497 1 d56982e497.txt INSTITUTIONAL SHARES CUSTOM PROSPECTUS May 1, 2008 GROWTH & CORE Large Cap Growth Portfolio Mid Cap Growth Portfolio Balanced Portfolio INTERNATIONAL & GLOBAL Worldwide Growth Portfolio International Growth Portfolio* BOND Flexible Bond Portfolio JANUS ASPEN SERIES INSTITUTIONAL SHARES Prospectus * The Portfolio is closed to new insurance companies and qualified plans. Current investors in existing insurance company products and qualified plans may continue to invest in the Portfolio, as well as reinvest any dividends or capital gains distributions. However, once an account is closed, additional investments in the Portfolio will not be accepted unless specified criteria are met. The Portfolio may resume sales of its Shares at some future date, but it has no present intention to do so. Refer to the "Shareholder's Guide" section of this Prospectus for more details. The Securities and Exchange Commission has not approved or disapproved of these securities or passed on the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminal offense. (JANUS LOGO) This Prospectus describes six series (each, a "Portfolio" and collectively, the "Portfolios") of Janus Aspen Series (the "Trust") with different investment objectives. Janus Capital Management LLC ("Janus Capital") serves as investment adviser to each Portfolio. Each Portfolio of Janus Aspen Series currently offers one or more classes of shares. The Institutional Shares (the "Shares") are sold under the name of "Janus Aspen Series" and are offered by this Prospectus in connection with investment in and payments under variable annuity contracts and variable life insurance contracts (collectively, "variable insurance contracts"), as well as certain qualified retirement plans. Janus Aspen Series - Institutional Shares sells and redeems its Shares at net asset value without sales charges, commissions, or redemption fees. Each variable insurance contract involves fees and expenses that are not described in this Prospectus. Certain Portfolios may not be available in connection with a particular contract, and certain contracts may limit allocations among the Portfolios. Refer to the accompanying contract prospectus for information regarding contract fees and expenses and any restrictions on purchases or allocations. Certain Janus Aspen Series Portfolios have similar investment objectives and similar principal strategies to corresponding Janus retail funds. Although it is anticipated that a Portfolio and its corresponding retail fund will hold similar securities, differences in asset size, expenses, cash flow needs, and other factors may result in differences in investment performance. This Prospectus contains information that a prospective purchaser of a variable insurance contract or plan participant should consider in conjunction with the accompanying separate account prospectus of the specific insurance company product before allocating purchase payments or premiums to the Portfolios. TABLE OF CONTENTS -------------------------------------------------------------------------------- RISK/RETURN SUMMARY Large Cap Growth Portfolio............................... 2 Mid Cap Growth Portfolio................................. 5 Balanced Portfolio....................................... 8 Worldwide Growth Portfolio............................... 11 International Growth Portfolio........................... 14 Flexible Bond Portfolio.................................. 17 FEES AND EXPENSES........................................... 20 PRINCIPAL INVESTMENT STRATEGIES AND RISKS Frequently asked questions about principal investment strategies............................................. 23 Risks.................................................... 24 Frequently asked questions about certain risks........... 25 General portfolio policies............................... 27 MANAGEMENT OF THE PORTFOLIOS Investment adviser....................................... 31 Management expenses...................................... 32 Investment personnel..................................... 35 OTHER INFORMATION........................................... 37 DISTRIBUTIONS AND TAXES..................................... 40 SHAREHOLDER'S GUIDE Pricing of portfolio shares.............................. 41 Purchases................................................ 42 Redemptions.............................................. 42 Excessive trading........................................ 43 Shareholder communications............................... 46 FINANCIAL HIGHLIGHTS........................................ 47 GLOSSARY OF INVESTMENT TERMS................................ 53 EXPLANATION OF RATING CATEGORIES............................ 58
Table of contents 1 RISK/RETURN SUMMARY -------------------------------------------------------------------------------- LARGE CAP GROWTH PORTFOLIO Large Cap Growth Portfolio (the "Portfolio") is designed for long-term investors who primarily seek growth of capital and who can tolerate the greater risks associated with common stock investments. INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- LARGE CAP GROWTH PORTFOLIO seeks long-term growth of capital in a manner consistent with the preservation of capital. The Portfolio's Trustees may change this objective or the Portfolio's principal investment strategies without a shareholder vote. The Portfolio has a policy of investing at least 80% of its net assets, measured at the time of purchase, in the type of securities suggested by its name, as described below. The Portfolio will notify you in writing at least 60 days before making any changes to this policy. If there is a material change to the Portfolio's objective or principal investment strategies, you should consider whether the Portfolio remains an appropriate investment for you. There is no guarantee that the Portfolio will meet its investment objective. PRINCIPAL INVESTMENT STRATEGIES The Portfolio pursues its investment objective by investing, under normal circumstances, at least 80% of its net assets in common stocks of large-sized companies. Large-sized companies are those whose market capitalization falls within the range of companies in the Russell 1000(R) Index at the time of purchase. The market capitalizations within the index will vary, but as of December 31, 2007, they ranged from approximately $480 million to $528 billion. The portfolio managers apply a "bottom up" approach in choosing investments. In other words, the portfolio managers look at companies one at a time to determine if a company is an attractive investment opportunity and if it is consistent with the Portfolio's investment policies. If the portfolio managers are unable to find such investments, the Portfolio's uninvested assets may be held in cash or similar investments, subject to the Portfolio's specific investment policies. Within the parameters of its specific investment policies, the Portfolio may invest in foreign equity and debt securities, which may include investments in emerging markets. The Portfolio may also lend portfolio securities on a short-term or long-term basis, up to one-third of its total assets, and may, within the parameters of its specific investment policies, invest its assets in derivatives. MAIN INVESTMENT RISKS The biggest risk is that the Portfolio's returns may vary, and you could lose money. The Portfolio is designed for long-term investors interested in an equity portfolio, including common stocks. Common stocks tend to be more volatile than many other investment choices. MARKET RISK. The value of the Portfolio's holdings may decrease if the value of an individual company or multiple companies in the Portfolio decreases. The value of the Portfolio's holdings could also decrease if the stock market goes down or there are deteriorating market conditions, regardless of how well the individual companies perform. If the value of the Portfolio's holdings decreases, the Portfolio's net asset value ("NAV") will also decrease, which means if you sell your shares in the Portfolio you may lose money. GROWTH SECURITIES RISK. The Portfolio invests in companies chosen for their growth potential. Securities of growth companies may be more volatile than other stocks. If the portfolio managers' perception of a company's growth potential is not realized, the securities purchased may not perform as expected, reducing the Portfolio's return. In addition, because different types of stocks tend to shift in and out of favor depending on market and economic conditions, "growth" stocks may perform differently from the market as a whole and other types of securities. FOREIGN EXPOSURE RISK. The Portfolio may have significant exposure to foreign markets, including emerging markets, which can be more volatile than the U.S. markets. As a result, its returns and NAV may be affected to a large degree by fluctuations in currency exchange rates or political or economic conditions in a particular country. A market swing in one or more countries or regions where the Portfolio has invested a significant amount of its assets may have a greater effect on the Portfolio's performance than it would in a more geographically diversified portfolio. The Portfolio's investments in emerging market countries may involve risks greater than, or in addition to, the risks of investing in more developed countries. 2 Janus Aspen Series SECURITIES LENDING RISK. The Portfolio may seek to earn additional income through lending its securities to certain qualified broker-dealers and institutions. When the Portfolio lends its securities, it receives collateral (including cash collateral), at least equal to the value of securities loaned. There is the risk that when portfolio securities are lent, the securities may not be returned on a timely basis, and the Portfolio may experience delays and costs in recovering the security or gaining access to the collateral. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the value of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio. DERIVATIVES RISK. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from derivatives can be substantially greater than the derivatives' original cost, and therefore, can involve leverage. Derivatives can be complex instruments and can involve analysis that differs from that required for other investment types used by the Portfolio. If the value of a derivative does not correlate well with the particular market or other asset class the derivative is intended to provide exposure to, the derivative may not have the effect anticipated. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Risk/return summary 3 PERFORMANCE INFORMATION The following information provides some indication of the risks of investing in the Portfolio by showing how the Portfolio's performance has varied over time. The bar chart depicts the change in performance from year to year during the periods indicated, but does not include charges or expenses attributable to any insurance product, which would lower the performance illustrated. The Portfolio does not impose any sales or other charges that would affect total return computations. Total return figures include the effect of the Portfolio's expenses. The table compares the average annual returns for the Institutional Shares of the Portfolio for the periods indicated to broad-based securities market indices. The indices are not actively managed and are not available for direct investment. All figures assume reinvestment of dividends and distributions. The Portfolio's past performance does not necessarily indicate how it will perform in the future. LARGE CAP GROWTH PORTFOLIO - INSTITUTIONAL SHARES Annual returns for periods ended 12/31 35.66% 43.98% (14.55)% (24.73)% (26.51)% 31.73% 4.57% 4.23% 11.38% 15.09% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Best Quarter: 4th-1998 27.71% Worst Quarter: 3rd-2001 (24.79)%
Average annual total return for periods ended 12/31/07 ------------------------------------------------------ Since Inception 1 year 5 years 10 years (9/13/93) Large Cap Growth Portfolio - Institutional Shares 15.09% 12.98% 5.44% 8.98% Russell 1000(R) Growth Index(1) 11.81% 12.11% 3.83% 9.01% (reflects no deduction for fees or expenses) S&P 500(R) Index(2) 5.49% 12.83% 5.91% 10.43% (reflects no deduction for fees or expenses) ------------------------------------------------
(1) The Russell 1000(R) Growth Index measures the performance of those Russell 1000(R) companies with higher price-to-book ratios and higher forecasted growth values. (2) The Standard & Poor's ("S&P") 500(R) Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. 4 Janus Aspen Series MID CAP GROWTH PORTFOLIO Mid Cap Growth Portfolio (the "Portfolio") is designed for long-term investors who primarily seek growth of capital and who can tolerate the greater risks associated with common stock investments. INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- MID CAP GROWTH PORTFOLIO seeks long-term growth of capital. The Portfolio's Trustees may change this objective or the Portfolio's principal investment strategies without a shareholder vote. The Portfolio has a policy of investing at least 80% of its net assets, measured at the time of purchase, in the type of securities suggested by its name, as described below. The Portfolio will notify you in writing at least 60 days before making any changes to this policy. If there is a material change to the Portfolio's objective or principal investment strategies, you should consider whether the Portfolio remains an appropriate investment for you. There is no guarantee that the Portfolio will meet its investment objective. PRINCIPAL INVESTMENT STRATEGIES The Portfolio pursues its investment objective by investing, under normal circumstances, at least 80% of its net assets in equity securities of mid-sized companies whose market capitalization falls, at the time of purchase, in the 12-month average of the capitalization range of the Russell Midcap(R) Growth Index. Market capitalization is a commonly used measure of the size and value of a company. The market capitalizations within the index will vary, but as of December 31, 2007, they ranged from approximately $624 million to $42.1 billion. The portfolio manager applies a "bottom up" approach in choosing investments. In other words, the portfolio manager looks at companies one at a time to determine if a company is an attractive investment opportunity and if it is consistent with the Portfolio's investment policies. If the portfolio manager is unable to find such investments, the Portfolio's uninvested assets may be held in cash or similar investments, subject to the Portfolio's specific investment policies. Within the parameters of its specific investment policies, the Portfolio may invest in foreign equity and debt securities, which may include investments in emerging markets. The Portfolio may also lend portfolio securities on a short-term or long-term basis, up to one-third of its total assets, and may, within the parameters of its specific investment policies, invest its assets in derivatives. MAIN INVESTMENT RISKS The biggest risk is that the Portfolio's returns may vary, and you could lose money. The Portfolio is designed for long-term investors interested in an equity portfolio, including common stocks. Common stocks tend to be more volatile than many other investment choices. MARKET RISK. The value of the Portfolio's holdings may decrease if the value of an individual company or multiple companies in the Portfolio decreases. The value of the Portfolio's holdings could also decrease if the stock market goes down or there are deteriorating market conditions, regardless of how well the individual companies perform. If the value of the Portfolio's holdings decreases, the Portfolio's net asset value ("NAV") will also decrease, which means if you sell your shares in the Portfolio you may lose money. MID-SIZED COMPANIES RISK. Due to the Portfolio's investments in mid-sized companies, the Portfolio's share price may fluctuate more than that of funds primarily invested in large companies. Mid-sized companies may pose greater market, liquidity, and information risks because of narrow product lines, limited financial resources, less depth in management, or a limited trading market for their stocks. The Portfolio's investments may often be focused in a small number of business sectors, which may pose greater market and liquidity risks. GROWTH SECURITIES RISK. The Portfolio invests in companies chosen for their growth potential. Securities of growth companies may be more volatile than other stocks. If the portfolio manager's perception of a company's growth potential is not realized, the securities purchased may not perform as expected, reducing the Portfolio's return. In addition, because different types of stocks tend to shift in and out of favor depending on market and economic conditions, "growth" stocks may perform differently from the market as a whole and other types of securities. FOREIGN EXPOSURE RISK. The Portfolio may have significant exposure to foreign markets, including emerging markets, which can be more volatile than the U.S. markets. As a result, its returns and NAV may be affected to a large degree by Risk/return summary 5 fluctuations in currency exchange rates or political or economic conditions in a particular country. A market swing in one or more countries or regions where the Portfolio has invested a significant amount of its assets may have a greater effect on the Portfolio's performance than it would in a more geographically diversified portfolio. The Portfolio's investments in emerging market countries may involve risks greater than, or in addition to, the risks of investing in more developed countries. SECURITIES LENDING RISK. The Portfolio may seek to earn additional income through lending its securities to certain qualified broker-dealers and institutions. When the Portfolio lends its securities, it receives collateral (including cash collateral), at least equal to the value of securities loaned. There is the risk that when portfolio securities are lent, the securities may not be returned on a timely basis, and the Portfolio may experience delays and costs in recovering the security or gaining access to the collateral. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the value of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio. DERIVATIVES RISK. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from derivatives can be substantially greater than the derivatives' original cost, and therefore, can involve leverage. Derivatives can be complex instruments and can involve analysis that differs from that required for other investment types used by the Portfolio. If the value of a derivative does not correlate well with the particular market or other asset class the derivative is intended to provide exposure to, the derivative may not have the effect anticipated. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 6 Janus Aspen Series PERFORMANCE INFORMATION The following information provides some indication of the risks of investing in the Portfolio by showing how the Portfolio's performance has varied over time. The bar chart depicts the change in performance from year to year during the periods indicated, but does not include charges or expenses attributable to any insurance product, which would lower the performance illustrated. The Portfolio does not impose any sales or other charges that would affect total return computations. Total return figures include the effect of the Portfolio's expenses. The table compares the average annual returns for the Institutional Shares of the Portfolio for the periods indicated to broad-based securities market indices. The indices are not actively managed and are not available for direct investment. All figures assume reinvestment of dividends and distributions. The Portfolio's past performance does not necessarily indicate how it will perform in the future. MID CAP GROWTH PORTFOLIO - INSTITUTIONAL SHARES Annual returns for periods ended 12/31 34.26% 125.40% (31.82)% (39.45)% (27.93)% 35.10% 20.75% 12.31% 13.61% 22.04% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Best Quarter: 4th-1999 59.34% Worst Quarter: 1st-2001 (32.12)%
Average annual total return for periods ended 12/31/07 ------------------------------------------------------ Since Inception 1 year 5 years 10 years (9/13/93) Mid Cap Growth Portfolio - Institutional Shares 22.04% 20.50% 8.62% 11.71% Russell Midcap(R) Growth Index(1) 11.43% 17.90% 7.59% 10.36% (reflects no deduction for fees or expenses) S&P MidCap 400 Index(2) 7.98% 16.20% 11.20% 13.38% (reflects no deduction for fees or expenses) ------------------------------------------------
(1) The Russell Midcap(R) Growth Index measures the performance of those Russell Midcap(R) companies with higher price-to-book ratios and higher forecasted growth values. The stocks are also members of the Russell 1000(R) Growth Index. (2) The S&P MidCap 400 Index is an unmanaged group of 400 domestic stocks chosen for their market size, liquidity, and industry group representation. Risk/return summary 7 BALANCED PORTFOLIO Balanced Portfolio (the "Portfolio") is designed for long-term investors who primarily seek growth of capital and who can tolerate the greater risks associated with common stock investments. Although the Portfolio may also emphasize some degree of income, it is not designed for investors who desire a certain level of income. INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- BALANCED PORTFOLIO seeks long-term capital growth, consistent with preservation of capital and balanced by current income. The Portfolio's Trustees may change this objective or the Portfolio's principal investment strategies without a shareholder vote. The Portfolio will notify you in writing at least 60 days before making any change it considers material. If there is a material change to the Portfolio's objective or principal investment strategies, you should consider whether the Portfolio remains an appropriate investment for you. There is no guarantee that the Portfolio will meet its investment objective. PRINCIPAL INVESTMENT STRATEGIES The Portfolio pursues its investment objective by normally investing 50-60% of its assets in equity securities selected primarily for their growth potential and 40-50% of its assets in securities selected primarily for their income potential. The Portfolio normally invests at least 25% of its assets in fixed-income senior securities. The portfolio managers share day-to-day responsibility for the Portfolio's investments. In choosing investments for the Portfolio, the portfolio managers apply a "bottom up" approach with one portfolio manager focusing on the equity portion of the Portfolio and the other portfolio manager focusing on the fixed-income portion of the Portfolio. In other words, the portfolio managers look at companies one at a time to determine if a company is an attractive investment opportunity and if it is consistent with the Portfolio's investment policies. If the portfolio managers are unable to find such investments, the Portfolio's uninvested assets may be held in cash or similar investments, subject to the Portfolio's specific investment policies. Within the parameters of its specific investment policies, the Portfolio may invest in foreign equity and debt securities, which may include investments in emerging markets. The Portfolio may also lend portfolio securities on a short-term or long-term basis, up to one-third of its total assets, and may, within the parameters of its specific investment policies, invest its assets in derivatives. MAIN INVESTMENT RISKS The biggest risk is that the Portfolio's returns may vary, and you could lose money. The Portfolio is designed for long-term investors interested in a balanced portfolio, including common stocks and bonds. Common stocks tend to be more volatile than many other investment choices. MARKET RISK. The value of the Portfolio's holdings may decrease if the value of an individual company or multiple companies in the Portfolio decreases. The value of the Portfolio's holdings could also decrease if the stock market goes down or there are deteriorating market conditions, regardless of how well the individual companies perform. If the value of the Portfolio's holdings decreases, the Portfolio's net asset value ("NAV") will also decrease, which means if you sell your shares in the Portfolio you may lose money. GROWTH SECURITIES RISK. The Portfolio invests in companies chosen for their growth potential. Securities of growth companies may be more volatile than other stocks. If the portfolio managers' perception of a company's growth potential is not realized, the securities purchased may not perform as expected, reducing the Portfolio's return. In addition, because different types of stocks tend to shift in and out of favor depending on market and economic conditions, "growth" stocks may perform differently from the market as a whole and other types of securities. FIXED-INCOME SECURITIES RISK. The income component of the Portfolio's holdings includes fixed-income securities. Typically, the values of fixed-income securities change inversely with interest rates. Therefore, a fundamental risk of fixed-income securities is that their value will generally fall if interest rates rise. Since the value of a fixed-income portfolio will generally decrease when interest rates rise, the Portfolio's NAV may likewise decrease. Moreover, while securities with longer maturities tend to produce higher yields, they are more volatile than shorter term securities and are subject to greater market fluctuations as a result of changes in interest rates. Fixed-income securities are also subject to credit or 8 Janus Aspen Series default risk, which is the risk that an issuer of a bond will be unable to make timely principal and interest payments. In addition, there is a risk that during periods of falling interest rates, certain fixed-income securities with higher interest rates, such as mortgage- and asset-backed securities, may be prepaid by the issuer. Collateral related to such investments may be subject to a higher degree of credit risk, valuation risk, and liquidity risk. FOREIGN EXPOSURE RISK. The Portfolio may have significant exposure to foreign markets, including emerging markets, which can be more volatile than the U.S. markets. As a result, its returns and NAV may be affected to a large degree by fluctuations in currency exchange rates or political or economic conditions in a particular country. A market swing in one or more countries or regions where the Portfolio has invested a significant amount of its assets may have a greater effect on the Portfolio's performance than it would in a more geographically diversified portfolio. The Portfolio's investments in emerging market countries may involve risks greater than, or in addition to, the risks of investing in more developed countries. SECURITIES LENDING RISK. The Portfolio may seek to earn additional income through lending its securities to certain qualified broker-dealers and institutions. When the Portfolio lends its securities, it receives collateral (including cash collateral), at least equal to the value of securities loaned. There is the risk that when portfolio securities are lent, the securities may not be returned on a timely basis, and the Portfolio may experience delays and costs in recovering the security or gaining access to the collateral. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the value of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio. DERIVATIVES RISK. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from derivatives can be substantially greater than the derivatives' original cost, and therefore, can involve leverage. Derivatives can be complex instruments and can involve analysis that differs from that required for other investment types used by the Portfolio. If the value of a derivative does not correlate well with the particular market or other asset class the derivative is intended to provide exposure to, the derivative may not have the effect anticipated. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Risk/return summary 9 PERFORMANCE INFORMATION The following information provides some indication of the risks of investing in the Portfolio by showing how the Portfolio's performance has varied over time. The bar chart depicts the change in performance from year to year during the periods indicated, but does not include charges or expenses attributable to any insurance product, which would lower the performance illustrated. The Portfolio does not impose any sales or other charges that would affect total return computations. Total return figures include the effect of the Portfolio's expenses. The table compares the average annual returns for the Institutional Shares of the Portfolio for the periods indicated to broad-based securities market indices. The indices are not actively managed and are not available for direct investment. All figures assume reinvestment of dividends and distributions. The Portfolio's past performance does not necessarily indicate how it will perform in the future. BALANCED PORTFOLIO - INSTITUTIONAL SHARES Annual returns for periods ended 12/31 34.28% 26.76% (2.27)% (4.66)% (6.44)% 14.05% 8.53% 7.95% 10.72% 10.54% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Best Quarter: 4th-1998 20.32% Worst Quarter: 3rd-2001 (5.87)%
Average annual total return for periods ended 12/31/07 ------------------------------------------------------ Since Inception 1 year 5 years 10 years (9/13/93) Balanced Portfolio - Institutional Shares 10.54% 10.34% 9.27% 11.34% S&P 500(R) Index(1) 5.49% 12.83% 5.91% 10.43% (reflects no deduction for fees or expenses) Lehman Brothers Government/Credit Index(2) 7.23% 4.44% 6.01% 6.02% (reflects no deduction for fees or expenses) Balanced Index(3) 6.43% 9.11% 6.30% 8.71% (reflects no deduction for fees or expenses) ------------------------------------------------
(1) The Standard & Poor's ("S&P") 500(R) Index is a commonly recognized, market-capitalization weighted index of 500 widely held equity securities, designed to measure broad U.S. equity performance. (2) The Lehman Brothers Government/Credit Index is composed of all bonds that are of investment grade with at least one year until maturity. (3) The Balanced Index is a hypothetical combination of unmanaged indices. This internally calculated index combines the total returns from the S&P 500(R) Index (55%) and the Lehman Brothers Government/Credit Index (45%). 10 Janus Aspen Series WORLDWIDE GROWTH PORTFOLIO Worldwide Growth Portfolio (the "Portfolio") is designed for long-term investors who primarily seek growth of capital and who can tolerate the greater risks associated with common stock investments. INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- WORLDWIDE GROWTH PORTFOLIO seeks long-term growth of capital in a manner consistent with the preservation of capital. The Portfolio's Trustees may change this objective or the Portfolio's principal investment strategies without a shareholder vote. The Portfolio will notify you in writing at least 60 days before making any change it considers material. If there is a material change to the Portfolio's objective or principal investment strategies, you should consider whether the Portfolio remains an appropriate investment for you. There is no guarantee that the Portfolio will meet its investment objective. PRINCIPAL INVESTMENT STRATEGIES The Portfolio pursues its investment objective by investing primarily in common stocks of companies of any size located throughout the world. The Portfolio normally invests in issuers from several different countries, including the United States. The Portfolio may, under unusual circumstances, invest in a single country. The Portfolio may have significant exposure to emerging markets. The portfolio manager applies a "bottom up" approach in choosing investments. In other words, the portfolio manager looks at companies one at a time to determine if a company is an attractive investment opportunity and if it is consistent with the Portfolio's investment policies. If the portfolio manager is unable to find such investments, the Portfolio's uninvested assets may be held in cash or similar investments, subject to the Portfolio's specific investment policies. Within the parameters of its specific investment policies, the Portfolio may invest in foreign equity and debt securities, which may include investments in emerging markets. The Portfolio may also lend portfolio securities on a short-term or long-term basis, up to one-third of its total assets, and may, within the parameters of its specific investment policies, invest its assets in derivatives. MAIN INVESTMENT RISKS The biggest risk is that the Portfolio's returns may vary, and you could lose money. The Portfolio is designed for long-term investors interested in an equity portfolio, including common stocks. Common stocks tend to be more volatile than many other investment choices. MARKET RISK. The value of the Portfolio's holdings may decrease if the value of an individual company or multiple companies in the Portfolio decreases. The value of the Portfolio's holdings could also decrease if the stock market goes down or there are deteriorating market conditions, regardless of how well the individual companies perform. If the value of the Portfolio's holdings decreases, the Portfolio's net asset value ("NAV") will also decrease, which means if you sell your shares in the Portfolio you may lose money. GROWTH SECURITIES RISK. The Portfolio invests in companies chosen for their growth potential. Securities of growth companies may be more volatile than other stocks. If the portfolio manager's perception of a company's growth potential is not realized, the securities purchased may not perform as expected, reducing the Portfolio's return. In addition, because different types of stocks tend to shift in and out of favor depending on market and economic conditions, "growth" stocks may perform differently from the market as a whole and other types of securities. FOREIGN EXPOSURE RISK. The Portfolio normally has significant exposure to foreign markets, including emerging markets, which can be more volatile than the U.S. markets. As a result, its returns and NAV may be affected to a large degree by fluctuations in currency exchange rates or political or economic conditions in a particular country. A market swing in one or more countries or regions where the Portfolio has invested a significant amount of its assets may have a greater effect on the Portfolio's performance than it would in a more geographically diversified portfolio. The Portfolio's investments in emerging market countries may involve risks greater than, or in addition to, the risks of investing in more developed countries. As of December 31, 2007, approximately 2.0% of the Portfolio's investments were in emerging markets. Risk/return summary 11 SECURITIES LENDING RISK. The Portfolio may seek to earn additional income through lending its securities to certain qualified broker-dealers and institutions. When the Portfolio lends its securities, it receives collateral (including cash collateral), at least equal to the value of securities loaned. There is the risk that when portfolio securities are lent, the securities may not be returned on a timely basis, and the Portfolio may experience delays and costs in recovering the security or gaining access to the collateral. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the value of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio. DERIVATIVES RISK. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from derivatives can be substantially greater than the derivatives' original cost, and therefore, can involve leverage. Derivatives can be complex instruments and can involve analysis that differs from that required for other investment types used by the Portfolio. If the value of a derivative does not correlate well with the particular market or other asset class the derivative is intended to provide exposure to, the derivative may not have the effect anticipated. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 12 Janus Aspen Series PERFORMANCE INFORMATION The following information provides some indication of the risks of investing in the Portfolio by showing how the Portfolio's performance has varied over time. The bar chart depicts the change in performance from year to year during the periods indicated, but does not include charges or expenses attributable to any insurance product, which would lower the performance illustrated. The Portfolio does not impose any sales or other charges that would affect total return computations. Total return figures include the effect of the Portfolio's expenses. The table compares the average annual returns for the Institutional Shares of the Portfolio for the periods indicated to a broad-based securities market index. The index is not actively managed and is not available for direct investment. All figures assume reinvestment of dividends and distributions. For certain periods, the Portfolio's performance reflects the effect of expense waivers. Without the effect of these expense waivers, the performance shown would have been lower. The Portfolio's past performance does not necessarily indicate how it will perform in the future. WORLDWIDE GROWTH PORTFOLIO - INSTITUTIONAL SHARES Annual returns for periods ended 12/31 28.92% 64.45% (15.67)% (22.44)% (25.50)% 23.99% 4.78% 5.87% 18.20% 9.63% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Best Quarter: 4th-1999 42.24% Worst Quarter: 3rd-2001 (20.49)%
Average annual total return for periods ended 12/31/07 ------------------------------------------------------ Since Inception 1 year 5 years 10 years (9/13/93) Worldwide Growth Portfolio - Institutional Shares 9.63% 12.25% 6.29% 11.04% Morgan Stanley Capital International World Index(SM)(1) 9.04% 16.96% 7.00% 8.70% (reflects no deduction for fees or expenses) ------------------------------------------------
(1) The Morgan Stanley Capital International World Index(SM) is a market capitalization weighted index composed of companies representative of the market structure of developed market countries in North America, Europe, and the Asia/Pacific Region. The index includes reinvestment of dividends, net of foreign withholding taxes. Risk/return summary 13 INTERNATIONAL GROWTH PORTFOLIO (CLOSED TO NEW INSURANCE COMPANIES AND QUALIFIED PLANS) International Growth Portfolio (the "Portfolio") is designed for long-term investors who primarily seek growth of capital and who can tolerate the greater risks associated with common stock investments. INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- INTERNATIONAL GROWTH PORTFOLIO seeks long-term growth of capital. The Portfolio's Trustees may change this objective or the Portfolio's principal investment strategies without a shareholder vote. The Portfolio has a policy of investing at least 80% of its net assets, measured at the time of purchase, in the type of securities suggested by its name, as described below. The Portfolio will notify you in writing at least 60 days before making any changes to this policy. If there is a material change to the Portfolio's objective or principal investment strategies, you should consider whether the Portfolio remains an appropriate investment for you. There is no guarantee that the Portfolio will meet its investment objective. PRINCIPAL INVESTMENT STRATEGIES The Portfolio invests, under normal circumstances, at least 80% of its net assets in securities of issuers from countries outside of the United States. The Portfolio normally invests in securities of issuers from several different countries, excluding the United States. Although the Portfolio intends to invest substantially all of its assets in issuers located outside the United States, it may at times invest in U.S. issuers, and it may, under unusual circumstances, invest all of its assets in a single country. The Portfolio may have significant exposure to emerging markets. The portfolio manager applies a "bottom up" approach in choosing investments. In other words, the portfolio manager looks at companies one at a time to determine if a company is an attractive investment opportunity and if it is consistent with the Portfolio's investment policies. If the portfolio manager is unable to find such investments, the Portfolio's uninvested assets may be held in cash or similar investments, subject to the Portfolio's specific investment policies. Within the parameters of its specific investment policies, the Portfolio may invest in foreign equity and debt securities, which may include investments in emerging markets. The Portfolio may also lend portfolio securities on a short-term or long-term basis, up to one-third of its total assets, and may, within the parameters of its specific investment policies, invest its assets in derivatives. MAIN INVESTMENT RISKS The biggest risk is that the Portfolio's returns may vary, and you could lose money. The Portfolio is designed for long-term investors interested in an equity portfolio, including common stocks. Common stocks tend to be more volatile than many other investment choices. MARKET RISK. The value of the Portfolio's holdings may decrease if the value of an individual company or multiple companies in the Portfolio decreases. The value of the Portfolio's holdings could also decrease if the stock market goes down or there are deteriorating market conditions, regardless of how well the individual companies perform. If the value of the Portfolio's holdings decreases, the Portfolio's net asset value ("NAV") will also decrease, which means if you sell your shares in the Portfolio you may lose money. GROWTH SECURITIES RISK. The Portfolio invests in companies chosen for their growth potential. Securities of growth companies may be more volatile than other stocks. If the portfolio manager's perception of a company's growth potential is not realized, the securities purchased may not perform as expected, reducing the Portfolio's return. In addition, because different types of stocks tend to shift in and out of favor depending on market and economic conditions, "growth" stocks may perform differently from the market as a whole and other types of securities. FOREIGN EXPOSURE RISK. The Portfolio normally has significant exposure to foreign markets, including emerging markets, which can be more volatile than the U.S. markets. As a result, its returns and NAV may be affected to a large degree by fluctuations in currency exchange rates or political or economic conditions in a particular country. A market swing in one or more countries or regions where the Portfolio has invested a significant amount of its assets may have a greater effect on the Portfolio's performance than it would in a more geographically diversified portfolio. The Portfolio's investments in emerging market countries may involve risks greater than, or in addition to, the risks of investing in more developed countries. As of December 31, 2007, approximately 36.8% of the Portfolio's investments were in emerging markets. 14 Janus Aspen Series SECURITIES LENDING RISK. The Portfolio may seek to earn additional income through lending its securities to certain qualified broker-dealers and institutions. When the Portfolio lends its securities, it receives collateral (including cash collateral), at least equal to the value of securities loaned. There is the risk that when portfolio securities are lent, the securities may not be returned on a timely basis, and the Portfolio may experience delays and costs in recovering the security or gaining access to the collateral. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the value of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio. DERIVATIVES RISK. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from derivatives can be substantially greater than the derivatives' original cost, and therefore, can involve leverage. Derivatives can be complex instruments and can involve analysis that differs from that required for other investment types used by the Portfolio. If the value of a derivative does not correlate well with the particular market or other asset class the derivative is intended to provide exposure to, the derivative may not have the effect anticipated. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Risk/return summary 15 PERFORMANCE INFORMATION The following information provides some indication of the risks of investing in the Portfolio by showing how the Portfolio's performance has varied over time. The bar chart depicts the change in performance from year to year during the periods indicated, but does not include charges or expenses attributable to any insurance product, which would lower the performance illustrated. The Portfolio does not impose any sales or other charges that would affect total return computations. Total return figures include the effect of the Portfolio's expenses. The table compares the average annual returns for the Institutional Shares of the Portfolio for the periods indicated to broad-based securities market indices. The indices are not actively managed and are not available for direct investment. All figures assume reinvestment of dividends and distributions. The Portfolio's past performance does not necessarily indicate how it will perform in the future. INTERNATIONAL GROWTH PORTFOLIO - INSTITUTIONAL SHARES Annual returns for periods ended 12/31 17.23% 82.27% (15.94)% (23.23)% (25.58)% 34.91% 18.99% 32.28% 47.02% 28.32% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Best Quarter: 4th-1999 58.48% Worst Quarter: 3rd-2001 (20.38)%
Average annual total return for periods ended 12/31/07 ------------------------------------------------------ Since Inception 1 year 5 years 10 years (5/2/94) International Growth Portfolio - Institutional Shares 28.32% 31.98% 15.18% 16.28% Morgan Stanley Capital International EAFE(R) Index(1) 11.17% 21.59% 8.66% 7.69% (reflects no deduction for fees or expenses) Morgan Stanley Capital International All Country World 16.65% 24.02% N/A 9.24%(3) ex-U.S. Index(SM)(2) (reflects no deduction for fees or expenses) ------------------------------------------------
(1) The Morgan Stanley Capital International ("MSCI") EAFE(R) (Europe, Australasia, Far East) Index is a free float-adjusted market capitalization weighted index designed to measure developed market equity performance. The MSCI EAFE(R) Index is composed of companies representative of the market structure of developed market countries. The index includes reinvestment of dividends, net of foreign withholding taxes. (2) The MSCI All Country World ex-U.S. Index(SM) is an unmanaged, free float-adjusted, market capitalization weighted index composed of stocks of companies located in countries throughout the world, excluding the United States. It is designed to measure equity market performance in global developed and emerging markets outside the United States. The index includes reinvestment of dividends, net of foreign withholding taxes. (3) The average annual total return was calculated based on historical information from December 31, 1998 to December 31, 2007 for the MSCI All Country World ex-U.S. Index(SM). 16 Janus Aspen Series FLEXIBLE BOND PORTFOLIO Flexible Bond Portfolio (the "Portfolio") is designed for long-term investors who primarily seek total return. INVESTMENT OBJECTIVE -------------------------------------------------------------------------------- FLEXIBLE BOND PORTFOLIO seeks to obtain maximum total return, consistent with preservation of capital. The Portfolio's Trustees may change this objective or the Portfolio's principal investment strategies without a shareholder vote. The Portfolio has a policy of investing at least 80% of its net assets, measured at the time of purchase, in the type of securities suggested by its name, as described below. The Portfolio will notify you in writing at least 60 days before making any changes to this policy. If there is a material change to the Portfolio's objective or principal investment strategies, you should consider whether the Portfolio remains an appropriate investment for you. There is no guarantee that the Portfolio will meet its investment objective. PRINCIPAL INVESTMENT STRATEGIES The Portfolio pursues its investment objective by primarily investing, under normal circumstances, at least 80% of its assets in bonds. Bonds include, but are not limited to, government bonds, corporate bonds, convertible bonds, mortgage-backed securities, and zero-coupon bonds. The Portfolio will invest at least 65% of its assets in investment grade debt securities and will maintain an average-weighted effective maturity of five to ten years. The Portfolio will limit its investment in high-yield/high-risk bonds to 35% or less of its net assets. The Portfolio generates total return from a combination of current income and capital appreciation, but income is usually the dominant portion. Due to the nature of the securities in which the Portfolio invests, it may have relatively high portfolio turnover compared to other Portfolios. In addition to considering economic factors such as the effect of interest rates on the Portfolio's investments, the portfolio managers apply a "bottom up" approach in choosing investments. This means that the portfolio managers look at income-producing securities one at a time to determine if a security is an attractive investment opportunity and if it is consistent with the Portfolio's investment policies. If the portfolio managers are unable to find such investments, the Portfolio's uninvested assets may be held in cash or similar investments, subject to the Portfolio's specific investment policies. The Portfolio may also lend portfolio securities on a short-term or long-term basis, up to one-third of its total assets, and may, within the parameters of its specific investment policies, invest its assets in derivatives. MAIN INVESTMENT RISKS Although the Portfolio may be less volatile than funds that invest most of their assets in common stocks, the Portfolio's returns and yields will vary, and you could lose money. FIXED-INCOME SECURITIES RISK. The Portfolio invests in a variety of fixed-income securities. Typically, the values of fixed-income securities change inversely with interest rates. Therefore, a fundamental risk of these securities is that their value will generally fall if interest rates rise. Since the value of a fixed-income portfolio will generally decrease when interest rates rise, the Portfolio's net asset value ("NAV") will likewise decrease. Moreover, while securities with longer maturities tend to produce higher yields, they are more volatile than shorter term securities and are subject to greater market fluctuations as a result of changes in interest rates. Fixed-income securities are also subject to credit risk or default risk, which is the risk that an issuer will be unable to make timely principal and interest payments. In addition, there is a risk that during periods of falling interest rates, certain fixed-income securities with higher interest rates, such as mortgage-and asset-backed securities, may be prepaid by the issuer. Collateral related to such investments may be subject to a higher degree of credit risk, valuation risk, and liquidity risk. MARKET RISK. The value of the Portfolio's holdings may decrease if the value of an individual company or multiple companies in the Portfolio decreases. The value of the Portfolio's holdings could also decrease if the stock market goes down or there are deteriorating market conditions, regardless of how well the individual companies perform. If the value of the Portfolio's holdings decreases, the Portfolio's net asset value ("NAV") will also decrease, which means if you sell your shares in the Portfolio you may lose money. Risk/return summary 17 HIGH-YIELD/HIGH-RISK BOND RISK. The Portfolio will limit its investments in high-yield/high-risk bonds, also known as "junk" bonds, to 35% or less of its net assets. High-yield/high-risk bonds may be sensitive to economic changes, political changes, or adverse developments specific to the company that issued the bond. These bonds generally have a greater credit risk than other types of fixed-income securities and are typically in poor financial health. Because of these factors, the performance and NAV of the Portfolio may vary significantly, depending upon its holdings of high-yield/high-risk bonds. PORTFOLIO TURNOVER RISK. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups, and other transaction costs. Higher costs associated with increased portfolio turnover may offset gains in the Portfolio's performance. SECURITIES LENDING RISK. The Portfolio may seek to earn additional income through lending its securities to certain qualified broker-dealers and institutions. When the Portfolio lends its securities, it receives collateral (including cash collateral), at least equal to the value of securities loaned. There is the risk that when portfolio securities are lent, the securities may not be returned on a timely basis, and the Portfolio may experience delays and costs in recovering the security or gaining access to the collateral. If the Portfolio is unable to recover a security on loan, the Portfolio may use the collateral to purchase replacement securities in the market. There is a risk that the value of the collateral could decrease below the value of the replacement security by the time the replacement investment is made, resulting in a loss to the Portfolio. DERIVATIVES RISK. Derivatives can be highly volatile and involve risks in addition to the risks of the underlying referenced securities. Gains or losses from derivatives can be substantially greater than the derivatives' original cost, and therefore, can involve leverage. Derivatives can be complex instruments and can involve analysis that differs from that required for other investment types used by the Portfolio. If the value of a derivative does not correlate well with the particular market or other asset class the derivative is intended to provide exposure to, the derivative may not have the effect anticipated. Derivatives can also reduce the opportunity for gain or result in losses by offsetting positive returns in other investments. Derivatives can be less liquid than other types of investments. An investment in the Portfolio is not a bank deposit and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. 18 Janus Aspen Series PERFORMANCE INFORMATION The following information provides some indication of the risks of investing in Flexible Bond Portfolio by showing how the Portfolio's performance has varied over time. The bar chart depicts the change in performance from year to year during the periods indicated, but does not include charges or expenses attributable to any insurance product, which would lower the performance illustrated. The Portfolio does not impose any sales or other charges that would affect total return computations. Total return figures include the effect of the Portfolio's expenses. The table compares the average annual returns for the Institutional Shares of the Portfolio for the periods indicated to a broad-based securities market index. The index is not actively managed and is not available for direct investment. All figures assume reinvestment of dividends and distributions. For certain periods, the Portfolio's performance reflects the effect of expense waivers. Without the effect of these expense waivers, the performance shown would have been lower. The Portfolio's past performance does not necessarily indicate how it will perform in the future. FLEXIBLE BOND PORTFOLIO - INSTITUTIONAL SHARES Annual returns for periods ended 12/31 9.11% 1.60% 6.25% 7.74% 10.48% 6.39% 3.97% 2.00% 4.22% 7.04% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Best Quarter: 3rd-2002 5.63% Worst Quarter: 2nd-2004 (2.87)%
Average annual total return for periods ended 12/31/07 ------------------------------------------------------ Since Inception 1 year 5 years 10 years (9/13/93) Flexible Bond Portfolio - Institutional Shares 7.04% 4.71% 5.84% 7.09% Lehman Brothers Aggregate Bond Index(1) 6.97% 4.42% 5.97% 6.08% (reflects no deduction for fees or expenses) ------------------------------------------------
(1) The Lehman Brothers Aggregate Bond Index is made up of the Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index, including securities that are of investment grade quality or better, have at least one year to maturity, and have an outstanding par value of at least $100 million. Risk/return summary 19 FEES AND EXPENSES The following table describes the shareholder fees and annual fund operating expenses that you may pay if you buy and hold Shares of the Portfolios. The fees and expenses shown were determined based on net assets as of the fiscal year ended December 31, 2007. SHAREHOLDER FEES are those paid directly from your investment and may include sales loads, redemption fees, or exchange fees. The Portfolios are no-load investments, so you will generally not pay any shareholder fees when you buy or sell Shares of the Portfolios. However, each variable insurance contract involves fees and expenses not described in this Prospectus. Refer to the accompanying contract prospectus for information regarding contract fees and expenses and any restrictions on purchases or allocations. ANNUAL FUND OPERATING EXPENSES are paid out of a Portfolio's assets and include fees for portfolio management, maintenance of shareholder accounts, shareholder servicing, accounting, and other services. You do not pay these fees directly but, as the examples show, these costs are borne indirectly by all shareholders. 20 Janus Aspen Series This table and the examples are designed to assist participants in qualified plans that invest in the Shares of the Portfolios in understanding the fees and expenses that you may pay as an investor in the Shares. OWNERS OF VARIABLE INSURANCE CONTRACTS THAT INVEST IN THE SHARES SHOULD REFER TO THE VARIABLE INSURANCE CONTRACT PROSPECTUS FOR A DESCRIPTION OF FEES AND EXPENSES, AS THE TABLE AND EXAMPLES DO NOT REFLECT DEDUCTIONS AT THE SEPARATE ACCOUNT LEVEL OR CONTRACT LEVEL FOR ANY CHARGES THAT MAY BE INCURRED UNDER A CONTRACT. INCLUSION OF THESE CHARGES WOULD INCREASE THE FEES AND EXPENSES DESCRIBED BELOW.
ANNUAL FUND OPERATING EXPENSES (DEDUCTED FROM PORTFOLIO ASSETS)* Acquired Total Annual Management Other Fund(2) Fees Fund Operating Fees(1) Expenses and Expenses Expenses GROWTH & CORE Large Cap Growth Portfolio 0.64% 0.02% 0.01% 0.67% Mid Cap Growth Portfolio 0.64% 0.04% 0.00% 0.68% Balanced Portfolio 0.55% 0.02% 0.00% 0.57% INTERNATIONAL & GLOBAL Worldwide Growth Portfolio(3) 0.65% 0.02% 0.00% 0.67% International Growth Portfolio(4) 0.64% 0.06% 0.00% 0.70% BOND Flexible Bond Portfolio 0.55% 0.06% 0.01% 0.62%
* All expenses are shown without the effect of expense offset arrangements. Pursuant to such arrangements, credits realized as a result of uninvested cash balances are used to reduce custodian and transfer agent expenses. (1) The "Management Fee" is the investment advisory fee rate paid by each Portfolio to Janus Capital as of the end of the fiscal year. For Worldwide Growth Portfolio, this fee may go up or down monthly based on the Portfolio's performance relative to its benchmark index. (2) "Acquired Fund" means any underlying portfolio (including, but not limited to, exchange-traded funds) in which a Portfolio invests or has invested during the period. Total Annual Fund Operating Expenses shown may not correlate to each Portfolio's ratio of gross expenses to average net assets appearing in the Financial Highlights tables, which reflect the operating expenses of a Portfolio and does not include Acquired Fund fees and expenses. Amounts less than 0.01%, if applicable, are included in Other Expenses. (3) Worldwide Growth Portfolio pays an investment advisory fee rate that adjusts up or down based upon the Portfolio's performance relative to its benchmark index during a measuring period. This fee rate, prior to any performance adjustment, is 0.60%, and may go up or down by a variable of up to 0.15% (assuming constant assets) on a monthly basis. Any such adjustment to this fee rate commenced February 2007, and may increase or decrease the Management Fee. Refer to "Management Expenses" in this Prospectus for additional information with further description in the Statement of Additional Information ("SAI"). (4) Closed to new insurance companies and qualified plans Risk/return summary 21 EXAMPLES: These examples are intended to help you compare the cost of investing in the Portfolios with the cost of investing in other mutual funds. The examples assume that you invest $10,000 in each Portfolio for the time periods indicated, reinvest all dividends and distributions, and then redeem all of your Shares at the end of each period. The examples also assume that your investment has a 5% return each year, and that the Portfolios' operating expenses remain the same. Since no sales load applies, the results apply whether or not you redeem your investment at the end of each period. Although your actual costs may be higher or lower, based upon these assumptions your costs would be as follows:
1 Year 3 Years 5 Years 10 Years ----------------------------------------- GROWTH & CORE Large Cap Growth Portfolio $ 68 $ 214 $ 373 $ 835 Mid Cap Growth Portfolio $ 69 $ 218 $ 379 $ 847 Balanced Portfolio $ 58 $ 183 $ 318 $ 714 INTERNATIONAL & GLOBAL Worldwide Growth Portfolio(1) $ 68 $ 214 $ 373 $ 835 International Growth Portfolio(2) $ 72 $ 224 $ 390 $ 871 BOND Flexible Bond Portfolio $ 63 $ 199 $ 346 $ 774
(1) The numbers shown do not include the impact of any future potential adjustments to the investment advisory fee as a result of the performance-based investment advisory fee. (2) Closed to new insurance companies and qualified plans 22 Janus Aspen Series PRINCIPAL INVESTMENT STRATEGIES AND RISKS -------------------------------------------------------------------------------- This section takes a closer look at the Portfolios' principal investment strategies, as well as certain risks of investing in the Portfolios. Please carefully review the "Risks" section of this Prospectus for a discussion of risks associated with certain investment techniques. The "Glossary of Investment Terms" includes descriptions of investment terms used throughout this Prospectus. FREQUENTLY ASKED QUESTIONS ABOUT PRINCIPAL INVESTMENT STRATEGIES The following questions and answers are designed to help you better understand the Portfolios' principal investment strategies. 1. HOW ARE COMMON STOCKS SELECTED FOR THE PORTFOLIOS? Unless its investment objective or policies prescribe otherwise, each of the Portfolios, with the exception of Flexible Bond Portfolio, may invest substantially all of its assets in common stocks if the portfolio managers believe that common stocks will appreciate in value. The portfolio managers generally take a "bottom up" approach to selecting companies. This means that they seek to identify individual companies with earnings growth potential that may not be recognized by the market at large. The portfolio managers make this assessment by looking at companies one at a time, regardless of size, country of organization, place of principal business activity, or other similar selection criteria. The Portfolios may sell a holding if, among other things, the security reaches the portfolio managers' price target, if the company has a deterioration of fundamentals such as failing to meet key operating benchmarks, or if the portfolio managers find a better investment opportunity. The Portfolios may also sell a holding to meet redemptions. BALANCED PORTFOLIO may emphasize some degree of income. In the case of Balanced Portfolio, the portfolio managers may consider dividend-paying characteristics to a greater degree in selecting common stocks. Realization of income is not a significant consideration when choosing investments for the other Portfolios. Income realized on the Portfolios' investments may be incidental to their investment objectives. 2. ARE THE SAME CRITERIA USED TO SELECT FOREIGN SECURITIES? Generally, yes. The portfolio managers seek companies that meet their selection criteria, regardless of where a company is located. Foreign securities are generally selected on a stock-by-stock basis without regard to any defined allocation among countries or geographic regions. However, certain factors such as expected levels of inflation, government policies influencing business conditions, the outlook for currency relationships, and prospects for economic growth among countries, regions, or geographic areas may warrant greater consideration in selecting foreign securities. There are no limitations on the countries in which the Portfolios may invest, and the Portfolios may at times have significant foreign exposure, including exposure in emerging markets. 3. WHAT DOES "MARKET CAPITALIZATION" MEAN? Market capitalization is the most commonly used measure of the size and value of a company. It is computed by multiplying the current market price of a share of the company's stock by the total number of its shares outstanding. As noted previously, market capitalization is an important investment criterion for Large Cap Growth Portfolio and Mid Cap Growth Portfolio. The other Portfolios offered by this Prospectus do not emphasize investments in companies of any particular size. 4. HOW ARE ASSETS ALLOCATED BETWEEN THE GROWTH AND INCOME COMPONENTS OF BALANCED PORTFOLIO'S HOLDINGS? Balanced Portfolio shifts assets between the growth and income components of its portfolio holdings based on the portfolio managers' analyses of relevant market, financial, and economic conditions. If the portfolio managers believe that growth securities will provide better returns than the yields then available or expected on income-producing securities, Balanced Portfolio will place a greater emphasis on the growth component. Balanced Portfolio's growth component will normally be 50-60% of its net assets. In addition, the Portfolio's income component may consist of dividend-paying stocks which exhibit growth characteristics. 5. WHAT TYPES OF SECURITIES MAKE UP THE GROWTH COMPONENT OF BALANCED PORTFOLIO'S HOLDINGS? The growth component of Balanced Portfolio's holdings is expected to consist primarily of common stocks, but may also include preferred stocks, convertible securities, or other securities selected primarily for their growth potential. Principal investment strategies and risks 23 6. WHAT TYPES OF SECURITIES MAKE UP THE INCOME COMPONENT OF BALANCED PORTFOLIO'S HOLDINGS? The income component of Balanced Portfolio's holdings will consist primarily of fixed-income securities. 7. HOW COULD INTEREST RATES AFFECT THE VALUE OF MY BALANCED PORTFOLIO OR FLEXIBLE BOND PORTFOLIO INVESTMENT? Generally, a fixed-income security will increase in value when interest rates fall and decrease in value when interest rates rise. Longer-term securities are generally more sensitive to interest rate changes than shorter-term securities, but they generally offer higher yields to compensate investors for the associated risks. High-yield bond prices and floating rate debt security prices are generally less directly responsive to interest rate changes than investment grade issues or comparable fixed rate securities and may not always follow this pattern. The income component of Balanced Portfolio's holdings includes fixed-income securities. 8. WHAT IS A HIGH-YIELD/HIGH-RISK BOND? A high-yield/high-risk bond (also called a "junk" bond) is a bond rated below investment grade by major rating agencies (i.e., BB+ or lower by Standard & Poor's Ratings Service ("Standard & Poor's") and Fitch, Inc. ("Fitch"), or Ba or lower by Moody's Investors Service, Inc. ("Moody's")) or is an unrated bond of similar quality. It presents greater risk of default (the failure to make timely interest and principal payments) than higher quality bonds. 9. WHAT ARE U.S. GOVERNMENT SECURITIES? Certain Portfolios, particularly Balanced Portfolio and Flexible Bond Portfolio, may invest in U.S. Government securities. U.S. Government securities include those issued directly by the U.S. Treasury and those issued or guaranteed by various U.S. Government agencies and instrumentalities. Some government securities are backed by the "full faith and credit" of the United States. Other government securities are backed only by the rights of the issuer to borrow from the U.S. Treasury. Others are supported by the discretionary authority of the U.S. Government to purchase the obligations. Certain other government securities are supported only by the credit of the issuer. For securities not backed by the full faith and credit of the United States, a Portfolio must look principally to the agency or instrumentality issuing or guaranteeing the securities for repayment and may not be able to assert a claim against the United States if the agency or instrumentality does not meet its commitment. Although they are high-quality, such securities may involve increased risk of loss of principal and interest compared to government debt securities that are backed by the full faith and credit of the United States. 10. HOW DOES FLEXIBLE BOND PORTFOLIO MANAGE INTEREST RATE RISK? The portfolio managers may vary the average-weighted effective maturity of the portfolio to reflect their analysis of interest rate trends and other factors. The Portfolio's average-weighted effective maturity will tend to be shorter when the portfolio managers expect interest rates to rise and longer when the portfolio managers expect interest rates to fall. The Portfolio may also use futures, options, and other derivatives to manage interest rate risk. 11. WHAT IS MEANT BY FLEXIBLE BOND PORTFOLIO'S "AVERAGE-WEIGHTED EFFECTIVE MATURITY"? The stated maturity of a bond is the date when the issuer must repay the bond's entire principal value to an investor. Some types of bonds may also have an "effective maturity" that is shorter than the stated date due to prepayment or call provisions. Securities without prepayment or call provisions generally have an effective maturity equal to their stated maturity. Average-weighted effective maturity is calculated by averaging the effective maturity of bonds held by the Portfolio with each effective maturity "weighted" according to the percentage of net assets that it represents. 12. WHAT IS MEANT BY FLEXIBLE BOND PORTFOLIO'S "DURATION"? A bond's duration indicates the time it will take investors to recoup their investment. Unlike average maturity, duration reflects both principal and interest payments. Generally, the higher the coupon rate on a bond, the lower its duration will be. The duration of a bond portfolio is calculated by averaging the duration of bonds held by the Portfolio with each duration "weighted" according to the percentage of net assets that it represents. Because duration accounts for interest payments, the Portfolio's duration is usually shorter than its average maturity. RISKS Because the Portfolios, with the exception of Flexible Bond Portfolio, may invest substantially all of their assets in common stocks, the main risk is the risk that the value of the stocks they hold might decrease in response to the 24 Janus Aspen Series activities of an individual company or in response to general market and/or economic conditions. If this occurs, a Portfolio's share price may also decrease. A Portfolio's performance may also be significantly affected, positively or negatively, by certain types of investments, such as foreign securities, derivative investments, non-investment grade bonds ("junk bonds"), initial public offerings ("IPOs"), or securities of companies with relatively small market capitalizations. IPOs and other types of investments may have a magnified performance impact on a Portfolio with a small asset base. A Portfolio may not experience similar performance as its assets grow. Because Flexible Bond Portfolio invests substantially all of its assets in fixed-income securities, it is subject to risks such as credit or default risks, and decreased value due to interest rate increases. The Portfolio's performance may also be affected by risks to certain types of investments, such as foreign securities and derivative instruments. The Portfolios are actively managed investment portfolios and are therefore subject to the risk that the investment strategies employed for the Portfolios may fail to produce the intended results. Janus Capital manages many funds and numerous other accounts. Management of multiple accounts may involve conflicts of interest among those accounts, and may create potential risks, such as the risk that investment activity in one account may adversely affect another account. For example, short sale activity in an account could adversely affect the market value of long positions in one or more other accounts (and vice versa). Additionally, Janus Capital is the adviser to the Janus Smart Portfolios, a series of "funds of funds," which invest in other Janus Capital mutual funds. Because Janus Capital is the adviser to the Janus Smart Portfolios and the portfolios, it is subject to certain potential conflicts of interest when allocating the assets of the Janus Smart Portfolios among underlying funds. A further discussion of potential conflicts of interest and a discussion of certain procedures intended to mitigate such potential conflicts is contained in the Portfolios' Statement of Additional Information. FREQUENTLY ASKED QUESTIONS ABOUT CERTAIN RISKS The following questions and answers are designed to help you better understand some of the risks of investing in the Portfolios. 1. HOW COULD THE PORTFOLIOS' INVESTMENTS IN FOREIGN SECURITIES AFFECT THEIR PERFORMANCE? Within the parameters of its specific investment policies, each Portfolio may invest in foreign debt and equity securities either indirectly (e.g., depositary receipts, depositary shares, and passive foreign investment companies) or directly in foreign markets, including emerging markets. Investments in foreign securities, including those of foreign governments, may involve greater risks than investing in domestic securities because a Portfolio's performance may depend on factors other than the performance of a particular company. These factors include: - CURRENCY RISK. As long as a Portfolio holds a foreign security, its value will be affected by the value of the local currency relative to the U.S. dollar. When a Portfolio sells a foreign currency denominated security, its value may be worth less in U.S. dollars even if the security increases in value in its home country. U.S. dollar-denominated securities of foreign issuers may also be affected by currency risk due to the overall impact of exposure to the issuer's local currency. - POLITICAL AND ECONOMIC RISK. Foreign investments may be subject to heightened political and economic risks, particularly in emerging markets which may have relatively unstable governments, immature economic structures, national policies restricting investments by foreigners, different legal systems, and economies based on only a few industries. In some countries, there is the risk that the government may take over the assets or operations of a company or that the government may impose taxes or limits on the removal of a Portfolio's assets from that country. - REGULATORY RISK. There may be less government supervision of foreign markets. As a result, foreign issuers may not be subject to the uniform accounting, auditing, and financial reporting standards and practices applicable to domestic issuers and there may be less publicly available information about foreign issuers. - FOREIGN MARKET RISK. Foreign securities markets, particularly those of emerging market countries, may be less liquid and more volatile than domestic markets. Certain markets may require payment for securities before delivery, and delays may be encountered in settling securities transactions. In some foreign markets, there may not be protection against failure by other parties to complete transactions. Such factors may hinder a Portfolio's ability to buy and sell Principal investment strategies and risks 25 emerging market securities in a timely manner, affecting the Portfolio's investment strategies and potentially affecting the value of the Portfolio. - TRANSACTION COSTS. Costs of buying, selling, and holding foreign securities, including brokerage, tax, and custody costs, may be higher than those involved in domestic transactions. 2. ARE THERE SPECIAL RISKS ASSOCIATED WITH INVESTMENTS IN SECURITIES OF COMPANIES FROM EMERGING MARKET COUNTRIES? Within the parameters of its specific investment policies, each Portfolio, particularly Worldwide Growth Portfolio and International Growth Portfolio, may invest in a company or companies from one or more "developing countries" or "emerging markets." Such countries include, but are not limited to, countries included in the S&P/International Finance Corporation Global ("IFCG") Composite and S&P/IFCG Frontier Markets indices. To the extent that a Portfolio invests a significant amount of its assets in one or more countries, returns and NAV may be affected to a large degree by events and economic conditions in such countries. A summary of each Portfolio's investments by country is contained in the Portfolios' shareholder reports and in the Portfolios' Form N-Q reports, which are filed with the Securities and Exchange Commission ("SEC"). In many developing markets, there is less government supervision and regulation of business and industry practices, stock exchanges, brokers, and listed companies than in more developed markets. The securities markets of many of the countries in which the Portfolios may invest may also be smaller, less liquid, and subject to greater price volatility than those in the United States. In the event of a default on any investments in foreign debt obligations, it may be more difficult for the Portfolios to obtain or to enforce a judgment against the issuers of such securities. The Portfolios may be subject to emerging markets risk to the extent that they invest in companies which are not considered to be from emerging markets, but which have customers, products, or transactions associated with emerging markets. 3. CERTAIN PORTFOLIOS MAY INVEST IN SMALLER OR NEWER COMPANIES. DOES THIS CREATE ANY SPECIAL RISKS? Many attractive investment opportunities may be smaller, start-up companies offering emerging products or services. Smaller or newer companies may suffer more significant losses as well as realize more substantial growth than larger or more established issuers because they may lack depth of management, be unable to generate funds necessary for growth or potential development, or be developing or marketing new products or services for which markets are not yet established and may never become established. In addition, such companies may be insignificant factors in their industries and may become subject to intense competition from larger or more established companies. Securities of smaller or newer companies may have more limited trading markets than the markets for securities of larger or more established issuers, or may not be publicly traded at all, and may be subject to wide price fluctuations. Investments in such companies tend to be more volatile and somewhat more speculative. 4. WHAT IS "INDUSTRY RISK"? Industry risk is the possibility that a group of related securities will decline in price due to industry-specific developments. Companies in the same or similar industries may share common characteristics and are more likely to react similarly to industry-specific market or economic developments. Each Portfolio's investments, if any, in multiple companies in a particular industry increase that Portfolio's exposure to industry risk. 5. ARE THERE SPECIAL RISKS ASSOCIATED WITH INVESTMENTS IN HIGH-YIELD/HIGH-RISK BONDS? High-yield/high-risk bonds (or "junk" bonds) are bonds rated below investment grade by the primary rating agencies such as Standard & Poor's, Fitch, and Moody's or are unrated bonds of similar quality. The value of lower quality bonds generally is more dependent on credit risk and default risk than investment grade bonds. Issuers of high-yield/high-risk bonds may not be as strong financially as those issuing bonds with higher credit ratings and are more vulnerable to real or perceived economic changes, political changes, or adverse developments specific to the issuer. In addition, the junk bond market can experience sudden and sharp price swings. The secondary market on which high-yield securities are traded may be less liquid than the market for investment grade securities. The lack of a liquid secondary market may have an adverse impact on the market price of the security. When secondary markets for high-yield securities are less liquid than the market for investment grade securities, it also may be more difficult to value the securities because valuation may require more research, and elements of judgment may play a larger role in the valuation because there is less reliable, objective data available. 26 Janus Aspen Series Please refer to the "Explanation of Rating Categories" section of this Prospectus for a description of bond rating categories. 6. WHAT IS MEANT BY "CREDIT QUALITY" AND WHAT ARE THE RISKS ASSOCIATED WITH IT? Credit quality measures the likelihood that the issuer or borrower will meet its obligations on a bond. One of the fundamental risks is credit risk, which is the risk that an issuer will be unable to make principal and interest payments when due, or default on its obligations. This may negatively impact a Portfolio's returns. U.S. Government securities are generally considered to be the safest type of investment in terms of credit risk. Municipal obligations generally rank between U.S. Government securities and corporate debt securities in terms of credit safety. Corporate debt securities, particularly those rated below investment grade, present the highest credit risk. 7. HOW IS CREDIT QUALITY MEASURED? Ratings published by nationally recognized statistical rating agencies such as Standard & Poor's, Fitch, and Moody's are widely accepted measures of credit risk. The lower a bond issue is rated by an agency, the more credit risk it is considered to represent. Lower rated instruments and securities generally pay higher yields to compensate investors for the associated risk. Please refer to the "Explanation of Rating Categories" section of this Prospectus for a description of bond rating categories. 8. HOW DO THE PORTFOLIOS TRY TO REDUCE RISK? The Portfolios may use short sales, futures, options, swap agreements (including, but not limited to, equity, interest rate, credit default, and total return swaps), and other derivative instruments individually or in combination to "hedge" or protect their portfolios from adverse movements in securities prices and interest rates. The Portfolios may also use a variety of currency hedging techniques, including the use of forward currency contracts, to manage currency risk. There is no guarantee that derivative investments will benefit the Portfolios. A Portfolio's performance could be worse than if the Portfolio had not used such instruments. GENERAL PORTFOLIO POLICIES Unless otherwise stated, the following general policies apply to each Portfolio. Except for the Portfolios' policies with respect to investments in illiquid securities and borrowing, the percentage limitations included in these policies and elsewhere in this Prospectus normally apply only at the time of purchase of a security. So, for example, if a Portfolio exceeds a limit as a result of market fluctuations or the sale of other securities, it will not be required to dispose of any securities. CASH POSITION The Portfolios may not always stay fully invested. For example, when the portfolio managers believe that market conditions are unfavorable for profitable investing, or when they are otherwise unable to locate attractive investment opportunities, a Portfolio's cash or similar investments may increase. In other words, cash or similar investments generally are a residual - they represent the assets that remain after a Portfolio has committed available assets to desirable investment opportunities. Partly because the portfolio managers act independently of each other, the cash positions of the Portfolios may vary significantly. When a Portfolio's investments in cash or similar investments increase, it may not participate in market advances or declines to the same extent that it would if the Portfolio remained more fully invested. In addition, a Portfolio may temporarily increase its cash position under certain unusual circumstances, such as to protect its assets or maintain liquidity in certain circumstances, for example, to meet unusually large redemptions. A Portfolio's cash position may also increase temporarily due to unusually large cash inflows. Under unusual circumstances such as these, a Portfolio may invest up to 100% of its assets in cash or similar investments. In this case, the Portfolio may not achieve its investment objective. PORTFOLIO TURNOVER In general, the Portfolios intend to purchase securities for long-term investment, although, to a limited extent, each Portfolio may purchase securities in anticipation of relatively short-term price gains. Short-term transactions may also result from liquidity needs, securities having reached a price or yield objective, changes in interest rates or the credit standing of an issuer, or by reason of economic or other developments not foreseen at the time of the investment decision. A Portfolio may also sell one security and simultaneously purchase the same or a comparable security to take Principal investment strategies and risks 27 advantage of short-term differentials in bond yields or securities prices. Portfolio turnover is affected by market conditions, changes in the size of a Portfolio, the nature of a Portfolio's investments, and the investment style of the portfolio managers. Changes are made in a Portfolio's holdings whenever the portfolio managers believe such changes are desirable. Portfolio turnover rates are generally not a factor in making buy and sell decisions. Due to the nature of the securities in which Flexible Bond Portfolio invests, it may have relatively high portfolio turnover compared to other Portfolios. Increased portfolio turnover may result in higher costs for brokerage commissions, dealer mark-ups, and other transaction costs. Higher costs associated with increased portfolio turnover may offset gains in a Portfolio's performance. The "Financial Highlights" section of this Prospectus shows the Portfolios' historical turnover rates. OTHER TYPES OF INVESTMENTS Unless otherwise stated within its specific investment policies, each Portfolio, with the exception of Flexible Bond Portfolio, may also invest in other types of domestic and foreign securities and use other investment strategies, as described in the "Glossary of Investment Terms." These securities and strategies are not principal investment strategies of the Portfolios. If successful, they may benefit the Portfolios by earning a return on the Portfolios' assets or reducing risk; however, they may not achieve the Portfolios' investment objectives. These securities and strategies may include: - debt securities - exchange-traded funds - indexed/structured securities - high-yield/high-risk bonds (20% or less of Large Cap Growth Portfolio's and Mid Cap Growth Portfolio's net assets and 35% or less of each of the other Portfolios' net assets) - various derivative transactions (which could comprise a significant percentage of a Portfolio's holdings) including, but not limited to, options, futures, forwards, swap agreements (such as equity, interest rate, credit default, and total return swaps), participatory notes, structured notes, and other types of derivatives individually or in combination for hedging purposes or for nonhedging purposes such as seeking to enhance return, to protect unrealized gains, or to avoid realizing losses; such techniques may also be used to gain exposure to the market pending investment of cash balances or to meet liquidity needs - short sales (no more than 10% of a Portfolio's net assets may be invested in short sales other than against the box) - securities purchased on a when-issued, delayed delivery, or forward commitment basis - bank loans, which may be acquired through loan participations and assignments (for Balanced Portfolio only, no more than 20% of the Portfolio's total assets) - entering into transactions to manage a Portfolio's realization of capital gains and to offset such realization of capital gains with capital losses where the portfolio managers believe it is appropriate; such techniques may result in increased transaction costs paid by a Portfolio and may be limited under the Internal Revenue Code and related regulations Unless otherwise stated within its specific investment policies, Flexible Bond Portfolio may also invest in other types of domestic and foreign securities and use other investment strategies, as described in the "Glossary of Investment Terms." These securities and strategies are not principal investment strategies of the Portfolio. If successful, they may benefit the Portfolio by earning a return on the Portfolio's assets or reducing risk; however, they may not achieve the Portfolio's investment objective. These securities and strategies may include: - equity securities - other debt securities - exchange-traded funds - pass-through securities including mortgage- and asset-backed securities and mortgage dollar rolls - zero coupon, pay-in-kind, and step coupon securities 28 Janus Aspen Series - various derivative transactions (which could comprise a significant percentage of the Portfolio's holdings) including, but not limited to, options, futures, forwards, swap agreements (such as equity, interest rate, credit default, and total return swaps), participatory notes, structured notes, and other types of derivatives individually or in combination for hedging purposes or for nonhedging purposes such as seeking to enhance return, to protect unrealized gains, or to avoid realizing losses; such techniques may also be used to gain exposure to the market pending investment of cash balances or to meet liquidity needs - short sales (no more than 10% of a portfolio's net assets may be invested in short sales other than against the box) - securities purchased on a when-issued, delayed delivery, or forward commitment basis - bank loans, which may be acquired through loan participations and assignments (no more than 20% of the Portfolio's total assets) - entering into transactions to manage the Portfolio's realization of capital gains and to offset such realization of capital gains with capital losses where the portfolio managers believe it is appropriate; such techniques may result in increased transaction costs paid by the Portfolio and may be limited under the Internal Revenue Code and related regulations COUNTERPARTIES Portfolio transactions involving a counterparty are subject to the risk that the counterparty or third party will not fulfill its obligation to the Portfolios ("counterparty risk"). The Portfolios may be exposed to counterparty risk through participation in various programs including, but not limited to, lending their securities to third parties, cash sweep arrangements whereby the Portfolios' cash balances are invested in one or more money market funds, as well as investments in, but not limited to, repurchase agreements, debt securities, and derivatives, including various types of swaps, futures, and options. SHORT SALES To a limited extent, certain Portfolios may engage in short sales. A short sale is subject to the risk that if the price of the security sold short increases in value, a Portfolio will incur a loss because it will have to replace the security sold short by purchasing it at a higher price. In addition, a Portfolio may not always be able to close out a short position at a particular time or at an acceptable price. A Portfolio's losses are potentially unlimited in a short sale transaction. A lender may request that the securities sold short be returned to it on short notice, and a Portfolio may have to buy the securities sold short at an unfavorable price. If this occurs at a time that other short sellers of the same security also want to close out their positions, it is more likely that a Portfolio will have to cover its short sale at an unfavorable price and potentially reduce or eliminate any gain, or cause a loss, as a result of the short sale. Due to certain foreign countries' restrictions, a Portfolio will not be able to engage in short sales in certain foreign countries where it may maintain long positions. As a result, a Portfolio's ability to fully implement a short selling strategy that could otherwise help the Portfolio pursue its investment goals may be limited. Although Janus Capital believes that its rigorous "bottom up" approach will be effective in selecting short positions, there is no assurance that Janus Capital will be successful in applying this approach when engaging in short sales. ILLIQUID INVESTMENTS Each Portfolio may invest up to 15% of its net assets in illiquid investments. An illiquid investment is a security or other position that cannot be disposed of quickly in the normal course of business. For example, some securities are not registered under U.S. securities laws and cannot be sold to the U.S. public because of SEC regulations (these are known as "restricted securities"). Under procedures adopted by the Portfolios' Trustees, certain restricted securities may be deemed liquid and will not be counted toward this 15% limit. SPECIAL SITUATIONS Certain Portfolios may invest in companies that demonstrate special situations or turnarounds, meaning companies that have experienced significant business problems but are believed to have favorable prospects for recovery. For example, a special situation or turnaround may arise when, in the opinion of the portfolio managers, the securities of a particular issuer will be recognized by the market and appreciate in value due to a specific development with respect to that issuer. Special situations may include significant changes in a company's allocation of its existing capital, a restructuring of assets, or a redirection of free cash flow. For example, issuers undergoing significant capital changes may include companies involved in spin-offs, sales of divisions, mergers or acquisitions, companies emerging from bankruptcy, or Principal investment strategies and risks 29 companies initiating large changes in their debt to equity ratio. Companies that are redirecting cash flows may be reducing debt, repurchasing shares, or paying dividends. Special situations may also result from: (i) significant changes in industry structure through regulatory developments or shifts in competition; (ii) a new or improved product, service, operation, or technological advance; (iii) changes in senior management or other extraordinary corporate event; (iv) differences in market supply of and demand for the security; or (v) significant changes in cost structure. A Portfolio's performance could suffer from its investments in "special situations." 30 Janus Aspen Series MANAGEMENT OF THE PORTFOLIOS -------------------------------------------------------------------------------- INVESTMENT ADVISER Janus Capital Management LLC, 151 Detroit Street, Denver, Colorado 80206-4805, is the investment adviser to each Portfolio. Janus Capital is responsible for the day-to-day management of the Portfolios' investment portfolios and furnishes continuous advice and recommendations concerning the Portfolios' investments. Janus Capital also provides certain administrative and other services and is responsible for other business affairs of each Portfolio. Janus Capital (together with its predecessors) has served as investment adviser to Janus Fund since 1970 and currently serves as investment adviser to all of the Janus funds, acts as subadviser for a number of private-label mutual funds, and provides separate account advisory services for institutional accounts. Janus Capital furnishes certain administrative, compliance, and accounting services for the Portfolios, and may be reimbursed by the Portfolios for its costs in providing those services. In addition, employees of Janus Capital and/or its affiliates serve as officers of the Trust, and Janus Capital provides office space for the Portfolios and pays the salaries, fees, and expenses of all Portfolio officers and those Trustees who are considered interested persons of Janus Capital. As of the date of this Prospectus, 100% of the Board of Trustees is independent. From its own assets, Janus Capital or its affiliates may pay fees to selected insurance companies, qualified plan service providers, or other financial intermediaries that distribute, market, or promote the Portfolios or perform services for contract owners and plan participants. The amount of these payments is determined from time to time by Janus Capital, may be substantial, and may differ for different financial intermediaries. Janus Capital and its affiliates consider a number of factors in making payments to financial intermediaries. Janus Capital or its affiliates may pay fees, from their own assets, to selected insurance companies, qualified plan service providers, and other financial intermediaries for providing recordkeeping, subaccounting, transaction processing, and other shareholder or administrative services (including payments for processing transactions via National Securities Clearing Corporation ("NSCC") or other means) in connection with investments in the Janus funds. These fees are in addition to any fees that may be paid by the Janus funds for these types of services or other services. In addition, Janus Capital or its affiliates may also share certain marketing expenses with intermediaries, or pay for or sponsor informational meetings, seminars, client awareness events, support for marketing materials, or business building programs for such intermediaries, to raise awareness of the Portfolios. Such payments may be in addition to, or in lieu of, sales- and asset-based payments. These payments are intended to promote the sales of Janus funds and to reimburse financial intermediaries, directly or indirectly, for the costs that they or their salespersons incur in connection with educational seminars, meetings, and training efforts about the Janus funds to enable the intermediaries and their salespersons to make suitable recommendations, provide useful services, and maintain the necessary infrastructure to make the Janus funds available to their customers. Participating insurance companies that purchase the Portfolios' Shares may perform certain administrative services relating to the Portfolios and Janus Capital, or the Portfolios may pay those companies for such services. The receipt of (or prospect of receiving) payments described above is not intended to, but may provide a financial intermediary and its salespersons with an incentive to favor sales of Janus funds' shares over sales of other mutual funds (or non-mutual fund investments), or to favor sales of one class of Janus funds' shares over sales of another Janus funds' share class, with respect to which the financial intermediary does not receive such payments or receives them in a lower amount. The payment arrangements described above will not change the price a contract owner or plan participant pays for shares or the amount a Janus fund receives to invest on behalf of the contract owner or plan participant. You should consider whether such arrangements exist when evaluating any recommendations from an intermediary to purchase or sell Shares of the Portfolios and when choosing which share class of the Portfolio is most appropriate for you. Please contact your insurance company or plan sponsor for details on such arrangements. Management of the Portfolios 31 MANAGEMENT EXPENSES Each Portfolio pays Janus Capital an investment advisory fee and incurs expenses not assumed by Janus Capital, including any transfer agent and custodian fees and expenses, legal and auditing fees, printing and mailing costs of sending reports and other information to existing shareholders, and Independent Trustees' fees and expenses. Each Portfolio's investment advisory fee is calculated daily and paid monthly. Each Portfolio's advisory agreement details the investment advisory fee and other expenses that the Portfolios must pay. The following tables reflect each Portfolio's contractual investment advisory fee rate or, if applicable, base fee rate (expressed as an annual rate), as well as the investment advisory fee rate paid by each Portfolio to Janus Capital (gross and net of fee waivers, if applicable). The Portfolios reflected below pay an investment advisory fee at a fixed rate based on each Portfolio's average net assets.
Actual Investment Contractual Advisory Fee (%) Average Daily Investment (for the Net Assets Advisory Fee (%) fiscal year ended Portfolio Name of Portfolio (annual rate) December 31, 2007) --------------------------------------------------------------------------------------------------------------- GROWTH & CORE Large Cap Growth Portfolio All Asset Levels 0.64 0.63(1) Mid Cap Growth Portfolio All Asset Levels 0.64 0.64 Balanced Portfolio All Asset Levels 0.55 0.55 INTERNATIONAL & GLOBAL International Growth Portfolio(2) All Asset Levels 0.64 0.64 BOND Flexible Bond Portfolio First $300 Million 0.55(3) 0.54 Over $300 Million 0.45
(1) The actual management fee paid reflects credits to the Portfolio for investment advisory fees paid by the Portfolio to a Janus money market fund for cash invested in that money market fund under the Portfolio's money fund sweep program. (2) Closed to new insurance companies and qualified plans (3) Janus Capital has agreed to limit the Portfolio's total operating expenses (excluding brokerage commissions, interest, dividends, taxes, and extraordinary expenses including, but not limited to, acquired fund fees and expenses) to a certain level until at least May 1, 2009. Application of the expense waiver and its effect on annual fund operating expenses is reflected, when applicable, in the Annual Fund Operating Expenses table in the "Fees and Expenses" section of this Prospectus, and additional information is included in the Statement of Additional Information. The waiver is not reflected in the contractual fee rate shown. Worldwide Growth Portfolio pays an investment advisory fee rate that may adjust up or down based on the Portfolio's performance relative to the cumulative performance of its benchmark index. Any adjustment to the investment advisory fee rate was effective February 2007. Until such time, only the base fee rate shown below applied. The third column shows the performance hurdle for outperformance or underperformance during the measurement period relative to the Portfolio's benchmark index. The fourth column shows the performance adjusted investment advisory fee rate, which is equal to the Portfolio's base fee rate plus or minus the performance adjustment over the period without any fee waivers. The fifth column shows the actual investment advisory fee rate, which is equal to the Portfolio's base fee rate plus or minus the performance adjustment over the period and includes any applicable fee waiver. This fifth column shows the actual amount of the investment advisory fee rate paid by the Portfolio as of the end of the fiscal year. Details discussing this performance fee are included below with further description in the Statement of Additional Information. As an example, if the Portfolio outperformed its benchmark index by its performance hurdle rate (listed in the table below), the advisory fee would increase by 0.15%. Conversely, if the Portfolio underperformed its benchmark index by its performance hurdle rate (listed in the table below), the advisory fee would decrease by 0.15%. Actual performance 32 Janus Aspen Series within the full range of the performance hurdle rate may result in positive or negative incremental adjustments to the advisory fee of greater or less than 0.15%.
Actual Investment Performance Advisory Fee (%) Performance Adjusted (for the Hurdle vs. Investment fiscal year ended Portfolio Name Base Fee (%) Benchmark Index Advisory Fee (%) December 31, 2007) ----------------------------------------------------------------------------------------------------------------- INTERNATIONAL & GLOBAL Worldwide Growth Portfolio 0.60 +/- 6.00% 0.65 0.64(1) -----------------------------------------------------------------------------------------------------------------
(1) The fee rate shown reflects a fee waiver which was in effect for a portion of the fiscal year. For the period from July 1, 2006 through January 31, 2007 ("Waiver Period"), Janus Capital contractually agreed to waive its right to receive a portion of the Portfolio's base management fee, at the annual rate of up to 0.15% of average daily net assets, under certain conditions. This waiver was applied for any calendar month in the Waiver Period if the total return performance of the Portfolio for the period from February 1, 2006 through the end of the preceding calendar month, calculated as though there had been no waiver of the base management fee, was less than performance of the Portfolio's primary benchmark index for that period. The fee rate shown also includes the impact of any performance adjustment. A discussion regarding the basis for the Board of Trustees' approval of the Portfolios' investment advisory agreements will be included in the Portfolios' next annual or semiannual report to shareholders, following such approval. You can request the Portfolios' annual or semiannual reports (as they become available), free of charge, by contacting your plan sponsor, broker-dealer, or financial institution, or by contacting a Janus representative at 1-877-335-2687. The reports are also available, free of charge, on www.janus.com/info. WORLDWIDE GROWTH PORTFOLIO For Worldwide Growth Portfolio, the investment advisory fee is determined by calculating a base fee (shown in the previous table) and applying a performance adjustment (described in further detail below). The performance adjustment either increases or decreases the base fee depending on how well the Portfolio has performed relative to the Morgan Stanley Capital International World Index(SM). Only the base fee rate applied until February 2007 for the Portfolio, at which time the calculation of the performance adjustment was applied as follows: Investment Advisory Fee = Base Fee +/- Performance Adjustment The investment advisory fee rate paid to Janus Capital by Worldwide Growth Portfolio consists of two components: (1) a base fee calculated by applying the contractual fixed rate of the advisory fee to the Portfolio's average daily net assets during the previous month ("Base Fee"), plus or minus (2) a performance-fee adjustment ("Performance Adjustment") calculated by applying a variable rate of up to 0.15% (positive or negative) to the Portfolio's average daily net assets during the applicable performance measurement period. The performance measurement period generally is the previous 36 months, although no Performance Adjustment will be made until the Portfolio's performance-based fee structure has been in effect for at least 12 months. When the Portfolio's performance-based fee structure has been in effect for at least 12 months, but less than 36 months, the performance measurement period will be equal to the time that has elapsed since the performance-based fee structure took effect. As noted above, any applicable Performance Adjustment began February 2007 for the Portfolio. No Performance Adjustment will be applied unless the difference between the Portfolio's investment performance and the cumulative investment record of the Portfolio's benchmark index is 0.50% or greater (positive or negative) during the applicable performance measurement period. Because the Performance Adjustment is tied to the Portfolio's relative performance compared to its benchmark index (and not its absolute performance), the Performance Adjustment could increase Janus Capital's fee even if the Portfolio's Shares lose value during the performance measurement period and could decrease Janus Capital's fee even if the Portfolio's Shares increase in value during the performance measurement period. For purposes of computing the Base Fee and the Performance Adjustment, net assets will be averaged over different periods (average daily net assets during the previous month for the Base Fee, versus average daily net assets during the performance measurement period for the Performance Adjustment). Performance of the Portfolio is calculated net of expenses whereas the Portfolio's benchmark index does not have any fees or expenses. Reinvestment of dividends and distributions is included in calculating both the performance of the Portfolio and the Portfolio's benchmark index. Management of the Portfolios 33 The Base Fee is calculated and accrued daily. The Performance Adjustment is calculated monthly in arrears and is accrued evenly each day throughout the month. The investment fee is paid monthly in arrears. The investment performance of the Portfolio's Service Shares for the performance measurement period is used to calculate the Performance Adjustment. After Janus Capital determines whether the Portfolio's performance was above or below its benchmark index by comparing the investment performance of the Portfolio's Service Shares against the cumulative investment record of the Portfolio's benchmark index, Janus Capital will apply the same Performance Adjustment (positive or negative) across each other class of shares of the Portfolio, as applicable. It is not possible to predict the effect of the Performance Adjustment on future overall compensation to Janus Capital since it will depend on the performance of the Portfolio relative to the record of the Portfolio's benchmark index and future changes to the size of the Portfolio. The Portfolio's Statement of Additional Information contains additional information about performance-based fees. 34 Janus Aspen Series INVESTMENT PERSONNEL Unless otherwise noted, the Portfolio Manager has primary responsibility for the day-to-day management of the Portfolio described. The Portfolios are presented in the order listed on this Prospectus' cover. LARGE CAP GROWTH PORTFOLIO -------------------------------------------------------------------------------- Co-Portfolio Managers Jonathan D. Coleman and Daniel Riff are responsible for the day-to-day management of the Portfolio. Mr. Coleman, as lead Portfolio Manager, has the authority to exercise final decision-making on the overall portfolio. JONATHAN D. COLEMAN, CFA, is Co-Chief Investment Officer of Janus Capital. He is Executive Vice President and Co-Portfolio Manager of Large Cap Growth Portfolio, which he has co-managed since November 2007. Mr. Coleman was Portfolio Manager of Mid Cap Growth Portfolio from February 2002 to October 2007. Mr. Coleman is also Portfolio Manager of other Janus accounts. He joined Janus Capital in 1994 as a research analyst. Mr. Coleman holds a Bachelor's degree in Political Economy and Spanish from Williams College, where he was a member of Phi Beta Kappa. As a Fulbright Fellow, he conducted research on economic integration in Central America. Mr. Coleman holds the Chartered Financial Analyst designation. DANIEL RIFF is Executive Vice President and Co-Portfolio Manager of Large Cap Growth Portfolio, which he has co-managed since November 2007. Mr. Riff is also Portfolio Manager of other Janus accounts. He joined Janus Capital in 2003 as an analyst. Prior to joining Janus Capital, he was a student at the University of Pennsylvania (2002-2004). Mr. Riff holds a Bachelor's degree (magna cum laude) in Economics from Williams College and a Master of Business Administration degree with honors in Finance from The Wharton School at the University of Pennsylvania. MID CAP GROWTH PORTFOLIO -------------------------------------------------------------------------------- BRIAN DEMAIN, CFA, is Executive Vice President and Portfolio Manager of Mid Cap Growth Portfolio, which he has managed since November 2007. He served as Assistant Portfolio Manager of the Portfolio from September 2004 to October 2007. Mr. Demain joined Janus Capital in 1999 as a securities analyst. He holds a Bachelor's degree in Economics from Princeton University, where he graduated summa cum laude and was a recipient of the Daniel L. Rubinfeld '67 Prize in Empirical Economics for his senior thesis. Mr. Demain holds the Chartered Financial Analyst designation. BALANCED PORTFOLIO -------------------------------------------------------------------------------- Co-Portfolio Managers Marc Pinto and Gibson Smith jointly share responsibility for the day-to-day management of the Portfolio, with no limitation on the authority of one co-portfolio manager in relation to the other. Mr. Pinto focuses on the equity portion of the Portfolio. Mr. Smith focuses on the fixed-income portion of the Portfolio. MARC PINTO, CFA, is Executive Vice President and Co-Portfolio Manager of Balanced Portfolio, which he has co-managed since May 2005. Mr. Pinto is also Portfolio Manager of other Janus accounts. Mr. Pinto joined Janus Capital in 1994 as an analyst. He holds a Bachelor's degree in History from Yale University and a Master's degree in Business Administration from Harvard University. He holds the Chartered Financial Analyst designation. GIBSON SMITH is Co-Chief Investment Officer of Janus Capital. He is Executive Vice President and Co-Portfolio Manager of Balanced Portfolio, which he has co-managed since May 2005. Mr. Smith is also Portfolio Manager of other Janus accounts. He joined Janus Capital in 2001 as a fixed-income analyst. Mr. Smith holds a Bachelor's degree in Economics from the University of Colorado. WORLDWIDE GROWTH PORTFOLIO -------------------------------------------------------------------------------- JASON P. YEE, CFA, is Executive Vice President and Portfolio Manager of Worldwide Growth Portfolio, which he has managed since July 2004. Mr. Yee is also Portfolio Manager of other Janus accounts. He joined Janus Capital in 1992, working as a research analyst until 1996. He re-joined Janus Capital in 2000 as a research analyst. He holds a Bachelor of Science in Mechanical Engineering from Stanford University. Mr. Yee holds the Chartered Financial Analyst designation. Management of the Portfolios 35 INTERNATIONAL GROWTH PORTFOLIO -------------------------------------------------------------------------------- BRENT A. LYNN, CFA, is Executive Vice President and Portfolio Manager of International Growth Portfolio, which he has managed or co-managed since January 2001. Mr. Lynn is also Portfolio Manager of other Janus accounts. He joined Janus Capital in 1991 as a research analyst. Mr. Lynn holds a Bachelor of Arts degree in Economics and a Master's degree in Economics and Industrial Engineering from Stanford University. Mr. Lynn holds the Chartered Financial Analyst designation. FLEXIBLE BOND PORTFOLIO -------------------------------------------------------------------------------- Co-Portfolio Managers Gibson Smith and Darrell Watters jointly share responsibility for the day-to-day management of the Portfolio, with no limitation on the authority of one co-portfolio manager in relation to the other. GIBSON SMITH is Co-Chief Investment Officer of Janus Capital. He is Executive Vice President and Co-Portfolio Manager of Flexible Bond Portfolio, which he has co-managed since May 2007. Mr. Smith is also Portfolio Manager of other Janus accounts. He joined Janus Capital in 2001 as a fixed-income analyst. He holds a Bachelor's degree in Economics from the University of Colorado. DARRELL WATTERS is Executive Vice President and Co-Portfolio Manager of Flexible Bond Portfolio, which he has co-managed since May 2007. Mr. Watters is also Portfolio Manager of other Janus accounts and performs duties as a fixed-income analyst. He joined Janus Capital in 1993 as a municipal bond trader. Mr. Watters holds a Bachelor's degree in Economics from Colorado State University. Information about the compensation structure, other accounts managed, and the range of ownership of securities for the portfolio managers is included in the SAI. 36 Janus Aspen Series OTHER INFORMATION -------------------------------------------------------------------------------- CLASSES OF SHARES Each Portfolio currently offers two or three classes of shares. Only Institutional Shares are offered by this Prospectus. Institutional Shares are sold under the name Janus Aspen Series. The Shares are available only in connection with investment in and payments under variable insurance contracts, as well as certain qualified retirement plans. Service Shares and Service II Shares of each Portfolio offering such Shares are offered only in connection with investment in and payments under variable insurance contracts, as well as certain qualified retirement plans that require a fee from Portfolio assets to procure distribution and administrative services to contract owners and plan participants. For Service II Shares, a redemption fee may be imposed on interests in separate accounts or plans held 60 days or less. Because the expenses of each class may differ, the performance of each class is expected to differ. If you would like additional information about the Service Shares or Service II Shares, please call 1-800-525-0020. CLOSED FUND POLICIES The Portfolios may limit sales of their Shares to new investors if Janus Capital and the Trustees believe continued sales may adversely affect a Portfolio's ability to achieve its investment objective. If sales of a Portfolio are limited, it is expected that existing shareholders invested in that Portfolio would be permitted to continue to purchase Shares through their existing Portfolio accounts and to reinvest any dividends or capital gains distributions in such accounts, absent highly unusual circumstances. Requests for new accounts into a closed portfolio would be reviewed by management, taking into consideration eligibility requirements and whether the addition to the portfolio is believed to negatively impact existing portfolio shareholders. The Portfolios may decline opening new accounts, including eligible new accounts, if it would be in the best interests of the Portfolios and their shareholders. International Growth Portfolio has limited sales of its Shares. Information regarding general policies and exceptions can be found under Closed Fund Policies in the "Shareholder's Guide" section of this Prospectus. PENDING LEGAL MATTERS In the fall of 2003, the Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), and the Colorado Division of Securities ("CDS") announced that they were investigating alleged frequent trading practices in the mutual fund industry. On August 18, 2004, Janus Capital announced that it had reached final settlements with the SEC, the NYAG, the COAG, and the CDS related to such regulators' investigations into Janus Capital's frequent trading arrangements. A number of civil lawsuits were brought against Janus Capital and certain of its affiliates, the Janus funds, and related entities and individuals based on allegations similar to those announced by the above regulators and were filed in several state and federal jurisdictions. Such lawsuits alleged a variety of theories for recovery including, but not limited to, the federal securities laws, other federal statutes (including ERISA), and various common law doctrines. The Judicial Panel on Multidistrict Litigation transferred these actions to the U.S. District Court for the District of Maryland (the "Court") for coordinated proceedings. On September 29, 2004, five consolidated amended complaints were filed with the Court that generally include: (i) claims by a putative class of investors in certain Janus funds asserting claims on behalf of the investor class (Marini, et al. v. Janus Investment Fund, et al., U.S. District Court, District of Maryland, Case No. 04-CV-00497); (ii) derivative claims by investors in certain Janus funds ostensibly on behalf of such funds (Steinberg et al. v. Janus Capital Management, LLC et al., U.S. District Court, District of Maryland, Case No. 04-CV-00518); (iii) claims on behalf of participants in the Janus 401(k) plan (Wangberger v. Janus Capital Group Inc., 401(k) Advisory Committee, et al., U.S. District Court, District of Maryland, Case No. JFM-05-2711); (iv) claims brought on behalf of shareholders of Janus Capital Group Inc. ("JCGI") on a derivative basis against the Board of Directors of JCGI (Chasen v. Whiston, et al., U.S. District Court, District of Maryland, Case No. 04-MD-00855); and (v) claims by a putative class of shareholders of JCGI asserting claims on behalf of the shareholders (Wiggins, et al. v. Janus Capital Group Inc., et al., U.S. District Court, District of Maryland, Case No. 04-CV-00818). Each of the five complaints initially named JCGI and/or Janus Capital as a defendant. In addition, the following were also named as defendants in one or more of the actions: Janus Investment Fund ("JIF"), Janus Aspen Series ("JAS"), Janus Adviser Series ("JAD"), Janus Distributors LLC, Enhanced Investment Technologies, LLC ("INTECH"), Bay Isle Financial LLC ("Bay Isle"), Perkins, Wolf, McDonnell and Company, LLC ("Perkins"), the Advisory Committee of the Janus 401(k) plan, and the current or former directors of JCGI. Other information 37 On August 25, 2005, the Court entered orders dismissing most of the claims asserted against Janus Capital and its affiliates by fund investors in the Marini and Steinberg cases (actions (i) and (ii) above) except certain claims under Section 10(b) of the Securities Exchange Act of 1934 and under Section 36(b) of the Investment Company Act of 1940, as amended (the "1940 Act"). On August 15, 2006, the Wangberger complaint in the 401(k) plan class action (action (iii) above) was dismissed by the district court with prejudice; the plaintiff appealed that dismissal decision to the United States Court of Appeals for the Fourth Circuit. The appeal is still pending and argument in the matter was held in December 2007. The Court also dismissed the Chasen lawsuit (action (iv) above) against JCGI's Board of Directors without leave to amend. Finally, a Motion to Dismiss the Wiggins suit (action (v) above) was granted and the matter was dismissed in May 2007. However, in June 2007, Plaintiffs appealed that dismissal to the United States Court of Appeals for the Fourth Circuit. That appeal is currently pending. In addition to the lawsuits described above, the Auditor of the State of West Virginia ("Auditor"), in his capacity as securities commissioner, has initiated administrative proceedings against many of the defendants in the market timing cases (including JCGI and Janus Capital) and, as a part of its relief, is seeking disgorgement and other monetary relief based on similar market timing allegations (In the Matter of Janus Capital Group Inc. et al., Before the Securities Commissioner, State of West Virginia, Summary Order No. 05-1320). The respondents in these proceedings collectively sought a Writ of Prohibition in state court, which was denied. Their subsequent Petition for Appeal was also denied. Consequently, in September 2006, JCGI and Janus Capital filed their answer to the Auditor's summary order instituting proceedings and requested a hearing. A status conference was held on June 28, 2007, during which the parties were ordered to submit their proposed scheduling order. To date, no scheduling order has been entered in the case. In addition to the pending Motion to Discharge Order to Show Cause, JCGI and Janus Capital, as well as other similarly situated defendants, continue to challenge the statutory authority of the Auditor to bring such an action. During 2007, several lawsuits were filed against Janus Management Holdings Corporation ("Janus Holdings"), an affiliate of JCGI, by former Janus portfolio managers, alleging that Janus Holdings unilaterally implemented certain changes to compensation in violation of prior agreements. These complaints allege some or all of the following claims: (1) breach of contract; (2) willful and wanton breach of contract; (3) breach of good faith and fair dealing; and (4) estoppel. Janus Holdings filed Answers to these complaints denying any liability for these claims and intends to vigorously defend against the allegations. Additional lawsuits may be filed against certain of the Janus funds, Janus Capital, and related parties in the future. Janus Capital does not currently believe that these pending actions will materially affect its ability to continue providing services it has agreed to provide to the Janus funds. CONFLICTS OF INTEREST The Shares offered by this Prospectus are available only to variable annuity and variable life separate accounts of insurance companies that are unaffiliated with Janus Capital and to certain qualified retirement plans. Although the Portfolios do not currently anticipate any disadvantages to policy owners because each Portfolio offers its Shares to such entities, there is a possibility that a material conflict may arise. The Trustees monitor events in an effort to identify any disadvantages or material irreconcilable conflicts and to determine what action, if any, should be taken in response. If a material disadvantage or conflict is identified, the Trustees may require one or more insurance company separate accounts or qualified plans to withdraw its investments in one or more Portfolios or substitute Shares of another Portfolio. If this occurs, a Portfolio may be forced to sell its securities at disadvantageous prices. In addition, the Portfolios may refuse to sell their Shares to any separate account or qualified plan or may suspend or terminate the offering of a Portfolio's Shares if such action is required by law or regulatory authority or is in the best interests of that Portfolio's shareholders. It is possible that a qualified plan investing in the Portfolios could lose its qualified plan status under the Internal Revenue Code, which could have adverse tax consequences on insurance company separate accounts investing in the Portfolios. Janus Capital intends to monitor such qualified plans, and the Portfolios may discontinue sales to a qualified plan and require plan participants with existing investments in the Portfolios to redeem those investments if a plan loses (or in the opinion of Janus Capital is at risk of losing) its qualified plan status. 38 Janus Aspen Series DISTRIBUTION OF THE PORTFOLIOS The Portfolios are distributed by Janus Distributors LLC ("Janus Distributors"), which is a member of the Financial Industry Regulatory Authority, Inc. ("FINRA"). To obtain information about FINRA member firms and their associated persons, you may contact FINRA at www.finra.org, or 1-800-289-9999. Other information 39 DISTRIBUTIONS AND TAXES -------------------------------------------------------------------------------- DISTRIBUTIONS To avoid taxation of the Portfolios, the Internal Revenue Code requires each Portfolio to distribute all or substantially all of its net investment income and any net capital gains realized on its investments at least annually. A Portfolio's income from certain dividends, interest, and any net realized short-term capital gains are paid to shareholders as ordinary income dividends. Net realized long-term capital gains are paid to shareholders as capital gains distributions, regardless of how long Shares of the Portfolio have been held. Distributions are made at the class level, so they may vary from class to class within a single Portfolio. DISTRIBUTION SCHEDULE Dividends for the Portfolios are normally declared and distributed in June and December. Capital gains are normally declared and distributed in June. However, in certain situations it may be necessary for a Portfolio to declare and distribute capital gains in December. If necessary, dividends and net capital gains may be distributed at other times as well. HOW DISTRIBUTIONS AFFECT A PORTFOLIO'S NAV Distributions are paid to shareholders as of the record date of a distribution of a Portfolio, regardless of how long the shares have been held. Undistributed dividends and net capital gains are included in each Portfolio's daily NAV. The share price of a Portfolio drops by the amount of the distribution, net of any subsequent market fluctuations. For example, assume that on December 31, a Portfolio declared a dividend in the amount of $0.25 per share. If the Portfolio's share price was $10.00 on December 30, the Portfolio's share price on December 31 would be $9.75, barring market fluctuations. TAXES TAXES ON DISTRIBUTIONS Because Shares of the Portfolios may be purchased only through variable insurance contracts and qualified plans, it is anticipated that any income dividends or net capital gains distributions made by a Portfolio will be exempt from current taxation if left to accumulate within the variable insurance contract or qualified plan. Generally, withdrawals from such contracts or plans may be subject to ordinary income tax and, if made before age 59 1/2, a 10% penalty tax may be imposed. The tax status of your investment depends on the features of your qualified plan or variable insurance contract. Further information may be found in your plan documents or in the prospectus of the separate account offering such contract. TAXATION OF THE PORTFOLIOS Dividends, interest, and some capital gains received by the Portfolios on foreign securities may be subject to foreign tax withholding or other foreign taxes. If a Portfolio is eligible, it may from year to year make the election permitted under Section 853 of the Internal Revenue Code to pass through such taxes to shareholders as a foreign tax credit. If such an election is not made, any foreign taxes paid or accrued will represent an expense to the Portfolios. The Portfolios do not expect to pay any federal income or excise taxes because they intend to meet certain requirements of the Internal Revenue Code. In addition, because the Shares of each Portfolio are sold in connection with variable insurance contracts, each Portfolio intends to qualify under the Internal Revenue Code with respect to the diversification requirements related to the tax-deferred status of insurance company separate accounts. 40 Janus Aspen Series SHAREHOLDER'S GUIDE -------------------------------------------------------------------------------- Investors may not purchase or redeem Shares of the Portfolios directly. Shares may be purchased or redeemed only through variable insurance contracts offered by the separate accounts of participating insurance companies or through qualified retirement plans. Certain Portfolios may not be available in connection with a particular contract, and certain contracts may limit allocations among the Portfolios. REFER TO THE PROSPECTUS FOR THE PARTICIPATING INSURANCE COMPANY'S SEPARATE ACCOUNT OR YOUR PLAN DOCUMENTS FOR INSTRUCTIONS ON PURCHASING OR SELLING OF VARIABLE INSURANCE CONTRACTS AND ON HOW TO SELECT SPECIFIC PORTFOLIOS AS INVESTMENT OPTIONS FOR A CONTRACT OR A QUALIFIED PLAN. With certain limited exceptions, the Portfolios are available only to U.S. citizens or residents. PRICING OF PORTFOLIO SHARES The per share NAV for each class is computed by dividing the total value of assets allocated to the class, less liabilities allocated to that class, by the total number of shares outstanding for the class. A Portfolio's NAV is calculated as of the close of the regular trading session of the New York Stock Exchange ("NYSE") (normally 4:00 p.m. New York time) each day that the NYSE is open ("business day"). However, the NAV may be calculated earlier if trading on the NYSE is restricted, or as permitted by the SEC. Because foreign securities markets may operate on days that are not business days in the United States, the value of a Portfolio's holdings may change on days when you will not be able to purchase or redeem a Portfolio's shares to the extent the Portfolio is invested in such markets. All purchases and redemptions will be duly processed at the NAV next calculated after your request is received in good order by a Portfolio or its agent. In order to receive a day's price, your order must be received in good order by a Portfolio (or insurance company or plan sponsor) or its agents by the close of the regular trading session of the NYSE. Securities held by the Portfolios are generally valued at market value. Certain short-term instruments maturing within 60 days or less are valued at amortized cost, which approximates market value. If a market quotation for a security is not readily available or is deemed unreliable, or if an event that is expected to affect the value of the security occurs after the close of the principal exchange or market on which the security is traded, and before the close of the NYSE, a fair value of the security (except for short-term instruments maturing within 60 days or less) will be determined in good faith under policies and procedures established by and under the supervision of the Portfolios' Board of Trustees. Circumstances in which fair value pricing may be utilized include, but are not limited to: (i) when significant events occur which may affect the securities of a single issuer, such as mergers, bankruptcies, or significant issuer-specific developments; (ii) when significant events occur which may affect an entire market, such as natural disasters or significant governmental actions; and (iii) when non-significant events occur such as markets closing early or not opening, security trading halts, or pricing of nonvalued securities and restricted or nonpublic securities. The Portfolios may use a systematic fair valuation model provided by an independent pricing service to value foreign equity securities in order to adjust for stale pricing, which may occur between the close of certain foreign exchanges and of the NYSE. While fair value pricing may be more commonly used with foreign equity securities, it may also be used with, among other things, thinly-traded domestic securities or fixed-income securities. Due to the subjective nature of fair value pricing, a Portfolio's value for a particular security may be different from the last quoted market price. Fair value pricing may reduce arbitrage activity involving the frequent buying and selling of mutual fund shares by investors seeking to take advantage of a perceived lag between a change in the value of a Portfolio's portfolio securities and the reflection of such change in the Portfolio's NAV, as further described in the "Excessive Trading" section of this Prospectus. While funds that invest in foreign securities may be at a greater risk for arbitrage activity, such activity may also arise in funds which do not invest in foreign securities, for example, when trading in a security held by a portfolio is halted and does not resume prior to the time the portfolio calculates its NAV (referred to as "stale pricing"). Portfolios that hold thinly-traded securities, such as certain small-capitalization securities, may be subject to attempted use of arbitrage techniques. To the extent that the Portfolio's valuation of a security is different from the security's market value, short-term arbitrage traders may dilute the NAV of the Portfolio, which negatively impacts long-term shareholders. The Portfolios' fair value pricing and excessive trading policies and procedures may not completely eliminate short-term trading in certain omnibus accounts and other accounts traded through intermediaries. The value of the securities of other open-end funds held by a Portfolio, if any, will be calculated using the NAV of such underlying funds, and the prospectuses for such open-end funds explain the circumstances under which they use fair value pricing and the effects of using fair value pricing. Shareholder's guide 41 PURCHASES Purchases of Shares may be made only by the separate accounts of insurance companies for the purpose of funding variable insurance contracts or by qualified plans. Refer to the prospectus of the appropriate insurance company separate account or your plan documents for information on how to invest in the Shares of each Portfolio. Participating insurance companies and certain other designated organizations are authorized to receive purchase orders on the Portfolios' behalf. As discussed under "Investment Adviser," Janus Capital and its affiliates may make payments to selected insurance companies, qualified plan service providers, or other financial intermediaries that were instrumental in the acquisition of accounts in the Portfolios or that provide services in connection with investments in the Portfolios. You may wish to consider such arrangements when evaluating any recommendation of the Portfolios. Each Portfolio reserves the right to reject any purchase order, including exchange purchases, for any reason. The Portfolios are not intended for excessive trading. For more information about the Portfolios' policy on excessive trading, refer to "Excessive Trading." The Portfolios may discontinue sales to a qualified plan and require plan participants with existing investments in the Shares to redeem those investments if the plan loses (or in the opinion of Janus Capital, is at risk of losing) its qualified plan status. In compliance with the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 ("USA PATRIOT Act"), your insurance company or plan sponsor is required to verify certain information on your account application as part of its Anti-Money Laundering Program. You will be required to provide your full name, date of birth, social security number, and permanent street address to assist in verifying your identity. You may also be asked to provide documents that may help to establish your identity. Until verification of your identity is made, your insurance company or plan sponsor may temporarily limit additional share purchases. In addition, your insurance company or plan sponsor may close an account if they are unable to verify a shareholder's identity. Please contact your insurance company or plan sponsor if you need additional assistance when completing your application or additional information about the insurance company or plan sponsor's Anti-Money Laundering Program. REDEMPTIONS Redemptions, like purchases, may be effected only through the separate accounts of participating insurance companies or through qualified plans. Please refer to the appropriate separate account prospectus or plan documents for details. Shares of any Portfolio may be redeemed on any business day on which the Portfolio's NAV is calculated. Redemptions are duly processed at the NAV next calculated after your redemption order is received in good order by a Portfolio or its agent. Redemption proceeds will normally be sent the business day following receipt of the redemption order, but in no event later than seven days after receipt of such order. REDEMPTIONS IN-KIND Shares normally will be redeemed for cash, although each Portfolio retains the right to redeem some or all of its shares in-kind under unusual circumstances, in order to protect the interests of remaining shareholders, or to accommodate a request by a particular shareholder that does not adversely affect the interest of the remaining shareholders, by delivery of securities selected from its assets at its discretion. However, each Portfolio is required to redeem shares solely for cash up to the lesser of $250,000 or 1% of the NAV of that Portfolio during any 90-day period for any one shareholder. Should redemptions by any shareholder exceed such limitation, a Portfolio will have the option of redeeming the excess in cash or in-kind. In-kind payment means payment will be made in portfolio securities rather than cash. If this occurs, the redeeming shareholder might incur brokerage or other transaction costs to convert the securities to cash. CLOSED FUND POLICIES - INTERNATIONAL GROWTH PORTFOLIO The Portfolio has limited sales of its Shares because Janus Capital and the Trustees believe continued sales may adversely affect the Portfolio's ability to achieve its investment objective. Sales through new insurance and retirement platform relationships have generally been discontinued and new accounts with the Portfolio may not be opened. Investors who meet certain criteria described below, however, may be able to purchase Shares of the Portfolio. You may be required to demonstrate eligibility to purchase Shares of the Portfolio before your investment is accepted. If you are a current Portfolio shareholder and close an existing Portfolio account, you will not be able to make additional investments in the 42 Janus Aspen Series Portfolio unless you meet one of the specified criteria. The Portfolio may resume sales of its Shares at some future date, but it has no present intention to do so. Investors who meet the following criteria may be able to invest in the Portfolio: (i) new or existing variable insurance product contracts funded by separate accounts of participating insurance companies that currently offer the Portfolio for investment may be permitted to purchase Shares and to reinvest any dividends or capital gains distributions in such accounts, absent highly unusual circumstances; (ii) existing shareholders invested in the Portfolio are permitted to continue to purchase Shares through their existing Portfolio accounts and to reinvest any dividends or capital gains distributions in such accounts, absent highly unusual circumstances; (iii) under certain circumstances, all or a portion of the Shares held in a closed Portfolio account may be reallocated to a different form of ownership, which may include, but is not limited to, mandatory retirement distributions, legal proceedings, estate settlements, and the gifting of Portfolio Shares; (iv) it is expected that existing or new participants in employer-sponsored retirement plans, including employees of Janus Capital Group Inc. ("JCGI") and any of its subsidiaries covered under the JCGI retirement plan, currently offering the Portfolio as an investment option may direct contributions to the Portfolio through their plan, regardless of whether the participant invested in such Portfolio prior to its closing; (v) Janus Capital encourages its employees to own Shares of the Janus funds, and as such, upon prior approval, employees of Janus Capital and its affiliates may open new accounts in the closed Portfolio; Trustees of the Janus funds and directors of JCGI may also open new accounts in the closed Portfolio; (vi) it is expected that participants in employer-sponsored retirement plans purchasing through platforms which currently offer the Portfolio, or the corresponding fund in another Janus investment trust (if applicable), as an investment option may direct contributions to the Portfolio through their plan, regardless of whether their plan invested in such Portfolio prior to its closing; and (vii) in the case of certain mergers or reorganizations, sponsors of certain retirement plans may be able to add the Portfolio as an investment option and those with existing accounts in the Portfolio would be able to continue to invest in the Portfolio on behalf of new customers. Such mergers, reorganizations, acquisitions, or other business combination are those in which one or more companies involved in such transaction currently offers the Portfolio as an investment option, and any company that as a result of such transaction becomes affiliated with the company currently offering the Portfolio (as a parent company, subsidiary, sister company, or otherwise). In the case of fund mergers, existing shareholders of predecessor funds may be treated as existing shareholders of a surviving closed Portfolio in applying closed fund policies. Requests for new accounts into a closed Portfolio will be reviewed by management on an individual basis, taking into consideration whether the addition to the Portfolio is believed to negatively impact existing Portfolio shareholders. EXCESSIVE TRADING EXCESSIVE TRADING POLICIES AND PROCEDURES The Board of Trustees has adopted policies and procedures with respect to short-term and excessive trading of Portfolio shares ("excessive trading"). The Portfolios are intended for long-term investment purposes only, and the Portfolios will take reasonable steps to attempt to detect and deter excessive trading. Transactions placed in violation of the Portfolios' excessive trading policies may be cancelled or revoked by the Portfolio by the next business day following receipt by the Portfolio. The trading history of accounts determined to be under common ownership or control within any of the Janus funds may be considered in enforcing these policies and procedures. As described below, however, the Portfolios may not be able to identify all instances of excessive trading or completely eliminate the possibility of excessive trading. In particular, it may be difficult to identify excessive trading in certain omnibus accounts and other accounts traded through intermediaries (such as insurance companies or plan sponsors). By their nature, omnibus accounts, in which purchases and redemptions of the Portfolios' shares by multiple investors are aggregated by the intermediary and presented to the Portfolios on a net basis, may effectively conceal the identity of individual investors and their transactions from the Portfolios and their agents. This makes the elimination of excessive trading in the accounts impractical without the assistance of the intermediary. The Portfolios attempt to deter excessive trading through at least the following methods: - fair valuation of securities as described under "Pricing of Portfolio Shares;" and - redemption fees (where applicable on certain classes of certain Portfolios). The Portfolios monitor Portfolio share transactions, subject to the limitations described below. Generally, a purchase of a Portfolio's shares followed by the redemption of the Portfolio's shares within a 90-day period may result in enforcement Shareholder's guide 43 of a Portfolio's excessive trading policies and procedures with respect to future purchase orders, provided that the Portfolios reserve the right to reject any purchase request as explained above. If the Portfolios detect excessive trading, the Portfolios may suspend or permanently terminate the exchange privilege (if permitted by your insurance company or plan sponsor) of the account and may bar future purchases into the Portfolio and any of the other Janus funds by such investor. The Portfolios' excessive trading policies generally do not apply to a money market portfolio, although money market portfolios at all times reserve the right to reject any purchase request (including exchange purchases, if permitted by your insurance company or plan sponsor) for any reason without prior notice. The Portfolios' Board of Trustees may approve from time to time a redemption fee to be imposed by any Janus fund, subject to 60 days' notice to shareholders of that fund. Investors who place transactions through the same insurance company or plan sponsor on an omnibus basis may be deemed part of a group for the purpose of the Portfolios' excessive trading policies and procedures and may be rejected in whole or in part by a Portfolio. The Portfolios, however, cannot always identify or reasonably detect excessive trading that may be facilitated by insurance companies or plan sponsors or made difficult to identify through the use of omnibus accounts by those intermediaries that transmit purchase, exchange, and redemption orders to the Portfolios, and thus the Portfolios may have difficulty curtailing such activity. Transactions accepted by an insurance company or plan sponsor in violation of the Portfolios' excessive trading policies may be cancelled or revoked by a Portfolio by the next business day following receipt by that Portfolio. In an attempt to detect and deter excessive trading in omnibus accounts, the Portfolios or their agents may require intermediaries to impose restrictions on the trading activity of accounts traded through those intermediaries. Such restrictions may include, but are not limited to, requiring that trades be placed by U.S. mail, prohibiting purchases for a designated period of time (typically 30 to 90 days) by investors who have recently redeemed Portfolio shares, requiring intermediaries to report information about customers who purchase and redeem large amounts, and similar restrictions. The Portfolios' ability to impose such restrictions with respect to accounts traded through particular intermediaries may vary depending on the systems capabilities, applicable contractual and legal restrictions, and cooperation of those intermediaries. Certain transactions in Portfolio shares, such as periodic rebalancing (no more frequently than quarterly) or those which are made pursuant to systematic purchase, exchange, or redemption programs generally do not raise excessive trading concerns and normally do not require application of the Portfolios' methods to detect and deter excessive trading. Each Portfolio also reserves the right to reject any purchase request (including exchange purchases) by any investor or group of investors for any reason without prior notice, including, in particular, if the trading activity in the account(s) is deemed to be disruptive to a Portfolio. For example, a Portfolio may refuse a purchase order if the portfolio managers believe they would be unable to invest the money effectively in accordance with the Portfolio's investment policies or the Portfolio would otherwise be adversely affected due to the size of the transaction, frequency of trading, or other factors. The Portfolios' policies and procedures regarding excessive trading may be modified at any time by the Portfolios' Board of Trustees. EXCESSIVE TRADING RISKS Excessive trading may present risks to a Portfolio's long-term shareholders. Excessive trading into and out of a Portfolio may disrupt portfolio investment strategies, may create taxable gains to remaining Portfolio shareholders, and may increase Portfolio expenses, all of which may negatively impact investment returns for all remaining shareholders, including long-term shareholders. Portfolios that invest in foreign securities may be at a greater risk for excessive trading. Investors may attempt to take advantage of anticipated price movements in securities held by a portfolio based on events occurring after the close of a foreign market that may not be reflected in the portfolio's NAV (referred to as "price arbitrage"). Such arbitrage opportunities may also arise in portfolios which do not invest in foreign securities, for example, when trading in a security held by a portfolio is halted and does not resume prior to the time the portfolio calculates its NAV (referred to as "stale pricing"). Portfolios that hold thinly-traded securities, such as certain small-capitalization securities, may be subject to attempted use of arbitrage techniques. To the extent that a Portfolio's valuation of a security differs from the 44 Janus Aspen Series security's market value, short-term arbitrage traders may dilute the NAV of a Portfolio, which negatively impacts long-term shareholders. Although the Portfolios have adopted fair valuation policies and procedures intended to reduce the Portfolios' exposure to price arbitrage, stale pricing, and other potential pricing inefficiencies, under such circumstances there is potential for short-term arbitrage trades to dilute the value of Portfolio shares. Although the Portfolios take steps to detect and deter excessive trading pursuant to the policies and procedures described in this Prospectus and approved by the Board of Trustees, there is no assurance that these policies and procedures will be effective in limiting excessive trading in all circumstances. For example, the Portfolios may be unable to completely eliminate the possibility of excessive trading in certain omnibus accounts and other accounts traded through intermediaries. Omnibus accounts may effectively conceal the identity of individual investors and their transactions from the Portfolios and their agents. This makes the Portfolios' identification of excessive trading transactions in the Portfolios through an omnibus account difficult and makes the elimination of excessive trading in the account impractical without the assistance of the intermediary. Moreover, the contract between an insurance company and the owner of a variable insurance contract may govern the frequency with which the contract owner may cause the insurance company to purchase or redeem shares of a Portfolio. Although the Portfolios encourage intermediaries to take necessary actions to detect and deter excessive trading, some intermediaries may be unable or unwilling to do so, and accordingly, the Portfolios cannot eliminate completely the possibility of excessive trading. Shareholders that invest through an omnibus account should be aware that they may be subject to the policies and procedures of their insurance company or plan sponsor with respect to excessive trading in the Portfolios. AVAILABILITY OF PORTFOLIO HOLDINGS INFORMATION The Mutual Fund Holdings Disclosure Policies and Procedures adopted by Janus Capital and all mutual funds managed within the Janus fund complex are designed to be in the best interests of the portfolios and to protect the confidentiality of the portfolios' holdings. The following describes policies and procedures with respect to disclosure of portfolio holdings. - FULL HOLDINGS. Each portfolio is required to disclose its complete holdings in the quarterly holdings report on Form N-Q within 60 days of the end of each fiscal quarter, and in the annual report and semiannual report to portfolio shareholders. These reports (i) are available on the SEC's website at http://www.sec.gov; (ii) may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. (information on the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iii) are available without charge, upon request, by calling a Janus representative at 1-877-335-2687 (toll free). Holdings are generally posted under the Characteristics tab of each portfolio on www.janus.com/info approximately two business days (six business days for Money Market Portfolio) after the end of the following applicable periods. The non-money market portfolios' holdings (excluding cash investments, derivatives, short positions, and other investment positions), consisting of at least the names of the holdings, are generally available on a calendar quarter-end basis with a 30-day lag. Portfolio holdings of portfolios subadvised by INTECH are generally available on a calendar quarter-end basis with a 60-day lag. Money Market Portfolio's holdings are generally available monthly with no lag. - TOP HOLDINGS. Each portfolio's (with the exception of portfolios subadvised by INTECH) top portfolio holdings, in order of position size and as a percentage of a portfolio's total portfolio, are available monthly with a 15-day lag, and on a calendar quarter-end basis with a 15-day lag. Top holdings of portfolios subadvised by INTECH are available monthly with a 30-day lag, and on a calendar quarter-end basis with a 15-day lag. Most portfolios disclose their top ten portfolio holdings. However, certain portfolios disclose only their top five portfolio holdings. - OTHER INFORMATION. Each portfolio may occasionally provide security breakdowns (e.g., industry, sector, regional, market capitalization, and asset allocation), top performance contributors/detractors, and specific portfolio level performance attribution information and statistics monthly with a 30-day lag, and on a calendar quarter-end basis with a 15-day lag. Full portfolio holdings will remain available on the Janus websites at least until a Form N-CSR or Form N-Q is filed with the SEC for the period that includes the date as of which the website information is current. Portfolios disclose their short positions, if applicable, only to the extent required in regulatory reports. Janus Capital may exclude from publication all or any portion of portfolio holdings or change the time periods of disclosure as deemed necessary to protect the interests of the Janus funds. A summary of the portfolios' portfolio holdings disclosure policies and procedures, which includes a discussion of any exceptions, is contained in the Portfolios' SAI. Shareholder's guide 45 SHAREHOLDER COMMUNICATIONS Your insurance company or plan sponsor is responsible for providing annual and semiannual reports, including the financial statements of the Portfolios that you have authorized for investment. These reports show each Portfolio's investments and the market value of such investments, as well as other information about each Portfolio and its operations. Please contact your insurance company or plan sponsor to obtain these reports. The Trust's fiscal year ends December 31. 46 Janus Aspen Series FINANCIAL HIGHLIGHTS -------------------------------------------------------------------------------- The financial highlights tables are intended to help you understand the Portfolios' financial performance through December 31 of the fiscal periods shown. Items "Net asset value, beginning of period" through "Net asset value, end of period" reflect financial results for a single Portfolio Share. The information shown for the fiscal periods ended December 31 has been audited by PricewaterhouseCoopers LLP, whose report, along with the Portfolios' financial statements, is included in the Annual Report, which is available upon request, and incorporated by reference into the Statement of Additional Information. The total returns in the tables represent the rate that an investor would have earned (or lost) on an investment in the Institutional Shares of the Portfolios (assuming reinvestment of all dividends and distributions) but do not include charges and expenses attributable to any insurance product. If these charges and expenses had been included, the performance for the periods shown would be lower.
LARGE CAP GROWTH PORTFOLIO - INSTITUTIONAL SHARES --------------------------------------------------------------------------------------------------------------------------- Years ended December 31 2007 2006 2005 2004 2003 NET ASSET VALUE, BEGINNING OF PERIOD $23.12 $20.86 $20.08 $19.23 $14.61 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.24 0.12 0.09 0.04 0.02 Net gain/(loss) on securities (both realized and unrealized) 3.25 2.25 0.76 0.84 4.62 Total from investment operations 3.49 2.37 0.85 0.88 4.64 LESS DISTRIBUTIONS AND OTHER: Dividends (from net investment income) (0.18) (0.11) (0.07) (0.03) (0.02) Distributions (from capital gains) -- -- -- -- -- Payment from affiliate --(1) -- -- -- -- Total distributions and other (0.18) (0.11) (0.07) (0.03) (0.02) NET ASSET VALUE, END OF PERIOD $26.43 $23.12 $20.86 $20.08 $19.23 Total return* 15.14%(2) 11.38% 4.23% 4.57% 31.73% Net assets, end of period (in thousands) $677,593 $677,289 $730,374 $1,177,145 $1,666,317 Average net assets for the period (in thousands) $686,441 $693,731 $857,660 $1,462,102 $1,533,995 Ratio of gross expenses to average net assets(3)(4) 0.66% 0.69% 0.66% 0.67% 0.67% Ratio of net expenses to average net assets(5) 0.66% 0.69% 0.66% 0.66% 0.67% Ratio of net investment income/(loss) to average net assets 0.89% 0.49% 0.31% 0.14% 0.12% Portfolio turnover rate 78% 54% 87% 33% 24% ---------------------------------------------------------------------------------------------------------------------------
* Includes adjustments in accordance with generally accepted accounting principles. Returns may differ from returns for shareholder transactions. (1) Payment from affiliate aggregated less than $0.01 on a per share basis for the fiscal year end. (2) Janus Capital and/or Janus Services LLC fully reimbursed the Portfolio for a loss on a transaction resulting from certain trading, pricing, and/or shareholder activity errors, which otherwise would have reduced total return by less than 0.01%. (3) The expense ratio reflects expenses prior to any expense offset arrangements. (4) The effect of non-recurring costs assumed by Janus Capital is included in the ratio of gross expenses to average net assets and was less than 0.01%. (5) The expense ratio reflects expenses after any expense offset arrangements. Financial highlights 47
MID CAP GROWTH PORTFOLIO - INSTITUTIONAL SHARES --------------------------------------------------------------------------------------------------------------------------- Years ended December 31 2007 2006 2005 2004 2003 NET ASSET VALUE, BEGINNING OF PERIOD $32.97 $29.02 $25.84 $21.40 $15.84 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.12 0.03 0.08 0.02 0.01 Net gain/(loss) on securities (both realized and unrealized) 7.15 3.92 3.10 4.42 5.55 Total from investment operations 7.27 3.95 3.18 4.44 5.56 LESS DISTRIBUTIONS AND OTHER: Dividends (from net investment income) (0.08) -- -- -- -- Distributions (from capital gains) (0.20) -- -- -- -- Payment from affiliate -- -- --(1) -- -- Total distributions and other (0.28) -- -- -- -- NET ASSET VALUE, END OF PERIOD $39.96 $32.97 $29.02 $25.84 $21.40 Total return* 22.10% 13.61% 12.31%(2) 20.75% 35.10% Net assets, end of period (in thousands) $565,996 $523,173 $532,085 $1,205,813 $1,649,423 Average net assets for the period (in thousands) $550,938 $525,467 $706,963 $1,579,383 $1,461,491 Ratio of gross expenses to average net assets(3)(4) 0.68% 0.69% 0.67% 0.66% 0.67% Ratio of net expenses to average net assets(5) 0.68% 0.69% 0.67% 0.66% 0.67% Ratio of net investment income/(loss) to average net assets 0.27% (0.03)% (0.01)% (0.05)% (0.11)% Portfolio turnover rate 45% 41% 32% 25% 36% ---------------------------------------------------------------------------------------------------------------------------
* Includes adjustments in accordance with generally accepted accounting principles. Returns may differ from returns for shareholder transactions. (1) Payment from affiliate aggregated less than $0.01 on a per share basis for the fiscal year end. (2) Janus Capital and/or Janus Services LLC fully reimbursed the Portfolio for a loss on a transaction resulting from certain trading, pricing, and/or shareholder activity errors, which otherwise would have reduced total return by less than 0.01%. (3) The expense ratio reflects expenses prior to any expense offset arrangements. (4) The effect of non-recurring costs assumed by Janus Capital is included in the ratio of gross expenses to average net assets and was less than 0.01%. (5) The expense ratio reflects expenses after any expense offset arrangements. 48 Janus Aspen Series
BALANCED PORTFOLIO - INSTITUTIONAL SHARES ------------------------------------------------------------------------------------------------------------------------------- Years ended December 31 2007 2006 2005 2004 2003 NET ASSET VALUE, BEGINNING OF PERIOD $27.89 $25.74 $24.39 $22.98 $20.59 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.82 0.61 0.61 0.60 0.47 Net gain/(loss) on securities (both realized and unrealized) 2.09 2.12 1.31 1.35 2.40 Total from investment operations 2.91 2.73 1.92 1.95 2.87 LESS DISTRIBUTIONS AND OTHER: Dividends (from net investment income) (0.76) (0.58) (0.57) (0.54) (0.48) Distributions (from capital gains) -- -- -- -- -- Payment from affiliate -- --(1) --(1) -- -- Total distributions and other (0.76) (0.58) (0.57) (0.54) (0.48) NET ASSET VALUE, END OF PERIOD $30.04 $27.89 $25.74 $24.39 $22.98 Total return* 10.50% 10.72%(2) 7.95%(2) 8.53% 14.05% Net assets, end of period (in thousands) $1,335,428 $1,475,350 $1,681,985 $2,395,562 $3,253,664 Average net assets for the period (in thousands) $1,417,947 $1,554,032 $1,887,185 $3,012,164 $3,183,585 Ratio of gross expenses to average net assets(3)(4) 0.57% 0.58% 0.57% 0.61% 0.67% Ratio of net expenses to average net assets(5) 0.57% 0.57% 0.56% 0.61% 0.67% Ratio of net investment income/(loss) to average net assets 2.54% 2.04% 2.01% 2.08% 2.12% Portfolio turnover rate 54% 52% 52% 64% 69% -------------------------------------------------------------------------------------------------------------------------------
* Includes adjustments in accordance with generally accepted accounting principles. Returns may differ from returns for shareholder transactions. (1) Payment from affiliate aggregated less than $0.01 on a per share basis for the fiscal year end. (2) Janus Capital and/or Janus Services LLC fully reimbursed the Portfolio for a loss on a transaction resulting from certain trading, pricing, and/or shareholder activity errors, which otherwise would have reduced total return by less than 0.01%. (3) The expense ratio reflects expenses prior to any expense offset arrangements. (4) The effect of non-recurring costs assumed by Janus Capital is included in the ratio of gross expenses to average net assets and was less than 0.01%. (5) The expense ratio reflects expenses after any expense offset arrangements. Financial highlights 49
WORLDWIDE GROWTH PORTFOLIO - INSTITUTIONAL SHARES ------------------------------------------------------------------------------------------------------------------------------- Years ended December 31 2007 2006 2005 2004 2003 NET ASSET VALUE, BEGINNING OF PERIOD $32.48 $27.96 $26.78 $25.82 $21.05 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.27 0.54 0.44 0.28 0.23 Net gain/(loss) on securities (both realized and unrealized) 2.87 4.50 1.11 0.94 4.79 Total from investment operations 3.14 5.04 1.55 1.22 5.02 LESS DISTRIBUTIONS AND OTHER: Dividends (from net investment income) (0.27) (0.52) (0.37) (0.26) (0.25) Distributions (from capital gains) -- -- -- -- -- Tax return of capital -- -- -- -- --(1) Payment from affiliate -- --(2) --(2) --(2) -- Total distributions and other (0.27) (0.52) (0.37) (0.26) (0.25) NET ASSET VALUE, END OF PERIOD $35.35 $32.48 $27.96 $26.78 $25.82 Total return* 9.66% 18.24%(3) 5.87%(4) 4.78%(3) 23.99% Net assets, end of period (in thousands) $1,119,569 $1,208,155 $1,464,300 $2,491,921 $3,743,762 Average net assets for the period (in thousands) $1,207,006 $1,271,755 $1,767,226 $3,232,578 $3,672,695 Ratio of gross expenses to average net assets(5)(6)(7) 0.67% 0.61% 0.61% 0.66% 0.71% Ratio of net expenses to average net assets(8) 0.67% 0.61% 0.61% 0.66% 0.71% Ratio of net investment income/(loss) to average net assets 0.70% 1.59% 1.33% 0.99% 1.08% Portfolio turnover rate 26% 46% 41% 120% 126% -------------------------------------------------------------------------------------------------------------------------------
* Includes adjustments in accordance with generally accepted accounting principles. Returns may differ from returns for shareholder transactions. (1) Tax return of capital aggregated less than $0.01 on a per share basis for the fiscal year end. (2) Payment from affiliate aggregated less than $0.01 on a per share basis for the fiscal year end. (3) Janus Capital and/or Janus Services LLC fully reimbursed the Portfolio for a loss on a transaction resulting from certain trading, pricing, and/or shareholder activity errors, which otherwise would have reduced total return by less than 0.01%. (4) Janus Capital and/or Janus Services LLC fully reimbursed the Portfolio for a loss on a transaction resulting from certain trading, pricing, and/or shareholder activity errors, which otherwise would have reduced total return by 0.02%. (5) The ratio was 0.64% in 2006 before waiver of certain fees and/or reduction of adviser's fees. (6) The expense ratio reflects expenses prior to any expense offset arrangements. (7) The effect of non-recurring costs assumed by Janus Capital is included in the ratio of gross expenses to average net assets without waivers and/or expense reimbursements and was less than 0.01%. (8) The expense ratio reflects expenses after any expense offset arrangements. 50 Janus Aspen Series
INTERNATIONAL GROWTH PORTFOLIO - INSTITUTIONAL SHARES ----------------------------------------------------------------------------------------------------------------------- Years ended December 31 2007 2006 2005 2004 2003 NET ASSET VALUE, BEGINNING OF PERIOD $51.21 $35.54 $27.19 $23.06 $17.30 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.50 0.56 0.41 0.30 0.24 Net gain/(loss) on securities (both realized and unrealized) 14.02 15.97 8.30 4.05 5.75 Total from investment operations 14.52 16.53 8.71 4.35 5.99 LESS DISTRIBUTIONS AND OTHER: Dividends (from net investment income) (0.37) (0.86) (0.36) (0.22) (0.23) Distributions (from capital gains) -- -- -- -- -- Payment from affiliate --(1) --(1) -- --(1) -- Total distributions and other (0.37) (0.86) (0.36) (0.22) (0.23) NET ASSET VALUE, END OF PERIOD $65.36 $51.21 $35.54 $27.19 $23.06 Total return* 28.41%(2) 46.98%(2) 32.28% 18.99%(2) 34.91% Net assets, end of period (in thousands) $987,570 $844,734 $549,948 $465,055 $637,918 Average net assets for the period (in thousands) $915,608 $691,150 $473,781 $556,677 $595,791 Ratio of gross expenses to average net assets(3)(4) 0.70% 0.71% 0.70% 0.69% 0.76% Ratio of net expenses to average net assets(5) 0.70% 0.71% 0.70% 0.68% 0.76% Ratio of net investment income/(loss) to average net assets 0.70% 1.79% 1.05% 1.02% 1.26% Portfolio turnover rate 59% 60% 57% 65% 123% -----------------------------------------------------------------------------------------------------------------------
* Includes adjustments in accordance with generally accepted accounting principles. Returns may differ from returns for shareholder transactions. (1) Payment from affiliate aggregated less than $0.01 on a per share basis for the fiscal year end. (2) Janus Capital and/or Janus Services LLC fully reimbursed the Portfolio for a loss on a transaction resulting from certain trading, pricing, and/or shareholder activity errors, which otherwise would have reduced total return by less than 0.01%. (3) The expense ratio reflects expenses prior to any expense offset arrangements. (4) The effect of non-recurring costs assumed by Janus Capital is included in the ratio of gross expenses to average net assets and was less than 0.01%. (5) The expense ratio reflects expenses after any expense offset arrangements. Financial highlights 51
FLEXIBLE BOND PORTFOLIO - INSTITUTIONAL SHARES --------------------------------------------------------------------------------------------------------------------- Years ended December 31 2007 2006 2005 2004 2003 NET ASSET VALUE, BEGINNING OF PERIOD $11.24 $11.36 $12.14 $12.49 $12.30 INCOME FROM INVESTMENT OPERATIONS: Net investment income/(loss) 0.53 0.54 0.60 0.66 0.63 Net gain/(loss) on securities (both realized and unrealized) 0.24 (0.08) (0.36) (0.18) 0.15 Total from investment operations 0.77 0.46 0.24 0.48 0.78 LESS DISTRIBUTIONS AND OTHER: Dividends (from net investment income) (0.55) (0.56) (0.59) (0.68) (0.59) Distributions (from capital gains) -- (0.02) (0.43) (0.15) -- Payment from affiliate --(1) -- --(1) --(1) -- Total distributions and other (0.55) (0.58) (1.02) (0.83) (0.59) NET ASSET VALUE, END OF PERIOD $11.46 $11.24 $11.36 $12.14 $12.49 Total return 7.04%(2) 4.22% 2.00%(2) 3.97%(2) 6.39% Net assets, end of period (in thousands) $297,919 $264,656 $278,324 $404,522 $576,021 Average net assets for the period (in thousands) $279,676 $264,990 $321,856 $525,932 $623,513 Ratio of gross expenses to average net assets(3)(4) 0.61% 0.64% 0.57% 0.59% 0.64% Ratio of net expenses to average net assets(5) 0.61% 0.64% 0.57% 0.59% 0.64% Ratio of net investment income/(loss) to average net assets 4.91% 4.63% 4.18% 4.28% 4.51% Portfolio turnover rate 138%(6) 163%(6) 171%(6) 171% 154% ---------------------------------------------------------------------------------------------------------------------
(1) Payment from affiliate aggregated less than $0.01 on a per share basis for the fiscal year end. (2) Janus Capital and/or Janus Services LLC fully reimbursed the Portfolio for a loss on a transaction resulting from certain trading, pricing, and/or shareholder activity errors, which otherwise would have reduced total return by less than 0.01%. (3) The expense ratio reflects expenses prior to any expense offset arrangements. (4) The effect of non-recurring costs assumed by Janus Capital is included in the ratio of gross expenses to average net assets and was less than 0.01%. (5) The expense ratio reflects expenses after any expense offset arrangements. (6) Excluding mortgage dollar roll transactions. If mortgage dollar roll transactions had been included, the portfolio turnover rate would have been 139% in 2007, 165% in 2006, and 177% in 2005. 52 Janus Aspen Series GLOSSARY OF INVESTMENT TERMS -------------------------------------------------------------------------------- This glossary provides a more detailed description of some of the types of securities, investment strategies, and other instruments in which the Portfolios may invest. The Portfolios may invest in these instruments to the extent permitted by their investment objectives and policies. The Portfolios are not limited by this discussion and may invest in any other types of instruments not precluded by the policies discussed elsewhere in this Prospectus. I. EQUITY AND DEBT SECURITIES BANK LOANS include institutionally-traded floating and fixed-rate debt securities generally acquired as a participation interest in or assignment of a loan originated by a lender or financial institution. Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with interest rate changes and/or issuer credit quality. If a Portfolio purchases a participation interest, it may only be able to enforce its rights through the lender and may assume the credit risk of both the borrower and the lender. Additional risks are involved in purchasing assignments. If a loan is foreclosed, a Portfolio may become part owner of any collateral securing the loan and may bear the costs and liabilities associated with owning and disposing of any collateral. The Portfolio could be held liable as a co-lender. In addition, there is no assurance that the liquidation of any collateral from a secured loan would satisfy a borrower's obligations or that any collateral could be liquidated. A Portfolio may have difficulty trading assignments and participations to third parties or selling such securities in secondary markets, which in turn may affect the Portfolio's NAV. BONDS are debt securities issued by a company, municipality, government, or government agency. The issuer of a bond is required to pay the holder the amount of the loan (or par value of the bond) at a specified maturity and to make scheduled interest payments. COMMERCIAL PAPER is a short-term debt obligation with a maturity ranging from 1 to 270 days issued by banks, corporations, and other borrowers to investors seeking to invest idle cash. A Portfolio may purchase commercial paper issued in private placements under Section 4(2) of the Securities Act of 1933. COMMON STOCKS are equity securities representing shares of ownership in a company and usually carry voting rights and earn dividends. Unlike preferred stock, dividends on common stock are not fixed but are declared at the discretion of the issuer's board of directors. CONVERTIBLE SECURITIES are preferred stocks or bonds that pay a fixed dividend or interest payment and are convertible into common stock at a specified price or conversion ratio. DEBT SECURITIES are securities representing money borrowed that must be repaid at a later date. Such securities have specific maturities and usually a specific rate of interest or an original purchase discount. DEPOSITARY RECEIPTS are receipts for shares of a foreign-based corporation that entitle the holder to dividends and capital gains on the underlying security. Receipts include those issued by domestic banks (American Depositary Receipts), foreign banks (Global or European Depositary Receipts), and broker-dealers (depositary shares). EQUITY SECURITIES generally include domestic and foreign common stocks; preferred stocks; securities convertible into common stocks or preferred stocks; warrants to purchase common or preferred stocks; and other securities with equity characteristics. EXCHANGE-TRADED FUNDS are index-based investment companies which hold substantially all of their assets in securities with equity characteristics. As a shareholder of another investment company, a Portfolio would bear its pro rata portion of the other investment company's expenses, including advisory fees, in addition to the expenses the Portfolio bears directly in connection with its own operations. FIXED-INCOME SECURITIES are securities that pay a specified rate of return. The term generally includes short- and long-term government, corporate, and municipal obligations that pay a specified rate of interest, dividends, or coupons for a specified period of time. Coupon and dividend rates may be fixed for the life of the issue or, in the case of adjustable and floating rate securities, for a shorter period. HIGH-YIELD/HIGH-RISK BONDS are bonds that are rated below investment grade by the primary rating agencies (i.e., BB+ or lower by Standard & Poor's and Fitch, or Ba or lower by Moody's). Other terms commonly used to describe such bonds include "lower rated bonds," "non-investment grade bonds," and "junk bonds." MORTGAGE- AND ASSET-BACKED SECURITIES are shares in a pool of mortgages or other debt instruments. These securities are generally pass-through securities, which means that principal and interest payments on the underlying securities (less Glossary of investment terms 53 servicing fees) are passed through to shareholders on a pro rata basis. These securities involve prepayment risk, which is the risk that the underlying mortgages or other debt may be refinanced or paid off prior to their maturities during periods of declining interest rates. In that case, a Portfolio may have to reinvest the proceeds from the securities at a lower rate. Potential market gains on a security subject to prepayment risk may be more limited than potential market gains on a comparable security that is not subject to prepayment risk. MORTGAGE DOLLAR ROLLS are transactions in which a Portfolio sells a mortgage-related security, such as a security issued by GNMA, to a dealer and simultaneously agrees to purchase a similar security (but not the same security) in the future at a pre-determined price. A "dollar roll" can be viewed as a collateralized borrowing in which a Portfolio pledges a mortgage-related security to a dealer to obtain cash. PASS-THROUGH SECURITIES are shares or certificates of interest in a pool of debt obligations that have been repackaged by an intermediary, such as a bank or broker-dealer. PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS) are any foreign corporations which generate certain amounts of passive income or hold certain amounts of assets for the production of passive income. Passive income includes dividends, interest, royalties, rents, and annuities. To avoid taxes and interest that a Portfolio must pay if these investments are profitable, the Portfolios may make various elections permitted by the tax laws. These elections could require that a Portfolio recognize taxable income, which in turn must be distributed, before the securities are sold and before cash is received to pay the distributions. PAY-IN-KIND BONDS are debt securities that normally give the issuer an option to pay cash at a coupon payment date or give the holder of the security a similar bond with the same coupon rate and a face value equal to the amount of the coupon payment that would have been made. PREFERRED STOCKS are equity securities that generally pay dividends at a specified rate and have preference over common stock in the payment of dividends and liquidation. Preferred stock generally does not carry voting rights. REAL ESTATE INVESTMENT TRUST (REIT) is an investment trust that operates through the pooled capital of many investors who buy its shares. Investments are in direct ownership of either income property or mortgage loans. RULE 144A SECURITIES are securities that are not registered for sale to the general public under the Securities Act of 1933, but that may be resold to certain institutional investors. STANDBY COMMITMENT is a right to sell a specified underlying security or securities within a specified period of time and at an exercise price equal to the amortized cost of the underlying security or securities plus accrued interest, if any, at the time of exercise, that may be sold, transferred, or assigned only with the underlying security or securities. A standby commitment entitles the holder to receive same day settlement, and will be considered to be from the party to whom the investment company will look for payment of the exercise price. STEP COUPON BONDS are high-quality issues with above-market interest rates and a coupon that increases over the life of the bond. They may pay monthly, semiannual, or annual interest payments. On the date of each coupon payment, the issuer decides whether to call the bond at par, or whether to extend it until the next payment date at the new coupon rate. STRIP BONDS are debt securities that are stripped of their interest (usually by a financial intermediary) after the securities are issued. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities of comparable maturity. TENDER OPTION BONDS are relatively long-term bonds that are coupled with the option to tender the securities to a bank, broker-dealer, or other financial institution at periodic intervals and receive the face value of the bond. This investment structure is commonly used as a means of enhancing a security's liquidity. U.S. GOVERNMENT SECURITIES include direct obligations of the U.S. Government that are supported by its full faith and credit. Treasury bills have initial maturities of less than one year, Treasury notes have initial maturities of one to ten years, and Treasury bonds may be issued with any maturity but generally have maturities of at least ten years. U.S. Government securities also include indirect obligations of the U.S. Government that are issued by federal agencies and government sponsored entities. Unlike Treasury securities, agency securities generally are not backed by the full faith and credit of the U.S. Government. Some agency securities are supported by the right of the issuer to borrow from the 54 Janus Aspen Series Treasury, others are supported by the discretionary authority of the U.S. Government to purchase the agency's obligations, and others are supported only by the credit of the sponsoring agency. VARIABLE AND FLOATING RATE SECURITIES have variable or floating rates of interest and, under certain limited circumstances, may have varying principal amounts. Variable and floating rate securities pay interest at rates that are adjusted periodically according to a specified formula, usually with reference to some interest rate index or market interest rate (the "underlying index"). The floating rate tends to decrease the security's price sensitivity to changes in interest rates. WARRANTS are securities, typically issued with preferred stock or bonds, which give the holder the right to buy a proportionate amount of common stock at a specified price. The specified price is usually higher than the market price at the time of issuance of the warrant. The right may last for a period of years or indefinitely. ZERO COUPON BONDS are debt securities that do not pay regular interest at regular intervals, but are issued at a discount from face value. The discount approximates the total amount of interest the security will accrue from the date of issuance to maturity. The market value of these securities generally fluctuates more in response to changes in interest rates than interest-paying securities. II. FUTURES, OPTIONS, AND OTHER DERIVATIVES CREDIT DEFAULT SWAPS are a specific kind of counterparty agreement that allows the transfer of third party credit risk from one party to the other. One party in the swap is a lender and faces credit risk from a third party, and the counterparty in the credit default swap agrees to insure this risk in exchange for regular periodic payments. EQUITY-LINKED STRUCTURED NOTES are derivative securities which are specially designed to combine the characteristics of one or more underlying securities and their equity derivatives in a single note form. The return and/or yield or income component may be based on the performance of the underlying equity securities, an equity index, and/or option positions. Equity-linked structured notes are typically offered in limited transactions by financial institutions in either registered or non-registered form. An investment in equity-linked notes creates exposure to the credit risk of the issuing financial institution, as well as to the market risk of the underlying securities. There is no guaranteed return of principal with these securities, and the appreciation potential of these securities may be limited by a maximum payment or call right. In certain cases, equity-linked notes may be more volatile and less liquid than less complex securities or other types of fixed-income securities. Such securities may exhibit price behavior that does not correlate with other fixed-income securities. EQUITY SWAPS involve the exchange by two parties of future cash flow (e.g., one cash flow based on a referenced interest rate and the other based on the performance of stock or a stock index). FORWARD CONTRACTS are contracts to purchase or sell a specified amount of a financial instrument for an agreed upon price at a specified time. Forward contracts are not currently exchange-traded and are typically negotiated on an individual basis. A Portfolio may enter into forward currency contracts for investment purposes or to hedge against declines in the value of securities denominated in, or whose value is tied to, a currency other than the U.S. dollar or to reduce the impact of currency appreciation on purchases of such securities. It may also enter into forward contracts to purchase or sell securities or other financial indices. FUTURES CONTRACTS are contracts that obligate the buyer to receive and the seller to deliver an instrument or money at a specified price on a specified date. A Portfolio may buy and sell futures contracts on foreign currencies, securities, and financial indices including indices of U.S. Government, foreign government, equity, or fixed-income securities. A Portfolio may also buy options on futures contracts. An option on a futures contract gives the buyer the right, but not the obligation, to buy or sell a futures contract at a specified price on or before a specified date. Futures contracts and options on futures are standardized and traded on designated exchanges. INDEXED/STRUCTURED SECURITIES are typically short- to intermediate-term debt securities whose value at maturity or interest rate is linked to currencies, interest rates, equity securities, indices, commodity prices, or other financial indicators. Such securities may be positively or negatively indexed (e.g., their value may increase or decrease if the reference index or instrument appreciates). Indexed/structured securities may have return characteristics similar to direct investments in the underlying instruments and may be more volatile than the underlying instruments. A Portfolio bears the market risk of an investment in the underlying instruments, as well as the credit risk of the issuer. Glossary of investment terms 55 INTEREST RATE SWAPS involve the exchange by two parties of their respective commitments to pay or receive interest (e.g., an exchange of floating rate payments for fixed rate payments). INVERSE FLOATERS are debt instruments whose interest rate bears an inverse relationship to the interest rate on another instrument or index. For example, upon reset, the interest rate payable on the inverse floater may go down when the underlying index has risen. Certain inverse floaters may have an interest rate reset mechanism that multiplies the effects of change in the underlying index. Such mechanism may increase the volatility of the security's market value. OPTIONS are the right, but not the obligation, to buy or sell a specified amount of securities or other assets on or before a fixed date at a pre-determined price. A Portfolio may purchase and write put and call options on securities, securities indices, and foreign currencies. A Portfolio may purchase or write such options individually or in combination. PARTICIPATORY NOTES are derivative securities which are linked to the performance of an underlying Indian security and which allow investors to gain market exposure to Indian securities without trading directly in the local Indian market. TOTAL RETURN SWAPS involve an exchange by two parties in which one party makes payments based on a set rate, either fixed or variable, while the other party makes payments based on the return of an underlying asset, which includes both the income it generates and any capital gains over the payment period. III. OTHER INVESTMENTS, STRATEGIES, AND/OR TECHNIQUES INDUSTRY CONCENTRATION for purposes under the Investment Company Act of 1940, as amended (the "1940 Act"), is the investment of more than 25% of a Portfolio's total assets in an industry or group of industries. MARKET CAPITALIZATION is the most commonly used measure of the size and value of a company. It is computed by multiplying the current market price of a share of the company's stock by the total number of its shares outstanding. Market capitalization is an important investment criterion for certain portfolios, while others do not emphasize investments in companies of any particular size. NONDIVERSIFICATION is a classification given to a portfolio under the 1940 Act. Portfolios are classified as either "diversified" or "nondiversified." To be classified as "diversified" under the 1940 Act, a portfolio may not, with respect to 75% of its total assets, invest more than 5% of its total assets in any issuer and may not own more than 10% of the outstanding voting securities of an issuer. A portfolio that is classified under the 1940 Act as "nondiversified," on the other hand, is not subject to the same restrictions and therefore has the flexibility to take larger positions in a smaller number of issuers than a portfolio that is classified as "diversified." This gives a "nondiversified" portfolio more flexibility to focus its investments in the most attractive companies identified by the portfolio managers and/or investment personnel but also may increase the risk of a portfolio. REPURCHASE AGREEMENTS involve the purchase of a security by a Portfolio and a simultaneous agreement by the seller (generally a bank or dealer) to repurchase the security from the Portfolio at a specified date or upon demand. This technique offers a method of earning income on idle cash. These securities involve the risk that the seller will fail to repurchase the security, as agreed. In that case, a Portfolio will bear the risk of market value fluctuations until the security can be sold and may encounter delays and incur costs in liquidating the security. REVERSE REPURCHASE AGREEMENTS involve the sale of a security by a Portfolio to another party (generally a bank or dealer) in return for cash and an agreement by the Portfolio to buy the security back at a specified price and time. This technique will be used primarily to provide cash to satisfy unusually high redemption requests, or for other temporary or emergency purposes. SHORT SALES in which a Portfolio may engage may be either "short sales against the box" or other short sales. Short sales against the box involve selling short a security that a Portfolio owns, or the Portfolio has the right to obtain the amount of the security sold short at a specified date in the future. A Portfolio may also enter into a short sale to hedge against anticipated declines in the market price of a security or to reduce portfolio volatility. If the value of a security sold short increases prior to the scheduled delivery date, the Portfolio loses the opportunity to participate in the gain. For short sales, the Portfolio will incur a loss if the value of a security increases during this period because it will be paying more for the security than it has received from the purchaser in the short sale. If the price declines during this period, a Portfolio will realize a short-term capital gain. Although a Portfolio's potential for gain as a result of a short sale is limited to the price at which it sold the security short less the cost of borrowing the security, its potential for loss is theoretically unlimited because there is no limit to the cost of replacing the borrowed security. 56 Janus Aspen Series WHEN-ISSUED, DELAYED DELIVERY, AND FORWARD COMMITMENT TRANSACTIONS generally involve the purchase of a security with payment and delivery at some time in the future - i.e., beyond normal settlement. A Portfolio does not earn interest on such securities until settlement and bears the risk of market value fluctuations in between the purchase and settlement dates. New issues of stocks and bonds, private placements, and U.S. Government securities may be sold in this manner. Glossary of investment terms 57 EXPLANATION OF RATING CATEGORIES -------------------------------------------------------------------------------- The following is a description of credit ratings issued by three of the major credit rating agencies. Credit ratings evaluate only the safety of principal and interest payments, not the market value risk of lower quality securities. Credit rating agencies may fail to change credit ratings to reflect subsequent events on a timely basis. Although Janus Capital considers security ratings when making investment decisions, it also performs its own investment analysis and does not rely solely on the ratings assigned by credit agencies. STANDARD & POOR'S RATINGS SERVICE BOND RATING EXPLANATION ----------------------------------------------------------------------------------------- Investment Grade AAA......................... Highest rating; extremely strong capacity to pay principal and interest. AA.......................... High quality; very strong capacity to pay principal and interest. A........................... Strong capacity to pay principal and interest; somewhat more susceptible to the adverse effects of changing circumstances and economic conditions. BBB......................... Adequate capacity to pay principal and interest; normally exhibit adequate protection parameters, but adverse economic conditions or changing circumstances more likely to lead to a weakened capacity to pay principal and interest than for higher rated bonds. Non-Investment Grade BB.......................... Less vulnerable to nonpayment than other speculative issues; major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the bond. B........................... More vulnerable to nonpayment than obligations rated 'BB', but capacity to meets its financial commitment on the obligation; adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the bond. CCC......................... Currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the bond. CC.......................... Currently highly vulnerable to nonpayment. C........................... Currently highly vulnerable to nonpayment; a bankruptcy petition may have been filed or similar action taken, but payments on the bond are being continued. D........................... In default.
FITCH, INC. BOND RATING EXPLANATION ----------------------------------------------------------------------------------------- Investment Grade AAA......................... Highest credit quality. Denotes the lowest expectation of credit risk. Exceptionally strong capacity for payment of financial commitments. AA.......................... Very high credit quality. Denotes expectations of very low credit risk. Very strong capacity for payment of financial commitments. A........................... High credit quality. Denotes expectations of low credit risk. Strong capacity for payment of financial commitments. May be more vulnerable to changes in circumstances or in economic conditions than is the case for higher ratings. BBB......................... Good credit quality. Currently expectations of low credit risk. Capacity for payment of financial commitments is considered adequate, but adverse changes in circumstances and economic conditions are more likely to impair this capacity than is the case for higher ratings. Non-Investment Grade BB.......................... Speculative. Indicates possibility of credit risk developing, particularly as the result of adverse economic change over time. Business or financial alternatives may be available to allow financial commitments to be met. B........................... Highly speculative. May indicate distressed or defaulted obligations with potential for extremely high recoveries. CCC......................... May indicate distressed or defaulted obligations with potential for average to superior levels of recovery. CC.......................... May indicate distressed or defaulted obligations with average or below average levels of recovery. C........................... May indicate distressed or defaulted obligations with potential for below-average to poor recoveries. D........................... In default.
58 Janus Aspen Series MOODY'S INVESTORS SERVICE, INC. BOND RATING EXPLANATION ----------------------------------------------------------------------------------------- Investment Grade Aaa......................... Highest quality, smallest degree of investment risk. Aa.......................... High quality; together with Aaa bonds, they compose the high-grade bond group. A........................... Upper to medium-grade obligations; many favorable investment attributes. Baa......................... Medium-grade obligations; neither highly protected nor poorly secured. Interest and principal appear adequate for the present but certain protective elements may be lacking or may be unreliable over any great length of time. Non-Investment Grade Ba.......................... More uncertain, with speculative elements. Protection of interest and principal payments not well safeguarded during good and bad times. B........................... Lack characteristics of desirable investment; potentially low assurance of timely interest and principal payments or maintenance of other contract terms over time. Caa......................... Poor standing, may be in default; elements of danger with respect to principal or interest payments. Ca.......................... Speculative in a high degree; could be in default or have other marked shortcomings. C........................... Lowest rated; extremely poor prospects of ever attaining investment standing.
Unrated securities will be treated as non-investment grade securities unless the portfolio managers determine that such securities are the equivalent of investment grade securities. When calculating the quality assigned to securities that receive different ratings from two or more agencies ("split rated securities"), the security will receive: (i) the middle rating from the three reporting agencies if three agencies provide a rating for the security; (ii) the lowest rating if only two agencies provide a rating for the security; or (iii) the rating assigned if only one agency rates the security. SECURITIES HOLDINGS BY RATING CATEGORY During the year ended December 31, 2007, the percentage of securities holdings for Flexible Bond Portfolio by rating category based upon a weighted monthly average was:
FLEXIBLE BOND PORTFOLIO --------------------------------------------------------------------- BONDS AND LOANS-S&P RATING: AAA 66.5% AA 2.1% A 3.8% BBB 5.6% BB 7.0% B 4.9% CCC 0.7% CC 0.0% C 0.0% Not Rated 1.5% Preferred Stock 1.4% Cash and Options 6.5% TOTAL 100.0% ---------------------------------------------------------------------
No other Portfolio described in this Prospectus held 5% or more of its assets in bonds rated below investment grade for the year ended December 31, 2007. Explanation of rating categories 59 This page intentionally left blank. 60 This page intentionally left blank. You can make inquiries and request other information, including a Statement of Additional Information, annual report, or semiannual report, free of charge, by contacting your insurance company or plan sponsor, or by contacting a Janus representative at 1-877-335-2687. The Portfolios' Statement of Additional Information and most recent annual and semiannual reports are also available, free of charge, on www.janus.com/info. Additional information about the Portfolios' investments is available in the Portfolios' annual and semiannual reports. In the Portfolios' annual and semiannual reports, you will find a discussion of the market conditions and investment strategies that significantly affected the Portfolios' performance during their last fiscal period. Other information is also available from financial intermediaries that sell Shares of the Portfolios. The Statement of Additional Information provides detailed information about the Portfolios and is incorporated into this Prospectus by reference. You may review and copy information about the Portfolios (including the Portfolios' Statement of Additional Information) at the Public Reference Room of the SEC or get text only copies, after paying a duplicating fee, by sending an electronic request by e-mail to publicinfo@sec.gov or by writing to or calling the Public Reference Room, Washington, D.C. 20549-0102 (1-202-942-8090). Information on the operation of the Public Reference Room may also be obtained by calling this number. You may also obtain reports and other information about the Portfolios from the Electronic Data Gathering Analysis and Retrieval (EDGAR) Database on the SEC's website at http://www.sec.gov. (JANUS LOGO) www.janus.com/info 151 Detroit Street Denver, CO 80206-4805 1-877-335-2687 The Trust's Investment Company Act File No. is 811-7736.