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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-21371
Janus Adviser
(Exact name of registrant as specified in charter)
151 Detroit Street, Denver, Colorado 80206
(Address of principal executive offices) (Zip code)
Kelley Abbott Howes, 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: 12/31/03
Item 1 - Reports to Stockholders
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2003 ANNUAL REPORT
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JANUS ADVISER US Value Fund
International Equity Fund
[LOGO] JANUS CAPITAL
Group
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TABLE OF CONTENTS
JANUS ADVISER
Portfolio Managers' Commentaries and Schedules of Investments
US Value Fund ............................................... 1
International Equity Fund ................................... 5
Statements of Assets and Liabilities ........................... 10
Statements of Operations ....................................... 11
Statements of Changes in Net Assets ............................ 12
Financial Highlights ........................................... 13
Notes to Schedules of Investments .............................. 17
Notes to Financial Statements .................................. 18
Report of Independent Auditors ................................. 28
Explanations of Charts, Tables and Financial Statements ........ 29
Trustees and Officers .......................................... 31
Shareholder Meetings ........................................... 35
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US VALUE FUND (unaudited) Managed by Vontobel
Asset Management, Inc.
FUND PERFORMANCE AND MARKET COMMENTARY
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[PHOTO]
Ed Walczak
portfolio manager
WHY DOES RUBBISH OCCASIONALLY BOUNCE?
Such a title for a year-end review might lead the cynical reader to believe that
we are just bad sports. Having had a cumulative positive performance of 36.28%
(Class A Shares) during the bear market years of 2000, 2001, and 2002 by
emphasizing quality companies at attractive prices, the fact that the Fund rose
"merely" 24.32% for its Investor Shares and 24.32% for its Class I Shares in
2003 vs. the S&P 500(R) up 28.67%, the NASDAQ up 50.01%, the Russell 2000 Index
up 47.25% and the average U.S. diversified stock fund up 32.80%, might lead one
to believe that we are just plain jealous at the much higher returns earned by
many others in 2003 and hence looking to heave unfair criticism.(1) The
limelight clearly went elsewhere in 2003 - to technology, cyclicals and
commodities - sectors in which we rarely traffic because of the quality
constraints imposed by our investment paradigm, and so one could suspect that
maybe we've just fallen into an intellectual funk.
The December 29, 2003 edition of The Financial Times called it the "Flight from
Quality." The Times observed, "Over the last year, the biggest investment gains
have come from poor quality stocks in poor quality sectors. Companies making
losses and paying no dividends have done better that those reporting profits and
paying dividends. It is worrisome to find the same investment themes that worked
in 1999 working so well this year." Why did this occur and why didn't we take
full advantage of this phenomenon?
The stocks of lesser quality, more precariously positioned businesses,
frequently do well at the onset of an economic recovery as a breath of much
needed oxygen is pumped into their weakened bodies. Many companies with low
earnings and stretched balance sheets are literally saved from the clutches of
death. Even companies that are not quite that bad off like Lucent and Ford Motor
tend to do well as the benefits of a strong economy are perceived to ultimately
trickle down to them also. Since many investors in the market rely on relative
earnings strength to guide their stock picks rather than fundamental analysis
which would take into consideration the net present value of many years of
future earnings power, nonsensical as it may be, if today's economy is doing
better, cyclical stocks typically rise and if today's economy is doing poorly,
cyclical stocks usually fall. After a few years of recession, there are
typically many low P/E stocks of lower quality businesses available in the
marketplace that may subsequently have enormous price rises once the economy
resuscitates, because of many investors' tendencies to chase relative earnings
strength.
Unlike many other "value" managers, we elect not to purchase the Fords and the
Lucents at the bottom of a cycle for three principal reasons. First, we never
predicate any investment decision on an economic outlook - it's too difficult to
do and we don't know many rich economists. Second, if a forecasted economic boom
didn't materialize, we wouldn't want to be stuck holding what we see as poor
quality businesses like Ford, Lucent, or Phelps Dodge. We believe these are not
long-term money making businesses with superior economics that you can live with
for five years. We see these as volatile, low return on equity, low return on
asset businesses whose stock prices may boom but frequently, later, bust. If you
traffic in these goods, we believe you've got to be very good at getting out of
these stocks at precisely the right time, also. The principal reason why we
elect not to purchase many of these apparently "cheap" stocks at the end of a
recession is due to their lack of quality and the fact that we won't be able to
live with them if inadvertently stuck with them.
A third, tactical and less important reason for not trafficking in what we call
"D" quality businesses (the "rubbish" that occasionally bounces) is that it is
much harder to value a "D" quality company. Ford Motor Company earned 15 cents
per share in 2002, lost $3.02 in 2001, and earned $3.22 in 2000. What, then, is
Ford's "normalized" earning power? We certainly can't come up with an intrinsic
value number for Ford, either because we have no idea what its earning power
will be five years out, or even whether Ford will have any earnings. Yes, most
businesses are cyclical, or subject to cycles (look at our insurance stocks, for
example), but we believe the low water mark of an AIG's return on equity is a
lot higher than a Ford Motor's and the variability in earnings from low to high
is a lot less, (ditto for virtually all of our companies) because AIG is in a
much better business than Ford Motor (it always seems to come back to quality,
doesn't it?)
We believe that our investment approach is a very simple, commonsensical one.
Buy quality businesses that you can own over long periods of time at attractive
prices. If a minimum threshold of quality is not there in our eyes (and quality
is defined based on long-term return on equity, superior management, etc.) then
to put clients' monies in lesser-quality businesses whose stock prices may or
may not be the temporary beneficiaries of an economic revival or continued
economic boom, is what we call speculation, and this will not do. We want to
invest, not speculate.
An alternative title to our year-end review might have been "The Year of the Big
Trim" because during 2003 we added only one new equity to the portfolio (Fifth
Third Bancorp, back in April). However, as the year progressed, we took profit
in a number of well-performing issues like Tiffany, and cut back our exposure to
a number of individual equities as price targets were approached, so that we
ended the year with roughly 20% cash and equivalents. In the fourth quarter we
trimmed AIG, Berkshire Hathaway, Corus Bankshares, Watts Industries, Golden West
Financial, Old Republic and State Street Bank. After Tiffany, our two smallest
cap companies, Corus and Watts, were our best performers for the year.
Janus Adviser December 31, 2003 1
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US VALUE FUND (unaudited)
Golden West, up this year, is now less than a one percent position in the
portfolio. American Express and Health Management Associates also did very well,
each rising about 35% this year. Having 20% cash doesn't necessarily mean that
we think that the market can't keep going up, or that we are bearish regarding
our own portfolio. A large cash position simply means that we are having a
harder time today finding high-quality businesses to buy at attractive
valuations.
Detracting from our performance in 2003 were Freddie Mac, Safeway and Fifth
Third Bankcorp., although Berkshire Hathaway and Fannie Mae also hurt on a
relative basis. We have written much in recent quarterlies regarding Fannie and
Freddie and have neither changed our point of view nor our substantial holdings
in the stocks (together they account for about 16% of our fund's net assets). We
think Fannie and Freddie are in good growth businesses, that the stocks are
significantly undervalued and that, even if interest rates rise one or two
hundred basis points this year, Fannie and Freddie will still be capable of
growing their earnings. Freddie Mac recently completed the restatement of
several prior years' earnings, which resulted in a cumulative upwards adjustment
of $5 billion, as expected. Both Fannie and Freddie are more than adequately
capitalized based on today's regulatory requirements, and we do not anticipate
any meaningful changes in that regard. As investors, we would welcome a stronger
regulator. In the meantime, Fannie Mae and Freddie Mac continue to benefit from
lower funding costs despite no explicit guarantees on their debt from the
federal government. Fifth Third, at $59, is up from our initial purchase price
of $48, but the stock was essentially flat for the year. We believe that as
corporate loan demand continues to pick up with a perculating economy, and as
Fifth Third Bancorp gets itself in compliance with certain lending standards
that were of concern to Federal regulators, Fifth Third Bancorp will in the
future perform in line with its stellar financial legacy. Safeway has probably
been our weakest performing business this year, as even food sales were knocked
by a weak economy, one-off costs were incurred in centralizing purchasing, and
the company is also being impacted by a strike as it attempts to bring health
and benefit costs under control. On the key strategic issue of Wal-Mart's
impending encroachment on Safeway's geography, we believe that there is room
enough for both companies to prosper and grow. Priced at about 10 times their
projection of this year's expected earnings, unless it is a true "value trap,"
we believe Safeway is cheap.
As we look forward into 2004, despite our 20% cash position, some rather de
miminus positions in individual stocks like Golden West and Liz Claiborne,
(which may suggest limited upside from these levels for these particular stocks)
and despite the apparent paucity of good companies selling for cheap prices, we
are not bearish about the portfolio. We believe that we are prudently managing
risk, that absolute returns are our principal priority, and that there is still
money to be made in the portfolio as a whole. We are well aware that insurance
is a cyclical business whose cycle may be getting long in the tooth, but we have
done a fair amount of profit taking in the group over the year (we have no more
Bermuda reinsurers and have cut back on every insurance stock except for
Cincinnati Financial). Even if insurance prices generally flatten or rise at a
less aggressive rate, we believe our companies can still enjoy healthy increases
in their book values as today's operating income falls cleanly to their book
values rather than being diverted to repair balance sheets and reserves which
should benefit their stock prices. If the economy continues to boom and tech,
cyclicals and commodities continue to do well, then we probably won't
participate as much, just like 2003. That's OK with us. We're not about to
contemplate violating our successful long-term investment approach to try to
keep up with the "bouncing rubbish." We're in it for the long run and we hope to
attract clients that have similar objectives and time horizons. Good luck and
health to everyone in the New Year and we thank you for your investment in the
Fund!
[LINE GRAPH]
INITIAL INVESTMENT OF $10,000
US Value Fund - A Shares (at MOP)*** $55,273
S&P 500(R) Index $44,047
A graphic comparison of the change in value of a hypothetical $10,000 investment
in US Value Fund - A Shares (at MOP) and the S&P 500(R) Index. US Value Fund - A
Shares (at MOP) is represented by a shaded area of blue. The S&P 500(R) Index is
represented by a solid black line. The "y" axis reflects the value of the
investment. The "x" axis reflects the computation periods from inception, March
30, 1990, through December 31, 2003. The upper right quadrant reflects the
ending value of the hypothetical investment in US Value Fund - A Shares (at MOP)
($55,273) as compared to the S&P 500(R) Index ($44,047).
Average Annual Total Return - for the periods ended December 31, 2003
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One Five Ten Since
Year Year Year Inception*
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US Value Fund
- - Investor Shares 24.35% 7.72% 14.13% 13.55%
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US Value Fund - I Shares 24.26% 7.58% 13.98% 13.42%
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US Value Fund
- - C Shares at NAV** 22.67% 6.86% 13.34% 12.84%
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US Value Fund
- - C Shares at MOP*** 20.30% 6.65% 13.22% 12.76%
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US Value Fund
- - A Shares at NAV** 24.54% 7.84% 14.37% 13.72%
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US Value Fund
- - A Shares at MOP*** 17.36% 6.57% 13.70% 13.23%
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S&P 500(R)Index 28.67% (0.57)% 11.06% 11.39%
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2 Janus Adviser December 31, 2003
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(unaudited)
FUND STRATEGY
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This nondiversified value fund seeks to find US companies of any size that are
attractively priced.
FUND ASSET MIX - (% of Net Assets)
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[PIE CHART]
Cash and Cash Equivalents -- 19.6%
Common Stock -- Domestic -- 80.4%
Number of Stocks: 20
Top 10 Equities: 60.8%
TOP 10 EQUITY HOLDINGS - (% of Net Assets)
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December 31, 2003
Berkshire Hathaway, Inc. - Class A 12.8%
Freddie Mac 8.4%
Fannie Mae 8.1%
American International Group, Inc. 6.5%
Cincinnati Financial Corp. 6.0%
Markel Corp. 4.0%
TJX Companies, Inc. 4.0%
Fifth Third Bancorp 3.8%
Wells Fargo & Co. 3.7%
Universal Health Services, Inc. - Class B 3.5%
TOP INDUSTRIES - FUND VS. INDEX (% of Net Assets)
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US Value Fund
S&P 500(R) Index
[BAR CHART]
US Value S&P 500(R)
Fund Index
Finance - Mortgage Loan Banker 16.5% 1.2%
Multi-Line Insurance 14.0% 2.8%
Reinsurance 12.8% NA
Property and Casualty Insurance 8.5% 0.8%
Super-Regional Banks 7.5% 5.4%
Medical - Hospitals 6.2% 0.3%
Retail - Discount 4.0% 3.0%
Finance - Credit Card 3.1% 1.1%
Fiduciary Banks 2.5% 0.7%
Food - Retail 1.8% 0.3%
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(1) All returns include reinvested dividends and capital gains, but do not
include the effect of taxes. See Notes to Schedules of Investments for
index definitions.
* The Fund's inception date - March 30, 1990.
** Perfomance is shown at Net Asset Value (NAV) which does not include any
applicable sales loads or contingent deferred sales charges. Performance
would have been lower had these charges been taken into account.
*** Performance is shown at Maximum Offering Price (MOP) which includes the
5.75% and 1.00% upfront sales charge on A Shares and C Shares,
respectively. The performance shown for class A Shares does not reflect the
1.00% contingent deferred sales charge that may be imposed on certain
redemptions of Class A Shares bought without an initial sales charge and
redeemed within 12 months of purchase. The one-year performance for Class C
Shares reflects a contingent deferred sales charge of 1.00%, which applies
to C Shares redeemed within 12 months of purchase.
See "Explanations of Charts, Tables and Financial Statements."
See Note 5 in Notes to Financial Statements.
Returns stated in the Average Annual Total Return Table for Investor Shares, I
Shares and C Shares for periods prior to 10/13/03 are derived from the
historical performance of Class A Shares of Vontobel US Value Fund. Returns are
restated to reflect the higher expected fees and expenses of US Value Fund.
Returns shown in the Portfolio Performance and Market Commentary and Financial
Highlights are based on the actual historical returns of Vontobel US Value Fund.
This Fund is designed for long-term investors who can accept the special risks
associated with value investing. A "nondiversified" portfolio has the ability to
take larger positions in a smaller number of issuers than a "diversified"
portfolio. Nondiversified portfolios may experience greater price volatility.
Due to market volatility, current performance may be higher or lower than the
figures shown. Call 1-800-525-1068 or visit janus.com for more current
performance information.
Past performance is no guarantee of future results and investment results and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. Total return includes reinvestment of
dividends and capital gains.
The returns shown do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
The Fund may differ significantly from the securities held in the indices. The
indices are not available for direct investment; therefore their performance
does not reflect the expenses associated with the active management of an actual
portfolio.
There is no assurance the investment process will consistently lead to
successful investing.
Due to recent market volatility, the Fund may have an increased position in cash
for temporary defensive purposes.
Janus Capital Management LLC ("Janus Capital") has contractually agreed to waive
the Fund's total operating expenses to the levels indicated in the prospectus
until at least Septmber 30, 2005. Without such waivers, total returns would have
been lower.
Janus Adviser December 31, 2003 3
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US VALUE FUND
SCHEDULE OF INVESTMENTS
Shares or Principal Amount Market Value
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Common Stock - 80.4%
Commercial Banks - 1.3%
31,000 Corus Bankshares, Inc. ......................... $ 978,360
Fiduciary Banks - 2.5%
34,600 State Street Corp. ............................. 1,801,968
Finance - Credit Card - 3.1%
46,700 American Express Co. ........................... 2,252,341
Finance - Mortgage Loan Banker - 16.5%
78,474 Fannie Mae ..................................... 5,890,258
105,000 Freddie Mac .................................... 6,123,601
12,013,859
Food - Retail - 1.8%
60,700 Safeway, Inc.* ................................. 1,329,937
Instruments - Controls - 1.5%
48,600 Watts Water Technologies, Inc. - Class A ....... 1,078,920
Medical - Hospitals - 6.2%
82,700 Health Management Associates, Inc.
- Class A ................................... 1,984,800
47,200 Universal Health Services, Inc. - Class B ...... 2,535,584
4,520,384
Multi-Line Insurance - 14.0%
71,900 American International Group, Inc. ............. 4,765,532
105,300 Cincinnati Financial Corp. ..................... 4,409,964
41,737 Old Republic International Corp. ............... 1,058,450
10,233,946
Property and Casualty Insurance - 8.5%
32,800 Chubb Corp. .................................... 2,233,680
11,630 Markel Corp.* .................................. 2,948,321
22,150 Mercury General Corp. .......................... 1,031,083
6,213,084
Reinsurance - 12.8%
111 Berkshire Hathaway, Inc. - Class A* ............ 9,351,750
Retail - Discount - 4.0%
132,900 TJX Companies, Inc. ............................ 2,930,445
Savings/Loan/Thrifts - 0.7%
5,300 Golden West Financial Corp. .................... 546,907
Super-Regional Banks - 7.5%
46,900 Fifth Third Bancorp ............................ 2,771,790
45,400 Wells Fargo & Co. .............................. 2,673,606
5,445,396
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Total Common Stock (cost $46,980,462) ......................... 58,697,297
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Short-Term U.S. Government Agency - 18.3%
Federal Home Loan Bank System
$13,400,000 0.65%, 1/2/04
(amortized cost $13,399,758) ................ 13,399,758
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Total Investments (total cost $60,380,220) - 98.7% ............ 72,097,055
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Cash, Receivables and Other Assets, net of Liabilities - 1.3% . 974,140
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Net Assets - 100% ............................................. $ 73,071,195
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See Notes to Schedules of Investments and Financial Statements.
4 Janus Adviser December 31, 2003
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INTERNATIONAL EQUITY FUND (unaudited) Managed by Vontobel
Asset Management, Inc.
FUND PERFORMANCE AND MARKET COMMENTARY
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[PHOTO]
Rajiv Jain
portfolio manager
Economic momentum seems strong across the world from the US to Europe and
throughout Asia. Thus, the best performing sectors were basic materials,
industrials, construction, technology and telecoms. Blame it on luck or on our
philosophy, we had no holdings in any of these sectors for the whole of 2003. As
we constantly seek predictability in our investments, we vigilantly avoid
unnecessary uncertainty. Normalizing for margins and revenue growth in most of
the better names in the above mentioned sectors, we found precious few companies
in which to invest. Obviously, these sectors went up without us for what was
surely a wild ride. Against this backdrop, the Fund advanced 29.99% for its
Investor Shares and 29.90% for its Class I Shares, while its benchmark, the MSCI
EAFE(R) Index gained 38.59%.(1)
Considering this, it is a little surprising that we did not underperform even
more as we were heavily weighted in the worst performing sectors including food,
beverages and utilities. Fortuitously, some of our smaller positions added
significantly to performance. This is also the very reason that we feel
reasonably upbeat about our prospects for 2004. In fact, a number of our larger
positions have not done much for the last 12 to 18 months. Names like Northern
Rock, Diageo, Heineken, Bank of Ireland, Swedish Match and ABN Amro were either
hindrances or very small contributors to our overall performance.
On the other hand, some of the big winners were Souza Cruz in Brazil, ITC in
India, Anglo Irish in Ireland, Macquarie Bank in Australia, Signet in the UK and
State Bank of India, each up an average of over 50% during the period. And
always bitter-sweetly, we trimmed several names as they approached our price
targets including Trinity Mirror, Dr. Reddy's, Dah Sing and Novo Nordisk.
The market that we missed in 2003 was Japan where ROEs (return on equity) still
remain low and most companies still look to deploy their free cash in stocks of
other companies. A number of companies that we visited talked about buying back
stock, but execution remains weak on this front. We did find a few names like
Millea, a property and casualty insurer, very attractive. We believe the stock
is still undervalued by nearly 30%, its impressive performance last year
notwithstanding. We see this as probably the bluest of the blue chips in Japan.
The combined ratio has been below 100 for years, much like the rest of the P&C
industry in Japan. With a sterling balance sheet and fairly aggressive buyback
plan, we believe the book value should grow at double digits for years to come.
Severity has been coming down due to deflation while cost control measures
should result in better expense ratios, in our opinion.
Luckily for us, the tobacco names added decent performance in the last quarter
after the industry won some reprieve from favorable legal verdicts in the US.
Despite the run, we continue to see value in many tobacco names including
Imperial Tobacco, British American Tobacco, Souza Cruz, ITC and Swedish Match.
Approximately 10% of the Fund is in tobacco. We believe that with litigation
risk lower than it has been for years and valuations still extremely attractive,
we should be paid handsomely over the next few years in these names. All of
these companies are growing at high-single-digit rates while selling at 9-12x
earnings. The amount of cash that these businesses generate is mind-boggling,
particularly when looking at the assets involved. The concern most often raised
is that as prices keep going up due to taxes, the volume will decline more than
the margin improvement can compensate for. Looking at the evidence, however, we
are convinced otherwise. In the UK, for example, where cigarette prices are even
higher than in New York City at around US$7 per pack, margins are the highest in
the world at around 50% (Imperial). Imperial has been able to grow earnings at
high-single digits for years in the UK market. As taxes increase in the rest of
Europe, we believe that earnings growth will be robust over the next 3-5 years,
especially for companies such as Imperial Tobacco. It is much easier to charge
an additional 25 cents per pack when the prices have already gone up by 50 cents
due to taxes. Even Philip Morris has seen its margins go up after the Master
Settlement Agreement (MSA) over the last three years.
We remain wary of US dollar weakness and its impact on the earnings of companies
like Heineken, Porsche, and BMW. In these cases, the impact is real, i.e.,
transaction-related as the goods are imported from Europe. In the case of
Nestle, Cadbury, Bunzl, and Signet, the currency impact is largely
translation-related as few goods are imported physically and the real intrinsic
value of the businesses is not greatly impacted. The US dollar seems to be in
secular decline, and has thus become an important factor on the margin in our
earnings picture on a normalized basis. True to our conservative nature, we are
therefore factoring a much weaker US dollar into our assumptions than analyst
expectations. We have not increased Heineken from its existing 3.5-3.9% level
due to this, as we believe the margins will be impacted after 2005 if the US
dollar remains in its current position.
Janus Adviser December 31, 2003 5
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INTERNATIONAL EQUITY FUND (unaudited)
We have nevertheless found some high-quality names in Europe from a euro-based
earnings growth perspective. Red Electrica is one such name. We believe the
monopoly electricity transmission company in Spain will deliver 12-14% earnings
growth for the next five years, irrespective of what happens in Spain or Europe.
The stock sells for 13 times earnings and is yielding 4%. Our holding in Red
Electrica, along with that in Banco Popular Espanol and Enagas, makes Spain one
of our largest European exposures. All have grown with reasonable valuations and
extremely predictable franchises.
The great news is that we believe the portfolio should continue to deliver
double-digit earnings growth and is still selling at 14 times our expected
earnings. The biggest risk for us remains our potential underperformance versus
the benchmark if the economies continue to grow at current rates and we
experience further commodity price increases. This would hurt our financial
exposure along with the continuing lagging staples. Regardless, we believe this
all means that 2004 could be another year of absolute performance, which is
where our focus lies!
[LINE GRAPH]
INITIAL INVESTMENT OF $10,000
International Equity Fund - A Shares (at MOP)*** $19,462
Morgan Stanley Capital International EAFE(R) Index $17,603
A graphic comparison of the change in value of a hypothetical $10,000 investment
in International Equity Fund - A Shares (at MOP)*** and the Morgan Stanley
Capital International EAFE(R) Index. International Equity Fund - A Shares (at
MOP) is represented by a shaded area of blue. The Morgan Stanley Capital
International EAFE(R) Index is represented by a solid black line. The "y" axis
reflects the value of the investment. The "x" axis reflects the computation
periods from inception, July 6, 1990, through December 31, 2003. The upper right
quadrant reflects the ending value of the hypothetical investment in
International Equity Fund - A Shares (at MOP) ($19,462) as compared to the
Morgan Stanley Capital International EAFE(R) Index ($17,603).
AVERAGE ANNUAL TOTAL RETURN - for the periods ended December 31, 2003
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One Five Ten Since
Year Year Year Inception*
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International Equity Fund
- - Investor Shares 30.58% (0.43)% 3.82% 5.44%
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International Equity Fund
- - I Shares 30.47% (0.57)% 3.68% 5.31%
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International Equity Fund
- - C Shares at NAV** 31.45% (0.79)% 3.35% 4.94%
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International Equity Fund
- - C Shares at MOP*** 28.88% (0.99)% 3.25% 4.86%
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International Equity Fund
- - A Shares at NAV** 30.67% (0.34)% 3.92% 5.52%
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International Equity Fund
- - A Shares at MOP*** 23.16% (1.51)% 3.30% 5.06%
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Morgan Stanley Capital
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International EAFE(R)Index 38.59% (0.05)% 4.47% 4.28%
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FUND STRATEGY
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This diversified fund seeks to invest in securities of large and medium-sized
companies located primarily outside the U.S. that are attractively priced.
FUND ASSET MIX - (% of Net Assets)
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[PIE CHART]
Preferred Stock - 0.5%
Cash and Cash Equivalents - 3.6%
Common Stock - Foreign - 95.9%
Number of Stocks: 50
Top 10 Equities: 33.2%
6 Janus Adviser December 31, 2003
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TOP 10 EQUITY HOLDINGS - (% of Net Assets)
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December 31, 2003
Northern Rock PLC 4.0%
Anglo Irish Bank Corporation PLC 4.0%
ABN AMRO Holding N.V. 3.9%
Diageo PLC 3.7%
Nestle S.A. 3.5%
Heineken N.V. 3.2%
British American Tobacco PLC 2.9%
Millea Holdings, Inc. 2.8%
Banco Popular Espanol S.A. 2.7%
Macquarie Bank, Ltd. 2.5%
TOP INDUSTRIES - FUND VS. INDEX (% of Net Assets)
- --------------------------------------------------------------------------------
International Equity Fund
MSCI EAFE(R) Index
[BAR CHART]
International MSCI EAFE(R)
Equity Fund Index
Commercial Banks 14.7% 4.8%
Tobacco 9.2% 0.7%
Money Center Banks 7.5% 12.8%
Food - Diversified 6.2% 3.1%
Diversified Operations 4.6% 2.1%
Gas - Distribution 4.6% 0.6%
Mortgage Banks 4.0% 0.0%
Food - Retail 3.9% 1.5%
Cosmetics and Toiletries 3.8% 0.7%
Beverages - Wine and Spirits 3.7% 0.7%
- --------------------------------------------------------------------------------
(1) All returns include reinvested dividends and capital gains, but do not
include the effect of taxes. See Notes to Schedules of Investments for
index definitions.
* The Fund's inception date - July 6, 1990. Since inception returns reflect
the returns of the Fund's predecessor from July 6, 1990, when Vontobel
Asset Management, Inc. became the Fund's investment adviser. Previous
periods during which the Fund was advised by other investment advisers are
not shown.
** Performance is shown at Net Asset Value (NAV) which does not include any
applicable sales loads or contingent deferred sales charges. Performance
would have been lower had these charges been taken into account.
*** Performance is shown at Maximum Offering Price (MOP) which includes the
5.75% and 1.00% upfront sales charge on A Shares and C Shares,
respectively. The performance shown for Class A Shares does not reflect the
1.00% contingent deferred sales charge that may be imposed on certain
redemptions of Class A Shares bought without an initial sales charge and
redeemed within 12 months of purchase. The one-year performance for Class C
Shares reflects a contingent deferred sales charge of 1.00%, which applies
to C Shares redeemed within 12 months of purchase.
See "Explanations of Charts, Tables and Financial Statements."
See Note 5 in Notes to Financial Statements.
Returns stated in the Average Annual Total Return Table for Investor Shares, I
Shares and C Shares for periods prior to 10/13/03 are derived from the
historical performance of Class A Shares of Vontobel International Equity Fund.
Returns are restated to reflect the higher expected fees and expenses of
International Equity Fund. Returns shown in the Portfolio Performance and Market
Commentary and Financial Highlights are based on the actual historical returns
of Vontobel International Equity Fund.
Due to market volatility, current performance may be higher or lower than the
figures shown. Call 1-800-525-1068 or visit janus.com for more current
performance information.
Past performance is no guarantee of future results and investment results and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost. Total return includes reinvestment of
dividends and capital gains.
The returns shown do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
The Fund may differ significantly from the securities held in the indices. The
indices are not available for direct investment; therefore their performance
does not reflect the expenses associated with the active management of an actual
portfolio.
There is no assurance the investment process will consistently lead to
successful investing.
Janus Capital Management LLC ("Janus Capital") has contractually agreed to waive
the Fund's total operating expenses to the levels indicated in the prospectus
until at least September 30, 2005. Without such waivers, total returns would
have been lower.
Foreign investing involves special risks such as currency fluctuations and
political uncertainty.
Janus Adviser December 31, 2003 7
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY FUND
SCHEDULE OF INVESTMENTS
Shares or Principal Amount Market Value
- --------------------------------------------------------------------------------
Common Stock - 95.9%
Automotive - Cars And Light Trucks - 2.0%
12,800 Honda Motor Company, Ltd. ...................... $ 568,517
Beverages - Non-Alcoholic - 1.2%
700 Lotte Chilsung Beverage Company, Ltd.* ......... 348,972
Beverages - Wine and Spirits - 3.7%
80,515 Diageo PLC ..................................... 1,059,389
Brewery - 3.2%
24,282 Heineken N.V. .................................. 924,664
Building - Residential And Commercial - 2.2%
63,176 Barratt Developments PLC ....................... 614,106
Commercial Banks - 14.7%
47,530 ABN AMRO Holding N.V. .......................... 1,112,111
71,377 Anglo Irish Bank Corporation PLC ............... 1,126,294
38,996 Australia and New Zealand Banking
Group, Ltd. ................................. 519,465
12,733 Banco Popular Espanol S.A. ..................... 759,676
20,600 Bank of Ireland ................................ 281,145
18,300 Svenska Handelsbanken A.B. - Class A ........... 373,869
4,172,560
Commercial Services - 1.2%
278,500 Singapore Airport Terminal Services, Ltd. ...... 350,933
Cosmetics and Toiletries - 3.8%
3,760 Amorepacific Corp.* ............................ 591,691
24,000 Kao Corp. ...................................... 488,196
1,079,887
Distribution/Wholesale - 1.5%
124,000 Esprit Holdings, Ltd. .......................... 412,875
Diversified Operations - 4.6%
63,293 Bunzl PLC ...................................... 483,527
42,900 Remgro, Ltd. ................................... 453,744
18,500 Wesfarmers, Ltd. ............................... 369,239
1,306,510
Electric - Integrated - 0.5%
12,700 Scottish & Southern Energy PLC ................. 153,007
Electric - Transmission - 1.7%
29,400 Red Electrica de Espana ........................ 482,089
Finance - Investment Bankers/Brokers - 2.5%
26,600 Macquarie Bank, Ltd. ........................... 712,684
Food - Confectionary - 2.1%
414 Lindt & Spruengli A.G. ......................... 344,790
650 Lotte Confectionery Company, Ltd.* ............. 244,671
589,461
Food - Miscellaneous/Diversified - 6.2%
59,817 Cadbury Schweppes PLC .......................... 439,303
17,500 Kerry Group PLC ................................ 328,898
3,990 Nestle S.A. .................................... 996,895
1,765,096
Food - Retail - 3.9%
153,137 Tesco PLC ...................................... 706,594
97,281 William Morrison Supermarkets PLC .............. 393,575
1,100,169
Gambling - Non-Hotel - 1.4%
45,700 TABCORP Holdings, Ltd. ......................... 386,678
Gas - Distribution - 4.6%
57,600 Enagas ......................................... 624,823
191,000 Tokyo Gas Company, Ltd. ........................ 680,807
1,305,630
Medical - Drugs - 0.7%
5,000 Novo Nordisk S.A. .............................. 203,705
Money Center Banks - 7.5%
37,200 Banco Bilbao Vizcaya Argentaria S.A. ........... 513,799
7,500 BNP Paribas S.A. ............................... 472,250
22,476 Royal Bank of Scotland Group PLC ............... 662,278
14,200 State Bank of India (GDR) ...................... 473,996
2,122,323
Mortgage Banks - 4.0%
89,038 Northern Rock PLC .............................. 1,137,262
Multi-Line Insurance - 1.5%
8,200 CNP Assurances ................................. 426,963
Office Automation and Equipment - 2.0%
29,000 Ricoh Company, Ltd. ............................ 572,315
Property and Casualty Insurance - 2.8%
61 Millea Holdings, Inc. .......................... 796,865
Publishing - Newspapers - 2.5%
85,100 Johnston Press PLC ............................. 709,535
Real Estate Management/Services - 1.2%
11,400 Daito Trust Construction Company, Ltd. ......... 338,266
Real Estate Operating/Development - 1.4%
36,600 Westfield Holdings, Ltd. ....................... 385,240
Retail - Jewelry - 0.9%
142,070 Signet Group PLC ............................... 261,957
Soap and Cleaning Preparations - 1.2%
15,058 Reckitt Benckiser PLC .......................... 340,726
Tobacco - 9.2%
59,833 British American Tobacco PLC ................... 824,751
24,600 Imperial Tobacco Group PLC ..................... 484,416
18,400 ITC, Ltd. (GDR) ................................ 403,512
32,800 Souza Cruz S.A. ................................ 344,144
55,600 Swedish Match A.B. ............................. 567,954
2,624,777
- --------------------------------------------------------------------------------
Total Common Stock (cost $21,342,691) ......................... 27,253,161
- --------------------------------------------------------------------------------
Preferred Stock - 0.5%
Medical - Hospitals - 0.5%
2,600 Rhoen-Klinikum A.G. (cost $128,902) ............ 133,640
- --------------------------------------------------------------------------------
Short-Term U.S. Government Agency - 2.5%
Federal Home Loan Bank System
$ 700,000 0.65%, 1/2/04 (amortized cost $699,987) ..... 699,987
- --------------------------------------------------------------------------------
Total Investments (total cost $22,171,580) - 98.9% ............ 28,086,788
- --------------------------------------------------------------------------------
Cash, Receivables and Other Assets, net of Liabilities - 1.1% . 312,641
- --------------------------------------------------------------------------------
Net Assets - 100% ............................................. $ 28,399,429
- --------------------------------------------------------------------------------
See Notes to Schedules of Investments and Financial Statements.
8 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Summary of Investments by Country, December 31, 2003
Country % of Investment Securities Market Value
- --------------------------------------------------------------------------------
Australia 8.4% $ 2,373,307
Bermuda 1.5% 412,875
Brazil 1.2% 344,144
Denmark 0.7% 203,705
France 3.2% 899,213
Germany 0.5% 133,640
India 3.1% 877,508
Ireland 6.2% 1,736,337
Japan 12.3% 3,444,966
Netherlands 7.3% 2,036,775
Singapore 1.2% 350,933
South Africa 1.6% 453,744
South Korea 4.2% 1,185,334
Spain 8.5% 2,380,387
Sweden 3.4% 941,823
Switzerland 4.8% 1,341,686
United Kingdom 29.4% 8,270,424
United States++ 2.5% 699,987
- --------------------------------------------------------------------------------
Total 100.0% $ 28,086,788
++Includes Short-Term Securities (0% excluding Short-Term Securities)
See Notes to Schedules of Investments and Financial Statements.
Janus Adviser December 31, 2003 9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
As of December 31, 2003 International
(all numbers in thousands except US Value Equity
net asset value per share) Fund(1) Fund(2)
- --------------------------------------------------------------------------------
Assets:
Investments at cost $ 60,380 $ 22,172
Investments at value $ 72,097 $ 28,087
Cash 127 123
Receivables:
Investments sold 808 343
Portfolio shares sold 130 42
Dividends 70 91
- --------------------------------------------------------------------------------
Total Assets 73,232 28,686
- --------------------------------------------------------------------------------
Liabilities:
Payables:
Investments purchased -- 229
Portfolio shares repurchased 59 --
Dividends -- 3
Advisory fees 58 23
Transfer agent fees and expenses 1 6
Administrative fees - Investor Shares 5 2
Administrative fees - Class I Shares 1 --
Distribution fees - Investor Shares 13 5
Distribution fees - Class I Shares 1 --
Distribution fees - Class C Shares 1 --
Distribution fees - Class A Shares 1 --
Accrued expenses 21 19
- --------------------------------------------------------------------------------
Total Liabilities 161 287
- --------------------------------------------------------------------------------
Net Assets $ 73,071 $ 28,399
- --------------------------------------------------------------------------------
Net Assets Consist of:
Capital (par value and paid-in surplus)* 57,256 30,026
Undistributed net investment income/(loss)* -- (7)
Undistributed net realized gain/(loss) from
investments and foreign currency transactions* 4,098 (7,555)
Unrealized appreciation/(depreciation) of
investments and foreign currency translations 11,717 5,935
- --------------------------------------------------------------------------------
Total Net Assets $ 73,071 $ 28,399
- --------------------------------------------------------------------------------
Net Assets - Investor Shares $ 61,970 $ 25,506
Shares Outstanding, $0.001 Par Value
(unlimited shares authorized) 2,845 1,720
- --------------------------------------------------------------------------------
Net Asset Value Per Share $ 21.78 $ 14.83
- --------------------------------------------------------------------------------
Net Assets - Class I Shares $ 6,005 $ 1,409
Shares Outstanding, $0.001 Par Value
(unlimited shares authorized) 276 95
- --------------------------------------------------------------------------------
Net Asset Value Per Share $ 21.78 $ 14.82
- --------------------------------------------------------------------------------
Net Assets - Class C Shares $ 1,344 $ 11
Shares Outstanding, $0.001 Par Value
(unlimited shares authorized) 62 1
- --------------------------------------------------------------------------------
Net Asset Value and Redemption Price Per Share(3) $ 21.52 $ 14.95
- --------------------------------------------------------------------------------
Maximum Offering Price Per Share(4) $ 21.74 $ 15.10
- --------------------------------------------------------------------------------
Net Assets - Class A Shares $ 3,752 $ 1,473
Shares Outstanding, $0.001 Par Value
(unlimited shares authorized) 172 99
- --------------------------------------------------------------------------------
Net Asset Value Per Share $ 21.82 $ 14.84
- --------------------------------------------------------------------------------
Maximum Offering Price Per Share(5) $ 23.15 $ 15.75
- --------------------------------------------------------------------------------
*See Note 3 in Notes to Financial Statements.
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Vontobel International Equity Fund prior to reorganization (Note 1).
(3) Redemption price per share may be reduced for any applicable contigent
deffered sales charge.
(4) Maximum offering price is computed at 100/99 of net asset value.
(5) Maximum offering price is computed at 100/94.25 of net asset value.
See Notes to Financial Statements.
10 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
International
For the fiscal year ended December 31, 2003 US Value Equity
(all numbers in thousands) Fund(1)(3) Fund(2)(4)
- ---------------------------------------------------------------------------------------------------
Investment Income:
Interest $ 15 $ 3
Dividends 964 848
Foreign tax withheld -- (73)
- ---------------------------------------------------------------------------------------------------
Total Investment Income 979 778
- ---------------------------------------------------------------------------------------------------
Expenses:
Advisory fees 776 261
Transfer agent expenses 127 57
Registration fees 179 158
Postage and mailing expenses 1 1
Custodian fees 37 78
Printing expenses 85 25
Audit fees 36 45
Trustees fees and expenses 119 53
Administrative fees - Investor Shares 120 41
Administrative fees - Class I Shares 15 3
Administrative fees - Class C Shares 1 --
Administrative fees - Class A Shares 6 2
Distribution fees - Investor Shares 35 13
Distribution fees - Class I Shares 3 1
Distribution fees - Class C Shares 9 --
Distribution fees - Class A Shares 2 1
Other expenses 143 108
- ---------------------------------------------------------------------------------------------------
Total Expenses 1,694 847
- ---------------------------------------------------------------------------------------------------
Excess Expense Reimbursement -- (88)
- ---------------------------------------------------------------------------------------------------
Net Expenses After Reimbursement 1,694 759
- ---------------------------------------------------------------------------------------------------
Net Investment Income/(Loss) (715) 19
- ---------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain/(Loss) on Investments:
Net realized gain/(loss) from securities transactions 8,813 2,096
Net realized gain/(loss) from foreign currency transactions -- (444)
Change in net unrealized appreciation/(depreciation) of investments
and foreign currency translations 5,996 5,279
- ---------------------------------------------------------------------------------------------------
Increase from payment by affiliate (Note 2) -- 26
- ---------------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain/(Loss) on Investments and
foreign currency translations 14,809 6,957
- ---------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations $ 14,094 $ 6,976
- ---------------------------------------------------------------------------------------------------
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Vontobel International Equity Fund prior to reorganization (Note 1).
(3) Commencement of operations of Class C Shares was October 9, 2002.
(4) Commencement of operations of Class C Shares was October 13, 2003.
See Notes to Financial Statements.
Janus Adviser December 31, 2003 11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
US Value International Equity
For the fiscal year or period ended December 31 Fund(1) Fund(2)
(all numbers in thousands) 2003 2002(3)(4) 2003(5) 2002(3)
- ---------------------------------------------------------------------------------------------------------------------------
Operations:
Net investment income/(loss) $ (715) $ (557) $ 19 $ 64
Net realized gain/(loss) from investment transactions
and foreign currency transactions 8,813 5,389 1,652 (1,032)
Change in unrealized net appreciation/(depreciation)
of investments and foreign currency translations 5,996 (8,113) 5,279 (2,106)
Increase from payment by affiliate (Note 2) -- -- 26 --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets Resulting from Operations 14,094 (3,281) 6,976 (3,074)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends and Distributions to Shareholders:
Net investment income*
Investor Shares -- N/A (128) N/A
Class I Shares -- N/A (9) N/A
Class C Shares -- -- -- --
Class A Shares -- -- (7) --
Net realized gain from investment transactions*
Investor Shares (3,790) N/A (704) N/A
Class I Shares (386) N/A (41) N/A
Class C Shares (75) (14) -- --
Class A Shares (190) (4,966) (42) --
Return of Capital
Investor Shares -- N/A (91) N/A
Class I Shares -- N/A (6) N/A
Class C Shares -- -- -- --
Class A Shares -- -- (6) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Decrease from Dividends and Distributions (4,441) (4,980) (1,034) --
- ---------------------------------------------------------------------------------------------------------------------------
Capital Share Transactions:
Shares sold
Investor Shares 5,379 N/A 2,592 N/A
Capital Transferred 53,231 N/A 20,887 N/A
Class I Shares 94 N/A 37 N/A
Capital Transferred 5,687 N/A 1,435 N/A
Class C Shares 843 352 10 --
Class A Shares 15,803 89,364 13,148 11,344
Reinvested dividends and distributions
Investor Shares 1,774 N/A 694 N/A
Class I Shares 153 N/A 24 N/A
Class C Shares 36 14 -- --
Class A Shares 73 4,700 36 --
Shares repurchased
Investor Shares (10,554) N/A (3,755) N/A
Class I Shares (1,208) N/A (415) N/A
Class C Shares (18) -- -- --
Class A Shares (61,614) (59,669) (18,940) (23,600)
Capital Transferred (58,918) N/A (22,322) N/A
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) from Capital Share Transactions (49,239) 34,761 (6,569) (12,256)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase/(Decrease) in Net Assets (39,586) 26,500 (627) (15,330)
Net Assets:
Beginning of period 112,657 86,157 29,026 44,356
- ---------------------------------------------------------------------------------------------------------------------------
End of period $ 73,071 $ 112,657 $ 28,399 $ 29,026
- ---------------------------------------------------------------------------------------------------------------------------
Purchases and Sales of Investment Securities:
(excluding short-term securities)
Purchases of securities $ 15,744 $ 96,456 $ 16,510 $ 34,874
Proceeds from sales of securities 85,029 66,158 25,474 47,884
Purchases of long-term U.S. government obligations -- -- -- --
Proceeds from sales of long-term U.S. government obligations -- -- -- --
Undistributed net investment income/(loss) -- -- $ (32) $ (7)
* See Note 3 in Notes to Financial Statements.
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Vontobel International Equity Fund prior to reorganization (Note 1).
(3) Certain prior year amounts have been reclassified to conform to current
year presentation.
(4) Commencement of operations of Class C Shares was October 9, 2002.
(5) Commencement of operations of Class C Shares was October 13, 2003.
See Notes to Financial Statements.
12 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - INVESTOR SHARES
Vontobel
For a share outstanding during the US Value Fund(1) US Value Fund - A Shares(1)
period ended December 31 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 18.64 $ 19.86 $ 19.29 $ 14.27 $ 16.73
- ------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) --(2) (.09) (.12) .02 .07
Net realized/unrealized gain/(loss) on
investments and foreign currencies 4.46 (.33) .71 5.00 (2.42)
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.46 (.42) .59 5.02 (2.35)
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income)* -- -- (.02) -- (.11)
Distributions (from net realized gains)* (1.32) (.80) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.32) (.80) (.02) -- (.11)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 21.78 $ 18.64 $ 19.86 $ 19.29 $ 14.27
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 24.32% (2.20)% 3.06% 35.18% (14.07)%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 61,970 $ 112,302 $ 86,157 $ 137,238 $ 71,480
Average Net Assets for the Period (in thousands) $ 67,077 N/A N/A N/A N/A
Ratio of Gross Expenses to Average Net Assets(3) 2.14% 1.74%(4) 1.75%(5) 1.75% 1.87%(6)
Ratio of Net Expenses to Average Net Assets(3) 2.14% 1.72% 1.75%(5) 1.75% 1.87%
Ratio of Net Investment Income/(Loss)
to Average Net Assets (0.90)% (0.63)% (0.43)% 0.23% 0.40%
Portfolio Turnover Rate 21% 76% 66% 104% 67%
International Vontobel
For a share outstanding during the Equity Fund(7) International Equity Fund - A Shares(7)
period ended December 31 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 11.86 $ 12.88 $ 18.86 $ 28.01 $ 20.18
- ------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .12 .03 (.10) (.03) .06
Net gain/(loss) on securities
(both realized and unrealized) 3.38 (1.05) (5.41) (5.30) 9.07
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.50 (1.02) (5.51) (5.33) 9.13
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions and Other:
Dividends (from net investment income)* (.07) -- (.12) (.08) (.05)
Distributions (from capital gains)* (.43) -- (.35) (3.74) (1.25)
Tax return of capital* (.05) N/A N/A N/A N/A
Payment by affiliate .02 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions and Other (.53) -- (.47) (3.82) (1.30)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 14.83 $ 11.86 $ 12.88 $ 18.86 $ 28.01
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 29.99% (7.92)% (29.22)% (18.70)% 46.52%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 25,506 $ 29,026 $ 44,356 $ 133,233 $ 192,537
Average Net Assets for the Period (in thousands) $ 23,269 N/A N/A N/A N/A
Ratio of Gross Expenses to Average Net Assets(3) 2.91%(8) 2.44% 1.89%(5) 1.39% 1.28%
Ratio of Net Expenses to Average Net Assets(3) 2.91% 2.44% 1.88%(5) 1.38% 1.27%
Ratio of Net Investment Income/(Loss)
to Average Net Assets 0.07% 0.18% (0.38)% (0.15)% 0.03%
Portfolio Turnover Rate 65% 98% 92% 69% 38%
*See Note 3 in Notes to Financial Statements.
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Net investment income/(loss) aggregated less than $.01 on a per share basis
for the fiscal year ended.
(3) See "Explanantions of Charts, Tables and Financial Statements."
(4) Expense ratio has been increased to include additional custodian fees which
were offset by custodian fee credits.
(5) Expense ratio has increased by .29% for Vontobel US Value Fund and .13% for
Vontobel International Equity Fund as a result of a change in accounting
principle related to the recording of redemption fees. Prior year numbers
have not been restated to reflect this change.
(6) The ratio was 2.76% in 1999 before waiver of management fees.
(7) Vontobel International Equity Fund prior to reorganization (Note 1).
(8) The ratio was 3.24% before the waiver of certain fees incurred by the Fund.
See Notes to Financial Statements.
Janus Adviser December 31, 2003 13
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - I SHARES
Vontobel
For a share outstanding during the US Value Fund(1) US Value Fund - A Shares(1)
period ended December 31 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 18.64 $ 19.86 $ 19.29 $ 14.27 $ 16.73
- ------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) (.02) (.09) (.12) .02 .07
Net realized/unrealized gain/(loss) on
investments and foreign currencies 4.48 (.33) .71 5.00 (2.42)
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.46 (.42) .59 5.02 (2.35)
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income)* -- -- (.02) -- (.11)
Distributions (from net realized gains)* (1.32) (.80) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.32) (.80) (.02) -- (.11)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 21.78 $ 18.64 $ 19.86 $ 19.29 $ 14.27
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 24.32% (2.20)% 3.06% 35.18% (14.07)%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 6,005 $ 112,302 $ 86,157 $ 137,238 $ 71,480
Average Net Assets for the Period (in thousands) $ 7,057 N/A N/A N/A N/A
Ratio of Gross Expenses to Average Net Assets(2) 2.16% 1.74%(3) 1.75%(4) 1.75% 1.87%(5)
Ratio of Net Expenses to Average Net Assets(2) 2.16% 1.72% 1.75%(4) 1.75% 1.87%
Ratio of Net Investment Income/(Loss)
to Average Net Assets (0.92)% (0.63)% (0.43)% 0.23% 0.40%
Portfolio Turnover Rate 21% 76% 66% 104% 67%
International Vontobel
For a share outstanding during the Equity Fund(6) International Equity Fund - A Shares(6)
period ended December 31 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 11.86 $ 12.88 $ 18.86 $ 28.01 $ 20.18
- ------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .10 .03 (.10) (.03) .06
Net gain/(loss) on securities
(both realized and unrealized) 3.39 (1.05) (5.41) (5.30) 9.07
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.49 (1.02) (5.51) (5.33) 9.13
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions and Other:
Dividends (from net investment income)* (.06) -- (.12) (.08) (.05)
Distributions (from capital gains)* (.43) -- (.35) (3.74) (1.25)
Tax return of capital* (.06) N/A N/A N/A N/A
Payment by affiliate .02 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions and Other (.53) -- (.47) (3.82) (1.30)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 14.82 $ 11.86 $ 12.88 $ 18.86 $ 28.01
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 29.90% (7.92)% (29.22)% (18.70)% 46.52%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 1,409 $ 29,026 $ 44,356 $ 133,233 $ 192,537
Average Net Assets for the Period (in thousands) $ 1,547 N/A N/A N/A N/A
Ratio of Gross Expenses to Average Net Assets(2) 2.87%(7) 2.44% 1.89%(4) 1.39% 1.28%
Ratio of Net Expenses to Average Net Assets(2) 2.87% 2.44% 1.88%(4) 1.38% 1.27%
Ratio of Net Investment Income/(Loss)
to Average Net Assets 0.11% 0.18% (0.38)% (0.15)% 0.03%
Portfolio Turnover Rate 65% 98% 92% 69% 38%
*See Note 3 in Notes to Financial Statements.
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) See "Explanantions of Charts, Tables and Financial Statements."
(3) Expense ratio has been increased to include additional custodian fees which
were offset by custodian fee credits.
(4) Expense ratio has increased by .29% for Vontobel US Value Fund and .13% for
Vontobel International Equity Fund as a result of a change in accounting
principle related to the recording of redemption fees. Prior year numbers
have not been restated to reflect this change.
(5) The ratio was 2.76% in 1999 before waiver of management fees.
(6) Vontobel International Equity Fund prior to reorganization (Note 1).
(7) The ratio was 3.21% before the waiver of certain fees incurred by the Fund.
See Notes to Financial Statements.
14 Janus Adviser December 31, 2003
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- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS - C SHARES
Vontobel
For a share outstanding during the US Value Fund(1) US Value Fund
periods ended December 31 2003 2002(1)(2)
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 18.60 $ 17.49
- --------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) (.07) (.06)
Net realized/unrealized gain/(loss)
on investments and foreign currencies 4.31 1.97
- --------------------------------------------------------------------------------
Total from Investment Operations 4.24 1.91
- --------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income)* -- --
Distributions (from net realized gains)* (1.32) (.80)
- --------------------------------------------------------------------------------
Total Distributions (1.32) (.80)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 21.52 $ 18.60
- --------------------------------------------------------------------------------
Total Return** 23.18% 10.82%
- --------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 1,344 $ 355
Average Net Assets for the Period (in thousands) $ 948 N/A
Ratio of Gross Expenses to Average Net Assets***(3) 3.16% 2.74%
Ratio of Net Expenses to Average Net Assets***(3) 3.16% 2.72%
Ratio of Net Investment Income/(Loss)
to Average Net Assets*** (1.81)% (1.63)%
Portfolio Turnover Rate*** 21% 76%
International
For a share outstanding during the Equity Fund(4)
period ended December 31 2003
- --------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 13.91
- --------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .11
Net gain/(loss) on securities (both realized and unrealized) 1.34
- --------------------------------------------------------------------------------
Total from Investment Operations 1.45
- --------------------------------------------------------------------------------
Less Distributions and Other:
Dividends (from net investment income)* --
Distributions (from capital gains)* (.43)
Payment by affiliate .02
- --------------------------------------------------------------------------------
Total Distributions and Other (.41)
- --------------------------------------------------------------------------------
Net Asset Value, End of Period $ 14.95
- --------------------------------------------------------------------------------
Total Return** 10.71%
- --------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 11
Average Net Assets for the Period (in thousands) $ 10
Ratio of Gross Expenses to Average Net Assets***(3) 1.92%(5)
Ratio of Net Expenses to Average Net Assets***(3) 1.92%
Ratio of Net Investment Income/(Loss) to Average Net Assets*** (0.14)%
Portfolio Turnover Rate*** 65%
* See Note 3 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) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Commencement of operations for Class C Shares was October 9, 2002.
(3) See "Explanantions of Charts, Tables and Financial Statements."
(4) Period from October 13, 2003 (inception) to December 31, 2003.
(5) The ratio was 5.85% before the waiver of certain fees incurred by the Fund.
See Notes to Financial Statements.
Janus Adviser December 31, 2003 15
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FINANCIAL HIGHLIGHTS - A SHARES
Vontobel
For a share outstanding during the US Value Fund(1) US Value Fund - A Shares(1)
periods ended December 31 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 18.64 $ 19.86 $ 19.29 $ 14.27 $ 16.73
- ------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .03 (.09) (.12) .02 .07
Net realized/unrealized gain/(loss) on
investments and foreign currencies 4.47 (.33) .71 5.00 (2.42)
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 4.50 (.42) .59 5.02 (2.35)
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions:
Dividends (from net investment income)* -- -- (.02) -- (.11)
Distributions (from net realized gains)* (1.32) (.80) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.32) (.80) (.02) -- (.11)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 21.82 $ 18.64 $ 19.86 $ 19.29 $ 14.27
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 24.54% (2.20)% 3.06% 35.18% (14.07)%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 3,752 $ 112,302 $ 86,157 $ 137,238 $ 71,480
Average Net Assets for the Period (in thousands) $ 3,649 N/A N/A N/A N/A
Ratio of Gross Expenses to Average Net Assets(2) 2.11% 1.74%(3) 1.75%(4) 1.75% 1.87%(5)
Ratio of Net Expenses to Average Net Assets(2) 2.11% 1.72% 1.75%(4) 1.75% 1.87%
Ratio of Net Investment Income/(Loss)
to Average Net Assets (0.88)% (0.63)% (0.43)% 0.23% 0.40%
Portfolio Turnover Rate 21% 76% 66% 104% 67%
International Vontobel
For a share outstanding during the Equity Fund(6) International Equity Fund - A Shares(6)
period ended December 31 2003 2002 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 11.86 $ 12.88 $ 18.86 $ 28.01 $ 20.18
- ------------------------------------------------------------------------------------------------------------------------------
Income from Investment Operations:
Net investment income/(loss) .12 .03 (.10) (.03) .06
Net gain/(loss) on securities
(both realized and unrealized) 3.39 (1.05) (5.41) (5.30) 9.07
- ------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.51 (1.02) (5.51) (5.33) 9.13
- ------------------------------------------------------------------------------------------------------------------------------
Less Distributions and Other:
Dividends (from net investment income)* (.06) -- (.12) (.08) (.05)
Distributions (from capital gains)* (.43) -- (.35) (3.74) (1.25)
Tax return of capital* (.06) N/A N/A N/A N/A
Payment by affiliate .02 -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total Distributions and Other (.53) -- (.47) (3.82) (1.30)
- ------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 14.84 $ 11.86 $ 12.88 $ 18.86 $ 28.01
- ------------------------------------------------------------------------------------------------------------------------------
Total Return 30.07% (7.92)% (29.22)% (18.70)% 46.52%
- ------------------------------------------------------------------------------------------------------------------------------
Net Assets, End of Period (in thousands) $ 1,473 $ 29,026 $ 44,356 $ 133,233 $ 192,537
Average Net Assets for the Period (in thousands) $ 1,395 N/A N/A N/A N/A
Ratio of Gross Expenses to Average Net Assets(2) 2.87%(7) 2.44% 1.89%(4) 1.39% 1.28%
Ratio of Net Expenses to Average Net Assets(2) 2.87% 2.44% 1.88%(4) 1.38% 1.27%
Ratio of Net Investment Income/(Loss)
to Average Net Assets 0.11% 0.18% (0.38)% (0.15)% 0.03%
Portfolio Turnover Rate 65% 98% 92% 69% 38%
*See Note 3 in Notes to Financial Statements.
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) See "Explanantions of Charts, Tables and Financial Statements."
(3) Expense ratio has been increased to include additional custodian fees which
were offset by custodian fee credits.
(4) Expense ratio has increased by .29% for Vontobel US Value Fund and .13% for
Vontobel International Equity Fund as a result of a change in accounting
principle related to the recording of redemption fees. Prior year numbers
have not been restated to reflect this change.
(5) The ratio was 2.76% in 1999 before waiver of management fees.
(6) Vontobel International Equity Fund prior to reorganization (Note 1).
(7) The ratio was 3.21% in 2003 before the waiver of certain fees incurred by
the Fund.
See Notes to Financial Statements.
16 Janus Adviser December 31, 2003
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- --------------------------------------------------------------------------------
NOTES TO SCHEDULES OF INVESTMENTS
S&P 500(R)Index The Standard & Poor's Composite Index of 500 stocks, a
widely recognized, unmanaged index of common stock
prices.
Morgan Stanley Capital Is a market capitalization weighted index composed of
International EAFE(R) companies representative of the market structure of 21
Index Developed Market countries in Europe, Australasia and
the Far East.
NASDAQ Composite Index Is an unmanaged index that measures all NASDAQ domestic
and non-U.S. based common stocks listed on the NASDAQ
stock market.
Russell 2000(R) Index Measures the performance of the 2,000 smallest
companies in the Russell 3000(R) Index with an average
market capitalization of approximately $852 million as
of December 31, 2003.
GDR Global Depository Receipt
PLC Public Limited Company
*Non-income-producing security.
Janus Adviser December 31, 2003 17
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NOTES TO FINANCIAL STATEMENTS
The following section describes organization and significant accounting policies
and provides more detailed information about the schedules and tables that
appear throughout this report. In addition, the Notes explain the methods used
in preparing and presenting this report.
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Effective October 13, 2003, Vontobel US Value Fund and Vontobel International
Equity Fund (collectively the "Reorganizing Funds") participated in a tax-free
reorganization with US Value Fund and International Equity Fund, respectively
(collectively the "Funds" and individually the "Fund"). As a result of the
reorganization, existing Reorganizing Funds Class A shareholders who purchased
shares directly received the Funds' Investor Class shares, existing Reorganizing
Funds Class A Shareholders who purchased shares through a financial intermediary
without sales charge received the Funds' Class I Shares, existing Reorganizing
Funds Class A Shareholders who purchased shares with a sales charge received the
Funds' Class A Shares, and existing Reorganizing Funds Class C shareholders
received Class C Shares of the corresponding Fund. The plan of reorganization
provided for, among other items listed in the Shareholder Meeting section of
this report, the transfer of assets and liabilities of the Reorganizing Funds to
the Funds. The Funds were created to serve as "shells" for the transfer of net
assets of the Reorganizing Funds. For accounting purposes, each of the
Reorganizing Funds is considered the surviving entity, and the statement of
changes and financial highlights shown for the fiscal periods prior to December
31, 2003 are of the Reorganizing Funds.
Janus Capital Management LLC ("Janus Capital") invested intital seed capital in
the amount of $10,000 for the International Equity Fund - C Shares. This class
was effective on October 13, 2003.
US Value Fund and International Equity Fund are series funds. The Funds are part
of Janus Adviser (the "Trust"), which was organized as a Delaware statutory
Trust on May 2, 2003, and is registered under the Investment Company Act of 1940
(the "1940 Act") as an open-end management investment company. The Trust offers
two Funds, which invest primarily in equity securities. The International Equity
Fund is classified as diversified, as defined in the 1940 Act. US Value Fund is
classified as nondiversified.
Prior to October 13, 2003, the Reorganizing Funds were a series established
under Vontobel Funds, Inc. ("VFI").
The following accounting policies have been consistently followed by the Trust
and are in conformity with accounting principles generally accepted in the
United States of America in the investment company industry.
INVESTMENT VALUATION
Securities are valued at the closing price for securities traded on a principal
securities exchange (U.S. or foreign) and on the NASDAQ National Market.
Securities traded on over-the-counter markets and listed securities for which no
sales are reported are valued at the latest bid price (or yield equivalent
thereof) obtained from one or more dealers making a market for such securities
or by a pricing service approved by the Funds' Trustees. Short-term investments
maturing within 60 days are valued at amortized cost, which approximates market
value. Foreign securities are converted to U.S. dollars using exchange rates at
the close of the New York Stock Exchange. When market quotations are not readily
available, or events or circumstances that may affect the value of portfolio
securities are between the closing of their principle markets and the time the
net asset value (NAV) is determined, securities are valued at fair value as
determined in good faith under procedures established by and under the
supervision of the Funds' Trustees.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for as of the date purchased or sold
(trade date). Dividend income is recorded on the ex-dividend date. Certain
dividends from foreign securities will be recorded as soon as the Trust is
informed of the dividend if such information is obtained subsequent to the
ex-dividend date. 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
unrealized and realized, 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.
FORWARD CURRENCY TRANSACTIONS
The Funds may enter into forward currency contracts in order to reduce their
exposure to changes in foreign currency exchange rates on their foreign
portfolio holdings and to lock in the U.S. dollar cost of firm purchase and
sales commitments for securities denominated in or exposed to foreign
currencies. A forward currency exchange contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated rate. 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 of
such contract is included in net realized gain or loss from foreign currency
transactions on the Statement of Operations.
Forward currency contracts held by the Funds are fully collateralized by other
securities, which are denoted in the accompanying Schedule of Investments (if
applicable). Such collateral is in the possession of the Fund's custodian. The
collateral is evaluated daily to ensure its market value equals
18 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
or exceeds the current market value of the corresponding forward currency
contracts.
FOREIGN CURRENCY TRANSLATIONS
The Funds do not isolate that portion of the results of operations resulting
from 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 on investments
and foreign currency translation arise from changes in the value of assets and
liabilities, including investments in securities at the date of the financial
statements, resulting from changes in the exchange rates and changes in market
prices of securities held.
Currency gain and loss are also calculated on payables and receivables that are
denominated in foreign currencies. The payables and receivables are generally
related to security transactions and income.
Foreign-denominated assets and forward currency contracts may involve more risks
than domestic transactions, including currency risk, political and economic
risk, regulatory risk and market risk. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the U.S.
dollar.
RESTRICTED SECURITY TRANSACTIONS
Restricted securities held by a Fund may not be sold except in exempt
transactions or in a public offering registered under the Securities Act of
1933. 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 a Fund to sell a security at a fair price and may substantially delay the
sale of the security which each Fund seeks to sell. In addition, these
securities may exhibit greater price volatility than securities for which
secondary markets exist.
DIVIDEND DISTRIBUTIONS
Each of the Funds generally declare and distribute dividends and capital gains
(if any) annually. The majority of dividends and capital gains distributions
from a Fund will be automatically reinvested into additional shares of that
Fund.
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 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.
FEDERAL INCOME TAXES
No provision for income taxes is included in the accompanying financial
statements as the Funds intend to distribute to shareholders all taxable
investment income and realized gains and otherwise comply with Subchapter M of
the Internal Revenue Code applicable to regulated investment companies.
PROXY VOTING
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to their portfolio securies is available (i) without
charge, upon request, by calling 1-800-525-3713 (toll free); (ii) on the fund's
website at www.janus.com; and (iii) on the SEC's website at http://www.sec.gov.
2. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
Janus Capital is the investment adviser to the Funds. US Value Fund is subject
to advisory fees payable to Janus Capital based upon annual rates of .96% of the
first $100 million of average daily net assets, .85% of average daily net assets
over $100 million to $300 million and .75% of average daily net assets in excess
of $300 million. International Equity Fund is subject to advisory fees payable
to Janus Capital based upon annual rates of .99% of the first $100 million of
average daily net assets, .85% of average daily net assets over $100 million to
$300 million and .75% of average daily net assets over $300 million.
Prior to October 13, 2003, Vontobel Asset Management, Inc. ("Vontobel") served
as investment adviser to Vontobel US Value Fund and Vontobel International
Equity Fund, the Funds' predecessors. Pursuant to Investment Advisory Agreements
with each of the Reorganizing Funds, Vontobel received an annual fee of 1.00% on
the first $100 million of average daily net assets and .75% on average daily net
assets over $100 million.
Vontobel Asset Management, Inc., formerly named Vontobel USA Inc. ("Vontobel")
serves as subadviser to the Funds. Janus Capital pays Vontobel a subadvisory fee
from its management fee at the annual rate of between .74% and .215% for US
Value Fund and .408% and .215% for International Equity Fund based on the value
of each Fund's respective average daily net assets.
The Trust currently offers four classes of shares: Investor Shares, Class I
Shares, Class C Shares and Class A Shares. Each class represents an interest in
the same portfolio of investments. Class I Shares have an aggregate account
balance requirement. Class A, C and Investor Shares have a minimum initial
investment requirement. Certain financial intermediaries may offer
Janus Adviser December 31, 2003 19
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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
only one class of shares. Class A and C Shares include a 5.75% and 1.00% upfront
sales charge of the offering price, respectively. Class C Shares includes a
1.00% contingent deferred sales charge paid by the redeeming shareholder. This
sales charge applies to shares redeemed within 12 months. The redemption price
may differ from the net asset value per share. During the fiscal year ended
December 31, 2003, the US Value Fund - Class C Shareholders and International
Equity Fund - Class C Shareholders paid $77,677 and $71,973 of contingent
deferred sales charges, respectively.
The Reorganizing Funds offered Class A Shares which included a maximum front-end
sales charge of 5.75% and a maximum contingent deferred sales charge of 2.00% on
the proceeds of Class A Shares redeemed within 360 days. Class A Shares may have
been purchased without a front-end sales charge through certain third-party fund
"supermarkets." Vontobel US Value Fund also offered Class C Shares which
included a maximum front-end sales charge of 1.00% and a maximum contingent
deferred sales charge of 1.00% on the proceeds of Class C Shares redeemed within
2 years of purchase.
Janus Services LLC ("Janus Services"), a wholly owned subsidiary of Janus
Capital, receives from the Funds a fee at an annual rate of up to .10% of the
average daily net assets of the Investor Shares of each of the Funds and at an
annual rate of up to .25% of the average daily net assets of Class I Shares of
each of the Funds, to compensate Janus Services for providing, or arranging for
the record keeping, subaccounting, and administrative services.
Prior to October 13, 2003, Commonwealth Shareholder Services, Inc. ("CSS"), the
administrative agent for the Reorganizing Funds, provided shareholder,
recordkeeping, administrative and blue-sky filing services. The Reorganizing
Funds compensated CSS for blue-sky and certain shareholder servicing on an
hourly rate basis. For other administrative services, CSS received 0.15% of
average daily net assets from the Vontobel US Value Fund and 0.20% of average
daily net assets from the Vontobel International Equity Fund.
Prior to October 13, 2003, Fund Services, Inc. ("FSI") provided transfer and
dividend disbursing agent services to the Reorganizing Funds.
First Dominion Capital Corp. ("FDCC") acted as the Reorganizing Funds' principal
underwriter in the continuous public offering of the Reorganizing Funds' shares.
In addition to underwriting fees and commissions received relating to the
distribution of the Reorganizing Funds' shares, FDCC received a maximum
contingent deferred sales charge ("CDSC") of 2.00% for certain share redemptions
occurring within 360 days of purchase of Class A Shares and within 2 years of
purchase of Class C Shares. Shares redeemed subject to a CDSC will receive a
lower redemption value per share.
For the period January 1, 2003 through October 13, 2003 (date of reorganization)
affiliated parties of the Reorganizing Funds received the following for
administrative, underwriting and transfer agent services rendered:
FDCC
(Commissions FDCC
CSS and Fees) (CDSC) FSI
- --------------------------------------------------------------------------------
Vontobel US Value Fund 146,468 10,116 77,677 82,009
Vontobel International Equity Fund 49,917 1,473 71,973 33,549
- --------------------------------------------------------------------------------
20 Janus Adviser December 31, 2003
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- --------------------------------------------------------------------------------
Prior to October 13, 2003, certain officers and/or directors of the Reorganizing
Funds were also officers and/or directors of Vontobel Asset Management, Inc.,
FDCC, CSS, and FSI.
Janus Capital has agreed to reimburse the Funds by the amount if any, that the
normal operating expenses in any fiscal year, including the investment advisory
fee but excluding the administrative fee applicable to Investor Shares and I
Shares, and the distribution and shareholder servicing fee applicable to
Investor Shares, Class I Shares, Class A Shares and Class C Shares, brokerage
commissions, interest, taxes and extraordinary expenses, exceed an annual rate
of .90% for US Value Fund and 1.00% for International Equity Fund of the average
daily net assets of each of the Funds until at least September 30, 2005. Janus
Capital will be entitled to recoup such reimbursement or fee reduction from the
Funds for a three-year period commencing with the operations of the Funds,
provided that at no time during such period shall the normal operating expenses
allocated to any class of the Funds, with the exceptions noted above, exceed the
percentages stated. For the fiscal year ended December 31, 2003, total fees and
expenses absorbed by Janus Capital were $88 for International Equity Fund. At
December 31, 2003, the reimbursement that may be potentially made by the Fund to
Janus Capital and that will expire during the year ended December 31, 2006 was
$88 for International Equity Fund. Janus Capital did not absorb any fees and
expenses for US Value Fund.
Prior to the reorganization, Vontobel had voluntarily agreed to waive its fees
and reimburse the International Equity Fund for expenses in order to limit the
operating expenses to 1.89% of average net assets of the Fund. Vontobel waived
$88,172 through the date of the reorganization.
Janus Services receives certain out-of-pocket expenses for transfer agent
services.
Certain officers and trustees of the Funds may also be officers and/or directors
of Janus Capital; however, such officers and trustees receive no compensation
from the Funds.
Janus Distributors LLC, a wholly owned subsidiary of Janus Capital, is a
distributor of the Funds. The Investor Shares, Class I Shares and Class A Shares
have each adopted a Distribution and Shareholder Servicing Plan (the "Plans")
pursuant to Rule 12b-1 under the 1940 Act. The Plans authorize payments by the
Funds in connection with the distribution of the Investor, Class I and Class A
Shares at an annual rate, as determined from time to time by the Board of
Trustees, of up to .25% of the Investor, Class I and Class A Shares' average
daily net assets. The Class C Shares have adopted a Distribution and Shareholder
Servicing Plan (the "Class C Plan") pursuant to Rule 12B-1under the 1940 Act.
The Class C Plan authorizes payments by the Funds in connection with the
distribution of the Class C Shares at an annual rate of up to 1.00% average
daily net assets of Class C Shares. Up to .75% of this fee is for activities
which are primarily intended to result in sales of Class C Shares of each Fund.
In addition, the Class C Plan permits the payment of up to .25% of this fee for
shareholder servicing activities.
The Vontobel US Value Fund had adopted a Distribution Plan (the "Plan") for
Class C Shares in accordance with Rule 12b-1 under the 1940 Act, providing for
the payment of distribution and service fees to the distributors of the Vontobel
US Value Fund. The Plan provided that the Vontobel US Value Fund pay a fee to
the Distributor at an annual rate of 1.00% of average daily net assets. Of this
amount, 0.75% represented distribution 12b-1 fees and 0.25% represented
shareholder servicing fees.
A 1.00% redemption fee may be imposed on Investor and Class I Shares of the
International Equity Fund held for 3 months or less. The redemption fee is
designed to offset transaction costs and other expenses associated with
short-term redemptions. This fee is paid to the Funds rather than Janus Capital,
and is designed to deter excessive short-term trading and to offset the
brokerage commissions, market impact, and other costs associated with changes in
the Funds' asset level and cash flow due to short-term money movements in and
out of the Funds. The redemption fee is accounted for as an addition to
Paid-in-Capital. There were no redemption fees received by International Equity
Fund, Investor and Class I Shares, during the fiscal year ended December 31,
2003.
During the fiscal year ended December 31, 2003, Janus Capital reimbursed the
International Equity Fund $26,260 as a result of the reorganization between
Vontobel International Equity Fund and International Equity Fund on October 13,
2003. Various foreign security shares held in the portfolio of Vontobel
International Equity Fund could not be converted to the International Equity
Fund's portfolio due to foreign regulation constraints on the transfer of the
shares from one entity to another, i.e. Vontobel International Equity Fund to
International Equity Fund. The International Equity Fund was required to sell
the foreign shares prior to the conversion and buy them back in the open market
following the conversion. This resulted in a realized loss to the Fund and was
subsequently reimbursed by Janus Capital on October 30, 2003.
DST Systems, Inc. ("DST"), a subsidiary of Janus Capital Group Inc. ("JCGI"),
parent to the Funds' adviser, provides a shareholder accounting system to the
Funds for a fee. As of December 1, 2003, following a share exchange transaction
in which JCGI exchanged 32.3 million shares of its holdings of DST common stock
for all of the stock of a wholly-owned subsidiary of DST, JCGI owned
approximately 9% of the outstanding common shares of DST. DST Fees are included
in Transfer Agent Fees and Expenses in the Statement of Operations. US Value and
International Equity paid $1,337 and $851, respectively for DST Systems Cost
from October 13, 2003 through the period end.
Janus Adviser December 31, 2003 21
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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
3. FEDERAL INCOME TAX
The tax components of capital shown in the table below represent: (1)
distribution requirements the Funds must satisfy under the income tax
regulations, (2) losses or deductions the Funds 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.
Accumulated capital losses noted below represent net capital loss carryovers, as
of December 31, 2003, that may be available to offset future realized capital
gains and thereby reduce future taxable gains distributions. These carryovers
expire between December 31, 2008 and December 31, 2009.
The International Equity Fund incurred "Post-October" losses during the period
from November 1, 2003 through December 31, 2003. These losses will be deferred
for tax purposes and recognized during the year ended December 31, 2004.
Other book-to-tax differences in the current year primarily consist of foreign
currency contract adjustments. Subsequent to the merger date, the Funds have
elected to treat gains and losses on forward foreign currency contracts as
capital gains and losses. Other foreign currency gains and losses on debt
instruments are treated as ordinary income for federal income tax purposes
pursuant to Section 988 of the Internal Revenue Code.
The capital loss carryforward in International Equity Fund includes $16,037,872
acquired in the reorganization of Vontobel International Equity Fund described
in Note 5. This capital loss carryover may be subject to annual limitations
under applicable tax laws and may expire unutilized. Due to these limitations,
$7,741,091 of the carryforward will not be available for use. As a result, this
amount has been reclassified to paid-in-capital. During the period ended
December 31, 2003, International Equity Fund utilized $501,865 of its capital
loss carryforward.
Net Tax AP/DP
Undistributed Undistributed on Foreign Net Tax
Ordinary Long-Term Accumulated Post-October Currency AP/DP on
Fund Income Gains Capital Losses Deferral and Futures Investments
- ------------------------------------------------------------------------------------------------------------------------
US Value Fund(1) $ 58,856 $ 4,080,358 -- -- -- $11,676,183
International Equity Fund(2) -- 240,339 $(7,794,916) $ (6,962) $ 19,731 5,915,208
- ------------------------------------------------------------------------------------------------------------------------
The aggregate cost of investments and the composition of unrealized appreciation
and depreciation of investments for federal income tax purposes as of December
31, 2003 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
Fund Cost Appreciation (Depreciation)
- --------------------------------------------------------------------------------
US Value Fund(1) $60,420,872 $11,692,388 $(16,205)
International Equity Fund(2) 22,171,580 5,983,106 (67,898)
- --------------------------------------------------------------------------------
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Vontobel International Equity Fund prior to reorganization (Note 1).
22 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
Distributions
------------------------
For the fiscal period or From Tax Net
year ended December 31, 2003 Ordinary From Long-Term Return of Investment
Fund Income Capital Gains Capital Loss
- --------------------------------------------------------------------------------
US Value Fund(1) -- $4,441,095 -- --
International Equity Fund(2) $143,837 787,056 $102,709 $(185,610)
- --------------------------------------------------------------------------------
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Vontobel International Equity Fund prior to reorganization (Note 1).
Distributions
For the fiscal period or ------------------------------
year ended December 31, 2002 From Ordinary From Long-Term Net Investment
Fund Income Capital Gains Loss
- --------------------------------------------------------------------------------
Vontobel US Value Fund $0 $4,979,832 $(557,163)
Vontobel International Equity Fund 0 0 0
- --------------------------------------------------------------------------------
4. EXPENSES
Expenses 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.
Each Fund bears expenses incurred specifically on its behalf as well as a
portion of general expenses, which are allocated pro rata to each of the Funds.
Janus Adviser December 31, 2003 23
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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. FUND REORGANIZATION
Effective October 13, 2003, Vontobel US Value Fund and Vontobel International
Equity Fund participated in a tax-free reorganization with US Value Fund and
International Equity Fund, respectively. The plan of the reorganization provided
for the transfer of assets and liabilities as follows: Existing Vontobel US
Value Fund Class A shareholders and Vontobel International Equity Fund Class A
shareholders who purchased shares directly received US Value Fund - Investor
Shares and International Equity Fund - Investor Shares, respectively. Existing
Vontobel US Value Fund Class A shareholders and Vontobel International Equity
Fund Class A shareholders who purchased shares through a financial intermediary
without sales charge received US Value Fund - Class I Shares and International
Equity Fund - Class I Shares, respectively. Existing Vontobel US Value Fund
Class A shareholders and Vontobel International Equity Fund Class A shareholders
who purchased shares with a sales charge received US Value Fund - Class A Shares
and International Equity Fund - Class A Shares, respectively. Existing Vontobel
US Value Fund Class C shareholders received US Value Fund - Class C Shares.
Vontobel US Value Fund - Class A Shares transferred net assets and shares
outstanding to US Value Fund - Investor Shares and Class I Shares as detailed
below.
Net Assets Shares Transferred
- --------------------------------------------------------------------------------
US Value Fund - Investor Shares $63,503,746 3,003,063
US Value Fund - Class I Shares $ 6,776,017 320,433
- --------------------------------------------------------------------------------
$70,279,763 3,323,496
- --------------------------------------------------------------------------------
Vontobel US Value Fund - Class C transferred net assets of $1,163,895 and shares
outstanding of 55,606 to US Value Fund - Class C Shares. The remaining net
assets of $3,265,888 and shares outstanding of 154,441 of the Vontobel US Value
Fund - Class A were transferred directly into US Value - Class A Shares.
Vontobel International Equity Fund - Class A Shares transferred net assets and
shares outstanding to International Equity Fund - Investor Shares and Class I
Shares as detailed below.
Net Assets Shares Transferred
- --------------------------------------------------------------------------------
International Equity Fund - Investor Shares $24,444,903 1,757,101
International Equity Fund - Class I Shares $ 1,674,733 120,345
- --------------------------------------------------------------------------------
$26,119,636 1,877,446
- --------------------------------------------------------------------------------
The remaining net assets of $1,288,651 and shares outstanding of 92,625 of the
Vontobel International Equity Fund - Class A were transferred directly into
International Equity Fund - Class A Shares.
24 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS
For the fiscal year or period ended December 31 US Value International Equity
(all numbers in thousands) Fund(1) Fund(2)
2003 2002(3) 2003 2002(3)
- -----------------------------------------------------------------------------------------------
Transactions in Fund Shares - Investor Shares
Shares sold 249 N/A 182 N/A
Shares transferred 3,003 N/A 1,757 N/A
Reinvested dividends and distributions 83 N/A 48 N/A
- -----------------------------------------------------------------------------------------------
Total 3,335 N/A 1,987 N/A
- -----------------------------------------------------------------------------------------------
Shares Repurchased (490) N/A (267) N/A
Net Increase/(Decrease) in Fund Shares 2,845 N/A 1,720 N/A
Shares Outstanding, Beginning of Period -- N/A -- N/A
- -----------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 2,845 N/A 1,720 N/A
- -----------------------------------------------------------------------------------------------
Transactions in Fund Shares - Class I Shares
Shares sold 5 N/A 3 N/A
Shares transferred 320 N/A 120 N/A
Reinvested dividends and distributions 7 N/A 2 N/A
- -----------------------------------------------------------------------------------------------
Total 332 N/A 125 N/A
- -----------------------------------------------------------------------------------------------
Shares Repurchased (56) N/A (30) N/A
Net Increase/(Decrease) in Fund Shares 276 N/A 95 N/A
Shares Outstanding, Beginning of Period -- N/A -- N/A
- -----------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 276 N/A 95 N/A
- -----------------------------------------------------------------------------------------------
Transactions in Fund Shares - Class C Shares
Shares sold 42 18 1 N/A
Reinvested dividends and distributions 2 1 -- N/A
- -----------------------------------------------------------------------------------------------
Total 44 19 1 N/A
- -----------------------------------------------------------------------------------------------
Shares Repurchased (1) -- -- N/A
Net Increase/(Decrease) in Fund Shares 44 19 1 N/A
Shares Outstanding, Beginning of Period 19 -- -- N/A
- -----------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 62 19 1 N/A
- -----------------------------------------------------------------------------------------------
Transactions in Fund Shares - Class A Shares
Shares sold 810 4,454 1,124 914
Reinvested dividends and distributions 4 248 3 --
- -----------------------------------------------------------------------------------------------
Total 814 4,702 1,127 914
- -----------------------------------------------------------------------------------------------
Shares Repurchased (3,343) (3,016) (1,599) (1,910)
Shares transferred (3,323) N/A (1,877) N/A
Net Increase/(Decrease) in Fund Shares (5,852) 1,686 (2,349) (996)
Shares Outstanding, Beginning of Period 6,024 4,338 2,448 3,444
- -----------------------------------------------------------------------------------------------
Shares Outstanding, End of Period 172 6,024 99 2,448
- -----------------------------------------------------------------------------------------------
(1) Vontobel US Value Fund prior to reorganization (Note 1).
(2) Vontobel International Equity Fund prior to reorganization (Note 1).
(3) Commencement of operations of Class C Shares was October 9, 2002.
(4) Commencement of operations of Class C Shares was October 13, 2003.
Janus Adviser December 31, 2003 25
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- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
7. PENDING LEGAL MATTERS
In September 2003, the Securities and Exchange Commission ("SEC") and the Office
of the New York State Attorney General ("NYAG") publicly announced that they
were investigating trading practices in the mutual fund industry. The
investigation was prompted by the NYAG's settlement with a hedge fund, Canary
Capital, which allegedly engaged in irregular trading practices with certain
mutual fund companies. While Janus Capital was not named as a defendant in the
NYAG complaint against the hedge fund, Janus Capital was mentioned in the
complaint as having allowed Canary Capital to "market time" certain Janus funds.
Market timing is an investment technique involving frequent short-term trading
of mutual fund shares that is designed to exploit inefficiencies in the way
mutual fund companies price their shares. The NYAG complaint alleges that this
practice is in contradiction to policies stated in the prospectuses for certain
Janus funds.
Certain Janus funds, as well as Janus Capital Group Inc. or one or more of its
subsidiaries, have received subpoenas and formal or informal document requests
from a number of legal and regulatory agencies - including the NYAG, the SEC,
the National Association of Securities Dealers, Inc., the Colorado Securities
Commissioner, the Colorado Attorney General, the West Virginia Attorney General,
the Florida Department of Financial Services, and one or more U.S. Attorney
offices or federal grand juries - which are conducting investigations into
market timing, late trading and other potentially irregular trading practices in
the mutual fund industry. The documentation and information sought by these
agencies relate to a variety of matters, including but not limited to: late day
trading, market timing, improper disclosure of portfolio holdings, trading by
executives in fund shares, certain revenue sharing arrangements, information
related to cash and non-cash compensation paid to brokers, trading by Janus
Capital investment personnel in portfolio securities owned by Janus funds,
information provided to certain Janus fund Trustees in connection with the
review and approval of management contracts related to Janus funds, information
related to certain types of distribution and sales arrangements with brokers and
other distributors of mutual fund products, and other topics related to the
foregoing. One of the requests received to date seeks documents related to Janus
Aspen Series. The Janus funds, Janus Capital Group Inc. and its subsidiaries
have complied, intend to comply with or continue to comply with these subpoenas
and other document and information requests, and will continue cooperating with
the federal and state legal and regulatory authorities which are conducting
investigations related to trading practices in the mutual fund industry.
As of the date of this report, none of the legal or regulatory agencies
conducting investigations into market timing, late trading and other trading
practices in the mutual fund industry have brought an enforcement action or
commenced other legal proceedings against Janus Capital or any of the Janus
funds.
While Janus Capital has had discussions with government authorities to resolve
the Colorado and other pending investigations, the outcome and timing of those
discussions will be determined in large part by the government agencies. Janus
Capital anticipates that the government agencies will seek substantial civil
penalties and other remedial measures.
Janus Capital is in the process of conducting an internal review of market
timing and other trading practices at Janus Capital which, as of the date of
this annual report, indicates that there were approximately twelve discretionary
frequent trading arrangements across Janus' U.S.-based mutual fund business, and
that significant discretionary frequent trading appears to have occurred with
respect to four of those arrangements. All of these arrangements have been
terminated. It also appears that redemption fees payable on certain transactions
may have been waived. Janus Capital also believes that there were several
discretionary frequent trading arrangements in Janus' offshore mutual fund
business, and these arrangements have also been terminated.
As noted earlier, the pending investigations by the NYAG and other agencies seek
to determine whether late trading occurred in mutual funds managed by Janus
Capital. Because many mutual fund transactions are cleared and settled through
financial intermediaries and because certain individuals who dealt with several
of the significant discretionary frequent trading relationships are no longer
employees of Janus Capital, Janus Capital cannot exclude the possibility that
one or more intermediaries may have submitted improper or unauthorized late
trade transactions to Janus Capital in violation of Janus Capital's agreements
with those intermediaries. Additionally, Janus Capital has bee advised by
certain financial intermediaries that, as a result of system errors, such
intermediaries may have permitted a small number of trades to be submitted late.
The impact of these transactions is immaterial.
26 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Legal counsel to the Independent Trustees of certain Janus funds hired Ernst &
Young LLP ("EY") to independently evaluate whether there was any monetary impact
to any Janus funds in which discretionary market timing occurred. Following
completion of that evaluation in December 2003, Janus Capital and the
Independent Trustees of certain U.S.-based Janus funds announced that Janus
Capital intends to restore approximately $31.5 million to the funds and/or the
funds' investors. The $31.5 million figure includes: (1) net gains of
approximately $22.8 million realized by the discretionary frequent traders, (2)
approximately $2.7 million representing the opportunity cost of those gains had
they been available to the funds, (3) management fees of approximately $1.0
million received by Janus Capital related to discretionary trading accounts, and
(4) waived redemption fees of approximately $5.0 million. The restoration amount
was determined by EY and does not include any fines and penalties that may be
sought by regulators. It is important to note that neither the methodology
underlying the determination of such $31.5 million amount, nor the mechanics by
which the payment might be made to funds or fund shareholders, has been approved
by or agreed to by regulators having authority over Janus Capital or the funds.
Subsequent to the initiation of the investigations by the NYAG and the SEC, a
number of civil lawsuits have been brought, in various federal and state courts,
against Janus Capital and certain of its affiliates, the Janus funds, and
related entities and individuals on behalf of fund shareholders and shareholders
of Janus Capital Group Inc. The factual allegations made in these actions are
generally based on the NYAG complaint against Canary Capital and in general
allege that Janus Capital allowed certain hedge funds and other investors to
engage in "market timing" trades in Janus funds. Such lawsuits allege a variety
of theories for recovery including, but not limited to: (i) violation of various
provisions of the federal securities laws; (ii) breach of fiduciary duties, as
established by state common law or federal law, to the funds and/or individual
investors; (iii) breach of contract; (iv) unjust enrichment; (v) violations of
Section 1962 of the Racketeering, Influenced and Corrupt Organizations Act; and
(vi) failure to adequately implement fair value pricing for portfolio securities
in Janus funds.
The actions include actions purportedly on behalf of a class of Janus fund
investors, cases allegedly brought on behalf of the funds themselves, a case
asserting claims both on behalf of an investor class and derivatively on behalf
of the funds, cases brought on behalf of shareholders of Janus Capital Group
Inc. on a derivative basis against the Board of Directors of Janus Capital Group
Inc., purported ERISA actions against the managers of the Janus 401(k) plan, and
a non-class "representative action" purportedly brought on behalf of the general
public. The complaints also name various defendants. One or more of the Janus
entities (Janus Capital Group Inc., Janus Capital Management LLC, or Janus
Capital Corporation) are named in every action. In addition, actions have been
brought against Janus Investment Fund and/or one or more of the individual Janus
funds, the Janus fund Trustees, officers of the Janus funds, officers of Janus
Capital, officers of Janus Capital Group Inc. and directors of Janus Capital
Group Inc.
These lawsuits are pending in a number of state and federal jurisdictions. Janus
Capital Group Inc. has filed a motion with the Judicial Panel on Multidistrict
Litigation (the "MDL Panel") to have all of the actions against Janus Capital
Group Inc. or any of its affiliates transferred to the Southern District of New
York, or in the alternative to the District of Colorado, for coordinated
pretrial proceedings. Transfer motions have also been filed by other plaintiffs
and defendants. The MDL Panel held a hearing on the various transfer motions on
January 29, 2004, and as of the date of this annual report the MDL Panel has not
yet issued its ruling on the transfer motions. For each case, Janus Capital
Group Inc. has requested (or is in the process of requesting) a stay of all
proceedings pending a transfer order from the MDL Panel. Such a stay has been
entered, or is not opposed, in the majority of pending cases. A stay has been
denied in only one case, in the Southern District of Illinois, and that case has
been remanded to Illinois state court for further proceedings.
Additional lawsuits arising out of these circumstances and presenting similar
allegations and requests for relief may be filed against certain of the Janus
funds, Janus Capital and related parties in the future. Janus Capital does not
currently believe that any of the pending actions will materially affect its
ability to continue to provide to the funds the services it has agreed to
provide.
Janus Adviser December 31, 2003 27
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- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Board of Trustees and Shareholders
of Janus Adviser Trust
In our opinion, the accompanying statements of assets and liabilities, including
the schedules 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 US Value Fund (formerly Vontobel
U.S. Value Fund, one of the funds constituting the series of Vontobel Funds,
Inc.) and International Equity Fund (formerly Vontobel International Equity
Fund, one of the funds constituting the series of Vontobel Funds, Inc.),
(hereafter referred to as the "Funds") at December 31, 2003, the results of each
of their operations, the changes in each of their net assets and the financial
highlights for the year ended December 31, 2003, 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 Funds' management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which 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 audit, which included confirmation
of securities at December 31, 2003 by correspondence with the custodian and
broker and the application of alternative auditing procedures where securities
purchased had not been received, provide a reasonable basis for our opinion. The
Statement of Changes in Net Assets for the year ended December 31, 2002 and the
Financial Highlights for each of the four years in the period then ended were
audited by other independent accountants whose report dated February 14, 2003,
expressed an unqualified opinion on these statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Denver, Colorado
February 23, 2004
28 Janus Adviser December 31, 2003
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- --------------------------------------------------------------------------------
EXPLANATIONS OF CHARTS, TABLES AND FINANCIAL STATEMENTS
(unaudited)
1. PERFORMANCE OVERVIEWS
Performance overview graphs on the previous pages compare the performance of a
$10,000 investment in each Fund (from inception) with one or more widely used
market indices through December 31, 2003.
When comparing the performance of a Fund 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 a Fund invested in the index.
Average annual total returns are quoted for each class of the Fund. 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 Fund distributions or redemption of Fund shares.
2. SCHEDULES OF INVESTMENTS
Following the performance overview section is each Fund's Schedule of
Investments. This schedule reports the industry concentrations and types of
securities held in each Fund 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.).
The market value of each security is quoted as of the last day of the reporting
period. The values of securities denominated in foreign currencies are converted
into U.S. dollars.
A summary of investments by country is provided if the Fund invested in foreign
securities as of December 31, 2003. This summary reports the Fund's exposure to
different countries by providing the percentage of securities invested in each
country.
2A. FORWARD CURRENCY CONTRACTS
A table listing forward currency contracts follows each Fund's Schedule of
Investments (if applicable). Forward currency contracts are agreements to
deliver or receive a preset amount of currency at a future date. Forward
currency contracts are used to hedge against foreign currency risk in the Fund's
long-term holdings.
The table provides the name of the foreign currency, the settlement date of the
contract, the amount of the contract, the value of the currency in U.S. dollars
and the amount of unrealized gain or loss. The amount of unrealized gain or loss
reflects the change in currency exchange rates from the time the contract was
opened to the last day of the reporting period.
2B. FUTURES
A table listing futures contracts follows each Fund's Schedule of Investments
(if applicable). Futures contracts are contracts that obligate the buyer to
receive and the seller to deliver an instrument or money at a specified price on
a specified date. Futures are used to hedge against adverse movements in
securities prices, currency risk or interest rates.
The table provides the name of the contract, number of contracts held, the
expiration date, the principal amount, value and the amount of unrealized gain
or loss. The amount of unrealized gain or loss reflects the marked to market
amount for the last day of the fiscal period.
3. STATEMENT OF ASSETS AND LIABILITIES
This statement is often referred to as the "balance sheet." It lists the assets
and liabilities of the Funds on the last day of the reporting period.
The Funds' assets are calculated by adding the value of the securities owned,
the receivable for securities sold but not yet settled, the receivable for
dividends declared but not yet received on stocks owned and the receivable for
Fund shares sold to investors but not yet settled. The Funds' liabilities
include payables for securities purchased but not yet settled, Fund shares
redeemed but not yet paid and expenses owed but not yet paid. Additionally,
there may be other assets and liabilities such as unrealized gain or loss on
forward currency contracts.
The last line of this statement reports the Funds' net asset value (NAV) per
share on the last day of the reporting period for each class of the Fund. The
NAV is calculated by dividing the Funds' net assets (assets minus liabilities)
by the number of shares outstanding.
4. STATEMENT OF OPERATIONS
This statement details the Funds' income, expenses, gains and losses on
securities and currency transactions, and appreciation or depreciation of
current Fund holdings.
The first section in this statement, entitled "Investment Income," reports the
dividends earned from stocks and interest earned from interest-bearing
securities in the Fund.
Janus Adviser December 31, 2003 29
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EXPLANATIONS OF CHARTS, TABLES AND FINANCIAL STATEMENTS
(unaudited)(continued)
The next section reports the expenses and expense offsets incurred by the Funds,
including the advisory fee paid to the investment adviser and transfer agent
fees.
The last section lists the increase or decrease in the value of securities held
in the Funds. Funds realize a gain (or loss) when they sell their position in a
particular security. An unrealized gain (or loss) refers to the change in net
appreciation or depreciation of the Funds during the period. "Net Realized and
Unrealized Gain/ (Loss) on Investments" is affected both by changes in the
market value of Fund holdings and by gains (or losses) realized during the
reporting period.
5. STATEMENT OF CHANGES IN NET ASSETS
This statement reports the increase or decrease in the Funds' net assets during
the reporting period. Changes in the Funds' net assets are attributable to
investment operations, dividends, distributions and capital share transactions.
This is important to investors because it shows exactly what caused the Funds'
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 Funds' investment performance. The
Funds' net assets may also change as a result of dividend and capital gains
distributions to investors. If investors receive their dividends in cash, money
is taken out of the Fund to pay the distribution. If investors reinvest their
dividends, the Funds' net assets will not be affected. If you compare each
Fund's "Net Decrease from Dividends and Distributions" to the "Reinvested
dividends and distributions," you'll notice that dividend distributions had
little effect on each Fund's net assets. This is because the majority of Janus
investors reinvest their distributions.
The reinvestment of dividends is included under "Capital Share Transactions."
"Capital Shares" refers to the money investors contribute to the Funds through
purchases or withdrawal via redemptions. Each Fund's net assets will increase
and decrease in value as investors purchase and redeem shares from a Fund.
6. FINANCIAL HIGHLIGHTS
This schedule provides a per-share breakdown of the components that affect the
net asset value (NAV) for current and past reporting periods for each class of
the Fund. Not only does this table provide you with total return, it also
reports total distributions, asset size, expense ratios and fund 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 Funds' net investment income per
share, which comprises dividends and interest income earned on securities held
by the Funds. Following is the total of gains, realized and unrealized.
Dividends and distributions are then subtracted to arrive at the NAV per share
at the end of the period. The next line reflects the average annual return
reported the last day of the period.
Also included are the Funds' expense ratios, or the percentage of net assets
that was used to cover operating expenses during the period. Expense ratios vary
across the Funds for a number of reasons, including the differences in
management fees, the frequency of dividend payments and the extent of foreign
investments, which entail greater transaction costs.
The Funds' expenses may be reduced through expense-reduction arrangements. These
arrangements include the use of brokerage commissions, uninvested cash balances
earning interest or balance credits. The Statement of Operations reflects total
expenses before any such offset, the amount of offset and the net expenses. The
expense ratios listed in the Financial Highlights reflect total expenses both
prior to any expense offset and after the offsets.
The ratio of net investment income/(loss) summarizes the income earned less
expenses divided by the average net assets of a Fund during the reporting
period. Don't confuse this ratio with a Fund's yield. The net investment income
ratio is not a true measure of a Fund's yield because it doesn't take into
account the dividends distributed to the Fund's investors.
The next ratio is the fund turnover rate, which measures the buying and selling
activity in a Fund. Fund turnover is affected by market conditions, changes in
the size of a Fund, the nature of the Fund's investments and the investment
style of the fund manager. A 100% rate implies that an amount equal to the value
of the entire Fund is turned over in a year; a 50% rate means that an amount
equal to the value of half the Fund is traded in a year; and a 200% rate means
that an amount equal to the value of the Fund is sold every six months.
30 Janus Adviser December 31, 2003
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- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (unaudited)
The Trust's Statement of Additional Information includes additional information
about the Trustees and officers and is available, without charge, by calling
1-800-525-0020.
The following are the names of the Trustees and officers of the Trust, together
with a brief description of their principal occupations during the last five
years. Each Trustee has served in that capacity since he or she was originally
elected or appointed. The Trustees do not serve a specified term of office. Each
Trustee will hold office until the termination of the Trust or his or her
earlier death, resignation, retirement, incapacity or removal. The retirement
age for Trustees is 72.
The Trust's Nominating and Governance Committee will consider nominees for the
position of Trustee recommended by shareholders. Shareholders may submit the
name of a candidate for consideration by the Committee by submitting their
recommendations to the Trust's Secretary. The Trust's officers are elected
annually by the Trustees for a one-year term. Certain Trustees and officers also
serve three other registered investment companies advised by Janus Capital:
Janus Investment Fund, Janus Aspen Series and Janus Adviser Series. As of the
date of this report, collectively, the four registered investment companies
consist of 61 series or funds.
TRUSTEES
Number of
Funds in
Name, Age as of Fund Complex
December 31, 2003 Positions Held Length of Principal Occupations Overseen Other Directorships
and Address with Funds Time Served During the Past Five Years by Trustee Held by Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Interested Trustees
Thomas H. Bailey* Trustee 5/03-Present Formerly, President (1978-2002) 61 N/A
151 Detroit Street and Chief Executive Officer (1994-
Denver, CO 80206 2002) of Janus Capital or Janus
Age 66 Capital Corporation. Formerly,
Chairman and Director (1978-2002)
of Janus Capital Corporation; and
Director (1997-2001) of Janus
Distributors, Inc.; President and
Director (1994-2002) of the
Janus Foundation.
Mark B. Whiston Chairman and 5/03-Present President, Chief Executive Officer 2 N/A
151 Detroit Street Trustee and Director Janus Capital Group
Denver, CO 80206 Inc. (since 1/1/03); President and
Age 42 Chief Executive Officer, Janus
Capital Management LLC (since 9/1/02).
Formerly, President of Retail and
Institutional Services, Janus Capital
(11/00-9/02); Vice President and Chief
Marketing Officer of Janus Capital
Corporation (Janus Capital's predecessor)
(3/91-11/00).
- ------------------------------------------------------------------------------------------------------------------------------------
*The Funds are treating Mr. Bailey as an "interested person" of the Trust by
virtue of his past positions and continuing relationships with Janus Capital.
Janus Adviser December 31, 2003 31
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TRUSTEES AND OFFICERS (unaudited) (continued)
Number of
Funds in
Name, Age as of Fund Complex
December 31, 2003 Positions Held Length of Principal Occupations Overseen Other Directorships
and Address with Funds Time Served During the Past Five Years by Trustee Held by Trustee
- ------------------------------------------------------------------------------------------------------------------------------------
Independent Trustees
Samuel Boyd, Jr. Trustee 8/03-Present Manager (since 1978) of Customer 2 Director, World Funds
151 Detroit Street Service Operations and Accounting Inc., The World
Denver, CO 80206 Division, Potomac Electric Power Insurance Trust,
Age 63 Company, Washington, D.C. Vontobel Funds USA
and Satuit Capital
Management Trust.
Thomas I. Florence Trustee 5/03-Present Consultant, President, Dividend 2 N/A
151 Detroit Street Capital Securities LLC (since July
Denver, CO 80206 2003). Formerly, President
Age 41 Morningstar Investment Services
(3/00-12/02) and Managing Director,
Pilgrim Baxter & Associates
(12/96-3/00).
Arthur F. Lerner Trustee 5/03-Present Retired. Formerly, Senior Vice 2 Director, Sthenos
151 Detroit Street President Arnhold and Capital (United
Denver, CO 80206 S. Bleichroeder (investment Kingdom).
Age 61 manager) (12/69-1/03).
Dennis B. Mullen Trustee 5/03-Present Private Investor. 61 Director, Red Robin
151 Detroit Street Gourmet Burgers, Inc.
Denver, CO 80206
Age 60
James T. Rothe Trustee 5/03-Present Professor of Business, University 61 Director, Optika,
151 Detroit Street of Colorado, Colorado Springs, CO Inc. and Neocore
Denver, CO 80206 (since 2002). Formerly, Distinguished Corp.
Age 60 Visiting Professor of Business (2001-
2002), Thunderbird (American
Graduate School of International
Management), Phoenix, AZ; and
Principal (1988-1999) of Phillips-
Smith Retail Group, Addison, TX
(a venture capital firm).
Maureen T. Upton Trustee 5/03-Present Formerly, Director of Sales and 2 N/A
151 Detroit Street Marketing, Intelligent Markets, Inc.
Denver, CO 80206 (3/00-3/03); Associate Equities
Age 37 Division, Goldman Sachs & Co.
(8/98-1/00).
32 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
OFFICERS
Name, Age as of Term of Office*
December 31, 2003 and Length Principal Occupations
and Address Positions Held with Funds of Time Served During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
Thomas A. Early Vice President and General Counsel 5/03-Present Senior Vice President, General Counsel,
151 Detroit Street Chief Corporate Affairs Officer, and
Denver, CO 80206 Secretary of Janus Capital and Janus
Age 48 Capital Group Inc.; Vice President,
General Counsel and Secretary of Janus
Services LLC, Janus Capital International
LLC, Janus Institutional Services LLC, Janus
Distributors LLC and the Janus Foundation;
Vice President, General Counsel and Director
to Janus International (Asia) Limited and
Janus International Limited; Director for
Janus Capital Trust Manager Limited, Janus
World Principal Protected Funds and Janus
World Funds; and Board member of Janus
Global Funds SPC. Formerly, Interim Director
of Janus Capital (2002-2003); Director
(2001) of Janus Distributors, Inc. and Janus
Services, Inc.; and General Counsel,
Secretary and Director (2000-2002) of Janus
International Holding, Inc.
Anita E. Falicia Vice President, Treasurer and 5/03-Present Vice President of Investment
151 Detroit Street Principal Accounting Officer Accounting of Janus Capital.
Denver, CO 80206 Chief Financial Officer 5/03-10/03 Formerly, Assistant Vice President
Age 35 (2000-2002) of Investment
Accounting of Janus Capital or Janus Capital
Corporation; Director (1999- 2000) of
Investment Accounting of Janus Capital
Corporation; and Director (1997-1999) of
Fund Accounting of Janus Capital
Corporation.
Bonnie M. Howe Vice President 5/03-Present Vice President and Assistant General
151 Detroit Street Counsel to Janus Capital, Janus
Denver, CO 80206 Distributors LLC and Janus Services
Age 38 LLC. Formerly, Assistant Vice
President (1997-1999) and Associate
Counsel (1995-1999) for Janus
Capital Corporation and Assistant
Vice President (1998-2000) for Janus
Service Corporation.
Kelley Abbott Howes Vice President and Secretary 5/03-Present Vice President of Domestic Funds
151 Detroit Street and Assistant General Counsel of
Denver, CO 80206 Janus Capital; Vice President and
Age 38 Assistant General Counsel of Janus
Distributors LLC and Janus Services
LLC. Formerly, Assistant Vice
President (1997-1999) of Janus
Capital Corporation; Chief
Compliance Officer, Director and
President (1997-1999) of Janus
Distributors, Inc.; and Assistant Vice
President (1998-2000) of Janus
Service Corporation.
- ------------------------------------------------------------------------------------------------------------------------------------
*Officers are elected annually by the Trustees for a one-year term.
Janus Adviser December 31, 2003 33
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES AND OFFICERS (unaudited) (continued)
OFFICERS (cont.)
Name, Age as of Term of Office*
December 31, 2003 and Length Principal Occupations
and Address Positions Held with Funds of Time Served During the Past Five Years
- ------------------------------------------------------------------------------------------------------------------------------------
David R. Kowalski Vice President and 5/03-Present Vice President and Chief Compliance
151 Detroit Street Chief Compliance Officer Officer of Janus Capital and Janus
Denver, CO 80206 Distributors LLC; and Assistant Vice
Age 46 President of Janus Services LLC.
Formerly, Senior Vice President and
Director (1985-2000) of Mutual Fund
Compliance for Van Kampen Funds.
Girard C. Miller President and Chief Executive Officer 10/03-Present Executive Vice President and Chief
151 Detroit Street Operating Officer of Janus Capital
Denver, CO 80206 Group Inc. and Janus Capital.
Age 52 Formerly, President and Chief
Executive Officer of ICMA Retirement
Corporation (1993-2003).
Loren M. Starr Vice President and Chief Financial 5/03-Present Senior Vice President and Chief
151 Detroit Street Officer Financial Officer of Janus Capital and
Denver, CO 80206 President and Chief Executive Officer 5/03-10/03 Janus Capital Group Inc.; Vice President
Age 42 and Chief Financial Officer of Janus
Services LLC, Janus Distributors LLC, Janus
Capital International LLC and Janus
Institutional Services LLC; Vice President,
Treasurer, Chief Financial Officer and
Director of Janus International Limited;
Director of Janus Capital Trust Manager
Limited, Janus World Principal Protected
Funds, Janus International (Asia) Limited
and Janus World Funds; and Board member of
Janus Global Funds SPC. Formerly, Interim
Director of Janus Capital (2002-2003); Vice
President of Finance, Treasurer, Chief
Financial Officer (2001-2002) and Director
(2002) for Janus International Holding,
Inc.; and Managing Director, Treasurer and
Head of Corporate Finance and Reporting
(1998-2001) for Putnam Investments.
Heidi J. Walter Vice President 5/03-Present Vice President and Assistant General
151 Detroit Street Counsel to Janus Capital and Janus
Denver, CO 80206 Services LLC. Formerly, Vice President
Age 36 and Senior Legal Counsel (1995-1999)
for Stein Roe & Farnham, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
*Officers are elected annually by the Trustees for a one-year term.
34 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDER MEETINGS (unaudited)
The proposal described below was considered at a special meeting of the Vontobel
Fund Shareholders. The Meeting was held on September 19, 2003. Tabulations of
the votes received on the proposal presented at the meeting with respect to
Vontobel US Value Fund and Vontobel International Equity Fund appear below. Each
vote reported represents a value held on the record date of the meeting.
PROPOSAL
Approve an Agreement and Plan of Reorganization by and between Janus Adviser and
Vontobel Funds, Inc. on behalf of the Fund.
Number of Shares Percentage of Outstanding Shares Percentage of Shares Voted
Record
Fund Total Shares Affirmative Against Abstain Affirmative Against Abstain Affirmative Against Abstain
- ------------------------------------------------------------------------------------------------------------------------------------
US Value Fund 3,586,286 1,677,826 148,759 42,601 46.78% 4.15% 1.19% 89.76% 7.96% 2.28%
International
Equity Fund 1,988,720 1,163,233 13,893 9,236 58.49% 0.70% 0.46% 98.05% 1.17% 0.78%
- ------------------------------------------------------------------------------------------------------------------------------------
Janus Adviser December 31, 2003 35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
36 Janus Adviser December 31, 2003
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTES
Janus Adviser December 31, 2003 37
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Janus provides access to a wide range of investment disciplines.
GROWTH INTERNATIONAL/GLOBAL CORE
Janus' growth funds focus on companies Janus' global and international funds Janus' core funds seek investments in
believed to be the leaders in their emphasize companies believed to have more stable and predictable companies.
respective industries - companies in solid prospects for growth and These funds seek to offer a strategic
growing industries, led by solid overlooked investment opportunities combination of steady growth and for
management teams and with expanding regardless of their location. Janus certain funds, some degree of income.
market share, margins and efficiencies. research seeks to take advantage of
attractive investment opportunities in
foreign markets, where accurate
information is often at a premium.
VALUE RISK-MANAGED INCOME
Value managers invest in companies they Seeks to outperform the S&P 500(R) Janus' income funds seek to provide more
believe are poised for a turnaround. The Index, while mathematically managing safety relative to equities while
goal is to gain unique insight into a risk. Managed by INTECH, this fund uses seeking to deliver a competitive total
company's true value and identify and a purely mathematical-based, return and high current income.
evaluate potential catalysts that may risk-controlled process in search of
unlock shareholder value. long-term returns.
FOR MORE INFORMATION, GO TO WWW.JANUS.COM.
[LOGO] JANUS CAPITAL
Group
151 Detroit Street
Denver, CO 80206
1-800-525-3713
Vontobel Asset Management, Inc. is the subadviser to the US Value and
International Equity Funds.
Funds distributed by Janus Distributors LLC. This material must be preceded or
accompanied by a prospectus. (1/04)
109-02-100 2/04
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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: www.janus.com. Registrant
intends to post any amendments to, or waivers from (as defined in Item
2 of Form N-CSR), such code on www.janus.com within five business
days following the date of such amendment or waiver.
Item 3 - Audit Committee Financial Expert
Janus Adviser's Board of Trustees has determined that the following
members of Janus Adviser's Audit Committee are "audit committee
financial experts," as defined in Item 3 to Form N-CSR: Dennis B.
Mullen (Chairman) and Samuel Boyd, Jr. each of whom is "independent"
under the standards set forth in Item 3 to Form N-CSR.
Item 4 - Principal Accountant Fees and Services
Pre-reorganization:
Effective October 13, 2003, Vontobel U.S. Value Fund and Vontobel
International Equity Fund, separate series of Vontobel Funds, Inc.
(the "Predecessor Fund"), participated in a tax-free reorganization
with US Value Fund and International Equity Fund, separate series of
Janus Adviser (the "Fund"), respectively. US Value Fund and
International Equity Fund were created as "shells" for the transfer of
net assets of Vontobel U.S. Value Fund and Vontobel International
Equity Fund, respectively. For accounting purposes, the Predecessor
Fund is considered the surviving entity. The Predecessor Fund's
auditor was Tate, Weller & Baker (the "Predecessor Auditor"). The
Fund's auditor is PricewaterhouseCoopers LLP (the "Auditor"). The
Principal Accountant Fees and Services information shown below is
organized into two sections, one pre-reorganization and one
post-reorganization.
The following table shows the amount of fees that Predecessor Auditor,
billed to the Predecessor Fund during the Predecessor Fund's fiscal year ended
December 31, 2002 and for the period January 1, 2003 through the date of
reorganization, October 13, 2003. For engagements with Predecessor Auditor
entered into on or after May 6, 2003, the Predecesso Audit Committee approved in
advance all audit services and non-audit services that Predecessor Auditor
provided to the Predecessor 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 Predecessor 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 Predecessor Fund during the fiscal year in which
the services are provided; (B) the Predecessor 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 Predecessor Audit Committee's attention,
and the Committee (or its delegate) approves the services before the audit is
completed.
<table>
Services that the Predecessor Auditor Billed to the Predecessor Fund
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
Fiscal Year Ended Audit Fees Audit-Related Tax Fees All Other Fees
December 31 Billed to Fees Billed to Billed to Billed to
Predecessor Fund Predecessor Fund Predecessor Fund Predecessor Fund
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
2003* $76,500 $0 $5,500 $0
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
Percentage approved pursuant N/A 0% 0% 0%
to pre-approval exception
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
2002 $56,500 $0 $0 $0
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
Percentage approved pursuant N/A N/A N/A N/A
to pre-approval exception
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
</table>
*January 1, 2003 through October 13, 2003 (date of reorganization)
The above "Audit Fees" were billed for amounts related to the audit of
the Predecessor Fund's financial statements and services normally
provided by the accountant in connection with statutory and regulatory
filings. The above "Tax Fees" were billed for amounts related to tax
compliance, tax planning, and tax advice.
Services that the Predecessor Fund's Auditor Billed to the Predecessor
Adviser and Affiliated Predecessor Fund Service Providers
The following table shows the amount of fees billed by Auditor to Vontobel
Asset Management, Inc. (the Predecessor "Adviser"), and any entity controlling,
controlled by or under common control with the Predecessor Adviser ("Predecessor
Control Affiliate") that provided ongoing services to the Predecessor Fund
("Affiliated Predecessor Fund Service Provider"), for engagements directly
related to the Predecessor Fund's operations and financial reporting, during the
Predecessor Fund's fiscal year ended December 31, 2002 and the period January 1,
2003 through the date of reorganization, October 13, 2003.
The table also shows the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to Predecessor
Adviser and any Affiliated Predecessor 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 the Predecessor Adviser by the Fund, the
Predecessor Adviser and Affiliated Predecessor Fund Service Providers during the
fiscal year in which the services are provided that would have to be
pre-approved by the Audit Committee; (B) the Predecessor 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 Predecessor Fund's audit is
completed.
<table>
<s> <c>
- ------------------------------- --------------------- ---------------------- ----------------------
Audit-Related All Other Fees
Fees Billed to Tax Fees Billed to Billed to Predecessor
Predecessor Adviser Predecessor Adviser Adviser and Affiliated
and Affiliated and Affiliated Fund Fund Service
Fiscal Year Ended Predecessor Fund Predecessor Fund Predecessor Fund
December 31 Service Providers Service Providers Service Providers
- ------------------------------- --------------------- ---------------------- ---------------------
- ------------------------------- --------------------- ---------------------- ---------------------
2003* $0 $0 $0
- ------------------------------- --------------------- ---------------------- ---------------------
- ------------------------------- --------------------- ---------------------- ---------------------
Percentage approved pursuant 0% 0% 0%
to pre-approval exception
- ------------------------------- --------------------- ---------------------- ---------------------
- ------------------------------- --------------------- ---------------------- ---------------------
2002 $0 $0 $0
- ------------------------------- --------------------- ---------------------- ---------------------
- ------------------------------- --------------------- ---------------------- ---------------------
Percentage approved pursuant N/A N/A N/A
to pre-approval exception
- ------------------------------- --------------------- ---------------------- ---------------------
</table>
* January 1, 2003 through October 13, 2003 (date of reorganization)
Non-Audit Services
The following table shows the amount of fees that Predecessor Auditor
billed during the Predecessor Fund's fiscal year ended December 31, 2002 and the
period January 1, 2003 through October 13, 2003 (date of the reorganization) for
non-audit services. For engagements entered into on or after May 6, 2003, the
Audit Committee was required to pre-approve non-audit services that Auditor
provided to the Adviser and any Affiliated Predecessor Fund Service Provider, if
the engagement related directly to the Predecessor Fund's operations and
financial reporting (except for those subject to the de minimis exception
described above). The Audit Committee requested and received information from
Predecessor Auditor about any non-audit services that Predecessor Auditor
rendered during the Predecessor Fund's fiscal year ended December 31, 2002 and
the period January 1, 2003 through the date of the reorganization, October 13,
2003, to the Predecessor Adviser and any Affiliated Predecessor Fund Service
Provider. The Predecessor Audit Committee considered this information in
evaluating Predecessor Auditor's independence.
<table>
<s> <c>
- ------------------------------- --------------------- ------------------------ ----------------------- ----------------------
Total Non-Audit Fees
billed to Adviser and
Affiliated Predecessor Total Non-Audit
Fund Service Providers Fees billed to
(engagement related Predecessor Adviser
Total Directly to the and Affiliated
Non-Audit Fees operations and financial Predecessor Fund
Billed to the reporting of the Service Providers
Fiscal Year Ended Predecessor Fund Predecessor Fund) (all other engagements) Total of (A), (B)
December 31 (A) (B) (C) and (C)1
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
2003* $0 $0 $0 $0
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
2002 $0 $0 $0 $0
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
</table>
1. The Audit Committee also considered amounts billed by Predecessor
Auditor to all other Predecessor Control Affiliates in evaluating Predecessor
Auditor's independence. * Period January 1, 2003 through October 13, 2003 (date
of reorganization).
Pre-Approval Policies
The Predecessor Fund's Audit Committee Charter required the Predecessor
Fund's Audit Committee to pre-approve any engagement of Predecessor Auditor
(i) to provide Audit or Non-Audit Services to the Predecessor Fund or (ii)
to provide Non-Audit Services to Predecessor Adviser or any Affiliated Fund
Service Provider, if the engagement related directly to the operations and
financial reporting of the Predecessor 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, could grant the
pre-approval. All such delegated pre-approvals were be presented to the
Audit Committee no later than the next Audit Committee meeting.
Post-reorganization:
The following table shows the amount of fees that Auditor billed to the
Fund during the Fund's first fiscal year, subsequent to the date of the
reorganization, October 13, 2003. 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 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.
<table>
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
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
2003* $35,500 $0 $0 $0
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
Percentage approved pursuant N/A 0% 0% 0%
to pre-approval exception
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- --------------------- ---------------------- -------------------
</table>
*Subsequent to Ocotber 13, 2003 (date or reorganization)
Services that the Fund's Auditor Billed to the Adviser
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 first fiscal
year, subsequent to the date of teh reorganization, October 13, 2003.
The table also shows the percentage of fees subject to the pre-approval
exception. The pre-approval exception for services provided to Adviser and
any Affiliated Fund Service Provider (other than audit, review or attest
services) waives the pre-approval requirement if: (A) the aggregate amount
of all such services provided constitutes no more than 5% of the total
amount of revenues paid the Adviser by the Fund, the Adviser and Affiliated
Fund Service Providers during the fiscal year in which the services are
provided that would have to be pre-approved by the Audit Committee; (B) the
Fund did not recognize the services as non-audit at the time of the
engagement; and (C) the services are promptly brought to the Audit
Committee's attention, and the Committee (or its delegate) approves the
services before the Fund's audit is completed.
<table>
<s> <c>
- ------------------------------- --------------------- ---------------------- -------------------
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
- ------------------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- ---------------------- -------------------
2003* $7,000 $0 $0
- ------------------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- ---------------------- -------------------
Percentage approved pursuant 0% 0% 0%
to pre-approval exception
- ------------------------------- --------------------- ---------------------- -------------------
- ------------------------------- --------------------- ---------------------- -------------------
</table>
* Subsequent to October 13, 2003 (date of reorganization)
The above "Audit-Related Fees" were billed for amounts related to the due
diligence related to mergers and acquisitions and semi-annual financial
statement disclosure review.
Non-Audit Services
The following table shows the amount of fees that Auditor billed during the
Fund's fiscal year for non-audit services, subsequent to the date
of the reorganization, October 13, 2003. For engagements entered into on or
after May 6, 2003, 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 de
minimis exception described above). The Audit Committee requested and
received information from Auditor about any non-audit services that Auditor
rendered during the Fund's last fiscal year to the Adviser and any
Affiliated Fund Service Provider. The Committee considered this information
in evaluating Auditor's independence.
<table>
<s> <c>
- ------------------------------- --------------------- ------------------------ ----------------------- ----------------------
Total Non-Audit Fees
billed to Adviser Fund
Service Providers Total Non-Audit
(engagements related Fees billed to
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
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
2003* $0 $0 $0 $0
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
2002 N/A N/A N/A N/A
- ------------------------------- --------------------- ------------------------ ----------------------- -----------------------
</table>
* Subsequent to Ocotber 13, 2003 (date of reorganization)
1. The Audit Committee also considered amounts billed by Auditor to all other
Control Affiliates in evaluating Auditor's independence.
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, 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 - [Reserved]
Item 7 - Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies
Not applicable.
Item 8 - Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers
Not applicable.
Item 9 - Submission of Matters to Vote of Security Holders
Not applicable.
Item 10 - 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) within 90 days of this filing and
have concluded that the Registrant's disclosure controls and
procedures were effective, as of that date.
(b) There was no change in the Registrant's internal control over financial
reporting during Registrant's second fiscal half-year that has materially
affected, or is reasonably likely to materially affect, the Registrant's
internal control over financial reporting.
Item 11 - Exhibits
(a)(1) Not applicable because the Registrant has posted its Code of
Ethics (as defined in Item 2(b)of Form N-CSR) on its website
pursuant to paragraph (f)(2) of Item 2 of Form N-CSR.
(a)(2) Separate certifications for the Registrant's Principal
Executive Officer and Principal Financial Officer, as required by
Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a)
under the Investment Company Act of 1940, are attached as
Ex99.CERT.
(a) (3) Not applicable.
(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, is attached as
Ex99.906CERT. The certification furnished pursuant to this
paragraph is not deemed to be "filed" for purposes of Section 18
of the Securities Exchange Act of 1934, or otherwise subject to
the liability of that section. Such certification is not deemed
to be incorporated by reference into any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
except to the extent that the Registrant specifically
incorporates it by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Janus Adviser
By: _/s/ Girard C. Miller_______
Girard C. Miller,
President, Chief Executive Officer (Principal Executive Officer)
Date: February 27, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, 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/ Girard C. Miller________
Girard C. Miller,
President, Chief Executive Officer (Principal Executive Officer)
Date: February 27, 2004
By: _/s/ Loren M. Starr________
Loren M. Starr,
Vice President and Chief Financial Officer (Principal Financial Officer)
Date: February 27, 2004