. | 2,358,825 | ||||||||
16,337,652 | ||||||||||
Textiles, Apparel & Luxury Goods – 1.8% | ||||||||||
26,654 | Cie Financiere Richemont S.A. | 2,654,042 | ||||||||
58,801 | NIKE, Inc. – Class B | 4,624,111 | ||||||||
347,261 | Prada SpA | 3,090,148 | ||||||||
1,247,400 | Samsonite International S.A. | 3,796,575 | ||||||||
14,164,876 | ||||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Tobacco – 2.0% | ||||||||||
226,016 | Imperial Tobacco Group PLC | $ | 8,749,199 | |||||||
215,300 | Japan Tobacco, Inc. | 6,993,314 | ||||||||
15,742,513 | ||||||||||
Wireless Telecommunication Services – 1.3% | ||||||||||
132,480 | T-Mobile U.S., Inc. | 4,456,627 | ||||||||
3,988,000 | Tower Bersama Infrastructure Tbk PT | 1,902,171 | ||||||||
991,259 | Vodafone Group PLC | 3,889,736 | ||||||||
10,248,534 | ||||||||||
Total Common Stock (cost $641,900,301) | 779,858,011 | |||||||||
Preferred Stock – 0.8% | ||||||||||
Automobiles – 0.8% | ||||||||||
23,035 | Volkswagen A.G., 1.7600% (cost $5,985,263) | 6,468,850 | ||||||||
Money Market – 0.4% | ||||||||||
2,815,221 | Janus Cash Liquidity Fund LLC, 0%£ (cost $2,815,221) | 2,815,221 | ||||||||
Total Investments (total cost $650,700,785) – 99.7% | 789,142,082 | |||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.3% | 2,183,677 | |||||||||
Net Assets – 100% | $ | 791,325,759 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Canada | $ | 27,979,550 | 3.5% | |||||
China | 8,441,919 | 1.1% | ||||||
Denmark | 15,010,429 | 1.9% | ||||||
France | 18,706,222 | 2.4% | ||||||
Germany | 18,151,457 | 2.3% | ||||||
Hong Kong | 20,861,992 | 2.6% | ||||||
India | 4,412,231 | 0.6% | ||||||
Indonesia | 1,902,171 | 0.2% | ||||||
Italy | 3,090,148 | 0.4% | ||||||
Japan | 53,703,974 | 6.8% | ||||||
Netherlands | 16,736,809 | 2.1% | ||||||
Qatar | 4,529,620 | 0.6% | ||||||
Russia | 6,452,987 | 0.8% | ||||||
South Africa | 1,797,550 | 0.2% | ||||||
South Korea | 7,656,802 | 1.0% | ||||||
Sweden | 10,045,674 | 1.3% | ||||||
Switzerland | 32,442,854 | 4.1% | ||||||
Taiwan | 5,395,369 | 0.7% | ||||||
Turkey | 5,565,503 | 0.7% | ||||||
United Kingdom | 85,668,458 | 10.9% | ||||||
United States†† | 440,590,363 | 55.8% | ||||||
Total | $ | 789,142,082 | 100.0% |
†† | Includes Cash Equivalents of 0.4%. |
(1) | Formerly named Janus Aspen Worldwide Portfolio. |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Notes to Schedule of Investments and Other Information
MSCI All Country World IndexSM | An unmanaged, free float-adjusted market capitalization weighted index composed of stocks of companies located in countries throughout the world. It is designed to measure equity market performance in global developed and emerging markets. The index includes reinvestment of dividends, net of foreign withholding taxes. | |
MSCI World IndexSM | A 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 | |
L.P. | Limited Partnership | |
LLC | Limited Liability Company | |
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 or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Global Research Portfolio | $ | 10,385,667 | |||
�� | |||||
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Global Research Portfolio | |||||||||||||||||||||
Janus Cash Liquidity Fund LLC | 181,060,717 | $ | 181,060,717 | (186,307,086) | $ | (186,307,086) | $ | – | $ | 7,601 | $ | 2,815,221 | |||||||||
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Global Research Portfolio | |||||||||||
Common Stock | $ | 779,858,011 | $ | – | $ | – | |||||
Preferred Stock | – | 6,468,850 | – | ||||||||
Money Market | – | 2,815,221 | – | ||||||||
Total Investments in Securities | $ | 779,858,011 | $ | 9,284,071 | $ | – | |||||
10 | DECEMBER 31, 2013
Table of Contents
Statement of Assets and Liabilities
As of December 31, 2013 | Janus Aspen Global | |||||||||
(all numbers in thousands except net asset value per share) | Research Portfolio(1) | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 650,701 | ||||||||
Unaffiliated investments at value | $ | 786,327 | ||||||||
Affiliated investments at value | 2,815 | |||||||||
Cash | 126 | |||||||||
Receivables: | ||||||||||
Investments sold | 2,228 | |||||||||
Portfolio shares sold | 954 | |||||||||
Dividends | 375 | |||||||||
Foreign dividend tax reclaim | 236 | |||||||||
Non-interested Trustees’ deferred compensation | 16 | |||||||||
Other assets | 216 | |||||||||
Total Assets | 793,293 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Investments purchased | 936 | |||||||||
Portfolio shares repurchased | 568 | |||||||||
Dividends | – | |||||||||
Advisory fees | 317 | |||||||||
Fund administration fees | 6 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 43 | |||||||||
Non-interested Trustees’ fees and expenses | 4 | |||||||||
Non-interested Trustees’ deferred compensation fees | 16 | |||||||||
Accrued expenses and other payables | 77 | |||||||||
Total Liabilities | 1,967 | |||||||||
Net Assets | $ | 791,326 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 882,488 | ||||||||
Undistributed net investment income* | 2,673 | |||||||||
Undistributed net realized loss from investment and foreign currency transactions* | (232,288) | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 138,453 | |||||||||
Total Net Assets | $ | 791,326 | ||||||||
Net Assets - Institutional Shares | $ | 588,619 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 15,096 | |||||||||
Net Asset Value Per Share | $ | 38.99 | ||||||||
Net Assets - Service Shares | $ | 202,707 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 5,279 | |||||||||
Net Asset Value Per Share | $ | 38.40 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Worldwide Portfolio. |
See Notes to Financial Statements.
Janus Aspen Series | 11
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Statement of Operations
For the year ended December 31, 2013 | Janus Aspen Global | |||||
(all numbers in thousands) | Research Portfolio(1) | |||||
Investment Income: | ||||||
Dividends | $ | 11,695 | ||||
Dividends from affiliates | 8 | |||||
Other Income | 6 | |||||
Foreign tax withheld | (561) | |||||
Total Investment Income | 11,148 | |||||
Expenses: | ||||||
Advisory fees | 3,492 | |||||
Internal servicing expense - Institutional Shares | 4 | |||||
Internal servicing expense - Service Shares | 1 | |||||
Shareholder reports expense | 76 | |||||
Transfer agent fees and expenses | 2 | |||||
Registration fees | 21 | |||||
Custodian fees | 83 | |||||
Professional fees | 63 | |||||
Non-interested Trustees’ fees and expenses | 14 | |||||
Fund administration fees | 73 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 456 | |||||
Other expenses | 38 | |||||
Total Expenses | 4,323 | |||||
Net Expenses after Waivers and Expense Offsets | 4,323 | |||||
Net Investment Income | 6,825 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 87,985 | |||||
Net realized loss from written options contracts | (299) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 87,964 | |||||
Net Gain on Investments | 175,650 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 182,475 |
(1) | Formerly named Janus Aspen Worldwide Portfolio. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2013
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Global Research | ||||||||||
For each year ended December 31 | Portfolio(1) | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 6,825 | $ | 7,441 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | 87,686 | (21,447) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 87,964 | 133,207 | ||||||||
Net Increase in Net Assets Resulting from Operations | 182,475 | 119,201 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (6,621) | (4,347) | ||||||||
Service Shares | (2,000) | (1,170) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (8,621) | (5,517) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 11,334 | 9,037 | ||||||||
Service Shares | 30,674 | 20,231 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 6,621 | 4,347 | ||||||||
Service Shares | 2,000 | 1,170 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (76,459) | (76,008) | ||||||||
Service Shares | (29,473) | (30,253) | ||||||||
Service II Shares(2) | N/A | (11) | ||||||||
Net Decrease from Capital Share Transactions | (55,303) | (71,487) | ||||||||
Net Increase in Net Assets | 118,551 | 42,197 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 672,775 | 630,578 | ||||||||
End of period | $ | 791,326 | $ | 672,775 | ||||||
Undistributed Net Investment Income* | $ | 2,673 | $ | 4,769 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Worldwide Portfolio. | |
(2) | A liquidation of Service II Shares occurred at the close of business on April 27, 2012. |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Financial Highlights
Institutional Shares
Janus Aspen Global Research Portfolio(1) | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $30.74 | $25.83 | $30.13 | $26.18 | $19.27 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.38 | 0.37 | 0.31 | 0.20 | 0.29 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 8.29 | 4.79 | (4.44) | 3.92 | 6.94 | |||||||||||||||||
Total from Investment Operations | 8.67 | 5.16 | (4.13) | 4.12 | 7.23 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.42) | (0.25) | (0.17) | (0.17) | (0.32) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (0.42) | (0.25) | (0.17) | (0.17) | (0.32) | |||||||||||||||||
Net Asset Value, End of Period | $38.99 | $30.74 | $25.83 | $30.13 | $26.18 | |||||||||||||||||
Total Return | 28.43% | 20.08% | (13.74)% | 15.83% | 37.70% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $588,619 | $516,001 | $490,539 | $648,827 | $639,936 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $550,131 | $505,342 | $587,144 | $623,284 | $558,029 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.53% | 0.55% | 0.70% | 0.65% | 0.63% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.53% | 0.55% | 0.70% | 0.65% | 0.63% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 0.99% | 1.19% | 1.05% | 0.76% | 1.35% | |||||||||||||||||
Portfolio Turnover Rate | 101% | 56% | 88% | 86% | 206% |
Service Shares
Janus Aspen Global Research Portfolio(1) | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $30.31 | $25.51 | $29.80 | $25.93 | $19.10 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.25 | 0.23 | 0.19 | 0.12 | 0.24 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 8.22 | 4.79 | (4.34) | 3.88 | 6.87 | |||||||||||||||||
Total from Investment Operations | 8.47 | 5.02 | (4.15) | 4.00 | 7.11 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.38) | (0.22) | (0.14) | (0.13) | (0.28) | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | (0.38) | (0.22) | (0.14) | (0.13) | (0.28) | |||||||||||||||||
Net Asset Value, End of Period | $38.40 | $30.31 | $25.51 | $29.80 | $25.93 | |||||||||||||||||
Total Return | 28.12% | 19.77% | (13.95)% | 15.52% | 37.40% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $202,707 | $156,774 | $140,029 | $172,885 | $144,294 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $181,844 | $149,451 | $165,580 | $151,800 | $114,103 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.78% | 0.80% | 0.95% | 0.90% | 0.88% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.78% | 0.80% | 0.95% | 0.90% | 0.88% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 0.75% | 0.94% | 0.81% | 0.50% | 1.08% | |||||||||||||||||
Portfolio Turnover Rate | 101% | 56% | 88% | 86% | 206% |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Formerly named Janus Aspen Worldwide Portfolio. |
See Notes to Financial Statements.
14 | DECEMBER 31, 2013
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 Research Portfolio (formerly named Janus Aspen Worldwide 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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in equity securities. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
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 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 translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy.
16 | DECEMBER 31, 2013
Table of Contents
Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold any Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out of | ||||||
Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Global Research Portfolio | $ | 132,169,189 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year. Financial assets were transferred out of Level 2 to Level 1 as the current market for the securities with quoted prices are considered active.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose
Janus Aspen Series | 17
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Notes to Financial Statements (continued)
performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. | |
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. |
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• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a contract is included in “Net realized gain/(loss) from investment and foreign currency transactions” on the Statement of Operations (if applicable).
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 is subject to interest rate risk, liquidity risk, equity risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use options contracts to hedge against changes in interest rates, the values of equities, or foreign currencies. The Portfolio may utilize American-style and European-style options. An American-style option is an option contract that can be exercised at any time between the time of purchase and the option’s expiration date. A European-style option is an option contract that can only be exercised on the option’s expiration date. The Portfolio may also purchase or write put and call options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. The Portfolio generally invests in options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Portfolio receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. In writing an option, the Portfolio bears the risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio buying or selling a security at a price different from the current market value.
When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option are adjusted by the amount of premium received or paid.
The Portfolio may also purchase and write exchange-listed and OTC put and call options on domestic securities indices, and on foreign securities indices listed on domestic and foreign securities exchanges. Options on securities indices are similar to options on securities except that (1) the expiration cycles of securities index options are monthly, while those of securities options are currently quarterly, and (2) the delivery requirements are different. Instead of giving the right to take or make delivery of securities at a specified price, an option on a securities index gives the holder the right to receive a cash “exercise settlement amount” equal to (a) the amount, if any, by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of exercise, multiplied by (b) a fixed “index multiplier.” Receipt of this cash amount will depend upon the closing level of the securities index upon which the option is based being greater than, in the case of a call, or less than, in the case of a put, the exercise price of the index and the exercise price of the option times a specified multiple. The writer of the option is obligated, in return for the premium received, to make delivery of this amount.
Options traded on an exchange are regulated and the terms of the options are standardized. Options traded OTC expose the Portfolio to counterparty risk in the event that the counterparty does not perform. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by having the counterparty post collateral to cover the Portfolio’s exposure to the counterparty.
Holdings of the Portfolio designated to cover outstanding written options are noted on the Schedule of Investments. Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value.” Realized gains and losses are reported as “Net realized gain/(loss) from written options contracts” on the Statement of Operations.
The risk in writing call options is that the Portfolio gives up the opportunity for profit if the market price of the security
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Notes to Financial Statements (continued)
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.
Written option activity for the year ended December 31, 2013 is indicated in the table below:
Number of | Premiums | |||||||
Call Options | Contracts | Received | ||||||
Janus Aspen Global Research Portfolio | ||||||||
Options outstanding at December 31, 2012 | – | $ | – | |||||
Options written | 1,810 | 27,380 | ||||||
Options closed | (1,810) | (27,380) | ||||||
Options expired | – | – | ||||||
Options exercised | – | – | ||||||
Options outstanding at December 31, 2013 | – | $ | – | |||||
The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as | Investment and foreign | |||||||||||
hedging instruments | currency transactions | Written options contracts | Total | |||||||||
Janus Aspen Global Research Portfolio | ||||||||||||
Equity Contracts | $ | (172,298 | )* | $ | (298,815 | ) | $ | (471,113 | ) | |||
Foreign Exchange Contracts | 5,679,526 | – | 5,679,526 | |||||||||
Total | $ | 5,507,228 | $ | (298,815 | ) | $ | 5,208,413 | |||||
* | Amounts relate to purchased options. |
Change in Unrealized Net Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||
Investments, foreign | ||||
currency translations and | ||||
Derivatives not accounted for as | non-interested Trustees’ | |||
hedging instruments | deferred compensation | |||
Janus Aspen Global Research Portfolio | ||||
Equity Contracts | $ | 132,769* | ||
Foreign Exchange Contracts | (1,729,597 | ) | ||
Total | $ | (1,596,828 | ) | |
* | Amounts relate to purchased options. |
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
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
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The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Emerging Market Investing
The Portfolio may invest in securities of issuers or companies from or with exposure to one or more “developing countries” or “emerging markets.” Investing in emerging markets may involve certain risks and considerations not typically associated with investing in the United States and imposes risks greater than, or in addition to, the risks associated with investing in securities of more developed foreign countries. Emerging markets securities are exposed to a number of additional risks, which may result from less government supervision and regulation of business and industry practices (including the potential lack of strict finance and accounting controls and standards), stock exchanges, brokers, and listed companies, making these investments potentially more volatile in price and less liquid than investments in developed securities markets, resulting in greater risk to investors. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, imposition or enforcement of foreign ownership limits, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on the Portfolio’s investments. In addition, the Portfolio’s investments may be denominated in foreign currencies and therefore, changes in the value of a country’s currency compared to the U.S. dollar may affect the value of the Portfolio’s investments. To the extent that the Portfolio invests a significant portion of its assets in the securities of issuers in or companies of a
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Notes to Financial Statements (continued)
single country or region, it is more likely to be impacted by events or conditions affecting that country or region, which could have a negative impact on the Portfolio’s performance. Additionally, foreign and emerging market risks, including but not limited to price controls, expropriation or confiscatory taxation, imposition or enforcement of foreign ownership limits, nationalization, and restrictions on repatriation of assets may be heightened to the extent the Portfolio invests in Chinese local market securities (also known as “A Shares”).
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
4. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Base Fee | |||||
Rate (%) | |||||
Portfolio | (annual rate) | ||||
Janus Aspen Global Research Portfolio | 0.60 | ||||
For the Portfolio, the investment advisory fee rate is determined by calculating a base fee and applying a performance adjustment. The base fee rate is the same as the contractual investment advisory fee rate shown in the table above. The performance adjustment either increases or decreases the base fee depending on how well the Portfolio has performed relative to its benchmark index, as shown below:
Portfolio | Benchmark Index | ||||
Janus Aspen Global Research Portfolio | MSCI World IndexSM | ||||
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance Adjustment
The investment advisory fee rate paid to Janus Capital by the Portfolio consists of two components: (1) a base fee calculated by applying the contractual fixed rate of the advisory fee to the Portfolio’s average daily net assets during the previous month (“Base Fee Rate”), plus or minus (2) a performance-fee adjustment (“Performance Adjustment”) calculated by applying a variable rate of up to 0.15% (positive or negative) to the Portfolio’s average daily net assets during the applicable performance measurement period. The Performance Adjustment is based on a rolling 36-month performance measurement period. 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. The Base Fee Rate is subject to an upward or downward Performance Adjustment for every full 0.50% increment by which the Portfolio outperforms or underperforms its benchmark index. Because the Performance Adjustment is tied to the Portfolio’s relative performance compared to its benchmark index (and not its absolute performance), the Performance Adjustment could increase Janus Capital’s fee even if the Portfolio’s Shares lose value during the performance measurement period and could decrease Janus Capital’s fee even if the Portfolio’s Shares increase in value during the performance measurement period. For purposes of computing the Base Fee Rate and the Performance Adjustment, net assets are averaged over different periods (average daily net assets during the previous month for the Base Fee Rate, versus average daily net assets during the performance measurement period for the Performance Adjustment). Performance of the Portfolio is calculated net of expenses, whereas the Portfolio’s benchmark index does not have any fees or expenses. Reinvestment of dividends and distributions is included in calculating both the performance of the Portfolio and the Portfolio’s benchmark index. The Base Fee Rate is calculated and accrued daily. The Performance Adjustment is calculated monthly in arrears and is accrued throughout the month. The investment fee is paid monthly in arrears. Under extreme circumstances involving underperformance by a rapidly shrinking Portfolio, the dollar amount of the Performance Adjustment could be more than the dollar amount of the Base Fee Rate. In such circumstances, Janus Capital would reimburse the Portfolio.
The investment performance of the Portfolio’s Service Shares for the performance measurement period is used to calculate the Performance Adjustment. After Janus Capital determines whether the Portfolio’s performance
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was above or below its benchmark index by comparing the investment performance of the Portfolio’s Service Shares against the cumulative investment record of the Portfolio’s benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance Adjustment on future overall compensation to Janus Capital since it depends on the performance of the Portfolio relative to the record of the Portfolio’s benchmark index and future changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional information contain additional information about performance-based fees. The amount shown as advisory fees on the Statement of Operations reflects the Base Fee Rate plus/minus any Performance Adjustment. During the year ended December 31, 2013, the Portfolio recorded a Performance Adjustment of $(913,104).
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the
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cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
5. | Federal Income Tax |
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 primarily consist of deferred compensation 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. 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 | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Global Research Portfolio | $ | 3,001,097 | $ | – | $ | (232,005,326) | $ | – | $ | – | $ | (7,063) | $ | 137,849,154 | |||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2013, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. Under the Regulated Investment Company Modernization Act of 2010, the Portfolio is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may more likely expire unused. Also, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law. The following table shows these capital loss carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2013
December 31, | No Expiration | Accumulated | ||||||||||||
Portfolio | 2017 | Short-Term | Long-Term | Capital Losses | ||||||||||
Janus Aspen Global Research Portfolio | $ | (232,005,326) | $ | – | $ | – | $ | (232,005,326) | ||||||
During the year ended December 31, 2013, the following capital loss carryovers were utilized by the Portfolio:
Capital Loss | ||||||||||||||
Portfolio | Carryover Utilized | |||||||||||||
Janus Aspen Global Research Portfolio | $ | 79,943,846 | ||||||||||||
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, 2013 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/(depreciation) on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments
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are wash sale loss deferrals, investments in partnerships and investments in passive foreign investment companies.
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Global Research Portfolio | $ | 651,292,928 | $ | 147,512,900 | $ | (9,663,746) | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Research Portfolio | $ | 8,621,812 | $ | – | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Research Portfolio | $ | 5,517,135 | $ | – | $ | – | $ | – | |||||||||
6. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Global Research Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 330 | 320 | ||||||||
Reinvested dividends and distributions | 195 | 155 | ||||||||
Shares repurchased | (2,214) | (2,684) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,689) | (2,209) | ||||||||
Shares Outstanding, Beginning of Period | 16,785 | 18,994 | ||||||||
Shares Outstanding, End of Period | 15,096 | 16,785 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 904 | 724 | ||||||||
Reinvested dividends and distributions | 60 | 42 | ||||||||
Shares repurchased | (857) | (1,084) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 107 | (318) | ||||||||
Shares Outstanding, Beginning of Period | 5,172 | 5,490 | ||||||||
Shares Outstanding, End of Period | 5,279 | 5,172 | ||||||||
Transactions in Portfolio Shares – Service II Shares(1)(2) | ||||||||||
Shares sold | N/A | – | ||||||||
Reinvested dividends and distributions | N/A | – | ||||||||
Shares repurchased | N/A | (386) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | N/A | (386) | ||||||||
Shares Outstanding, Beginning of Period | – | 386 | ||||||||
Shares Outstanding, End of Period | N/A | – |
(1) | Transactions in Portfolio Shares - Service II Shares are not in thousands. | |
(2) | A liquidation of Service II Shares occurred at the close of business on April 27, 2012. |
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Notes to Financial Statements (continued)
7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Global Research Portfolio | $ | 729,501,089 | $ | 774,601,338 | $ | – | $ | – | ||||||
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Janus Aspen Global Research Portfolio
(formerly named Janus Aspen Worldwide Portfolio):
of Janus Aspen Global Research Portfolio
(formerly named 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 Global Research Portfolio (formerly named Janus Aspen Worldwide Portfolio) (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
Janus Aspen Series | 27
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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Additional Information (unaudited) (continued)
charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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Additional Information (unaudited) (continued)
• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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Additional Information (unaudited) (continued)
conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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Useful Information About Your Portfolio Report (unaudited) (continued)
such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Global Research Portfolio | 48% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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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 | |||
James P. Goff 151 Detroit Street Denver, CO 80206 DOB: 1964 | Executive Vice President Janus Aspen Global Research Portfolio | 5/13-Present | Vice President and Director of Equity Research of Janus Capital. | |||
Robin C. Beery** 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Notes
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55230 | 109-02-81112 02-14 |
Table of Contents
annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Table of Contents
Janus Aspen Global Technology Portfolio (unaudited)
PORTFOLIO SNAPSHOT We seek to identify strong businesses with sustainable competitive advantages and improving returns on capital. We believe what sets us apart is the depth of our research, our willingness to focus our investments where we feel we have a research edge, and our commitment to delivering strong long-term results for our clients. | ![]() J. Bradley Slingerlend portfolio manager |
PERFORMANCE OVERVIEW
During the 12 months ended December 31, 2013, Janus Aspen Global Technology Portfolio’s Institutional Shares and Service Shares returned 35.76% and 35.39%, respectively. By comparison, the Portfolio’s secondary and primary benchmarks, the MSCI World Information Technology Index and the S&P 500® Index, returned 28.72% and 32.39%, respectively.
INVESTMENT ENVIRONMENT
Global technology stocks generated excellent returns during 2013, performing in line with broader global developed markets. All technology subsectors, led by Internet software/services and data processing, generated gains during the year. Among relative detractors, IT consulting suffered from the fiscal year U.S. immigration cap limit on temporary foreign workers being reached in early April. In other segments, communications equipment stocks performed well, reflecting higher expenditures among service providers building faster networks to accommodate stronger consumer adoption of smartphones and tablet computers. Semiconductors, meanwhile, rebounded off a cyclical low reached in the fourth quarter of 2012. Cloud-computing and consumer Internet stocks generally saw valuations expand to somewhat unprecedented levels, reminiscent of the 1999 technology bubble. Scarcity of alternative growth investments drove most of the returns rather than improving fundamentals, in our view.
Despite the bullish environment, enterprise spending overall was weak. Along with ongoing softness due to reduced U.S. federal government spending and general European economic weakness, U.S.-based technology companies were also negatively impacted by the National Security Agency’s (NSA) spying scandal during the fourth quarter, and the ongoing shift to cloud computing. Consumer spending, meanwhile, remained firmly focused on handsets and tablets, with few other areas showing strength.
PORTFOLIO MANAGER COMMENTS
We spend a lot of time thinking about competitive advantage. Many great investors believe that good investments rely on businesses with wide “moats” or protective barriers that keep competitors from eroding their position. Traditionally, these competitive barriers relied on obfuscation of information, in our view. A company would essentially hold secrets or power over some aspect of their business – the supply chain, distribution, marketing expenditures, brand value, etc. Through our analytical lens of disruption and innovation driven by new and evolving technologies, we believe the traditional concepts of “moats” are anachronistic – they do not apply to the 21st-century global economy. In fact, we believe these pre-existing “moats” may now be vulnerabilities for many companies across many sectors, not simply limited to the technology sector.
Billions of people in the global economy today have smartphones or low-cost tablets – a theme we have discussed before in these letters. We believe it represents the most transformative technological force of the decade, and probably well into next decade. We expect over 5 billion people to have access to smart-mobile devices within a few years. That is remarkable. This transformation has finally brought the promise of the Internet into existence – ubiquitous real time information access. Pockets of hidden information around the world are finally becoming open, and in the process dramatically impacting many businesses, industries and government regimes.
Is there still such a thing as sustainable competitive advantage in the information age we now find ourselves in? We believe there are patterns of behavior inside companies and industries that can lead to solid competitive advantage and resilience, but perhaps not sustainable competitive advantage over a very long time period. There are several characteristics we look for as hallmarks of companies that have a chance at building solid, long-term businesses: 1) A long-term focused management team and board, usually with 5 to 10-year outlooks and incentive structures, 2) A strong culture of
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Table of Contents
Janus Aspen Global Technology Portfolio (unaudited)
innovation, focused on the current and evolving needs of customers, and 3) A strong ability to adapt, evolve and be flexible in the face of ever-changing circumstances and potential disruptions.
In addition to these aspects we look for businesses with strong network effects – those that create win-win solutions for their customers, suppliers, partners and shareholders, in our view. Lastly, we look for companies that can grow at a steady pace for a very long time – we believe this creates a stable backdrop for potential competitive advantage.
We do not believe there are any magic formulas or complicated strategies that differentiate winners and losers. Rather, it often comes down to a very focused and intentioned management team that leads by example, instilling a culture that can endure disruption, and emerge even stronger on the other side. Increasingly, we are finding these attributes in strong companies leveraging technology in other sectors such as health care, finance, industrials and retail. It is very exciting to be able to invest in the broad and accelerating innovation around the world, and we believe the companies in the Janus Global Technology Portfolio benefit from innovation and building 21st-century competitive advantages.
CONTRIBUTORS TO PERFORMANCE
Internet search engine leader Google was our largest contributor. The company benefited from better-than-expected quarterly results, with strong year-over-year revenue growth. The company’s transition from desktop to mobile search has continued to exceed market expectations, and there is greater investor appreciation for its powerful platform. We feel the company remains attractively valued relative to the multi-year growth outlook we see for its resilient core search business combined with potential growth drivers around its Android software for mobile devices, YouTube, mobile and enterprise businesses.
Another key contributor, MasterCard, rose after the credit card company hiked its dividend significantly and authorized a new stock repurchase program. The company saw strong transaction growth both in the U.S. and overseas. We continue to appreciate the company’s strong and predictable growth profile, large addressable market globally (i.e., increasing use of electronic forms of payment instead of cash and checks), high returns on invested capital and considerable capital return to shareholders via dividends and stock repurchases.
Electronic connectors maker TE Connectivity was another top contributor. TE Connectivity reported better-than-expected results on improved margins, and it raised its full-year guidance. The stock also benefited after another electronics connectors manufacturer was acquired during the third quarter. We continue to appreciate TE Connectivity’s industry-leading position.
DETRACTORS FROM PERFORMANCE
VMware was our largest individual detractor. The server virtualization software designer traded lower after the company gave guidance that was below the market’s expectations. We sold our position after gains earlier in the period made its risk/reward profile less attractive.
Enterprise data analysis firm Teradata, another detractor, declined after the company warned its quarterly results would be below expectations and reduced its full-year outlook, citing particular weakness in emerging markets. We feel the market overreacted to short-term concerns, so we added to our position. As the leading data warehousing provider, Teradata offers an attractive growth profile, in our view. We believe Teradata has a well-positioned product and services portfolio to help organizations leverage data in generating insights for competitive advantage.
Indonesian telecommunications tower company Tower Bersama, which also weighed on performance, suffered from weak performance in the Indonesian equity markets. Indonesia was among emerging markets negatively impacted by the U.S. Federal Reserve’s announcement that it planned to begin a gradual reduction in its stimulative bond-buying program. Tower Bersama’s fundamentals remained strong; therefore, we added to our position. We believe Tower Bersama has pricing power similar to tower companies in the U.S. and will benefit from the proliferation of mobile devices that are increasing demand for more towers. We appreciate both the company’s historical cash generation capability and its growth potential, given the country’s sparse geography and need for towers.
Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.
Thanks you for your investment in Janus Aspen Global Technology Portfolio.
2 | DECEMBER 31, 2013
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(unaudited)
Janus Aspen Global Technology Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Google, Inc. – Class A | 3.42% | |||
MasterCard, Inc. – Class A | 1.54% | |||
TE Connectivity, Ltd. (U.S. Shares) | 1.37% | |||
Apple, Inc. | 1.30% | |||
Amphenol Corp. – Class A | 1.24% |
5 Bottom Performers – Holdings
Contribution | ||||
VMware, Inc. – Class A | –0.22% | |||
Teradata Corp. | –0.21% | |||
Tower Bersama Infrastructure Tbk PT | –0.13% | |||
Citrix Systems, Inc. | –0.11% | |||
Samsung Electronics Co., Ltd. | –0.10% |
5 Top Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (Average % of Equity) | S&P 500® Index Weighting | ||||||||||
Consumer Discretionary | 2.21% | 9.77% | 12.04% | |||||||||
Information Technology | 1.69% | 76.11% | 18.03% | |||||||||
Energy | 0.77% | 0.00% | 10.66% | |||||||||
Utilities | 0.64% | 0.00% | 3.28% | |||||||||
Consumer Staples | 0.61% | 0.03% | 10.49% |
5 Bottom Performers – Sectors*
Portfolio Weighting | ||||||||||||
Portfolio Contribution | (Average % of Equity) | S&P 500® Index Weighting | ||||||||||
Industrials | –1.90% | 4.74% | 10.35% | |||||||||
Other** | –1.36% | 4.26% | 0.00% | |||||||||
Health Care | –0.56% | 1.27% | 12.74% | |||||||||
Materials | 0.23% | 0.00% | 3.44% | |||||||||
Telecommunication Services | 0.28% | 0.99% | 2.72% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
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Janus Aspen Global Technology Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Apple, Inc. Computers & Peripherals | 10.7% | |||
Google, Inc. – Class A Internet Software & Services | 9.4% | |||
Oracle Corp. Software | 4.8% | |||
Amphenol Corp. – Class A Electronic Equipment, Instruments & Components | 3.7% | |||
TE Connectivity, Ltd. (U.S. Shares) Electronic Equipment, Instruments & Components | 2.9% | |||
31.5% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas07p01.gif)
Emerging markets comprised 7.1% of total net assets.
*Includes Securities Sold Short of (0.6)%.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
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(unaudited)
Performance
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Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Global Technology Portfolio – Institutional Shares | 35.76% | 23.80% | 9.31% | –0.92% | 0.76% | ||||||
Janus Aspen Global Technology Portfolio – Service Shares | 35.39% | 23.52% | 9.02% | –1.18% | 1.01% | ||||||
S&P 500® Index | 32.39% | 17.94% | 7.41% | 3.68% | |||||||
MSCI World Information Technology Index | 28.72% | 19.08% | 6.15% | –2.24%** | |||||||
Morningstar Quartile – Institutional Shares | 2nd | 1st | 2nd | 3rd | |||||||
Morningstar Ranking – based on total returns for Technology Funds | 72/203 | 51/203 | 71/194 | 86/141 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
Foreign securities have additional risks including exchange rate changes, political and economic upheaval, the relative lack of information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. These risks are magnified in emerging markets. The prices of foreign securities held by the fund, and therefore a fund’s performance, may decline in response to such risks.
The Portfolio will normally invest at least 80% of its net assets, measured at the time of purchase, in the type of securities described by its name.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Net dividends reinvested are the dividends that remain to be reinvested after foreign tax obligations have been met. Such obligations vary from country to country.
Ranking is for the share class shown only; other classes may have different performance characteristics. When an expense waiver is in effect, it may have a material effect on the total return, and therefore the ranking for the period.
See important disclosures on the next page.
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Janus Aspen Global Technology Portfolio (unaudited)
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
* | The 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. |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,244.30 | $ | 4.58 | $ | 1,000.00 | $ | 1,021.12 | $ | 4.13 | 0.81% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,241.10 | $ | 5.99 | $ | 1,000.00 | $ | 1,019.86 | $ | 5.40 | 1.06% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
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Janus Aspen Global Technology Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Contract Amounts | Value | |||||||||
Common Stock – 97.8% | ||||||||||
Aerospace & Defense – 0.5% | ||||||||||
21,338 | Ultra Electronics Holdings PLC** | $ | 681,154 | |||||||
Communications Equipment – 3.3% | ||||||||||
38,203 | CommScope Holding Co., Inc.* | 722,801 | ||||||||
18,642 | QUALCOMM, Inc. | 1,384,168 | ||||||||
213,901 | Telefonaktiebolaget L.M. Ericsson – Class B | 2,611,429 | ||||||||
4,718,398 | ||||||||||
Computers & Peripherals – 11.0% | ||||||||||
27,371 | Apple, Inc.** | 15,358,142 | ||||||||
3,057 | Stratasys, Ltd.* | 411,778 | ||||||||
15,769,920 | ||||||||||
Consumer Finance – 1.9% | ||||||||||
24,080 | American Express Co. | 2,184,778 | ||||||||
9,085 | Discover Financial Services | 508,306 | ||||||||
2,693,084 | ||||||||||
Diversified Financial Services – 0.3% | ||||||||||
90,300 | BM&F Bovespa S.A. | 423,383 | ||||||||
Electrical Equipment – 0.9% | ||||||||||
33,926 | Sensata Technologies Holding N.V.* | 1,315,311 | ||||||||
Electronic Equipment, Instruments & Components – 9.7% | ||||||||||
58,897 | Amphenol Corp. – Class A | 5,252,434 | ||||||||
800 | Keyence Corp.** | 341,913 | ||||||||
120,480 | National Instruments Corp. | 3,857,770 | ||||||||
74,466 | TE Connectivity, Ltd. (U.S. Shares) | 4,103,821 | ||||||||
258,975 | WT Microelectronics Co., Ltd. | 306,338 | ||||||||
13,862,276 | ||||||||||
Food & Staples Retailing – 0.1% | ||||||||||
2,298 | Whole Foods Market, Inc. | 132,893 | ||||||||
Health Care Technology – 0.9% | ||||||||||
10,102 | athenahealth, Inc.* | 1,358,719 | ||||||||
Hotels, Restaurants & Leisure – 0.6% | ||||||||||
442,028 | Bwin.Party Digital Entertainment PLC** | 900,933 | ||||||||
Information Technology Services – 8.3% | ||||||||||
76,370 | Amdocs, Ltd. (U.S. Shares) | 3,149,499 | ||||||||
11,200 | Cognizant Technology Solutions Corp. – Class A* | 1,130,976 | ||||||||
16,615 | Gartner, Inc.* | 1,180,496 | ||||||||
15,983 | Jack Henry & Associates, Inc. | 946,353 | ||||||||
4,487 | MasterCard, Inc. – Class A | 3,748,709 | ||||||||
11,397 | QIWI PLC (ADR) | 638,232 | ||||||||
24,756 | Teradata Corp.* | 1,126,150 | ||||||||
11,920,415 | ||||||||||
Internet & Catalog Retail – 5.2% | ||||||||||
6,323 | Amazon.com, Inc.* | 2,521,549 | ||||||||
19,086 | Ctrip.com International, Ltd. (ADR)* | 947,047 | ||||||||
1,247 | Netflix, Inc.* | 459,108 | ||||||||
1,009 | priceline.com, Inc.* | 1,172,862 | ||||||||
7,091 | Qunar Cayman Islands, Ltd. (ADR)* | 188,124 | ||||||||
120,000 | Rakuten, Inc.** | 1,782,505 | ||||||||
10,218 | zulily, Inc.* | 423,332 | ||||||||
7,494,527 | ||||||||||
Internet Software & Services – 17.8% | ||||||||||
26,036 | ChannelAdvisor Corp.* | 1,085,962 | ||||||||
10,625 | Cornerstone OnDemand, Inc.* | 566,737 | ||||||||
57,615 | eBay, Inc.* | 3,162,487 | ||||||||
12,013 | Google, Inc. – Class A*,** | 13,463,089 | ||||||||
2,004 | LinkedIn Corp. – Class A* | 434,527 | ||||||||
11,599 | Marin Software, Inc.* | 118,774 | ||||||||
9,623 | MercadoLibre, Inc. | 1,037,263 | ||||||||
3,914 | Shutterstock, Inc.* | 327,328 | ||||||||
20,100 | Tencent Holdings, Ltd. | 1,282,107 | ||||||||
10,647 | Twitter, Inc.* | 677,682 | ||||||||
21,905 | Yandex N.V. – Class A* | 945,201 | ||||||||
5,625 | Yelp, Inc.* | 387,844 | ||||||||
38,000 | Youku Tudou, Inc. (ADR)* | 1,151,400 | ||||||||
10,693 | Zillow, Inc. – Class A* | 873,939 | ||||||||
25,514,340 | ||||||||||
Machinery – 2.2% | ||||||||||
17,149 | FANUC Corp.** | 3,135,324 | ||||||||
Media – 2.4% | ||||||||||
29,891 | News Corp. – Class A* | 538,636 | ||||||||
46,845 | SFX Entertainment, Inc.* | 562,140 | ||||||||
31,556 | Twenty-First Century Fox, Inc. | 1,110,140 | ||||||||
16,132 | Walt Disney Co. | 1,232,485 | ||||||||
3,443,401 | ||||||||||
Oil, Gas & Consumable Fuels – 0.4% | ||||||||||
25,738 | Apptio, Inc.*,§ | 584,114 | ||||||||
Professional Services – 1.0% | ||||||||||
4,623 | Corporate Executive Board Co. | 357,959 | ||||||||
16,679 | Verisk Analytics, Inc. – Class A* | 1,096,144 | ||||||||
1,454,103 | ||||||||||
Real Estate Investment Trusts (REITs) – 1.7% | ||||||||||
29,878 | American Tower Corp. | 2,384,862 | ||||||||
Semiconductor & Semiconductor Equipment – 9.2% | ||||||||||
205,312 | ARM Holdings PLC** | 3,735,912 | ||||||||
273,151 | Atmel Corp.* | 2,138,772 | ||||||||
42,785 | Cypress Semiconductor Corp. | 449,242 | ||||||||
40,359 | Freescale Semiconductor, Ltd.* | 647,762 | ||||||||
43,000 | MediaTek, Inc. | 639,950 | ||||||||
181,507 | ON Semiconductor Corp.* | 1,495,618 | ||||||||
379 | Samsung Electronics Co., Ltd. | 492,786 | ||||||||
726,000 | Taiwan Semiconductor Manufacturing Co., Ltd. | 2,570,235 | ||||||||
23,391 | Xilinx, Inc. | 1,074,115 | ||||||||
13,244,392 | ||||||||||
Software – 19.2% | ||||||||||
16,357 | Advent Software, Inc. | 572,331 | ||||||||
26,140 | ANSYS, Inc.* | 2,279,408 | ||||||||
16,015 | Aveva Group PLC** | 573,811 | ||||||||
27,474 | Blackbaud, Inc. | 1,034,396 | ||||||||
143,004 | Cadence Design Systems, Inc.* | 2,004,916 | ||||||||
32,490 | Informatica Corp.* | 1,348,335 | ||||||||
19,038 | Intuit, Inc. | 1,452,980 | ||||||||
59,000 | Nexon Co., Ltd.** | 544,667 | ||||||||
25,620 | NICE Systems, Ltd. (ADR) | 1,049,395 | ||||||||
10,032 | Nintendo Co., Ltd.** | 1,334,869 | ||||||||
180,358 | Oracle Corp.** | 6,900,497 | ||||||||
16,012 | PROS Holdings, Inc.* | 638,879 | ||||||||
36,797 | RealPage, Inc.* | 860,314 | ||||||||
22,166 | Red Hat, Inc.* | 1,242,183 | ||||||||
13,244 | Salesforce.com, Inc.* | 730,936 | ||||||||
16,919 | Solera Holdings, Inc. | 1,197,189 | ||||||||
28,839 | SS&C Technologies Holdings, Inc.* | 1,276,414 | ||||||||
16,424 | Synopsys, Inc.* | 666,322 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen Global Technology Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Contract Amounts | Value | |||||||||
Software – (continued) | ||||||||||
56,504 | TIBCO Software, Inc.* | $ | 1,270,210 | |||||||
7,483 | Workday, Inc. – Class A* | 622,286 | ||||||||
27,600,338 | ||||||||||
Trading Companies & Distributors – 0.3% | ||||||||||
1,435 | W.W. Grainger, Inc. | 366,528 | ||||||||
Wireless Telecommunication Services – 0.9% | ||||||||||
22,041 | T-Mobile U.S., Inc. | 741,459 | ||||||||
1,307,000 | Tower Bersama Infrastructure Tbk PT | 623,405 | ||||||||
1,364,864 | ||||||||||
Total Common Stock (cost $96,481,029) | 140,363,279 | |||||||||
Purchased Options – Calls – 0.1% | ||||||||||
100 | QUALCOMM, Inc. expires April 2014 exercise price $70.00 | 56,900 | ||||||||
25 | Whole Foods Market, Inc. expires May 2014 exercise price $60.00 | 7,057 | ||||||||
Total Purchased Options – Calls (premiums paid $33,575) | 63,957 | |||||||||
Money Market – 2.2% | ||||||||||
3,210,971 | Janus Cash Liquidity Fund LLC, 0%£ (cost $3,210,971) | 3,210,971 | ||||||||
Total Investments (total cost $99,725,575) – 100.1% | 143,638,207 | |||||||||
Securities Sold Short – (0.6)% | ||||||||||
Common Stock Sold Short – (0.6)% | ||||||||||
Semiconductor & Semiconductor Equipment – (0.3)% | ||||||||||
2,176 | Cree, Inc.* | (136,152) | ||||||||
49,485 | Imagination Technologies Group PLC* | (126,316) | ||||||||
2,805 | Synaptics, Inc.* | (145,327) | ||||||||
(407,795) | ||||||||||
Software – (0.3)% | ||||||||||
2,275 | ServiceNow, Inc.* | (127,423) | ||||||||
1,976 | Splunk, Inc.* | (135,692) | ||||||||
3,445 | Tableau Software, Inc. – Class A* | (237,464) | ||||||||
(500,579) | ||||||||||
Total Securities Sold Short (proceeds $881,527) | (908,374) | |||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.5% | 728,877 | |||||||||
Net Assets – 100% | $ | 143,458,710 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Brazil | $ | 423,383 | 0.3% | |||||
China | 3,568,678 | 2.5% | ||||||
Indonesia | 623,405 | 0.4% | ||||||
Israel | 1,049,395 | 0.7% | ||||||
Japan | 7,139,278 | 5.0% | ||||||
Russia | 1,583,433 | 1.1% | ||||||
South Korea | 492,786 | 0.3% | ||||||
Sweden | 2,611,429 | 1.8% | ||||||
Taiwan | 3,516,523 | 2.5% | ||||||
United Kingdom | 5,891,810 | 4.1% | ||||||
United States†† | 116,738,087 | 81.3% | ||||||
Total | $ | 143,638,207 | 100.0% |
†† | Includes Cash Equivalents of 2.2%. |
Summary of Investments by Country – (Short Positions) (unaudited)
% of Securities | ||||||||
Country | Value | Sold Short | ||||||
United Kingdom | $ | (126,316) | 13.9% | |||||
United States | (782,058) | 86.1% | ||||||
Total | $ | (908,374) | 100.0% |
Forward Currency Contracts, Open
Unrealized | ||||||||||||
Currency Units | Currency | Appreciation/ | ||||||||||
Counterparty/Currency and Settlement Date | Sold | Value U.S. $ | (Depreciation) | |||||||||
Credit Suisse International: | ||||||||||||
British Pound 1/9/14 | 318,000 | $ | 526,492 | $ | (14,337) | |||||||
Japanese Yen 1/9/14 | 140,100,000 | 1,330,628 | 63,739 | |||||||||
1,857,120 | 49,402 | |||||||||||
HSBC Securities (USA), Inc.: | ||||||||||||
British Pound 1/16/14 | 110,000 | 182,110 | (2,182) | |||||||||
Japanese Yen 1/16/14 | 133,600,000 | 1,268,951 | 27,847 | |||||||||
1,451,061 | 25,665 | |||||||||||
JPMorgan Chase & Co.: | ||||||||||||
British Pound 1/23/14 | 175,000 | 289,705 | (4,284) | |||||||||
Japanese Yen 1/23/14 | 138,300,000 | 1,313,651 | 24,525 | |||||||||
1,603,356 | 20,241 | |||||||||||
RBC Capital Markets Corp.: | ||||||||||||
British Pound 1/16/14 | 229,000 | 379,120 | (4,655) | |||||||||
Japanese Yen 1/16/14 | 145,800,000 | 1,384,828 | 31,903 | |||||||||
1,763,948 | 27,248 | |||||||||||
Total | $ | 6,675,485 | $ | 122,556 | ||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Schedule of Written Options – Puts | Value | |||
QUALCOMM, Inc. expires April 2014 100 contracts exercise price $62.50 | $ | (4,186) | ||
Whole Foods Market, Inc. expires May 2014 25 contracts exercise price $55.00 | (6,713) | |||
Total Written Options – Puts (premiums received $31,525) | $ | (10,899) | ||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Notes to Schedule of Investments and Other Information
MSCI World Information Technology Index | A capitalization weighted index that monitors the performance of information technology stocks from developed market countries in North America, Europe, and the Asia/Pacific Region. The index includes reinvestment of dividends, net of foreign withholding taxes. | |
S&P 500® Index | A commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. | |
ADR | American Depositary Receipt | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
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 or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Global Technology Portfolio | $ | 20,186,015 | |||
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2013) |
Acquisition | Acquisition | Value as a | ||||||||||
Date | Cost | Value | % of Net Assets | |||||||||
Janus Aspen Global Technology Portfolio | ||||||||||||
Apptio, Inc. | 5/2/13 | $ | 584,114 | $ | 584,114 | 0.4% | ||||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2013. The issuer incurs all registration costs.
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Global Technology Portfolio | |||||||||||||||||||||
Janus Cash Liquidity Fund LLC | 33,809,653 | $ | 33,809,653 | (38,176,000) | $ | (38,176,000) | $ | – | $ | 4,024 | $ | 3,210,971 | |||||||||
10 | DECEMBER 31, 2013
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
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 | |||||||||||
Oil, Gas & Consumable Fuels | $ | – | $ | – | $ | 584,114 | |||||
All Other | 139,779,165 | – | – | ||||||||
Purchased Options | – | 63,957 | – | ||||||||
Money Market | – | 3,210,971 | – | ||||||||
Total Investments in Securities | $ | 139,779,165 | $ | 3,274,928 | $ | 584,114 | |||||
Other Financial Instruments(a) – Assets: | |||||||||||
Forward Currency Contracts | $ | – | $ | 148,014 | $ | – | |||||
Investments in Securities Sold Short: | |||||||||||
Common Stock | $ | 908,374 | $ | – | $ | – | |||||
Other Financial Instruments(a) – Liabilities: | |||||||||||
Forward Currency Contracts | $ | – | $ | 25,458 | $ | – | |||||
Options Written, at Value | – | 10,899 | – | ||||||||
(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 | 11
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||||||
Global | ||||||||||
As of December 31, 2013 | Technology | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 99,726 | ||||||||
Unaffiliated investments at value | $ | 140,427 | ||||||||
Affiliated investments at value | 3,211 | |||||||||
Deposits with broker for short sales | 882 | |||||||||
Receivables: | ||||||||||
Portfolio shares sold | 14 | |||||||||
Dividends | 50 | |||||||||
Foreign dividend tax reclaim | 20 | |||||||||
Non-interested Trustees’ deferred compensation | 3 | |||||||||
Other assets | 1 | |||||||||
Forward currency contracts | 148 | |||||||||
Total Assets | 144,756 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Short sales, at value(1) | 908 | |||||||||
Options written, at value(2) | 11 | |||||||||
Due to custodian | 2 | |||||||||
Portfolio shares repurchased | 159 | |||||||||
Advisory fees | 78 | |||||||||
Fund administration fees | 1 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 29 | |||||||||
Non-interested Trustees’ fees and expenses | 1 | |||||||||
Non-interested Trustees’ deferred compensation fees | 3 | |||||||||
Accrued expenses and other payables | 80 | |||||||||
Forward currency contracts | 25 | |||||||||
Total Liabilities | 1,297 | |||||||||
Net Assets | $ | 143,459 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 90,795 | ||||||||
Undistributed net investment loss* | (95) | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 8,729 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 44,030 | |||||||||
Total Net Assets | $ | 143,459 | ||||||||
Net Assets - Institutional Shares | $ | 7,346 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 896 | |||||||||
Net Asset Value Per Share | $ | 8.20 | ||||||||
Net Assets - Service Shares | $ | 136,113 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 16,322 | |||||||||
Net Asset Value Per Share | $ | 8.34 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Proceeds $881,527. | |
(2) | Premiums received $31,525. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2013
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Global | ||||||
For the year ended December 31, 2013 | Technology | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest proceeds from short sales | $ | – | ||||
Dividends | 1,180 | |||||
Dividends from affiliates | 4 | |||||
Other Income | – | |||||
Foreign tax withheld | (27) | |||||
Total Investment Income | 1,157 | |||||
Expenses: | ||||||
Advisory fees | 797 | |||||
Internal servicing expense - Institutional Shares | – | |||||
Internal servicing expense - Service Shares | 1 | |||||
Shareholder reports expense | 41 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | – | |||||
Custodian fees | 20 | |||||
Professional fees | 50 | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Short sales dividend expense | 5 | |||||
Short sales interest expense | 1 | |||||
Stock loan fees | 1 | |||||
Fund administration fees | 12 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 296 | |||||
Other expenses | 21 | |||||
Total Expenses | 1,248 | |||||
Net Expenses after Waivers and Expense Offsets | 1,248 | |||||
Net Investment Loss | (91) | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 13,433 | |||||
Net realized loss from short sales | (135) | |||||
Net realized gain from written options contracts | 285 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 24,798 | |||||
Change in unrealized net appreciation/(depreciation) of short sales | (22) | |||||
Change in unrealized net appreciation/(depreciation) of written options contracts | (58) | |||||
Net Gain on Investments | 38,301 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 38,210 |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Global Technology | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment loss | $ | (91) | $ | (128) | ||||||
Net realized gain from investment and foreign currency transactions | 13,583 | 4,049 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 24,718 | 15,115 | ||||||||
Net Increase in Net Assets Resulting from Operations | 38,210 | 19,036 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | – | – | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 2,230 | 2,649 | ||||||||
Service Shares(1) | 16,680 | 47,531 | ||||||||
Service II Shares | N/A | 9,048 | ||||||||
Redemption Fees | ||||||||||
Service II Shares | N/A | 2 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (1,775) | (2,797) | ||||||||
Service Shares | (24,271) | (26,616) | ||||||||
Service II Shares(1) | N/A | (39,836) | ||||||||
Net Decrease from Capital Share Transactions | (7,136) | (10,019) | ||||||||
Net Increase in Net Assets | 31,074 | 9,017 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 112,385 | 103,368 | ||||||||
End of period | $ | 143,459 | $ | 112,385 | ||||||
Undistributed Net Investment Loss* | $ | (95) | $ | (5) |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Effective April 27, 2012, Service II Shares of the Portfolio were converted to Service Shares. This was accomplished by a tax-free exchange of 5,906,975 Service II Shares (valued at $37,017,239) for 6,038,701 Service Shares. |
See Notes to Financial Statements.
14 | DECEMBER 31, 2013
Table of Contents
Financial Highlights
Institutional Shares
Janus Aspen Global Technology Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $6.04 | $5.05 | $5.53 | $4.43 | $2.82 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | –(1) | 0.02 | 0.03 | (0.04) | (0.04) | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 2.16 | 0.97 | (0.51) | 1.14 | 1.65 | |||||||||||||||||
Total from Investment Operations | 2.16 | 0.99 | (0.48) | 1.10 | 1.61 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | – | – | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | – | – | – | – | – | |||||||||||||||||
Net Asset Value, End of Period | $8.20 | $6.04 | $5.05 | $5.53 | $4.43 | |||||||||||||||||
Total Return | 35.76% | 19.60% | (8.68)% | 24.83% | 57.09% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $7,346 | $4,987 | $4,275 | $4,803 | $2,835 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $6,188 | $4,947 | $4,972 | $3,825 | $2,218 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.77% | 0.76% | 0.80% | 0.87% | 0.95% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.77% | 0.76% | 0.80% | 0.87% | 0.95% | |||||||||||||||||
Ratio of Net Investment Income/(Loss) to Average Net Assets | 0.16% | 0.14% | (0.10)% | (0.23)% | (0.31)% | |||||||||||||||||
Portfolio Turnover Rate | 39% | 56% | 83% | 79% | 101% |
Service Shares
Janus Aspen Global Technology Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $6.16 | $5.17 | $5.66 | $4.55 | $2.90 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income/(loss) | (0.01) | 0.01 | –(1) | (0.01) | –(1) | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 2.19 | 0.98 | (0.49) | 1.12 | 1.65 | |||||||||||||||||
Total from Investment Operations | 2.18 | 0.99 | (0.49) | 1.11 | 1.65 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | – | – | – | – | – | |||||||||||||||||
Distributions (from capital gains)* | – | – | – | – | – | |||||||||||||||||
Total Distributions | – | – | – | – | – | |||||||||||||||||
Net Asset Value, End of Period | $8.34 | $6.16 | $5.17 | $5.66 | $4.55 | |||||||||||||||||
Total Return | 35.39% | 19.15% | (8.66)% | 24.40% | 56.90% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $136,113 | $107,398 | $73,246 | $112,809 | $99,472 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $117,904 | $99,664 | $94,128 | $101,085 | $78,097 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 1.02% | 1.01% | 1.04% | 1.13% | 1.22% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 1.02% | 1.01% | 1.04% | 1.13% | 1.22% | |||||||||||||||||
Ratio of Net Investment Loss to Average Net Assets | (0.09)% | (0.10)% | (0.36)% | (0.50)% | (0.56)% | |||||||||||||||||
Portfolio Turnover Rate | 39% | 56% | 83% | 79% | 101% |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Less than $0.01 on a per share basis. |
See Notes to Financial Statements.
Janus Aspen Series | 15
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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in equity securities. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which
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may be allocated pro rata to the Portfolio. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a
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Notes to Financial Statements (continued)
market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold a material amount of Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out of | ||||||
Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Global Technology Portfolio | $ | 17,279,821 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year. Financial assets were transferred out of Level 2 to Level 1 as the current market for the securities with quoted prices are considered active.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on
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foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. | |
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. | |
• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to |
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Notes to Financial Statements (continued)
sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a contract is included in “Net realized gain/(loss) from investment and foreign currency transactions” on the Statement of Operations (if applicable).
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 is subject to interest rate risk, liquidity risk, equity risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use options contracts to hedge against changes in interest rates, the values of equities, or foreign currencies. The Portfolio may utilize American-style and European-style options. An American-style option is an option contract that can be exercised at any time between the time of purchase and the option’s expiration date. A European-style option is an option contract that can only be exercised on the option’s expiration date. The Portfolio may also purchase or write put and call options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. The Portfolio generally invests in options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Portfolio receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. In writing an option, the Portfolio bears the risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio buying or selling a security at a price different from the current market value.
When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option are adjusted by the amount of premium received or paid.
The Portfolio may also purchase and write exchange-listed and OTC put and call options on domestic securities indices, and on foreign securities indices listed on domestic and foreign securities exchanges. Options on securities indices are similar to options on securities except that (1) the expiration cycles of securities index options are monthly, while those of securities options are currently quarterly, and (2) the delivery requirements are different. Instead of giving the right to take or make delivery of securities at a specified price, an option on a securities index gives the holder the right to receive a cash “exercise settlement amount” equal to (a) the amount, if any, by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of exercise, multiplied by (b) a fixed “index multiplier.” Receipt of this cash amount will depend upon the closing level of the securities index upon which the option is based being greater than, in the case of a call, or less than, in the case of a put, the exercise price of the index and the exercise price of the option times a specified multiple. The writer of the option is obligated, in return for the premium received, to make delivery of this amount.
Options traded on an exchange are regulated and the terms of the options are standardized. Options traded OTC expose the Portfolio to counterparty risk in the event that the counterparty does not perform. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by having the counterparty post collateral to cover the Portfolio’s exposure to the counterparty.
Holdings of the Portfolio designated to cover outstanding written options are noted on the Schedule of Investments. Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value.” Realized gains and losses are reported as “Net realized gain/(loss) from written options contracts” on the Statement of Operations.
The risk in writing call options is that the Portfolio gives up the opportunity for profit if the market price of the security increases and the options are exercised. The risk in writing put options is that the Portfolio may incur a loss if
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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.
Written option activity for the year ended December 31, 2013 is indicated in the tables below:
Number of | Premiums | |||||||
Put Options | Contracts | Received | ||||||
Janus Aspen Global Technology Portfolio | ||||||||
Options outstanding at December 31, 2012 | 125 | $ | 190,085 | |||||
Options written | 224 | 242,831 | ||||||
Options closed | (146) | (292,607) | ||||||
Options expired | (22) | (29,568) | ||||||
Options exercised | (56) | (79,216) | ||||||
Options outstanding at December 31, 2013 | 125 | $ | 31,525 | |||||
The following table, grouped by derivative type, provides information about the fair value and location of derivatives within the Statement of Assets and Liabilities as of December 31, 2013.
Fair Value of Derivative Instruments as of December 31, 2013
Derivatives not accounted | Asset Derivatives | Liability Derivatives | ||||||||||
for as hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Janus Aspen Global Technology Portfolio | ||||||||||||
Equity Contracts | Unaffiliated investments at value | $ | 63,957* | Options written, at value | $ | 10,899 | ||||||
Foreign Exchange Contracts | Forward currency contracts | 148,014 | Forward currency contracts | 25,458 | ||||||||
Total | $ | 211,971 | $ | 36,357 | ||||||||
* | Amounts relate to purchased options. |
The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as | Investment and foreign | |||||||||||
hedging instruments | currency transactions | Written options contracts | Total | |||||||||
Janus Aspen Global Technology Portfolio | ||||||||||||
Equity Contracts | $ | (480,327 | )* | $ | 284,871 | $ | (195,456 | ) | ||||
Foreign Exchange Contracts | 783,973 | – | 783,973 | |||||||||
Total | $ | 303,646 | $ | 284,871 | $ | 588,517 | ||||||
* | Amounts relate to purchased options. |
Change in Unrealized Net Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||
Investments, foreign | ||||||||||||
currency translations and | ||||||||||||
Derivatives not accounted for as | non-interested Trustees’ | |||||||||||
hedging instruments | deferred compensation | Written options contracts | Total | |||||||||
Janus Aspen Global Technology Portfolio | ||||||||||||
Equity Contracts | $ | 138,192* | $ | (57,631 | ) | $ | 80,561 | |||||
Foreign Exchange Contracts | (64,238 | ) | – | (64,238 | ) | |||||||
Total | $ | 73,954 | $ | (57,631 | ) | $ | 16,323 | |||||
* | Amounts relate to purchased options. |
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.
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Notes to Financial Statements (continued)
3. | Other Investments and Strategies |
Additional Investment Risk
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Act is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Emerging Market Investing
The Portfolio may invest in securities of issuers or companies from or with exposure to one or more
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“developing countries” or “emerging markets.” Investing in emerging markets may involve certain risks and considerations not typically associated with investing in the United States and imposes risks greater than, or in addition to, the risks associated with investing in securities of more developed foreign countries. Emerging markets securities are exposed to a number of additional risks, which may result from less government supervision and regulation of business and industry practices (including the potential lack of strict finance and accounting controls and standards), stock exchanges, brokers, and listed companies, making these investments potentially more volatile in price and less liquid than investments in developed securities markets, resulting in greater risk to investors. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, imposition or enforcement of foreign ownership limits, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on the Portfolio’s investments. In addition, the Portfolio’s investments may be denominated in foreign currencies and therefore, changes in the value of a country’s currency compared to the U.S. dollar may affect the value of the Portfolio’s investments. To the extent that the Portfolio invests a significant portion of its assets in the securities of issuers in or companies of a single country or region, it is more likely to be impacted by events or conditions affecting that country or region, which could have a negative impact on the Portfolio’s performance. Additionally, foreign and emerging market risks, including but not limited to price controls, expropriation or confiscatory taxation, imposition or enforcement of foreign ownership limits, nationalization, and restrictions on repatriation of assets may be heightened to the extent the Portfolio invests in Chinese local market securities (also known as “A Shares”).
Offsetting Assets and Liabilities
The Portfolio has recently adopted guidance requiring entities to present gross and net information about transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. Note that for financial reporting purposes, the Portfolio does not offset certain derivative financial instrument’s payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following tables present gross amounts of recognized assets and liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable).
Offsetting of Financial Assets and Derivative Assets
Gross Amounts Offset in the | ||||||||||||||
Statement of | ||||||||||||||
Counterparty | Gross Amounts of Recognized Assets | Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 70,796 | $ | (21,050) | $ | – | $ | 49,746 | ||||||
HSBC Securities (USA), Inc. | 27,847 | (2,182) | – | 25,665 | ||||||||||
JPMorgan Chase & Co. | 24,525 | (4,284) | – | 20,241 | ||||||||||
Morgan Stanley & Co., Inc. | 56,900 | (4,186) | – | 52,714 | ||||||||||
RBC Capital Markets Corp. | 31,903 | (4,655) | – | 27,248 | ||||||||||
Total | $ | 211,971 | $ | (36,357) | $ | – | $ | 175,614 | ||||||
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Notes to Financial Statements (continued)
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts Offset in the | ||||||||||||||
Statement of | ||||||||||||||
Counterparty | Gross Amounts of Recognized Liabilities | Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 21,050 | $ | (21,050) | $ | – | $ | – | ||||||
HSBC Securities (USA), Inc. | 2,182 | (2,182) | – | – | ||||||||||
JPMorgan Chase & Co. | 4,284 | (4,284) | – | – | ||||||||||
Morgan Stanley & Co., Inc. | 4,186 | (4,186) | – | – | ||||||||||
RBC Capital Markets Corp. | 4,655 | (4,655) | – | – | ||||||||||
Total | $ | 36,357 | $ | (36,357) | $ | – | $ | – | ||||||
* | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
The Portfolio does not require the counterparty to post collateral for forward currency contracts; however, the Portfolio will segregate cash or high-grade securities with its custodian in an amount at all times equal to or greater than the Portfolio’s commitment with respect to these contracts. Such segregated assets are denoted on the accompanying Schedule of Investments and are evaluated daily to ensure their market value equals or exceeds the current market value of the Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities as collateral daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized gain on OTC derivative contracts with a particular counterparty. The Portfolio may deposit cash as collateral with the counterparty and/or custodian daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized loss on OTC derivative contacts with a particular counterparty. The collateral amounts are subject to minimum exposure requirements and initial margin requirements. Collateral amounts are monitored and subsequently adjusted up or down as valuations fluctuate by at least the minimum exposure requirement. Collateral reduces the risk of loss.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
Restricted Security Transactions
Restricted securities held by the Portfolio may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933, as amended. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of the Portfolio to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist.
Short Sales
The Portfolio may engage in “short sales against the box.” Short sales against the box involve either selling short a security that the Portfolio owns or selling short a security that the Portfolio has the right to obtain, for delivery at a specified date in the future. The Portfolio may enter into short sales against the box to hedge against anticipated declines in the market price of portfolio securities. The Portfolio does not deliver from its portfolio the securities sold short and does not immediately receive the proceeds of the short sale. The Portfolio borrows the securities sold short and receives proceeds from the short sale only when it delivers the securities to the lender. If the value of the securities sold short increases prior to the scheduled delivery date, the Portfolio loses the opportunity to participate in the gain.
The Portfolio may also engage in other short sales. The Portfolio may engage in short sales when the portfolio manager anticipates that a security’s market purchase price will be less than its borrowing price. To complete the transaction, the Portfolio must borrow the security to deliver it to the purchaser and buy that same security in the market to return it to the lender. No more than 10% of the Portfolio’s net assets may be invested in short positions (through short sales of stocks, structured products, futures, swaps, and uncovered written calls). The Portfolio may engage in short sales “against the box” and options for hedging purposes that are not subject to this 10% limit. Although the potential for gain as a result of a short sale is limited to the price at which the Portfolio sold the security short less the cost of borrowing the security, the potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. There is no assurance the Portfolio will be able to
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close out a short position at a particular time or at an acceptable price. A gain or a loss will be recognized upon termination of a short sale. Short sales held by the Portfolio are fully collateralized by restricted cash or other securities, which are denoted on the accompanying Schedule of Investments. The Portfolio is also required to pay the lender of the security any dividends or interest that accrue on a borrowed security during the period of the loan. Depending on the arrangements made with the broker or custodian, the Portfolio may or may not receive any payments (including interest) on collateral it has deposited with the broker. The Portfolio pays stock loan fees, disclosed on the Statement of Operations, on assets borrowed from the security broker.
The Portfolio may also enter into short positions through derivative instruments, such as options contracts, futures contracts, and swap agreements, which may expose the Portfolio to similar risks. To the extent that the Portfolio enters into short derivative positions, the Portfolio may be exposed to risks similar to those associated with short sales, including the risk that the Portfolio’s losses are theoretically unlimited.
4. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s contractual investment advisory fee rate (expressed as an annual rate).
Contractual | ||||||||
Average Daily | Investment | |||||||
Net Assets | Advisory Fee (%) | |||||||
Portfolio | of the Portfolio | (annual rate) | ||||||
Janus Aspen Global Technology Portfolio | All Asset Levels | 0.64 | ||||||
Janus Capital has contractually agreed to waive the advisory fee payable by the Portfolio in an amount equal to the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing fees (applicable to Service Shares), administrative services fees payable pursuant to the Transfer Agency Agreement, brokerage commissions, interest, dividends, taxes, acquired fund fees and expenses, and extraordinary expenses, exceed the annual rate shown below. Janus Capital has agreed to continue the waiver until at least May 1, 2014. If applicable, amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations.
Portfolio | Expense Limit (%) | ||||
Janus Aspen Global Technology Portfolio | 0.97 | ||||
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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/
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Notes to Financial Statements (continued)
(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation” on the Statement of Assets and Liabilities. Deferred compensation expenses for the year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
5. | Federal Income Tax |
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 primarily 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. 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 | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Global Technology Portfolio | $ | – | $ | 8,987,239 | $ | – | $ | – | $ | – | $ | 18,540 | $ | 43,657,981 | |||||||||
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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, 2013 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/(depreciation) on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in passive foreign investment companies.
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Global Technology Portfolio | $ | 99,953,379 | $ | 44,815,501 | $ | (1,130,673) | |||||
Information on the tax components of securities sold short as of December 31, 2013 is as follows:
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | (Appreciation) | Depreciation | ||||||||
Janus Aspen Global Technology Portfolio | $ | (881,527) | $ | (140,333) | $ | 113,486 | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Technology Portfolio | $ | – | $ | – | $ | – | $ | (13,318) | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Global Technology Portfolio | $ | – | $ | – | $ | – | $ | (168,353) | |||||||||
6. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Global Technology Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 321 | 459 | ||||||||
Reinvested dividends and distributions | – | – | ||||||||
Shares repurchased | (251) | (479) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 70 | (20) | ||||||||
Shares Outstanding, Beginning of Period | 826 | 846 | ||||||||
Shares Outstanding, End of Period | 896 | 826 |
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Notes to Financial Statements (continued)
For each year ended December 31 | Janus Aspen Global Technology Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 2,341 | 1,788 | ||||||||
Shares sold – Service II Shares Conversion(1) | N/A | 6,039 | ||||||||
Reinvested dividends and distributions | – | – | ||||||||
Shares repurchased | (3,456) | (4,566) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,115) | 3,261 | ||||||||
Shares Outstanding, Beginning of Period | 17,437 | 14,176 | ||||||||
Shares Outstanding, End of Period | 16,322 | 17,437 | ||||||||
Transactions in Portfolio Shares – Service II Shares | ||||||||||
Shares sold | N/A | 1,497 | ||||||||
Reinvested dividends and distributions | N/A | – | ||||||||
Shares repurchased | N/A | (482) | ||||||||
Shares repurchased – Service II Shares Conversion(1) | N/A | (5,907) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | N/A | (4,892) | ||||||||
Shares Outstanding, Beginning of Period | N/A | 4,892 | ||||||||
Shares Outstanding, End of Period | N/A | – | ||||||||
(1) Effective April 27, 2012, Service II Shares of the Portfolio were converted to Service Shares. |
7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Global Technology Portfolio | $ | 46,462,107 | $ | 48,850,389 | $ | – | $ | – | ||||||
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of 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, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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Useful Information About Your Portfolio Report (unaudited) (continued)
such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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OFFICERS
Principal Occupations | ||||||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | During the Past Five Years | |||
Brinton Johns 151 Detroit Street Denver, CO 80206 DOB: 1973 | Executive Vice President and Co-Portfolio Manager Janus Aspen Global Technology Portfolio | 1/14-Present | Portfolio Manager for other Janus accounts and Equity Research Analyst for Janus Capital. | |||
J. Bradley Slingerlend 151 Detroit Street Denver, CO 80206 DOB: 1978 | Executive Vice President and Co-Portfolio Manager Janus Aspen Global Technology Portfolio | 5/11-Present | 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 | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
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Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55528 | 109-02-81119 02-14 |
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annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen INTECH U.S. Low Volatility Portfolio (unaudited)
PORTFOLIO SNAPSHOT INTECH’s mathematical investment process focuses solely on the covariance structure of the market and the correlations of stocks to potentially generate market-like returns at lower levels of absolute volatility over time. | Managed by INTECH Investment Management LLC |
PERFORMANCE OVERVIEW
For the 12-month period ended December 31, 2013, Janus Aspen INTECH U.S. Low Volatility Portfolio’s Service Shares returned 24.84%. This compares to the 32.39% return posted by the S&P 500 Index, the Portfolio’s benchmark.
INVESTMENT STRATEGY
INTECH’s mathematical investment process is designed to determine potentially more mean-variance efficient equity weightings of the securities in the benchmark index, utilizing a specific mathematical optimization and disciplined rebalancing routine. Rather than trying to predict the future direction of stock prices, the process seeks to use the volatility and correlation characteristics of stocks to construct portfolios with similar returns to the S&P 500 Index over time, but with lower return volatility. In particular, the Portfolio attempts to achieve market-like returns over the long-term and lower the volatility of its absolute returns.
The investment process begins with the stocks in the Portfolio’s benchmark, the S&P 500 Index. Within specific risk constraints, INTECH’s mathematical process attempts to identify stocks that have high volatility relative to the index and low correlation to one another. Once the stocks are identified and a portfolio of stocks is constructed, the Portfolio is then rebalanced and re-optimized periodically. The Portfolio aims to generate market-like returns over time with significantly lower return fluctuations. Although the Portfolio may underperform its benchmark in strong up markets, the strategy seeks to reduce losses in down markets. Therefore, while some downside protection and a more consistent experience are expected over the long term, the tracking-error relative to the S&P 500 Index is expected to be high.
Over time, we believe that the Portfolio will achieve its investment objective of producing returns that are similar to the S&P 500 Index, but with lower absolute volatility.
PERFORMANCE REVIEW
U.S. equity markets experienced a strong 12-month period, led by higher beta and higher volatility stocks on average, especially toward the second half of the year. This was a typical market environment in which low volatility-oriented strategies tend to underperform capitalization-weighted indexes. On average, the Portfolio was overweight lower beta stocks or stocks with lower sensitivity to market movements and tend to be less volatile. Consequently, this weighting detracted from the Portfolio’s relative returns.
From a sector perspective, an overweight allocation to the defensive consumer staples and utilities sectors, which lagged the overall market as measured by the S&P 500 Index, had a negative impact on the Portfolio’s relative return. Contributors included our holdings and underweights in information technology and energy.
OUTLOOK
Because INTECH does not conduct traditional economic or fundamental analysis, INTECH has no view on individual stocks, sectors, economic, or market conditions. Going forward, INTECH will continue to implement its mathematical investment process in a disciplined and deliberate manner, with risk management remaining the hallmark of the investment process. At the same time, INTECH continues to make marginal improvements to the process, seeking an efficient portfolio that offers equity market like return with lower return volatility than the benchmark over the long term.
Thank you for your investment in Janus Aspen INTECH U.S. Low Volatility Portfolio.
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Janus Aspen INTECH U.S. Low Volatility Portfolio (unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Southern Co. Electric Utilities | 4.5% | |||
General Mills, Inc. Food Products | 4.4% | |||
Procter & Gamble Co. Household Products | 3.8% | |||
Kimberly-Clark Corp. Household Products | 3.8% | |||
Kellogg Co. Food Products | 3.8% | |||
20.3% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
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Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
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(unaudited)
Performance
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Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratio – per the May 1, 2013 prospectus (estimated for the fiscal year) | ||||||
One | Since | Total Annual Fund | |||||
Year | Inception* | Operating Expenses | |||||
Janus Aspen INTECH U.S. Low Volatility Portfolio – Service Shares | 24.84% | 17.93% | 0.91% | ||||
S&P 500® Index | 32.39% | 24.04% | |||||
Morningstar Quartile – Service Shares | 4th | 4th | |||||
Morningstar Ranking – based on total returns for Large Blend Funds | 1,470/1,601 | 1,461/1,564 | |||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
The expense ratios shown reflect estimated annualized expenses that the Portfolio expects to incur during its initial fiscal year.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
The proprietary mathematical process used by INTECH may not achieve the desired results. Since the portfolio is periodically re-balanced, this may result in a higher portfolio turnover rate and higher expenses compared to a “buy and hold” or index fund strategy. INTECH’s low volatility strategy may underperform its benchmark during certain periods of up markets and may not achieve the desired level of protection in down markets.
For a period of three years subsequent to the Portfolio’s commencement of operations, Janus Capital may recover from the Portfolio fees and expenses previously waived or reimbursed, which could be considered a deferral, if the Portfolio’s expense ratio, including recovered expenses, falls below the expense limit.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
See important disclosures on the next page.
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Janus Aspen INTECH U.S. Low Volatility Portfolio (unaudited)
When an expense waiver is in effect, it may have a material effect on the total return, and therefore the ranking for the period.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
* | The Portfolio’s inception date – September 6, 2012 |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in the share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectus. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,084.80 | $ | 5.15 | $ | 1,000.00 | $ | 1,020.27 | $ | 4.99 | 0.98% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectus for more information regarding waivers and/or reimbursements. |
4 | DECEMBER 31, 2013
Table of Contents
Janus Aspen INTECH U.S. Low Volatility Portfolio
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Common Stock – 98.5% | ||||||||||
Aerospace & Defense – 2.6% | ||||||||||
4,800 | Boeing Co. | $ | 655,152 | |||||||
2,000 | General Dynamics Corp. | 191,100 | ||||||||
1,500 | L-3 Communications Holdings, Inc. | 160,290 | ||||||||
11,400 | Lockheed Martin Corp. | 1,694,724 | ||||||||
11,900 | Northrop Grumman Corp. | 1,363,859 | ||||||||
300 | Precision Castparts Corp. | 80,790 | ||||||||
9,500 | Raytheon Co. | 861,650 | ||||||||
5,007,565 | ||||||||||
Air Freight & Logistics – 0% | ||||||||||
500 | United Parcel Service, Inc. – Class B | 52,540 | ||||||||
Auto Components – 0.6% | ||||||||||
3,400 | BorgWarner, Inc. | 190,094 | ||||||||
7,700 | Delphi Automotive PLC | 463,001 | ||||||||
22,300 | Goodyear Tire & Rubber Co. | 531,855 | ||||||||
1,184,950 | ||||||||||
Automobiles – 0.2% | ||||||||||
18,400 | Ford Motor Co. | 283,912 | ||||||||
800 | Harley-Davidson, Inc. | 55,392 | ||||||||
339,304 | ||||||||||
Beverages – 1.9% | ||||||||||
14,800 | Coca-Cola Co. | 611,388 | ||||||||
3,400 | Constellation Brands, Inc. – Class A* | 239,292 | ||||||||
33,000 | PepsiCo, Inc. | 2,737,020 | ||||||||
3,587,700 | ||||||||||
Biotechnology – 0.1% | ||||||||||
1,000 | Amgen, Inc. | 114,160 | ||||||||
Capital Markets – 0.7% | ||||||||||
24,400 | Charles Schwab Corp. | 634,400 | ||||||||
19,200 | E*TRADE Financial Corp.* | 377,088 | ||||||||
4,400 | State Street Corp. | 322,916 | ||||||||
1,334,404 | ||||||||||
Chemicals – 3.7% | ||||||||||
5,700 | Air Products & Chemicals, Inc. | 637,146 | ||||||||
5,100 | Airgas, Inc. | 570,435 | ||||||||
1,800 | CF Industries Holdings, Inc. | 419,472 | ||||||||
4,300 | E.I. du Pont de Nemours & Co. | 279,371 | ||||||||
1,800 | Ecolab, Inc. | 187,686 | ||||||||
8,700 | FMC Corp. | 656,502 | ||||||||
1,700 | LyondellBasell Industries N.V. – Class A | 136,476 | ||||||||
6,000 | Praxair, Inc. | 780,180 | ||||||||
16,600 | Sherwin-Williams Co. | 3,046,100 | ||||||||
3,800 | Sigma-Aldrich Corp. | 357,238 | ||||||||
7,070,606 | ||||||||||
Commercial Banks – 1.7% | ||||||||||
5,600 | BB&T Corp. | 208,992 | ||||||||
7,000 | Comerica, Inc. | 332,780 | ||||||||
13,700 | Huntington Bancshares, Inc. | 132,205 | ||||||||
29,500 | KeyCorp | 395,890 | ||||||||
5,400 | M&T Bank Corp. | 628,668 | ||||||||
1,800 | PNC Financial Services Group, Inc. | 139,644 | ||||||||
30,700 | Regions Financial Corp. | 303,623 | ||||||||
14,200 | U.S. Bancorp | 573,680 | ||||||||
7,200 | Wells Fargo & Co. | 326,880 | ||||||||
4,700 | Zions Bancorp | 140,812 | ||||||||
3,183,174 | ||||||||||
Commercial Services & Supplies – 0.5% | ||||||||||
16,800 | ADT Corp. | 679,896 | ||||||||
2,400 | Cintas Corp. | 143,016 | ||||||||
500 | Republic Services, Inc. | 16,600 | ||||||||
3,700 | Waste Management, Inc. | 166,019 | ||||||||
1,005,531 | ||||||||||
Communications Equipment – 1.2% | ||||||||||
3,200 | Cisco Systems, Inc. | 71,840 | ||||||||
21,600 | Harris Corp. | 1,507,896 | ||||||||
12,900 | Juniper Networks, Inc.* | 291,153 | ||||||||
900 | Motorola Solutions, Inc. | 60,750 | ||||||||
5,100 | QUALCOMM, Inc. | 378,675 | ||||||||
2,310,314 | ||||||||||
Computers & Peripherals – 1.8% | ||||||||||
4,500 | Apple, Inc. | 2,524,995 | ||||||||
18,100 | EMC Corp. | 455,215 | ||||||||
12,100 | NetApp, Inc. | 497,794 | ||||||||
3,478,004 | ||||||||||
Construction & Engineering – 0% | ||||||||||
1,400 | Jacobs Engineering Group, Inc.* | 88,186 | ||||||||
Consumer Finance – 0.6% | ||||||||||
3,500 | American Express Co. | 317,555 | ||||||||
400 | Capital One Financial Corp. | 30,644 | ||||||||
27,500 | SLM Corp. | 722,700 | ||||||||
1,070,899 | ||||||||||
Containers & Packaging – 0.1% | ||||||||||
1,000 | Bemis Co., Inc. | 40,960 | ||||||||
1,800 | MeadWestvaco Corp. | 66,474 | ||||||||
107,434 | ||||||||||
Diversified Financial Services – 0.5% | ||||||||||
11,400 | CME Group, Inc. | 894,444 | ||||||||
502 | IntercontinentalExchange Group, Inc. | 112,910 | ||||||||
300 | McGraw Hill Financial, Inc. | 23,460 | ||||||||
1,030,814 | ||||||||||
Diversified Telecommunication Services – 0.5% | ||||||||||
19,400 | CenturyLink, Inc. | 617,890 | ||||||||
7,900 | Verizon Communications, Inc. | 388,206 | ||||||||
1,006,096 | ||||||||||
Electric Utilities – 5.8% | ||||||||||
6,000 | Entergy Corp. | 379,620 | ||||||||
3,900 | Exelon Corp. | 106,821 | ||||||||
1,100 | NextEra Energy, Inc. | 94,182 | ||||||||
39,700 | PPL Corp. | 1,194,573 | ||||||||
212,300 | Southern Co. | 8,727,653 | ||||||||
27,000 | Xcel Energy, Inc. | 754,380 | ||||||||
11,257,229 | ||||||||||
Electrical Equipment – 0.1% | ||||||||||
1,000 | Roper Industries, Inc. | 138,680 | ||||||||
Electronic Equipment, Instruments & Components – 0.5% | ||||||||||
13,500 | FLIR Systems, Inc. | 406,350 | ||||||||
17,400 | Jabil Circuit, Inc. | 303,456 | ||||||||
2,900 | TE Connectivity, Ltd. (U.S. Shares) | 159,819 | ||||||||
869,625 | ||||||||||
Energy Equipment & Services – 0.4% | ||||||||||
14,300 | Nabors Industries, Ltd. | 242,957 | ||||||||
1,100 | National Oilwell Varco, Inc. | 87,483 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 5
Table of Contents
Janus Aspen INTECH U.S. Low Volatility Portfolio
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Energy Equipment & Services – (continued) | ||||||||||
4,500 | Rowan Cos. PLC – Class A* | $ | 159,120 | |||||||
2,100 | Schlumberger, Ltd. (U.S. Shares) | 189,231 | ||||||||
678,791 | ||||||||||
Food & Staples Retailing – 3.1% | ||||||||||
2,600 | CVS Caremark Corp. | 186,082 | ||||||||
9,700 | Kroger Co. | 383,441 | ||||||||
6,600 | Safeway, Inc. | 214,962 | ||||||||
24,100 | Sysco Corp. | 870,010 | ||||||||
55,000 | Wal-Mart Stores, Inc. | 4,327,950 | ||||||||
5,982,445 | ||||||||||
Food Products – 14.1% | ||||||||||
8,500 | Campbell Soup Co. | 367,880 | ||||||||
87,000 | ConAgra Foods, Inc. | 2,931,900 | ||||||||
171,600 | General Mills, Inc. | 8,564,556 | ||||||||
28,700 | Hershey Co. | 2,790,501 | ||||||||
16,100 | Hormel Foods Corp. | 727,237 | ||||||||
11,100 | J.M. Smucker Co. | 1,150,182 | ||||||||
118,600 | Kellogg Co. | 7,242,902 | ||||||||
1,700 | Kraft Foods Group, Inc. | 91,664 | ||||||||
39,000 | McCormick & Co., Inc. | 2,687,880 | ||||||||
5,700 | Mead Johnson Nutrition Co. | 477,432 | ||||||||
2,700 | Mondelez International, Inc. – Class A | 95,310 | ||||||||
4,000 | Tyson Foods, Inc. – Class A | 133,840 | ||||||||
27,261,284 | ||||||||||
Gas Utilities – 0.1% | ||||||||||
3,600 | AGL Resources, Inc. | 170,028 | ||||||||
Health Care Equipment & Supplies – 3.1% | ||||||||||
1,300 | Abbott Laboratories | 49,829 | ||||||||
10,300 | Baxter International, Inc. | 716,365 | ||||||||
14,600 | Becton, Dickinson and Co. | 1,613,154 | ||||||||
26,300 | Boston Scientific Corp.* | 316,126 | ||||||||
6,100 | C.R. Bard, Inc. | 817,034 | ||||||||
6,600 | CareFusion Corp.* | 262,812 | ||||||||
2,400 | DENTSPLY International, Inc. | 116,352 | ||||||||
5,100 | Edwards Lifesciences Corp.* | 335,376 | ||||||||
4,200 | Intuitive Surgical, Inc.* | 1,613,136 | ||||||||
2,500 | St. Jude Medical, Inc. | 154,875 | ||||||||
5,995,059 | ||||||||||
Health Care Providers & Services – 7.5% | ||||||||||
26,564 | Aetna, Inc. | 1,822,024 | ||||||||
2,800 | AmerisourceBergen Corp. | 196,868 | ||||||||
16,300 | Cigna Corp. | 1,425,924 | ||||||||
26,200 | DaVita HealthCare Partners, Inc.* | 1,660,294 | ||||||||
6,600 | Express Scripts Holding Co.* | 463,584 | ||||||||
20,700 | Humana, Inc. | 2,136,654 | ||||||||
28,000 | Laboratory Corp. of America Holdings* | 2,558,360 | ||||||||
1,700 | McKesson Corp. | 274,380 | ||||||||
26,500 | Quest Diagnostics, Inc. | 1,418,810 | ||||||||
22,700 | UnitedHealth Group, Inc. | 1,709,310 | ||||||||
9,200 | WellPoint, Inc. | 849,988 | ||||||||
14,516,196 | ||||||||||
Hotels, Restaurants & Leisure – 2.1% | ||||||||||
400 | Chipotle Mexican Grill, Inc.* | 213,112 | ||||||||
31,000 | McDonald’s Corp. | 3,007,930 | ||||||||
3,300 | Starbucks Corp. | 258,687 | ||||||||
6,700 | Yum! Brands, Inc. | 506,587 | ||||||||
3,986,316 | ||||||||||
Household Durables – 0.1% | ||||||||||
5,800 | Garmin, Ltd. | 268,076 | ||||||||
Household Products – 10.5% | ||||||||||
44,900 | Clorox Co. | 4,164,924 | ||||||||
19,700 | Colgate-Palmolive Co. | 1,284,637 | ||||||||
70,800 | Kimberly-Clark Corp. | 7,395,768 | ||||||||
91,200 | Procter & Gamble Co. | 7,424,592 | ||||||||
20,269,921 | ||||||||||
Industrial Conglomerates – 0% | ||||||||||
2,500 | General Electric Co. | 70,075 | ||||||||
Information Technology Services – 0.8% | ||||||||||
800 | Automatic Data Processing, Inc. | 64,648 | ||||||||
5,600 | Cognizant Technology Solutions Corp. – Class A* | 565,488 | ||||||||
1,800 | Computer Sciences Corp. | 100,584 | ||||||||
2,400 | Fidelity National Information Services, Inc. | 128,832 | ||||||||
100 | International Business Machines Corp. | 18,757 | ||||||||
12,500 | Total System Services, Inc. | 416,000 | ||||||||
900 | Visa, Inc. – Class A | 200,412 | ||||||||
7,500 | Western Union Co. | 129,375 | ||||||||
1,624,096 | ||||||||||
Insurance – 1.8% | ||||||||||
11,000 | AFLAC, Inc. | 734,800 | ||||||||
3,500 | Aon PLC | 293,615 | ||||||||
4,800 | Assurant, Inc. | 318,576 | ||||||||
8,700 | Cincinnati Financial Corp. | 455,619 | ||||||||
5,100 | Lincoln National Corp. | 263,262 | ||||||||
1,100 | Loews Corp. | 53,064 | ||||||||
2,800 | MetLife, Inc. | 150,976 | ||||||||
1,900 | Principal Financial Group, Inc. | 93,689 | ||||||||
18,300 | Progressive Corp. | 499,041 | ||||||||
2,600 | Prudential Financial, Inc. | 239,772 | ||||||||
5,800 | Torchmark Corp. | 453,270 | ||||||||
3,555,684 | ||||||||||
Internet & Catalog Retail – 0.3% | ||||||||||
300 | Netflix, Inc.* | 110,451 | ||||||||
300 | priceline.com, Inc.* | 348,720 | ||||||||
500 | TripAdvisor, Inc.* | 41,415 | ||||||||
500,586 | ||||||||||
Internet Software & Services – 0.5% | ||||||||||
100 | Google, Inc. – Class A* | 112,071 | ||||||||
6,100 | VeriSign, Inc. | 364,658 | ||||||||
10,400 | Yahoo!, Inc.* | 420,576 | ||||||||
897,305 | ||||||||||
Life Sciences Tools & Services – 1.1% | ||||||||||
1,600 | Agilent Technologies, Inc. | 91,504 | ||||||||
20,200 | Life Technologies Corp.* | 1,531,160 | ||||||||
1,100 | PerkinElmer, Inc. | 45,353 | ||||||||
4,200 | Thermo Fisher Scientific, Inc. | 467,670 | ||||||||
2,135,687 | ||||||||||
Machinery – 0.4% | ||||||||||
3,500 | Deere & Co. | 319,655 | ||||||||
5,400 | Dover Corp. | 521,316 | ||||||||
300 | Flowserve Corp. | 23,649 | ||||||||
864,620 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
6 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Media – 1.5% | ||||||||||
8,700 | Cablevision Systems Corp. – Class A | $ | 155,991 | |||||||
1,500 | Graham Holdings Co. | 994,980 | ||||||||
9,800 | Interpublic Group of Cos., Inc. | 173,460 | ||||||||
11,400 | News Corp. – Class A* | 205,428 | ||||||||
2,800 | Scripps Networks Interactive, Inc. – Class A | 241,948 | ||||||||
2,900 | Time Warner Cable, Inc. | 392,950 | ||||||||
1,100 | Time Warner, Inc. | 76,692 | ||||||||
3,200 | Twenty-First Century Fox, Inc. | 112,576 | ||||||||
6,100 | Viacom, Inc. – Class B | 532,774 | ||||||||
2,886,799 | ||||||||||
Metals & Mining – 1.0% | ||||||||||
83,400 | Newmont Mining Corp. | 1,920,702 | ||||||||
Multi-Utilities – 2.6% | ||||||||||
67,900 | Consolidated Edison, Inc. | 3,753,512 | ||||||||
6,200 | Dominion Resources, Inc. | 401,078 | ||||||||
13,400 | PG&E Corp. | 539,752 | ||||||||
2,100 | Public Service Enterprise Group, Inc. | 67,284 | ||||||||
1,900 | Sempra Energy | 170,544 | ||||||||
3,700 | Wisconsin Energy Corp. | 152,958 | ||||||||
5,085,128 | ||||||||||
Multiline Retail – 1.1% | ||||||||||
1,100 | Dollar General Corp.* | 66,352 | ||||||||
2,300 | Dollar Tree, Inc.* | 129,766 | ||||||||
6,100 | Family Dollar Stores, Inc. | 396,317 | ||||||||
2,500 | Kohl’s Corp. | 141,875 | ||||||||
21,400 | Target Corp. | 1,353,978 | ||||||||
2,088,288 | ||||||||||
Office Electronics – 0.1% | ||||||||||
18,200 | Xerox Corp. | 221,494 | ||||||||
Oil, Gas & Consumable Fuels – 1.9% | ||||||||||
900 | Anadarko Petroleum Corp. | 71,388 | ||||||||
23,900 | Cabot Oil & Gas Corp. | 926,364 | ||||||||
9,700 | Chesapeake Energy Corp. | 263,258 | ||||||||
400 | Chevron Corp. | 49,964 | ||||||||
2,800 | ConocoPhillips | 197,820 | ||||||||
5,400 | Denbury Resources, Inc.* | 88,722 | ||||||||
2,100 | EOG Resources, Inc. | 352,464 | ||||||||
6,900 | EQT Corp. | 619,482 | ||||||||
800 | Exxon Mobil Corp. | 80,960 | ||||||||
5,500 | Occidental Petroleum Corp. | 523,050 | ||||||||
1,800 | Pioneer Natural Resources Co. | 331,326 | ||||||||
1,500 | Range Resources Corp. | 126,465 | ||||||||
3,631,263 | ||||||||||
Pharmaceuticals – 4.9% | ||||||||||
8,500 | Actavis PLC* | 1,428,000 | ||||||||
6,900 | Bristol-Myers Squibb Co. | 366,735 | ||||||||
61,100 | Johnson & Johnson | 5,596,149 | ||||||||
21,800 | Merck & Co., Inc. | 1,091,090 | ||||||||
15,900 | Mylan, Inc.* | 690,060 | ||||||||
7,600 | Pfizer, Inc. | 232,788 | ||||||||
9,404,822 | ||||||||||
Professional Services – 0.4% | ||||||||||
2,900 | Dun & Bradstreet Corp. | 355,975 | ||||||||
10,400 | Nielsen Holdings N.V. | 477,256 | ||||||||
833,231 | ||||||||||
Real Estate Investment Trusts (REITs) – 0.1% | ||||||||||
1,000 | Public Storage | 150,520 | ||||||||
Semiconductor & Semiconductor Equipment – 1.2% | ||||||||||
6,500 | Applied Materials, Inc. | 114,985 | ||||||||
9,800 | Intel Corp. | 254,408 | ||||||||
51,000 | Micron Technology, Inc.* | 1,109,760 | ||||||||
11,300 | NVIDIA Corp. | 181,026 | ||||||||
14,300 | Xilinx, Inc. | 656,656 | ||||||||
2,316,835 | ||||||||||
Software – 0.7% | ||||||||||
600 | Adobe Systems, Inc.* | 35,928 | ||||||||
2,300 | Autodesk, Inc.* | 115,759 | ||||||||
6,900 | CA, Inc. | 232,185 | ||||||||
1,300 | Citrix Systems, Inc.* | 82,225 | ||||||||
29,300 | Electronic Arts, Inc.* | 672,142 | ||||||||
1,200 | Intuit, Inc. | 91,584 | ||||||||
400 | Microsoft Corp. | 14,972 | ||||||||
2,000 | Symantec Corp. | 47,160 | ||||||||
1,291,955 | ||||||||||
Specialty Retail – 6.5% | ||||||||||
800 | AutoNation, Inc.* | 39,752 | ||||||||
12,800 | AutoZone, Inc.* | 6,117,632 | ||||||||
7,100 | Best Buy Co., Inc. | 283,148 | ||||||||
7,000 | GameStop Corp. – Class A | 344,820 | ||||||||
11,400 | Home Depot, Inc. | 938,676 | ||||||||
9,900 | L Brands, Inc. | 612,315 | ||||||||
500 | Lowe’s Cos., Inc. | 24,775 | ||||||||
23,000 | O’Reilly Automotive, Inc.* | 2,960,330 | ||||||||
3,800 | PetSmart, Inc. | 276,450 | ||||||||
2,300 | Ross Stores, Inc. | 172,339 | ||||||||
10,700 | TJX Cos., Inc. | 681,911 | ||||||||
12,452,148 | ||||||||||
Textiles, Apparel & Luxury Goods – 0.2% | ||||||||||
2,900 | Coach, Inc. | 162,777 | ||||||||
2,900 | NIKE, Inc. – Class B | 228,056 | ||||||||
800 | VF Corp. | 49,872 | ||||||||
440,705 | ||||||||||
Thrifts & Mortgage Finance – 0.3% | ||||||||||
26,400 | Hudson City Bancorp, Inc. | 248,952 | ||||||||
27,700 | People’s United Financial, Inc. | 418,824 | ||||||||
667,776 | ||||||||||
Tobacco – 6.7% | ||||||||||
180,200 | Altria Group, Inc. | 6,917,878 | ||||||||
81,300 | Lorillard, Inc. | 4,120,284 | ||||||||
36,400 | Reynolds American, Inc. | 1,819,636 | ||||||||
12,857,798 | ||||||||||
Trading Companies & Distributors – 0.2% | ||||||||||
9,100 | Fastenal Co. | 432,341 | ||||||||
Wireless Telecommunication Services – 0.1% | ||||||||||
2,900 | Crown Castle International Corp.* | 212,947 | ||||||||
Total Common Stock (cost $178,237,593) | 189,908,136 | |||||||||
Money Market – 2.4% | ||||||||||
4,650,289 | Janus Cash Liquidity Fund LLC, 0%£ (cost $4,650,289) | 4,650,289 | ||||||||
Total Investments (total cost $182,887,882) – 100.9% | 194,558,425 | |||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.9)% | (1,829,164) | |||||||||
Net Assets – 100% | $ | 192,729,261 | ||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 7
Table of Contents
Janus Aspen INTECH U.S. Low Volatility Portfolio
Schedule of Investments
As of December 31, 2013
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
United States†† | $ | 194,558,425 | 100.0% | |||||
Total | $ | 194,558,425 | 100.0% |
†† | Includes Cash Equivalents of 2.4%. |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Notes to Schedule of Investments and Other Information
S&P 500® Index | A commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. | |
LLC | Limited Liability Company | |
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. |
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | ||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | ||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | ||||||||||||||||
Janus Cash Liquidity Fund LLC | 120,587,566 | $120,587,566 | (116,445,582) | $(116,445,582) | $– | $2,820 | $4,650,289 | |||||||||
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | |||||||||||
Common Stock | $ | 189,908,136 | $ | – | $ | – | |||||
Money Market | – | 4,650,289 | – | ||||||||
Total Investments in Securities | $ | 189,908,136 | $ | 4,650,289 | $ | – | |||||
Janus Aspen Series | 9
Table of Contents
Statement of Assets and Liabilities
As of December 31, 2013 | ||||||||||
(all numbers in thousands except net asset value per share) | Janus Aspen INTECH U.S. Low Volatility Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 182,888 | ||||||||
Unaffiliated investments at value | $ | 189,908 | ||||||||
Affiliated investments at value | 4,650 | |||||||||
Cash | – | |||||||||
Receivables: | ||||||||||
Portfolio shares sold | 1,115 | |||||||||
Dividends | 330 | |||||||||
Non-interested Trustees’ deferred compensation | 4 | |||||||||
Other assets | 1 | |||||||||
Total Assets | 196,008 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Investments purchased | 2,554 | |||||||||
Portfolio shares repurchased | 558 | |||||||||
Advisory fees | 72 | |||||||||
Fund administration fees | 2 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 40 | |||||||||
Non-interested Trustees’ fees and expenses | – | |||||||||
Non-interested Trustees’ deferred compensation fees | 4 | |||||||||
Accrued expenses and other payables | 49 | |||||||||
Total Liabilities | 3,279 | |||||||||
Net Assets | $ | 192,729 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 180,387 | ||||||||
Undistributed net investment income* | 37 | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 634 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 11,671 | |||||||||
Total Net Assets | $ | 192,729 | ||||||||
Net Assets - Service Shares | $ | 192,729 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 15,736 | |||||||||
Net Asset Value Per Share | $ | 12.25 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
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Statement of Operations
For the year ended December 31, 2013 | ||||||
(all numbers in thousands) | Janus Aspen INTECH U.S. Low Volatility Portfolio | |||||
Investment Income: | ||||||
Dividends | $ | 2,091 | ||||
Dividends from affiliates | 3 | |||||
Other Income | – | |||||
Foreign tax withheld | – | |||||
Total Investment Income | 2,094 | |||||
Expenses: | ||||||
Advisory fees | 406 | |||||
Internal servicing expense - Service Shares | 1 | |||||
Shareholder reports expense | 9 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | – | |||||
Custodian fees | 19 | |||||
Professional fees | 101 | |||||
Non-interested Trustees’ fees and expenses | 2 | |||||
Fund administration fees | 8 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 203 | |||||
Recoupment expense | 39 | |||||
Other expenses | 5 | |||||
Total Expenses | 794 | |||||
Net Expenses after Waivers and Expense Offsets | 794 | |||||
Net Investment Income | 1,300 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 1,134 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 11,790 | |||||
Net Gain on Investments | 12,924 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 14,224 |
See Notes to Financial Statements.
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Statements of Changes in Net Assets
Janus Aspen | ||||||||||
INTECH U.S. Low Volatility | ||||||||||
For each year or period ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012(1) | ||||||||
Operations: | ||||||||||
Net investment income | $ | 1,300 | $ | 51 | ||||||
Net realized gain/(loss) from investment and foreign currency transactions | 1,134 | (6) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 11,790 | (119) | ||||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | 14,224 | (74) | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Service Shares | (1,274) | (40) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Service Shares | (494) | – | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (1,768) | (40) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Service Shares | 179,455 | 17,376 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Service Shares | 1,768 | 40 | ||||||||
Shares Repurchased | ||||||||||
Service Shares | (18,020) | (232) | ||||||||
Net Increase from Capital Share Transactions | 163,203 | 17,184 | ||||||||
Net Increase in Net Assets | 175,659 | 17,070 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 17,070 | – | ||||||||
End of period | $ | 192,729 | $ | 17,070 | ||||||
Undistributed Net Investment Income* | $ | 37 | $ | 11 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Period from September 6, 2012 (inception date) through December 31, 2012. |
See Notes to Financial Statements.
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Financial Highlights
Service Shares
Janus Aspen INTECH U.S. Low Volatility Portfolio | ||||||||||
For a share outstanding during each year or period ended December 31 | 2013 | 2012(1) | ||||||||
Net Asset Value, Beginning of Period | $9.92 | $10.00 | ||||||||
Income from Investment Operations: | ||||||||||
Net investment income | 0.09 | 0.04 | ||||||||
Net gain/(loss) on investments (both realized and unrealized) | 2.37 | (0.08) | ||||||||
Total from Investment Operations | 2.46 | (0.04) | ||||||||
Less Distributions: | ||||||||||
Dividends (from net investment income)* | (0.10) | (0.04) | ||||||||
Distributions (from capital gains)* | (0.03) | – | ||||||||
Total Distributions | (0.13) | (0.04) | ||||||||
Net Asset Value, End of Period | $12.25 | $9.92 | ||||||||
Total Return** | 24.84% | (0.45)% | ||||||||
Net Assets, End of Period (in thousands) | $192,729 | $17,070 | ||||||||
Average Net Assets for the Period (in thousands) | $80,670 | $7,270 | ||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets*** | 0.98% | 2.69% | ||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets*** | 0.98% | 1.01% | ||||||||
Ratio of Net Investment Income to Average Net Assets*** | 1.61% | 2.20% | ||||||||
Portfolio Turnover Rate | 21% | 2% |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
** | Total return not annualized for periods of less than one full year. | |
*** | Annualized for periods of less than one full year. | |
(1) | Period from September 6, 2012 (inception date) through December 31, 2012. |
See Notes to Financial Statements.
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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 U.S. Low Volatility Portfolio (the “Portfolio”) is a series fund. The Portfolio is part of Janus Aspen Series (the “Trust”), which is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in common stocks. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers Service Shares. Service Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
The following accounting policies have been followed by the Portfolio and are in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which may be allocated pro rata to the Portfolio.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make
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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 translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and
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Notes to Financial Statements (continued)
forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold any Level 3 securities as of December 31, 2013.
There were no transfers in or out of Level 1, Level 2 and Level 3 during the year.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Other Investments and Strategies |
Additional Investment Risk
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending,
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which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
3. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s 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 INTECH U.S. Low Volatility Portfolio | All Asset Levels | 0.50 | ||||||
Janus Capital has contractually agreed to waive the advisory fee payable by the Portfolio in an amount equal to the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding the distribution and shareholder servicing fees (applicable to Service Shares), administrative services fees payable pursuant to the Transfer Agency Agreement, brokerage commissions,
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Notes to Financial Statements (continued)
interest, dividends, taxes, acquired fund fees and expenses, and extraordinary expenses, exceed the annual rate shown below. Janus Capital has agreed to continue the waiver until at least May 1, 2014. If applicable, amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations.
Portfolio | Expense Limit (%) | ||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | 0.75 | ||||
For a period of three years subsequent to the Portfolio’s commencement of operations, Janus Capital may recover from the Portfolio fees and expenses previously waived or reimbursed, which could then be considered a deferral, if the Portfolio’s expense ratio, including recovered expenses, falls below the expense limit. For the year ended December 31, 2013, Janus Capital recovered $39,051 from the Portfolio. This amount is disclosed as “Recoupment expense” on the Statement of Operations. As of December 31, 2013, the aggregate amount of recoupment that may potentially be made to Janus Capital is $0. The recoupment of such reimbursements expires September 6, 2015.
INTECH Investment Management LLC (“INTECH”) serves as subadviser to the Portfolio. Janus Capital owns approximately 97% of INTECH. Janus Capital pays INTECH a subadvisory fee rate equal to 50% of the investment advisory fee paid by the Portfolio to Janus Capital (calculated after any fee waivers and expense reimbursements).
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital (or the subadviser) provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year
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ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
Janus Capital or an affiliate invested and/or redeemed initial seed capital during the year ended December 31, 2013, as indicated in the following table.
Seed Capital | Date of | Date of | Seed Capital | |||||||||||||||||
Portfolio | at 12/31/12 | Purchases | Purchases | Redemptions | Redemptions | at 12/31/13 | ||||||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio - Service Shares | $ | 4,000,000 | $ | – | – | $ | (4,000,000) | 2/25/13 | $ | – | ||||||||||
4. | 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 primarily consist of deferred compensation. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Undistributed | Undistributed | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | ||||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Net Tax Appreciation | ||||||||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | $ | 563,214 | $ | 173,863 | $ | – | $ | – | $ | – | $ | (3,202) | $ | 11,607,896 | |||||||||
During the year ended December 31, 2013, the following capital loss carryovers were utilized by the Portfolio:
Capital Loss | |||||||||||||||||||||||
Portfolio | Carryover Utilized | ||||||||||||||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | $ | 632 | |||||||||||||||||||||
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Notes to Financial Statements (continued)
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, 2013 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 U.S. Low Volatility Portfolio | $ | 182,950,529 | $ | 13,311,281 | $ | (1,703,385) | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | $ | 1,761,373 | $ | 7,065 | $ | – | $ | – | |||||||||
For the period ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio(1) | $ | 40,152 | $ | – | $ | – | $ | – | |||||||||
(1) | Period from September 6, 2012 (inception date) through December 31, 2012. |
5. | Capital Share Transactions |
For each year or period ended December 31 | Janus Aspen INTECH U.S. Low Volatility Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012(1) | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 15,440 | 1,740 | ||||||||
Reinvested dividends and distributions | 145 | 4 | ||||||||
Shares repurchased | (1,570) | (23) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 14,015 | 1,721 | ||||||||
Shares Outstanding, Beginning of Period | 1,721 | – | ||||||||
Shares Outstanding, End of Period | 15,736 | 1,721 | ||||||||
(1) Period from September 6, 2012 (inception date) through December 31, 2012. |
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6. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | $ | 176,747,681 | $ | 16,435,982 | $ | – | $ | – | ||||||
7. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
Janus Aspen Series | 21
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Janus Aspen INTECH U.S. Low Volatility Portfolio:
of Janus Aspen INTECH U.S. Low Volatility 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 U.S. Low Volatility Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2013, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the periods presented, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
![(-s- PRICEWATERHOUSECOOPERS LLP)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139pwcsig.gif)
Denver, Colorado
February 14, 2014
22 | DECEMBER 31, 2013
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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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Additional Information (unaudited) (continued)
including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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Additional Information (unaudited) (continued)
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Janus Aspen Series | 27
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Additional Information (unaudited) (continued)
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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Additional Information (unaudited) (continued)
to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s investment personnel as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s investment personnel may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed by the Portfolio’s investment personnel in the Management Commentary are just that: opinions. They are a reflection of the investment personnel’s best judgment at the time this report was compiled, which was December 31, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet
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paid. Additionally, there may be other assets and liabilities such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Useful Information About Your Portfolio Report (unaudited) (continued)
Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the investment personnel. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | $ | 7,065 | ||||||||
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen INTECH U.S. Low Volatility Portfolio | 88% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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OFFICERS
Principal Occupations During the | ||||||
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Past Five Years | |||
Robin C. Beery** 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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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.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55525 | 109-02-81127 02-14 |
Table of Contents
annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Table of Contents
Janus Aspen Janus Portfolio (unaudited)
PORTFOLIO SNAPSHOT We believe that buying high-quality growth franchises with sustainable, projected above-average earnings growth outlooks should allow us to outperform the benchmark and peers over the long term. We perform in-depth, fundamental research to build a diversified, moderately positioned portfolio aiming to deliver peer and index-beating returns while managing for risk and volatility. | ![]() Barney Wilson portfolio manager |
PERFORMANCE REVIEW
For the 12-month period ended December 31, 2013, Janus Aspen Janus Portfolio’s Institutional Shares and Service Shares returned 30.34% and 29.99%, respectively. Meanwhile, the Portfolio’s primary benchmark, the Russell 1000® Growth Index, returned 33.48% and its secondary benchmarks, the S&P 500® Index and the Core Growth Index, returned 32.39% and 32.94% respectively.
INVESTMENT ENVIRONMENT
U.S. equity markets enjoyed strong gains during the year, lifted by signs that the U.S. economy was improving and that Europe’s economy was slowly recovering. Loose monetary policy also provided a supportive backdrop for equities during the year, though fears about how and when the Federal Reserve (Fed) would taper its quantitative easing program caused bouts of volatility. However, stocks climbed at the end of December when the Fed announced that tapering would be more gradual than expected. Price-earnings (P/E) ratios expanded during the year as stock appreciation outpaced true earnings growth.
PORTFOLIO MANAGER COMMENTS
We want to describe our investment approach to stock selection and portfolio construction. Simply put, we seek to construct a diversified portfolio of high-quality, long-duration growth businesses.
In our stock selection, we look for companies with the following five attributes: (1) sustainable above-market earnings per share growth with understandable and logical growth drivers, (2) returns on capital that are increasing or stable at a high level, (3) participation in an attractive industry, (4) strong management that has articulated a compelling strategy, and (5) a reasonable valuation in light of the multi-year growth outlook.
We have two types of investment theses in which we invest. First, the majority of the portfolio is made up of companies we believe are market-share gainers. We believe these companies will be able to deliver attractive growth for the next five-plus years by primarily executing their existing strategies. And second, we seek to invest in companies undergoing material positive change. These companies typically comprise a minority of the portfolio. Within this group, we often find attractive opportunities where there is a new management team, a new strategy, or significant new product introductions.
In our portfolio construction, diversity is the hallmark of our approach. We desire to drive outperformance by being right more than we are wrong in a number of moderate-sized investments, not by having a single big position that will make or break our performance. We are well represented in the major sectors and explicitly avoid large overweights or underweights in any single sector.
PERFORMANCE DISCUSSION
While many of our companies performed well this year and the Portfolio generated strong absolute returns, we underperformed our primary benchmark during the period. It is important that investors in the Janus Aspen Janus Portfolio understand that we seek to maintain a moderately positioned Portfolio, focusing on high-quality companies with sustainable competitive advantages and predictable, growing revenue streams. We believe the higher quality focus should help the Portfolio outperform its benchmark through an economic cycle, but may not always keep up with the benchmark when the macroeconomic environment is more favorable. We believe this approach can lead to higher compounded returns over time, even if it results in performance lagging an up market, as we did in this period.
Much of our relative underperformance was driven by our holdings in the industrials and consumer discretionary sectors. The industrials sector tends to be one of the more cyclical sectors. Within the sector, we look for companies that can control their own destiny and are less tied to the macroeconomic environment. As a result, we expect our industrials holdings to underperform when the economy appears to be improving, but outperform when the
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Table of Contents
Janus Aspen Janus Portfolio (unaudited)
economic outlook is less certain. A couple of industrial companies we held fell during the period, which also negatively impacted performance. FANUC was our largest detractor within the sector. The stock fell during the year as it suffered weak demand for some of its factory automation equipment. We sold the position during the period due to concerns about slowing growth in China, and how that would affect demand for FANUC’s products.
Third-party logistics company C.H. Robinson also fell during the period. We sold the stock during the year due to concern over whether private entrants into the marketplace would make the industry more competitive.
While stock selection in the industrials sector was a large reason for our relative underperformance, there were also a few stocks outside the sector that negatively impacted our results. Teradata was the largest detractor from Portfolio performance, but we continue to have strong conviction in the company. A weak IT capital spending environment led to disappointing earnings results in the fourth quarter. We believe concerns about security amid the National Security Agency’s spying scandal have also been headwinds for U.S.-based companies such as Teradata that sell their data center products globally. Finally, concern about competition from other analytics companies has also weighed on the stock in recent months. However, we believe perceived secular threats from competition are overstated. In our view, Teradata has a competitive advantage because we believe it has the ability to mine deeper analytical insights from data than other analytics companies, and we believe the company is well positioned to benefit from ongoing trends associated with enterprises needing more insight from the vast amounts of data being created.
While some of our holdings negatively impacted performance, we were generally pleased by the results from most companies in our Portfolio. Our stock selection in the health care sector was particularly strong relative to the index. Two highly specialized pharmaceutical companies, Gilead and Celgene, were among our top performers. We believe our research team has done a tremendous job of understanding the potential of the drugs in both companies’ pipelines as these drugs go through the development process. The market is now beginning to appreciate what some of these drugs mean to the companies’ revenue streams.
Gilead rose after its hepatitis C drug, Sovaldi, was approved by the Food and Drug Administration. The company also announced impressive late-stage clinical data for its once-daily combination hepatitis C pill, which demonstrated cure rates well in excess of 90% with as little as eight weeks of treatment for some patients. The data verified our thesis that Gilead has the best offering in hepatitis C treatment and is poised to have one of the strongest drug launches in pharmaceutical industry history. We also like the potential for Gilead’s new single-pill HIV treatment, which offers patients a simpler drug regimen than some other competing HIV drugs, and is potentially more tolerable than other single-pill competitors. Gilead’s new treatment also gives the company the potential to capture a greater share of revenue for HIV treatment than its previous drug, which was used in combination with treatments from other companies.
Celgene was up 114% and was another top contributor to the Portfolio’s performance. During the year, a global study pointed to the benefits of using Celgene’s drug Revlimid as a first-line treatment for multiple myeloma. Currently, the drug is only approved as a second-line treatment for the disease, and using Revlimid earlier in the treatment cycle could meaningfully expand its addressable market, especially outside the United States. Other drugs in Celgene’s pipeline also offer promising potential. We think the company is in the early stages of a major new product cycle, with other potential meaningful contributors including Abraxane for pancreatic cancer, Pomalyst for refractory multiple myeloma, and Apremilast, an oral drug to treat psoriatic arthritis and psoriasis. The stock has risen as management has explained to the market that multi-year growth will be driven by four different drug franchises, and that Celgene is much more than a one-product company.
One of our top contributors outside the health care sector was Google. The company continued to demonstrate its ability to monetize its mobile platform during the year. Going forward, we think Google has multiple long-term growth drivers. The company’s internet search business continues to do well and the company continues to improve monetization of increased viewing on its YouTube platform. The company’s Android mobile operating platform exists in a duopoly with Apple’s mobile platform and we believe both companies benefit from the rapid adoption and heavier use of smartphones.
Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.
OUTLOOK
We believe the U.S. economy will continue to strengthen and have more growth in 2014 due in large part to a reduced drag from the federal government’s reduction in spending, and also due to broad benefits associated with
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Table of Contents
(unaudited)
increased oil and natural gas production. In Europe, we believe austerity has run its course and that the economy will be able to grow modestly, which is an improvement over the last two years. While there are currently a wide range of economic outlooks for emerging market countries, we believe emerging markets on the whole are undergoing positive long-term changes as a burgeoning middle class starts increasing consumption. We are investing in a number of companies that we think will benefit as consumption rates in those markets increase.
Thank you for your investment in Janus Aspen Janus Portfolio.
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Table of Contents
Janus Aspen Janus Portfolio (unaudited)
Janus Aspen Janus Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Google, Inc. – Class A | 2.05% | |||
Gilead Sciences, Inc. | 1.93% | |||
Celgene Corp. | 1.51% | |||
MasterCard, Inc. – Class A | 1.01% | |||
Precision Castparts Corp. | 0.93% |
5 Bottom Performers – Holdings
Contribution | ||||
Teradata Corp. | –0.25% | |||
FANUC Corp. | –0.20% | |||
VMware, Inc. – Class A | –0.10% | |||
SPDR S&P 500® Trust (ETF) – expired September 2013 | –0.08% | |||
C.H. Robinson Worldwide, Inc. | –0.06% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell 1000® Growth | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Health Care | 2.59% | 14.44% | 12.43% | |||||||||
Telecommunication Services | 0.30% | 0.70% | 2.19% | |||||||||
Energy | 0.07% | 5.39% | 4.43% | |||||||||
Utilities | –0.15% | 0.62% | 0.22% | |||||||||
Financials | –0.19% | 2.71% | 5.11% |
5 Bottom Performers – Sectors*
�� | Portfolio Weighting | Russell 1000® Growth | ||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Industrials | –1.76% | 13.70% | 12.53% | |||||||||
Other** | –0.74% | 0.89% | 0.00% | |||||||||
Consumer Discretionary | –0.73% | 17.85% | 18.42% | |||||||||
Consumer Staples | –0.48% | 10.58% | 12.65% | |||||||||
Information Technology | –0.45% | 29.93% | 27.80% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
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(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Apple, Inc. Computers & Peripherals | 5.5% | |||
Google, Inc. – Class A Internet Software & Services | 5.2% | |||
Gilead Sciences, Inc. Biotechnology | 2.8% | |||
Canadian Pacific Railway, Ltd. (U.S. Shares) Road & Rail | 2.4% | |||
Monsanto Co. Chemicals | 2.3% | |||
18.2% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas12p01.gif)
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas12t01.gif)
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas12c01.gif)
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Janus Aspen Janus Portfolio (unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas12m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Janus Portfolio – Institutional Shares | 30.34% | 17.98% | 6.77% | 7.94% | 0.53% | ||||||
Janus Aspen Janus Portfolio – Service Shares | 29.99% | 17.68% | 6.50% | 7.64% | 0.78% | ||||||
Russell 1000® Growth Index | 33.48% | 20.39% | 7.83% | 8.61% | |||||||
S&P 500® Index | 32.39% | 17.94% | 7.41% | 9.17% | |||||||
Core Growth Index | 32.94% | 19.17% | 7.63% | 8.93% | |||||||
Morningstar Quartile – Institutional Shares | 4th | 3rd | 3rd | 3rd | |||||||
Morningstar Ranking – based on total returns for Large Growth Funds | 1,381/1,770 | 992/1,547 | 954/1,333 | 364/565 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
This Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period. See the Portfolio’s Prospectus or Statement of Additional Information for more details.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
Returns shown for Service Shares for periods prior to December 31, 1999 are derived from the historical performance of Institutional Shares, adjusted to reflect the higher operating expenses of Service Shares.
Ranking is for the share class shown only; other classes may have different performance characteristics.
See important disclosures on the next page.
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Table of Contents
(unaudited)
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective May 13, 2013, Burton H. Wilson is the sole Portfolio Manager of the Portfolio.
* | The Portfolio’s inception date – September 13, 1993 |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,192.20 | $ | 3.04 | $ | 1,000.00 | $ | 1,022.43 | $ | 2.80 | 0.55% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,190.60 | $ | 4.42 | $ | 1,000.00 | $ | 1,021.17 | $ | 4.08 | 0.80% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
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Janus Aspen Janus Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Contract Amounts | Value | |||||||||
Common Stock – 98.8% | ||||||||||
Aerospace & Defense – 1.8% | ||||||||||
39,838 | Precision Castparts Corp. | $ | 10,728,373 | |||||||
Air Freight & Logistics – 0.3% | ||||||||||
12,722 | FedEx Corp. | 1,829,042 | ||||||||
Beverages – 4.4% | ||||||||||
168,626 | Diageo PLC** | 5,583,920 | ||||||||
75,372 | Pernod-Ricard S.A.** | 8,585,830 | ||||||||
240,888 | SABMiller PLC** | 12,368,060 | ||||||||
26,537,810 | ||||||||||
Biotechnology – 8.9% | ||||||||||
36,284 | Alexion Pharmaceuticals, Inc.* | 4,827,949 | ||||||||
22,433 | Biogen Idec, Inc.* | 6,275,632 | ||||||||
61,726 | Celgene Corp.* | 10,429,225 | ||||||||
223,833 | Gilead Sciences, Inc.* | 16,821,050 | ||||||||
81,111 | Medivation, Inc.* | 5,176,504 | ||||||||
66,463 | Perrigo Co. PLC | 10,199,412 | ||||||||
53,729,772 | ||||||||||
Capital Markets – 0.4% | ||||||||||
30,373 | T. Rowe Price Group, Inc. | 2,544,346 | ||||||||
Chemicals – 2.3% | ||||||||||
120,286 | Monsanto Co. | 14,019,333 | ||||||||
Commercial Services & Supplies – 1.0% | ||||||||||
145,650 | Tyco International, Ltd. (U.S. Shares) | 5,977,476 | ||||||||
Communications Equipment – 1.2% | ||||||||||
69,484 | Motorola Solutions, Inc. | 4,690,170 | ||||||||
34,496 | QUALCOMM, Inc. | 2,561,328 | ||||||||
7,251,498 | ||||||||||
Computers & Peripherals – 5.5% | ||||||||||
59,254 | Apple, Inc.** | 33,248,012 | ||||||||
Containers & Packaging – 1.5% | ||||||||||
181,288 | Ball Corp. | 9,365,338 | ||||||||
Electric Utilities – 0.9% | ||||||||||
137,539 | Brookfield Infrastructure Partners L.P. | 5,394,280 | ||||||||
Electrical Equipment – 2.0% | ||||||||||
308,989 | Sensata Technologies Holding N.V.* | 11,979,504 | ||||||||
Electronic Equipment, Instruments & Components – 3.0% | ||||||||||
123,023 | Amphenol Corp. – Class A | 10,971,191 | ||||||||
125,235 | TE Connectivity, Ltd. (U.S. Shares) | 6,901,701 | ||||||||
17,872,892 | ||||||||||
Energy Equipment & Services – 1.1% | ||||||||||
71,192 | Dresser-Rand Group, Inc.* | 4,245,179 | ||||||||
29,756 | Helmerich & Payne, Inc. | 2,501,884 | ||||||||
6,747,063 | ||||||||||
Food & Staples Retailing – 2.7% | ||||||||||
62,144 | Costco Wholesale Corp. | 7,395,758 | ||||||||
154,639 | Whole Foods Market, Inc. | 8,942,773 | ||||||||
16,338,531 | ||||||||||
Health Care Providers & Services – 2.3% | ||||||||||
65,484 | Aetna, Inc. | 4,491,547 | ||||||||
130,511 | Express Scripts Holding Co.* | 9,167,093 | ||||||||
13,658,640 | ||||||||||
Health Care Technology – 0.5% | ||||||||||
22,744 | athenahealth, Inc.* | 3,059,068 | ||||||||
Hotels, Restaurants & Leisure – 1.9% | ||||||||||
98,834 | Dunkin’ Brands Group, Inc. | 4,763,799 | ||||||||
88,336 | Starbucks Corp. | 6,924,659 | ||||||||
11,688,458 | ||||||||||
Household Products – 1.4% | ||||||||||
126,873 | Colgate-Palmolive Co. | 8,273,388 | ||||||||
Industrial Conglomerates – 1.6% | ||||||||||
129,291 | Danaher Corp. | 9,981,265 | ||||||||
Information Technology Services – 5.6% | ||||||||||
109,071 | Amdocs, Ltd. (U.S. Shares) | 4,498,088 | ||||||||
14,196 | MasterCard, Inc. – Class A | 11,860,190 | ||||||||
163,266 | Teradata Corp.* | 7,426,970 | ||||||||
44,335 | Visa, Inc. – Class A | 9,872,518 | ||||||||
33,657,766 | ||||||||||
Insurance – 0.5% | ||||||||||
662,000 | AIA Group, Ltd. | 3,321,099 | ||||||||
Internet & Catalog Retail – 1.3% | ||||||||||
39,331 | Ctrip.com International, Ltd. (ADR)* | 1,951,604 | ||||||||
2,139 | priceline.com, Inc.* | 2,486,374 | ||||||||
212,900 | Rakuten, Inc.** | 3,162,462 | ||||||||
7,600,440 | ||||||||||
Internet Software & Services – 6.8% | ||||||||||
152,643 | eBay, Inc.* | 8,378,574 | ||||||||
28,229 | Google, Inc. – Class A*,** | 31,636,523 | ||||||||
18,778 | Twitter, Inc.* | 1,195,220 | ||||||||
41,210,317 | ||||||||||
Leisure Equipment & Products – 0.9% | ||||||||||
110,646 | Mattel, Inc. | 5,264,537 | ||||||||
Machinery – 0.8% | ||||||||||
72,592 | Colfax Corp.* | 4,623,384 | ||||||||
Media – 3.3% | ||||||||||
65,527 | CBS Corp. – Class B | 4,176,691 | ||||||||
304,523 | Twenty-First Century Fox, Inc. | 10,713,119 | ||||||||
66,544 | Walt Disney Co. | 5,083,962 | ||||||||
19,973,772 | ||||||||||
Oil, Gas & Consumable Fuels – 3.7% | ||||||||||
32,291 | Antero Resources Corp.* | 2,048,541 | ||||||||
141,471 | Enterprise Products Partners L.P. | 9,379,528 | ||||||||
27,705 | EOG Resources, Inc. | 4,650,007 | ||||||||
89,827 | Noble Energy, Inc. | 6,118,117 | ||||||||
22,196,193 | ||||||||||
Pharmaceuticals – 3.8% | ||||||||||
134,834 | AbbVie, Inc. | 7,120,583 | ||||||||
26,559 | Endo Health Solutions, Inc.* | 1,791,670 | ||||||||
20,616 | Shire PLC (ADR)** | 2,912,835 | ||||||||
47,905 | Valeant Pharmaceuticals International, Inc. (U.S. Shares) | 5,624,047 | ||||||||
167,066 | Zoetis, Inc. | 5,461,388 | ||||||||
22,910,523 | ||||||||||
Professional Services – 0.9% | ||||||||||
85,901 | Verisk Analytics, Inc. – Class A* | 5,645,414 | ||||||||
Real Estate Investment Trusts (REITs) – 2.1% | ||||||||||
76,049 | American Tower Corp. | 6,070,231 | ||||||||
4,423,715 | Colony American Homes Holdings III L.P. – Private Placement§ | 4,474,145 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Contract Amounts | Value | |||||||||
Real Estate Investment Trusts (REITs) – (continued) | ||||||||||
43,191 | Ventas, Inc. | $ | 2,473,981 | |||||||
13,018,357 | ||||||||||
Real Estate Management & Development – 0.4% | ||||||||||
91,520 | CBRE Group, Inc. – Class A* | 2,406,976 | ||||||||
Road & Rail – 4.2% | ||||||||||
97,175 | Canadian Pacific Railway, Ltd. (U.S. Shares) | 14,704,521 | ||||||||
64,048 | Union Pacific Corp. | 10,760,064 | ||||||||
25,464,585 | ||||||||||
Semiconductor & Semiconductor Equipment – 2.1% | ||||||||||
319,081 | ARM Holdings PLC** | 5,806,083 | ||||||||
353,978 | Atmel Corp.* | 2,771,648 | ||||||||
1,156,942 | Taiwan Semiconductor Manufacturing Co., Ltd. | 4,095,885 | ||||||||
12,673,616 | ||||||||||
Software – 6.4% | ||||||||||
52,351 | ANSYS, Inc.* | 4,565,007 | ||||||||
694,888 | Cadence Design Systems, Inc.* | 9,742,330 | ||||||||
143,598 | Informatica Corp.* | 5,959,317 | ||||||||
159,641 | Intuit, Inc. | 12,183,801 | ||||||||
96,440 | Oracle Corp.** | 3,689,794 | ||||||||
45,078 | Salesforce.com, Inc.* | 2,487,855 | ||||||||
38,628,104 | ||||||||||
Specialty Retail – 7.5% | ||||||||||
6,109 | AutoZone, Inc.* | 2,919,735 | ||||||||
173,811 | L Brands, Inc. | 10,750,210 | ||||||||
78,106 | PetSmart, Inc. | 5,682,211 | ||||||||
295,812 | Sally Beauty Holdings, Inc.* | 8,942,397 | ||||||||
161,790 | TJX Cos., Inc. | 10,310,877 | ||||||||
49,352 | Ulta Salon, Cosmetics & Fragrance, Inc. | 4,763,455 | ||||||||
30,656 | Williams-Sonoma, Inc. | 1,786,632 | ||||||||
45,155,517 | ||||||||||
Textiles, Apparel & Luxury Goods – 1.1% | ||||||||||
83,660 | NIKE, Inc. – Class B | 6,579,022 | ||||||||
Trading Companies & Distributors – 1.9% | ||||||||||
45,817 | W.W. Grainger, Inc. | 11,702,578 | ||||||||
Wireless Telecommunication Services – 0.8% | ||||||||||
151,794 | T-Mobile U.S., Inc. | 5,106,350 | ||||||||
Total Common Stock (cost $411,021,766) | 597,362,639 | |||||||||
Purchased Options – Calls – 0.2% | ||||||||||
927 | Oracle Corp. expires March 2014 exercise price $35.00 | 340,358 | ||||||||
1,715 | Oracle Corp. expires March 2014 exercise price $34.00 | 775,750 | ||||||||
Total Purchased Options – Calls (premiums paid $447,658) | 1,116,108 | |||||||||
Money Market – 1.3% | ||||||||||
8,086,000 | Janus Cash Liquidity Fund LLC, 0%£ (cost $8,086,000) | 8,086,000 | ||||||||
Total Investments (total cost $419,555,424) – 100.3% | 606,564,747 | |||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.3)% | (2,081,773) | |||||||||
Net Assets – 100% | $ | 604,482,974 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Canada | $ | 20,328,568 | 3.4% | |||||
China | 1,951,604 | 0.3% | ||||||
France | 8,585,830 | 1.4% | ||||||
Hong Kong | 3,321,099 | 0.5% | ||||||
Japan | 3,162,462 | 0.5% | ||||||
Taiwan | 4,095,885 | 0.7% | ||||||
United Kingdom | 26,670,898 | 4.4% | ||||||
United States†† | 538,448,401 | 88.8% | ||||||
Total | $ | 606,564,747 | 100.0% |
†† | Includes Cash Equivalents of 1.3%. |
Forward Currency Contracts, Open
Unrealized | ||||||||||||
Currency Units | Currency | Appreciation/ | ||||||||||
Counterparty/Currency and Settlement Date | Sold | Value U.S. $ | (Depreciation) | |||||||||
Credit Suisse International: | ||||||||||||
British Pound 1/9/14 | 1,740,000 | $ | 2,880,805 | $ | (78,448) | |||||||
Euro 1/9/14 | 820,000 | 1,127,982 | (19,046) | |||||||||
Japanese Yen 1/9/14 | 109,300,000 | 1,038,099 | 47,178 | |||||||||
5,046,886 | (50,316) | |||||||||||
HSBC Securities (USA), Inc.: | ||||||||||||
British Pound 1/16/14 | 3,450,000 | 5,711,633 | (62,244) | |||||||||
Euro 1/16/14 | 2,240,000 | 3,081,305 | (8,361) | |||||||||
Japanese Yen 1/16/14 | 110,000,000 | 1,044,795 | 22,928 | |||||||||
9,837,733 | (47,677) | |||||||||||
JPMorgan Chase & Co.: | ||||||||||||
British Pound 1/23/14 | 3,040,000 | 5,032,589 | (86,782) | |||||||||
Euro 1/23/14 | 1,450,000 | 1,994,588 | (3,579) | |||||||||
Japanese Yen 1/23/14 | 29,000,000 | 275,458 | 5,759 | |||||||||
7,302,635 | (84,602) | |||||||||||
RBC Capital Markets Corp.: | ||||||||||||
British Pound 1/16/14 | 3,780,000 | 6,257,964 | (76,832) | |||||||||
Euro 1/16/14 | 180,000 | 247,605 | 102 | |||||||||
Japanese Yen 1/16/14 | 67,000,000 | 636,375 | 14,660 | |||||||||
7,141,944 | (62,070) | |||||||||||
Total | $ | 29,329,198 | $ | (244,665) | ||||||||
Schedule of Written Option – Put | Value | |||
Oracle Corp. expires March 2014 1,715 contracts exercise price $31.00 (premiums received $168,070) | $ | (21,847) | ||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Notes to Schedule of Investments and Other Information
Core Growth Index | An internally-calculated, hypothetical combination of total returns from the Russell 1000® Growth Index (50%) and the S&P 500® Index (50%). | |
Russell 1000® Growth Index | Measures the performance of those Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values. | |
S&P 500® Index | A commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. | |
ADR | American Depositary Receipt | |
ETF | Exchange-Traded Fund | |
L.P. | Limited Partnership | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust | |
SPDR | Standard & Poor’s Depositary Receipt | |
U.S. Shares | Securities of foreign companies trading on an American stock exchange. |
* | Non-income producing security. | |
** | A portion of this security or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Janus Portfolio | $ | 81,228,491 | |||
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2013) |
Acquisition | Acquisition | Value as a | ||||||||
Date | Cost | Value | % of Net Assets | |||||||
Janus Aspen Janus Portfolio | ||||||||||
Colony American Homes Holdings III L.P. – Private Placement | 1/30/13 | $4,429,260 | $4,474,145 | 0.7% | ||||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2013. The issuer incurs all registration costs.
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | ||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | ||||||||||
Janus Aspen Janus Portfolio | ||||||||||||||||
Janus Cash Liquidity Fund LLC | 127,364,421 | $127,364,421 | (143,333,567) | $(143,333,567) | $– | $9,760 | $8,086,000 | |||||||||
10 | DECEMBER 31, 2013
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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Janus Portfolio | |||||||||||
Common Stock | |||||||||||
Real Estate Investments Trusts (REITs) | $ | 8,544,212 | $ | – | $ | 4,474,145 | |||||
All Other | 584,344,282 | – | – | ||||||||
Purchased Options | – | 1,116,108 | – | ||||||||
Money Market | – | 8,086,000 | – | ||||||||
Total Investments in Securities | $ | 592,888,494 | $ | 9,202,108 | $ | 4,474,145 | |||||
Other Financial Instruments(a) – Assets: | |||||||||||
Forward Currency Contracts | $ | – | $ | 90,627 | $ | – | |||||
Other Financial Instruments(a) – Liabilities: | |||||||||||
Forward Currency Contracts | $ | – | $ | 335,292 | $ | – | |||||
Options Written, at Value | – | 21,847 | – | ||||||||
(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 | 11
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||||||
As of December 31, 2013 | Janus | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 419,555 | ||||||||
Unaffiliated investments at value | $ | 598,479 | ||||||||
Affiliated investments at value | 8,086 | |||||||||
Receivables: | ||||||||||
Investments sold | 1,721 | |||||||||
Closed foreign currency contracts | 17 | |||||||||
Portfolio shares sold | 139 | |||||||||
Dividends | 241 | |||||||||
Foreign dividend tax reclaim | 31 | |||||||||
Non-interested Trustees’ deferred compensation | 12 | |||||||||
Other assets | 7 | |||||||||
Forward currency contracts | 91 | |||||||||
Total Assets | 608,824 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Options written, at value(1) | 22 | |||||||||
Due to custodian | 80 | |||||||||
Investments purchased | 3,119 | |||||||||
Portfolio shares repurchased | 388 | |||||||||
Advisory fees | 260 | |||||||||
Fund administration fees | 5 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 37 | |||||||||
Non-interested Trustees’ fees and expenses | 3 | |||||||||
Non-interested Trustees’ deferred compensation fees | 12 | |||||||||
Accrued expenses and other payables | 80 | |||||||||
Forward currency contracts | 335 | |||||||||
Total Liabilities | 4,341 | |||||||||
Net Assets | $ | 604,483 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 466,004 | ||||||||
Undistributed net investment income* | 1,454 | |||||||||
Undistributed net realized loss from investment and foreign currency transactions* | (49,887) | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 186,912 | |||||||||
Total Net Assets | $ | 604,483 | ||||||||
Net Assets - Institutional Shares | $ | 433,603 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 12,679 | |||||||||
Net Asset Value Per Share | $ | 34.20 | ||||||||
Net Assets - Service Shares | $ | 170,880 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 5,064 | |||||||||
Net Asset Value Per Share | $ | 33.74 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Premiums received $168,070. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2013
Table of Contents
Statement of Operations
Janus Aspen | ||||||
For the year ended December 31, 2013 | Janus | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Dividends | $ | 6,976 | ||||
Dividends from affiliates | 10 | |||||
Other Income | 1 | |||||
Foreign tax withheld | (152) | |||||
Total Investment Income | 6,835 | |||||
Expenses: | ||||||
Advisory fees | 2,803 | |||||
Internal servicing expense - Institutional Shares | 3 | |||||
Internal servicing expense - Service Shares | 2 | |||||
Shareholder reports expense | 41 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | 24 | |||||
Custodian fees | 26 | |||||
Professional fees | 63 | |||||
Non-interested Trustees’ fees and expenses | 13 | |||||
Fund administration fees | 58 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 437 | |||||
Other expenses | 45 | |||||
Total Expenses | 3,516 | |||||
Net Expenses after Waivers and Expense Offsets | 3,516 | |||||
Net Investment Income | 3,319 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 90,112 | |||||
Net realized gain from written options contracts | 93 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 58,542 | |||||
Change in unrealized net appreciation/(depreciation) of written options contracts | 146 | |||||
Net Gain on Investments | 148,893 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 152,212 |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Janus | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 3,319 | $ | 5,592 | ||||||
Net realized gain from investment and foreign currency transactions | 90,205 | 25,762 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 58,688 | 63,565 | ||||||||
Net Increase in Net Assets Resulting from Operations | 152,212 | 94,919 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (3,139) | (2,082) | ||||||||
Service Shares | (1,161) | (796) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | – | (6,428) | ||||||||
Service Shares | – | (3,132) | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (4,300) | (12,438) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 8,002 | 10,398 | ||||||||
Service Shares | 8,111 | 12,600 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 3,139 | 8,510 | ||||||||
Service Shares | 1,161 | 3,928 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (55,778) | (51,784) | ||||||||
Service Shares | (60,562) | (45,293) | ||||||||
Net Decrease from Capital Share Transactions | (95,927) | (61,641) | ||||||||
Net Increase in Net Assets | 51,985 | 20,840 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 552,498 | 531,658 | ||||||||
End of period | $ | 604,483 | $ | 552,498 | ||||||
Undistributed Net Investment Income* | $ | 1,454 | $ | 3,662 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
14 | DECEMBER 31, 2013
Table of Contents
Financial Highlights
Institutional Shares
Janus Aspen Janus Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $26.45 | $22.84 | $24.26 | $21.43 | $15.81 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.16 | 0.27 | 0.20 | 0.16 | 0.12 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 7.83 | 3.92 | (1.48) | 2.91 | 5.60 | |||||||||||||||||
Total from Investment Operations | 7.99 | 4.19 | (1.28) | 3.07 | 5.72 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.24) | (0.14) | (0.14) | (0.24) | (0.10) | |||||||||||||||||
Distributions (from capital gains)* | – | (0.44) | – | – | – | |||||||||||||||||
Total Distributions | (0.24) | (0.58) | (0.14) | (0.24) | (0.10) | |||||||||||||||||
Net Asset Value, End of Period | $34.20 | $26.45 | $22.84 | $24.26 | $21.43 | |||||||||||||||||
Total Return | 30.34% | 18.59% | (5.30)% | 14.52% | 36.26% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $433,603 | $374,860 | $352,646 | $424,037 | $441,921 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $399,973 | $377,786 | $393,230 | $409,886 | $380,924 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.54% | 0.53% | 0.62% | 0.70% | 0.68% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.54% | 0.53% | 0.62% | 0.70% | 0.68% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 0.65% | 1.08% | 0.81% | 0.60% | 0.59% | |||||||||||||||||
Portfolio Turnover Rate | 50% | 38% | 90% | 43% | 56% |
Service Shares
Janus Aspen Janus Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $26.13 | $22.60 | $24.03 | $21.11 | $15.59 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.02 | 0.17 | 0.09 | 0.03 | 0.07 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 7.79 | 3.91 | (1.41) | 2.97 | 5.52 | |||||||||||||||||
Total from Investment Operations | 7.81 | 4.08 | (1.32) | 3.00 | 5.59 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.20) | (0.11) | (0.11) | (0.08) | (0.07) | |||||||||||||||||
Distributions (from capital gains)* | – | (0.44) | – | – | – | |||||||||||||||||
Total Distributions | (0.20) | (0.55) | (0.11) | (0.08) | (0.07) | |||||||||||||||||
Net Asset Value, End of Period | $33.74 | $26.13 | $22.60 | $24.03 | $21.11 | |||||||||||||||||
Total Return | 29.99% | 18.28% | (5.54)% | 14.26% | 35.93% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $170,880 | $177,638 | $179,012 | $242,135 | $2,046,895 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $174,538 | $184,029 | $216,273 | $962,905 | $1,528,802 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.79% | 0.78% | 0.87% | 0.92% | 0.92% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.79% | 0.78% | 0.87% | 0.92% | 0.92% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 0.41% | 0.82% | 0.56% | 0.39% | 0.32% | |||||||||||||||||
Portfolio Turnover Rate | 50% | 38% | 90% | 43% | 56% |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
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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 (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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in common stocks. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which
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may be allocated pro rata to the Portfolio. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a
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Notes to Financial Statements (continued)
market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold a material amount of Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out of | ||||||
Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Janus Portfolio | $ | 25,238,362 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year. Financial assets were transferred out of Level 2 to Level 1 as the current market for the securities with quoted prices are considered active.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on
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foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. | |
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. | |
• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to |
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Notes to Financial Statements (continued)
sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a contract is included in “Net realized gain/(loss) from investment and foreign currency transactions” on the Statement of Operations (if applicable).
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 is subject to interest rate risk, liquidity risk, equity risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use options contracts to hedge against changes in interest rates, the values of equities, or foreign currencies. The Portfolio may utilize American-style and European-style options. An American-style option is an option contract that can be exercised at any time between the time of purchase and the option’s expiration date. A European-style option is an option contract that can only be exercised on the option’s expiration date. The Portfolio may also purchase or write put and call options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. The Portfolio generally invests in options to hedge against adverse movements in the value of portfolio holdings.
When an option is written, the Portfolio receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. In writing an option, the Portfolio bears the risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio buying or selling a security at a price different from the current market value.
When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option are adjusted by the amount of premium received or paid.
The Portfolio may also purchase and write exchange-listed and OTC put and call options on domestic securities indices, and on foreign securities indices listed on domestic and foreign securities exchanges. Options on securities indices are similar to options on securities except that (1) the expiration cycles of securities index options are monthly, while those of securities options are currently quarterly, and (2) the delivery requirements are different. Instead of giving the right to take or make delivery of securities at a specified price, an option on a securities index gives the holder the right to receive a cash “exercise settlement amount” equal to (a) the amount, if any, by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of exercise, multiplied by (b) a fixed “index multiplier.” Receipt of this cash amount will depend upon the closing level of the securities index upon which the option is based being greater than, in the case of a call, or less than, in the case of a put, the exercise price of the index and the exercise price of the option times a specified multiple. The writer of the option is obligated, in return for the premium received, to make delivery of this amount.
Options traded on an exchange are regulated and the terms of the options are standardized. Options traded OTC expose the Portfolio to counterparty risk in the event that the counterparty does not perform. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by having the counterparty post collateral to cover the Portfolio’s exposure to the counterparty.
Holdings of the Portfolio designated to cover outstanding written options are noted on the Schedule of Investments. Options written are reported as a liability on the Statement of Assets and Liabilities as “Options written at value.” Realized gains and losses are reported as “Net realized gain/(loss) from written options contracts” on the Statement of Operations.
The risk in writing call options is that the Portfolio gives up the opportunity for profit if the market price of the security increases and the options are exercised. The risk in writing put options is that the Portfolio may incur a loss if
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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.
Written option activity for the year ended December 31, 2013 is indicated in the table below:
Number of | Premiums | |||||||
Put Options | Contracts | Received | ||||||
Janus Aspen Janus Portfolio | ||||||||
Options outstanding at December 31, 2012 | – | $ | – | |||||
Options written | 3,569 | 310,828 | ||||||
Options closed | (1,854) | (142,758) | ||||||
Options expired | – | – | ||||||
Options exercised | – | – | ||||||
Options outstanding at December 31, 2013 | 1,715 | $ | 168,070 | |||||
The following table, grouped by derivative type, provides information about the fair value and location of derivatives within the Statement of Assets and Liabilities as of December 31, 2013.
Fair Value of Derivative Instruments as of December 31, 2013
Derivatives not accounted | Asset Derivatives | Liability Derivatives | ||||||||||
for as hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Janus Aspen Janus Portfolio | ||||||||||||
Equity Contracts | Unaffiliated investments at value | $ | 1,116,108* | Options written, at value | $ | 21,847 | ||||||
Foreign Exchange Contracts | Forward currency contracts | 90,627 | Forward currency contracts | 335,292 | ||||||||
Total | $ | 1,206,735 | $ | 357,139 | ||||||||
* | Amounts relate to purchased options. |
The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as | Investment and foreign | |||||||||||
hedging instruments | currency transactions | Written options contracts | Total | |||||||||
Janus Aspen Janus Portfolio | ||||||||||||
Equity Contracts | $ | (546,954 | )* | $ | 92,700 | $ | (454,254 | ) | ||||
Foreign Exchange Contracts | 229,568 | – | 229,568 | |||||||||
Total | $ | (317,386 | ) | $ | 92,700 | $ | (224,686 | ) | ||||
* | Amounts relate to purchased options. |
Change in Unrealized Net Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||
Investments, foreign | ||||||||||||
currency translations and | ||||||||||||
Derivatives not accounted for as | non-interested Trustees’ | |||||||||||
hedging instruments | deferred compensation | Written options contracts | Total | |||||||||
Janus Aspen Janus Portfolio | ||||||||||||
Equity Contracts | $ | 1,018,825* | $ | 146,223 | $ | 1,165,048 | ||||||
Foreign Exchange Contracts | (299,650 | ) | – | (299,650 | ) | |||||||
Total | $ | 719,175 | $ | 146,223 | $ | 865,398 | ||||||
* | Amounts relate to purchased options. |
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.
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Notes to Financial Statements (continued)
3. | Other Investments and Strategies |
Additional Investment Risk
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Offsetting Assets and Liabilities
The Portfolio has recently adopted guidance requiring entities to present gross and net information about
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transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. Note that for financial reporting purposes, the Portfolio does not offset certain derivative financial instrument’s payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following tables present gross amounts of recognized assets and liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable).
Offsetting of Financial Assets and Derivative Assets
Gross Amounts Offset in the | ||||||||||||||
Counterparty | Gross Amounts of Recognized Assets | Statement of Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 1,163,286 | $ | (119,341) | $ | (999,968) | $ | 43,977 | ||||||
HSBC Securities (USA), Inc. | 22,928 | (22,928) | – | – | ||||||||||
JPMorgan Chase & Co. | 5,759 | (5,759) | – | – | ||||||||||
RBC Capital Markets Corp. | 14,762 | (14,762) | – | – | ||||||||||
Total | $ | 1,206,735 | $ | (162,790) | $ | (999,968) | $ | 43,977 | ||||||
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts Offset in the | ||||||||||||||
Counterparty | Gross Amounts of Recognized Liabilities | Statement of Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 119,341 | $ | (119,341) | $ | – | $ | – | ||||||
HSBC Securities (USA), Inc. | 70,605 | (22,928) | – | 47,677 | ||||||||||
JPMorgan Chase & Co. | 90,361 | (5,759) | – | 84,602 | ||||||||||
RBC Capital Markets Corp. | 76,832 | (14,762) | – | 62,070 | ||||||||||
Total | $ | 357,139 | $ | (162,790) | $ | – | $ | 194,349 | ||||||
* | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
The Portfolio does not require the counterparty to post collateral for forward currency contracts; however, the Portfolio will segregate cash or high-grade securities with its custodian in an amount at all times equal to or greater than the Portfolio’s commitment with respect to these contracts. Such segregated assets are denoted on the accompanying Schedule of Investments and are evaluated daily to ensure their market value equals or exceeds the current market value of the Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities as collateral daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized gain on OTC derivative contracts with a particular counterparty. The Portfolio may deposit cash as collateral with the counterparty and/or custodian daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized loss on OTC derivative contacts with a particular counterparty. The collateral amounts are subject to minimum exposure requirements and initial margin requirements. Collateral amounts are monitored and subsequently adjusted up or down as valuations fluctuate by at least the minimum exposure requirement. Collateral reduces the risk of loss.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
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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 “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Base Fee | |||||
Rate (%) | |||||
Portfolio | (annual rate) | ||||
Janus Aspen Janus Portfolio | 0.64 | ||||
For the Portfolio, the investment advisory fee rate is determined by calculating a base fee and applying a performance adjustment. The base fee rate is the same as the contractual investment advisory fee rate shown in the table above. The performance adjustment either increases or decreases the base fee depending on how well the Portfolio has performed relative to its benchmark index, as shown below:
Portfolio | Benchmark Index | ||||
Janus Aspen Janus Portfolio | Core Growth Index | ||||
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance Adjustment
The investment advisory fee rate paid to Janus Capital by the Portfolio consists of two components: (1) a base fee calculated by applying the contractual fixed rate of the advisory fee to the Portfolio’s average daily net assets during the previous month (“Base Fee Rate”), plus or minus (2) a performance-fee adjustment (“Performance Adjustment”) calculated by applying a variable rate of up to 0.15% (positive or negative) to the Portfolio’s average daily net assets during the applicable performance measurement period. The performance measurement period generally is the previous 36 months, although no Performance Adjustment is made until the Portfolio’s performance-based fee structure has been in effect for at least 12 months. When the Portfolio’s performance-based fee structure has been in effect for at least 12 months, but less than 36 months, the performance measurement period will be equal to the time that has elapsed since the performance-based fee structure took effect. Any applicable Performance Adjustment began July 2011 for the Portfolio.
No Performance Adjustment is applied unless the difference between the Portfolio’s investment performance and the cumulative investment record of the Portfolio’s benchmark index is 0.50% or greater (positive or negative) during the applicable performance measurement period. The Base Fee Rate is subject to an upward or downward Performance Adjustment for every full 0.50% increment by which the Portfolio outperforms or underperforms its benchmark index. Because the Performance Adjustment is tied to the Portfolio’s relative performance compared to its benchmark index (and not its absolute performance), the Performance Adjustment could increase Janus Capital’s fee even if the Portfolio’s Shares lose value during the performance measurement period and could decrease Janus Capital’s fee even if the Portfolio’s Shares increase in value during the performance measurement period. For purposes of computing the Base Fee Rate and the Performance Adjustment, net assets are averaged over different periods (average daily net assets during the previous month for the Base Fee Rate, versus average daily net assets during the performance measurement period for the Performance Adjustment). Performance of the Portfolio is calculated net of expenses, whereas the Portfolio’s benchmark index does not have any fees or expenses. Reinvestment of dividends and distributions is included in calculating both the performance of the Portfolio and the Portfolio’s benchmark index. The Base Fee Rate is calculated and accrued daily. The Performance Adjustment is calculated monthly in arrears and is accrued throughout the month. The investment fee is paid monthly in arrears. Under extreme circumstances involving underperformance by a rapidly shrinking Portfolio, the dollar amount of the Performance Adjustment could be more than the dollar amount of the Base Fee Rate. In such circumstances, Janus Capital would reimburse the Portfolio.
The investment performance of the Portfolio’s Service Shares for the performance measurement period is used to calculate the Performance Adjustment. After Janus Capital determines whether the Portfolio’s performance was above or below its benchmark index by comparing the investment performance of the Portfolio’s Service Shares against the cumulative investment record of the Portfolio’s benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance Adjustment on future overall compensation to Janus Capital since it depends on the performance of the Portfolio relative to the record of the Portfolio’s benchmark index and future changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional information contain additional information about performance-based fees. The amount shown as advisory fees on the Statement of Operations reflects the Base Fee Rate plus/minus any Performance Adjustment. During the year ended December 31, 2013, the Portfolio recorded a Performance Adjustment of $(884,560).
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Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
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Notes to Financial Statements (continued)
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
5. | Federal Income Tax |
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 primarily 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. 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 | Loss Deferrals | Other Book | |||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | ||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | |||||||||
Janus Aspen Janus Portfolio | $1,469,726 | $41,836,825 | $(93,222,242) | $– | $– | $127,879 | $188,267,024 | |||||||||
Accumulated capital losses noted below represent net capital loss carryovers, as of December 31, 2013, that may be available to offset future realized capital gains and thereby reduce future taxable gains distributions. Under the Regulated Investment Company Modernization Act of 2010, the Portfolio is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. Losses incurred during those future years will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards may more likely expire unused. Also, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law. The following table shows these capital loss carryovers.
Capital Loss Carryover Expiration Schedule
For the year ended December 31, 2013
Accumulated | ||||||||||||||
Portfolio | December 31, 2017 | Capital Losses | ||||||||||||
Janus Aspen Janus Portfolio(1) | $ | (93,222,242) | $ | (93,222,242) | ||||||||||
(1) | Capital loss carryover is subject to annual limitations, at least $(23,370,699) should be available in the next fiscal year. |
During the year ended December 31, 2013, the following capital loss carryovers were utilized by the Portfolio:
Capital Loss | |||||||||||||||||||||||
Portfolio | Carryover Utilized | ||||||||||||||||||||||
Janus Aspen Janus Portfolio | $ | 46,888,681 | |||||||||||||||||||||
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, 2013 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/(depreciation) on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in partnerships.
Federal Tax | Unrealized | Unrealized | ||||||
Portfolio | Cost | Appreciation | (Depreciation) | |||||
Janus Aspen Janus Portfolio | $418,297,723 | $189,395,191 | $(1,128,167) | |||||
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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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Janus Portfolio | $ | 4,299,455 | $ | – | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Janus Portfolio | $ | 2,878,313 | $ | 9,560,271 | $ | – | $ | – | |||||||||
6. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Janus Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 270 | 404 | ||||||||
Reinvested dividends and distributions | 106 | 351 | ||||||||
Shares repurchased | (1,870) | (2,024) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,494) | (1,269) | ||||||||
Shares Outstanding, Beginning of Period | 14,173 | 15,442 | ||||||||
Shares Outstanding, End of Period | 12,679 | 14,173 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 278 | 499 | ||||||||
Reinvested dividends and distributions | 40 | 164 | ||||||||
Shares repurchased | (2,052) | (1,787) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (1,734) | (1,124) | ||||||||
Shares Outstanding, Beginning of Period | 6,798 | 7,922 | ||||||||
Shares Outstanding, End of Period | 5,064 | 6,798 |
7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Janus Portfolio | $ | 281,343,270 | $ | 357,918,612 | $ | – | $ | – | ||||||
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Notes to Financial Statements (continued)
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of 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 (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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Additional Information (unaudited) (continued)
charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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Additional Information (unaudited) (continued)
• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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Additional Information (unaudited) (continued)
conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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Useful Information About Your Portfolio Report (unaudited) (continued)
such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
42 | DECEMBER 31, 2013
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Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Janus Portfolio | 100% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office* and | Principal Occupations During the | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Past Five Years | |||
Burton H. Wilson 151 Detroit Street Denver, CO 80206 DOB: 1963 | Executive Vice President and Portfolio Manager Janus Aspen Janus Portfolio | 5/11-Present | Vice President and Assistant Director of Equity Research of Janus Capital, and Portfolio Manager for other Janus accounts. Formerly, Portfolio Manager (2006-2011) for Global Technology Portfolio and Research Analyst (2005-2009) for Janus Capital. | |||
Robin C. Beery** 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
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Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55233 | 109-02-81111 02-14 |
Table of Contents
annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen Overseas Portfolio (unaudited)
PORTFOLIO SNAPSHOT I believe that company fundamentals drive share prices over the long term. I use intensive, fundamental research to make high-conviction investments. | ![]() Brent Lynn portfolio manager |
PERFORMANCE OVERVIEW
Janus Aspen Overseas Portfolio’s Institutional Shares and Service Shares returned 14.56% and 14.28%, respectively, over the 12-month period ended December 31, 2013. The Portfolio’s primary benchmark, the MSCI All Country World ex-U.S. Index, returned 15.29%, and its secondary benchmark, the MSCI EAFE Index, returned 22.78% during the period.
Despite the positive absolute return, I am disappointed with the Portfolio’s one-year performance and especially with the three-year performance relative to the benchmarks. My investment approach has not changed, however, and I am optimistic about my Portfolio because of what I believe to be strong long-term prospects of our companies and their attractive stock valuations.
I see two key reasons for the relatively poor performance of the Portfolio in the last year as well as over the past three years. The most important reason by far is that my style of opportunistic investment has been out of favor in the past three years. I prefer to invest in long-term, high-conviction opportunities even if there are short-term headwinds.
I believe that during the past few years we have seen a highly momentum- and safety-oriented market. Companies with near-term visibility of earnings and cash flows, especially if they are growing, have performed extremely well, despite often trading at high valuations. Meanwhile, on the other end of this bifurcated market, many stocks facing near-term uncertainty in their businesses have dramatically underperformed, seemingly regardless of attractively low valuations or longer-term growth prospects. The Overseas Portfolio is overwhelmingly invested in companies I believe are attractive and have long-term growth potential, but many of these holdings are cyclical businesses sensitive to the difficult global economic and political macroeconomic environment of the past few years. Even in the cases where the economic environment has hurt shorter-term results, I believe these companies remain competitively advantaged and will emerge strongly positioned.
I like situations where fear and short-term noise provide opportunities to own companies with great long-term prospects at compelling valuations. Many of these names are in emerging markets or in out-of-favor segments of the market, such as cyclicals, energy and financials. As long as we have conviction in a company’s franchise value, competitive advantages, long-term growth prospects and compelling valuation, I have maintained or in some cases increased our position.
The second and related reason for the underperformance is the Portfolio’s large weight in emerging markets, relative to the benchmark. During the past three years, large emerging markets such as Brazil, India and China have dramatically underperformed. I believe this underperformance is unwarranted. Many of the world’s most pressing economic problems, such as aging populations, looming government debt, fiscal deficits and slow economic growth, are most pronounced in Europe, Japan and the U.S. The reasons for underperformance in emerging markets are short-term slowdowns in economic growth and concerns about the near-term political environment. I took advantage of the market weakness to increase our investments in strong emerging market franchises at what I thought were attractive valuations.
I believe there are fundamental reasons why the extreme bifurcation in the market will not last.
First, the pressure on economically sensitive stocks should ease. The global economy won’t stay down forever. The U.S. may not be firing on all cylinders, but clearly our economy has strengthened this year. Europe has recently shown signs of a small pickup. Chinese growth appears stable, refuting the arguments of those predicting a hard-landing. In Japan, (Prime Minister Shinzo Abe) Abenomics-fueled optimism has spurred at least a temporary increase in economic activity. In addition, I believe that the likelihood of a dangerous outcome from either the European sovereign debt crisis or the Chinese leadership transition is greatly reduced from a year ago. And fortunately, the U.S. appears to have avoided a worst-case scenario in its debt ceiling saga.
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Janus Aspen Overseas Portfolio (unaudited)
Second, over the long term, I believe the BRICs (Brazil, Russia, India and China) and other emerging markets will be the key growth engines of the global economy, driven by secular trends of globalization, urbanization and infrastructure development. On a near-term basis, I also see some cause for macroeconomic optimism. In China, stable economic activity and a relatively smooth leadership transition laid the groundwork for a new period of reforms necessary to transform its economy. In India, under the surface, the government is making modest progress restarting stalled infrastructure projects, implementing pragmatic reforms and reducing the current account deficit.
Valuation is the third and by far the most important reason why I believe the market bifurcation will not last. The valuations of some of our holdings are the most attractive I’ve seen since the 2008-2009 financial crisis. My Portfolio and my investment philosophy are all about investing in what I think are competitively advantaged companies with long-term growth opportunities trading at valuations far below their intrinsic values.
DETRACTORS FROM PERFORMANCE
Relative to its primary benchmark, the MSCI All-Country World ex-U.S. Index, the Portfolio’s large exposure to emerging markets, particularly India and Brazil, significantly hurt performance during the period. On a sector basis, the Portfolio’s investments in energy and financials significantly hurt performance.
Currency detracted from the Portfolio’s absolute performance during the period primarily due to the fall in the Indian rupee and Brazilian real. The Portfolio’s hedge against Japanese yen exposure helped performance. For the past few years, I have hedged most of our yen exposure because I felt Japan’s high level of government debt would eventually lead to a weaker yen.
Li & Fung, the Portfolio’s largest holding, was the most significant individual detractor. Despite what we consider its very low valuation, the Hong Kong-based retail outsourcing and logistics company continued to suffer from concerns about the U.S. retail environment. While we continue to believe the company is well positioned for growth longer term, we reduced our position to reflect the company’s near-term uncertainties.
Petroleo Brasileiro (Petrobras), the Brazilian integrated energy giant, was the second-largest detractor. Production shortfalls, and more importantly the unwillingness of the Brazilian government to raise refined product prices to global levels, pressured the stock. I saw Petrobras as a global leader in deepwater production with one of the most exciting production growth outlooks of any large oil company globally. I maintained a significant position in Petrobras during the period, but I am monitoring refined product price developments in Brazil, because the company needs price increases to fund its huge development program.
Brazilian homebuilder MRV Engenharia e Participacoes, the Portfolio’s third-largest detractor, suffered from weakness in the Brazilian economy and relatedly its market. MRV’s shares were also weak due to disappointing profit margins from higher-than-expected costs in some of its housing projects and lower average selling prices. I believe the company’s margin profile should see significant improvement over the next few years.
CONTRIBUTORS TO PERFORMANCE
U.S.-based airlines, Delta Air Lines and United Continental Holdings, were the first and third largest contributors, respectively. Despite higher oil prices and a lackluster economic environment, improving operations and merger synergies, continued industry capacity discipline and airline consolidation led to solid cash flows and profits. Delta in particular demonstrated strong performance. I believed that the cash flow generation potential for both companies had still not been fully appreciated by the market, but I cut both positions based on valuation.
Jazz Pharmaceuticals, the Portfolio’s second-largest contributor, benefited from strong earnings growth and significant sales momentum for its key drug Xyrem. A good market environment for specialty pharmaceutical stocks in general also aided the shares. I consider Xyrem to be a life-changing drug for people who suffer from narcolepsy, a chronic sleep disorder. I also believe the company is well positioned to benefit from the consolidation trend in the specialty pharmaceutical industry.
In aggregate, derivatives added to performance during the period. In addition to the currency hedge on the Japanese yen mentioned earlier, the Portfolio also selectively utilized swaps during the period. Reasons for using these instruments included hedging downside risks, achieving market access, and establishing positions more quickly. Please see “Notes to Financial Statements” for information about the hedging techniques used by the Portfolio.
INVESTMENT STRATEGY AND OUTLOOK
I am also an investor in the Overseas strategy, but more importantly, I am a steward of your money. I take my
2 | DECEMBER 31, 2013
Table of Contents
(unaudited)
responsibility very seriously. I recognize that you have entrusted me and Janus with your hard-earned savings.
I am hopeful an improving global situation will provide a better backdrop for global risk assets, especially in emerging markets. I strongly believe that our stocks are poised to reflect the earnings, cash flows and prospects of the underlying companies. We constantly evaluate the Portfolio to make sure we still have conviction in the core franchise and in the long-term prospects of each holding.
Conviction always is important, but in difficult times, it is critical. My conviction in the Portfolio comes from our team’s tremendous, in-depth fundamental research. The risk averse, momentum-oriented markets of the past few years have created tremendous opportunities to buy what I think are strong franchises on sale around the world. Many of our holdings have been out of favor in this environment because of perceived short-term stock specific or macro headwinds. As markets once again take a longer-term view and focus more on valuation, and as our companies’ strong long-term growth prospects become more visible, I believe the Portfolio can once again perform to my expectations and to the expectations of my investors.
Thank you for your continued investment in Janus Aspen Overseas Portfolio.
Janus Aspen Series | 3
Table of Contents
Janus Aspen Overseas Portfolio (unaudited)
Janus Aspen Overseas Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Delta Air Lines, Inc. | 3.58% | |||
Jazz Pharmaceuticals PLC | 2.97% | |||
United Continental Holdings, Inc. | 2.40% | |||
Melco International Development, Ltd. | 2.01% | |||
Renault S.A. | 1.72% |
5 Bottom Performers – Holdings
Contribution | ||||
Li & Fung, Ltd. | –1.94% | |||
Petroleo Brasileiro S.A. (ADR) | –1.51% | |||
MRV Engenharia e Participacoes S.A. | –0.86% | |||
OGX Petroleo e Gas Participacoes S.A. | –0.83% | |||
Cobalt International Energy, Inc. | –0.75% |
5 Top Performers – Sectors*
Portfolio Weighting | MSCI All Country World ex-U.S. | |||||||||||
Portfolio Contribution | (Average % of Equity) | IndexSM Weighting | ||||||||||
Industrials | 3.35% | 15.24% | 10.85% | |||||||||
Health Care | 2.24% | 4.86% | 7.68% | |||||||||
Information Technology | 2.20% | 13.64% | 6.38% | |||||||||
Materials | 1.03% | 3.95% | 9.28% | |||||||||
Other** | –0.01% | 1.51% | 0.00% |
5 Bottom Performers – Sectors*
Portfolio Weighting | MSCI All Country World ex-U.S. | |||||||||||
Portfolio Contribution | (Average % of Equity) | IndexSM Weighting | ||||||||||
Energy | –6.77% | 16.15% | 9.51% | |||||||||
Financials | –4.28% | 24.02% | 26.62% | |||||||||
Consumer Discretionary | –1.55% | 19.24% | 10.26% | |||||||||
Telecommunication Services | –0.66% | 0.00% | 5.56% | |||||||||
Utilities | –0.11% | 0.35% | 3.45% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
4 | DECEMBER 31, 2013
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(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Li & Fung, Ltd. Textiles, Apparel & Luxury Goods | 6.1% | |||
Reliance Industries, Ltd. Oil, Gas & Consumable Fuels | 5.2% | |||
United Continental Holdings, Inc. Airlines | 5.2% | |||
Telefonaktiebolaget L.M. Ericsson – Class B Communications Equipment | 4.2% | |||
Nintendo Co., Ltd. Software | 4.0% | |||
24.7% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas11p01.gif)
Emerging markets comprised 38.9% of total net assets.
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas11t01.gif)
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas11c01.gif)
Janus Aspen Series | 5
Table of Contents
Janus Aspen Overseas Portfolio (unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas11m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception* | Operating Expenses | |||||||
Janus Aspen Overseas Portfolio – Institutional Shares | 14.56% | 14.68% | 10.93% | 10.76% | 0.49% | ||||||
Janus Aspen Overseas Portfolio – Service Shares | 14.28% | 14.40% | 10.65% | 10.63% | 0.74% | ||||||
MSCI All Country World ex-U.S. IndexSM | 15.29% | 12.81% | 7.57% | N/A** | |||||||
MSCI EAFE® Index | 22.78% | 12.44% | 6.91% | 5.37% | |||||||
Morningstar Quartile – Institutional Shares | 4th | 1st | 1st | 1st | |||||||
Morningstar Ranking – based on total returns for Foreign Large Blend Funds | 708/818 | 86/731 | 3/500 | 4/184 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
This Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period. See the Portfolio’s Prospectus or Statement of Additional Information for more details.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
Investments in derivatives can be highly volatile and involve additional risks than if the underlying securities were held directly. Such risks include gains or losses which, as a result of leverage, can be substantially greater than the derivatives’ original cost. There is also a possibility that derivatives may not perform as intended which can reduce opportunity for gain or result in losses by offsetting positive returns in other securities.
Foreign securities have additional risks including exchange rate changes, political and economic upheaval, the relative lack of information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards. These risks are magnified in emerging markets. The prices of foreign securities held by the fund, and therefore a fund’s performance, may decline in response to such risks.
The Portfolio will normally invest at least 80% of its net assets, measured at the time of purchase, in the type of securities described by its name.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
See important disclosures on the next page.
6 | DECEMBER 31, 2013
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(unaudited)
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.
Net dividends reinvested are the dividends that remain to be reinvested after foreign tax obligations have been met. Such obligations vary from country to country.
Ranking is for the share class shown only; other classes may have different performance characteristics.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
* | The Portfolio’s inception date – May 2, 1994 | |
** | Since inception return is not shown for the index because the index’s inception date differs significantly from the Portfolio’s inception date. |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,181.20 | $ | 2.86 | $ | 1,000.00 | $ | 1,022.58 | $ | 2.65 | 0.52% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,179.80 | $ | 4.23 | $ | 1,000.00 | $ | 1,021.32 | $ | 3.92 | 0.77% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Overseas Portfolio
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Common Stock – 97.1% | ||||||||||
Air Freight & Logistics – 1.5% | ||||||||||
126,574 | Panalpina Welttransport Holding A.G. | $ | 21,218,673 | |||||||
Airlines – 7.2% | ||||||||||
1,057,482 | Delta Air Lines, Inc. | 29,049,031 | ||||||||
1,952,052 | United Continental Holdings, Inc.*,** | 73,846,127 | ||||||||
102,895,158 | ||||||||||
Automobiles – 0.2% | ||||||||||
1,129,300 | SAIC Motor Corp., Ltd.ß | 2,637,688 | ||||||||
Capital Markets – 1.4% | ||||||||||
425,865 | Deutsche Bank A.G. | 20,313,179 | ||||||||
Commercial Banks – 5.4% | ||||||||||
932,963 | Axis Bank, Ltd. | 19,602,782 | ||||||||
1,637,655 | Punjab National Bank | 16,587,049 | ||||||||
775,263 | State Bank of India | 22,142,314 | ||||||||
792,604 | TCS Group Holding PLC (GDR)* | 12,443,883 | ||||||||
1,124,139 | Turkiye Halk Bankasi A/S | 6,364,533 | ||||||||
77,140,561 | ||||||||||
Communications Equipment – 4.2% | ||||||||||
4,913,195 | Telefonaktiebolaget L.M. Ericsson – Class B** | 59,983,174 | ||||||||
Construction & Engineering – 1.1% | ||||||||||
9,553,400 | Louis XIII Holdings, Ltd. | 9,622,395 | ||||||||
922,819 | UGL, Ltd. | 6,021,967 | ||||||||
15,644,362 | ||||||||||
Diversified Financial Services – 2.1% | ||||||||||
510,200 | Japan Exchange Group, Inc.** | 14,483,691 | ||||||||
2,702,552 | Reliance Capital, Ltd. | 15,793,652 | ||||||||
30,277,343 | ||||||||||
Electrical Equipment – 1.1% | ||||||||||
1,242,927 | Havells India, Ltd. | 15,893,791 | ||||||||
Food & Staples Retailing – 0.8% | ||||||||||
712,669 | X5 Retail Group N.V. (GDR)* | 11,951,459 | ||||||||
Food Products – 0.1% | ||||||||||
46,586,847 | Chaoda Modern Agriculture Holdings, Ltd.ß | 1,982,675 | ||||||||
Hotels, Restaurants & Leisure – 4.6% | ||||||||||
6,566,400 | Melco Crown Philippines Resorts Corp.* | 2,024,529 | ||||||||
6,886,465 | Melco International Development, Ltd. | 25,311,356 | ||||||||
302,885 | Orascom Development Holding A.G. | 4,941,665 | ||||||||
16,913,835 | Shangri-La Asia, Ltd. | 32,981,324 | ||||||||
65,258,874 | ||||||||||
Household Durables – 2.5% | ||||||||||
430,900 | Iida Group Holdings Co., Ltd.** | 8,602,449 | ||||||||
6,586,500 | MRV Engenharia e Participacoes S.A. | 23,538,172 | ||||||||
5,510,620 | PDG Realty S.A. Empreendimentos e Participacoes | 4,228,336 | ||||||||
36,368,957 | ||||||||||
Independent Power Producers & Energy Traders – 0.3% | ||||||||||
7,057,844 | Adani Power, Ltd.* | 4,444,673 | ||||||||
Industrial Conglomerates – 2.4% | ||||||||||
19,347,985 | John Keells Holdings PLC | 33,635,159 | ||||||||
Information Technology Services – 1.4% | ||||||||||
346,395 | QIWI PLC (ADR) | 19,398,120 | ||||||||
Internet & Catalog Retail – 4.3% | ||||||||||
675,211 | Ctrip.com International, Ltd. (ADR)* | 33,503,970 | ||||||||
1,894,700 | Rakuten, Inc.** | 28,144,276 | ||||||||
61,648,246 | ||||||||||
Internet Software & Services – 2.4% | ||||||||||
1,138,888 | Youku Tudou, Inc. (ADR)* | 34,508,306 | ||||||||
Machinery – 0.8% | ||||||||||
220,253 | Vallourec S.A. | 11,997,935 | ||||||||
Media – 1.0% | ||||||||||
668,900 | Fuji Media Holdings, Inc.** | 13,658,800 | ||||||||
Metals & Mining – 3.8% | ||||||||||
7,411,959 | Fortescue Metals Group, Ltd. | 38,508,839 | ||||||||
3,376,046 | Hindustan Zinc, Ltd. | 7,232,435 | ||||||||
2,586,335 | Turquoise Hill Resources, Ltd.* | 8,547,251 | ||||||||
54,288,525 | ||||||||||
Oil, Gas & Consumable Fuels – 18.0% | ||||||||||
1,118,325 | Africa Oil Corp.* | 9,718,614 | ||||||||
848,054 | Africa Oil Corp. – Private Placement*,§ | 7,352,993 | ||||||||
2,465,335 | Athabasca Oil Corp.* | 15,041,306 | ||||||||
1,218,001 | Cobalt International Energy, Inc.* | 20,036,116 | ||||||||
1,343,952 | Karoon Gas Australia, Ltd.* | 5,206,884 | ||||||||
959,383 | Niko Resources, Ltd.* | 2,294,353 | ||||||||
6,400,377 | Ophir Energy PLC* | 34,737,546 | ||||||||
1,942,248 | Pacific Rubiales Energy Corp. | 33,538,112 | ||||||||
3,954,905 | Petroleo Brasileiro S.A. (ADR)** | 54,498,591 | ||||||||
5,114,549 | Reliance Industries, Ltd. | 74,026,585 | ||||||||
256,451,100 | ||||||||||
Pharmaceuticals – 7.4% | ||||||||||
316,966 | Endo Health Solutions, Inc.* | 21,382,526 | ||||||||
9,752,300 | Genomma Lab Internacional S.A.B. de C.V. – Class B* | 27,373,566 | ||||||||
426,361 | Jazz Pharmaceuticals PLC* | 53,960,248 | ||||||||
434,317 | Strides Arcolab, Ltd. | 2,529,361 | ||||||||
105,245,701 | ||||||||||
Real Estate Investment Trusts (REITs) – 1.1% | ||||||||||
4,945,900 | Concentradora Fibra Hotelera Mexicana S.A. de C.V. | 7,923,145 | ||||||||
7,822,186 | Emlak Konut Gayrimenkul Yatirim Ortakligi A/S | 7,654,516 | ||||||||
15,577,661 | ||||||||||
Real Estate Management & Development – 4.7% | ||||||||||
12,635,525 | DLF, Ltd. | 34,055,651 | ||||||||
86,676,732 | Evergrande Real Estate Group, Ltd. | 33,087,842 | ||||||||
67,143,493 | ||||||||||
Road & Rail – 0.6% | ||||||||||
499,327 | Globaltrans Investment PLC (GDR) | 7,939,299 | ||||||||
Semiconductor & Semiconductor Equipment – 4.0% | ||||||||||
2,884,056 | ARM Holdings PLC | 52,479,056 | ||||||||
581,300 | Sumco Corp.** | 5,123,434 | ||||||||
57,602,490 | ||||||||||
Software – 5.3% | ||||||||||
1,999,200 | Nexon Co., Ltd.** | 18,455,906 | ||||||||
430,100 | Nintendo Co., Ltd.** | 57,229,566 | ||||||||
75,685,472 | ||||||||||
Textiles, Apparel & Luxury Goods – 6.1% | ||||||||||
68,129,940 | Li & Fung, Ltd. | 87,864,251 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares | Value | |||||||||
Trading Companies & Distributors – 1.3% | ||||||||||
4,383,510 | Adani Enterprises, Ltd. | $ | 18,604,226 | |||||||
Total Common Stock (cost $1,418,023,814) | 1,387,259,351 | |||||||||
Warrants – 0.1% | ||||||||||
Industrial Conglomerates – 0.1% | ||||||||||
348,229 | John Keells Holdings PLC* expires 11/12/15 | 213,065 | ||||||||
348,229 | John Keells Holdings PLC* expires 11/11/16 | 251,684 | ||||||||
Total Warrants (cost $165,463) | 464,749 | |||||||||
Money Market – 0.7% | ||||||||||
10,292,000 | Janus Cash Liquidity Fund LLC, 0%£ (cost $10,292,000) | 10,292,000 | ||||||||
Total Investments (total cost $1,428,481,277) – 97.9% | 1,398,016,100 | |||||||||
Cash, Receivables and Other Assets, net of Liabilities** – 2.1% | 30,203,843 | |||||||||
Net Assets – 100% | $ | 1,428,219,943 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Australia | $ | 49,737,690 | 3.6% | |||||
Brazil | 82,265,099 | 5.9% | ||||||
Canada | 76,492,629 | 5.5% | ||||||
China | 105,720,481 | 7.6% | ||||||
France | 11,997,935 | 0.9% | ||||||
Germany | 20,313,179 | 1.5% | ||||||
Hong Kong | 155,779,326 | 11.1% | ||||||
India | 230,912,519 | 16.5% | ||||||
Japan | 145,698,122 | 10.4% | ||||||
Mexico | 35,296,711 | 2.5% | ||||||
Philippines | 2,024,529 | 0.1% | ||||||
Russia | 51,732,761 | 3.7% | ||||||
Sri Lanka | 34,099,908 | 2.4% | ||||||
Sweden | 59,983,174 | 4.3% | ||||||
Switzerland | 26,160,338 | 1.9% | ||||||
Turkey | 14,019,049 | 1.0% | ||||||
United Kingdom | 87,216,602 | 6.2% | ||||||
United States†† | 208,566,048 | 14.9% | ||||||
Total | $ | 1,398,016,100 | 100.0% |
†† | Includes Cash Equivalents of 0.7%. |
Forward Currency Contracts, Open
Currency Units | Currency | Unrealized | ||||||||||
Counterparty/Currency and Settlement Date | Sold | Value U.S. $ | Appreciation | |||||||||
Credit Suisse International: Japanese Yen 1/9/14 | 5,325,000,000 | $ | 50,575,260 | $ | 2,483,238 | |||||||
HSBC Securities (USA), Inc.: Japanese Yen 1/16/14 | 4,855,000,000 | 46,113,435 | 1,011,964 | |||||||||
JPMorgan Chase & Co.: Japanese Yen 1/23/14 | 5,231,000,000 | 49,686,991 | 952,961 | |||||||||
RBC Capital Markets Corp.: Japanese Yen 1/16/14 | 3,840,000,000 | 36,472,831 | 840,240 | |||||||||
Total | $ | 182,848,517 | $ | 5,288,403 | ||||||||
Total Return Swaps outstanding at December 31, 2013
Notional | Return Paid | Return Received | Unrealized | ||||||||||||
Counterparty | Amount | by the Portfolio | by the Portfolio | Termination Date | Appreciation | ||||||||||
Credit Suisse International: | $13,455,706 | 1 month USD LIBOR plus 75 basis points | Moscow Exchange | 8/22/14 | $ | 214,077 | |||||||||
Morgan Stanley & Co. International PLC | 5,760,188,206 JPY | 1 day JPY LIBOR plus 50 basis points | Mitsubishi UFJ Financial Group, Inc.; Mizuho Financial Group, Inc.; Sumitomo Mitsui Financial Group, Inc. | 12/30/14 | 4,914,150 | ||||||||||
Morgan Stanley & Co. International PLC | 22,881,328 | 1 month USD LIBOR plus 85 basis points | Sberbank of Russia | 1/20/15 | 75,900 | ||||||||||
UBS A.G. | 25,265,405 | 1 month USD LIBOR plus 95 basis points | Sberbank of Russia | 9/16/14 | 350,414 | ||||||||||
Total | $ | 5,554,541 | |||||||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Notes to Schedule of Investments and Other Information
MSCI All Country World ex-U.S. IndexSM | An unmanaged, free float-adjusted market capitalization weighted index composed of stocks of companies located in countries throughout the world, excluding the United States. It is designed to measure equity market performance in global developed and emerging markets outside the United States. The index includes reinvestment of dividends, net of foreign withholding taxes. | |
MSCI EAFE® Index | A free float-adjusted market capitalization weighted index designed to measure developed market equity performance. The MSCI EAFE® Index is composed of companies representative of the market structure of developed market countries. The index includes reinvestment of dividends, net of foreign withholding taxes. | |
ADR | American Depositary Receipt | |
GDR | Global Depositary Receipt | |
LIBOR | London Interbank Offered Rate | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust |
* | Non-income producing security. | |
** | A portion of this security or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Overseas Portfolio | $ | 339,893,028 | |||
ß | Security is illiquid. |
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2013) |
Acquisition | Acquisition | Value as a | ||||||||
Date | Cost | Value | % of Net Assets | |||||||
Janus Aspen Overseas Portfolio | ||||||||||
Africa Oil Corp. – Private Placement | 10/17/13 | $6,845,546 | $7,352,993 | 0.5% | ||||||
The Portfolio has registration rights for certain restricted securities held as of December 31, 2013. The issuer incurs all registration costs.
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Overseas Portfolio | |||||||||||||||||||||
Janus Cash Liquidity Fund LLC | 397,468,287 | $ | 397,468,287 | (389,747,287) | $ | (389,747,287) | $ | – | $ | 9,946 | $ | 10,292,000 | |||||||||
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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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Overseas Portfolio | |||||||||||
Common Stock | |||||||||||
Food Products | $ | – | $ | – | $ | 1,982,675 | |||||
Oil, Gas & Consumable Fuels | 249,098,107 | 7,352,993 | – | ||||||||
All Other | 1,128,825,576 | – | – | ||||||||
Warrants | 464,749 | – | – | ||||||||
Money Market | – | 10,292,000 | – | ||||||||
Total Investments in Securities | $ | 1,378,388,432 | $ | 17,644,993 | $ | 1,982,675 | |||||
Other Financial Instruments(a) – Assets: | |||||||||||
Forward Currency Contracts | $ | – | $ | 5,288,403 | $ | – | |||||
Outstanding Swap Contracts at Value | – | 5,554,541 | – | ||||||||
(a) | Other financial instruments include futures, forward currency, written options, and swap contracts. Forward currency contracts and swap contracts are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contract’s value from trade date. Futures are reported at their variation margin at measurement date, which represents the amount due to/from the Portfolio at that date. Options are reported at their market value at measurement date. |
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Statement of Assets and Liabilities
Janus Aspen | ||||||||||
As of December 31, 2013 | Overseas | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 1,428,481 | ||||||||
Unaffiliated investments at value | $ | 1,387,724 | ||||||||
Affiliated investments at value | 10,292 | |||||||||
Cash | 21 | |||||||||
Cash denominated in foreign currency(1) | – | |||||||||
Restricted cash (Note 1) | 20,593 | |||||||||
Receivables: | ||||||||||
Investments sold | 998 | |||||||||
Portfolio shares sold | 385 | |||||||||
Dividends | 142 | |||||||||
Foreign dividend tax reclaim | 472 | |||||||||
Outstanding swap contracts at value | 5,555 | |||||||||
Non-interested Trustees’ deferred compensation | 28 | |||||||||
Other assets | 45 | |||||||||
Forward currency contracts | 5,288 | |||||||||
Total Assets | 1,431,543 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Portfolio shares repurchased | 2,257 | |||||||||
Advisory fees | 576 | |||||||||
Fund administration fees | 12 | |||||||||
Internal servicing cost | 1 | |||||||||
Distribution fees and shareholder servicing fees | 211 | |||||||||
Non-interested Trustees’ fees and expenses | 7 | |||||||||
Non-interested Trustees’ deferred compensation fees | 28 | |||||||||
Accrued expenses and other payables | 231 | |||||||||
Total Liabilities | 3,323 | |||||||||
Net Assets | $ | 1,428,220 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 1,292,736 | ||||||||
Undistributed net investment income* | 30,016 | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 125,082 | |||||||||
Unrealized net depreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | (19,614) | |||||||||
Total Net Assets | $ | 1,428,220 | ||||||||
Net Assets - Institutional Shares | $ | 453,796 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 10,799 | |||||||||
Net Asset Value Per Share | $ | 42.02 | ||||||||
Net Assets - Service Shares | $ | 974,424 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 23,814 | |||||||||
Net Asset Value Per Share | $ | 40.92 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Includes cost of $152. |
See Notes to Financial Statements.
12 | DECEMBER 31, 2013
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Statement of Operations
Janus Aspen | ||||||
For the year ended December 31, 2013 | Overseas | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Dividends | $ | 26,105 | ||||
Dividends from affiliates | 10 | |||||
Other Income | 7 | |||||
Foreign tax withheld | (1,153) | |||||
Total Investment Income | 24,969 | |||||
Expenses: | ||||||
Advisory fees | 6,378 | |||||
Internal servicing expense - Institutional Shares | 4 | |||||
Internal servicing expense - Service Shares | 8 | |||||
Shareholder reports expense | 280 | |||||
Transfer agent fees and expenses | 2 | |||||
Registration fees | 10 | |||||
Custodian fees | 294 | |||||
Professional fees | 74 | |||||
Non-interested Trustees’ fees and expenses | 13 | |||||
Fund administration fees | 143 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 2,436 | |||||
Other expenses | 73 | |||||
Total Expenses | 9,715 | |||||
Net Expenses after Waivers and Expense Offsets | 9,715 | |||||
Net Investment Income | 15,254 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 152,018 | |||||
Net realized gain from swap contracts | 25,906 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | (5,906) | |||||
Change in unrealized net appreciation/(depreciation) of swap contracts | 2,467 | |||||
Net Gain on Investments | 174,485 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 189,739 |
See Notes to Financial Statements.
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Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Overseas | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 15,254 | $ | 14,258 | ||||||
Net realized gain from investment and foreign currency transactions | 177,924 | 81,680 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | (3,439) | 99,944 | ||||||||
Net Increase in Net Assets Resulting from Operations | 189,739 | 195,882 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (14,252) | (3,418) | ||||||||
Service Shares | (29,616) | (6,389) | ||||||||
Service II Shares | N/A | – | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | – | (52,074) | ||||||||
Service Shares | – | (114,512) | ||||||||
Service II Shares | N/A | – | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (43,868) | (176,393) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 20,881 | 41,888 | ||||||||
Service Shares(1) | 71,773 | 301,398 | ||||||||
Service II Shares | N/A | 5,171 | ||||||||
Redemption Fees | ||||||||||
Service II Shares | N/A | 9 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 14,252 | 55,492 | ||||||||
Service Shares | 29,616 | 120,901 | ||||||||
Service II Shares | N/A | – | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (119,911) | (84,612) | ||||||||
Service Shares | (243,707) | (291,726) | ||||||||
Service II Shares(1) | N/A | (207,795) | ||||||||
Net Decrease from Capital Share Transactions | (227,096) | (59,274) | ||||||||
Net Decrease in Net Assets | (81,225) | (39,785) | ||||||||
Net Assets: | ||||||||||
Beginning of period | 1,509,445 | 1,549,230 | ||||||||
End of period | $ | 1,428,220 | $ | 1,509,445 | ||||||
Undistributed Net Investment Income* | $ | 30,016 | $ | 35,116 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Effective April 27, 2012, Service II Shares of the Portfolio were converted to Service Shares. This was accomplished by a tax-free exchange of 4,581,576 Service II Shares (valued at $194,963,005) for 4,609,055 Service Shares. |
See Notes to Financial Statements.
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Financial Highlights
Institutional Shares
Janus Aspen Overseas Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $37.96 | $38.15 | $57.10 | $45.89 | $26.49 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 1.40 | 0.98 | 0.42 | 0.41 | 0.43 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.91 | 3.39 | (18.65) | 11.15 | 20.22 | |||||||||||||||||
Total from Investment Operations | 5.31 | 4.37 | (18.23) | 11.56 | 20.65 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (1.25) | (0.27) | (0.23) | (0.35) | (0.21) | |||||||||||||||||
Distributions (from capital gains)* | – | (4.29) | (0.49) | – | (1.04) | |||||||||||||||||
Total Distributions | (1.25) | (4.56) | (0.72) | (0.35) | (1.25) | |||||||||||||||||
Net Asset Value, End of Period | $42.02 | $37.96 | $38.15 | $57.10 | $45.89 | |||||||||||||||||
Total Return | 14.56% | 13.59% | (32.25)% | 25.33% | 79.15% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $453,796 | $492,360 | $473,616 | $751,518 | $716,237 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $458,592 | $490,614 | $632,218 | $708,368 | $554,581 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.51% | 0.49% | 0.65% | 0.68% | 0.70% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.51% | 0.49% | 0.65% | 0.68% | 0.70% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 1.23% | 1.09% | 0.66% | 0.47% | 0.64% | |||||||||||||||||
Portfolio Turnover Rate | 30% | 36% | 32% | 30% | 44% |
Service Shares
Janus Aspen Overseas Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $37.03 | $37.38 | $56.04 | $45.08 | $26.07 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 1.12 | 0.87 | 0.27 | 0.20 | 0.34 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.96 | 3.31 | (18.25) | 11.03 | 19.86 | |||||||||||||||||
Total from Investment Operations | 5.08 | 4.18 | (17.98) | 11.23 | 20.20 | |||||||||||||||||
Less Distributions: | ||||||||||||||||||||||
Dividends (from net investment income)* | (1.19) | (0.24) | (0.19) | (0.27) | (0.15) | |||||||||||||||||
Distributions (from capital gains)* | – | (4.29) | (0.49) | – | (1.04) | |||||||||||||||||
Total Distributions | (1.19) | (4.53) | (0.68) | (0.27) | (1.19) | |||||||||||||||||
Net Asset Value, End of Period | $40.92 | $37.03 | $37.38 | $56.04 | $45.08 | |||||||||||||||||
Total Return | 14.28% | 13.30% | (32.41)% | 25.02% | 78.66% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $974,424 | $1,017,085 | $896,544 | $1,475,804 | $1,254,824 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $971,802 | $998,304 | $1,232,913 | $1,328,827 | $1,001,144 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.76% | 0.74% | 0.90% | 0.93% | 0.95% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.76% | 0.74% | 0.90% | 0.93% | 0.95% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 0.99% | 0.89% | 0.41% | 0.21% | 0.39% | |||||||||||||||||
Portfolio Turnover Rate | 30% | 36% | 32% | 30% | 44% |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
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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 (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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in equity securities. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which
16 | DECEMBER 31, 2013
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may be allocated pro rata to the Portfolio. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Restricted Cash
As of December 31, 2013, Janus Aspen Overseas Portfolio had restricted cash in the amount of $20,593,376. The restricted cash represents collateral received in relation to swap contracts invested in by the Portfolio at December 31, 2013 as well as investment quota for China A Shares. The carrying value of the restricted cash approximates fair value.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices
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Notes to Financial Statements (continued)
for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold a material amount of Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out of | ||||||
Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Overseas Portfolio | $ | 909,587,192 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year. Financial assets were transferred out of Level 2 to Level 1 as the current market for the securities with quoted prices are considered active.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
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2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. | |
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, |
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Notes to Financial Statements (continued)
such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. |
• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
Forward Foreign Currency Exchange Contracts
A forward foreign currency exchange contract (“forward currency contract”) is an obligation to buy or sell a specified currency at a future date at a negotiated rate (which may be U.S. dollars or a foreign currency). The Portfolio may enter into forward currency contracts for hedging purposes, including, but not limited to, reducing exposure to changes in foreign currency exchange rates on foreign portfolio holdings and locking in the U.S. dollar cost of firm purchase and sale commitments for securities denominated in or exposed to foreign currencies. The Portfolio may also invest in forward currency contracts for nonhedging purposes such as seeking to enhance returns. The Portfolio is subject to currency risk in the normal course of pursuing its investment objective through its investments in forward currency contracts.
The gain or loss arising from the difference between the U.S. dollar cost of the original contract and the value of the foreign currency in U.S. dollars upon closing a contract is included in “Net realized gain/(loss) from investment and foreign currency transactions” on the Statement of Operations (if applicable).
Swaps
A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset. The Portfolio may utilize swap agreements as a means to gain exposure to certain common stocks and/or to “hedge” or protect its portfolio from adverse movements in securities prices or interest rates. The Portfolio is subject to equity risk and interest rate risk in the normal course of pursuing its investment objective through investments in swap contracts. Swap agreements entail the risk that a party will default on its payment obligation to the Portfolio. If the other party to a swap defaults, the Portfolio would risk the loss of the net amount of the payments that it contractually is entitled to receive. If the Portfolio utilizes a swap at the wrong time or judges market conditions incorrectly, the swap may result in a loss to the Portfolio and reduce the Portfolio’s total return. Swap agreements traditionally were privately negotiated and entered into in the OTC market. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) of 2010 now requires certain swap agreements to be cleared through a clearinghouse and traded on an exchange or swap execution facility. New regulations under the Dodd-Frank Act could, among other things, increase the cost of such transactions. Swap contracts of the Portfolio are reported as an asset or liability on the Statement of Assets and Liabilities. Realized gains and losses of the Portfolio are reported in “Net realized gain/(loss) from swap contracts” on the Statement of Operations.
Total return swaps involve an exchange by two parties in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains over the payment period.
The Portfolio’s maximum risk of loss for total return swaps from counterparty risk or credit risk is the discounted value of the payments to be received from/paid to the counterparty over the contract’s remaining life, to the extent that the amount is positive. The risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by the posting of collateral to the Portfolio to cover the Portfolio’s exposure to the counterparty.
The following table, grouped by derivative type, provides information about the fair value and location of derivatives within the Statement of Assets and Liabilities as of December 31, 2013.
Fair Value of Derivative Instruments as of December 31, 2013
Derivatives not accounted | Asset Derivatives | |||||||
for as hedging instruments | Statement of Assets and Liabilities Location | Fair Value | ||||||
Janus Aspen Overseas Portfolio | ||||||||
Equity Contracts | Outstanding swap contracts at value | $ | 5,554,541 | |||||
Foreign Exchange Contracts | Forward currency contracts | 5,288,403 | ||||||
Total | $ | 10,842,944 | ||||||
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The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||
Derivatives not accounted for as | Investment and foreign | |||||||||||
hedging instruments | currency transactions | Swap contracts | Total | |||||||||
Janus Aspen Overseas Portfolio | ||||||||||||
Equity Contracts | $ | – | $ | 25,906,498 | $ | 25,906,498 | ||||||
Foreign Exchange Contracts | 32,585,697 | – | 32,585,697 | |||||||||
Total | $ | 32,585,697 | $ | 25,906,498 | $ | 58,492,195 | ||||||
Change in Unrealized Net Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||
Investments, foreign | ||||||||||||
currency translations and | ||||||||||||
Derivatives not accounted for as | non-interested Trustees’ | |||||||||||
hedging instruments | deferred compensation | Swap contracts | Total | |||||||||
Janus Aspen Overseas Portfolio | ||||||||||||
Equity Contracts | $ | – | $ | 2,466,829 | $ | 2,466,829 | ||||||
Foreign Exchange Contracts | (2,565,825 | ) | – | (2,565,825 | ) | |||||||
Total | $ | (2,565,825 | ) | $ | 2,466,829 | $ | (98,996 | ) | ||||
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 financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Act is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other
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Notes to Financial Statements (continued)
weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
China A Shares
The Chinese government may permit a foreign investor to invest in China A Shares as a licensed Qualified Foreign Institutional Investor (“QFII”). QFII licenses are granted by the China Securities Regulatory Commission and investment quota is granted by the State Administration of Foreign Exchange. Janus Capital has been granted a QFII license and investment quota.
People’s Republic of China (“PRC”) regulations require QFIIs to entrust assets held in the PRC and to interact with government agencies through a China-based qualified custodian bank. Assets attributable to clients of Janus Capital will be held by the custodian in foreign exchange accounts and securities accounts in the joint name of Janus Capital and its clients, although the terms of the custody agreement make clear that the contents of the accounts belong to the clients, and not to Janus Capital.
During the year ended December 31, 2013, Janus Capital, in its capacity as a QFII, invested in China A Shares on behalf of the Portfolio. With respect to direct China A Shares investments, as a general matter, any capital invested and profits generated cannot be repatriated for a minimum of one year. Repatriation of any invested capital is subject to approval by the regulator. Additionally, any repatriation of profits would be subject to an audit by a registered accountant in China, and subject to regulatory approval. In light of the foregoing, the Portfolio’s investment in China A Shares would be subject to the Portfolio’s limit of investing up to 15% of its net assets in illiquid investments. Current Chinese tax law is unclear whether capital gains realized on the Portfolio’s investments in A shares will be subject to tax. Because management believes it is more likely than not that Chinese capital gains tax ultimately will not be imposed, the Portfolio does not accrue for such taxes.
As of December 31, 2013, the Portfolio had allocated investment quota of $5,729. The Portfolio is subject to certain restrictions and administrative processes relating to its ability to repatriate cash balances and may incur substantial delays in gaining access to its assets.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Emerging Market Investing
The Portfolio may invest in securities of issuers or companies from or with exposure to one or more “developing countries” or “emerging markets.” Investing in emerging markets may involve certain risks and considerations not typically associated with investing in the United States and imposes risks greater than, or in addition to, the risks associated with investing in securities of more developed foreign countries. Emerging markets securities are exposed to a number of additional risks, which may result from less government supervision and regulation of business and industry practices (including the potential lack of strict finance and accounting controls and standards), stock exchanges, brokers, and listed companies, making these investments potentially more volatile in price and less liquid than investments in developed securities markets, resulting in greater risk to investors. There is a risk in developing countries that a future economic or political crisis could lead to price
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controls, forced mergers of companies, expropriation or confiscatory taxation, imposition or enforcement of foreign ownership limits, seizure, nationalization, or creation of government monopolies, any of which may have a detrimental effect on the Portfolio’s investments. In addition, the Portfolio’s investments may be denominated in foreign currencies and therefore, changes in the value of a country’s currency compared to the U.S. dollar may affect the value of the Portfolio’s investments. To the extent that the Portfolio invests a significant portion of its assets in the securities of issuers in or companies of a single country or region, it is more likely to be impacted by events or conditions affecting that country or region, which could have a negative impact on the Portfolio’s performance. Additionally, foreign and emerging market risks, including but not limited to price controls, expropriation or confiscatory taxation, imposition or enforcement of foreign ownership limits, nationalization, and restrictions on repatriation of assets may be heightened to the extent the Portfolio invests in Chinese local market securities (also known as “A Shares”).
Offsetting Assets and Liabilities
The Portfolio has recently adopted guidance requiring entities to present gross and net information about transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. Note that for financial reporting purposes, the Portfolio does not offset certain derivative financial instrument’s payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following tables present gross amounts of recognized assets and liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable).
Offsetting of Financial Assets and Derivative Assets
Gross Amounts Offset in the | ||||||||||||||
Counterparty | Gross Amounts of Recognized Assets | Statement of Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
Credit Suisse International | $ | 2,697,315 | $ | – | $ | – | $ | 2,697,315 | ||||||
HSBC Securities (USA), Inc. | 1,011,964 | – | – | 1,011,964 | ||||||||||
JPMorgan Chase & Co. | 952,961 | – | – | 952,961 | ||||||||||
Morgan Stanley & Co. International PLC | 4,990,050 | – | – | 4,990,050 | ||||||||||
RBC Capital Markets Corp. | 840,240 | – | – | 840,240 | ||||||||||
UBS A.G. | 350,414 | – | – | 350,414 | ||||||||||
Total | $ | 10,842,944 | $ | – | $ | – | $ | 10,842,944 | ||||||
* | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
The Portfolio does not require the counterparty to post collateral for forward currency contracts; however, the Portfolio will segregate cash or high-grade securities with its custodian in an amount at all times equal to or greater than the Portfolio’s commitment with respect to these contracts. Such segregated assets are denoted on the accompanying Schedule of Investments and are evaluated daily to ensure their market value equals or exceeds the current market value of the Portfolio’s corresponding forward currency contracts.
The Portfolio may require the counterparty to pledge securities as collateral daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized gain on OTC derivative contracts with a particular counterparty. The Portfolio may deposit cash as collateral with the counterparty and/or custodian daily (based on the daily valuation of the financial asset) if the Portfolio has a net aggregate unrealized loss on OTC derivative contacts with a particular counterparty. The collateral amounts are subject to minimum exposure requirements and initial margin requirements. Collateral amounts are monitored and subsequently adjusted up or down as valuations fluctuate by at least the minimum exposure requirement. Collateral reduces the risk of loss.
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Notes to Financial Statements (continued)
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other equity securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
Restricted Security Transactions
Restricted securities held by the Portfolio may not be sold except in exempt transactions or in a public offering registered under the Securities Act of 1933, as amended. The risk of investing in such securities is generally greater than the risk of investing in the securities of widely held, publicly traded companies. Lack of a secondary market and resale restrictions may result in the inability of the Portfolio to sell a security at a fair price and may substantially delay the sale of the security. In addition, these securities may exhibit greater price volatility than securities for which secondary markets exist.
4. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Base Fee | |||||
Rate (%) | |||||
Portfolio | (annual rate) | ||||
Janus Aspen Overseas Portfolio | 0.64 | ||||
For the Portfolio, the investment advisory fee rate is determined by calculating a base fee and applying a performance adjustment. The base fee rate is the same as the contractual investment advisory fee rate shown in the table above. The performance adjustment either increases or decreases the base fee depending on how well the Portfolio has performed relative to its benchmark index, as shown below:
Portfolio | Benchmark Index | ||||
Janus Aspen Overseas Portfolio | MSCI All Country World ex-U.S. IndexSM | ||||
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance Adjustment
The investment advisory fee rate paid to Janus Capital by the Portfolio consists of two components: (1) a base fee calculated by applying the contractual fixed rate of the advisory fee to the Portfolio’s average daily net assets during the previous month (“Base Fee Rate”), plus or minus (2) a performance-fee adjustment (“Performance Adjustment”) calculated by applying a variable rate of up to 0.15% (positive or negative) to the Portfolio’s average daily net assets during the applicable performance measurement period. The performance measurement period generally is the previous 36 months, although no Performance Adjustment is made until the Portfolio’s performance-based fee structure has been in effect for at least 15 months. When the Portfolio’s performance-based fee structure has been in effect for at least 15 months, but less than 36 months, the performance measurement period will be equal to the time that has elapsed since the performance-based fee structure took effect. Any applicable Performance Adjustment began October 2011 for the Portfolio.
No Performance Adjustment is applied unless the difference between the Portfolio’s investment performance and the cumulative investment record of the Portfolio’s benchmark index is 0.50% or greater (positive or negative) during the applicable performance measurement period. The Base Fee Rate is subject to an upward or downward Performance Adjustment for every full 0.50% increment by which the Portfolio outperforms or underperforms its benchmark index. Because the Performance Adjustment is tied to the Portfolio’s relative performance compared to its benchmark index (and not its absolute performance), the Performance Adjustment could increase Janus Capital’s fee even if the Portfolio’s Shares lose value during the performance measurement period and could decrease Janus Capital’s fee even if the Portfolio’s Shares increase in value during the performance measurement period. For purposes of computing the Base Fee Rate and the Performance Adjustment, net assets are averaged over different periods (average daily net assets during the previous month for the Base Fee Rate, versus average daily net assets during the performance measurement period for the Performance Adjustment). Performance of the Portfolio is calculated net of expenses, whereas the Portfolio’s benchmark index does not have any fees or expenses. Reinvestment of dividends and distributions is included in calculating both the performance of the Portfolio and the Portfolio’s benchmark index. The Base Fee Rate is calculated and accrued daily. The Performance Adjustment is calculated
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monthly in arrears and is accrued throughout the month. The investment fee is paid monthly in arrears. Under extreme circumstances involving underperformance by a rapidly shrinking Portfolio, the dollar amount of the Performance Adjustment could be more than the dollar amount of the Base Fee Rate. In such circumstances, Janus Capital would reimburse the Portfolio.
The investment performance of the Portfolio’s Service Shares for the performance measurement period is used to calculate the Performance Adjustment. After Janus Capital determines whether the Portfolio’s performance was above or below its benchmark index by comparing the investment performance of the Portfolio’s Service Shares against the cumulative investment record of the Portfolio’s benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance Adjustment on future overall compensation to Janus Capital since it depends on the performance of the Portfolio relative to the record of the Portfolio’s benchmark index and future changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional information contain additional information about performance-based fees. The amount shown as advisory fees on the Statement of Operations reflects the Base Fee Rate plus/minus any Performance Adjustment. During the year ended December 31, 2013, the Portfolio recorded a Performance Adjustment of $(2,801,862).
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013.
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Notes to Financial Statements (continued)
The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
5. | Federal Income Tax |
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 primarily 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. 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 | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | (Depreciation) | ||||||||||||||||
Janus Aspen Overseas Portfolio | $ | 77,503,300 | $ | 94,733,662 | $ | – | $ | – | $ | – | $ | (19,526) | $ | (36,733,258) | |||||||||
During the year ended December 31, 2013, the following capital loss carryovers were utilized by the Portfolio:
Capital Loss | ||||||||||||||
Portfolio | Carryover Utilized | |||||||||||||
Janus Aspen Overseas Portfolio | $ | 19,352,232 | ||||||||||||
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, 2013 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/(depreciation) on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in passive foreign investment companies.
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Overseas Portfolio | $ | 1,434,749,358 | $ | 325,935,298 | $ | (362,668,556) | |||||
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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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Overseas Portfolio | $ | 43,867,476 | $ | – | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Overseas Portfolio | $ | 9,807,602 | $ | 166,586,195 | $ | – | $ | – | |||||||||
6. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Overseas Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 534 | 1,060 | ||||||||
Reinvested dividends and distributions | 399 | 1,715 | ||||||||
Shares repurchased | (3,103) | (2,219) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (2,170) | 556 | ||||||||
Shares Outstanding, Beginning of Period | 12,969 | 12,413 | ||||||||
Shares Outstanding, End of Period | 10,799 | 12,969 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 1,894 | 2,883 | ||||||||
Shares sold – Service II Shares Conversion(1) | N/A | 4,609 | ||||||||
Reinvested dividends and distributions | 851 | 3,829 | ||||||||
Shares repurchased | (6,396) | (7,840) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (3,651) | 3,481 | ||||||||
Shares Outstanding, Beginning of Period | 27,465 | 23,984 | ||||||||
Shares Outstanding, End of Period | 23,814 | 27,465 | ||||||||
Transactions in Portfolio Shares – Service II Shares | ||||||||||
Shares sold | N/A | 113 | ||||||||
Reinvested dividends and distributions | N/A | – | ||||||||
Shares repurchased | N/A | (293) | ||||||||
Shares repurchased – Service II Shares Conversion(1) | N/A | (4,582) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | N/A | (4,762) | ||||||||
Shares Outstanding, Beginning of Period | N/A | 4,762 | ||||||||
Shares Outstanding, End of Period | N/A | – | ||||||||
(1) Effective April 27, 2012, Service II Shares of the Portfolio were converted to Service Shares. |
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Notes to Financial Statements (continued)
7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Overseas Portfolio | $ | 418,592,149 | $ | 635,981,051 | $ | – | $ | – | ||||||
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Janus Aspen Overseas Portfolio:
of Janus Aspen Overseas 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 Overseas Portfolio (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2013, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
Janus Aspen Series | 29
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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Additional Information (unaudited) (continued)
charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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Additional Information (unaudited) (continued)
• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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Additional Information (unaudited) (continued)
conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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Useful Information About Your Portfolio Report (unaudited) (continued)
such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Foreign Taxes Paid and Foreign Source Income
Portfolio | Foreign Taxes Paid | Foreign Source Income | ||||||||
Janus Aspen Overseas Portfolio | $ | 1,054,077 | $ | 25,861,108 | ||||||
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Overseas Portfolio | 2% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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Trustees and Officers (unaudited) (continued)
OFFICERS
Name, Address, and Age | Positions Held with the Trust | Term of Office* and Length of Time Served | Principal Occupations 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 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 | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55426 | 109-02-81120 02-14 |
Table of Contents
annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
PORTFOLIO SNAPSHOT We believe in the timeless adage of the power of compounding, and in doing so our focus is on mitigating losses in difficult markets. We invest in securities we believe to have favorable reward to risk ratios by focusing first on rigorous downside analysis prior to determining upside potential. We seek to outperform both our benchmark and peers over a full market cycle by building diversified portfolios of what we believe to be high-quality, undervalued stocks. | ![]() Tom Perkins co-portfolio manager | ![]() Jeff Kautz co-portfolio manager | ![]() Kevin Preloger co-portfolio manager |
PERFORMANCE OVERVIEW
During the 12 months ended December 31, 2013, Janus Aspen Perkins Mid Cap Value Portfolio’s Institutional Shares and Service Shares returned 26.09% and 25.81%, respectively, underperforming the Portfolio’s benchmark, the Russell Midcap Value Index, which returned 33.46%.
Our stocks did not fully participate in the rally, led by high beta (a measure of volatility) stocks. Within the benchmark, stocks with betas in the highest quintile rose over 38% for the year while those with betas in the lowest quintile were up less than 24%. The Portfolio is underweight the highest beta quintile with less than 10% exposure versus a 20% weighting for the Russell Midcap Value Index. On a sector basis, our stocks lagged the index’s holdings in information technology, materials and industrials. Stock selection within financials and energy was additive. Our underweight in utilities, the worst-performing sector for the index, was also beneficial. Our average 7.01% weighting in cash was also a key detractor, but we ended the year with around a 5% cash position.
During the fourth quarter, we reduced our health care weighting. We continue to be overweight the sector, but took gains in a number of stocks that had significant appreciation and whose risk/rewards had become less favorable. Financials were modestly reduced but this sector continues to be our largest exposure from an absolute weight perspective. We added to positions in the information technology, industrial and energy sectors.
MARKET COMMENTARY
The strong rally in the stock market in 2012’s second half extended into 2013. An agreement to push out Congress’ debt ceiling debate and clarity on tax policy helped open the year on a strong note. U.S. stocks continued to climb higher in the second quarter of 2013, but they took a volatile path to get there following Federal Reserve (Fed) Chairman Ben Bernanke’s comments that the central bank could begin reducing (tapering) its stimulative bond-buying program later in the year. In the third quarter, the Fed surprised the market by delaying tapering, which combined with an end to a partial government shutdown, led to a resumption of the year’s rally.
Several positive developments contributed to the continued market gains in the fourth quarter. Perhaps most importantly, continuing monetary easing policies kept interest rates at relatively low levels, and maintained the attractiveness of stocks compared to bonds. This was the case even after the December announcement that Fed monthly purchases of securities would be reduced from $85 billion to $75 billion beginning in January. The stock market’s short-term reaction to the announcement was positive and encouraging. The Fed indicated it was somewhat more comfortable with the state of the economy. Corroborating that comfort level was the subsequent revision to 4.1% from 3.6% (and originally estimated at 3.1%) growth in third quarter real gross domestic product (GDP). The other major element in the market’s perception of continuing accommodative monetary policy was the confirmation of Janet Yellen to succeed Bernanke as Fed chair. She is presumed to be at least as aggressive as Bernanke in being accommodative. All of these elements have removed some of the uncertainty about intermediate-term monetary policy.
Another enhancement of confidence was a compromise on the U.S. budget. This was a modest agreement, but it removed the potential for a major dislocation of government operations. The positive view is that there was an element of bipartisanship in the agreement and the influence of more partisan legislators seemed to be reduced. Also contributing to the positive backdrop was lack of further deterioration in the international political and economic environment.
While interest rates on 10-year Treasurys increased during the year from 1.75% to just over 3%, at year end the S&P 500 Index was selling at 1,849 and at 15.5x estimated 2014 earnings per share, has an earnings yield over 6%, and remains attractively valued relative to bonds.
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Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
On the other hand, at year end the cyclically-adjusted Shiller price earnings ratio is 40% higher than its historical mean. Meanwhile, there continues to be a significant number of unresolved long-term issues. As highlighted below, we believe the higher-quality issues that we emphasize are relatively attractively valued. We believe they have good appreciation potential while having less than average market risk.
STOCKS THAT HURT RESULTS
Goldcorp weighed the most on performance. Shares of this high-quality gold miner suffered, as the underlying spot gold price declined during the year. Goldcorp has among the lowest production costs and the best production growth outlook of any major gold miner as several major projects are expected to enter production in the next four years. Goldcorp also has a net debt-free balance sheet, and high-quality assets that are unlikely to need a write-down in value, unlike the actions its competitors have recently taken. With valuations based on tangible book value near multi-year lows, and spot prices below the all-in production costs of higher-cost competitors, we maintain a position.
Staying in materials, Teck Resources also detracted from performance. The Canadian metallurgical coal and copper producer was hit by significant oversupply, as the largest metallurgical coal producer, BHP, announced its intention to increase coal production from several new projects, despite deterioration in pricing. Those supply additions, in combination with increased domestic Chinese metallurgical coal production and a slowing Chinese economy, forced us to re-evaluate our downside and upside cases for the stock. As a result of our lower proprietary reward to risk ratio, we eliminated our position.
Global fertilizer provider Mosaic, another top detractor, sold off significantly after a global cartel that controls a significant portion of the potash market collapsed. Infighting between Russian producer Uralkali and Belarus-based Belarusian Potash Company over their joint venture led Uralkali to break up the partnership and expand its production. The end result was significantly lower prices for the commodity. On expectations that contract pricing for potash would decline substantially, the entire sector traded much lower. Given the deteriorating outlook for potash pricing and Mosaic’s higher cost structure relative to peers, we exited our position.
STOCKS THAT HELPED RESULTS
Thermo Fisher Scientific was our most significant contributor. The company manufactures scientific instruments, consumables, chemicals and re-agents for the pharmaceutical and biotech industry. Thermo Fisher, which continued to report strong results, is in the process of closing its acquisition of Life Technologies. We believe the addition will be meaningfully accretive, given the sales channel leverage and cost synergies in the combined entity, and will increase the company’s overall mix of recurring revenue. Although the stock has had a strong move up, we continue to hold a position given what we view as a relatively attractive risk-reward when considering its strong long-term fundamentals.
Ameriprise Financial was also a key contributor, as the financial planning and wealth management company enjoyed another year of strong returns. The strength of the equity market drove margin improvement and offset headwinds from asset management outflows. Capital generation and buybacks continued to be exceptionally strong as the company has reduced its share count by over 17% the past two years. We trimmed our position, as we felt the stock’s risk/reward profile became less attractive. We maintain a smaller position based on our belief the company is well positioned for growth and is well capitalized, generates strong free cash flow, and has been disciplined in returning capital to shareholders.
Vodafone Group also aided performance. One of the world’s largest mobile communications companies, Vodafone has over 360 million customers in 30 countries. A large part of the company’s value is derived from Western Europe, but it also has an extensive emerging market portfolio and a very significant 45% stake in the top mobile operator in the U.S., Verizon Wireless. We believed the valuation of Vodafone’s stake in Verizon Wireless was not properly reflected in the stock’s valuation, given the increasing and sustainable distributions of free cash flow to Vodafone and its joint venture partner Verizon Communications. During the third quarter of 2013, Vodafone agreed to sell its stake to Verizon Communications for a staggering $130 billion, and the share price responded favorably. We trimmed the position on strength, given the rally in the stock, but continue to believe that the remainder of Vodafone is still undervalued.
OUTLOOK AND POSITIONING
Our conclusion continues to be that, while the case for stocks relative to bonds remains strong, equities are not undervalued in the context of long-term metrics. We have benefited from the strength of the market and hope that it continues. The market’s momentum and the rotation from bonds to stocks could continue to take equities higher. The result in 2013 has been that the S&P 500’s gain is
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(unaudited)
the best since 1997 and third best in the last 30 years of our investing experience. It has been more than two years since the market had a 10% correction.
Whether up or down, increased volatility is likely. The CBOE VIX Index (a measure of market volatility) has fallen below 14, the lower end of its long-term range. The diminished level of market liquidity and increased share of volume taken by computer trading could exacerbate any volatility. In addition, the muted economic outlook both domestically and abroad, the inevitable rise in interest rates over the long term and political and economic uncertainty here (the debt ceiling decision is likely in the first quarter and could be contentious) and abroad (Middle East, emerging markets and Europe) inject an element of risk to the market. Longer term, the Fed’s ability to unwind its unprecedented monetary stimulus is a major question.
As outlined above, the valuation of the equity market is debatable. However, higher-quality stocks, which we define as those with strong balance sheets, cash flows, earnings stability and competitive position, are relatively attractive. Based on our analysis, these stocks have significantly underperformed since the 2009 market bottom. More volatile, leveraged and what we view as generally lower-quality issues have been much greater beneficiaries of stimulative monetary policy as they have been able to more easily refinance and have seen their interest costs decline. We historically have emphasized higher-quality stocks. We believe these stocks will hold up better in a meaningful market decline, while having significant participation in further market appreciation. A likely increase in merger and acquisition activity should benefit these stocks as it has this year and in past years. In the past, higher-quality stocks have regained favor in the middle part of the economic cycle, when profit margins have peaked, making earnings more unpredictable. We believe emphasizing quality results in a less volatile path of investment returns, which encourages investors to maintain a long-term perspective and avoid momentum influenced reallocations that could result in suboptimal results. We believe our disciplined approach mitigates downside risk while enabling us to participate in stronger markets and is a formula for compounding compelling long-term returns.
Thank you for your investment in Janus Aspen Perkins Mid Cap Value Portfolio.
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Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
Janus Aspen Perkins Mid Cap Value Portfolio At A Glance
5 Top Performers – Holdings
Contribution | ||||
Thermo Fisher Scientific, Inc. | 0.81% | |||
Ameriprise Financial, Inc. | 0.73% | |||
Vodafone Group PLC (ADR) | 0.73% | |||
Discover Financial Services | 0.66% | |||
McKesson Corp. | 0.65% |
5 Bottom Performers – Holdings
Contribution | ||||
Goldcorp, Inc. (U.S. Shares) | –0.40% | |||
Teck Resources, Ltd. – Class B | –0.32% | |||
Mosaic Co. | –0.22% | |||
Rayonier, Inc. | –0.20% | |||
American Campus Communities, Inc. | –0.18% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell Midcap® Value | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Financials | 1.77% | 30.73% | 31.73% | |||||||||
Utilities | 1.15% | 3.52% | 11.22% | |||||||||
Energy | 0.23% | 8.61% | 8.13% | |||||||||
Telecommunication Services | –0.14% | 1.97% | 0.99% | |||||||||
Consumer Staples | –0.26% | 3.59% | 3.87% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell Midcap® Value | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Other** | –3.04% | 7.01% | 0.00% | |||||||||
Information Technology | –2.05% | 9.11% | 10.32% | |||||||||
Materials | –1.12% | 1.87% | 5.56% | |||||||||
Industrials | –1.06% | 14.48% | 11.24% | |||||||||
Health Care | –0.81% | 12.46% | 7.78% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
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(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Torchmark Corp. Insurance | 2.1% | |||
Tyco International, Ltd. (U.S. Shares) Commercial Services & Supplies | 2.0% | |||
Raymond James Financial, Inc. Capital Markets | 2.0% | |||
PPL Corp. Electric Utilities | 2.0% | |||
CIT Group, Inc. Commercial Banks | 1.9% | |||
10.0% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
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Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
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Janus Aspen Perkins Mid Cap Value Portfolio (unaudited)
Performance
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Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||||
One | Five | Ten | Since | Total Annual Fund | |||||||
Year | Year | Year | Inception | Operating Expenses | |||||||
Janus Aspen Perkins Mid Cap Value Portfolio – Institutional Shares | 26.09% | 16.10% | 9.46% | 11.98%# | 0.58% | ||||||
Janus Aspen Perkins Mid Cap Value Portfolio – Service Shares | 25.81% | 15.70% | 9.10% | 11.32%* | 0.83% | ||||||
Russell Midcap® Value Index | 33.46% | 21.16% | 10.25% | 12.53%** | |||||||
Morningstar Quartile – Service Shares | 4th | 4th | 3rd | 3rd | |||||||
Morningstar Ranking – based on total returns for Mid-Cap Value Funds | 404/428 | 347/373 | 164/290 | 151/277 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
This Portfolio has a performance-based management fee that adjusts up or down based on the Portfolio’s performance relative to an approved benchmark index over a performance measurement period. See the Portfolio’s Prospectus or Statement of Additional Information for more details.
A Portfolio’s performance may be affected by risks that include those associated with nondiversification, non-investment grade debt securities, high-yield/high-risk securities, undervalued or overlooked companies, investments in specific industries or countries and potential conflicts of interest. Additional risks to a Portfolio may also include, but are not limited to, those associated with investing in foreign securities, emerging markets, initial public offerings, real estate investment trusts (REITs), derivatives, short sales, commodity-linked investments and companies with relatively small market capitalizations. Each Portfolio has different risks. Please see a Janus prospectus for more information about risks, Portfolio holdings and other details.
The Portfolio will normally invest at least 80% of its net assets, measured at the time of purchase, in the type of securities described by its name.
Holding a meaningful portion of assets in cash or cash equivalents may negatively affect performance.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
Ranking is for the share class shown only; other classes may have different performance characteristics. When an expense waiver is in effect, it may have a material effect on the total return, and therefore the ranking for the period.
See important disclosures on the next page.
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(unaudited)
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective April 1, 2013, Tom Perkins, Jeff Kautz and Kevin Preloger are Co-Portfolio Managers of the Portfolio.
# | Institutional Shares inception date – May 1, 2003 | |
* | Service Shares inception date – December 31, 2002 | |
** | The Russell Midcap® Value Index’s since inception returns are calculated from December 31, 2002. |
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,118.50 | $ | 3.15 | $ | 1,000.00 | $ | 1,022.23 | $ | 3.01 | 0.59% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,117.40 | $ | 4.48 | $ | 1,000.00 | $ | 1,020.97 | $ | 4.28 | 0.84% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Perkins Mid Cap Value Portfolio
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Common Stock – 94.4% | ||||||||||
Aerospace & Defense – 1.9% | ||||||||||
18,168 | General Dynamics Corp. | $ | 1,735,952 | |||||||
15,000 | Rockwell Collins, Inc. | 1,108,800 | ||||||||
2,844,752 | ||||||||||
Auto Components – 1.4% | ||||||||||
23,300 | Johnson Controls, Inc. | 1,195,290 | ||||||||
12,700 | TRW Automotive Holdings Corp.* | 944,753 | ||||||||
2,140,043 | ||||||||||
Beverages – 3.1% | ||||||||||
53,400 | Dr. Pepper Snapple Group, Inc. | 2,601,648 | ||||||||
35,400 | Molson Coors Brewing Co. – Class B | 1,987,710 | ||||||||
4,589,358 | ||||||||||
Capital Markets – 3.6% | ||||||||||
8,547 | Ameriprise Financial, Inc. | 983,333 | ||||||||
18,100 | Invesco, Ltd. | 658,840 | ||||||||
56,796 | Raymond James Financial, Inc. | 2,964,183 | ||||||||
10,600 | State Street Corp. | 777,934 | ||||||||
5,384,290 | ||||||||||
Commercial Banks – 8.0% | ||||||||||
16,205 | Bank of Hawaii Corp. | 958,363 | ||||||||
54,600 | CIT Group, Inc. | 2,846,298 | ||||||||
18,018 | Cullen / Frost Bankers, Inc. | 1,341,080 | ||||||||
81,100 | Fifth Third Bancorp | 1,705,533 | ||||||||
52,348 | First Republic Bank | 2,740,418 | ||||||||
86,559 | Fulton Financial Corp. | 1,132,192 | ||||||||
20,214 | SunTrust Banks, Inc. | 744,077 | ||||||||
16,200 | Zions Bancorp | 485,352 | ||||||||
11,953,313 | ||||||||||
Commercial Services & Supplies – 4.8% | ||||||||||
40,600 | ADT Corp. | 1,643,082 | ||||||||
77,303 | Republic Services, Inc. | 2,566,460 | ||||||||
72,660 | Tyco International, Ltd. (U.S. Shares) | 2,981,966 | ||||||||
7,191,508 | ||||||||||
Communications Equipment – 0.6% | ||||||||||
12,400 | Motorola Solutions, Inc. | 837,000 | ||||||||
Construction & Engineering – 1.2% | ||||||||||
13,418 | Jacobs Engineering Group, Inc.* | 845,200 | ||||||||
29,575 | KBR, Inc. | 943,147 | ||||||||
1,788,347 | ||||||||||
Consumer Finance – 1.5% | ||||||||||
41,000 | Discover Financial Services | 2,293,950 | ||||||||
Diversified Financial Services – 0.7% | ||||||||||
4,700 | IntercontinentalExchange Group, Inc. | 1,057,124 | ||||||||
Electric Utilities – 2.0% | ||||||||||
97,935 | PPL Corp. | 2,946,864 | ||||||||
Electrical Equipment – 1.4% | ||||||||||
61,526 | Babcock & Wilcox Co. | 2,103,574 | ||||||||
Electronic Equipment, Instruments & Components – 0.4% | ||||||||||
6,831 | IPG Photonics Corp. | 530,154 | ||||||||
Energy Equipment & Services – 1.7% | ||||||||||
22,000 | Ensco PLC – Class A | 1,257,960 | ||||||||
16,700 | National Oilwell Varco, Inc. | 1,328,151 | ||||||||
2,586,111 | ||||||||||
Food & Staples Retailing – 1.1% | ||||||||||
15,029 | Kroger Co. | 594,096 | ||||||||
27,719 | Sysco Corp. | 1,000,656 | ||||||||
1,594,752 | ||||||||||
Gas Utilities – 0.8% | ||||||||||
24,685 | AGL Resources, Inc. | 1,165,873 | ||||||||
Health Care Equipment & Supplies – 3.1% | ||||||||||
26,200 | Stryker Corp. | 1,968,668 | ||||||||
10,500 | Varian Medical Systems, Inc.* | 815,745 | ||||||||
19,800 | Zimmer Holdings, Inc. | 1,845,162 | ||||||||
4,629,575 | ||||||||||
Health Care Providers & Services – 3.9% | ||||||||||
21,300 | Laboratory Corp. of America Holdings* | 1,946,181 | ||||||||
8,071 | McKesson Corp. | 1,302,659 | ||||||||
39,717 | Patterson Cos., Inc. | 1,636,341 | ||||||||
19,087 | Quest Diagnostics, Inc. | 1,021,918 | ||||||||
5,907,099 | ||||||||||
Insurance – 7.0% | ||||||||||
45,440 | Allstate Corp. | 2,478,298 | ||||||||
19,975 | Arthur J. Gallagher & Co. | 937,427 | ||||||||
46,521 | Marsh & McLennan Cos., Inc. | 2,249,755 | ||||||||
17,680 | RenaissanceRe Holdings, Ltd. | 1,720,971 | ||||||||
39,300 | Torchmark Corp. | 3,071,295 | ||||||||
10,457,746 | ||||||||||
Life Sciences Tools & Services – 2.3% | ||||||||||
22,649 | Charles River Laboratories International, Inc.* | 1,201,303 | ||||||||
20,495 | Thermo Fisher Scientific, Inc. | 2,282,118 | ||||||||
3,483,421 | ||||||||||
Machinery – 2.5% | ||||||||||
11,700 | Deere & Co. | 1,068,561 | ||||||||
21,300 | Kennametal, Inc. | 1,109,091 | ||||||||
20,195 | Stanley Black & Decker, Inc. | 1,629,535 | ||||||||
3,807,187 | ||||||||||
Marine – 1.7% | ||||||||||
25,400 | Kirby Corp.* | 2,520,950 | ||||||||
Metals & Mining – 1.1% | ||||||||||
17,217 | Allegheny Technologies, Inc. | 613,442 | ||||||||
44,855 | Goldcorp, Inc. (U.S. Shares) | 972,008 | ||||||||
1,585,450 | ||||||||||
Multi-Utilities – 1.3% | ||||||||||
38,800 | Alliant Energy Corp. | 2,002,080 | ||||||||
Multiline Retail – 2.3% | ||||||||||
16,500 | Kohl’s Corp. | 936,375 | ||||||||
19,245 | Macy’s, Inc. | 1,027,683 | ||||||||
24,000 | Nordstrom, Inc. | 1,483,200 | ||||||||
3,447,258 | ||||||||||
Oil, Gas & Consumable Fuels – 7.5% | ||||||||||
11,700 | Anadarko Petroleum Corp. | 928,044 | ||||||||
12,800 | Hess Corp. | 1,062,400 | ||||||||
20,077 | HollyFrontier Corp. | 997,626 | ||||||||
21,036 | Noble Energy, Inc. | 1,432,762 | ||||||||
22,788 | Plains All American Pipeline L.P. | 1,179,735 | ||||||||
88,874 | Plains GP Holdings L.P. – Class A | 2,379,157 | ||||||||
50,000 | QEP Resources, Inc. | 1,532,500 |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
8 | DECEMBER 31, 2013
Table of Contents
Schedule of Investments
As of December 31, 2013
Shares or Principal Amount | Value | |||||||||
Oil, Gas & Consumable Fuels – (continued) | ||||||||||
15,092 | Valero Energy Corp. | $ | 760,637 | |||||||
16,880 | Whiting Petroleum Corp.* | 1,044,365 | ||||||||
11,317,226 | ||||||||||
Pharmaceuticals – 1.1% | ||||||||||
40,200 | Teva Pharmaceutical Industries, Ltd. (ADR) | 1,611,216 | ||||||||
Professional Services – 0.3% | ||||||||||
10,014 | Robert Half International, Inc. | 420,488 | ||||||||
Real Estate Investment Trusts (REITs) – 8.3% | ||||||||||
12,500 | Alexandria Real Estate Equities, Inc. | 795,250 | ||||||||
9,136 | AvalonBay Communities, Inc. | 1,080,149 | ||||||||
25,600 | Equity Lifestyle Properties, Inc. | 927,488 | ||||||||
28,900 | HCP, Inc. | 1,049,648 | ||||||||
19,100 | Home Properties, Inc. | 1,024,142 | ||||||||
29,430 | Potlatch Corp. | 1,228,408 | ||||||||
4,985 | Public Storage | 750,342 | ||||||||
22,223 | Rayonier, Inc. | 935,588 | ||||||||
38,985 | Redwood Trust, Inc. | 755,140 | ||||||||
10,800 | Taubman Centers, Inc. | 690,336 | ||||||||
66,674 | Two Harbors Investment Corp. | 618,735 | ||||||||
83,230 | Weyerhaeuser Co. | 2,627,571 | ||||||||
12,482,797 | ||||||||||
Road & Rail – 2.3% | ||||||||||
17,800 | Canadian Pacific Railway, Ltd. (U.S. Shares) | 2,693,496 | ||||||||
6,650 | Kansas City Southern | 823,469 | ||||||||
3,516,965 | ||||||||||
Semiconductor & Semiconductor Equipment – 4.2% | ||||||||||
44,674 | Altera Corp. | 1,453,245 | ||||||||
50,610 | Analog Devices, Inc. | 2,577,567 | ||||||||
30,808 | Microchip Technology, Inc. | 1,378,658 | ||||||||
37,771 | Semtech Corp.* | 954,851 | ||||||||
6,364,321 | ||||||||||
Software – 5.2% | ||||||||||
24,907 | Autodesk, Inc.* | 1,253,569 | ||||||||
38,600 | CA, Inc. | 1,298,890 | ||||||||
25,645 | Check Point Software Technologies, Ltd.* | 1,654,615 | ||||||||
17,290 | Citrix Systems, Inc.* | 1,093,593 | ||||||||
16,600 | MICROS Systems, Inc.* | 952,342 | ||||||||
38,400 | Synopsys, Inc.* | 1,557,888 | ||||||||
7,810,897 | ||||||||||
Specialty Retail – 1.6% | ||||||||||
24,065 | PetSmart, Inc. | 1,750,729 | ||||||||
9,044 | Ross Stores, Inc. | 677,667 | ||||||||
2,428,396 | ||||||||||
Textiles, Apparel & Luxury Goods – 1.5% | ||||||||||
9,351 | Ralph Lauren Corp. | 1,651,106 | ||||||||
10,664 | VF Corp. | 664,794 | ||||||||
2,315,900 | ||||||||||
Thrifts & Mortgage Finance – 0.8% | ||||||||||
52,717 | Washington Federal, Inc. | 1,227,779 | ||||||||
Wireless Telecommunication Services – 2.2% | ||||||||||
40,226 | Rogers Communications, Inc. – Class B | 1,820,604 | ||||||||
36,620 | Vodafone Group PLC (ADR) | 1,439,532 | ||||||||
3,260,136 | ||||||||||
Total Common Stock (cost $110,281,682) | 141,603,900 | |||||||||
Repurchase Agreement – 5.2% | ||||||||||
$7,800,000 | ING Financial Markets LLC, 0.0100%, dated 12/31/13, maturing 1/2/14 to be repurchased at $7,800,004 collateralized by $8,343,635 in U.S. Treasuries 0.0000% – 6.3750%, 5/1/14 – 5/15/43 with a value of $7,956,077 (cost $7,800,000) | 7,800,000 | ||||||||
Total Investments (total cost $118,081,682) – 99.6% | 149,403,900 | |||||||||
Cash, Receivables and Other Assets, net of Liabilities – 0.4% | 572,366 | |||||||||
Net Assets – 100% | $ | 149,976,266 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Canada | $ | 5,486,108 | 3.7% | |||||
Israel | 3,265,831 | 2.2% | ||||||
United Kingdom | 1,439,532 | 0.9% | ||||||
United States†† | 139,212,429 | 93.2% | ||||||
Total | $ | 149,403,900 | 100.0% |
†† | Includes Cash Equivalents of 5.2%. |
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Notes to Schedule of Investments and Other Information
CBOE VIX Index | The Chicago Board of Options Exchange (CBOE) Volatility Index (“VIX”) shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options and is a widely used measure of market risk and is often referred to as the “investor fear” gauge. | |
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 | 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 | |
L.P. | Limited Partnership | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
REIT | Real Estate Investment Trust | |
U.S. Shares | Securities of foreign companies trading on an American stock exchange. |
Repurchase agreements held by the Portfolio are fully collateralized, and such collateral is in the possession of the Portfolio’s custodian or, for tri-party agreements, the custodian designated by the agreement. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements, including accrued interest. 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.
* | 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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
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 | $ | 141,603,900 | $ | – | $ | – | |||||
Repurchase Agreement | – | 7,800,000 | – | ||||||||
Total Investments in Securities | $ | 141,603,900 | $ | 7,800,000 | $ | – | |||||
10 | DECEMBER 31, 2013
Table of Contents
Statement of Assets and Liabilities
Janus Aspen | ||||||||||
Perkins | ||||||||||
Mid Cap | ||||||||||
As of December 31, 2013 | Value | |||||||||
(all numbers in thousands except net asset value per share) | Portfolio | |||||||||
Assets: | ||||||||||
Investments at cost(1) | $ | 118,082 | ||||||||
Investments at value | $ | 141,604 | ||||||||
Repurchase agreements at value | 7,800 | |||||||||
Cash | 13 | |||||||||
Receivables: | ||||||||||
Investments sold | 1,020 | |||||||||
Portfolio shares sold | 132 | |||||||||
Dividends | 245 | |||||||||
Interest | – | |||||||||
Non-interested Trustees’ deferred compensation | 3 | |||||||||
Other assets | 2 | |||||||||
Total Assets | 150,819 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Investments purchased | 594 | |||||||||
Portfolio shares repurchased | 126 | |||||||||
Advisory fees | 66 | |||||||||
Fund administration fees | 1 | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 23 | |||||||||
Non-interested Trustees’ fees and expenses | 1 | |||||||||
Non-interested Trustees’ deferred compensation fees | 3 | |||||||||
Accrued expenses and other payables | 29 | |||||||||
Total Liabilities | 843 | |||||||||
Net Assets | $ | 149,976 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 104,344 | ||||||||
Undistributed net investment income* | 588 | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 13,721 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 31,323 | |||||||||
Total Net Assets | $ | 149,976 | ||||||||
Net Assets - Institutional Shares | $ | 44,998 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 2,332 | |||||||||
Net Asset Value Per Share | $ | 19.30 | ||||||||
Net Assets - Service Shares | $ | 104,978 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 5,532 | |||||||||
Net Asset Value Per Share | $ | 18.98 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Includes cost of repurchase agreement of $7,800,000. |
See Notes to Financial Statements.
Janus Aspen Series | 11
Table of Contents
Statement of Operations
Janus Aspen | ||||||
Perkins | ||||||
Mid Cap | ||||||
For the year ended December 31, 2013 | Value | |||||
(all numbers in thousands) | Portfolio | |||||
Investment Income: | ||||||
Interest | $ | 7 | ||||
Dividends | 2,535 | |||||
Foreign tax withheld | (21) | |||||
Total Investment Income | 2,521 | |||||
Expenses: | ||||||
Advisory fees | 730 | |||||
Internal servicing expense - Institutional Shares | – | |||||
Internal servicing expense - Service Shares | 1 | |||||
Shareholder reports expense | 5 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | 13 | |||||
Custodian fees | 15 | |||||
Professional fees | 32 | |||||
Non-interested Trustees’ fees and expenses | 4 | |||||
Fund administration fees | 14 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 248 | |||||
Other expenses | 11 | |||||
Total Expenses | 1,074 | |||||
Net Expenses after Waivers and Expense Offsets | 1,074 | |||||
Net Investment Income | 1,447 | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 14,197 | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 16,908 | |||||
Net Gain on Investments | 31,105 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 32,552 |
See Notes to Financial Statements.
12 | DECEMBER 31, 2013
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
Perkins Mid Cap Value | ||||||||||
For each year ended December 31 | Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Operations: | ||||||||||
Net investment income | $ | 1,447 | $ | 1,654 | ||||||
Net realized gain from investment and foreign currency transactions | 14,197 | 3,668 | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 16,908 | 7,445 | ||||||||
Net Increase in Net Assets Resulting from Operations | 32,552 | 12,767 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | (547) | (398) | ||||||||
Service Shares | (1,095) | (714) | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | (874) | (2,582) | ||||||||
Service Shares | (1,912) | (5,254) | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (4,428) | (8,948) | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | 13,300 | 11,385 | ||||||||
Service Shares | 21,570 | 17,006 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 1,421 | 2,980 | ||||||||
Service Shares | 3,007 | 5,968 | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | (20,318) | (15,070) | ||||||||
Service Shares | (25,788) | (17,618) | ||||||||
Net Increase/(Decrease) from Capital Share Transactions | (6,808) | 4,651 | ||||||||
Net Increase in Net Assets | 21,316 | 8,470 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 128,660 | 120,190 | ||||||||
End of period | $ | 149,976 | $ | 128,660 | ||||||
Undistributed Net Investment Income* | $ | 588 | $ | 819 |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Financial Highlights
Institutional Shares
Janus Aspen Perkins Mid Cap Value Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $15.81 | $15.37 | $15.91 | $13.85 | $10.71 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.24 | 0.24 | 0.16 | 0.13 | 0.05 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.82 | 1.37 | (0.58) | 2.03 | 3.48 | |||||||||||||||||
Total from Investment Operations | 4.06 | 1.61 | (0.42) | 2.16 | 3.53 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.22) | (0.15) | (0.12) | (0.10) | (0.07) | |||||||||||||||||
Distributions (from capital gains)* | (0.35) | (1.02) | – | – | (0.31) | |||||||||||||||||
Return of capital | N/A | N/A | N/A | N/A | (0.01) | |||||||||||||||||
Total Distributions and Other | (0.57) | (1.17) | (0.12) | (0.10) | (0.39) | |||||||||||||||||
Net Asset Value, End of Period | $19.30 | $15.81 | $15.37 | $15.91 | $13.85 | |||||||||||||||||
Total Return | 26.09% | 11.14% | (2.64)% | 15.66% | 33.69% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $44,998 | $41,829 | $41,295 | $38,892 | $31,424 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $44,335 | $41,170 | $42,054 | $35,949 | $20,308 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.58% | 0.58% | 0.83% | 0.92% | 0.95% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.58% | 0.58% | 0.83% | 0.92% | 0.95% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 1.19% | 1.51% | 0.97% | 0.99% | 0.93% | |||||||||||||||||
Portfolio Turnover Rate | 71% | 49% | 52% | 65% | 77% |
Service Shares
Janus Aspen Perkins Mid Cap Value Portfolio | ||||||||||||||||||||||
For a share outstanding during each year ended December 31 | 2013 | 2012 | 2011 | 2010 | 2009 | |||||||||||||||||
Net Asset Value, Beginning of Period | $15.57 | $15.18 | $15.74 | $13.72 | $10.63 | |||||||||||||||||
Income from Investment Operations: | ||||||||||||||||||||||
Net investment income | 0.16 | 0.19 | 0.11 | 0.08 | 0.04 | |||||||||||||||||
Net gain/(loss) on investments (both realized and unrealized) | 3.80 | 1.35 | (0.58) | 2.01 | 3.41 | |||||||||||||||||
Total from Investment Operations | 3.96 | 1.54 | (0.47) | 2.09 | 3.45 | |||||||||||||||||
Less Distributions and Other: | ||||||||||||||||||||||
Dividends (from net investment income)* | (0.20) | (0.13) | (0.09) | (0.07) | (0.04) | |||||||||||||||||
Distributions (from capital gains)* | (0.35) | (1.02) | – | – | (0.31) | |||||||||||||||||
Return of capital | N/A | N/A | N/A | N/A | (0.01) | |||||||||||||||||
Total Distributions and Other | (0.55) | (1.15) | (0.09) | (0.07) | (0.36) | |||||||||||||||||
Net Asset Value, End of Period | $18.98 | $15.57 | $15.18 | $15.74 | $13.72 | |||||||||||||||||
Total Return | 25.81% | 10.79% | (2.98)% | 15.28% | 33.14% | |||||||||||||||||
Net Assets, End of Period (in thousands) | $104,978 | $86,831 | $78,895 | $82,754 | $77,766 | |||||||||||||||||
Average Net Assets for the Period (in thousands) | $98,703 | $84,211 | $83,879 | $76,667 | $64,356 | |||||||||||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets | 0.83% | 0.86% | 1.19% | 1.27% | 1.38% | |||||||||||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets | 0.83% | 0.86% | 1.19% | 1.27% | 1.38% | |||||||||||||||||
Ratio of Net Investment Income to Average Net Assets | 0.93% | 1.22% | 0.63% | 0.61% | 0.53% | |||||||||||||||||
Portfolio Turnover Rate | 71% | 49% | 52% | 65% | 77% |
* | See “Federal Income Tax” in Notes to Financial Statements. |
See Notes to Financial Statements.
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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 offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in equity securities. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts 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.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
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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 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 translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy.
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Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold any Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out of | ||||||
Level 2 to | ||||||
Portfolio | Level 1 | |||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 1,902,162 | ||||
Financial assets were transferred out of Level 2 to Level 1 as the current market for the securities with quoted prices are considered active.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Other Investments and Strategies |
Additional Investment Risk
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks
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Notes to Financial Statements (continued)
have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Portfolio. The Portfolio may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may be exposed to counterparty risk through participation in various programs including, but not limited to, lending its securities to third parties, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties.
Offsetting Assets and Liabilities
The Portfolio has recently adopted guidance requiring entities to present gross and net information about transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio may enter into an International Swaps and Derivatives Association, Inc.
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Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. Note that for financial reporting purposes, the Portfolio does not offset certain derivative financial instrument’s payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following tables present gross amounts of recognized assets and liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable).
Offsetting of Financial Assets and Derivative Assets
Gross Amounts Offset in the | ||||||||||||||
Statement of | ||||||||||||||
Counterparty | Gross Amounts of Recognized Assets | Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
ING Financial Markets LLC | $ | 7,800,000 | $ | – | $ | (7,800,000) | $ | – | ||||||
* | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
All repurchase agreements are transacted under legally enforceable master repurchase agreements that give the Portfolio, in the event of default by the counterparty, the right to liquidate securities held and to offset receivables and payables with the counterparty. Repurchase agreements held by the Portfolio are fully collateralized, and such collateral is in the possession of the Portfolio’s custodian or, for tri-party agreements, the custodian designated by the agreement. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements, including accrued interest.
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
3. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s “base” fee rate prior to any performance adjustment (expressed as an annual rate).
Base Fee | |||||
Rate (%) | |||||
Portfolio | (annual rate) | ||||
Janus Aspen Perkins Mid Cap Value Portfolio | 0.64 | ||||
For the Portfolio, the investment advisory fee rate is determined by calculating a base fee and applying a performance adjustment. The base fee rate is the same as the contractual investment advisory fee rate shown in the table above. The performance adjustment either increases or decreases the base fee depending on how well the Portfolio has performed relative to its benchmark index, as shown below:
Portfolio | Benchmark Index | ||||
Janus Aspen Perkins Mid Cap Value Portfolio | Russell Midcap® Value Index | ||||
The calculation of the performance adjustment applies as follows:
Investment Advisory Fee = Base Fee Rate +/- Performance Adjustment
The investment advisory fee rate paid to Janus Capital by the Portfolio consists of two components: (1) a base fee calculated by applying the contractual fixed rate of the advisory fee to the Portfolio’s average daily net assets during the previous month (“Base Fee Rate”), plus or minus (2) a performance-fee adjustment (“Performance Adjustment”) calculated by applying a variable rate of up to 0.15% (positive or negative) to the Portfolio’s average daily net assets during the applicable performance measurement period. The Performance Adjustment is based on a rolling 36-month performance measurement
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Notes to Financial Statements (continued)
period. 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. The Base Fee Rate is subject to an upward or downward Performance Adjustment for every full 0.50% increment by which the Portfolio outperforms or underperforms its benchmark index. Because the Performance Adjustment is tied to the Portfolio’s relative performance compared to its benchmark index (and not its absolute performance), the Performance Adjustment could increase Janus Capital’s fee even if the Portfolio’s Shares lose value during the performance measurement period and could decrease Janus Capital’s fee even if the Portfolio’s Shares increase in value during the performance measurement period. For purposes of computing the Base Fee Rate and the Performance Adjustment, net assets are averaged over different periods (average daily net assets during the previous month for the Base Fee Rate, versus average daily net assets during the performance measurement period for the Performance Adjustment). Performance of the Portfolio is calculated net of expenses, whereas the Portfolio’s benchmark index does not have any fees or expenses. Reinvestment of dividends and distributions is included in calculating both the performance of the Portfolio and the Portfolio’s benchmark index. The Base Fee Rate is calculated and accrued daily. The Performance Adjustment is calculated monthly in arrears and is accrued throughout the month. The investment fee is paid monthly in arrears. Under extreme circumstances involving underperformance by a rapidly shrinking Portfolio, the dollar amount of the Performance Adjustment could be more than the dollar amount of the Base Fee Rate. In such circumstances, Janus Capital would reimburse the Portfolio.
The application of an expense limit, if any, will have a positive effect upon the Portfolio’s performance and may result in an increase in the Performance Adjustment. It is possible that the cumulative dollar amount of additional compensation ultimately payable to Janus Capital may, under some circumstances, exceed the cumulative dollar amount of management fees waived by Janus Capital.
The investment performance of the Portfolio’s Service Shares for the performance measurement period is used to calculate the Performance Adjustment. After Janus Capital determines whether the Portfolio’s performance was above or below its benchmark index by comparing the investment performance of the Portfolio’s Service Shares against the cumulative investment record of the Portfolio’s benchmark index, Janus Capital applies the same Performance Adjustment (positive or negative) to the Institutional Shares.
It is not possible to predict the effect of the Performance Adjustment on future overall compensation to Janus Capital since it depends on the performance of the Portfolio relative to the record of the Portfolio’s benchmark index and future changes to the size of the Portfolio.
The Portfolio’s prospectuses and statements of additional information contain additional information about performance-based fees. The amount shown as advisory fees on the Statement of Operations reflects the Base Fee Rate plus/minus any Performance Adjustment. During the year ended December 31, 2013, the Portfolio recorded a Performance Adjustment of $(188,192).
Janus Capital has contractually agreed to waive the advisory fee payable by the Portfolio in an amount equal to the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee, but excluding any performance adjustments to management fees, the distribution and shareholder servicing fees (applicable to Service Shares), administrative services fees payable pursuant to the Transfer Agency Agreement, brokerage commissions, interest, dividends, taxes, acquired fund fees and expenses, and extraordinary expenses, exceed the annual rate shown below. Janus Capital has agreed to continue the waiver until at least May 1, 2014. If applicable, amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations.
Expense | |||||
Portfolio | Limit (%) | ||||
Janus Aspen Perkins Mid Cap Value Portfolio | 0.86 | ||||
Perkins Investment Management LLC (“Perkins”) serves as subadviser to the Portfolio. Janus Capital pays Perkins a fee equal to 50% of the advisory fee paid by the Portfolio to Janus Capital (plus or minus half of any performance fee adjustment, and net of any reimbursement of expenses incurred or fees waived by Janus Capital).
Perkins or its predecessors have been in the investment management business since 1984 and serves as investment adviser or subadviser to other Janus registered investment companies and other accounts. Janus Capital owns approximately 99% of Perkins.
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its
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services related to the Shares, except for out-of-pocket costs.
Effective May 1, 2012, Service Shares of the Portfolio no longer pay Janus Services an administrative services fee. Prior to May 1, 2012, the Portfolio paid Janus Services an administrative services fee at an annual rate of up to 0.10% of the average daily net assets of the Service Shares of the Portfolio for providing, or arranging for the provision of, recordkeeping, subaccounting, and other administrative services to retirement or pension plan participants, variable contract owners, or other underlying investors investing through institutional channels.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus Capital (or the subadviser) provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
4. | Federal Income Tax |
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 primarily consist of deferred compensation. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
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Notes to Financial Statements (continued)
Undistributed | Undistributed | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 3,540,033 | $ | 10,880,873 | $ | – | $ | – | $ | – | $ | (2,525) | $ | 31,213,249 | |||||||||
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, 2013 are noted below.
Unrealized appreciation and unrealized depreciation in the table below exclude appreciation/(depreciation) on foreign currency translations. The primary differences between book and tax appreciation or depreciation of investments are wash sale loss deferrals and investments in partnerships.
Federal Tax | Unrealized | Unrealized | |||||||||
Portfolio | Cost | Appreciation | (Depreciation) | ||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 118,190,651 | $ | 32,062,421 | $ | (849,172) | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 1,641,628 | $ | 2,785,754 | $ | – | $ | – | |||||||||
For the year ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 1,112,012 | $ | 7,835,965 | $ | – | $ | – | |||||||||
5. | Capital Share Transactions |
For each year ended December 31 | Janus Aspen Perkins Mid Cap Value Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Institutional Shares | ||||||||||
Shares sold | 754 | 708 | ||||||||
Reinvested dividends and distributions | 82 | 204 | ||||||||
Shares repurchased | (1,150) | (952) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (314) | (40) | ||||||||
Shares Outstanding, Beginning of Period | 2,646 | 2,686 | ||||||||
Shares Outstanding, End of Period | 2,332 | 2,646 |
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For each year ended December 31 | Janus Aspen Perkins Mid Cap Value Portfolio | |||||||||
(all numbers in thousands) | 2013 | 2012 | ||||||||
Transactions in Portfolio Shares – Service Shares | ||||||||||
Shares sold | 1,238 | �� | 1,090 | |||||||
Reinvested dividends and distributions | 176 | 415 | ||||||||
Shares repurchased | (1,460) | (1,125) | ||||||||
Net Increase/(Decrease) in Portfolio Shares | (46) | 380 | ||||||||
Shares Outstanding, Beginning of Period | 5,578 | 5,198 | ||||||||
Shares Outstanding, End of Period | 5,532 | 5,578 |
6. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 92,666,031 | $ | 91,760,815 | $ | – | $ | – | ||||||
7. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
Janus Aspen Series | 23
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Report of Independent Registered Public Accounting Firm
To the Board of 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, 2013, 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, 2013 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
24 | DECEMBER 31, 2013
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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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Additional Information (unaudited) (continued)
including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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Additional Information (unaudited) (continued)
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Table of Contents
• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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Additional Information (unaudited) (continued)
to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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Additional Information (unaudited) (continued)
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
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conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s managers as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s managers may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
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such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
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Useful Information About Your Portfolio Report (unaudited) (continued)
Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio managers. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | $ | 2,785,754 | ||||||||
Dividends Received Deduction Percentage
Portfolio | ||||||||||
Janus Aspen Perkins Mid Cap Value Portfolio | 72% | |||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
40 | DECEMBER 31, 2013
Table of Contents
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
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OFFICERS
Term of Office* and | Principal Occupations During the | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Past Five Years | |||
Robin C. Beery** 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
Janus Aspen Series | 43
Table of Contents
Notes
44 | DECEMBER 31, 2013
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.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55526 | 109-02-81122 02-14 |
Table of Contents
annual report
December 31, 2013
Janus Aspen Series
highlights
• | Portfolio management perspective |
• | Investment strategy behind your portfolio |
• | Portfolio performance, characteristics and holdings |
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Janus Aspen Series
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Table of Contents
Janus Aspen Protected Series - Growth (unaudited)
PORTFOLIO SNAPSHOT Janus Aspen Protected Series – Growth is a growth Portfolio with a protection feature that seeks to minimize and cap losses. This is the only U.S. Portfolio that offers potential upside based on stock market participation and a level of certainty in falling markets. | ![]() Jonathan Coleman portfolio manager |
PERFORMANCE
For the one-year period ending December 31, 2013, Janus Aspen Protected Series – Growth’s Institutional Shares and Service Shares returned 26.66% and 26.45%, respectively. The Portfolio’s primary benchmark, the Russell 1000 Growth Index, returned 33.48%, and its secondary benchmark, the Protected Series – Growth Blended Index, returned 19.13% during the same period.
PORTFOLIO MANAGER COMMENTS
U.S. equity markets enjoyed strong gains during the year, lifted by signs that the U.S. economy was improving and that Europe’s economy was slowly recovering. Loose monetary policy also provided a supportive backdrop for equities during the year, though fears about how and when the Federal Reserve (Fed) would taper its quantitative easing program caused bouts of volatility. However, stocks climbed at the end of December when the Fed’s announcement about tapering was more gradual than expected.
As volatility decreased during the year, we were able to increase our exposure to equities. We entered the year at 85.1% exposure to equities and ended at 98.7% exposure, with the protection component comprising the rest of the portfolio. The allocation to the protection component contributed to the Portfolio’s underperformance of its benchmark.
The protection component can be comprised of cash and cash equivalents, U.S. Treasurys, short index futures and other instruments designed to reduce equity market exposure. Depending on the market environment, the Portfolio can be invested in any variation in either component. In rising markets, we expect there to be more assets in the equity component as compared to falling markets, during which we expect to have more allocated to the protection component. The protection feature, however, affects the Portfolio’s ability to respond to changing equity market conditions and the Portfolio’s ability to capture certain market gains when the allocations are weighted more heavily to the protection component.
During the course of the year, the average allocation to the protection component was approximately 1.42%. In declining markets, we expect the protection component to contribute to performance. In rising markets, we expect the protection component to detract from relative performance, as it did during the year.
In addition to the protection component allocation, the Portfolio has a protection feature that is designed to minimize and ultimately cap any losses at a maximum of 20%. As the Net Asset Value (NAV) of the Portfolio rises to new levels, the Protected NAV (PNAV) also rises. Over time, this could lead to a situation where an investor could potentially limit losses. We feel this is an attractive feature, providing investors with a level of downside protection given the significant uncertainty evident in the global economy and markets.
While the protection component played a role in our underperformance this year, our equity holdings in the Portfolio also underperformed our primary benchmark. We seek to identify companies with clearly definable and sustainable long-term growth drivers. These companies often have a high barrier to entry, a notable edge in an attractive industry with high growth potential, or a strong management team that has a clear vision for the future course of their company. We believe a collection of companies with these competitive advantages should lead to compounded growth in excess of the market over longer time horizons. We believe much of the outperformance should come in weak or uncertain economic environments because we believe the competitive advantages of the companies in our Portfolio should make them less dependent on a strong economic environment to thrive. In our view, the recent market rally has largely been driven on the premise of an improving global economy. Against that backdrop, we believe stocks that depend on a strong economy tend to rise a little faster than those that put up more consistent growth.
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Janus Aspen Protected Series - Growth (unaudited)
Much of our relative underperformance was driven by our holdings in the industrials sector. The industrials sector tends to be one of the more cyclical sectors. Within the sector, we look for companies that control their own destiny and are less tied to the macroeconomic environment. As a result, we expect our industrials holdings to underperform when the economy appears to be improving, but outperform when the economic outlook is less certain. A couple of industrials companies we held fell during the period, which also negatively impacted performance. FANUC was our largest detractor within the industrials sector. The stock fell during the year as it suffered weak demand for some of its factory automation equipment. We sold the position during the period due to concerns about slowing growth in China, and how that would affect demand for FANUC’s products.
While stock selection in the industrials sector was a large reason for our relative underperformance, there were also a few stocks outside the sector that negatively impacted our results. Teradata was one of the largest detractors from Portfolio performance, but we continue to have strong conviction in the company. A weak IT capital spending environment led to disappointing earnings results in the fourth quarter. We believe concerns about security amid the National Security Agency’s spying scandal have also been headwinds for U.S.-based companies such as Teradata that sell their data center products globally. Finally, concern about competition from other analytics companies has also weighed on the stock in recent months. However, we believe perceived secular threats from competition are overstated. In our view Teradata has a competitive advantage because we believe it has the ability to mine deeper analytical insights from data than other analytics companies, and we believe the company is well positioned to benefit from ongoing trends associated with enterprises needing more insight from the vast amounts of data being created.
VMware was another detractor. We grew concerned about the potential size of the software virtualization market and VMware’s ability to gain share in that market, and sold the position during the year.
While some of the holdings in our Portfolio negatively impacted performance, we were generally pleased by the results from most companies in our Portfolio. Our stock selection in the health care sector was particularly strong relative to the index. Two highly specialized pharmaceutical companies, Gilead and Celgene, were among our top performers. We believe our research team has done a tremendous job of understanding the potential of the drugs in both companies’ pipelines as these drugs go through the development process. The market is now beginning to appreciate what some of these drugs mean to the companies’ revenue streams.
Gilead rose after its hepatitis C drug, Sovaldi, was approved by the Food and Drug Administration. The company also announced impressive late-stage clinical data for its once-daily combination hepatitis C pill, which demonstrated cure rates well in excess of 90% with as little as eight weeks of treatment for some patients. The data verified our thesis that Gilead has the best offering in hepatitis C treatment and is poised to have one of the strongest drug launches in pharmaceutical industry history. We also like the potential for Gilead’s new single-pill HIV treatment, which offers patients a simpler drug regimen than some other competing HIV drugs, and is potentially more tolerable than other single-pill competitors. Gilead’s new treatment also gives the company the potential to capture a greater share of revenue for HIV treatment than its previous drug, which was used in combination with treatments from other companies.
Celgene was up more than 114% and was another top contributor to the Portfolio’s performance. During the year, a global study pointed to the benefits of using Celgene’s drug Revlimid as a first-line treatment for multiple myeloma. Currently, the drug is only approved as a second-line treatment for the disease, and using Revlimid earlier in the treatment cycle could meaningfully expand its addressable market, especially outside the United States. Other drugs in Celgene’s pipeline also offer promising potential. We think the company is in the early stages of a major new product cycle, with other potential meaningful contributors including Abraxane for pancreatic cancer, Pomalyst for refractory multiple myeloma, and Apremilast, an oral drug to treat psoriatic arthritis and psoriasis. The stock has risen as management has explained to the market that multi-year growth will be driven by four different drug franchises, and that Celgene is much more than a one-product company.
One of our top contributors outside the health care sector was Google. The company continued to demonstrate its ability to monetize its mobile platform during the year. Going forward, we think Google has multiple long-term growth drivers. The company’s Internet search business continues to do well and the company continues to improve monetization of increased viewing on its YouTube platform. The company’s Android mobile operating platform exists in a duopoly with Apple’s mobile platform and we believe both companies benefit from the rapid adoption and heavier use of smartphones.
2 | DECEMBER 31, 2013
Table of Contents
(unaudited)
DERIVATIVES
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. Derivatives, primarily options, are used in the Portfolio to generate income (through selling calls and selling puts), to have exposure to a position without owning it, and periodically to hedge market risk (generally by buying puts in market indices, such as the S&P 500). The purpose of the option strategy is an attempt to generate income and reduce the risk in the Portfolio. During the period, this strategy detracted from relative results. Please see the Derivative Instruments section in the “Notes to Financial Statements” for a discussion of derivatives used by the Portfolio.
OUTLOOK
We believe the U.S. economy will continue to strengthen and have more growth in 2014 due in large part to a reduced drag from the federal government’s reduction in spending, and also due to broad benefits associated with increased oil and natural gas production. In Europe, we believe austerity has run its course and that the economy will be able to grow modestly, which is an improvement over the last two years. While there are currently a wide range of economic outlooks for emerging market countries, we believe emerging markets on the whole are undergoing positive long-term changes as a burgeoning middle class starts increasing consumption. We are investing in a number of companies that we think will benefit as consumption rates in those markets increase.
Thank you for your investment in Janus Aspen Protected Series – Growth.
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Table of Contents
Janus Aspen Protected Series - Growth (unaudited)
Janus Aspen Protected Series - Growth At A Glance
5 Top Performers – Holdings
Contribution | ||||
Gilead Sciences, Inc. | 1.95% | |||
Google, Inc. – Class A | 1.82% | |||
Celgene Corp. | 1.45% | |||
MasterCard, Inc. – Class A | 1.03% | |||
L Brands, Inc. | 0.96% |
5 Bottom Performers – Holdings
Contribution | ||||
S&P 500® E-mini Future – expired March 2013 | –0.30% | |||
Teradata Corp. | –0.25% | |||
FANUC Corp. | –0.11% | |||
VMware, Inc. – Class A | –0.09% | |||
Ventas, Inc. | –0.06% |
5 Top Performers – Sectors*
Portfolio Weighting | Russell 1000® Growth | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Health Care | 2.45% | 14.37% | 12.43% | |||||||||
Telecommunication Services | 0.29% | 0.70% | 2.19% | |||||||||
Utilities | 0.00% | –0.01% | 0.22% | |||||||||
Financials | –0.17% | 2.60% | 5.11% | |||||||||
Materials | –0.26% | 3.23% | 4.23% |
5 Bottom Performers – Sectors*
Portfolio Weighting | Russell 1000® Growth | |||||||||||
Portfolio Contribution | (Average % of Equity) | Index Weighting | ||||||||||
Industrials | –1.64% | 13.81% | 12.53% | |||||||||
Protection Component** | –1.24% | 1.87% | 0.00% | |||||||||
Information Technology | –0.87% | 29.31% | 27.80% | |||||||||
Consumer Discretionary | –0.68% | 17.92% | 18.42% | |||||||||
Energy | –0.54% | 5.42% | 4.43% |
Security contribution to performance is measured by using an algorithm that multiplies the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. | ||
* | Based on sector classification according to the Global Industry Classification Standard (“GICS”) codes, which are the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s. | |
** | Not a GICS classified sector. |
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Table of Contents
(unaudited)
5 Largest Equity Holdings – (% of Net Assets)
As of December 31, 2013
Apple, Inc. Computers & Peripherals | 5.7% | |||
Google, Inc. – Class A Internet Software & Services | 5.4% | |||
Gilead Sciences, Inc. Biotechnology | 2.9% | |||
Canadian Pacific Railway, Ltd. Road & Rail | 2.6% | |||
Monsanto Co. Chemicals | 2.4% | |||
19.0% |
Asset Allocation – (% of Net Assets)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas03p01.gif)
Top Country Allocations – Long Positions (% of Investment Securities)
As of December 31, 2013
![(GRAPH)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas03t01.gif)
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Janus Aspen Protected Series - Growth (unaudited)
Performance
![(PERFORMANCE CHART)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139jas03m01.gif)
Average Annual Total Return – for the periods ended December 31, 2013 | Expense Ratios – per the May 1, 2013 prospectuses | ||||||||
One | Since | Total Annual Fund | Net Annual Fund | ||||||
Year | Inception* | Operating Expenses | Operating Expenses | ||||||
Janus Aspen Protected Series - Growth – Institutional Shares | 26.66% | 17.22% | 4.52% | 1.42% | |||||
Janus Aspen Protected Series - Growth – Service Shares | 26.45% | 16.97% | 4.77% | 1.67% | |||||
Russell 1000® Growth Index | 33.48% | 23.26% | |||||||
Protected Series - Growth Blended Index | 19.13% | 13.57% | |||||||
S&P 500® Index | 32.39% | 23.05% | |||||||
Morningstar Quartile – Institutional Shares | 4th | 4th | |||||||
Morningstar Ranking – based on total returns for Large Growth Funds | 1,691/1,770 | 1,680/1,723 | |||||||
Returns quoted are past performance and do not guarantee future results; current performance may be lower or higher. Investment returns and principal value will vary; there may be a gain or loss when shares are sold. For the most recent month-end performance call 877.33JANUS(52687) or visit janus.com/variable-insurance.
Net expense ratios reflect the expense waiver, if any, Janus Capital has contractually agreed to through May 1, 2014, and include a Capital Protection Fee that can fluctuate between 0.60% and 0.75%.
The Portfolio is not a capital guaranteed or insured portfolio. As with all investments, there are inherent risks when investing in the Portfolio including, but not limited to, allocation risk, maximum settlement amount risk, turnover risk, liquidation risk, opportunity cost risk, capital protection termination risk, underperformance risk and counterparty risk, each as disclosed in the Portfolio’s Prospectuses. The protection feature only covers shareholders who hold their shares on the termination date, and is subject to various conditions and the financial payment capabilities of BNP Paribas, the Capital Protection Provider, as described in the Notes to Financial Statements.
The Capital Protection Agreement is a financial product that is intended to protect the Portfolio against significant market declines and does not in any way constitute any form of insurance. The Capital Protection Provider is not an insurance company or an insurance provider, nor is it acting as an adviser or subadviser for the Portfolio.
The Portfolio’s asset allocation will vary over time depending on market conditions and therefore the Portfolio’s allocation to each investment component could change as frequently as daily resulting in a higher portfolio turnover rate than other mutual funds. Increased portfolio turnover may result in higher costs, which may have a negative effect on the Portfolio’s performance.
Amounts owed by the Capital Protection Provider under the Capital Protection Agreement are owed directly to the Portfolio and not to the Portfolio’s shareholders. As a result, a shareholder’s ability to receive the Protected NAV from the Portfolio is dependent on the Portfolio’s ability to collect any settlement amount due from the Capital Protection Provider, and/or its parent guarantor pursuant to the terms of the Capital Protection Agreement. Portfolio transactions involving a counterparty, such as the Capital Protection Provider and/or its parent guarantor, are subject to the risk that the counterparty will not fulfill its obligation to the Portfolio. Counterparty risk may arise because of the counterparty’s financial condition (i.e. financial difficulties, bankruptcy or insolvency), market activities or developments, or other reasons, whether foreseen or not. As such the Portfolio’s ability to benefit from the Protection may depend on the Capital Protection Provider’s, as well as its parent guarantor’s, financial condition.
See important disclosures on the next page.
6 | DECEMBER 31, 2013
Table of Contents
(unaudited)
Although the risk allocation methodology is designed so that the NAV of any share class does not fall below its Protected NAV, there is the possibility that the risk allocation methodology may not work as designed and the NAV of any share class may fall below its Protected NAV. If this happens, it is expected that the Portfolio will receive payment of the Settlement Amount from the Capital Protection Provider, if due, and commence the liquidation process as soon as possible following the event.
It is possible that under the terms of the Capital Protection Agreement, the Portfolio’s allocation to the Equity Component could drop to a low level or be eliminated altogether, especially during periods of heightened volatility in the equity markets. This would reduce the Portfolio’s ability to participate in upward equity market movements and therefore, represents loss of opportunity compared to a portfolio that is fully invested in equities and may cause the Portfolio to underperform its primary benchmark and/or other similarly situated growth funds. As a result, the Portfolio may not achieve its investment objective.
The Portfolio uses short index futures and other types of derivatives in attempt to hedge risk. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from a derivative can be substantially greater than the derivative’s original cost, and can therefore involve leverage.
These returns do not reflect the charges and expenses of any particular insurance product or qualified plan. Returns shown would have been lower had they included insurance charges.
Returns include reinvestment of all dividends and distributions and do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions on Portfolio shares. The returns do not include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes.
Ranking is for the share class shown only; other classes may have different performance characteristics. When an expense waiver is in effect, it may have a material effect on the total return, and therefore the ranking for the period.
© 2013 Morningstar, Inc. All Rights Reserved.
There is no assurance that the investment process will consistently lead to successful investing.
See Notes to Schedule of Investments and Other Information for index definitions.
A Portfolio’s holdings may differ significantly from the securities held in an index. An index is unmanaged and not available for direct investment; therefore, its performance does not reflect the expenses associated with the active management of an actual portfolio.
See “Useful Information About Your Portfolio Report.”
Effective May 1, 2013, Janus Aspen Protected Series – Growth’s secondary benchmark changed from the S&P 500® Index to the Protected Series – Growth Blended Index.
* | The Portfolio’s inception date – January 3, 2012 |
Janus Aspen Series | 7
Table of Contents
Janus Aspen Protected Series - Growth (unaudited)
Expense Examples
As a shareholder of the Portfolio, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees; the capital protection fee; distribution and shareholder servicing (12b-1) fees (applicable to Service Shares only); administrative services fees payable pursuant to the Transfer Agency Agreement; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. The example is based upon an investment of $1,000 invested at the beginning of the period and held for the six-months indicated, unless noted otherwise in the table and footnotes below.
Actual Expenses
The information in the table under the heading “Actual” provides information about actual account values and actual expenses. You may use the information in these columns, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the appropriate column for your share class under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes
The information in the table under the heading “Hypothetical (5% return before expenses)” provides information about hypothetical account values and hypothetical expenses based upon the Portfolio’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Portfolio’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Portfolio and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Additionally, for an analysis of the fees associated with an investment in either share class or other similar funds, please visit www.finra.org/fundanalyzer.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. These fees are fully described in the Portfolio’s prospectuses. Therefore, the hypothetical examples are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Hypothetical | ||||||||||||||||||||||||||||||
Actual | (5% return before expenses) | |||||||||||||||||||||||||||||
Beginning | Ending | Expenses | Beginning | Ending | Expenses | |||||||||||||||||||||||||
Account | Account | Paid During | Account | Account | Paid During | Net Annualized | ||||||||||||||||||||||||
Value | Value | Period | Value | Value | Period | Expense Ratio | ||||||||||||||||||||||||
(7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13) | (12/31/13) | (7/1/13 - 12/31/13)† | (7/1/13 - 12/31/13) | ||||||||||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,187.70 | $ | 7.78 | $ | 1,000.00 | $ | 1,018.10 | $ | 7.17 | 1.41% | |||||||||||||||||
Service Shares | $ | 1,000.00 | $ | 1,186.60 | $ | 9.15 | $ | 1,000.00 | $ | 1,016.84 | $ | 8.44 | 1.66% | |||||||||||||||||
† | Expenses Paid During Period are equal to the Net Annualized Expense Ratio multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). Expenses in the examples include the effect of applicable fee waivers and/or expense reimbursements, if any. Had such waivers and/or reimbursements not been in effect, your expenses would have been higher. Please refer to the Notes to Financial Statements or the Portfolio’s prospectuses for more information regarding waivers and/or reimbursements. |
8 | DECEMBER 31, 2013
Table of Contents
Janus Aspen Protected Series – Growth
Schedule of Investments
As of December 31, 2013
Shares/Principal/Contract Amounts | Value | |||||||||
Common Stock – 98.7% | ||||||||||
Aerospace & Defense – 1.9% | ||||||||||
475 | Precision Castparts Corp. | $ | 127,918 | |||||||
Air Freight & Logistics – 0.3% | ||||||||||
149 | FedEx Corp. | 21,422 | ||||||||
Beverages – 4.4% | ||||||||||
1,899 | Diageo PLC | 62,884 | ||||||||
855 | Pernod-Ricard S.A. | 97,395 | ||||||||
2,736 | SABMiller PLC | 140,476 | ||||||||
300,755 | ||||||||||
Biotechnology – 8.9% | ||||||||||
419 | Alexion Pharmaceuticals, Inc.* | 55,752 | ||||||||
229 | Biogen Idec, Inc.* | 64,063 | ||||||||
723 | Celgene Corp.* | 122,158 | ||||||||
2,682 | Gilead Sciences, Inc.* | 201,552 | ||||||||
962 | Medivation, Inc.* | 61,395 | ||||||||
700 | Perrigo Co. PLC | 107,422 | ||||||||
612,342 | ||||||||||
Chemicals – 2.4% | ||||||||||
1,390 | Monsanto Co. | 162,004 | ||||||||
Commercial Services & Supplies – 1.0% | ||||||||||
1,650 | Tyco International, Ltd. (U.S. Shares) | 67,716 | ||||||||
Communications Equipment – 1.2% | ||||||||||
795 | Motorola Solutions, Inc. | 53,662 | ||||||||
2,109 | Telefonaktiebolaget L.M. Ericsson – Class B | 25,748 | ||||||||
79,410 | ||||||||||
Computers & Peripherals – 5.7% | ||||||||||
698 | Apple, Inc.** | 391,655 | ||||||||
Containers & Packaging – 1.6% | ||||||||||
2,091 | Ball Corp. | 108,021 | ||||||||
Electrical Equipment – 2.0% | ||||||||||
3,535 | Sensata Technologies Holding N.V.* | 137,052 | ||||||||
Electronic Equipment, Instruments & Components – 3.0% | ||||||||||
1,394 | Amphenol Corp. – Class A | 124,317 | ||||||||
1,513 | TE Connectivity, Ltd. (U.S. Shares) | 83,381 | ||||||||
207,698 | ||||||||||
Energy Equipment & Services – 1.2% | ||||||||||
886 | Dresser-Rand Group, Inc.* | 52,832 | ||||||||
343 | Helmerich & Payne, Inc. | 28,840 | ||||||||
81,672 | ||||||||||
Food & Staples Retailing – 2.7% | ||||||||||
715 | Costco Wholesale Corp. | 85,092 | ||||||||
1,759 | Whole Foods Market, Inc. | 101,723 | ||||||||
186,815 | ||||||||||
Health Care Providers & Services – 2.3% | ||||||||||
760 | Aetna, Inc. | 52,129 | ||||||||
1,513 | Express Scripts Holding Co.* | 106,273 | ||||||||
158,402 | ||||||||||
Health Care Technology – 0.5% | ||||||||||
272 | athenahealth, Inc.* | 36,584 | ||||||||
Hotels, Restaurants & Leisure – 1.9% | ||||||||||
1,099 | Dunkin’ Brands Group, Inc. | 52,972 | ||||||||
1,014 | Starbucks Corp. | 79,487 | ||||||||
132,459 | ||||||||||
Household Products – 1.4% | ||||||||||
1,451 | Colgate-Palmolive Co. | 94,620 | ||||||||
Industrial Conglomerates – 1.7% | ||||||||||
1,496 | Danaher Corp. | 115,491 | ||||||||
Information Technology Services – 5.8% | ||||||||||
1,399 | Amdocs, Ltd. (U.S. Shares) | 57,695 | ||||||||
163 | MasterCard, Inc. – Class A | 136,180 | ||||||||
1,871 | Teradata Corp.* | 85,112 | ||||||||
517 | Visa, Inc. – Class A | 115,125 | ||||||||
394,112 | ||||||||||
Insurance – 0.5% | ||||||||||
7,000 | AIA Group, Ltd. | 35,117 | ||||||||
Internet & Catalog Retail – 1.3% | ||||||||||
474 | Ctrip.com International, Ltd. (ADR)* | 23,520 | ||||||||
25 | priceline.com, Inc.* | 29,060 | ||||||||
2,500 | Rakuten, Inc. | 37,135 | ||||||||
89,715 | ||||||||||
Internet Software & Services – 7.0% | ||||||||||
1,770 | eBay, Inc.* | 97,155 | ||||||||
328 | Google, Inc. – Class A* | 367,593 | ||||||||
210 | Twitter, Inc.* | 13,367 | ||||||||
478,115 | ||||||||||
Leisure Equipment & Products – 0.9% | ||||||||||
1,232 | Mattel, Inc. | 58,619 | ||||||||
Machinery – 0.8% | ||||||||||
844 | Colfax Corp.* | 53,754 | ||||||||
Media – 3.3% | ||||||||||
738 | CBS Corp. – Class B | 47,040 | ||||||||
3,530 | Twenty-First Century Fox, Inc. | 124,185 | ||||||||
752 | Walt Disney Co. | 57,453 | ||||||||
228,678 | ||||||||||
Oil, Gas & Consumable Fuels – 3.7% | ||||||||||
363 | Antero Resources Corp.* | 23,029 | ||||||||
319 | EOG Resources, Inc. | 53,541 | ||||||||
3,020 | Kinder Morgan, Inc. | 108,720 | ||||||||
1,035 | Noble Energy, Inc. | 70,494 | ||||||||
255,784 | ||||||||||
Pharmaceuticals – 3.8% | ||||||||||
1,530 | AbbVie, Inc. | 80,799 | ||||||||
308 | Endo Health Solutions, Inc.* | 20,778 | ||||||||
731 | Shire PLC | 34,518 | ||||||||
535 | Valeant Pharmaceuticals International, Inc. (U.S. Shares) | 62,809 | ||||||||
1,884 | Zoetis, Inc. | 61,588 | ||||||||
260,492 | ||||||||||
Professional Services – 0.9% | ||||||||||
990 | Verisk Analytics, Inc. – Class A* | 65,063 | ||||||||
Real Estate Investment Trusts (REITs) – 1.4% | ||||||||||
879 | American Tower Corp. | 70,162 | ||||||||
453 | Ventas, Inc. | 25,948 | ||||||||
96,110 | ||||||||||
Real Estate Management & Development – 0.4% | ||||||||||
1,056 | CBRE Group, Inc. – Class A* | 27,773 | ||||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
Janus Aspen Series | 9
Table of Contents
Janus Aspen Protected Series – Growth
Schedule of Investments
As of December 31, 2013
Shares/Principal/Contract Amounts | Value | |||||||||
Road & Rail – 4.4% | ||||||||||
1,151 | Canadian Pacific Railway, Ltd. | $ | 174,097 | |||||||
738 | Union Pacific Corp. | 123,984 | ||||||||
298,081 | ||||||||||
Semiconductor & Semiconductor Equipment – 2.1% | ||||||||||
3,641 | ARM Holdings PLC | 66,252 | ||||||||
4,160 | Atmel Corp.* | 32,573 | ||||||||
2,595 | Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) | 45,257 | ||||||||
144,082 | ||||||||||
Software – 6.6% | ||||||||||
728 | ANSYS, Inc.* | 63,482 | ||||||||
7,863 | Cadence Design Systems, Inc.* | 110,239 | ||||||||
1,663 | Informatica Corp.* | 69,014 | ||||||||
1,827 | Intuit, Inc. | 139,437 | ||||||||
1,127 | Oracle Corp. | 43,119 | ||||||||
522 | Salesforce.com, Inc.* | 28,809 | ||||||||
454,100 | ||||||||||
Specialty Retail – 7.7% | ||||||||||
78 | AutoZone, Inc.* | 37,279 | ||||||||
2,062 | L Brands, Inc. | 127,535 | ||||||||
903 | PetSmart, Inc. | 65,693 | ||||||||
3,411 | Sally Beauty Holdings, Inc.* | 103,114 | ||||||||
1,898 | TJX Cos., Inc. | 120,960 | ||||||||
567 | Ulta Salon, Cosmetics & Fragrance, Inc. | 54,727 | ||||||||
356 | Williams-Sonoma, Inc. | 20,748 | ||||||||
530,056 | ||||||||||
Textiles, Apparel & Luxury Goods – 1.1% | ||||||||||
953 | NIKE, Inc. – Class B | 74,944 | ||||||||
Trading Companies & Distributors – 2.0% | ||||||||||
525 | W.W. Grainger, Inc. | 134,095 | ||||||||
Wireless Telecommunication Services – 0.9% | ||||||||||
1,765 | T-Mobile U.S., Inc. | 59,375 | ||||||||
Total Common Stock (cost $5,249,442) | 6,760,101 | |||||||||
U.S. Treasury Notes/Bonds – 0.5% | ||||||||||
U.S. Treasury Notes/Bonds: | ||||||||||
$15,000 | 0.8750%, 11/30/16 | 15,048 | ||||||||
15,000 | 1.3750%, 12/31/18 | 14,751 | ||||||||
Total U.S. Treasury Notes/Bonds (cost $30,006) | 29,799 | |||||||||
Money Market – 1.4% | ||||||||||
98,514 | Janus Cash Liquidity Fund LLC, 0%£ (cost $98,514) | 98,514 | ||||||||
Capital Protection Agreement – 0% | ||||||||||
1 | Janus Aspen Protected Series - Growth with BNP Paribas Prime Brokerage, Inc.§ exercise price at 12/31/13 $10.46-$10.52 (cost $0) | 0 | ||||||||
Total Investments (total cost $5,377,962) – 100.6% | 6,888,414 | |||||||||
Liabilities, net of Cash, Receivables and Other Assets – (0.6)% | (38,853) | |||||||||
Net Assets – 100% | $ | 6,849,561 | ||||||||
Summary of Investments by Country – (Long Positions) (unaudited)
% of Investment | ||||||||
Country | Value | Securities | ||||||
Canada | $ | 236,906 | 3.4% | |||||
China | 23,520 | 0.4% | ||||||
France | 97,395 | 1.4% | ||||||
Hong Kong | 35,117 | 0.5% | ||||||
Japan | 37,135 | 0.5% | ||||||
Sweden | 25,748 | 0.4% | ||||||
Taiwan | 45,257 | 0.7% | ||||||
United Kingdom | 304,130 | 4.4% | ||||||
United States†† | 6,083,206 | 88.3% | ||||||
Total | $ | 6,888,414 | 100.0% |
†† | Includes Cash Equivalents of 1.4%. |
Premium to | Unrealized | |||||||||||
Schedule of Purchased Options – Zero Strike Calls | be Paid | Value | Depreciation | |||||||||
BNP IVIX Index expires March 2014 19,215 contracts exercise price $0.00 | $ | (72,389) | $ | 62,030 | $ | (10,359) | ||||||
See Notes to Schedule of Investments and Other Information and Notes to Financial Statements.
10 | DECEMBER 31, 2013
Table of Contents
Notes to Schedule of Investments and Other Information
BNP IVIX Index | A volatility strategy index sponsored by BNP Paribas. | |
Citigroup 3-Month U.S. Treasury Bill Index | An unmanaged index that represents the performance of three-month Treasury bills. The index reflects reinvestment of all distributions and changes in market prices. | |
Protected Series – Growth Blended Index | An internally-calculated, hypothetical combination of unmanaged indices that combines total returns from the Russell 1000® Growth Index (60%) and the Citigroup 3-Month U.S. Treasury Bill Index (40%). | |
Russell 1000® Growth Index | Measures the performance of those Russell 1000® Index companies with higher price-to-book ratios and higher forecasted growth values. | |
S&P 500® Index | A commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. | |
ADR | American Depositary Receipt | |
LLC | Limited Liability Company | |
PLC | Public Limited Company | |
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 or cash has been segregated to cover margin or segregation requirements on open futures contracts, forward currency contracts, options contracts, short sales, swap agreements, and/or securities with extended settlement dates, the value of which, as of December 31, 2013, is noted below. |
Portfolio | Aggregate Value | ||||
Janus Aspen Protected Series - Growth | $ | 154,305 | |||
§ | Schedule of Restricted and Illiquid Securities (as of December 31, 2013) |
Acquisition | Acquisition | Value as a | ||||||||||
Date | Cost | Value | % of Net Assets | |||||||||
Janus Aspen Protected Series - Growth | ||||||||||||
Capital Protection Agreement | 1/3/12 | $ | 0 | $ | 0 | 0.0% | ||||||
£ | The Portfolio may invest in certain securities that are considered affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated company is one in which the Portfolio owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control. Based on the Portfolio’s relative ownership, the following securities were considered affiliated companies for all or some portion of the year ended December 31, 2013. Except for the value at year end, all other information in the table is for the year ended December 31, 2013. |
Purchases | Sales | Realized | Dividend | Value | |||||||||||||||||
Shares | Cost | Shares | Cost | Gain/(Loss) | Income | at 12/31/13 | |||||||||||||||
Janus Aspen Protected Series – Growth | |||||||||||||||||||||
Janus Cash Liquidity Fund LLC | 988,267 | $ | 988,267 | (1,648,000) | $ | (1,648,000) | $ | – | $ | 126 | $ | 98,514 | |||||||||
Janus Aspen Series | 11
Table of Contents
Notes to Schedule of Investments and Other Information (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, 2013. See Notes to Financial Statements for more information.
Valuation Inputs Summary (as of December 31, 2013)
Level 2 – Other Significant | Level 3 – Significant | ||||||||||
Level 1 – Quoted Prices | Observable Inputs | Unobservable Inputs | |||||||||
Investments in Securities: | |||||||||||
Janus Aspen Protected Series – Growth | |||||||||||
Common Stock | $ | 6,760,101 | $ | – | $ | – | |||||
U.S. Treasury Notes/Bonds | – | 29,799 | – | ||||||||
Money Market | – | 98,514 | – | ||||||||
Total Investments in Securities | $ | 6,760,101 | $ | 128,313 | $ | – | |||||
Other Financial Instruments(a) - Assets | |||||||||||
Capital Protection Agreement | $ | – | $ | – | $ | 0 | |||||
Other Financial Instruments(a) - Liabilities | |||||||||||
Purchased Options – Zero Strike Calls | $ | – | $ | 10,359 | $ | – | |||||
(a) | Other financial instruments include the capital protection agreement, futures, forward currency, written option, zero strike option, and swap contracts. Forward currency contracts, zero strike options, and swap contracts are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contract’s value from trade date. Futures are reported at their variation margin at measurement date, which represents the amount due to/from the Portfolio at that date. Options are reported at their market value at measurement date. The capital protection agreement is reported at its market value at measurement date. |
12 | DECEMBER 31, 2013
Table of Contents
Statement of Assets and Liabilities
As of December 31, 2013 | ||||||||||
(all numbers in thousands except net asset value per share) | Janus Aspen Protected Series -Growth | |||||||||
Assets: | ||||||||||
Investments at cost | $ | 5,378 | ||||||||
Unaffiliated investments at value | $ | 6,790 | ||||||||
Affiliated investments at value | 98 | |||||||||
Capital protection agreement | – | |||||||||
Cash | – | |||||||||
Receivables: | ||||||||||
Investments sold | 335 | |||||||||
Dividends | 3 | |||||||||
Foreign dividend tax reclaim | 1 | |||||||||
Due from adviser | 29 | |||||||||
Interest | – | |||||||||
Non-interested Trustees’ deferred compensation | – | |||||||||
Other assets | – | |||||||||
Total Assets | 7,256 | |||||||||
Liabilities: | ||||||||||
Payables: | ||||||||||
Purchased options - zero strike calls at value(1) | 10 | |||||||||
Investments purchased | 354 | |||||||||
Advisory fees | 4 | |||||||||
Capital protection fee | 4 | |||||||||
Fund administration fees | – | |||||||||
Internal servicing cost | – | |||||||||
Distribution fees and shareholder servicing fees | 1 | |||||||||
Non-interested Trustees’ fees and expenses | – | |||||||||
Non-interested Trustees’ deferred compensation fees | – | |||||||||
Accrued expenses and other payables | 33 | |||||||||
Total Liabilities | 406 | |||||||||
Net Assets | $ | 6,850 | ||||||||
Net Assets Consist of: | ||||||||||
Capital (par value and paid-in surplus)* | $ | 5,252 | ||||||||
Undistributed net investment income* | – | |||||||||
Undistributed net realized gain from investment and foreign currency transactions* | 98 | |||||||||
Unrealized net appreciation of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 1,500 | |||||||||
Total Net Assets | $ | 6,850 | ||||||||
Net Assets - Institutional Shares | $ | 3,434 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 261 | |||||||||
Net Asset Value Per Share | $ | 13.14 | ||||||||
Protected Net Asset Value Per Share(2) | $ | 10.52 | ||||||||
Net Assets - Service Shares | $ | 3,416 | ||||||||
Shares Outstanding, $0.001 Par Value (unlimited shares authorized) | 261 | |||||||||
Net Asset Value Per Share | $ | 13.08 | ||||||||
Protected Net Asset Value Per Share(2) | $ | 10.46 |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Premiums to be paid of $72,389. | |
(2) | The Protected NAV is the protection feature of the Portfolio and is calculated at 80% of the highest previously achieved NAV, reduced for dividends, distributions, any extraordinary expenses, and certain extraordinary items. Shareholders cannot transact purchases or redemptions at the Protected NAV. |
See Notes to Financial Statements.
Janus Aspen Series | 13
Table of Contents
Statement of Operations
For the year ended December 31, 2013 | ||||||
(all numbers in thousands) | Janus Aspen Protected Series - Growth | |||||
Investment Income: | ||||||
Interest | $ | – | ||||
Dividends | 71 | |||||
Dividends from affiliates | – | |||||
Other Income | – | |||||
Foreign tax withheld | (1) | |||||
Total Investment Income | 70 | |||||
Expenses: | ||||||
Advisory fees | 39 | |||||
Capital protection fee | 37 | |||||
Internal servicing expense - Institutional Shares | – | |||||
Internal servicing expense - Service Shares | – | |||||
Shareholder reports expense | 58 | |||||
Transfer agent fees and expenses | 1 | |||||
Registration fees | 38 | |||||
Custodian fees | 14 | |||||
Professional fees | 38 | |||||
Non-interested Trustees’ fees and expenses | – | |||||
Fund administration fees | 1 | |||||
Distribution fees and shareholder servicing fees - Service Shares | 8 | |||||
Other expenses | 10 | |||||
Total Expenses | 244 | |||||
Less: Excess Expense Reimbursement | (152) | |||||
Net Expenses after Waivers and Expense Offsets | 92 | |||||
Net Investment Loss | (22) | |||||
Net Realized and Unrealized Gain/(Loss) on Investments: | ||||||
Net realized gain from investment and foreign currency transactions | 594 | |||||
Net realized loss from futures contracts | (41) | |||||
Net realized loss from purchased options - zero strike calls | (58) | |||||
Change in unrealized net appreciation/(depreciation) of investments, foreign currency translations and non-interested Trustees’ deferred compensation | 936 | |||||
Change in unrealized net appreciation/(depreciation) of futures contracts | 2 | |||||
Change in unrealized net appreciation/(depreciation) of purchased options - zero strike calls | 27 | |||||
Net Gain on Investments | 1,460 | |||||
Net Increase in Net Assets Resulting from Operations | $ | 1,438 |
See Notes to Financial Statements.
14 | DECEMBER 31, 2013
Table of Contents
Statements of Changes in Net Assets
Janus Aspen | ||||||||||
For each year or period ended December 31 | Protected Series - Growth | |||||||||
(all numbers in thousands) | 2013 | 2012(1) | ||||||||
Operations: | ||||||||||
Net investment loss | $ | (22) | $ | (8) | ||||||
Net realized gain/(loss) from investment, purchased option - zero strike call and foreign currency transactions | 495 | (116) | ||||||||
Change in unrealized net appreciation/(depreciation) of investments, purchased options - zero strike calls, foreign currency translations and non-interested Trustees’ deferred compensation | 965 | 536 | ||||||||
Net Increase in Net Assets Resulting from Operations | 1,438 | 412 | ||||||||
Dividends and Distributions to Shareholders: | ||||||||||
Net Investment Income* | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Realized Gain/(Loss) from Investment Transactions* | ||||||||||
Institutional Shares | (141) | – | ||||||||
Service Shares | (141) | – | ||||||||
Net Decrease from Dividends and Distributions to Shareholders | (282) | – | ||||||||
Capital Share Transactions: | ||||||||||
Shares Sold | ||||||||||
Institutional Shares | – | 2,500 | ||||||||
Service Shares | – | 2,500 | ||||||||
Reinvested Dividends and Distributions | ||||||||||
Institutional Shares | 141 | – | ||||||||
Service Shares | 141 | – | ||||||||
Shares Repurchased | ||||||||||
Institutional Shares | – | – | ||||||||
Service Shares | – | – | ||||||||
Net Increase from Capital Share Transactions | 282 | 5,000 | ||||||||
Net Increase in Net Assets | 1,438 | 5,412 | ||||||||
Net Assets: | ||||||||||
Beginning of period | 5,412 | – | ||||||||
End of period | $ | 6,850 | $ | 5,412 | ||||||
Undistributed Net Investment Income* | $ | – | $ | – |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
(1) | Period from January 3, 2012 (inception date) through December 31, 2012. |
See Notes to Financial Statements.
Janus Aspen Series | 15
Table of Contents
Financial Highlights
Institutional Shares
Janus Aspen Protected Series – Growth | ||||||||||
For a share outstanding during each year or period ended December 31 | 2013 | 2012(1) | ||||||||
Net Asset Value, Beginning of Period | $10.84 | $10.00 | ||||||||
Income from Investment Operations: | ||||||||||
Net investment income | 0.01 | 0.01 | ||||||||
Net gain on investments (both realized and unrealized) | 2.86 | 0.83 | ||||||||
Total from Investment Operations | 2.87 | 0.84 | ||||||||
Less Distributions: | ||||||||||
Dividends (from net investment income)* | – | – | ||||||||
Distributions (from capital gains)* | (0.57) | – | ||||||||
Total Distributions | (0.57) | – | ||||||||
Net Asset Value, End of Period | $13.14 | $10.84 | ||||||||
Total Return** | 26.66% | 8.40% | ||||||||
Net Assets, End of Period (in thousands) | $3,434 | $2,709 | ||||||||
Average Net Assets for the Period (in thousands) | $3,009 | $2,689 | ||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets*** | 3.95% | 4.52% | ||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets*** | 1.41% | 1.42% | ||||||||
Ratio of Net Investment Loss to Average Net Assets*** | (0.24)% | (0.02)% | ||||||||
Portfolio Turnover Rate | 67% | 107% |
Service Shares
Janus Aspen Protected Series – Growth | ||||||||||
For a share outstanding during each year or period ended December 31 | 2013 | 2012(1) | ||||||||
Net Asset Value, Beginning of Period | $10.81 | $10.00 | ||||||||
Income from Investment Operations: | ||||||||||
Net investment loss | (0.01) | (0.01) | ||||||||
Net gain on investments (both realized and unrealized) | 2.85 | 0.82 | ||||||||
Total from Investment Operations | 2.84 | 0.81 | ||||||||
Less Distributions: | ||||||||||
Dividends (from net investment income)* | – | – | ||||||||
Distributions (from capital gains)* | (0.57) | – | ||||||||
Total Distributions | (0.57) | – | ||||||||
Net Asset Value, End of Period | $13.08 | $10.81 | ||||||||
Total Return** | 26.45% | 8.10% | ||||||||
Net Assets, End of Period (in thousands) | $3,416 | $2,703 | ||||||||
Average Net Assets for the Period (in thousands) | $2,998 | $2,686 | ||||||||
Ratio of Gross Expenses (Absent the Waiver of Certain Fees and Expense Offsets) to Average Net Assets*** | 4.20% | 4.77% | ||||||||
Ratio of Net Expenses (After Waivers and Expense Offsets) to Average Net Assets*** | 1.66% | 1.67% | ||||||||
Ratio of Net Investment Loss to Average Net Assets*** | (0.49)% | (0.27)% | ||||||||
Portfolio Turnover Rate | 67% | 107% |
* | See “Federal Income Tax” in Notes to Financial Statements. | |
** | Total return not annualized for periods of less than one full year. | |
*** | Annualized for periods of less than one full year. | |
(1) | Period from January 3, 2012 (inception date) through December 31, 2012. |
See Notes to Financial Statements.
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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 Protected Series – Growth (the “Portfolio”) is a series fund. The Portfolio is part of Janus Aspen Series (the “Trust”), which is organized as a Delaware statutory trust and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust offers twelve Portfolios which include multiple series of shares, with differing investment objectives and policies. The Portfolio invests primarily in equity securities. The Portfolio is classified as diversified, as defined in the 1940 Act. The Portfolio is a no-load investment.
The Portfolio currently offers two classes of shares: Institutional Shares and Service Shares. Institutional Shares are offered only in connection with investment in and payments under variable insurance contracts as well as certain qualified retirement plans. Service Shares are offered only in connection with investment in and payments under variable insurance contracts and to qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants.
Effective January 28, 2014, the name of the Portfolio changed to Janus Aspen Preservation Series – Growth. The investment objective, investment strategies, and risk did not change in connection with the name change for the Portfolio.
Capital Protection Agreement
The Portfolio has entered into a Capital Protection Agreement with BNP Paribas Prime Brokerage, Inc., a U.S. registered broker-dealer (the “Capital Protection Provider”), pursuant to which, under certain conditions, the Capital Protection Provider will provide capital protection (the “Protection”), initially up to $500 million, to protect against a decrease in the “Protected NAV” (or 80% of the highest net asset value (“NAV”) attained separately by each share class, reduced for dividends, distributions, any extraordinary expenses, and certain extraordinary items) of each share class so long as the terms and conditions of the Capital Protection Agreement are satisfied. Shareholders cannot transact purchases or redemptions at the Protected NAV. In order to comply with the terms of the Capital Protection Agreement, the Portfolio must provide certain information to the Capital Protection Provider and the portfolio manager is required to manage the Portfolio within certain risk parameters on a daily basis as identified by the Capital Protection Provider based on a risk allocation methodology. Pursuant to which, the portfolio manager allocates its portfolio assets between and within two investment components: (1) the “Equity Component,” through which the Portfolio seeks to achieve growth of capital by investing primarily in common stocks selected for their growth potential, and (2) the “Protection Component,” through which the Portfolio seeks to limit downside risk by investing in cash and other investments including, but not limited to, money market instruments, U.S. Treasuries, and other equity market risk reducing instruments, such as short index futures. This risk allocation methodology factors in, among other things, market volatility, the Portfolio’s exposure to industries, sectors, or countries, and liquidity of the Portfolio’s holdings. The Portfolio’s asset allocation will vary over time depending on equity market conditions and the portfolio composition. As a result, the Portfolio’s allocation to each investment component could change as frequently as daily, resulting in a higher portfolio turnover rate than other mutual funds. The Capital Protection Agreement also imposes very specific reporting and monitoring obligations on the Portfolio, on Janus Capital, and indirectly on the Portfolio’s custodian. While in some instances the parties will be afforded some opportunity to remedy certain breaches, failure to do so within specified cure periods could result in the termination of the Capital Protection Agreement at the option of the Capital Protection Provider.
The Capital Protection Agreement has an initial term of 10 years and may be extended for additional 10-year terms by mutual agreement of the Portfolio and the Capital Protection Provider. There are numerous events that can cause the Capital Protection Agreement to terminate prior to the expiration of any effective term, including the NAV of either share class falling below its respective corresponding Protected NAV. In the event of termination of the Capital Protection Agreement, the Capital Protection Provider is obligated to pay any settlement amount due to the Portfolio pursuant to the agreement as of the termination date. However, the Protection will terminate without any obligation by the Capital Protection Provider to make any payment to the Portfolio if the termination of the Capital Protection Agreement results from acts or omissions of the Portfolio, Janus Capital or certain key employees of Janus Capital, or the Portfolio’s custodian that constitute gross negligence, fraud, bad faith, willful misconduct, or a criminal act which causes a decrease of 1% or more in the NAV per share of any class of shares of the Portfolio. In addition, the Capital Protection Provider has the right to terminate the Capital Protection Agreement should the aggregate protected amount exceed the maximum
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Notes to Financial Statements (continued)
settlement amount. In the event of any termination of the Capital Protection Agreement, the Portfolio will be converted to cash and cash equivalents, the Capital Protection Provider will pay the Portfolio any amounts due related to the Protection, and the Portfolio is expected to be liquidated. Only shareholders who hold their shares and sell those shares on the date that the Capital Protection Agreement terminates are entitled to receive the Protected NAV from the Portfolio. The Capital Protection Provider’s obligations to the Portfolio are subject to all of the terms, conditions, and limitations of the Capital Protection Agreement and terminate upon the triggering of the capital protection. None of the Portfolio, Janus Capital, any affiliate thereof, or any insurance company or other financial intermediary offering the shares will cover any shortfall so a shareholder could lose money including amounts that would have otherwise been protected.
Pursuant to the Capital Protection Agreement, the Capital Protection Provider has agreed to provide capital protection to protect the Portfolio against a decrease in the NAV per share for each share class of the Portfolio below 80% of the highest NAV per share for the share class attained since the inception of the share class, reduced for dividends, distributions, any extraordinary expenses, and certain extraordinary items, provided the terms and conditions of the Capital Protection Agreement are satisfied and the agreement is not otherwise void. For this capital protection, the Portfolio pays the Capital Protection Provider, under the Capital Protection Agreement, a fee equal to 0.75% of the aggregate protected amount, which is calculated daily and paid monthly. Because the Capital Protection Fee is based on the aggregate protected assets of the Portfolio rather than on the Portfolio’s total net assets, it can fluctuate between 0.60% and 0.75% of the total net assets.
The Capital Protection Agreement is valued at the greater of $0.00 or the Protected NAV less the NAV per share.
The Protected NAV for each share class as well as the percentages of Portfolio assets that are allocated between the Equity Component and the Protection Component will be posted on the Janus website at janus.com/variable-insurance. Please refer to the Prospectus for information regarding how the Protection works in the event it is triggered and the Portfolio proceeds to liquidation, as well as how the Protection is calculated to help you understand the 80% protection of the NAV per share.
The following accounting policies have been followed by the Portfolio and are in conformity with accounting principles generally accepted in the United States of America.
Investment Valuation
Securities held by the Portfolio are valued in accordance with policies and procedures established by and under the supervision of the Trustees (the “Valuation Procedures”). Equity securities traded on a domestic securities exchange are generally valued at the closing prices on the primary market or exchange on which they trade. If such price is lacking for the trading period immediately preceding the time of determination, such securities are valued at their current bid price. Equity securities that are traded on a foreign exchange are generally valued at the closing prices on such markets. In the event that there is not current trading volume on a particular security in such foreign exchange, the bid price from the primary exchange is generally used to value the security. Securities that are traded on the over-the-counter (“OTC”) markets are generally valued at their closing or latest bid prices as available. Foreign securities and currencies are converted to U.S. dollars using the applicable exchange rate in effect at the close of the New York Stock Exchange (“NYSE”). Each Portfolio will determine the market value of individual securities held by it by using prices provided by one or more professional pricing services which may provide market prices to other funds or, as needed, by obtaining market quotations from independent broker-dealers. Short-term securities maturing within 60 days or less are valued on an amortized cost basis. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service that is intended to reflect market value. The evaluated bid price supplied by the pricing service is an evaluation that may consider factors such as security prices, yields, maturities and ratings. Securities for which market quotations or evaluated prices are not readily available or deemed unreliable are valued at fair value determined in good faith under the Valuation Procedures. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) a significant event that may affect the securities of a single issuer, such as a merger, bankruptcy, or significant issuer-specific development; (ii) an event that may affect an entire market, such as a natural disaster or significant governmental action; (iii) a nonsignificant event such as a market closing early or not opening, or a security trading halt; and (iv) pricing of a nonvalued security and a restricted or nonpublic security. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE.
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Investment Transactions and Investment Income
Investment transactions are accounted for as of the date purchased or sold (trade date). Dividend income is recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Trust is informed of the dividend, if such information is obtained subsequent to the ex-dividend date. Dividends from foreign securities may be subject to withholding taxes in foreign jurisdictions. Interest income is recorded on the accrual basis and includes amortization of premiums and accretion of discounts. Gains and losses are determined on the identified cost basis, which is the same basis used for federal income tax purposes. Income, as well as gains and losses, both realized and unrealized, are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets.
Expenses
The Portfolio bears expenses incurred specifically on its behalf, as well as a portion of general expenses, which may be allocated pro rata to the Portfolio. Each class of shares bears a portion of general expenses, which are allocated daily to each class of shares based upon the ratio of net assets represented by each class as a percentage of total net assets. Expenses directly attributable to a specific class of shares are charged against the operations of such class. Expenses include the fee paid to the Capital Protection Provider. Because the fee is based on the aggregate protected assets of the Portfolio, it can fluctuate between 0.60% and 0.75% of the Portfolio’s net assets.
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Translations
The Portfolio does not isolate that portion of the results of operations resulting from the effect of changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held at the date of the financial statements. Net unrealized appreciation or depreciation of investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities held at the date of the financial statements, resulting from changes in the exchange rates and changes in market prices of securities held.
Currency gains and losses are also calculated on payables and receivables that are denominated in foreign currencies. The payables and receivables are generally related to foreign security transactions and income translations.
Foreign currency-denominated assets and forward currency contracts may involve more risks than domestic transactions, including currency risk, political and economic risk, regulatory risk and equity risk. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of foreign currencies relative to the U.S. dollar.
Dividend Distributions
The Portfolio may make semiannual distributions of substantially all of its investment income and an annual distribution of its net realized capital gains (if any).
Because the payment of dividends and distributions could have the effect of reducing the Portfolio’s NAV as a result of the reduction in the aggregate value of the Portfolio’s assets, any such distribution made during the term of the Capital Protection Agreement, including distributions made before the investment by the shareholder, will reduce the Protected NAV of each share class and therefore the amount of protection afforded to the Portfolio by the Capital Protection Provider. This means that the Protected NAV could be less than 80% of the highest previously attained NAV. Janus Capital intends to estimate dividends payable prior to any distribution date in an effort to minimize the impact of such distributions to the Protected NAV. There is no guarantee that Janus Capital will be successful in doing so. Incorrect estimates could impact the dividend calculation methodology and affect the Protected NAV per share. Please refer to the Portfolio’s Prospectuses for additional examples of how distributions will affect the Protected NAV.
The Portfolio may make certain investments in real estate investment trusts (“REITs”) which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REITs’ taxable earnings and profits, resulting in the excess portion of such dividends being designated as a return of capital. If the Portfolio distributes such amounts, such distributions could constitute a return of capital to shareholders for federal income tax purposes.
Federal Income Taxes
The Portfolio intends to continue to qualify as a regulated investment company and distribute all of its taxable
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Notes to Financial Statements (continued)
income in accordance with the requirements of Subchapter M of the Internal Revenue Code. Management has analyzed the Portfolio’s tax positions taken for all open federal income tax years, generally a three-year period, and has concluded that no provision for federal income tax is required in the Portfolio’s financial statements. The Portfolio is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Valuation Inputs Summary
In accordance with Financial Accounting Standards Board (“FASB”) standard guidance, the Portfolio utilizes the “Fair Value Measurements” to define fair value, establish a framework for measuring fair value, and expand disclosure requirements regarding fair value measurements. The Fair Value Measurement Standard does not require new fair value measurements, but is applied to the extent that other accounting pronouncements require or permit fair value measurements. This standard emphasizes that fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. Various inputs are used in determining the value of the Portfolio’s investments defined pursuant to this standard. These inputs are summarized into three broad levels:
Level 1 – Quoted prices in active markets for identical securities.
Level 2 – Prices determined using other significant observable inputs. Observable inputs are inputs that reflect the assumptions market participants would use in pricing a security and are developed based on market data obtained from sources independent of the reporting entity. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, and others.
Debt securities are valued in accordance with the evaluated bid price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Securities traded on OTC markets and listed securities for which no sales are reported are valued at the latest bid price (or yield equivalent thereof) obtained from one or more dealers transacting in a market for such securities or by a pricing service approved by the Portfolio’s Trustees and are categorized as Level 2 in the hierarchy. Short-term securities with maturities of 60 days or less are valued at amortized cost, which approximates market value and are categorized as Level 2 in the hierarchy. Other securities that may be categorized as Level 2 in the hierarchy include, but are not limited to, preferred stocks, bank loans, certain American Depositary Receipts (“ADRs”), certain Global Depositary Receipts (“GDRs”), warrants, swaps, investments in mutual funds, OTC options, and forward contracts. The Portfolio uses systematic fair valuation models provided by independent third parties to value international equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and the close of the NYSE. These are generally categorized as Level 2 in the hierarchy.
Level 3 – Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable or deemed less relevant (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the factors market participants would use in pricing the security and would be based on the best information available under the circumstances.
For restricted equity securities and private placements where observable inputs are limited, assumptions about market activity and risk are used in employing valuation techniques such as the market approach, the income approach, or the cost approach, as defined under the FASB Guidance. These are categorized as Level 3 in the hierarchy.
There have been no significant changes in valuation techniques used in valuing any such positions held by the Portfolio since the beginning of the fiscal year.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The summary of inputs used as of December 31, 2013 to value the Portfolio’s investments in securities and other financial instruments is included in the “Valuation Inputs Summary” in the Notes to Schedule of Investments and Other Information.
FASB Accounting Standards Update, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements,” requires disclosures about amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. For fair value measurements categorized within Level 3 of the fair value hierarchy, the Portfolio shall provide quantitative information about the significant unobservable inputs used in the fair value measurement. To meet the objective of the quantitative disclosure, the Portfolio may need to further disaggregate to provide more meaningful information about the significant unobservable inputs used and how these inputs vary over time.
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The Portfolio is not required to create quantitative information to comply with this disclosure requirement if quantitative unobservable inputs are not developed by the Portfolio when measuring fair value (for example, when a Portfolio uses prices from prior transactions or third-party pricing information without adjustment). However, when providing this disclosure, the Portfolio cannot ignore quantitative unobservable inputs that are significant to the fair value measurement and are reasonably available to the Portfolio.
In addition, the Accounting Standards Update requires the Portfolio to provide a narrative sensitivity disclosure of the fair value measurement changes in unobservable inputs and the interrelationships between those unobservable inputs for fair value measurements categorized within Level 3 of the fair value hierarchy. The Portfolio did not hold a material amount of Level 3 securities as of December 31, 2013.
The following table shows transfers in or out of Level 1, Level 2 and Level 3 of the fair value hierarchy during the year ended December 31, 2013.
Transfers Out of | ||||||
Level 2 | ||||||
Portfolio | to Level 1 | |||||
Janus Aspen Protected Series - Growth | $ | 187,593 | ||||
Financial assets were transferred out of Level 2 to Level 1 since certain foreign equity prices were applied a fair valuation adjustment factor at the end of the prior fiscal year and no factor was applied at the end of the current fiscal year.
The Portfolio recognizes transfers between the levels as of the beginning of the fiscal year.
2. | Derivative Instruments |
The Portfolio may invest in various types of derivatives, which may at times result in significant derivative exposure. A derivative is a financial instrument whose performance is derived from the performance of another asset. The Portfolio may invest in derivative instruments including, but not limited to: futures contracts, put options, call options, options on future contracts, options on foreign currencies, swaps, forward contracts, structured investments, and other equity-linked derivatives. Each derivative instrument that was held by the Portfolio during the year ended December 31, 2013 is discussed in further detail below. A summary of derivative activity is reflected in the tables at the end of this section.
The Portfolio may use derivative instruments for hedging (to offset risks associated with an investment, currency exposure, or market conditions) or for speculative (to seek to enhance returns) purposes. When the Portfolio invests in a derivative for speculative purposes, the Portfolio will be fully exposed to the risks of loss of that derivative, which may sometimes be greater than the derivative’s cost. The Portfolio may not use any derivative to gain exposure to an asset or class of assets in which it would be prohibited by its investment restrictions from purchasing directly. The Portfolio’s ability to use derivative instruments may also be limited by tax considerations.
Investments in derivatives in general are subject to market risks that may cause their prices to fluctuate over time. Investments in derivatives may not directly correlate with the price movements of the underlying instrument. As a result, the use of derivatives may expose the Portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The use of derivatives may result in larger losses or smaller gains than otherwise would be the case. Derivatives can be volatile and may involve significant risks, including, but not limited to, counterparty risk, credit risk, currency risk, equity risk, index risk, interest rate risk, leverage risk, and liquidity risk, as described below.
Derivatives may generally be traded OTC or on an exchange. Derivatives traded OTC, such as options and structured notes, are agreements that are individually negotiated between parties and can be tailored to meet a purchaser’s needs.
OTC derivatives are not guaranteed by a clearing agency and may be subject to increased credit risk. In an effort to mitigate credit risk associated with derivatives traded OTC, the Portfolio may enter into collateral agreements with certain counterparties whereby, subject to certain minimum exposure requirements, the Portfolio may require the counterparty to post collateral if the Portfolio has a net aggregate unrealized gain on all OTC derivative contracts with a particular counterparty. There is no guarantee that counterparty exposure is reduced and these arrangements are dependent on Janus Capital Management LLC’s (“Janus Capital”) ability to establish and maintain appropriate systems and trading.
In pursuit of its investment objective, the Portfolio may seek to use derivatives to increase or decrease exposure to the following market risk factors:
• | Counterparty Risk – Counterparty risk is the risk that the counterparty (the party on the other side of the transaction) on a derivative transaction will be unable to honor its financial obligation to the Portfolio. | |
• | Credit Risk – Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations. |
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Notes to Financial Statements (continued)
• | Currency Risk – Currency risk is the risk that changes in the exchange rate between currencies will adversely affect the value (in U.S. dollar terms) of an investment. | |
• | Equity Risk – Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market. | |
• | Index Risk – If the derivative is linked to the performance of an index, it will be subject to the risks associated with changes in that index. If the index changes, the Portfolio could receive lower interest payments or experience a reduction in the value of the derivative to below what the Portfolio paid. Certain indexed securities, including inverse securities (which move in an opposite direction to the index), may create leverage, to the extent that they increase or decrease in value at a rate that is a multiple of the changes in the applicable index. | |
• | Interest Rate Risk – Interest rate risk is the risk that the value of fixed-income securities will generally decline as prevailing interest rates rise, which may cause the Portfolio’s NAV to likewise decrease, and vice versa. | |
• | Leverage Risk – Leverage risk is the risk associated with certain types of leveraged investments or trading strategies pursuant to which relatively small market movements may result in large changes in the value of an investment. The Portfolio creates leverage by investing in instruments, including derivatives, where the investment loss can exceed the original amount invested. Certain investments or trading strategies, such as short sales, that involve leverage can result in losses that greatly exceed the amount originally invested. | |
• | Liquidity Risk – Liquidity risk is the risk that certain securities may be difficult or impossible to sell at the time that the seller would like or at the price that the seller believes the security is currently worth. |
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, equity risk, and currency risk in the normal course of pursuing its investment objective through its investments in futures contracts. The Portfolio may also use such derivative instruments to hedge or protect from adverse movements in securities prices, currency rates or interest rates. The use of futures contracts may involve risks such as the possibility of illiquid markets or imperfect correlation between the values of the contracts and the underlying securities, or that the counterparty will fail to perform its obligations.
Futures contracts are marked-to-market daily, and the daily variation margin is recorded as a receivable or payable on the Statement of Assets and Liabilities. When a contract is closed, a realized gain or loss is recorded as “Net realized gain/(loss) from futures contracts” on the Statement of Operations, equal to the difference between the opening and closing value of the contract. Generally, futures contracts are marked-to-market (i.e., treated as realized and subject to distribution) for federal income tax purposes at fiscal year-end. Securities held by the Portfolio that are designated as collateral for market value on futures contracts are noted on the Schedule of Investments. Such collateral is in the possession of the Portfolio’s futures commission merchant.
With futures, there is minimal counterparty credit risk to the Portfolio since futures are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures, guarantees the futures against default.
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 is subject to interest rate risk, liquidity risk, equity risk, and currency risk in the normal course of pursuing its investment objective through its investments in options contracts. The Portfolio may use options contracts to hedge against changes in interest rates, the values of equities, or foreign currencies. The Portfolio may utilize American-style and European-style options. An American-style option is an option contract that can be exercised at any time between the time of purchase and the option’s expiration date. A European-style option is an option contract that can only be exercised on the option’s expiration date. The Portfolio may also purchase or write put and call options on foreign currencies in a manner similar to that in which futures or forward contracts on foreign currencies will be utilized. The Portfolio generally invests in options to hedge against adverse movements in the value of portfolio holdings.
The Portfolio may also utilize swaps, options, exchange-traded funds, exchange-traded notes, or other instruments for exposure to the Chicago Board Options Exchange Market Volatility Index (“VIX”) or another volatility index.
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Such investments would be used in accordance with the risk methodology under the Capital Protection Agreement and would be designed in an effort to limit losses in a sharp market decline. There is no guarantee that using such instruments would be effective in limiting losses, and the use of such instruments could impact the ability to increase returns. There are costs associated with entering into such investments, which can impact returns. The Capital Protection Provider may be the entity used to enter into a transaction related to the VIX and, if so, would receive compensation.
When an option is written, the Portfolio receives a premium and becomes obligated to sell or purchase the underlying security at a fixed price, upon exercise of the option. In writing an option, the Portfolio bears the risk of an unfavorable change in the price of the security underlying the written option. Exercise of an option written by the Portfolio could result in the Portfolio buying or selling a security at a price different from the current market value.
When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option are adjusted by the amount of premium received or paid.
The Portfolio may also purchase and write exchange-listed and OTC put and call options on domestic securities indices, and on foreign securities indices listed on domestic and foreign securities exchanges. Options on securities indices are similar to options on securities except that (1) the expiration cycles of securities index options are monthly, while those of securities options are currently quarterly, and (2) the delivery requirements are different. Instead of giving the right to take or make delivery of securities at a specified price, an option on a securities index gives the holder the right to receive a cash “exercise settlement amount” equal to (a) the amount, if any, by which the fixed exercise price of the option exceeds (in the case of a put) or is less than (in the case of a call) the closing value of the underlying index on the date of exercise, multiplied by (b) a fixed “index multiplier.” Receipt of this cash amount will depend upon the closing level of the securities index upon which the option is based being greater than, in the case of a call, or less than, in the case of a put, the exercise price of the index and the exercise price of the option times a specified multiple. The writer of the option is obligated, in return for the premium received, to make delivery of this amount.
Options traded on an exchange are regulated and the terms of the options are standardized. Options traded OTC expose the Portfolio to counterparty risk in the event that the counterparty does not perform. This risk is mitigated by having a netting arrangement between the Portfolio and the counterparty and by having the counterparty post collateral to cover the Portfolio’s exposure to the counterparty.
Options are valued daily based upon the last sale price on the principal exchange on which the option is traded. The difference between the premium received or paid, and market value of the option, is recorded as unrealized appreciation or depreciation. The net change in unrealized appreciation or depreciation is reported in the Statement of Operations. When an option is exercised, the proceeds on sales for a written call option, the purchase cost for a written put option, or the cost of the security for a purchased put or call option are adjusted by the amount of premium received or paid. Upon the expiration or closing of the option transaction, a gain or loss is reported in the Statement of Operations.
The following table, grouped by derivative type, provides information about the fair value and location of derivatives within the Statement of Assets and Liabilities as of December 31, 2013.
Fair Value of Derivative Instruments as of December 31, 2013
Derivatives not accounted | Asset Derivatives | Liability Derivatives | ||||||||||
for as hedging instruments | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||
Janus Aspen Protected Series - Growth | ||||||||||||
Capital Protection Agreement | Capital protection agreement | $ | 0 | |||||||||
Equity Contracts | Purchased options, zero strike calls at value | $ | 10,359 | |||||||||
Total | $ | 0 | $ | 10,359 | ||||||||
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The following tables provide information about the effect of derivatives and hedging activities on the Portfolio’s Statement of Operations for the year ended December 31, 2013.
The effect of Derivative Instruments on the Statement of Operations for the year ended December 31, 2013
Amount of Net Realized Gain/(Loss) on Derivatives Recognized in Income | ||||||||||||||||
Derivatives not accounted for as | Investment and foreign | Purchased options - | ||||||||||||||
hedging instruments | currency transactions | Futures contracts | zero strike calls | Total | ||||||||||||
Janus Aspen Protected Series - Growth | ||||||||||||||||
Equity Contracts | $ | 2,736* | $ | (41,473 | ) | $ | (57,639 | ) | $ | (96,376 | ) | |||||
* | Amounts relate to purchased options. |
Change in Unrealized Net Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||||||||||
Investments, foreign | ||||||||||||||||
currency translations and | ||||||||||||||||
Derivatives not accounted for as | non-interested Trustees’ | Purchased options - | ||||||||||||||
hedging instruments | deferred compensation | Futures contracts | zero strike calls | Total | ||||||||||||
Janus Aspen Protected Series - Growth | ||||||||||||||||
Capital Protection Agreement | $ | 0 | $ | – | $ | – | $ | 0 | ||||||||
Equity Contracts | – | 1,965 | 27,329 | 29,294 | ||||||||||||
Total | $ | 0 | $ | 1,965 | $ | 27,329 | $ | 29,294 | ||||||||
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
As with all investments, there are inherent risks when investing in the Portfolio. The Portfolio’s participation in the Capital Protection Agreement also subjects the Portfolio to certain risks not generally associated with equity funds, including but not limited to, allocation risk, maximum settlement amount risk, turnover risk, liquidation risk, opportunity cost risk, capital protection termination risk, underperformance risk, and counterparty risk. For information relating to these and other risks of investing in the Portfolio as well as other general information about the Portfolio, please refer to the Portfolio’s Prospectuses and statements of additional information.
The financial crisis that began in 2008 has caused a significant decline in the value and liquidity of many securities of issuers worldwide in the equity and fixed-income/credit markets. In response to the crisis, the United States and certain foreign governments, along with the U.S. Federal Reserve and certain foreign central banks have taken steps to support the financial markets. The withdrawal of this support, failure of efforts to respond to the crisis, or investor perception that such efforts are not succeeding each could also negatively affect financial markets generally, and the value and liquidity of specific securities. In addition, policy and legislative changes in the United States and in other countries are impacting many aspects of financial regulation. The effect of these changes on the markets, and the practical implications for market participants, including the Portfolio, may not be fully known for some time. Redemptions, particularly a large redemption, may impact the allocation process, and the NAV of any share class may fall below its Protected NAV. If this happens, it is expected that the Portfolio will receive payment of the Settlement Amount from the Capital Protection Provider, if due, and will proceed with the liquidation process as soon as possible following the event. Because the situation is unprecedented and widespread, it may also be unusually difficult to identify both investment risks and opportunities, which could limit or preclude the Portfolio’s ability to achieve its investment objective. Therefore, it is important to understand that the value of your investment may fall, sometimes sharply, and you could lose money.
The enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010 is dramatically changing the way in which the U.S. financial system is supervised and regulated. The Dodd-Frank Act provides for widespread regulation of financial institutions, consumer financial products and services, broker-dealers, OTC derivatives, investment advisers, credit rating agencies, and mortgage lending, which expands federal oversight in the financial sector, including the investment management industry. Many provisions of the Dodd-Frank Act will be implemented through future rulemaking. Therefore, the ultimate impact of the Dodd-Frank Act and the regulations under the Dodd-Frank Act, on the Portfolio and the investment management industry as a whole, is not yet certain.
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A number of countries in the European Union (“EU”) have experienced severe economic and financial difficulties. As a result, financial markets in the EU have been subject to extreme volatility and declines in asset values and liquidity. Responses to these financial problems by European governments, central banks, and others, including austerity measures and reforms, may not work, may result in social unrest, and may limit future growth and economic recovery or have other unintended consequences. Further defaults or restructuring by governments and others of their debt could have additional adverse effects on economies, financial markets, and asset valuations around the world.
Certain areas of the world have historically been prone to and economically sensitive to environmental events such as, but not limited to, hurricanes, earthquakes, typhoons, flooding, tidal waves, tsunamis, erupting volcanoes, wildfires or droughts, tornadoes, mudslides, or other weather-related phenomena. Such disasters, and the resulting physical or economic damage, could have a severe and negative impact on the Portfolio’s investment portfolio and, in the longer term, could impair the ability of issuers in which the Portfolio invests to conduct their businesses as they would under normal conditions. Adverse weather conditions may also have a particularly significant negative effect on issuers in the agricultural sector and on insurance companies that insure against the impact of natural disasters.
Counterparties
Portfolio transactions involving a counterparty, such as the Capital Protection Provider, are subject to the risk that the counterparty or a third party will not fulfill its obligation to the Portfolio (“counterparty risk”). Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not.
A shareholder’s ability to receive the Protected NAV from the Portfolio is dependent on the Portfolio’s ability to collect any settlement from the Capital Protection Provider pursuant to the terms of the Capital Protection Agreement or from BNP Paribas, the parent company of the Capital Protection Provider (the “Parent Guarantor”), under a separate parent guaranty. As such, the Portfolio’s ability to benefit from the Protection may depend on the Capital Protection Provider’s, as well as its parent company’s, financial condition. As an added measure of protection, the Parent Guarantor has issued an absolute, irrevocable and continuing guaranty pursuant to which it guarantees any and all financial obligations of the Capital Protection Provider under the Capital Protection Agreement. There is, however, a risk that the Capital Protection Provider’s parent company may not fulfill its obligations under the guaranty it has issued. The extent of the Portfolio’s exposure to counterparty risk in respect to financial assets approximates its carrying value as recorded on the Portfolio’s Statement of Assets and Liabilities.
The Portfolio may also be exposed to counterparty risk through participation in various programs including, but not limited to, cash sweep arrangements whereby the Portfolio’s cash balance is invested in one or more types of cash management vehicles, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures and options. The Portfolio intends to enter into financial transactions with counterparties that Janus Capital believes to be creditworthy at the time of the transaction. There is always the risk that Janus Capital’s analysis of a counterparty’s creditworthiness is incorrect or may change due to market conditions. To the extent that the Portfolio focuses its transactions with a limited number of counterparties, it will have greater exposure to the risks associated with one or more counterparties. Under the terms of the Capital Protection Agreement, the Protected NAV of each share class will be reduced by any reductions in the NAV per share resulting from such events as, but not limited to, (i) the bankruptcy, insolvency, reorganization or default of a contractual counterparty of the Portfolio, including counterparties to derivatives transactions, and entities that hold cash or other assets of the Portfolio; (ii) any trade or pricing error of the Portfolio; and (iii) any realized or unrealized losses on any investment of the Portfolio in money market funds.
Emerging Market Investing
Within the parameters of its investment policies, the Portfolio may invest in securities of issuers or companies from or with exposure to one or more “developing countries” or “emerging markets.” Investing in emerging markets may involve certain risks and considerations not typically associated with investing in the United States and imposes risks greater than, or in addition to, the risks associated with investing in securities of more developed foreign countries. Emerging markets securities are exposed to a number of additional risks, which may result from less government supervision and regulation of business and industry practices (including the potential lack of strict finance and accounting controls and standards), stock exchanges, brokers, and listed companies, making these investments potentially more volatile in price and less liquid than investments in developed securities markets, resulting in greater risk to investors. There is a risk in developing countries that a future economic or political crisis could lead to price controls, forced mergers of companies, expropriation or confiscatory taxation, imposition or enforcement of foreign ownership limits, seizure, nationalization, or creation of
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Notes to Financial Statements (continued)
government monopolies, any of which may have a detrimental effect on the Portfolio’s investments. In addition, the Portfolio’s investments may be denominated in foreign currencies and therefore, changes in the value of a country’s currency compared to the U.S. dollar may affect the value of the Portfolio’s investments. To the extent that the Portfolio invests a significant portion of its assets in the securities of issuers in or companies of a single country or region, it is more likely to be impacted by events or conditions affecting that country or region, which could have a negative impact on the Portfolio’s performance.
Offsetting Assets and Liabilities
The Portfolio has recently adopted guidance requiring entities to present gross and net information about transactions that are either offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement with a designated counterparty, regardless of whether the transactions are actually offset in the Statement of Assets and Liabilities.
In order to better define its contractual rights and to secure rights that will help the Portfolio mitigate its counterparty risk, the Portfolio may enter into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between a Portfolio and a counterparty that governs OTC derivatives and forward foreign currency exchange contracts and typically contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, in the event of a default and/or termination event, the Portfolio may offset with each counterparty certain derivative financial instrument’s payables and/or receivables with collateral held and/or posted and create one single net payment. Note that for financial reporting purposes, the Portfolio does not offset certain derivative financial instrument’s payables and receivables and related collateral on the Statement of Assets and Liabilities.
The following table presents gross amounts of recognized assets and liabilities and the net amounts after deducting collateral that has been pledged by counterparties or has been pledged to counterparties (if applicable).
Offsetting of Financial Liabilities and Derivative Liabilities
Gross Amounts | Gross Amounts Offset | |||||||||||||
Counterparty | of Recognized Liabilities | in the Statement of Assets and Liabilities | Collateral Pledged* | Net Amount | ||||||||||
BNP Paribas Prime Brokerage, Inc. | $ | 10,359 | $ | – | $ | – | $ | 10,359 | ||||||
* | Collateral pledged is limited to the net outstanding amount due to/from an individual counterparty. The actual collateral amounts pledged may exceed these amounts and may fluctuate in value. |
Real Estate Investing
The Portfolio may invest in equity and debt securities of real estate-related companies. Such companies may include those in the real estate industry or real estate-related industries. These securities may include common stocks, preferred stocks, and other securities, including, but not limited to, mortgage-backed securities, real estate-backed securities, securities of REITs and similar REIT-like entities. A REIT is a trust that invests in real estate-related projects, such as properties, mortgage loans, and construction loans. REITs are generally categorized as equity, mortgage, or hybrid REITs. A REIT may be listed on an exchange or traded OTC.
Sovereign Debt
The Portfolio may invest in U.S. and foreign government debt securities (“sovereign debt”). Investments in U.S. sovereign debt are considered low risk. However, investments in non-U.S. sovereign debt can involve a high degree of risk, including the risk that the governmental entity that controls the repayment of sovereign debt may not be willing or able to repay the principal and/or to pay the interest on its sovereign debt in a timely manner. A sovereign debtor’s willingness or ability to satisfy its debt obligation may be affected by various factors, including its cash flow situation, the extent of its foreign currency reserves, the availability of foreign exchange when a payment is due, the relative size of its debt position in relation to its economy as a whole, the sovereign debtor’s policy toward international lenders, and local political constraints to which the governmental entity may be subject. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies, and other entities. The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance, or repay principal or interest when due may result in the cancellation of third party commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to timely service its debts. The Portfolio may be requested to participate in the rescheduling of such sovereign debt and to extend further loans to governmental entities, which may adversely affect the Portfolio’s holdings. In the event of default, there may be limited or no legal remedies for collecting sovereign debt and there may be no bankruptcy proceedings
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through which the Portfolio may collect all or part of the sovereign debt that a governmental entity has not repaid.
4. | Investment Advisory Agreements and Other Transactions with Affiliates |
The Portfolio pays Janus Capital an investment advisory fee which is calculated daily and paid monthly. The following table reflects the Portfolio’s contractual investment advisory fee rate (expressed as an annual rate).
Contractual | ||||||||
Average | Investment | |||||||
Daily | Advisory | |||||||
Net Assets | Fee (%) | |||||||
Portfolio | of the Portfolio | (annual rate) | ||||||
Janus Aspen Protected Series - Growth | All Asset Levels | 0.64 | ||||||
Janus Capital has contractually agreed to waive the advisory fee payable by the Portfolio in an amount equal to the amount, if any, that the Portfolio’s normal operating expenses in any fiscal year, including the investment advisory fee and the capital protection fee, but excluding the distribution and shareholder servicing fees (applicable to Service Shares), administrative services fees payable pursuant to the Transfer Agency Agreement, brokerage commissions, interest, dividends, taxes, acquired fund fees and expenses, and extraordinary expenses, exceed the annual rate shown below. Janus Capital has agreed to continue the waiver until at least May 1, 2014. If applicable, amounts reimbursed to the Portfolio by Janus Capital are disclosed as “Excess Expense Reimbursement” on the Statement of Operations.
Expense | |||||
Portfolio | Limit (%) | ||||
Janus Aspen Protected Series - Growth | 1.38 - 1.53* | ||||
* | Varies based on the amount of the Capital Protection Fee. |
Janus Services LLC (“Janus Services”), a wholly-owned subsidiary of Janus Capital, is the Portfolio’s transfer agent. In addition, Janus Services provides or arranges for the provision of certain other administrative, recordkeeping, and shareholder relations services for the Portfolio. Janus Services is not compensated for its services related to the Shares, except for out-of-pocket costs.
Janus Distributors LLC, a wholly-owned subsidiary of Janus Capital, is a distributor of the Portfolio. Service Shares 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 to Janus Distributors for remittance to insurance companies and qualified plan service providers as compensation for distribution and/or shareholder servicing performed by such service providers. The Plan may pay Janus Distributors a fee 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 the Portfolio’s actual distribution and shareholder service expenses incurred during a calendar year are less than the payments made during a calendar year, the Portfolio will be refunded the difference. Refunds, if any, are included in “Distribution fees and shareholder servicing fees” in the Statement of Operations.
The Board of Trustees has adopted a deferred compensation plan (the “Deferred Plan”) for independent Trustees to elect to defer receipt of all or a portion of the annual compensation they are entitled to receive from the Portfolio. All deferred fees are credited to an account established in the name of the Trustees. The amounts credited to the account then increase or decrease, as the case may be, in accordance with the performance of one or more of the Janus funds that are selected by the Trustees. The account balance continues to fluctuate in accordance with the performance of the selected fund or funds until final payment of all amounts are credited to the account. The fluctuation of the account balance is recorded by the Portfolio as unrealized appreciation/(depreciation) and is shown as of December 31, 2013 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 year ended December 31, 2013 are included in “Non-interested Trustees’ fees and expenses” on the Statement of Operations. Trustees are allowed to change their designation of mutual funds from time to time. Amounts will be deferred until distributed in accordance with the Deferred Plan. Deferred fees of $274,709 were paid by the Trust to a Trustee under the Deferred Plan during the year ended December 31, 2013.
Certain officers of the Portfolio may also be officers and/or directors of Janus Capital. The Portfolio indirectly pays for the salaries, fees, and expenses of certain Janus Capital employees and Portfolio officers, with respect to certain specified administration functions they perform on behalf of the Portfolio. Administration costs are separate and apart from advisory fees and other expenses paid in connection with the investment advisory services Janus
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Notes to Financial Statements (continued)
Capital provides to the Portfolio. Some expenses related to compensation payable to the Portfolio’s Chief Compliance Officer and compliance staff are shared with the Portfolio. Total compensation of $33,152 was paid to the Chief Compliance Officer and certain compliance staff by the Trust during the year ended December 31, 2013. The Portfolio’s portion is reported as part of “Other Expenses” on the Statement of Operations.
The Portfolio’s expenses may be reduced by expense offsets from an unaffiliated custodian and/or transfer agent. Such credits or offsets are included in “Expense and Fee Offset” on the Statement of Operations. The Portfolio could have employed the assets used by the custodian and/or transfer agent to produce income if it had not entered into an expense offset arrangement.
Pursuant to the provisions of the 1940 Act and rules promulgated thereunder, the Portfolio may participate in an affiliated or nonaffiliated cash sweep program. In the cash sweep program, uninvested cash balances of the Portfolio may be used to purchase shares of affiliated or nonaffiliated money market funds or cash management pooled investment vehicles. The Portfolio is eligible to participate in the cash sweep program (the “Investing Fund”). Janus Cash Liquidity Fund LLC is an affiliated unregistered cash management pooled investment vehicle that invests primarily in highly-rated short-term fixed-income securities. Janus Cash Liquidity Fund LLC currently maintains a NAV of $1.00 per share and distributes income daily in a manner consistent with a registered 2a-7 product. There are no restrictions on the Portfolio’s ability to withdraw investments from Janus Cash Liquidity Fund LLC at will, and there are no unfunded capital commitments due from the Portfolio to Janus Cash Liquidity Fund LLC. As adviser, Janus Capital has an inherent conflict of interest because of its fiduciary duties to the affiliated cash management pooled investment vehicles and the Investing Fund.
During the year ended December 31, 2013, any recorded distributions from affiliated investments as affiliated dividend income, and affiliated purchases and sales can be found in the Notes to Schedule of Investments and Other Information.
The seed capital contribution by Janus Capital or an affiliate as of December 31, 2013 is indicated in the following table. Janus Capital owns 100% of the Portfolio.
Seed | |||||
Capital at | |||||
Portfolio | 12/31/13 | ||||
Janus Aspen Protected Series - Growth - Institutional Shares | $ | 2,500,000 | |||
Janus Aspen Protected Series - Growth - Service Shares | 2,500,000 | ||||
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 (3) unrealized appreciation or depreciation of investments for federal income tax purposes.
Other book to tax differences primarily consist of deferred compensation and derivatives. The Portfolio has elected to treat gains and losses on forward foreign currency contracts as capital gains and losses, if applicable. Other foreign currency gains and losses on debt instruments are treated as ordinary income for federal income tax purposes pursuant to Section 988 of the Internal Revenue Code.
Undistributed | Undistributed | Loss Deferrals | Other Book | ||||||||||||||||||||
Ordinary | Long-Term | Accumulated | Late-Year | Post-October | to Tax | Net Tax | |||||||||||||||||
Portfolio | Income | Gains | Capital Losses | Ordinary Loss | Capital Loss | Differences | Appreciation | ||||||||||||||||
Janus Aspen Protected Series - Growth | $ | – | $ | 127,524 | $ | – | $ | – | $ | – | $ | (10,390) | $ | 1,480,455 | |||||||||
During the year ended December 31, 2013, the following capital loss carryovers were utilized by the Portfolio:
Capital Loss | |||||||||||||||||||||||
Portfolio | Carryover Utilized | ||||||||||||||||||||||
Janus Aspen Protected Series - Growth | $ | 107,466 | |||||||||||||||||||||
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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, 2013 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 Protected Series - Growth | $ | 5,407,959 | $ | 1,498,320 | $ | (17,865) | |||||
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 year ended December 31, 2013
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Protected Series - Growth | $ | – | $ | 282,600 | $ | – | $ | (22,183) | |||||||||
For the period ended December 31, 2012
Distributions | |||||||||||||||||
From Ordinary | From Long-Term | Tax Return of | Net Investment | ||||||||||||||
Portfolio | Income | Capital Gains | Capital | Loss | |||||||||||||
Janus Aspen Protected Series - Growth(1) | $ | – | $ | – | $ | – | $ | (8,445) | |||||||||
(1) | Period from January 3, 2012 (inception date) through December 31, 2012. |
6. | Capital Share Transactions |
For each year or period ended December 31 | Janus Aspen Protected Series - Growth | |||||||||
(all numbers in thousands) | 2013 | 2012(1) | ||||||||
Transactions in Portfolio Shares – Institutional Shares: | ||||||||||
Shares sold | – | 250 | ||||||||
Reinvested dividends and distributions | 11 | – | ||||||||
Shares repurchased | – | – | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 11 | 250 | ||||||||
Shares Outstanding, Beginning of Period | 250 | – | ||||||||
Shares Outstanding, End of Period | 261 | 250 | ||||||||
Transactions in Portfolio Shares – Service Shares: | ||||||||||
Shares sold | – | 250 | ||||||||
Reinvested dividends and distributions | 11 | – | ||||||||
Shares repurchased | – | – | ||||||||
Net Increase/(Decrease) in Portfolio Shares | 11 | 250 | ||||||||
Shares Outstanding, Beginning of Period | 250 | – | ||||||||
Shares Outstanding, End of Period | 261 | 250 | ||||||||
(1) Period from January 3, 2012 (inception date) through December 31, 2012. |
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Notes to Financial Statements (continued)
7. | Purchases and Sales of Investment Securities |
For the year ended December 31, 2013, the aggregate cost of purchases and proceeds from sales of investment securities (excluding any short-term securities, short-term options contracts, and in-kind transactions) was as follows:
Purchases of Long- | Proceeds from Sales | |||||||||||||
Purchases of | Proceeds from Sales | Term U.S. Government | of Long-Term U.S. | |||||||||||
Portfolio | Securities | of Securities | Obligations | Government Obligations | ||||||||||
Janus Aspen Protected Series - Growth | $ | 4,559,862 | $ | 3,935,964 | $ | – | $ | – | ||||||
8. | Subsequent Event |
Management has evaluated whether any other events or transactions occurred subsequent to December 31, 2013 and through the date of issuance of the Portfolio’s financial statements and determined that there were no material events or transactions that would require recognition or disclosure in the Portfolio’s financial statements.
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Report of Independent Registered Public Accounting Firm
To the Board of Trustees and Shareholders
of Janus Aspen Protected Series – Growth:
of Janus Aspen Protected Series – Growth:
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 Protected Series – Growth (one of the portfolios constituting Janus Aspen Series, hereafter referred to as the “Portfolio”) at December 31, 2013, the results of its operations for the year then ended and the changes in its net assets and the financial highlights for each of the periods presented, 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, 2013 by correspondence with the custodian, transfer agent and brokers, provide a reasonable basis for our opinion.
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Denver, Colorado
February 14, 2014
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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 Investment Fund and Janus Aspen Series, each of whom serves as an “independent” Trustee (the “Trustees”), oversee the management of each Fund of Janus Investment Fund and each Portfolio of Janus Aspen Series (each, a “Fund” and collectively, the “Funds”), and as required by law, determine annually whether to continue the investment advisory agreement for each Fund and the subadvisory agreements for the 16 Funds that utilize subadvisers.
In connection with their most recent consideration of those agreements for each Fund, the Trustees received and reviewed information provided by Janus Capital and the respective subadvisers in response to requests of the Trustees and their independent legal counsel. They also received and reviewed information and analysis provided by, and in response to requests of, their independent fee consultant. Throughout their consideration of the agreements, the Trustees were advised by their independent legal counsel. The Trustees met with management to consider the agreements, and also met separately in executive session with their independent legal counsel and their independent fee consultant.
At a meeting held on December 17, 2013, based on the Trustees’ evaluation of the information provided by Janus Capital, the subadvisers, and the independent fee consultant, as well as other information, the Trustees determined that the overall arrangements between each Fund and Janus Capital and each subadviser, as applicable, were fair and reasonable in light of the nature, extent and quality of the services provided by Janus Capital, its affiliates and the subadvisers, the fees charged for those services, and other matters that the Trustees considered relevant in the exercise of their business judgment. At that meeting, the Trustees unanimously approved the continuation of the investment advisory agreement for each Fund, and the subadvisory agreement for each subadvised Fund, for the period from either January 1 or February 1, 2014 through January 1 or February 1, 2015, respectively, subject to earlier termination as provided for in each agreement.
In considering the continuation of those agreements, the Trustees reviewed and analyzed various factors that they determined were relevant, including the factors described below, none of which by itself was considered dispositive. However, the material factors and conclusions that formed the basis for the Trustees’ determination to approve the continuation of the agreements are discussed separately below. Also included is a summary of the independent fee consultant’s conclusions and opinions that arose during, and were included as part of, the Trustees’ consideration of the agreements. “Management fees,” as used herein, reflect actual annual advisory fees and any administration fees, net of any waivers.
Nature, Extent and Quality of Services
The Trustees reviewed the nature, extent and quality of the services provided by Janus Capital and the subadvisers to the Funds, taking into account the investment objective, strategies and policies of each Fund, and the knowledge the Trustees gained from their regular meetings with management on at least a quarterly basis and their ongoing review of information related to the Funds. In addition, the Trustees reviewed the resources and key personnel of Janus Capital and each subadviser, particularly noting those employees who provide investment and risk management services to the Funds. The Trustees also considered other services provided to the Funds by Janus Capital or the subadvisers, such as managing the execution of portfolio transactions and the selection of broker-dealers for those transactions. The Trustees considered Janus Capital’s role as administrator to the Funds, noting that Janus Capital does not receive a fee for its services but is reimbursed for its out-of-pocket costs. The Trustees considered the role of Janus Capital in monitoring adherence to the Funds’ investment restrictions, providing support services for the Trustees and Trustee committees, communicating with shareholders and overseeing the activities of other service providers,
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including monitoring compliance with various policies and procedures of the Funds and with applicable securities laws and regulations.
In this regard, the independent fee consultant noted that Janus Capital provides a number of different services for the Funds and Fund shareholders, ranging from investment management services to various other servicing functions, and that, in its opinion, Janus Capital is a capable provider of those services. The independent fee consultant also provided its belief that Janus Capital has developed institutional competitive advantages that should be able to provide superior investment management returns over the long term.
The Trustees concluded that the nature, extent and quality of the services provided by Janus Capital or the subadviser to each Fund were appropriate and consistent with the terms of the respective advisory and subadvisory agreements, and that, taking into account steps taken to address those Funds whose performance lagged that of their peers for certain periods, the Funds were likely to benefit from the continued provision of those services. They also concluded that Janus Capital and each subadviser had sufficient personnel, with the appropriate education and experience, to serve the Funds effectively and had demonstrated its ability to attract well-qualified personnel.
Performance of the Funds
The Trustees considered the performance results of each Fund over various time periods. They noted that they considered Fund performance data throughout the year, including periodic meetings with each Fund’s portfolio manager(s), and also reviewed information comparing each Fund’s performance with the performance of comparable funds and peer groups identified by independent data providers, and with the Fund’s benchmark index. In this regard, the independent fee consultant found that the overall Funds’ performance has improved modestly: for the 36 months ended September 30, 2013, approximately 51% of the Funds were in the top two Lipper quartiles of performance, and for the 12 months ended September 30, 2013, approximately 52% of the Funds were in the top two Lipper quartiles of performance.
The Trustees considered the performance of each Fund, noting that performance may vary by share class, and noted the following:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus High-Yield Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Real Return Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Short-Term Bond Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and the steps Janus Capital had taken or was taking to improve performance. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance and that the performance trend was improving. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Real Estate Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Perkins Large Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Select Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Perkins Small Cap Value Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital and Perkins had taken or was taking to improve performance. |
• | For Perkins Value Plus Income Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH International Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Growth Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
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• | For Janus Contrarian Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Enterprise Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Forty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Growth and Income Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and in the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Triton Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Global Research Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Global Select Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
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Additional Information (unaudited) (continued)
• | For Janus Global Technology Fund, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus International Equity Fund, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
• | For Janus Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s performance was in the first Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Global Allocation Portfolio – Moderate, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s performance was in the third Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and that the performance trend was improving. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s performance was in the second Lipper quartile for the 36 months ended May 31, 2013 and the first Lipper quartile for the 12 months ended May 31, 2013. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that this was a new Fund and did not yet have extensive performance to evaluate. |
• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the second Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, and the steps Janus Capital had taken or was taking to improve performance. |
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• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 36 months ended May 31, 2013 and the third Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, noting that the Fund has a performance fee structure that results in lower management fees during periods of underperformance, the steps Janus Capital and Perkins had taken or was taking to improve performance, and that the performance trend was improving. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that the Fund’s performance was in the bottom Lipper quartile for the 12 months ended May 31, 2013. The Trustees noted the reasons for the Fund’s underperformance, and its limited performance history. |
In consideration of each Fund’s performance, the Trustees concluded that, taking into account the factors relevant to performance, as well as other considerations, the Fund’s performance warranted continuation of the Fund’s investment advisory agreement(s).
Costs of Services Provided
The Trustees examined information regarding the fees and expenses of each Fund in comparison to similar information for other comparable funds as provided by independent data providers. They also reviewed an analysis of that information provided by their independent fee consultant and noted that the rate of management (investment advisory and any administration) fees for many of the Funds, after applicable contractual expense limitations, was below the mean management fee rate of the respective peer group of funds selected by independent data providers. The Trustees also examined information regarding the subadvisory fees charged for subadvisory services, as applicable, noting that all such fees were paid by Janus Capital out of its management fees collected from such Fund.
In this regard, the independent fee consultant provided its belief that the management fees charged by Janus Capital to each of the Funds under the current investment advisory and administration agreements are reasonable in relation to the services provided by Janus Capital. The independent fee consultant found: (1) the total expenses and management fees of the Funds to be reasonable relative to other mutual funds; (2) total expenses, on average, were 17% below the mean total expenses of their respective Lipper Expense Group peers and 29% below the mean total expenses for their Lipper Expense Universes; (3) management fees for the Funds, on average, were 14% below the mean management fees for their Expense Groups and 16% below the mean for their Expense Universes; and (4) Janus fund expenses at the functional level for each asset and share class category were reasonable. The Trustees also considered how the total expenses for each share class of each Fund compared to the mean total expenses for its Lipper Expense Group peers and to mean total expenses for its Lipper Expense Universe.
The independent fee consultant concluded that, based on its strategic review of expenses at the complex, category and individual fund level, Fund expenses were found to be reasonable relative to both Expense Group and Expense Universe benchmarks. Further, for certain Funds, the independent fee consultant also performed a systematic “focus list” analysis of expenses in the context of the performance or service delivered to each set of investors in each share class in each selected Fund. Based on this analysis, the independent fee consultant found that the combination of service quality/performance and expenses on these individual Funds and share classes were reasonable in light of performance trends, performance histories, and existence of performance fees on such Funds.
The Trustees considered the methodology used by Janus Capital and each subadviser in determining compensation payable to portfolio managers, the competitive environment for investment management talent, and the competitive market for mutual funds in different distribution channels.
The Trustees also reviewed management fees charged by Janus Capital and each subadviser to comparable separate account clients and to comparable non-affiliated funds subadvised by Janus Capital or by a subadviser (for which Janus Capital or the subadviser provides only portfolio management services). Although in most instances subadvisory and separate account fee rates for various investment strategies were lower than management fee rates for Funds having a similar strategy, the Trustees noted that, under the terms of the management agreements with the Funds, Janus Capital performs significant additional services for the Funds that it does not provide to those other clients, including administration services, oversight of the Funds’ other service providers, trustee support, regulatory compliance and numerous other services, and that, in serving the Funds, Janus Capital assumes many legal risks that it does not assume in servicing its other clients. Moreover, they noted that the independent fee consultant found that: (1) the management fees Janus Capital charges to the Funds are reasonable in relation to the management fees Janus Capital charges to its institutional and subadvised accounts; (2) these institutional and subadvised accounts have different service and infrastructure needs; and (3) the average spread between management fees
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Additional Information (unaudited) (continued)
charged to the Funds and those charged to Janus Capital’s institutional and subadvised accounts is reasonable relative to the average spreads seen in the industry.
The Trustees considered the fees for each Fund for its fiscal year ended in 2012, and noted the following with regard to each Fund’s total expenses, net of applicable fee waivers:
Fixed-Income Funds and Money Market Funds
• | For Janus Flexible Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus High-Yield Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Real Return Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Short-Term Bond Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Government Money Market Fund, the Trustees noted that the Fund’s total expenses exceeded the peer group mean for both share classes. The Trustees considered that management fees for this Fund are higher than the peer group mean due to the Fund’s management fee including other costs, such as custody and transfer agent services, while many funds in the peer group pay these expenses separately from their management fee. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
• | For Janus Money Market Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. In addition, the Trustees considered that Janus Capital voluntarily waives one-half of its advisory fee. |
Asset Allocation Funds
• | For Janus Global Allocation Fund – Conservative, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Allocation Fund – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Allocation Fund – Moderate, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Alternative Funds
• | For Janus Diversified Alternatives Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Global Real Estate Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Value Funds
• | For Perkins Global Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Perkins Large Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed |
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to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Perkins Mid Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Select Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Small Cap Value Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Perkins Value Plus Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Mathematical Funds
• | For INTECH Global Dividend Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For INTECH International Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Core Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For INTECH U.S. Growth Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For INTECH U.S. Value Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Growth and Core Funds
• | For Janus Balanced Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Contrarian Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
• | For Janus Enterprise Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Forty Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Growth and Income Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
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Additional Information (unaudited) (continued)
• | For Janus Research Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus Triton Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for certain share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Twenty Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Venture Fund, the Trustees noted that the Fund’s total expenses were below or the same as the peer group mean for all share classes. |
Global and International Funds
• | For Janus Asia Equity Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Emerging Markets Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Life Sciences Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Research Fund (formerly named Janus Worldwide Fund), the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Global Select Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Global Technology Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. |
• | For Janus International Equity Fund, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses, although this limit did not apply because the Fund’s total expenses were already below the applicable fee limit. |
• | For Janus Overseas Fund, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
Protected Series
• | For Janus Protected Series – Global, the Trustees noted that the Fund’s total expenses were below the peer group mean for all share classes. |
• | For Janus Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for one share class, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
Janus Aspen Series
• | For Janus Aspen Balanced Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Enterprise Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Flexible Bond Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Forty Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Allocation Portfolio-Moderate, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
• | For Janus Aspen Global Research Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Global Technology Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen INTECH U.S. Low Volatility Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for its sole share class. |
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• | For Janus Aspen Janus Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Overseas Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Perkins Mid Cap Value Portfolio, the Trustees noted that the Fund’s total expenses were below the peer group mean for both share classes. |
• | For Janus Aspen Protected Series – Growth, the Trustees noted that, although the Fund’s total expenses exceeded the peer group mean for both share classes, overall the Fund’s total expenses were reasonable. The Trustees also noted that Janus Capital has contractually agreed to limit the Fund’s expenses. |
The Trustees reviewed information on the profitability to Janus Capital and its affiliates of their relationships with each Fund, as well as an explanation of the methodology utilized in allocating various expenses of Janus Capital and its affiliates among the Funds and other clients. The Trustees also reviewed the financial statements and corporate structure of Janus Capital’s parent company. In their review, the Trustees considered whether Janus Capital and each subadviser receive adequate incentives to manage the Funds effectively. The Trustees recognized that profitability comparisons among fund managers are difficult because very little comparative information is publicly available, and the profitability of any fund manager is affected by numerous factors, including the organizational structure of the particular fund manager, the types of funds and other accounts it manages, possible other lines of business, the methodology for allocating expenses, and the fund manager’s capital structure and cost of capital. However, taking into account those factors and the analysis provided by the Trustees’ independent fee consultant, and based on the information available, the Trustees concluded that Janus Capital’s profitability with respect to each Fund in relation to the services rendered was not unreasonable.
In this regard, the independent fee consultant found that, while assessing the reasonableness of expenses in light of Janus Capital’s profits is dependent on comparisons with other publicly-traded mutual fund advisers, and that these comparisons are limited in accuracy by differences in complex size, business mix, institutional account orientation, and other factors, after accepting these limitations, the level of profit earned by Janus Capital from managing the Funds is reasonable.
The Trustees concluded that the management fees and other compensation payable by each Fund to Janus Capital and its affiliates, as well as the fees paid by Janus Capital to the subadvisers of subadvised Funds, were reasonable in relation to the nature, extent, and quality of the services provided, taking into account the fees charged by other advisers for managing comparable mutual funds with similar strategies, the fees Janus Capital and the subadvisers charge to other clients, and, as applicable, the impact of fund performance on management fees payable by the Funds. The Trustees also concluded that the overall expense ratio of each Fund was reasonable, taking into account the size of the Fund, the quality of services provided by Janus Capital and any subadviser, the investment performance of the Fund, and any expense limitations agreed to or provided by Janus Capital.
Economies of Scale
The Trustees considered information about the potential for Janus Capital to realize economies of scale as the assets of the Funds increase. They noted that, although many Funds pay advisory fees at a base fixed rate as a percentage of net assets, without any breakpoints, the base management fee rate paid by most of the Funds, before any adjustment for performance and after any contractual expense limitations, was below the mean management fee rate of the Fund’s peer group identified by independent data providers; and, for those Funds whose expenses are being reduced by the contractual expense limitations of Janus Capital, Janus Capital is subsidizing the Funds because they have not reached adequate scale. Moreover, as the assets of many of the Funds have declined in the past few years, certain Funds have benefited from having advisory fee rates that have remained constant rather than increasing as assets declined. In addition, performance fee structures have been implemented for various Funds that have caused the effective rate of advisory fees payable by such a Fund to vary depending on the investment performance of the Fund relative to its benchmark index over the measurement period; and a few Funds have fee schedules with breakpoints and reduced fee rates above certain asset levels. The Trustees also noted that the Funds share directly in economies of scale through the lower charges of third-party service providers that are based in part on the combined scale of all of the Funds. Based on all of the information they reviewed, including research and analysis conducted by the Trustees’ independent fee consultant, the Trustees concluded that the current fee structure of each Fund was reasonable and that the current rates of fees do reflect a sharing between Janus Capital and the Fund of any economies of scale that may be present at the current asset level of the Fund.
In this regard, the independent fee consultant concluded that, based on analysis it completed, and given the limitations in these analytical approaches and their
Janus Aspen Series | 41
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Additional Information (unaudited) (continued)
conflicting results, it could not confirm or deny the existence of economies of scale in the Janus complex. Further, the independent fee consultant provided its belief that Fund investors are well-served by the fee levels and performance fee structures in place on the Funds in light of any economies of scale that may be present at Janus Capital.
Other Benefits to Janus Capital
The Trustees also considered benefits that accrue to Janus Capital and its affiliates from their relationships with the Funds. They recognized that two affiliates of Janus Capital separately serve the Funds as transfer agent and distributor, respectively, and the transfer agent receives compensation directly from the non-money market funds for services provided. The Trustees also considered Janus Capital’s past and proposed use of commissions paid by the Funds on their portfolio brokerage transactions to obtain proprietary and third-party research products and services benefiting the Fund and/or other clients of Janus Capital. The Trustees concluded that Janus Capital’s use of these types of client commission arrangements to obtain proprietary and third-party research products and services was consistent with regulatory requirements and guidelines and was likely to benefit each Fund. The Trustees also concluded that, other than the services provided by Janus Capital and its affiliates pursuant to the agreements and the fees to be paid by each Fund therefor, the Funds and Janus Capital may potentially benefit from their relationship with each other in other ways. They concluded that Janus Capital benefits from the receipt of research products and services acquired through commissions paid on portfolio transactions of the Funds and that the Funds benefit from Janus Capital’s receipt of those products and services as well as research products and services acquired through commissions paid by other clients of Janus Capital. They further concluded that the success of any Fund could attract other business to Janus Capital or other Janus funds, and that the success of Janus Capital could enhance Janus Capital’s ability to serve the Funds.
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Useful Information About Your Portfolio Report (unaudited)
1. | Management Commentary |
The Management Commentary in this report includes valuable insight from the Portfolio’s manager as well as statistical information to help you understand how your Portfolio’s performance and characteristics stack up against those of comparable indices.
If the Portfolio invests in foreign securities, this report may include information about country exposure. Country exposure is based primarily on the country of risk. The Portfolio’s manager may allocate a company to a country based on other factors such as location of the company’s principal office, the location of the principal trading market for the company’s securities, or the country where a majority of the company’s revenues are derived.
Please keep in mind that the opinions expressed 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, 2013. As the investing environment changes, so could their opinions. These views are unique to them and aren’t necessarily shared by fellow employees or by Janus in general.
2. | Performance Overviews |
Performance overview graphs compare the performance of a hypothetical $10,000 investment in the Portfolio with one or more widely used market indices. 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 quoted for a Portfolio with more than one year of performance history. Average annual total return is calculated by taking the growth or decline in value of an investment over a period of time, including reinvestment of dividends and distributions, then calculating the annual compounded percentage rate that would have produced the same result had the rate of growth been constant throughout the period. Average annual total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Cumulative total returns are quoted for a Portfolio with less than one year of performance history. Cumulative total return is the growth or decline in value of an investment over time, independent of the period of time involved. Cumulative total return does not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or redemptions of Portfolio shares.
Pursuant to federal securities rules, expense ratios shown in the performance chart reflect subsidized (if applicable) and unsubsidized ratios. The total annual fund operating expenses ratio is gross of any fee waivers, reflecting the Portfolio’s unsubsidized expense ratio. The net annual fund operating expenses ratio (if applicable) includes contractual waivers of Janus Capital and reflects the Portfolio’s subsidized expense ratio. Ratios may be higher or lower than those shown in the “Financial Highlights” in this report.
3. | Schedule of Investments |
Following the performance overview section is the Portfolio’s Schedule of Investments. This schedule reports the types of securities held in the Portfolio on the last day of the reporting period. Securities are usually listed by type (common stock, corporate bonds, U.S. Government obligations, etc.) and by industry classification (banking, communications, insurance, etc.). Holdings are subject to change without notice.
The value of each security is quoted as of the last day of the reporting period. The value of securities denominated in foreign currencies is converted into U.S. dollars.
If the Portfolio invests in foreign securities, it will also provide a summary of investments by country. This summary reports the Portfolio’s exposure to different countries by providing the percentage of securities invested in each country. The country of each security represents the country of risk. The Portfolio’s Schedule of Investments relies upon the industry group and country classifications published by Barclays and/or MSCI Inc.
Tables listing details of individual forward currency contracts, futures, written options and swaps follow the Portfolio’s Schedule of Investments (if applicable).
4. | Statement of Assets and Liabilities |
This statement is often referred to as the “balance sheet.” It lists the assets and liabilities of the Portfolio on the last day of the reporting period.
The Portfolio’s assets are calculated by adding the value of the securities owned, the receivable for securities sold but not yet settled, the receivable for dividends declared but not yet received on securities owned and the receivable for Portfolio shares sold to investors but not yet settled. The Portfolio’s liabilities include payables for securities purchased but not yet settled, Portfolio shares redeemed but not yet paid and expenses owed but not yet paid. Additionally, there may be other assets and liabilities
Janus Aspen Series | 43
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Useful Information About Your Portfolio Report (unaudited) (continued)
such as unrealized gain or loss on forward currency contracts.
The section entitled “Net Assets Consist of” breaks down the components of the Portfolio’s net assets. Because the Portfolio must distribute substantially all earnings, you will notice that a significant portion of net assets is shareholder capital.
The last section of this statement reports the net asset value (“NAV”) per share on the last day of the reporting period. The NAV is calculated by dividing the Portfolio’s net assets for each share class (assets minus liabilities) by the number of shares outstanding.
5. | Statement of Operations |
This statement details the Portfolio’s income, expenses, realized gains and losses on securities and currency transactions, and changes in unrealized appreciation or depreciation of Portfolio holdings.
The first section in this statement, entitled “Investment Income,” reports the dividends earned from securities and interest earned from interest-bearing securities in the Portfolio.
The next section reports the expenses incurred by the Portfolio, including the advisory fee paid to the investment adviser, transfer agent fees and expenses, and printing and postage for mailing statements, financial reports and prospectuses. Expense offsets and expense reimbursements, if any, are also shown.
The last section lists the amounts of realized gains or losses from investment and foreign currency transactions, and changes in unrealized appreciation or depreciation of investments and foreign currency-denominated assets and liabilities. The Portfolio will realize a gain (or loss) when it sells its position in a particular security. A change in unrealized gain (or loss) refers to the change in net appreciation or depreciation of the Portfolio during the reporting period. “Net Realized and Unrealized Gain/(Loss) on Investments” is affected both by changes in the market value of Portfolio holdings and by gains (or losses) realized during the reporting period.
6. | Statements of Changes in Net Assets |
These statements report the increase or decrease in the Portfolio’s net assets during the reporting period. Changes in the Portfolio’s net assets are attributable to investment operations, dividends and distributions to investors and capital share transactions. This is important to investors because it shows exactly what caused the Portfolio’s net asset size to change during the period.
The first section summarizes the information from the Statement of Operations regarding changes in net assets due to the Portfolio’s investment operations. The Portfolio’s net assets may also change as a result of dividend and capital gains distributions to investors. If investors receive their dividends and/or distributions in cash, money is taken out of the Portfolio to pay the dividend and/or distribution. If investors reinvest their dividends and/or distributions, the Portfolio’s net assets will not be affected. If you compare the Portfolio’s “Net Decrease from Dividends and Distributions” to “Reinvested Dividends and Distributions,” you will notice that dividends and distributions have little effect on the Portfolio’s net assets. This is because the majority of the Portfolio’s investors reinvest their dividends and/or distributions.
The reinvestment of dividends and distributions is included under “Capital Share Transactions.” “Capital Shares” refers to the money investors contribute to the Portfolio through purchases or withdrawals via redemptions. The Portfolio’s net assets will increase and decrease in value as investors purchase and redeem shares from the Portfolio.
7. | Financial Highlights |
This schedule provides a per-share breakdown of the components that affect the Portfolio’s NAV for current and past reporting periods as well as total return, asset size, ratios and portfolio turnover rate.
The first line in the table reflects the NAV per share at the beginning of the reporting period. The next line reports the net investment income/(loss) per share. Following is the per share total of net gains/(losses), realized and unrealized. Per share dividends and distributions to investors are then subtracted to arrive at the NAV per share at the end of the period. The next line reflects the total return for the period. The total return may include adjustments in accordance with generally accepted accounting principles required at the period end for financial reporting purposes. As a result, the total return may differ from the total return reflected for individual shareholder transactions. Also included are ratios of expenses and net investment income to average net assets.
The Portfolio’s expenses may be reduced through expense offsets and expense reimbursements. The ratios shown reflect expenses before and after any such offsets and reimbursements.
The ratio of net investment income/(loss) summarizes the income earned less expenses, divided by the average net assets of the Portfolio during the reporting period. Don’t confuse this ratio with the Portfolio’s yield. The net investment income ratio is not a true measure of the
44 | DECEMBER 31, 2013
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Portfolio’s yield because it doesn’t take into account the dividends distributed to the Portfolio’s investors.
The next figure is the portfolio turnover rate, which measures the buying and selling activity in the Portfolio. Portfolio turnover is affected by market conditions, changes in the asset size of the Portfolio, fluctuating volume of shareholder purchase and redemption orders, the nature of the Portfolio’s investments, and the investment style and/or outlook of the portfolio manager. A 100% rate implies that an amount equal to the value of the entire portfolio was replaced once during the fiscal year; a 50% rate means that an amount equal to the value of half the portfolio is traded in a year; and a 200% rate means that an amount equal to the value of the entire portfolio is traded every six months.
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Designation Requirements (unaudited)
For federal income tax purposes, the Portfolio designated the following for the year ended December 31, 2013:
Capital Gain Distributions
Portfolio | ||||||||||
Janus Aspen Protected Series - Growth | $ | 282,600 | ||||||||
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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. Pursuant to the Portfolio’s Governance Procedures and Guidelines, Trustees are required to retire no later than the end of the calendar year in which the Trustee turns 72. The Trustees review the Portfolio’s Governance Procedures and Guidelines from time to time and may make changes they deem appropriate. 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 56 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
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
Independent Trustees | ||||||||||
William F. McCalpin 151 Detroit Street Denver, CO 80206 DOB: 1957 | Chairman Trustee | 1/08-Present 6/02-Present | Chief Executive Officer, Imprint Capital (impact investment firm) (since 2013), and Managing Director, Holos Consulting LLC (provides consulting services to foundations and other nonprofit organizations). Formerly, Executive Vice President and Chief Operating Officer of The Rockefeller Brothers Fund (a private family foundation) (1998-2006). | 56 | Chairman of the Board and Director of The Investment Fund for Foundations Investment Program (TIP) (consisting of 2 funds), and Director of the F.B. Heron Foundation (a private grantmaking foundation). | |||||
Alan A. Brown 151 Detroit Street Denver, CO 80206 DOB: 1962 | Trustee | 1/13-Present | Managing Director, Institutional Markets, of Dividend Capital Group (private equity real estate investment management firm) (since 2012). Formerly, Executive Vice President and Co-Head, Global Private Client Group (2007-2010), Executive Vice President, Mutual Funds (2005-2007), and Chief Marketing Officer (2001-2005) of Nuveen Investments, Inc. (asset management). | 56 | Director of MotiveQuest LLC (strategic social market research company) (since 2003), and Director of WTTW (PBS affiliate) (since 2003). Formerly, Director of Nuveen Global Investors LLC (2007-2011); Director of Communities in Schools (2004-2010); and Director of Mutual Fund Education Alliance (until 2010). |
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Trustees and Officers (unaudited) (continued)
TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
William D. Cvengros 151 Detroit Street Denver, CO 80206 DOB: 1948 | Trustee | 1/11-Present | Managing Member and Chief Executive Officer of SJC Capital, LLC (a personal investment company and consulting firm) (since 2002). Formerly, Venture Partner for The Edgewater Funds (a middle market private equity firm) (2002-2004); Chief Executive Officer and President of PIMCO Advisors Holdings L.P. (a publicly traded investment management firm) (1994-2000); and Chief Investment Officer of Pacific Life Insurance Company (a mutual life insurance and annuity company) (1987-1994). | 56 | Managing Trustee of National Retirement Partners Liquidating Trust (since 2013). Formerly, Chairman, National Retirement Partners, Inc. (formerly a network of advisors to 401(k) plans) (2005-2013); Director of Prospect Acquisition Corp. (a special purpose acquisition corporation) (2007-2009); Director of RemedyTemp, Inc. (temporary help services company) (1996-2006); and Trustee of PIMCO Funds Multi-Manager Series (1990-2000) and Pacific Life Variable Life & Annuity Trusts (1987-1994). | |||||
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, L.P. (SBA SBIC fund focusing on private 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. | 56 | Director of Red Robin Gourmet Burgers, Inc. (RRGB) (since 2004). | |||||
William D. Stewart 151 Detroit Street Denver, CO 80206 DOB: 1944 | Trustee | 9/93-Present | Retired. Formerly, 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) (1976-2012). | 56 | None |
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TRUSTEES (continued)
Number of | ||||||||||
Portfolios/Funds in | Other Directorships | |||||||||
Fund Complex | Held by Trustee | |||||||||
Positions Held | Length of | Principal Occupations | Overseen | During the Past | ||||||
Name, Address, and Age | with the Trust | Time Served | During the Past Five Years | by Trustee | Five Years | |||||
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). | 56 | Director of Chicago Community Trust (Regional Community Foundation), Chicago Council on Global Affairs, The Field Museum of Natural History (Chicago, IL), InnerWorkings (U.S. provider of print procurement solutions to corporate clients), Lurie Children’s Hospital (Chicago, IL), Rehabilitation Institute of Chicago, Walmart, and Wrapports, LLC (digital communications company). Formerly, Director of Chicago Convention & Tourism Bureau (until 2014). |
Janus Aspen Series | 49
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Trustees and Officers (unaudited) (continued)
OFFICERS
Term of Office* and | Principal Occupations During the | |||||
Name, Address, and Age | Positions Held with the Trust | Length of Time Served | Past Five Years | |||
Jonathan D. Coleman 151 Detroit Street Denver, CO 80206 DOB: 1971 | Executive Vice President and Portfolio Manager Janus Aspen Protected Series – Growth | 1/12-Present | Executive Vice President of Janus Capital and Portfolio Manager for other Janus accounts. Formerly, Co-Chief Investment Officer of Janus Capital (2006-2013). | |||
Robin C. Beery** 151 Detroit Street Denver, CO 80206 DOB: 1967 | President and Chief Executive Officer | 4/08-Present | Interim Head of Strategic Marketing and Communications (since 2014); Executive Vice President Janus Distributors LLC and Janus Services LLC (since 2006); Executive Vice President of Janus Capital Group Inc. and Janus Capital (since 2005); Director of Perkins Investment Management LLC; and Working Director of INTECH Investment Management LLC. Formerly, Head of U.S. Distribution of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2010-2014); Head of Intermediary Distribution, Global Marketing and Product of Janus Capital Group Inc., Janus Capital, Janus Distributors LLC, and Janus Services LLC (2009-2010); Chief Marketing Officer of Janus Capital Group Inc. and Janus Capital (2002-2009); and Director of The Janus Foundation (2011-2012). | |||
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. Formerly, Vice President and Assistant Secretary of Janus Distributors LLC (2007-2013). | |||
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; Vice President of INTECH Investment Management LLC and Perkins Investment Management LLC; and Director of The Janus Foundation. | |||
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 and Janus Services LLC. |
* 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.
** Ms. Beery has announced her intention to retire by third quarter 2014.
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Notes
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Notes
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Notes
Janus Aspen Series | 53
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Janus provides access to a wide range of investment disciplines.
Alternative
Janus alternative funds seek to deliver strong risk-adjusted returns over a full market cycle with lower correlation to equity markets than traditional investments.
Asset Allocation
Janus’ asset allocation funds utilize our fundamental, bottom-up research to balance risk over the long term. From fund options that meet investors’ risk tolerance and objectives to a method that incorporates non-traditional investment choices to seek non-correlated sources of risk and return, Janus’ asset allocation funds aim to allocate risk more effectively.
Fixed Income
Janus fixed income funds attempt to provide less risk relative to equities while seeking to deliver a competitive total return through high current income and appreciation. Janus money market funds seek capital preservation and liquidity with current income as a secondary objective.
Global & International
Janus global and international funds seek to leverage Janus’ research capabilities by taking advantage of inefficiencies in foreign markets, where accurate information and analytical insight are often at a premium.
Growth & Core
Janus growth funds focus on companies believed to be the leaders in their respective industries, with solid management teams, expanding market share, margins and efficiencies. Janus core funds seek investments in more stable and predictable companies. Our core funds look for a strategic combination of steady growth and, for certain funds, some degree of income.
Mathematical
Our mathematical funds seek to outperform their respective indices while maintaining a risk profile equal to or lower than the index itself. Managed by INTECH (a Janus subsidiary), these funds use a mathematical process in an attempt to build a more “efficient” portfolio than the index.
Value
Our value funds, managed by Perkins (a Janus subsidiary), seek to identify companies with favorable reward to risk characteristics by conducting rigorous downside analysis before determining upside potential.
For more information about our funds, contact your investment professional or go to janus.com/variable-insurance.
![(JANUS LOGO)](https://capedge.com/proxy/N-CSR/0000950123-14-002902/d31139janus.gif)
Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus at 877.33JANUS (52687) or download the file from janus.com/variable-insurance. Read it carefully before you invest or send money.
Funds distributed by Janus Distributors LLC
Investment products offered are: | NOT FDIC-INSURED | MAY LOSE VALUE | NO BANK GUARANTEE | ||||||
C-0214-55231 | 109-02-81126 02-14 |
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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.
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: William D. Cvengros (Chairman) and William D. Stewart who are each “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 | ||||||||||||
2013 | $ | 547,383 | $ | 0 | $ | 90,885 | $ | 0 | ||||||||
Percentage approved pursuant to pre-approval exception | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||
2012 | $ | 440,229 | $ | 3,520 | $ | 96,355 | $ | 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 “Audit-Related Fees” were billed for amounts related to semi-annual financial statement disclosure review. The above “Tax Fees” were billed for amounts related to tax compliance, tax planning, tax advice, and corporate actions review.
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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 the 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 years 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 | |||||||||
2013 | $ | 29,434 | $ | 3,087 | $ | 0 | ||||||
Percentage approved pursuant to pre-approval exception | 0 | % | 0 | % | 0 | % | ||||||
2012 | $ | 26,471 | $ | 9,750 | $ | 0 | ||||||
Percentage approved pursuant to pre-approval exception | 0 | % | 0 | % | 0 | % |
The above “Audit-Related Fees” were billed for amounts related to semi-annual financial statement disclosure review and internal control examination.
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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 years 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 | ||||||||||||
2013 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||
2012 | $ | 0 | $ | 0 | $ | 0 | $ | 0 |
1. | The Audit Committee also considered amounts billed by Auditor to all other Control Affiliates in evaluating Auditor’s independence. |
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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) | Schedule of Investments is contained in the Reports to Shareholders included under Item 1 of this Form N-CSR. | ||
(b) | Not applicable. |
Item 7 — Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not applicable to this Registrant.
Item 8 — Portfolio Managers of Closed-End Management Investment Companies
Not applicable to this Registrant.
Item 9 — Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not applicable to this Registrant.
Item 10 — Submission of Matters to a Vote of Security Holders There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees.
Item 11 — Controls and Procedures
(a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have evaluated the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) within 90 days of this filing and have concluded that the Registrant’s disclosure controls and procedures were effective, as of that date. | ||
(b) | There have been no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the Registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
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Item 12 — Exhibits
(a)(1) | Not applicable because the Registrant has posted its Code of Ethics (as defined in Item 2(b) of Form N-CSR) on its website pursuant to paragraph (f)(2) of Item 2 of Form N-CSR. | ||
(a)(2) | Separate certifications for the Registrant’s Principal Executive Officer and Principal Financial Officer, as required under Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached as Ex99.CERT. | ||
(a)(3) | Not applicable to this Registrant. | ||
(b) | A certification for the Registrant’s Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended, is attached as Ex99.906CERT. |
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 28, 2014
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 28, 2014 | |
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 28, 2014 |