Multi-Sector Income Fund

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3Q17 Portfolio Commentary

Multi-Sector Income Fund Investment Environment The quarter started off relatively tranquil, with generally solid corporate earnings and the economy humming along at its slow but steady pace. Corporate credit spreads gradually compressed. Treasury yields also fell as investors continued to doubt the Federal Reserve’s (Fed) ability to raise interest rates again this year. Concerns over hurricane damage in Texas and Florida coupled with the December debt ceiling deadline supported this point of view. Calm receded mid-quarter as escalating tension between the U.S. and North Korea shook global markets. Corporate credit sold off through much of August and investors flocked to the safety of U.S. Treasury securities. However, sentiment reversed again in September. Geopolitical concerns waned, investors honed in on strong corporate fundamentals and credit markets absorbed elevated supply. Rates sold off with the release of August’s strong headline inflation print and Fed Chair Janet Yellen’s indication that the central bank is prepared to hike in December. The Fed also said it would begin normalizing its balance sheet in October, which was widely anticipated. After another failed attempt at health care reform, the Trump administration moved on to tax policy late in the period. Treasury yields continued to tick higher and corporate credit spreads tightened with the renewed possibility of tax reform bolstering economic growth. The bond market, as represented by the Bloomberg Barclays U.S. Aggregate Bond Index, gained 0.85% in the third quarter. Investment-grade corporate credit was the strongest-performing asset class in the index. Despite the quarter’s volatility, spreads ultimately tightened by eight basis points. Gains were more prominent in high yield, which was aided, in part, by a steady rise in the price of crude oil. After fluctuating throughout the quarter, the yield on the 10-year note finished September at 2.33%, near where it began in June at 2.30%. The yield on the 5-year note closed the quarter at 1.94%, up from 1.89%.

Seth Meyer, CFA Portfolio Manager

John Kerschner, CFA Portfolio Manager

Performance Discussion The Fund outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the three months ending September 30, 2017. The Fund leverages a bottom-up, fundamentally driven investment process that focuses on identifying, and dynamically allocating to, the best riskadjusted opportunities across fixed income sectors. We seek to provide high monthly income while effectively navigating market and rate cycles. We attempt to offer much of the yield benefit of the high-yield asset class but with less volatility, and with less interest-rate sensitivity than the Aggregate index.

Highlights • The Fund outperformed its benchmark during the quarter. • Our plus sector positioning, particularly exposure to high-yield corporate credit, aided the Fund’s outperformance. • We are cautiously optimistic for corporate credit and are closely monitoring progress on U.S. tax reform. A tax overhaul could support improving corporate fundamentals and drive spreads tighter. Page 1 of 3

John Lloyd Portfolio Manager

3Q17 Portfolio Commentary Strong fundamentals, solid earnings and synchronous global growth bode well for corporate credit. We believe these factors, coupled with investors’ reach for yield, should continue to support modest spread tightening. With this in mind, we leveraged the intra-quarter volatility to modestly increase our high-yield allocation. However, we remain wary of valuations that are at the expensive end of their range and of corporate behavior symptomatic of the late stages of the credit cycle. As such, we sought opportunities in issuers with conservative business models and stable free cash flows. We also added to our allocation in commercial mortgage-backed securities (CMBS). We continue to identify attractive risk-adjusted opportunities in CMBS due to the healthy commercial real estate market in the U.S. and the refinance-friendly, low-rate environment. The Fund ended September with approximately 80% of assets allocated to “plus sectors.” This allocation includes high-yield corporate credit, CMBS, asset-backed securities (ABS) and bank loans. These sectors support our goal of generating greater monthly income than the benchmark. With the gains in high yield over the quarter, our out-of-index exposure to high-yield corporate credit drove outperformance. Our allocation to CMBS further bolstered relative results. Our emphasis on out-carrying the benchmark proved beneficial across our plus sector holdings. Carry is a measure of excess income generated by the Fund’s securities. “Core sectors,” including Treasurys, investment-grade corporate credit and mortgage-backed securities (MBS), are utilized to dampen the volatility of our plus sector positioning. The Fund’s MBS allocation weighed on relative performance during the quarter. Our holdings, which emphasize specified

pools with lower prepayment risk and higher coupons, lagged the positions in the index. Our investment-grade corporate credit exposure also detracted. Spreads tightened over the period, and our underweight allocation held back relative performance. In an environment where corporate credit performed well, our underweight exposure to Treasury securities supported outperformance. At the credit sector level, metals and mining led relative contributors. Improved global growth and a rebound in commodity prices supported the sector’s performance and our overweight allocation aided results. A position in Blackhawk Mining also contributed to the sector’s outperformance. Strong demand for both thermal and metallurgical coal helped bonds to rebound after a challenging second quarter. In our view, Blackhawk’s high-quality assets, many of which were acquired from distressed competitors, leave the company well positioned versus its competition. Supermarkets led relative sector detractors. This was largely due to our position in SuperValu. Amazon’s recent acquisition of Whole Foods and subsequent reduction of in-store prices continued to create noise for grocers over the period, and our out-of-index position in SuperValu detracted. While we continue to believe that Supervalu is a misunderstood wholesale food distribution business that generates significant free cash flow, it is still perceived as a supermarket chain. We believe Amazon’s entrance into the space has the ability to dramatically impact inflation and pricing in supermarkets. This could limit grocers’ ability to pass cost increases on to consumers and will likely challenge profit margins. We trimmed our position.

For detailed performance information, please visit janushenderson.com/performance.

Outlook We believe that the Fed will raise interest rates as gross domestic product (GDP) growth and inflation allow, in order to create a cushion in the event the economy rolls over. Modestly higher gas prices along with recovering crude oil prices, continued improvement in the labor picture and a weaker dollar are all tailwinds for inflation and a higher Fed funds rate. With low productivity and the economy near full employment, any drastic bounce in GDP – from tax reform, for example – will also bolster inflation. While the inflation pickup is unlikely to be sustainable, we believe these pops could jolt the bond market. The tightening cycle will remain gradual to protect the consumer, the largest engine of the economy, but we expect the number of forthcoming hikes to fall between Fed and market expectations. The next hike is likely to come in December and we anticipate further tightening next year. Fund duration closed the period at 3.65, which we would expect to assist in preserving capital in all but the most extreme of rising-rate environments. Both fundamentals and technicals remain favorable for corporate credit. Earnings have been decent, companies are adequately covering their

interest expense and investors continue to reach for yield. The U.S. economy is strengthening (albeit slowly), China appears stable and global growth is moving in the right direction. Still, we remain wary of valuations that are at the expensive end of their range and of corporate behavior symptomatic of the late stages of the credit cycle. We are also mindful of geopolitical concerns and the reversal of accommodative monetary policy in the developed world. We expect a continued sideways grind, or modest spread tightening, in credit. We see few catalysts outside of tax reform that will drive spreads significantly tighter. As we move toward year-end, our analysts continue to seek issuers with management teams dedicated to sound balance sheets and those with transformational balance sheet stories. We are emphasizing issuers with cash flow stability and those that can generate excess carry versus the index. We are cautiously optimistic for corporate credit, but we remain vigilant in both security selection and security avoidance. Our approach reflects our objective of delivering consistent income with lower volatility than a dedicated high-yield strategy.

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3Q17 Portfolio Commentary Top Relative Contributors and Detractors Held for the Quarter Ended 9/30/17 Top Contributors

Average Weight (%)

Relative Top Detractors Contribution (%)

Average Weight (%)

Relative Contribution (%)

U.S. Treasury Notes/Bonds

0.01

0.17

U.S. Ultra Long-Term Treasury Bond

1.00

-0.05

LB-UBS Commercial Mortgage Trust 2007-C7

0.97

0.08

SuperValu Inc

0.67

-0.03

Blackhawk Mining

0.79

0.08

Ginnie Mae 2014-166

0.31

-0.03

Wachovia Bank Commercial Mortgage Trust Series 2007-C30

2.71

0.06

P.F. Chang's China Bistro

0.69

-0.03

U.S. Ultra Long-Term Treasury Bond

2.20

0.06

Entravision Communications Corp

0.76

-0.02

The holdings identified in this table, in compliance with Janus Henderson policy, do not represent all of the securities purchased, held or sold during the period. To obtain a list showing every holding as a percentage of the portfolio at the end of the most recent publicly available disclosure period, contact 800.668.0434 or visit janushenderson.com/info. Relative contribution is the difference between the contribution by ticker to the portfolio's performance versus that ticker's contribution to the benchmark's performance. It reflects how the portfolio's holdings impacted return relative to the benchmark. Cash and tickers not held in the portfolio are excluded.

For more information, please visit janushenderson.com. Please consider the charges, risks, expenses and investment objectives carefully before investing. For a prospectus or, if available, a summary prospectus containing this and other information, please call Janus Henderson at 800.668.0434 or download the file from janushenderson.com/info. Read it carefully before you invest or send money. Past performance is no guarantee of future results. Call 800.668.0434 or visit janushenderson.com/performance for current month-end performance. Discussion is based on the performance of Class I Shares. As of 9/30/17 the top ten portfolio holdings of Janus Henderson Multi-Sector Income Fund are: Wachovia Bank Commercial Mortgage Trust Series 2007-C30 (2.97%), LBUBS Commercial Mortgage Trust 2007-C7 (2.90%), Golden Nugget Inc (1.49%), Mural Lofts Loan (1.20%), GS Mortgage Securities Trust 2014-GSFL (1.08%), Applebee's Funding LLC / IHOP Funding LLC (1.07%), Fannie Mae Pool (1.07%), Meccanica Holdings USA Inc (1.01%), Quintiles IMS Inc (0.98%) and Carlyle Group LP (0.92%). There are no assurances that any portfolio currently holds these securities or other securities mentioned. The opinions are as of 9/30/17 and are subject to change at any time due to changes in market or economic conditions. Janus Henderson may have a business relationship with certain entities discussed. The comments should not be construed as a recommendation of individual holdings or market sectors, but as an illustration of broader themes. For fixed income portfolios, relative contribution is calculated by rolling up securities by ticker and comparing the daily returns for securities in the portfolio relative to those in the index. Relative contribution is based on returns gross of advisory fees, and may differ from actual performance. Performance may be affected by risks that include those associated with nondiversification, portfolio turnover, short sales, potential conflicts of interest, foreign and emerging markets, initial public offerings (IPOs), high-yield and highC-0917-13272 01-15-18

risk securities, undervalued, overlooked and smaller capitalization companies, real estate related securities including Real Estate Investment Trusts (REITs), derivatives, and commodity-linked investments. Each product has different risks. Please see the prospectus for more information about risks, holdings and other details. Fixed income securities are subject to interest rate, inflation, credit and default risk. The bond market is volatile. As interest rates rise, bond prices usually fall, and vice versa. The return of principal is not guaranteed, and prices may decline if an issuer fails to make timely payments or its credit strength weakens. High-yield or "junk" bonds involve a greater risk of default and price volatility and can experience sudden and sharp price swings. Foreign securities are subject to additional risks including currency fluctuations, political and economic uncertainty, increased volatility, lower liquidity and differing financial and information reporting standards, all of which are magnified in emerging markets. Derivatives can be highly volatile and more sensitive to changes in economic or market conditions than other investments. This could result in losses that exceed the original investment and may be magnified by leverage. Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based measure of the investment grade, US dollar-denominated, fixed-rate taxable bond market. Index performance does not reflect the expenses of managing a portfolio as an index is unmanaged and not available for direct investment. Janus Henderson is a trademark of Janus Henderson Investors. © Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC. Funds distributed by Janus Henderson Distributors

188-42-49585 10/17

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