Portfolio Commentary

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4Q17 Portfolio Commentary

Contrarian Fund Investment Environment The S&P 500® Index notched strong gains in the fourth quarter. Signs of synchronized global economic growth and anticipation of U.S. tax reform were major market drivers during the period. As confidence in the passage of tax reform increased, a market rotation favored those companies which would benefit most from tax reform at the cost of those that are less likely to benefit. Companies within the financials and consumer sectors were the most obvious beneficiaries of reform.

Performance Discussion The Fund underperformed its benchmark, the S&P 500 Index. As part of our contrarian investment approach, we seek stocks that trade at a significant discount to our estimate of fair value, whose intrinsic value we believe will grow over time and whose management teams are aligned with shareholders. For most stocks in our portfolio, we believe the market either misunderstands the business model, undervalues the company’s assets or underappreciates the company’s long-term growth potential. We believe a concentrated, high-conviction portfolio of such companies can drive outperformance over time as the intrinsic value of these businesses gains greater appreciation by the market. This quarter, a few of our health care holdings were a large drag on our performance. Some of those positions have been trimmed or sold, but we are confident with the long-term outlook of the remaining companies in our portfolio. Allergan was our largest detractor. Patent disputes concerning Restasis, the firm’s blockbuster medicine for dry eye, weighed on the stock. A federal judge invalidated Allergan’s patent. After several generic drug makers had also been challenging Allergan’s patent through inter partes review (IPR). 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 was another large detractor. 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.

Highlights • The S&P 500 Index notched strong gains in the fourth quarter. • The Fund underperformed its benchmark. • We see buying opportunities in the financial sector and in a few industries where we believe consolidation will lead to greater profitability than the market appreciates. Page 1 of 4

Nick Schommer, CFA Portfolio Manager

4Q17 Portfolio Commentary Outside the health care sector, Ball Corp. was a large detractor. The metal packaging company’s third quarter performance was adversely impacted by hurricanes that weakened demand and increased supply chain costs. We view these as transitory issues and are constructive on the stock. Ball has acquired a large competitor in the beverage packaging industry, and we believe industry consolidation will improve competitive dynamics and profitability. We also believe Ball’s cash flow generation potential as it realizes synergies from the acquisition remains underappreciated by the market. While the aforementioned companies detracted from our results, we also held stocks that made positive contributions to performance. 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, and we believe the company is poised to experience mid- to high-single-digit sales growth in the coming years. A strong quarterly earnings report that included impressive store traffic and same-store sales

growth affirms our view that demand at Tractor Supply remains strong. Tractor Supply is also a beneficiary of tax reform. WEX Inc. was another large contributor. WEX provides fuel payment cards for trucking fleets, along with several other unique payment services. The company’s services provide tremendous back-end value to trucking fleets by providing better security for drivers using the cards, allowing fleets to implement purchase controls, and giving fleets more data on their drivers’ purchase habits. The stock was up this quarter after the company won a large contract with a new customer. Rising fuel prices also helped the stock, as increased fuel costs translate into higher revenue from its fuel payment cards. Ultimate Software was also a top contributor. The stock sold off in the third quarter, due to delays in implementing a few large customers onto its payroll and HR software systems, which pushed out revenue recognition. With the implementation issue better understood, the stock has rebounded as investors became more confident in the business and Ultimate Software continued to experience robust demand for its products. We continue to believe growth for Ultimate Software is underappreciated, as its cloud-based subscription software for payroll and HR departments takes share from legacy, on-premises solutions.

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

Outlook We have a positive outlook heading into 2018. The global economy appears stronger than any point since before the financial crisis. In the U.S., tax reform could provide another boost to earnings. We believe tax reform will also incentivize larger capital expenditures, and that clarity around taxes and repatriation of cash overseas will encourage greater merger and acquisition activity. Perhaps most important, a better economic backdrop could encourage a broader set of market leaders. For much of 2017, as economic growth remained slow, the market assigned higher multiples to companies with secular growth drivers that could grow in excess of GDP. Companies with less visible growth generally didn’t participate in the rally. We believe there are some competitively advantaged companies that were put into that

bucket, which provided buying opportunities in a few different market segments. With the economic backdrop improving, some of these companies may begin to get more credit for their earnings potential. One area where we’ve found buying opportunities is the financial sector. We mentioned it last quarter, but we believe the market has failed to appreciate the prospects for deregulation and for some banks to finally leverage excess capital that has built up in a stringent regulatory environment since the financial crisis. We also believe U.S. tax reform and the wind down of quantitative easing will benefit the sector. We also see opportunity with companies in a few industries where we believe consolidation will lead to greater levels of profitability than the market appreciates. We look forward to seeing how companies tied to these themes perform next year.

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

Ending Weight (%)

Ending Weight (%)

Contribution (%)

Tractor Supply Co

3.92

0.61

Allergan PLC

4.76

-1.06

WEX Inc

1.69

0.46

Envision Healthcare Corp

0.00

-0.71

Stanley Black & Decker Inc

3.78

0.43

Ball Corp

5.13

-0.46

Ultimate Software Group Inc

3.59

0.40

General Electric Co

1.79

-0.39

E*TRADE Financial Corp

3.00

0.36

Glaukos Corp

0.74

-0.20

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.

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4Q17 Portfolio Commentary Top Contributors

Top Detractors

Tractor Supply Company: We think this operator of rural tractor and farm supply stores can add meaningfully to its square footage in the coming years, while growing same-store sales comps. As it grows, Tractor Supply should continue to gain economies of scale, especially over local farm cooperatives and feed stores, which should allow the company to increase revenues and expand margins. Weather conditions and depressed agricultural and oil prices have hurt Tractor Supply’s clients, but we view these trends as temporary. In the meantime, the stock trades at an attractive valuation.

Allergan: We like the multi-specialty health care company’s dominant market positions in medical aesthetics and ophthalmology, and like that many of its products have a high cash pay component, making them less subject to government reimbursement.

WEX Inc.: WEX provides payment processing and information management services to vehicle fleets. We believe that WEX has earned its leading market share position through differentiated back-end reporting, bill pay consolidation features and complex analytics. In addition, we estimate that it would take significant effort for competitors to achieve similar transaction fees. We also like the company's strong customer retention, international expansion and potential for growth into other verticals.

Ball Corp.: Ball Corporation is a supplier of metal packaging to the beverage, food, personal care and household products industries. We believe Ball’s management team are good capital allocators and like that the company competes in a consolidated and disciplined industry which has translated into good returns on capital and free cash flow, in our view.

Stanley Black & Decker: Stanley Black & Decker manufactures industrial tools and household hardware. We believe the industry backdrop for toolmakers is healthy as construction picks up in the U.S. We also think the market fails to appreciate the value of some of the brands Stanley has acquired. In particular, we see increased value for the Craftsman brand as Stanley starts selling Craftsman tools outside of Sears. Finally, we also believe innovation at the company has been overlooked. In our view, Stanley has created a platform of lithium batterypowered tools that consumers will migrate to in the coming years. Ultimate Software: Ultimate Software provides cloud-based subscription software for payroll and other human resources functions. They primarily sell to mid-size companies and are increasingly selling more products to larger customers. We believe Ultimate Software has a long runway for growth as they take share from incumbent, legacy software providers in the payroll and HR sector.

Envision Healthcare: Envision Healthcare provides physician outsourcing services to hospitals, owns outpatient surgery centers and provides emergency transportation services. We sold the stock due to volume concerns and what we viewed as executional missteps from the management team.

General Electric: We like General Electric for its leading market position in a number of industrial markets, and also like that much of its revenue comes from aftermarket and maintenance services, which provide a steady, recurring revenue stream for the company. We also believe new management will simplify GE’s portfolio of companies and drive a change in expense management. Glaukos: The medical device company pioneered micro-invasive glaucoma surgery (MIGS), creating a stent that helps alleviate pressure in the eye caused by glaucoma, which can lead to blindness. Glaucoma is the biggest market within ophthalmology, and we believe MIGS represents a significant paradigm shift in the way the disease can be treated. We also like the management team at Glaukos and are impressed by the company’s pipeline, which could expand the number of addressable markets for the firm.

E*TRADE Financial: E*TRADE Financial Corporation is a financial services company offering an online brokerage services and related products for investors. We believe the core brokerage business is attractive, and that the market has failed to recognize the strength of the company, now that it has restructured its balance sheet. By shuttering its mortgage business, E*TRADE can redeploy capital into the brokerage business and also return more cash to shareholders. Finally, we believe the company is well positioned to benefit from tax reform and rising interest rates.

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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 Contrarian Fund are: Citigroup Inc (6.00%), Ball Corp (5.05%), Allergan PLC (4.69%), Oracle Corp (4.50%), Tractor Supply Co (3.85%), Stanley Black & Decker Inc (3.71%), Abbott Laboratories (3.62%), Ultimate Software Group Inc (3.52%), Intercontinental Exchange Inc (3.11%) and Alphabet Inc (3.09%). 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 portfolio and is gross of advisory fees. Fixed income securities and certain equity C-1217-14783 04-15-18

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. Holding a meaningful portion of assets in cash or cash equivalents may negatively affect performance. 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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