Portfolio Commentary

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4Q17 Portfolio Commentary

Growth and Income Fund Investment Environment U.S. stocks pushed higher during the quarter, fueled by strong third quarter earnings and supportive economic data. The nomination of Jerome Powell as the next chair of the Federal Reserve (Fed) signaled to investors that the Fed would likely continue its slow and measured normalization of monetary policy. At its December meeting, the Fed took a widely anticipated step along that path by raising interest rates for the third time in 2017. Equities were boosted late in the period as markets priced in the likelihood that tax reform would be signed into law. All equity sectors generated positive returns, led by consumer discretionary, technology and financials, while utilities, health care and real estate delivered modest returns.

Jeremiah Buckley, CFA Portfolio Manager

Performance Discussion The Fund outperformed its S&P 500® Index benchmark during the quarter. We seek to provide our clients with both growth of capital and quarterly income. As part of that investment mandate, we focus much of our research efforts on identifying large, well-established companies that should be in a position to grow free cash flow and continue increasing their dividend over longer time horizons. We believe investing in companies that pay out the majority of their free cash flow in dividends and have the ability to grow their dividends over time will drive better risk-adjusted performance over the long term. Strong stock selection in the industrials sector helped drive outperformance during the quarter. Aerospace company Boeing was the Fund’s top individual contributor. Boeing benefited from continued strength in global air traffic. There also continues to be strong demand for Boeing’s 737 and 787 planes. Additionally, we have a favorable opinion of the company’s ambitious goals for growing its newly integrated services business, which combined its defense and commercial servicing facilities. The company also continues to exceed expectations on free cash flow, and as a result was able to increase its dividend during the quarter. Stock selection in information technology also aided relative returns, and Microsoft was a large contributor to performance. Our investment thesis in the technology company continues to play out as momentum in its cloud-based businesses, Azure and Office 365, led to strong quarterly earnings results. Microsoft continues to return cash to shareholders by way of dividends and share repurchases, and we believe tax reform will allow them to bring back much of their offshore cash balance. While the stock’s valuation is now toward the higher end of its historic range, we continue to like the company’s position as the second-largest provider of cloud-based IT services, and believe its strategic partnerships with clients provide a competitive advantage relative to peers.

Highlights • U.S. stocks performed well during the quarter on strong corporate earnings and the successful passage of the tax reform bill. • The Fund outperformed its benchmark during the period. • Continued low interest rates, modest economic growth and lower corporate tax rates should support the equity market going forward. Page 1 of 4

Marc Pinto, CFA Portfolio Manager

4Q17 Portfolio Commentary Semiconductor company Texas Instruments also performed well as heightened demand for semiconductor chips supported the stock during the quarter. The company is benefiting from its focus on automotive applications as semiconductor equipment per machine continues to grow, especially as more electric vehicles hit the road. This has allowed the company to transition to higher-margin business, and increase its dividend payout and share repurchase program. We believe the eventual adoption of electric and autonomous vehicles should support demand for the company’s technology. Further, the company should also benefit from increasing demand in industrial applications as more machines use data applications to improve performance. While pleased with our performance during the quarter, some holdings disappointed. Security selection in the consumer discretionary sector weighed on relative returns, with toy and board game company Hasbro among the leading detractors. The bankruptcy of retailer Toys“R”Us was a headwind for the stock during the quarter as it caused uncertainty over toy sales headed into the holiday shopping season and 2018. However, we believe the company is well positioned to grow sales outside of the U.S., and still stands to benefit from its partnerships with entertainment properties such as Star Wars and Marvel. Further, the company is a good steward of capital, and is adept at increasing efficiencies in its supply

chain and growing free cash flow which is returned to shareholders via dividends and share repurchases. Stock selection in the health care sector also weighed on relative returns. Pharmaceutical company Merck & Co. was the largest detractor during the period. The company encountered lingering problems from a cyberattack earlier in the year that disrupted its manufacturing process and negatively impacted revenue growth. Merck was also forced to extend the endpoint for a trial being conducted with its lung cancer drug Keytruda to 2019. A successful trial in 2018 could have helped cement the company as the leader in lung cancer treatment, and investors are concerns about the potential implications of the extension. Despite this setback, we remain optimistic on the growth potential of Keytruda as well as Merck’s broader product pipeline. We believe the company also has an opportunity to achieve higher productivity from its expense structure and improve margins over time. We also appreciate that the stock provides a high dividend yield. Biopharmaceutical company Amgen also detracted. Slower-than-expected adoption of its cholesterol drug Repatha – which has been expected to be a critical driver of Amgen’s future growth, and a potential offset to patent expirations for its other drugs – weighed on the stock price. However, we maintain a positive view of Repatha’s growth prospects and continue to hold the stock, which has a considerable dividend yield.

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

Outlook Barring a shock to the market, we expect the equity market to continue grinding higher. The predicted gradual pace of monetary normalization by Mr. Powell and the Fed should continue to foster a benign rate environment, which bodes well for stocks. Modest economic growth around the world adds to the favorable environment for equities, and a number of our holdings stand to benefit from tax reform. We remain focused on companies with strong growth prospects and those that are

innovating through the use of technology to improve the efficiency and quality of product offerings. However, we remain mindful of the potential implications of a rising rate environment, and have positioned the portfolio accordingly. We believe our holdings in banks and asset managers stand to benefit from rising interest rates, and our avoidance of bond-proxy style stocks – such as telecoms, utilities and rate-sensitive real estate investment trusts – should prove beneficial. Our overweight exposure to cyclical sectors like industrials and consumer discretionary, which typically outperform as the economy expands, could further bolster performance, in our view.

Top Contributors and Detractors for the Quarter Ended 12/31/17 Top Contributors

Ending Weight (%)

Contribution (%) Top Detractors

Ending Weight (%)

Contribution (%)

Boeing Co

4.23

0.67

Merck & Co Inc

1.86

-0.22

Microsoft Corp

4.17

0.61

Hasbro Inc

1.24

-0.09

Texas Instruments Inc

3.08

0.49

Amgen Inc

0.94

-0.07

Altria Group Inc

3.21

0.42

Allergan PLC

0.18

-0.05

TE Connectivity Ltd

2.98

0.42

OUTFRONT Media Inc

0.55

-0.04

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.

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4Q17 Portfolio Commentary Top Contributors

Top Detractors

Boeing: The Boeing Company is the largest manufacturer of commercial jet aircraft in the world. The company also builds military aircraft and provides support services to both commercial airlines and the U.S. military. We believe Boeing could have the opportunity to grow its domestic and foreign defense businesses, particularly if the new U.S. administration increases defense spending. Growth in commercial air travel globally should lead to strong demand for its commercial airplanes, as will the increasingly efficient and reliable planes being produced through Boeing’s innovation pipeline. Boeing also continues to make progress on lowering the production costs of the 787 Dreamliner aircraft. The cost reductions have led to higher free cash flow, which enabled the company to increase its dividend and repurchase shares.

Merck & Co.: Merck & Co. is a global pharmaceutical company with a wide product offering for conditions ranging from lung cancer, diabetes, and high cholesterol. With annual sales of nearly $40 billion, it is among the world's largest pharmaceutical companies. We have a favorable view of Merck’s new products such as cancer treatment drug Keytruda, as well as the company’s deep product pipeline. Merck returns cash to shareholders by way of a high dividend payout which management has consistently raised over time.

Microsoft Corp.: Microsoft, the legacy software giant, has reinvented itself to become the second-largest provider of cloud-based IT services. We believe the transformation has been a smart one, as more companies move workloads from physical servers to the cloud. We are also impressed by Microsoft’s transition to a subscription-based model for its popular Office suite, and the company’s continued focus on cutting costs, buying back shares and raising its dividend. Texas Instruments: Texas Instruments has repositioned its business to focus on analog and other high margin semiconductor sub-segments. It is also in the early phases of transitioning production from 200mm fabs to 300mm fabs which should result in higher incremental gross margins. The company’s asset-light strategy has allowed it to generate substantial free cash flow, which it has returned to shareholders through dividends and share repurchases. We also believe they will continue to see strong organic revenue growth from increasing demand for a number of their products in additional automotive and industrial applications. Altria Group: The tobacco company remains an attractive holding given its historical ability to generate significant levels of cash, a high percentage of which is returned to shareholders via dividends and share buybacks. We think despite declining cigarette volumes in the U.S., Altria’s cash flows will grow moderately over time as the company continues to improve margins and grow the non-cigarette business. We also believe the company will benefit from an industry shift toward heatnot-burn products that significantly reduce health risks and could stem volume declines. TE Connectivity: TE Connectivity designs and manufactures products that connect and protect the flow of power and data inside a number of products used by consumers and industries. The company holds a leading position in electronic connectors – an attractive industry in our view. We believe the company’s ongoing initiatives in outsourcing and factory consolidation will result in higher margins over time. We also appreciate the company’s healthy dividend and stock buyback program.

Hasbro Bradley Inc.: Hasbro provides children’s toys, games, interactive software and infant products through a portfolio of industry leading brands that include Nerf, Magic: The Gathering, Monopoly and Transformers. Hasbro is also the go-to partner for designing and manufacturing toys for the leading entertainment properties like Star Wars, Disney Princess and Marvel. Hasbro has been at the industry forefront in leveraging the growing impact of these global media properties and linking with consumers digitally to increase their brand’s appeal. Hasbro has also been very disciplined about managing costs and finding efficiencies in their supply chain, which has led to growing free cash flow that has been returned to shareholders through increasing dividends and share repurchases. Amgen: Amgen is a leading biotech company with multiple biologic products treating cancer, autoimmune diseases, kidney disease and osteoporosis. We have a favorable opinion about the potential for growth in their new drug Repatha and its high margin potential. We also appreciate the company’s initiatives to streamline its corporate functions and rationalize manufacturing which could lead to meaningful margin expansion. The company also has excess free cash flow that it can use to either repurchase stock or make additional acquisitions. Allergan: Allergan is a Dublin, Ireland-based pharmaceuticals business with leading therapies in eye care, medical aesthetics and dermatology. In our opinion, the market undervalues Allergan’s durable growth franchises, such as the popular wrinkle treatments Botox and Juvéderm. An increasing percentage of Allergan’s business is based on cash payments, rather than reimbursement, and the company has a strong product pipeline. OUTFRONT Media: The real estate investment trust (REIT) provides billboard and transit advertising in the U.S. and Canada for both local and national advertisers. We believe the outdoor advertising industry should continue to keep market share versus online advertising, and OUTFRONT Media is well positioned to remain a key player in the space. Further, the company’s efforts to roll out more digital billboards, which achieve higher revenue and returns on capital, should drive future profit and dividend growth.

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4Q17 Portfolio Commentary

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 12/31/17 the top ten portfolio holdings of Janus Henderson Growth and Income Fund are: Boeing Co (4.20%), Microsoft Corp (4.15%), Apple Inc (3.44%), Altria Group Inc (3.20%), Texas Instruments Inc (3.07%), McDonald's Corp (3.06%), TE Connectivity Ltd (2.97%), CME Group Inc (2.79%), Accenture PLC (2.72%) and JPMorgan Chase & Co (2.45%). There are no assurances that any portfolio currently holds these securities or other securities mentioned. 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 the daily performance of each security with the previous day’s ending weight in the C-1217-14829 04-15-18

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. 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, 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. S&P 500® Index reflects U.S. large-cap equity performance and represents broad U.S. equity market performance. 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

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