Portfolio Commentary

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3Q17 Portfolio Commentary

Global Bond Fund Investment Environment Risk assets, including corporate credit, rose early on optimism around synchronous global economic growth. A well-received U.S. earnings season further supported spread tightening. Midquarter, escalating tension between the U.S. and North Korea shook global markets. Investors flocked to safe havens and corporate credit sold off through much of August. Uncertainty surrounding monetary policy also gave investors pause. Market participants had generally doubted the Federal Reserve’s (Fed) ability to raise interest rates again this year. However, at its September meeting, Fed officials indicated they are prepared to hike in December, and Treasury securities fell out of favor. The U.S. central bank also said it would begin normalizing its balance sheet in October, which was widely anticipated. The Bank of Canada (BOC) surprised by raising interest rates and the Bank of England (BOE) hinted that a rate hike could be on the horizon. Late in the period, corporate credit was buoyed by the renewed possibility of U.S. tax reform bolstering economic growth. The bond market, as represented by the Bloomberg Barclays Global Aggregate Bond Index, gained 1.76% 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 seven basis points. Gains were more prominent in high yield, which was aided, in part, by a steady rise in oil prices. After fluctuating throughout the quarter, Treasury yields were little changed. Yields on the government bonds of Japan and Germany also finished near where they began. The weaker dollar and generally benign environment continued to support strength in emerging markets.

Performance Discussion The Fund underperformed its primary benchmark, the Bloomberg Barclays Global Aggregate Bond Index, and its secondary benchmark, the Bloomberg Barclays Global Aggregate Corporate Bond Index. Our currency positioning was a significant detractor from relative performance. Specifically, exposure to the Turkish lira weighed on results. Early in the period, the currency declined versus the basket of benchmark currencies as investors expressed concern over the potential for Turkish President Recep Tayyip Erdoğan to revoke the central bank’s independence. The currency was troubled further as the U.S. dollar rallied late in the period. Market participants also grew concerned that the vote for independence in Iraq’s Kurdish region, which neighbors Turkey, could trigger volatility in the region. We are closely monitoring our position. Also detracting at the currency level was our exposure to the Japanese yen. While the currency was flat for the quarter,

Highlights • The Fund underperformed its primary benchmark during the quarter. • Our currency positioning was a leading detractor from relative results. • We are cautiously optimistic for corporate credit. Fundamentals and technicals remain favorable, and global growth is moving in the right direction. However, we are wary of valuations that are at the expensive end of their ranges. Page 1 of 3

Chris Diaz, CFA Portfolio Manager

Ryan Myerberg Portfolio Manager

3Q17 Portfolio Commentary our positioning was negatively impacted by the risk-on/risk-off sentiment swings in reaction to North Korea’s aggressions. Our positioning in the Norwegian krone and the Czech koruna partially offset these losses. We remain underweight the euro, in favor of the Swedish krona and the Norwegian krone. The krone rose with recovering oil prices over the quarter and our overweight allocation aided relative performance. Rising oil prices are beneficial for the Norwegian economy and the Norges Bank raised its tightening path during the quarter, which put additional upward pressure on the krone. The Czech koruna also appreciated versus the basket of currencies in the benchmark. Economic data continues to be firm in the Czech Republic, and the central bank raised its key interest rate during the quarter which spurred the koruna’s upward trajectory. At the asset class level, our sovereign debt allocation contributed to relative performance. Both security selection and carry, a measure of excess income generated by the Fund’s holdings, supported results. Generally speaking, developed markets continue to offer low yields. With limited market volatility and steady global growth, we have sought higheryielding opportunities outside of risk-free markets, particularly where central banks may look to ease monetary policy. Our exposure to the government debt of Indonesia was particularly accretive during the quarter. The local central bank cut rates in both August and September, which took markets by surprise. Yields fell across the country’s sovereign curve, benefiting our out-of-index exposure. An allocation to Portuguese government bonds further aided performance. Our out-of-index position benefited when S&P upgraded the nation’s debt to investment grade. We appreciate Portugal’s economic reform initiatives, which should lead to continued improvement in the country’s fundamentals.

government debt, we were positioned for a flattening yield curve. The German sovereign curve modestly steepened over the period, and our yield curve positioning detracted from relative performance. In Canada, the central bank raised interest rates in September, and left the door open for additional hikes this year. This put upward pressure on rates across the country’s sovereign curve, and our overweight allocation weighed on results. Our high-yield corporate credit allocation was another asset class contributor. Global high-yield spreads tightened 20 basis points over the quarter, and our out-of-index exposure proved beneficial. Relative performance was especially generative in the highest tier of high-yield ratings. We believe these “crossover” issuers, with management teams committed to balance sheet discipline and improving free-cash-flow generation, are often candidates for ratings upgrades. Yield curve positioning and a modest underweight in investment-grade corporate credit led that asset class to detract on a relative basis. Our cash position also held back results. Cash is not used as a strategy within the Fund but is a residual of our bottom-up, fundamental investment process. At the credit sector level, wireline communications was the strongest relative contributor. This was largely due to our out-of-index position in Telecom Italia. The company continues to perform well versus comparable investment-grade telecommunications issuers, and we believe it is a candidate for investment grade ratings. The Italian telecommunications company has recently focused on operational improvements and repairing its balance sheet. We appreciate its ability to generate free cash flow and management’s emphasis on using that cash to pay down debt. No credit sector or individual corporate security materially detracted from relative performance.

These gains were partially offset by our exposure to the government bonds of both Germany and Canada. While we remain underweight German For detailed performance information, please visit janushenderson.com/performance.

Outlook We expect moderately higher yields in risk-free markets. In our view, 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. The tightening cycle will remain gradual but the number of forthcoming hikes will likely fall between Fed and market expectations. With balance sheet contraction also on the horizon, we anticipate Treasury yields will remain range-bound, but will bump up against the higher end of that range. We are also closely monitoring signals from the European Central Bank (ECB) and the BOE. The ECB is running out of bonds to buy and, in our view, will soon be forced to taper its purchases. The decline in the pound has brought on inflationary concerns for the BOE, which in turn, has the central bank prepping markets for a rise in interest rates. One bank reversing course would have had minimal impact on markets, but we believe three shifting simultaneously is more concerning. We are actively managing yield curve positioning and continue to seek duration opportunities in countries with easing inflationary pressures and with central banks looking to hold or reduce interest rates. We are cautiously optimistic for corporate credit. Both fundamentals and technicals remain favorable. Earnings have been decent, companies are

adequately covering their interest expense and investors continue to reach for yield. Global growth is moving in the right direction and investor confidence remains high. Still, we are wary of valuations at the expensive end of their ranges. In the U.S., companies continue to exhibit behavior symptomatic of the late stages of the credit cycle. While Europe is not as late cycle as the U.S., the crowding-out effect of the ECB’s quantitative easing program has led to uncomfortably tight valuations. In the UK, economic conditions are uncertain at best as Brexit looms, and we are finding limited opportunities in the region. We expect a continued sideways grind, or modest spread tightening, in global credit. Outside of U.S. tax reform, we see few catalysts that will drive spreads significantly tighter. In our view, maintaining a defensive stance is still the appropriate course of action. Our analysts remain focused on higher-quality credit, companies with less cyclicality and issuers with cash flow stability that can generate carry versus the index. We are emphasizing shorter- to intermediate-dated issues, in which we believe we have a better insight into the company’s ability to pay down debt. We are actively seeking strong risk-adjusted opportunities in sectors that may benefit from U.S. tax reform. We are avoiding those issuers we expect to engage in merger and acquisition activity. Our goal is to participate in spread tightening, but our priority is to provide capital preservation and strong risk-adjusted returns for our clients.

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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 (%)

Portugal (Republic Of)

3.90

0.13

Germany (Federal Republic)

0.83

-0.05

Telecom Italia Spa

0.92

0.08

U.S. Treasury Notes/Bonds

9.35

-0.03

Argentine Bonos del Tesoro

1.74

0.07

Canada (Government Of)

2.01

-0.03

Indonesia (Republic Of)

2.07

0.07

Australia (Government Of)

3.96

-0.02

Japan (Govt of)

5.39

0.04

Japan (Govt of) I/L

1.56

-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 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 Global Bond Fund are: New Zealand Government Bond (4.18%), Japan Government Ten Year Bond (3.23%), Australia Government Bond (2.76%), US TSY INFL BOND .375 07/15/27 (2.14%), Japanese Government CPI Linked Bond (2.12%), Argentine Bonos del Tesoro (1.79%), Portugal Obrigacoes do Tesouro OT (1.76%), Portugal Obrigacoes do Tesouro OT (1.73%), Norway Government Bond (1.72%) and Norway Government Bond (1.70%). 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 highrisk securities, undervalued, overlooked and smaller capitalization companies, C-0917-12751 01-15-18

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. 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. High-yield or "junk" bonds involve a greater risk of default and price volatility and can experience sudden and sharp price swings. 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 Global Aggregate Bond Index is a broad-based measure of the global investment grade fixed-rate debt markets. Bloomberg Barclays Global Aggregate Corporate Bond Index measures global investment grade, fixed-rate corporate bonds. 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 188-42-29107 10/17

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