Frequently Asked Questions (FAQs)

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1)  How much will Janus pay affected shareholders?
2)  Why is Janus making these payments to affected shareholders?
3)  What is “frequent trading” ?
4)  Who is paying for this settlement?
5)  Who is eligible to receive a payment?
6)  How will I receive a payment since my shares were held through my broker?
7)  Will all affected shareholders receive payments?
8)  What controls are in place to ensure that all shareholders received the amount of the distribution to which they are entitled?
9)  How were payments calculated?
10)  How will this settlement affect my tax reporting?
11)  What has Janus done to prevent this from happening again?
12)  I held my Janus mutual fund shares through a broker. Were these shares included in the determination of whether I am eligible for payments?
13)  How is Janus providing distribution to omnibus accounts?
14)  How is Janus providing distribution to retirement plan administrators or plan sponsors?
15)  What are the responsibilities of the Independent Distribution Consultant (IDC) who developed the Modified Plan of Distribution?

1) How much will Janus pay affected shareholders?

As part of its August 2004 settlement with the Securities and Exchange Commission (SEC), Janus Capital Management LLC set aside $100 million to provide distribution to affected shareholders. Individual payments to shareholders will vary based on their proportionate share of losses, as calculated by the Independent Distribution Consultant (IDC).

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2) Why is Janus making these payments to affected shareholders?

Janus is making payments to affected shareholders pursuant to a 2004 final settlement with the Securities and Exchange Commission (SEC) relating to the SEC’s investigation into Janus’s frequent trading arrangements.

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3) What is “frequent trading”?

Frequent trading includes: (a) frequent buying and selling of shares of the same mutual fund; or (b) buying or selling mutual fund shares in order to exploit inefficiencies in mutual fund pricing. 

Frequent trading can harm other mutual fund shareholders because it can dilute the value of their shares if the frequent trader is exploiting pricing inefficiencies; or disrupt the management of the mutual fund's investment portfolio and can cause the targeted mutual fund to incur costs borne by other shareholders to accommodate frequent buying and selling of shares.

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4) Who is paying for this settlement?

The $100 million settlement comes entirely from the Janus Capital Management LLC corporate treasury. It does not come from the company’s mutual funds or its fund shareholders.

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5) Who is eligible to receive a payment?

Janus shareholders who owned shares in one or more of the seven Janus mutual funds during the time periods listed below may be eligible to receive a distribution payment if the shareholders' calculated losses exceed the minimum threshold (de minimis amount) of $10.

Payments to eligible shareholders distributed by the Janus Fair Fund Administrator will be in the form of a check.

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6) How will I receive a payment since my shares were held through my broker?

You will receive your payment either directly from your broker dealer firm or from the Janus Fair Fund Administrator. This is dependent on the approach your broker dealer chose based on the options available within the Modified Plan of Distribution.

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7) Will all affected shareholders receive payments?

The Independent Distribution Consultant (IDC) has established a minimum threshold (de minimis amount) in the Modified Plan of Distribution. Therefore, accounts that incurred losses of less than $10 will not receive a payment.

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8) What controls are in place to ensure that all shareholders received the amount of the distribution to which they are entitled?

At each step in the calculation process, in-depth reviews and formal validations were conducted under the supervision of the Independent Distribution Consultant (IDC).

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9) How were payments calculated?

Payment amounts for all eligible shareholders are comprised of both allocated losses and advisory fees.

The Independent Distribution Consultant (IDC) calculated the aggregate losses suffered by shareholders in the affected funds during the relevant time periods as a result of trades made by discretionary frequent traders.

The IDC first calculated dilution losses using two different methodologies: total profits methodology and next-day NAV (net asset value) methodology. The methodology used was dependent on whether the discretionary frequent traders’ funds appear to have been held in cash or invested in securities.

Once the dilution losses were calculated, the IDC calculated the foregone appreciation on the dilution, the incremental portfolio trading costs and administrative costs, totaling the aggregate losses to shareholders in the seven Janus mutual funds as a result of discretionary frequent trading activity.

To allocate the aggregate losses to unique accounts, the IDC calculated for each fund a daily loss per share and then multiplied this loss per share by the number of shares held in an account on a particular day. The daily loss was calculated as the sum of the dilution and incremental portfolio trading costs on that day, plus the foregone appreciation associated with those losses. This daily loss was then divided by the number of shares that were diluted to determine the loss per share. Administrative costs were allocated proportionally to other losses.

The IDC allocated the remainder of the Janus Fair Fund in proportion to the losses suffered by each account as a return of advisory fees paid by the Janus Funds. For more information on payment calculations or allocation, please refer to the Modified Plan of Distribution.

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10) How will this settlement affect my tax reporting?

For tax information related to this settlement, please refer to the Tax Information section of this website.

As always, please consult your financial adviser or tax professional to determine the potential tax consequences and appropriate tax treatment for your individual situation.

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11) What has Janus done to prevent this from happening again?

Janus has taken a series of steps to deter frequent trading, strengthen our corporate governance and further align our interests with those of our shareholders:

Measures to Deter Frequent Trading

• Increased redemption fees on several Janus funds from 1% to 2% on shares held less than 90 days;
• Enhanced fair-valuation practices and use more fair-value pricing;
• Revised prospectus language to more firmly discourage frequent trading;
• Required intermediaries to certify compliance with market close rules;
• Improved procedures to identify and address frequent trading;
• Enhanced daily monitoring to identify and address frequent trading;
• Worked with omnibus partners to increase transparency into their accounts;
• Continue providing feedback to industry associations and committees working toward legislative and regulatory changes.

• Appointed an independent chairman to lead the Janus fund trustees well before it became a Securities and Exchange Commission(SEC) requirement. As a result, all eight Janus fund trustees are now independent;
• New business relationships are reviewed through an extensive screening process at the senior management level to identify any potential conflicts of interest;
• Janus now discloses full mutual fund portfolio holdings on a monthly basis with a 30-day lag, rather than semi-annually.

• Instituted Janus stock and Janus mutual fund ownership guidelines for Janus' investment team and senior executives;
• Linked portfolio manager compensation more closely to long-term performance by putting greater emphasis on 3-year and 5-year results.

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12) I held my Janus mutual fund shares through a broker. Were these shares included in the determination of whether I am eligible for payments?

Yes, the Modified Plan of Distribution explains in detail the process used to identify shareholders who owned their Janus mutual fund shares through a broker or other third-party.

The Janus Fair Fund Administrator requested the broker dealer firm’s account registration and transactional information needed to determine which shareholders were eligible for this settlement. Any information received from the brokerage firm by the Janus Fair Fund Administrator will be treated as confidential information.

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13) How is Janus providing distribution to omnibus accounts?

The Independent Distribution Consultant (IDC) has recommended that a $1,000 minimum threshold be used in providing distribution for omnibus accounts.

Omnibus account holders may choose to provide the IDC with the data or they may choose to handle the distribution themselves. For the omnibus account holders who choose to provide the data, the IDC will handle the distribution to individual shareholders. If requested, Janus will reimburse the company for any commercially reasonable expenses incurred in providing the data, not to exceed the amount of the distribution.

For those omnibus account holders who choose to handle the distribution themselves, the IDC will provide guidelines and algorithms so the omnibus account holder can determine the amount owed to each individual shareholder. Janus will reimburse the omnibus account holder for commercially reasonable expenses incurred, not to exceed the amount of the distribution. These omnibus account holders will not receive the funds until they have performed the necessary calculations (using the IDC guidelines and algorithms) and will be required to certify that they have distributed the funds in accordance with the Modified Plan of Distribution.

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14) How is Janus providing distribution to retirement plan administrators or plan sponsors?

• For 401(k) plans and other ERISA-qualified accounts where the shares are held in trust by retirement plans, the funds will be distributed to the plan administrators or plan sponsors;
• Distributions to plan accounts will be subject to the $10 minimum threshold (de minimis amount);
• The plan administrators or plan sponsors must determine whether and how to allocate funds to any plan participants in accordance with its legal, fiduciary, or contractual obligations, including any guidance from the Department of Labor.

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15) What are the responsibilities of the Independent Distribution Consultant (IDC) who developed the Modified Plan of Distribution?

The Independent Distribution Consultant (IDC), who was approved by the Securities and Exchange Commission (SEC), is University of Florida Finance Professor Dr. Christopher James.

As the IDC, Dr. James has been responsible for:

• Reviewing more than 1.3 million accounts;
• Calculating the payment each shareholder may receive;
• Developing a Modified Plan of Distribution to distribute the $100 million set aside for the JCM Fair Fund QSF;
• Submitting the Modified Plan of Distribution for public comment and SEC approval;
• Revising the Modified Plan of Distribution as requested;
• Determining whether any person who files a dispute form is entitled to a distribution;
• Ensuring that the Modified Plan of Distribution is executed within the guidelines.

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