Portfolio Commentary

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4Q17 Portfolio Commentary

Opportunistic Alpha SMA Performance Discussion The Portfolio underperformed its benchmark. Stock selection in the health care and materials sectors detracted from relative performance. Stock selection in the utilities and consumer discretionary sectors contributed to relative results. Allergan was our largest detractor. Patent disputes concerning Restasis, the firm’s blockbuster medicine for dry eye, weighed on the stock. Despite the Restasis patent issue, we are constructive on the stock. In our view, the current stock price considerably undervalues Allergan’s medical aesthetics franchise, which includes Botox and Juvéderm. We believe the duration of growth for those franchises will exceed current market expectations. Envision Healthcare also detracted. The company provides physician outsourcing services to hospitals and health systems and also owns ambulatory surgery centers. Managed care companies have pressured consumers to limit utilization of hospital services, and that has hurt volumes for Envision. We sold the stock, which was an inherited position from the previous portfolio manager, due to volume concerns and what we viewed as executional missteps from the management team. Tractor Supply Company, a retail farm supply store, was our top contributor. Like many other retail companies, the market has assigned a low multiple to Tractor Supply due to fears it will be disrupted by e-commerce. We feel Tractor Supply’s business model is misunderstood, however. Most of its goods are large and costlier to ship. The company also has a more rural customer base and much of its tender remains in the form of cash. In our view, such factors make its business less susceptible to e-commerce disruption. WEX Inc. also contributed. WEX provides fuel payment cards for trucking fleets, along with several other unique payment services. Rising fuel prices helped the stock, as increased fuel costs typically translate into higher revenue on its fuel payment cards. We continue to believe the company’s services provide tremendous back-end value to trucking fleets.

Highlights • The Portfolio underperformed its benchmark. • Allergan was our largest detractor. • Tractor Supply Co. was our largest contributor. Page 1 of 2

Nick Schommer, CFA Portfolio Manager

4Q17 Portfolio Commentary Representative Account Top Contributors and Detractors for the Quarter Ended 12/31/17 Top Contributors

Ending Weight (%)

Ending Weight (%)

Contribution (%)

Tractor Supply Co

4.04

0.67

Allergan PLC

4.70

-1.07

WEX Inc

2.29

0.51

Envision Healthcare Corp

0.00

-0.72

Stanley Black & Decker Inc

3.96

0.44

Ball Corp

5.35

-0.49

Ultimate Software Group Inc

3.47

0.40

General Electric Co

1.78

-0.40

Polaris Industries Inc

0.00

0.39

Impax Laboratories Inc

1.23

-0.26

Contribution (%) Top Detractors

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.

For more information, please visit janushenderson.com. Past performance is no guarantee of future results. Discussion is based on performance gross of fees and expenses. Information relating to portfolio holdings is based on the representative account in the composite and may vary for other accounts in the strategy due to asset size, client guidelines and other factors. The representative account is believed to most closely reflect the current portfolio management style. As of 12/31/17 the top ten portfolio holdings of the Representative Account are: Citigroup Inc (5.89%), Ball Corp (5.15%), Allergan PLC (4.52%), Oracle Corp (4.44%), Tractor Supply Co (3.90%), Stanley Black & Decker Inc (3.82%), Ultimate Software Group Inc (3.35%), Abbott Laboratories (3.29%), Alphabet Inc (3.07%) and Air Products & Chemicals Inc (3.00%). There are no assurances that any portfolio currently holds these securities or other securities mentioned. Portfolio holdings are as of the date indicated, and are subject to change. This material should not be construed as a recommendation to buy or sell any security. The opinions are as of 12/31/17 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. Security contribution to performance is measured by using an algorithm that multiplies C-1217-14781 04-30-18

the daily performance of each security with the previous day’s ending weight in the portfolio and is gross of advisory fees. Fixed income securities and certain equity securities, such as private placements and some share classes of equity securities, are excluded. Investing involves risk, including the possible loss of principal and fluctuation of value. Opportunistic Alpha managed accounts, benchmarked to the S&P 500 Index, seek to invest in under-valued companies with improving return on invested capital and an asymmetrical risk/reward profile. The portfolios may have exposure to foreign securities through ADRs. A typical portfolio invests in 35 to 55 equity securities. Prior to June 1, 2007 returns for the composite are for the Institutional Opportunistic Alpha Composite, which consisted of separately managed institutional accounts as well as sub-advised pooled funds. The composite was created in June 2007. S&P 500® Index reflects U.S. large-cap equity performance and represents broad U.S. equity market performance. 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. Janus Capital Management LLC serves as investment adviser. 388-42-22548 01/18

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