Portfolio Commentary

---

2Q18 Portfolio Commentary

Core Plus Bond Composite Investment Environment The bond market, as represented by the Bloomberg Barclays U.S. Aggregate Bond Index, returned -0.16% in the second quarter. Government bonds outperformed corporate credit as investors flocked to more defensive assets on multiple occasions. Rising trade tensions and the formation of a eurosceptic coalition government in Italy were the primary causes of volatility. Investment-grade corporate spreads widened, with tapering demand, debt-funded consolidation activity and steady supply further impacting valuations. High-yield spreads also widened, but to a lesser degree.

Darrell Watters Portfolio Manager

Late in the period, the Federal Reserve (Fed) raised its benchmark rate for the second time this year, reflecting near-term confidence in the U.S. economy. However, while the Fed upwardly revised its short-term economic projections, it did not lift its long-term expectations for the terminal rate or economic growth. The Treasury curve flattened, with the spread between the 10year bond and the 2-year note falling from 47 to 33 basis points. The yield on the 10-year note ended June at 2.86%, up from 2.74% in March.

Performance Discussion The Portfolio outperformed its benchmark, the Bloomberg Barclays U.S. Aggregate Bond Index, for the three months ending June 30, 2018. Corporate valuations remain rich, rates are rising and risk is asymmetrically skewed to the downside at this late stage of the economic and credit cycles. We are concerned with robust merger-and-acquisition (M&A) activity and commensurate new issuance in the investment-grade space. Additionally, hedging costs for foreign buyers in the U.S. fixed income market increase as the Fed hikes, depleting return potential and weighing on demand. Further, we believe the incremental yield investors receive for extending duration in corporate credit is generally insufficient at this juncture. In light of this landscape, we significantly reduced our corporate credit exposure early in the quarter and increased emphasis on issues with shorter-dated maturities. We diversified our spread product exposure by adding to front-end and floating-rate securitized products and bank loans that can offer more attractive risk-adjusted carry opportunities with less interest rate risk than longer-duration credit. We also increased our exposure to mortgage-backed securities (MBS). Outperformance was driven by the composition of our corporate credit allocation, including strong security selection in investment grade and our out-of-index allocation to high yield. Our exposure to MBS and commercial mortgage-backed securities (CMBS) also supported results. The

Highlights • The Portfolio outperformed its benchmark during the quarter. • Our corporate credit allocation drove outperformance, while our Treasury positioning weighed modestly on relative results. • We remain concerned with rising rates, rich valuations and debt-funded consolidation activity. We believe it is prudent to limit credit risk at this point in the credit cycle, but we remain opportunistic. Page 1 of 3

Michael Keough Portfolio Manager

Mayur Saigal Portfolio Manager

2Q18 Portfolio Commentary Portfolio’s Treasury positioning detracted from relative performance. With rates set to move higher, we trimmed our Treasury exposure, and our underweight allocation amid the quarter’s volatility weighed on results. These losses were partially offset by our yield curve positioning. We extended duration in our Treasury bucket to balance our shorter-dated credit exposure, which proved beneficial as the yield curve flattened. Portfolio duration ended the period at 90% of the benchmark. On a corporate industry basis, our positioning in pharmaceuticals was a relative contributor. This was largely due to our out-of-index exposure to Teva Pharmaceutical Industries. The company is performing in line with our expectations, with recently appointed Chief Executive Officer Kåre Schultz driving significant operational improvements and delivering strong quarterly results. We continue to like the high-yield issuer, believing

valuations are compelling given the company’s solid pipeline of generic and specialty drugs and strong management team. Additionally, we appreciate management’s commitment to paying down debt over the next few years. Positioning in brokerage, asset managers and exchanges detracted on a relative basis. This was primarily a result of our exposure to Raymond James Financial. Our overweight and longer-dated positions were impacted by overall spread widening during the quarter. In our view, Raymond James continues to demonstrate its ability to attract advisors and assets and to strengthen its business for the long term. We continue to like the stability of the company’s business model and appreciate the management team’s conservative approach to the balance sheet.

For detailed performance information, please contact a Janus Henderson Institutional team representative.

Outlook The Fed is delivering on rate hikes, and Fed officials forecast two additional increases this year. We expect that to come to fruition, with additional hikes in 2019. Supply/demand dynamics should also push U.S. rates higher with hedging costs deterring foreign buyers, while Treasury issuance compensates for unfinanced corporate and individual income tax cuts. We are incrementally positive on the economy, but we question the sustainability of growth long term, particularly once the impact of tax reform recedes. We also anticipate that long-term secular trends, such as demographics and the pervasiveness of technology, will ultimately keep inflation in check. That said, we expect yields to rise and the Treasury curve to flatten. We are, however, mindful that volatility has returned and that there are a number of geopolitical risks, including trade policy and the new eurosceptic coalition government in Italy, that could put rate hikes on pause and steer investors toward more defensive assets. We intend to maintain duration modestly below that of the benchmark, but will continue in our tactical approach to yield curve positioning. We acknowledge that corporate fundamentals are strong, tax reform is beneficial and economic growth is decent, all of which can extend the

economic and credit cycles, but we are definitely in the later stages of both. Rates are rising and valuations are rich. Leverage is creeping higher as investment-grade issuers seek to buy growth to combat industry disruption. We expect debt-funded consolidation activity to continue to weigh on valuations. Demand is also tapering, due to a combination of new repatriation policies and higher hedging costs. Investment-grade corporates are struggling in the face of these technical challenges. In contrast, shrinking high-yield supply is supporting valuations, and we anticipate this credit market divergence to continue. We believe it is prudent to limit credit risk at this point in the cycle, but we remain opportunistic. We will continue to emphasize favorable riskadjusted carry opportunities in shorter-dated and floating rate spread products with minimal interest rate risk. Our analysts are also seeking issuers with fundamental improvement stories and the potential to generate outperformance as they progress through an upgrade cycle. We are monitoring the widening in investment-grade spreads for attractive reentry points. Given the asymmetric risk at this point of the cycle, we believe security avoidance is as important as security selection. This approach aligns with our core tenets of capital preservation and delivering strong risk-adjusted returns.

Representative Account Top Relative Contributors and Detractors Held for the Quarter Ended 6/30/18 Top Contributors

Average Weight (%)

Relative Top Detractors Contribution (%)

Average Weight (%)

Relative Contribution (%)

Federal National Mortgage Assn

17.38

0.09

Government National Mortgage Assn

2.07

-0.04

Teva Pharmaceutical Industries Ltd

0.46

0.02

U.S. Treasury Notes/Bonds

17.89

-0.03

FREMF 2010-KSCT B

0.19

0.01

Raymond James Financial, Inc

0.57

-0.02

Charter Communications, Inc

0.53

0.01

Federal Home Loan Mortgage Corp

5.69

-0.01

LeasePlan Corporation NV

0.55

0.01

Verisk Analytics, Inc

0.89

-0.01

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 recently available disclosure period contact a Janus Henderson institutional team representative. 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.

Page 2 of 3

2Q18 Portfolio Commentary

For more information, please visit janushenderson.com. Past performance is no guarantee of future results. Discussion is based on performance gross of fees. 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 6/30/18 the top ten portfolio holdings of the Representative Account are: United States Treasury Note/Bond (4.27%), Fannie Mae Pool (3.24%), United States Treasury Note/Bond (2.18%), United States Treasury Note/Bond (2.03%), Fannie Mae Pool (1.27%), United States Treasury Note/Bond (1.22%), Fannie Mae Pool (1.20%), Fannie Mae Pool (1.07%), United States Treasury Note/Bond (0.86%) and BBCMS 2018-TALL Mortgage Trust (0.81%). 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 6/30/18 and are subject to change without notice. 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 C-0618-17915 10-30-18

index. Relative contribution is based on returns gross of advisory fees, and may differ from actual performance. Investing involves risk, including the possible loss of principal and fluctuation of value. Core Plus Bond portfolios, benchmarked to the Bloomberg Barclays US Aggregate Bond Index, pursue maximum total return by investing in various income-producing securities. The portfolios will, under normal market conditions, maintain an average-weighted effective maturity of five to ten years and, may invest up to 35% high yield/high risk bonds. Total return is expected to result from a combination of current income and capital appreciation, with income normally being the dominant component of total return. Effective January 1, 2005 the composite definition was changed to include only proprietary mutual funds and exclude sub-advised pooled funds. Effective January 1, 2009 the composite definition was expanded to also include sub-advised pooled funds and separately managed institutional accounts. The composite was created in January 2003. 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. FOR INSTITUTIONAL INVESTOR USE ONLY / NOT FOR PUBLIC VIEWING OR DISTRIBUTION 388-42-29103 07/18

Page 3 of 3