485BPOS
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Ticker |
Janus
Henderson Securitized Income ETF |
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JSI |
Principal
U.S. Listing Exchange: NYSE Arca, Inc. |
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Janus
Detroit Street Trust
Prospectus
The
Securities and Exchange Commission has not approved or disapproved of these
securities or passed on the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
This
Prospectus describes Janus Henderson Securitized Income ETF (the “Fund”), a
portfolio of Janus Detroit Street Trust (the “Trust”). Janus Henderson Investors
US LLC (the “Adviser”) serves as investment adviser to the Fund.
Shares
of the Fund are not individually redeemable and the owners of Fund shares may
purchase or redeem shares from the Fund in Creation Units only, in accordance
with the terms set forth in this prospectus. The purchase and sale price of
individual Fund shares trading on an exchange may be below, at or above the most
recently calculated net asset value for Fund shares (sometimes referred to as
the “NAV”).
TABLE
OF CONTENTS
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1½Janus Detroit Street Trust
FUND
SUMMARY
Janus
Henderson Securitized Income ETF
Janus Henderson Securitized Income ETF seeks
current income with a focus on preservation of capital.
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FEES AND EXPENSES OF THE FUND |
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. Investors may pay brokerage commissions and other fees to
financial intermediaries on their purchases and sales of Fund shares, which are
not reflected in the table or in the example below.
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ANNUAL
FUND OPERATING EXPENSES
(expenses
that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
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0.49% |
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Other
Expenses(1) |
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0.00% |
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Acquired
Fund Fees and Expenses(2) |
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0.04% |
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Total
Annual Fund Operating Expenses |
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0.53% |
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Fee
Waiver(3) |
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0.03% |
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Total
Annual Fund Operating Expenses After Fee Waiver(3) |
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0.50% |
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(1) |
Other
Expenses are based on the estimated expenses that the Fund expects to
incur during the current fiscal
year. |
(2) |
Acquired Fund Fees
and Expenses are indirect fees and expenses that the Fund incurs from
investing in other investment companies. These expenses are based on the
total expense ratio of the underlying fund disclosed in such underlying
fund’s most recent shareholder report. Acquired Fund Fees and Expenses are
estimated for the current fiscal
year. |
(3) |
The
Adviser has contractually agreed to waive and/or reimburse a portion of
the Fund’s management fee in an amount equal to the management fee it
earns as an investment adviser to any affiliated exchange-traded funds
(“ETFs”) with respect to the Fund’s investment in such affiliated ETF,
less certain operating expenses. The fee waiver agreement will remain in
effect at least through February 28,
2025. The fee waiver agreement may be modified or
terminated prior to this date only at the discretion of the Board of
Trustees. |
EXAMPLE:
The Example is intended
to help you compare the cost of investing in the Fund with the cost of investing
in other funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses are
equal to the Total Annual Fund Operating Expenses After Fee Waiver for the first
year and the Total Annual Fund Operating Expenses thereafter. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
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1 Year |
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3 Years |
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$ |
51 |
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$ |
167 |
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Portfolio
Turnover: The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual fund operating expenses
or in the Example, affect the Fund’s performance. Because the Fund was not in
operation during the most recent fiscal year, no portfolio turnover information
is available as of the date of this Prospectus.
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PRINCIPAL INVESTMENT STRATEGY |
The
Fund pursues its investment objective by investing, under normal circumstances,
at least 80% of its net assets (plus borrowings for investment purposes) in
securitized securities. Securitized securities are debt securities that entitle
their holders to payments that depend primarily on the assets underlying the
securities, and include, but are not limited to, asset-backed securities
(“ABS”),
2½Janus Henderson Securitized Income
ETF
collateralized
loan obligations (“CLOs”), agency and non‑agency mortgage-backed securities
(“MBS”), and collateralized mortgage obligations (“CMOs”). ABS include, but are
not limited to, private and multi-class structures, pass-through certificates,
and other instruments secured by financial, physical, and/or intangible assets.
MBS include, but are not limited to, commercial mortgage-backed securities
(“CMBS”) and credit risk transfer securities (“CRTs”) issued by government
sponsored entities or private issuers. The Fund will typically enter into “to be
announced” or “TBA” commitments when purchasing MBS, which allows the Fund to
agree to pay for certain yet‑to‑be issued securities at a future date and which
may have a leveraging effect on the Fund. The Fund may enter into mortgage
dollar rolls which allow the Fund to sell securities for delivery in the current
month and simultaneously contract with the same counterparty to repurchase
similar securities on a specified future date.
In
addition to its investments in securitized securities, the Fund may from time to
time also invest in certain other fixed-income securities and/or hold cash and
cash-equivalents (such as U.S.
Treasuries).
The
Fund may invest in securities of any maturity or duration and the securities may
have fixed, floating, or variable interest
rates.
The
Fund will normally invest a substantial portion of its assets in securities
rated investment grade (that is, securities rated Baa3/BBB‑ or higher, or if
unrated, determined to be of comparable credit quality by the Adviser). The Fund
may not invest more than 40% of its net assets in securities rated below
investment grade (that is, securities rated lower than Baa3/BBB‑, or if unrated,
determined to be of comparable credit quality by the Adviser) at the time of
purchase by the Fund. The Fund invests only in U.S. dollar denominated
securities. The Fund may invest its uninvested cash in affiliated or
non‑affiliated money market funds or unregistered cash management pooled
investment vehicles that operate as money market funds. The Fund may invest in
securities that have contractual restrictions that prohibit or limit their
resale (these are known as “restricted securities”), which may include Rule 144A
securities.
The
Fund may invest in derivatives. Derivative instruments have a value derived
from, or directly linked to, an underlying asset, such as fixed-income
securities, interest rates, or market indices. In particular, the Fund may use
swaps, including interest rate, total return and credit-default swaps, and
interest rate or bond futures. The Fund may use derivatives to manage or hedge
portfolio risk, including interest rate and/or credit risks. The Fund’s exposure
to derivatives will vary.
The
Fund is “actively-managed” and does not seek to replicate the composition or
performance of any particular index. Accordingly, the portfolio managers have
discretion on a daily basis to manage the Fund’s portfolio in accordance with
the Fund’s investment objective. The portfolio managers apply a “bottom up”
approach to selecting investments to purchase and sell. This means that the
portfolio managers look at securities one at a time to determine if a security
is an attractive investment opportunity and if it is consistent with the Fund’s
investment policies.
The
Fund is classified as nondiversified, which allows it to hold larger positions
in securities, compared to a fund that is classified as
diversified.
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PRINCIPAL INVESTMENT RISKS |
The biggest risk is that the Fund’s returns and yields will vary,
and you could lose money. The principal risks associated with
investing in the Fund are set forth below.
Asset-Backed
Securities Risk. ABS may
be adversely affected by changes in interest rates, underperformance of the
underlying assets, the creditworthiness of the entities that provide any
supporting letters of credit, surety bonds, or other credit or liquidity
enhancements. In addition, most asset-backed securities are subject to
prepayment risk in a declining interest rate environment, and extension risk in
an increasing rate environment.
Mortgage-Backed
Securities Risk. MBS are classified generally as either commercial
mortgage-backed securities or residential mortgage-backed securities, each of
which is subject to certain specific risks. MBS may be more sensitive to changes
in interest rates than other types of debt securities. Investments in MBS are
subject to both extension risk and prepayment risk. These risks may reduce the
Fund’s returns. In addition, investments in MBS, including those comprised of
subprime mortgages, may be subject to a higher degree of credit risk, valuation
risk, and liquidity risk than various other types of fixed-income
securities.
Commercial
Mortgage-Backed Securities Risk. CMBS are not backed by the full
faith and credit of the U.S. Government and are subject to risk of default on
the underlying mortgages, particularly during periods of economic downturn. CMBS
issued by non-government entities may offer higher yields than those issued by
government entities, but also may be subject to
greater
3½Janus Henderson Securitized Income
ETF
volatility
than government issues. CMBS are subject to a greater degree of prepayment and
extension risk than many other forms of fixed-income securities and therefore
react differently to changes in interest rates than other bonds, and the prices
of CMBS may reflect adverse economic and market
conditions.
Privately Issued
Mortgage-Related Securities Risk. Privately issued
mortgage-related securities may not be subject to the same underwriting
requirements for the underlying mortgages that are applicable to those
mortgage-related securities that have a government or government-sponsored
entity guarantee. As a result, the mortgage loans underlying privately issued
mortgage-related securities may, and frequently do, have less favorable
collateral, credit risk, or other underwriting characteristics than government
or government-sponsored mortgage-related securities and have wider variances in
a number of terms including interest rate, term, size, purpose, and borrower
characteristics. The risk of nonpayment is greater for mortgage-related
securities that are backed by loans that were originated under weak underwriting
standards, including loans made to borrowers with limited means to make
repayment. A level of risk exists for all loans, although, historically, the
poorest performing loans have been those classified as subprime. “Subprime”
loans are loans made to borrowers with lower credit ratings and/or a shorter
credit history, who are more likely to default on their loan obligations as
compared to more credit-worthy borrowers. Privately issued mortgage-related
securities are not traded on an exchange. There may be a limited market for the
securities, especially when there is a perceived weakness in the mortgage and
real estate market sectors. Without an active trading market, mortgage-related
securities held in the Fund’s portfolio may be particularly difficult to value
because of the complexities involved in assessing the value of the underlying
mortgage loans.
Collateralized
Mortgage Obligation Risk. CMOs are a type of mortgage-backed
security. CMOs are created by dividing the principal and interest payments
collected on a pool of mortgages into several revenue streams (tranches) with
different priority rights to portions of the underlying mortgage payments.
Certain CMO tranches may represent a right to receive interest only (“IOs”),
principal only (“POs”) or an amount that remains after floating-rate tranches
are paid (an inverse floater). These securities are frequently referred to as
“mortgage derivatives” and may be extremely sensitive to changes in interest
rates. Interest rates on inverse floaters, for example, vary inversely with a
short-term floating rate (which may be reset periodically). Interest rates on
inverse floaters will decrease when short-term rates increase, and will increase
when short-term rates decrease. These securities have the effect of providing a
degree of investment leverage. In response to changes in market interest rates
or other market conditions, the value of an inverse floater may increase or
decrease at a multiple of the increase or decrease in the value of the
underlying securities. If the Fund invests in CMO tranches (including CMO
tranches issued by government agencies) and interest rates move in a manner not
anticipated by the Adviser, it is possible that the Fund could lose all or
substantially all of its investment.
Credit Risk Transfer
Securities Risk. CRTs are unguaranteed and unsecured debt
securities that are commonly issued by a government sponsored entity. CRTs are
not directly linked to or backed by the underlying mortgage loans, so investors
such as the Fund have no direct recourse to the underlying mortgage loans in the
event of a default. The risks associated with CRTs are different from the risks
associated with investments in MBS issued by government sponsored entities or
private issuers because some or all of the mortgage default or credit risk
associated with the underlying mortgage loans is transferred to investors.
Additional risks associated with investments in CRTs may include valuation risk,
credit risk, liquidity risk, and prepayment
risk.
TBA Commitments
Risk. The Fund will typically enter into “to be announced” or
“TBA” commitments for MBS and, at times, the portion of the Fund’s portfolio
allocated to TBA securities may be significant. Although TBA securities must
meet industry-accepted “good delivery” standards, there can be no assurance that
a security purchased on a forward commitment basis will ultimately be issued or
delivered by the counterparty. During the settlement period, the Fund will still
bear the risk of any decline in the value of the security to be delivered.
Because TBA commitments do not require the purchase and sale of identical
securities, the characteristics of the security delivered to the Fund may be
less favorable than the security delivered to the dealer. If the counterparty to
a transaction fails to deliver the securities, the Fund could suffer a loss. At
the time of its acquisition, a TBA security may be valued at less than the
purchase price. When the Fund sells a TBA security prior to settlement, it does
not participate in future gains or losses with respect to the security. The Fund
is generally not required to pay for the TBA security until the settlement date
and, as a result, if the Fund remains substantially fully invested at a time
when TBA commitment purchases are outstanding, the purchases may result in a
form of leverage.
CLO
Risk. The risks of investing in CLOs include both the economic
risks of the underlying loans combined with the risks associated with the CLO
structure governing the priority of payments. The degree of such risk will
generally correspond to the specific tranche in which the Fund is invested.
Higher rated tranches (such as AAA rated tranches) do not constitute a
guarantee, may be downgraded, and in stressed market environments it is possible
that even senior CLO tranches could experience losses
4½Janus Henderson Securitized Income
ETF
due
to actual defaults, increased sensitivity to defaults due to collateral default
and the disappearance of the subordinated/equity tranches, market anticipation
of defaults, as well as negative market sentiment with respect to CLO securities
as an asset class. The Fund’s portfolio management may not be able to accurately
predict how specific CLOs or the portfolio of underlying loans for such CLOs
will react to changes or stresses in the market, including changes in interest
rates. The most common risks associated with investing in CLOs are liquidity
risk, interest rate risk, credit risk, prepayment risk, and the risk of default
of the underlying asset, among
others.
CLO Manager
Risk. CLOs are managed by
investment advisers independent of the Adviser. CLO managers are responsible for
selecting, managing and replacing the underlying bank loans within a CLO. CLO
managers may have limited operating histories, may be subject to conflicts of
interests, including managing the assets of other clients or other investment
vehicles, or receiving fees that incentivize maximizing the yield, and
indirectly the risk, of a CLO. Adverse developments with respect to a CLO
manager, such as personnel and resource constraints, regulatory issues or other
developments that may impact the ability and/or performance of the CLO manager,
may adversely impact the performance of the CLO securities in which the Fund
invests.
Mortgage Dollar Rolls
Risk. Mortgage dollar roll transactions involve the risk that the
market value of the securities sold by the Fund may decline below the repurchase
price of those securities. Since the counterparty in the transaction is required
to deliver a similar, but not identical, security to the Fund, the security the
Fund is required to buy under the mortgage dollar roll may be worth less than an
identical security. These transactions involve the risk that portfolio
management may not correctly predict mortgage prepayments and interest rates,
which may diminish the Fund’s performance. In addition, mortgage dollar roll
transactions may increase the Fund’s portfolio turnover rate, which can increase
the Fund’s expenses and decrease returns.
High-Yield Bond
Risk. High-yield bonds (also known as “junk” bonds) are considered
speculative and may be more sensitive than other types of bonds to economic
changes, political changes, or adverse developments specific to the company that
issued the bond, which may adversely affect their value. High-yield bonds are
bonds rated below investment grade by the primary rating agencies such as
Standard & Poor’s Ratings Services, Fitch, Inc., and Moody’s Investors
Service, Inc. or are unrated bonds of similar quality. The value of lower
quality bonds generally is more dependent on credit risk than investment grade
bonds. Issuers of high-yield bonds may not be as strong financially as those
issuing bonds with higher credit ratings and are more vulnerable to real or
perceived economic changes, political changes, or adverse developments specific
to the issuer. In addition, the junk bond market can experience sudden and sharp
price swings.
Agency Securities
Risk. Certain debt securities issued or guaranteed by agencies of
the U.S. Government are guaranteed as to the payment of principal and interest
by the relevant entity but have not been backed by the full faith and credit of
the U.S. Government. Instead, they have been supported only by the discretionary
authority of the U.S. Government to purchase the agency’s obligations. An event
affecting the guaranteeing entity could adversely affect the payment of
principal or interest or both on the security and, therefore, these types of
securities should be considered to be riskier than U.S. Government
securities.
Fixed-Income
Securities Risk. The Fund invests in a variety of debt and other
fixed-income securities that are generally subject to the following
risks:
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Interest
rate risk is the risk that prices of bonds and other fixed-income
securities will increase as interest rates fall and decrease as interest
rates rise. Rising interest rates have unpredictable effects on the
markets and may expose fixed-income and related markets to heightened
volatility. |
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Credit
risk is the risk that the credit strength of an issuer of a fixed-income
security will weaken and/or that the issuer will be unable to make timely
principal and interest payments and that the security may go into
default. |
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Prepayment
risk is the risk that, during periods of falling interest rates, certain
debt obligations may be paid off quicker than originally anticipated,
which may cause the Fund to reinvest its assets in securities with lower
yields, resulting in a decline in the Fund’s income or return
potential. |
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Valuation
risk is the risk that one or more of the fixed-income securities in which
the Fund invests are priced differently than the value realized upon such
security’s sale. In times of market instability, valuation may be more
difficult. Valuation may also be affected by changes in the issuer’s
financial strength, the market’s perception of such strength, or in the
credit rating of the issuer or the
security. |
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Extension
risk is the risk that, during periods of rising interest rates, certain
debt obligations may be paid off substantially slower than originally
anticipated, and as a result, the value of those obligations may
fall. |
5½Janus Henderson Securitized Income
ETF
• |
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Liquidity
risk is the risk that fixed-income securities may be difficult or
impossible to sell at the time that portfolio management would like or at
the price portfolio management believes the security is currently worth.
Consequently, the Fund may have to accept a lower price to sell a
security, sell other securities to raise cash, or give up an investment
opportunity, any of which could have a negative effect on the Fund’s
performance. In unusual market conditions, even normally liquid securities
may be affected by a degree of liquidity risk (i.e., if the number and
capacity of traditional market participants is
reduced). |
Market
Risk. The value of the Fund’s portfolio may decrease due to
short-term market movements and over more prolonged market downturns. As a
result, the Fund’s net asset value (“NAV”) may decrease. Market risk may affect
a single issuer, industry, economic sector, or the market as a whole. Market
risk may be magnified if certain social, political, economic, and other
conditions and events (such as terrorism, conflicts, including related
sanctions, social unrest, natural disasters, epidemics and pandemics, including
COVID‑19) adversely interrupt the global economy and financial markets. It is
important to understand that the value of your investment may fall, sometimes
sharply, in response to changes in the market, and you could lose
money.
Derivatives
Risk. Derivatives can be volatile and involve risks in addition to
the risks of the underlying referenced securities or asset. Gains or losses from
a derivative investment can be substantially greater than the derivative’s
original cost and can therefore involve leverage. Leverage may cause the Fund to
be more volatile than if it had not used leverage because leverage can
exaggerate the effect of any increase or decrease in the value of securities and
other instruments held by the Fund. Derivatives entail the risk that the
counterparty to the derivative transaction will default on its payment
obligations. Derivatives used for hedging purposes may reduce or eliminate gains
or cause losses if the market moves in a manner different from that anticipated
by portfolio management or if the cost of the derivative outweighs the benefit
of the hedge.
Restricted Securities
Risk. Investments in restricted securities, including securities
issued under Regulation S and Rule 144A, could have the effect of decreasing the
Fund’s liquidity profile or preventing the Fund from disposing of them promptly
at advantageous prices. Restricted securities may be less liquid than other
investments because such securities may not always be readily sold in broad
public markets and may have no active trading market. As a result, they may be
difficult to value because market quotations may not be readily
available.
Management
Risk. The Fund is an actively managed investment portfolio and is
therefore subject to the risk that the investment strategies employed for the
Fund may fail to produce the intended results. Although the Fund seeks to
provide long-term positive returns, market conditions or implementation of the
Fund’s investment process may result in losses, and the Fund may not meet its
investment objective. As such, there can be no assurance of positive “absolute”
returns.
New/Smaller Sized
Fund Risk. Because the Fund is relatively new, it has a limited
operating history and a small asset base. The Fund’s performance may not
represent how the Fund is expected to or may perform in the long term if and
when it becomes larger. If a new or smaller fund were to fail to attract
sufficient assets to achieve or maintain economies of scale, performance may be
negatively impacted, and any resulting liquidation could create negative
transaction costs for the Fund and tax consequences for
investors.
Leverage Risk.
The risk associated with certain types of leveraged investments or
trading strategies pursuant to which relatively small market movements may
result in large changes in the value of an investment. The Fund creates leverage
by investing in instruments where the investment loss can exceed the original
amount invested. The use of other investment techniques, such as short sales and
certain derivative transactions, can create a leveraging effect on the
Fund.
Cash Transaction
Risk. The Fund intends to effect Creation Unit transactions
primarily for cash, rather than in‑kind securities, because of the nature of the
Fund’s investments. Cash purchases may cause the Fund to incur portfolio
transaction fees or charges or delays in investing the cash that it would
otherwise not incur if a purchase was made on an in‑kind basis. Because the Fund
may be required to sell portfolio securities to obtain the cash needed to
distribute redemption proceeds and thereby may recognize a capital gain on such
sales, Creation Unit redemption on a cash basis may be less tax‑efficient for
the Fund compared to an in‑kind redemption. In addition, Creation Unit
redemptions for cash may cause the Fund to incur portfolio transaction fees or
charges it would not otherwise incur with an in‑kind redemption, to the extent
such fees or charges are not offset by the redemption transaction fee paid by
Authorized Participants. In addition, the Fund’s use of cash transactions may
result in wider bid‑ask spreads in Fund shares trading in the secondary market
as compared to ETFs that transact exclusively on an in‑kind basis.
6½Janus Henderson Securitized Income
ETF
Nondiversification
Risk. The Fund is classified as nondiversified under the
Investment Company Act of 1940, as amended. This gives the Fund’s portfolio
management more flexibility to hold larger positions in securities. As a result,
an increase or decrease in the value of a single security held by the Fund may
have a greater impact on the Fund’s NAV and total return.
Exchange Listing and
Trading Issues Risk. Although Fund shares are listed for trading
on the NYSE, Arca, Inc. (the “Exchange”), there can be no assurance that an
active trading market for such shares will develop or be maintained. The lack of
an active market for Fund shares, as well as periods of high volatility,
disruptions in the creation/redemption process, or factors affecting the
liquidity of the underlying securities held by the Fund, may result in the
Fund’s shares trading at a premium or discount to its
NAV.
Trading
in Fund shares may be halted due to market conditions or for reasons that, in
the view of the Exchange, make trading in Fund shares inadvisable. In addition,
trading is subject to trading halts caused by extraordinary market volatility
pursuant to the Exchange’s “circuit breaker” rules. There can be no assurance
that the requirements of the Exchange necessary to maintain the Fund’s listing
will continue to be met or will remain
unchanged.
Fluctuation of NAV
and Market Price Risk. The NAV of the Fund’s shares will generally
fluctuate with changes in the market value of the Fund’s securities holdings.
The market prices of the Fund’s shares will generally fluctuate in accordance
with changes in the Fund’s NAV and supply and demand of shares on the Exchange.
Volatile market conditions, an absence of trading in shares of the Fund, or a
high volume of trading in the Fund, may result in trading prices in the Fund’s
shares that differ significantly from the Fund’s NAV. Additionally, during a
“flash crash,” the market prices of the Fund’s shares may decline suddenly and
significantly, resulting in Fund shares trading at a substantial discount to
NAV. Such a decline may not reflect the performance of the portfolio securities
held by the Fund. Flash crashes may cause Authorized Participants and other
market makers to limit or cease trading in the Fund’s shares for temporary or
longer periods, which may result in an increase in the variance between market
prices of the Fund’s shares and the Fund’s NAV. Shareholders could suffer
significant losses to the extent that they sell shares at these temporarily low
market prices.
It
cannot be predicted whether Fund shares will trade below, at or above the Fund’s
NAV. Further, the securities held by the Fund may be traded in markets that
close at a different time than the Exchange. Liquidity in those securities may
be reduced after the applicable closing times. Accordingly, during the time when
the Exchange is open but after the applicable market closing or fixing
settlement times, bid‑ask spreads and the resulting premium or discount to the
Fund shares’ NAV is likely to widen. Similarly, the Exchange may be closed at
times or days when markets for securities held by the Fund are open, which may
increase bid‑ask spreads and the resulting premium or discount to the Fund
shares’ NAV when the Exchange re‑opens. The Fund’s bid‑ask spread and the
resulting premium or discount to the Fund’s NAV may also be impacted by the
liquidity of the underlying securities held by the Fund, particularly in
instances of significant volatility of the underlying
securities.
Authorized
Participant Risk. The Fund may have a limited number of financial
institutions that may act as Authorized Participants (“APs”). Only APs who have
entered into agreements with the Fund’s distributor may engage in creation or
redemption transactions directly with the Fund. These APs have no obligation to
submit creation or redemption orders and, as a result, there is no assurance
that an active trading market for the Fund’s shares will be established or
maintained. This risk may be heightened to the extent that the securities
underlying the Fund are traded outside of a collateralized settlement system. In
that case, APs may be required to post collateral on certain trades on an agency
basis (i.e., on behalf of other market participants), which only a limited
number of APs may be willing or able to do. Additionally, to the extent that
those APs exit the business or are unable to process creation and/or redemption
orders, and no other AP is able to step forward to create and redeem in either
of these cases, shares may trade like closed‑end fund shares at a premium or a
discount to NAV and possibly face delisting.
An investment in the Fund is not a bank
deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
The Fund does not have a full calendar year
of operations. Performance information for certain periods will
be included in the Fund’s first annual and/or semiannual report and is available
at janushenderson.com/info
or by calling 1‑800‑668‑0434.
7½Janus Henderson Securitized Income
ETF
Investment Adviser: Janus Henderson
Investors US LLC
Portfolio Management: Nick
Childs, CFA, is Co‑Portfolio Manager of the Fund, which he has co‑managed
since inception in November 2023. John
Kerschner, CFA, is Co‑Portfolio Manager of the Fund, which he has
co‑managed since inception in November 2023.
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PURCHASE AND SALE OF FUND SHARES |
The
Fund is an actively-managed ETF. Unlike shares of traditional mutual funds,
shares of the Fund are not individually redeemable and may only be purchased or
redeemed directly from the Fund at NAV in large increments called “Creation
Units” through APs and the Adviser may modify the Creation Unit size with prior
notification to the Fund’s APs. See the ETF portion of the Janus Henderson
website for the Fund’s current Creation Unit size. Creation Unit transactions
are conducted primarily in exchange for all cash, but may be conducted in
exchange for the deposit or delivery of a designated portfolio of in‑kind
securities with a cash balancing amount. Except when aggregated in Creation
Units, Fund shares are not redeemable securities of the Fund. Shares of the Fund
are listed and trade on the Exchange, and individual investors can purchase or
sell shares in much smaller increments for cash in the secondary market through
a broker-dealer. These transactions, which do not involve the Fund, are made at
market prices that may vary throughout the day and differ from the Fund’s NAV.
As a result, you may pay more than NAV (at a premium) when you purchase shares,
and receive less than NAV (at a discount) when you sell shares, in the secondary
market.
Investors
purchasing or selling shares in the secondary market may also incur additional
costs, including brokerage commissions and an investor may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (bid) and the lowest price a seller is
willing to accept for shares of the Fund (ask) when buying or selling shares in
the secondary market (the “bid‑ask spread”). Historical information regarding
the Fund’s bid/ask spread can be accessed on the Fund’s website at
janushenderson.com/performance by selecting the Fund.
The
Fund’s distributions are generally taxable, and will be taxed as ordinary income
or capital gains, unless you are investing through a tax‑advantaged arrangement,
such as a 401(k) plan or an individual retirement account (in which case you may
be taxed at ordinary income tax rates upon withdrawal of your investment from
such account). A sale of Fund shares may result in a capital gain or loss.
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PAYMENTS TO BROKER‑DEALERS AND OTHER FINANCIAL INTERMEDIARIES |
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Adviser and/or its affiliates may pay broker-dealers or
intermediaries for the sale and/or maintenance of Fund shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
8½Janus Henderson Securitized Income
ETF
ADDITIONAL INFORMATION ABOUT THE FUND
Please refer to the following important information
when reviewing the “Fees and Expenses of the Fund” table in the Fund Summary of
the Prospectus. The fees and expenses shown reflect estimated annualized
expenses that the shares expect to incur.
• |
|
“Annual
Fund Operating Expenses” are paid out of the Fund’s assets. You do not pay
these fees directly but, as the Example in the Fund Summary shows, these
costs are borne indirectly by all shareholders. |
• |
|
The
“Management Fee” is the rate paid by the Fund to the Adviser for providing
certain services. Refer to “Management Expenses” in this Prospectus for
additional information with further description in the Statement of
Additional Information (“SAI”). |
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“Other
Expenses” may include brokerage expenses or commissions, interest,
dividends, taxes, litigation expenses, and expenses and other
extraordinary expenses not incurred in the ordinary course of the Fund’s
business. |
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“Acquired
Fund Fees and Expenses” are indirect expenses the Fund may incur as a
result of investing in shares of an underlying fund. “Acquired Fund”
refers to any underlying fund (including, but not limited to, business
development companies (“BDCs”) and exchange-traded funds (“ETFs”)) in
which the Fund invests or has invested during the
period. |
• |
|
The
Adviser has contractually agreed to waive and/or reimburse a portion of
the Fund’s management fee in an amount equal to the management fee it
earns as an investment adviser to any of the underlying affiliated ETFs
with respect to the Fund’s investments in such underlying ETFs, less
certain operating expenses. This expense limit will remain in effect
through February 28, 2025 and is described in the “Management Expenses”
section of this Prospectus. |
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ADDITIONAL INVESTMENT STRATEGIES AND GENERAL PORTFOLIO POLICIES |
The
Fund is an actively managed ETF and, thus, does not seek to replicate the
performance of a specified index. Accordingly, portfolio management has
discretion on a daily basis to manage the Fund’s portfolio in accordance with
the Fund’s investment objective. Under normal circumstances, the Fund will
generally sell or dispose of its portfolio investments when, in the opinion of
the Adviser, they have reached their profit or price target, or as the result of
changing market conditions. The Fund is designed for investors who seek exposure
to an actively managed portfolio consisting primarily of securitized
fixed-income instruments.
The
Fund’s Board of Trustees (“Trustees”) may change the Fund’s investment objective
or non‑fundamental principal investment strategies without a shareholder vote.
The Fund will notify you in writing at least 60 days or as soon as reasonably
practicable before making any such change it considers material. If there is a
material change to the Fund’s investment objective or principal investment
strategies, you should consider whether the Fund remains an appropriate
investment for you. There is no guarantee that the Fund will achieve its
investment objective.
On
each business day before commencement of trading in shares on the Exchange, the
Fund will disclose on janushenderson.com/info the identities and quantities of
each portfolio position held by the Fund that will form the basis for the Fund’s
next calculation of the NAV per share. A description of the Fund’s policies and
procedures with respect to the disclosure of the Fund’s portfolio holdings is
available in the Fund’s SAI. Information about the premiums and discounts at
which the Fund’s shares have traded is available at
janushenderson.com/performance by selecting the Fund for additional
details.
Unless
otherwise stated, the following additional investment strategies and general
policies apply to the Fund and provide further information including, but not
limited to, the types of securities the Fund may invest in when
implementing its investment objective. Some of these strategies and policies may
be part of a principal strategy. Other strategies and policies may be utilized
to a lesser extent. Except for the Fund’s policies with respect to investments
in illiquid investments, borrowing and derivatives use, the percentage
limitations included in these policies and elsewhere in this Prospectus and/or
the SAI normally apply only at the time of purchase of a security. So, for
example, if the Fund exceeds a limit, other than illiquid investments, borrowing
and derivatives use, as a result of market fluctuations or the sale of other
securities, it will not be required to dispose of any securities. The “Glossary
of Investment Terms” includes descriptions of investment terms used throughout
the Prospectus.
The
Fund may borrow to the extent permitted by the Investment Company Act of 1940,
as amended (the “1940 Act”). For temporary liquidity and cash management
purposes, the Fund may invest in other ETFs that provide exposure to related
securities.
9½Janus Detroit Street Trust
Asset-Backed
Securities
Asset-backed
securities are collateralized by pools of obligations or assets. Almost any type
of asset may be used to create an asset-backed security. The Fund will typically
invest in asset-backed securities backed by pools of aircraft, auto, credit
cards, equipment, litigation financing, marketplace lending, single family
rental, and other equivalent forms of securities representing interests in pools
backed by financial, physical, and/or intangible assets. Asset-backed securities
may take the form of commercial paper, notes, or pass-through certificates and
may be structured as floaters, inverse floaters, interest-only and
principal-only obligations. Payments on asset-backed securities include both
interest and a partial payment of principal. The value of the Fund’s investments
in asset-backed securities may be adversely affected by changes in interest
rates, factors concerning the interests in and structure of the issuer or
originator of the receivables, the creditworthiness of the entities that provide
any supporting letters of credit, surety bonds, or other credit or liquidity
enhancements, and/or the market’s assessment of the quality of the underlying
assets. Generally, the originating bank or credit provider is neither the
obligor nor the guarantor of the security, and interest and principal payments
ultimately depend upon payment of the underlying loans by individuals. The Fund
could incur a loss if the underlying loans are not paid. In addition, most
asset-backed securities are subject to prepayment risk in a declining interest
rate environment. Prepayment risk is the risk that during periods of falling
interest rates, certain fixed-income securities with higher interest rates, such
as mortgage- and asset-backed securities, may be prepaid by their issuers
thereby reducing the amount of interest payments. The impact of prepayments on
the value of asset-backed securities may be difficult to predict and may result
in greater volatility. Rising interest rates tend to extend the duration of
asset-backed securities, making them more volatile and sensitive to changing
interest rates.
Cash
Position
The
Fund may not always stay fully invested. When the portfolio managers believe
that market conditions are unfavorable for investing, a Fund’s cash or similar
investments may increase. When the Fund’s investments in cash or similar
investments increase, it may not participate in market advances or declines to
the same extent that it would if the Fund remained more fully invested. To the
extent the Fund invests its uninvested cash through a sweep program (meaning its
uninvested cash is pooled with uninvested cash of other funds and invested in
certain securities such as repurchase agreements), it is subject to the risks of
the account or fund into which it is investing, including liquidity issues that
may delay the Fund from accessing its cash.
In
addition, the Fund may temporarily increase its cash position under certain
unusual circumstances, such as to protect its assets or maintain liquidity in
certain circumstances to meet unusually large redemptions. The Fund’s cash
position may also increase temporarily due to unusually large cash inflows.
Under unusual circumstances such as these, the Fund may invest up to 100% of its
assets in cash or similar investments. In this case, the Fund may take positions
that are inconsistent with its investment policies. As a result, the Fund may
not achieve its investment objective.
Collateralized
Loan Obligations
A
CLO is a type of structured credit, which is a sector of the fixed income market
that also includes asset-backed and mortgage backed securities. Typically
organized as a trust or other special purpose vehicle, a CLO issues debt and
equity interests and uses the proceeds from this issuance to acquire a portfolio
of bank loans made primarily to businesses that are rated below investment
grade. The underlying loans in which a CLO may invest may be issued or offered
as “covenant lite” loans, which have few or no financial maintenance covenants.
The underlying loans are generally senior-secured/first-priority loans; however,
the CLO may also include an allowance for second-lien and/or unsecured debt.
Additionally, the underlying loans may include domestic and foreign senior
secured loans, senior unsecured loans and subordinate corporate loans, some of
which may individually be below investment grade or the equivalent if unrated.
The portfolio of underlying loans is actively managed by the CLO manager for a
fixed period of time (“reinvestment period”). During the reinvestment period,
the CLO manager may buy and sell individual loans to create trading gains or
mitigate loses. The CLO portfolio will generally be required to adhere to
certain diversification rules established by the CLO issuer to mitigate against
the risk of concentrated defaults within a given industry or sector. After a
specified period of time, the majority owner of equity interests in the CLO may
seek to call the CLO’s outstanding debt or refinance its position. If not called
or refinanced, when the reinvestment period ends, the CLO uses cash flows from
the underlying loans to pay down the outstanding debt tranches and wind up the
CLO’s operations.
Interests
in the CLOs are divided into two or more separate debt and equity tranches, each
with a different credit rating and risk/return profile based upon its priority
of claim on the cash flows produced by the underlying loan pool. Tranches are
categorized as senior, mezzanine and subordinated/equity, according to their
degree of credit risk. If there are defaults or the CLO’s collateral otherwise
underperforms, scheduled payments to senior tranches take precedence over those
of mezzanine tranches, and scheduled payments to mezzanine tranches take
precedence over those to subordinated/equity tranches. The riskiest portion is
the “Equity” tranche, which bears the bulk of defaults from the loans in the
trust and serves to protect the
10½Janus Detroit Street Trust
other,
more senior tranches from default in all but the most severe circumstances.
Senior and mezzanine tranches are typically rated, with the former receiving
ratings of A to AAA/Aaa and the latter receiving ratings of B to BBB/Baa. The
ratings reflect both the credit quality of underlying collateral as well as how
much protection a given tranche is afforded by tranches that are subordinate to
it. Normally, CLOs are privately offered and sold, and thus are not registered
under the securities laws.
Collateralized
Mortgage Obligations
The
Fund may invest in CMOs. A CMO is a debt obligation of a legal entity that is
collateralized by mortgages and divided into classes. Similar to a bond,
interest and prepaid principal is paid, in most cases, on a monthly basis. CMOs
may be collateralized by whole mortgage loans or private mortgage bonds, but are
more typically collateralized by portfolios of mortgage pass-through securities
guaranteed by Ginnie Mae, Freddie Mac, or Fannie Mae, and their income
streams.
CMOs
are structured into multiple classes, often referred to as “tranches,” with each
class bearing a different stated maturity and entitled to a different schedule
for payments of principal and interest, including pre‑payments. Actual maturity
and average life will depend upon the pre‑payment experience of the collateral.
In the case of certain CMOs (known as “sequential pay” CMOs), payments of
principal received from the pool of underlying mortgages, including
pre‑payments, are applied to the classes of CMOs in the order of their
respective final distribution dates. Thus, no payment of principal will be made
to any class of sequential pay CMOs until all other classes having an earlier
final distribution date have been paid in full.
Credit
Risk Transfer Securities
The
Fund may invest in credit risk transfer securities (“CRTs”). CRTs are
unguaranteed and unsecured debt securities that are commonly issued by a
government sponsored entity (“GSE”). The Fund may also invest in CRTs that are
issued by private entities, such as banks or other financial institutions. CRTs
issued by private entities are structured similarly to those issued by a GSE and
are generally subject to the same types of risks, including mortgage, credit,
prepayment, liquidity, and valuation risks.
Exchange-Traded
Funds
The
Fund may invest in ETFs, including affiliated ETFs. ETFs are typically open‑end
investment companies that are traded on a national securities exchange. ETFs
typically incur fees, such as investment advisory fees and other operating
expenses that are separate from those of the Fund, which will be indirectly paid
by the Fund. As a result, the cost of investing in the Fund may be higher than
the cost of investing directly in the underlying ETFs and may be higher than
other ETFs or mutual funds that invest directly in stocks and bonds. Since ETFs
are traded on an exchange at market prices that may vary from the NAV of their
underlying investments, there may be times when ETFs trade at a premium or
discount. In the case of affiliated ETFs, unless waived, the Adviser will earn
fees both from the Fund and from the underlying ETF, with respect to assets of
the Fund invested in the underlying ETF. The Fund is also subject to the risks
associated with the securities in which the ETF invests.
Within
the parameters of its specific investment policies, the Fund may invest in bonds
that are rated below investment grade (also known as a “junk” bond), such as BB+
or lower by Standard & Poor’s Ratings Services (“Standard &
Poor’s”) and Fitch, Inc. (“Fitch”), or Ba1 or lower by Moody’s Investors
Service, Inc. (“Moody’s”), or is an unrated bond of similar quality. Lower rated
bonds have a higher degree of credit risk than higher quality bonds. The Fund
may also invest in unrated bonds of domestic issuers.
Illiquid
Investments
The
Fund will not acquire any illiquid investment if, immediately after the
acquisition, the Fund would have invested more than 15% of its net assets in
illiquid investments that are assets. An illiquid investment is any investment
that the Fund reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without the sale or disposition
significantly changing the market value of the investment.
Interest
Rate Futures Contracts
Interest
rate futures contracts, including futures contracts on U.S. Treasuries,
Eurodollars and other futures contracts that provide interest rate exposure, are
typically exchange-traded, are typically used to obtain interest rate exposure
in order to manage duration and hedge interest rate risk. An interest rate
futures contract is a bilateral agreement where one party agrees to accept and
the other party agrees to make delivery of a specified security, as called for
in the agreement at a specified date and at an agreed upon price. Generally,
Treasury interest rate futures contracts are closed out or rolled over prior to
their expiration date.
Leverage
The
Fund may use leverage for investment purposes by entering into TBA commitments,
mortgage dollar rolls, and/or reverse repurchase agreement transactions and
using the cash made available from these transactions to make additional
investments in
11½Janus Detroit Street Trust
fixed-income
securities in accordance with the Fund’s principal strategies. In addition,
other investment techniques, such as certain derivative transactions, can create
a leveraging effect.
Mortgage-Backed
Securities
Mortgage-backed
securities represent an ownership interest in a pool of mortgage loans used to
finance purchases of real estate. The mortgage loans that comprise a pool
normally have similar interest rates (fixed or variable), maturities and other
terms. Pools of mortgages financing residential home purchases are referred to
as residential mortgage-backed securities (“RMBS”), while pools of mortgages
financing commercial buildings, multi-family properties and other real estate
are referred to as commercial mortgage-backed securities (“CMBS”).
Mortgage-backed securities may be issued or guaranteed by the U.S. Government,
its agencies or instrumentalities (“agency mortgage-backed securities”), or may
be issued or guaranteed by private entities such as commercial banks, savings
and loan institutions or mortgage bankers (“privately issued mortgage-backed
securities”).
Unlike
traditional debt instruments, payments on mortgage-backed securities include
both interest and a partial payment of principal. Prepayment of the principal of
underlying loans at a faster pace than expected is known as “prepayment risk”
and may shorten the effective maturities of these securities. This may result in
the Fund having to reinvest proceeds at a lower interest rate. Mortgage-backed
securities tend to be more sensitive to changes in interest rates than other
types of debt securities. In addition to prepayment risk, investments in
privately-issued mortgage-backed securities may be subject to a higher degree of
credit risk, valuation risk, and liquidity risk than other mortgage-backed
securities. Mortgage-backed securities are also subject to extension risk.
Extension risk is the risk that borrowers may pay off their debt obligations
more slowly in times of rising interest rates. The risks associated with CMBS
reflect the risks of investing in the commercial real estate securing the
underlying mortgage loans and are therefore different from the risks of other
types of mortgage-backed securities.
Agency Mortgage-Backed Securities. The Fund
will invest in fixed or variable rate agency mortgage-backed securities issued
by the Government National Mortgage Association (“Ginnie Mae”), the Federal
National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage
Corporation (“Freddie Mac”), or other governmental or government-related
entities. Ginnie Mae’s guarantees are backed by the full faith and credit of the
U.S. Government, which means that the U.S. Government guarantees that the
interest and principal will be paid when due. Fannie Mae and Freddie Mac are not
backed by the full faith and credit of the U.S. Government.
Non‑Agency Mortgage-Backed Securities. The
Fund may invest in non‑agency mortgage-backed securities, which are
mortgage-backed securities issued or guaranteed by private issuers.
Mortgage
Dollar Rolls
The
Fund utilizes “mortgage dollar rolls,” which are similar to reverse repurchase
agreements in certain respects. In a mortgage dollar roll transaction, the Fund
sells a mortgage-related security (such as a Ginnie Mae security) to a dealer
and simultaneously agrees to repurchase a similar security (but not the same
security) in the future at a predetermined price. A “dollar roll” can be viewed,
like a reverse repurchase agreement, as a collateralized borrowing in which the
Fund pledges a mortgage-related security to a dealer to obtain cash. Successful
use of mortgage dollar rolls depends on the Fund’s ability to predict interest
rates and mortgage payments. Dollar roll transactions involve the risk that the
market value of the securities the Fund is required to purchase may decline
below the agreed upon repurchase price. The use of mortgage dollar rolls often
results in higher portfolio turnover.
Nondiversification
Diversification
is a way to reduce risk by investing in a broad range of stocks or other
securities. The Fund is classified as nondiversified. A fund that is classified
as nondiversified has the ability to take larger positions in securities than a
fund that is classified as diversified. This gives a fund which is classified as
nondiversified more flexibility to focus its investments in companies that
portfolio management has identified as the most attractive for the investment
objective and strategy of the Fund. However, because the appreciation or
depreciation of a single security may have a greater impact on the NAV of a fund
which is classified as nondiversified, its share price can be expected to
fluctuate more than a comparable fund which is classified as diversified. This
fluctuation, if significant, may affect the performance of a fund.
Pass
Through Securities
Pass-through
securities (such as mortgage‑and asset-backed securities) are debt securities
that normally give the issuer an option to pay cash at a coupon payment date or
give the holder of the security a similar bond with the same coupon rate and a
face value equal to the amount of the coupon payment that would have been made.
In the pass-through structure, principal and
12½Janus Detroit Street Trust
interest
payments on the underlying securities (less servicing fees) are passed through
to shareholders on a pro rata basis. These securities involve prepayment risk.
In that case, the Fund may have to reinvest the proceeds from the securities at
a lower rate. Potential market gains on a security subject to prepayment risk
may be more limited than potential market gains on a comparable security that is
not subject to prepayment risk.
Portfolio
Turnover
Portfolio
turnover rates are generally not a factor in making buy and sell decisions.
Changes may be made to the Fund’s portfolio, consistent with the Fund’s
investment objective and policies, when portfolio management believes such
changes are in the best interests of the Fund and its shareholders. Short-term
transactions may result from the purchase of a security in anticipation of
relatively short-term gains, liquidity needs, securities having reached a price
or yield objective, changes in interest rates or the credit standing of an
issuer, or by reason of economic or other developments not foreseen at the time
of the initial investment decision. The Fund may also sell one security and
simultaneously purchase the same or a comparable security to take advantage of
short-term differentials in bond yields or securities prices. Portfolio turnover
is affected by market conditions, changes in the size of the Fund (including due
to purchases and redemptions of Creation Units), the nature of the Fund’s
investments, and the investment style of portfolio management. Due to the nature
of the securities in which it invests, the Fund may have relatively high
portfolio turnover compared to other funds.
Increased
portfolio turnover may result in higher costs for brokerage commissions, dealer
mark‑ups, and other transaction costs, and may also result in taxable capital
gains. Higher costs associated with increased portfolio turnover also may have a
negative effect on the Fund’s performance. Because the Fund was not in operation
during the most recent fiscal year, no portfolio turnover information is
available as of the date of this Prospectus. The “Financial Highlights” section
of this Prospectus will show the Fund’s historical turnover rates once
available.
Preferred
Stock
A
preferred stock represents an ownership interest in a company, but pays
dividends at a specific rate and has priority over common stock in payment of
dividends and liquidation claims. Like debt securities, the value of a preferred
stock often fluctuates more in response to changes in interest rates and the
creditworthiness of the issuer, rather than in response to changes in the
issuer’s profitability and business prospects. Preferred stock is subject to
similar risks as common stock and debt securities.
REITs
and Real Estate-Related Securities
The
Fund may invest in equity and debt securities of real estate-related companies.
Such companies may include those in the real estate industry or real
estate-related industries. These securities may include common stocks, preferred
stocks, and other securities, including, but not limited to, mortgage-backed
securities, real estate-backed securities, securities of real estate investment
trusts (“REITs”) and similar REIT-like entities (such as real estate operation
companies (“REOCs”)). A REIT is an entity that invests in real estate-related
projects, such as properties, mortgage loans, and construction loans. REITs are
often categorized as equity REITs, mortgage REITs, and hybrid REITs. An equity
REIT, the most common type of REIT, invests primarily in the fee ownership of
land and buildings. An equity REIT derives its income primarily from rental
income but may also realize capital gains or losses by selling real estate
properties in its portfolio that have appreciated or depreciated in value. A
mortgage REIT invests primarily in mortgages on real estate, which may secure
construction, development, or long-term loans. A mortgage REIT generally derives
its income from interest payments on the credit it has extended. A hybrid REIT
combines the characteristics of equity REITs and mortgage REITs, generally by
holding both ownership interests and mortgage interests in real estate.
Similar
to REITs, REOCs are publicly-traded real estate companies that typically engage
in the development, management or financing of real estate, such as
homebuilders, hotel management companies, land developers and brokers. REOCs,
however, have not elected (or are not eligible) to be taxed as a REIT. The
reasons for not making such an election include the (i) availability of
tax‑loss carry-forwards, (ii) operation in non‑REIT‑qualifying lines of
business, and (iii) ability to retain earnings. Instead, REOCs are
generally structured as “C” corporations under the Internal Revenue Code of
1986, as amended, and, as a result, are not required to distribute any portion
of their income. In this regard, although REOCs do not receive the same
favorable tax treatment that is accorded to REITs, REOCs are typically subject
to fewer restrictions than REITs, including the ability to retain and/or
reinvest funds from operations and more flexibility in terms of the real estate
investments they can make.
Securities
Lending
The
Fund may seek to earn additional income through lending its securities to
certain qualified broker-dealers and institutions on a short-term or long-term
basis. The Fund may lend portfolio securities on a short-term or long-term
basis, in an amount
13½Janus Detroit Street Trust
equal
to up to one‑third of its total assets as determined at the time of the loan
origination. When the Fund lends its securities, it receives collateral
(including cash collateral), at least equal to the value of securities loaned.
The Fund may earn income by investing this collateral in one or more affiliated
or non‑affiliated cash management vehicles or in time deposits. It is also
possible that, due to a decline in the value of a cash management vehicle in
which collateral is invested, the Fund may lose money. Securities lending
involves a risk of loss because the borrower may fail to return the securities
in a timely manner or at all. If the Fund lends its securities and is unable to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Any cash received as
collateral for loaned securities will be invested in an affiliated cash
management vehicle or time deposits. This investment is subject to market
appreciation or depreciation and the Fund will bear any loss on the investment
of its cash collateral. In certain circumstances, individual loan transactions
could yield negative returns. The Adviser intends to manage a portion of the
cash collateral in an affiliated cash management vehicle and will receive an
investment advisory fee for managing such assets.
Swap
Agreements
The
Fund may utilize swap agreements such as credit default, interest rate, and
total return swaps, as a means to hedge its portfolio against adverse movements
in securities prices, the rate of inflation, or interest rates. Swap agreements
are two‑party contracts to exchange one set of cash flows for another. Swap
agreements entail the risk that a party will default on its payment obligations
to the Fund. If the other party to a swap defaults, the Fund would risk the loss
of the net amount of the payments that it contractually is entitled to receive.
If the Fund utilizes a swap at the wrong time or judges market conditions
incorrectly, the swap may result in a loss to the Fund and reduce the Fund’s
total return. Various types of swaps such as credit default, interest rate, and
total return swaps are described in this Prospectus and/or in the “Glossary of
Investment Terms.”
Index Credit Default Swaps. The Fund may
invest in index credit default swaps (“CDX”). A CDX is a swap on an index of
credit default swaps. CDXs allow an investor to manage credit risk or take a
position on a basket of credit entities (such as credit default swaps or a
commercial mortgage-backed index) in a more efficient manner than transacting in
a single-name credit default swap. If a credit event occurs in one of the
underlying companies, the protection is paid out via the delivery of the
defaulted bond by the buyer of protection in return for a payment of notional
value of the defaulted bond by the seller of protection or it may be settled
through a cash settlement between the two parties. The underlying company is
then removed from the index. New series of CDXs are issued on a regular
basis.
Commercial
mortgage-backed securities index swaps (“CMBX”) are a type of index credit
default swap that are made up of tranches of commercial mortgage-backed
securities rather than credit default swaps. CMBX involve a pay‑as‑you go
settlement process designed to capture non‑default events that affect the cash
flow to the underlying mortgage-backed securities tranche.
Interest Rate Swaps. The Fund may enter into
interest rate swaps, which involve the exchange by two parties of their
respective commitments to pay or receive interest (e.g., an exchange of floating
rate payments for fixed rate payments). Interest rate swaps are generally
entered into on a net basis. Interest rate swaps do not involve the delivery of
securities, other underlying assets, or principal. Accordingly, the risk of loss
with respect to interest rate swaps is limited to the net amount of interest
payments that the Fund is contractually obligated to make.
Total Return Swaps. The Fund may enter into
total return swaps, which involve the exchange by two parties in which one party
makes payments based on a set rate, either fixed or variable, while the other
party makes payments based on the return of an underlying asset, which includes
both the income it generates and any capital gains over the payment period. A
fixed-income total return swap may be written on many different kinds of
underlying reference assets, and may include different indices for various kinds
of debt securities (e.g., U.S. investment grade bonds, high-yield bonds, or
emerging market bonds).
TBA
Commitments
The
Fund will typically enter into “to be announced” or “TBA” commitments. TBA
commitments are forward agreements for the purchase or sale of securities,
including mortgage-backed securities, for a fixed price, with payment and
delivery on an agreed upon future settlement date. The specific securities to be
delivered are not identified at the trade date. However, delivered securities
must meet industry-accepted “good delivery” standards, which include specified
terms, for issuer, rate, and mortgage terms. At the time the TBA commitment is
made, the transaction is recorded and thereafter the value of such securities is
reflected each day in determining the Fund’s NAV. Because the Fund is generally
not required to pay for the security until the settlement date, if the Fund
remains substantially fully invested at a time when TBA commitment purchases are
outstanding, the purchases may result in a form of leverage.
14½Janus Detroit Street Trust
U.S.
Government Securities
The
Fund may invest in U.S. Government securities. U.S. Government securities
include those issued directly by the U.S. Treasury, including Treasury
Inflation-Protected Securities (also known as TIPS), and those issued or
guaranteed by various U.S. Government agencies and instrumentalities. Some
government securities are backed by the full faith and credit of the United
States. Other government securities are backed only by the rights of the issuer
to borrow from the U.S. Treasury. Others are supported by the discretionary
authority of the U.S. Government to purchase the obligations. Certain other
government securities are supported only by the credit of the issuer. For
securities not backed by the full faith and credit of the United States, the
Fund must look principally to the agency or instrumentality issuing or
guaranteeing the securities for repayment and may not be able to assert a claim
against the United States if the agency or instrumentality does not meet its
commitment. Such securities may involve increased risk of loss of principal and
interest compared to government debt securities that are backed by the full
faith and credit of the United States.
Because
of the rising U.S. Government debt burden, it is possible that the U.S.
Government may not be able to meet its financial obligations or that securities
issued or backed by the U.S. Government may experience credit downgrades. Such a
credit event may adversely affect the financial markets.
Variable-
and Floating-Rate Obligations
The
Fund may invest in securities with variable or floating rates of interest which,
under certain limited circumstances, may have varying principal amounts.
Variable and floating rate securities pay interest at rates that are adjusted
periodically according to a specified formula, usually with reference to some
interest rate index or market interest rate (the “underlying index”). The
floating rate tends to decrease the security’s price sensitivity to changes in
interest rates. These types of securities are relatively long-term instruments
that often carry demand features permitting the holder to demand payment of
principal at any time or at specified intervals prior to maturity. Inverse
floating rate securities (“Inverse Floaters”) are debt instruments whose
interest bears an inverse relationship to the interest rate on another security.
A rise in the reference rate of an inverse floater will cause a drop in the
interest rate paid by the inverse floater, while a drop in the reference rate of
the inverse floater will cause an increase in the interest rate paid on the
inverse floater. Inverse Floaters may exhibit greater price volatility than a
fixed rate obligation with similar credit quality. If movements in interest
rates are incorrectly anticipated, the Fund could lose money, or its NAV could
decline by the use of inverse floaters.
Other
Types of Investments
Unless
otherwise stated within its specific investment policies, the Fund may also
invest in other types of U.S. dollar denominated securities and use other
investment strategies. These securities and strategies are not intended to be
principal investment strategies of the Fund. If successful, they may benefit the
Fund by earning a return on the Fund’s assets or reducing risk; however, they
may not achieve the Fund’s investment objective.
The
value of your investment will vary over time, sometimes significantly, and you
may lose money by investing in the Fund. The Fund invests mainly in
mortgage-related instruments. The following information is intended to help you
better understand some of the risks of investing in the Fund. The impact of the
following risks on the Fund may vary depending on the Fund’s investments. The
greater the Fund’s investment in a particular security, the greater the Fund’s
exposure to the risks associated with that security. Before investing in the
Fund, you should consider carefully the risks that you assume when investing in
the Fund.
Affiliated Underlying
Fund Risk. The Adviser may invest in certain affiliated ETFs as
investments for the Fund. The Adviser will generally receive fees for managing
such funds, in addition to the fees paid to the Adviser by the Fund. The payment
of such fees by affiliated funds creates a conflict of interest when selecting
affiliated funds for investment in the Fund. The Adviser, however, is a
fiduciary to the Fund and its shareholders and is legally obligated to act in
its best interest when selecting affiliated funds. In addition, the Adviser has
contractually agreed to waive and/or reimburse a portion of the Fund’s
management fee in an amount equal to the management fee it earns as an
investment adviser to any of the affiliated ETFs with respect to the Fund’s
investment in such ETF, less certain operating expenses.
Collateralized Loan
Obligation Risk. The risks of investing in a Collateralized Loan
Obligation (“CLO”) can be generally summarized as a combination of economic
risks of the underlying loans combined with the risks associated with the CLO
structure governing the priority of payments. The degree of such risk will
generally correspond to the specific tranche in which the Fund is invested.
Higher-rated CLO tranches (such as AAA‑rated tranches) do not constitute a
guarantee and in stressed
15½Janus Detroit Street Trust
market
environments it is possible that these CLO tranches could experience losses due
to actual defaults, increased sensitivity to defaults due to collateral default
and the disappearance of the subordinated/equity tranches, market anticipation
of defaults, as well as negative market sentiment with respect to CLO securities
as an asset class. The Fund’s portfolio management may not be able to accurately
predict how specific CLOs or the portfolio of underlying loans for such CLOs
will react to changes or stresses in the market, including changes in interest
rates. The most common risks associated with investing in CLOs are interest rate
risk, credit risk, liquidity risk, prepayment risk, and the risk of default of
the underlying asset, among others.
• |
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Mezzanine CLO
Risk. The Fund may invest in BBB or lower rated CLO tranches
of CLOs. Such securities are often subordinate to higher-rated tranches in
terms of payment priority. Subordinated CLO tranches are subject to higher
credit risk and liquidity risk relative to more senior CLO tranches. To
the extent a CLO or its underlying loans experience default or are having
difficulty making principal and/or interest payments, such subordinate CLO
tranches will be more likely to experience adverse impacts, and such
impacts will be more severe, relative to more senior and/or higher-rated
CLO securities, which in turn will adversely affect the performance of the
Fund. In many cases, pursuant to the terms of the CLO governance
documents, no payment of interest of principal can be made to a holders of
subordinated CLO tranches until the interest or principal payments have
been made in full to holders of senior CLO
tranches. |
Collateralized
Mortgage Obligation Risk. Collateralized mortgage obligations
(“CMOs”) are a type of mortgage-backed security. CMOs are created by dividing
the principal and interest payments collected on a pool of mortgages into
several revenue streams (tranches) with different priority rights to portions of
the underlying mortgage payments. Certain CMO tranches may represent a right to
receive interest only (“IOs”), principal only (“POs”) or an amount that remains
after floating-rate tranches are paid (an inverse floater). These securities are
frequently referred to as “mortgage derivatives” and may be extremely sensitive
to changes in interest rates. Interest rates on inverse floaters, for example,
vary inversely with a short-term floating rate (which may be reset
periodically). Interest rates on inverse floaters will decrease when short-term
rates increase, and will increase when short-term rates decrease. These
securities have the effect of providing a degree of investment leverage. In
response to changes in market interest rates or other market conditions, the
value of an inverse floater may increase or decrease at a multiple of the
increase or decrease in the value of the underlying securities. If the Fund
invests in CMO tranches (including CMO tranches issued by government agencies)
and interest rates move in a manner not anticipated by the Adviser, it is
possible that the Fund could lose all or substantially all of its
investment.
Counterparty
Risk. Fund transactions involving a counterparty are subject to
the risk that the counterparty or a third party will not fulfill its obligation
to the Fund (“counterparty risk”). Counterparty risk may arise because of the
counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or
insolvency), market activities and developments, or other reasons, whether
foreseen or not. A counterparty’s inability to fulfill its obligation may result
in significant financial loss to the Fund. The Fund may be unable to recover its
investment from the counterparty or may obtain a limited recovery, and/or
recovery may be delayed. The Fund may be exposed to counterparty risk to the
extent it participates in lending its securities to third parties and/or cash
sweep arrangements whereby the Fund’s cash balance is invested in one or more
types of cash management vehicles or in time deposits. In addition, the Fund may
be exposed to counterparty risk through its investments in certain securities,
including, but not limited to, repurchase agreements, debt securities, and
derivatives (including various types of forwards, swaps, futures, and options).
The Fund intends to enter into financial transactions with counterparties that
the Adviser believes to be creditworthy at the time of the transaction. There is
always the risk that the Adviser’s analysis of a counterparty’s creditworthiness
is incorrect or may change due to market conditions. To the extent that the Fund
focuses its transactions with a limited number of counterparties, it will have
greater exposure to the risks associated with one or more counterparties.
Credit Quality
Risk. The Fund is subject to the risks associated with the credit
quality of the issuers of fixed-income securities. Credit quality measures the
likelihood that the issuer or borrower will meet its obligations on a bond. One
of the fundamental risks is credit risk, which is the risk that an issuer will
be unable to make principal and interest payments when due, or default on its
obligations. Higher credit risk may negatively impact the Fund’s returns and
yield.
Many
fixed-income securities receive credit ratings from services such as
Standard & Poor’s, Fitch, and Moody’s. These services assign ratings to
securities by assessing the likelihood of issuer default. The lower a bond issue
is rated by an agency, the more credit risk it is considered to represent. Lower
rated instruments and securities generally pay interest at a higher rate to
compensate for the associated greater risk. Interest rates can fluctuate in
response to economic or market conditions, which can result in a fluctuation in
the price of a security and impact the Fund’s return and yield. If a security
has not received a rating, the Fund must rely upon the Adviser’s credit
assessment, which if incorrect can also impact the Fund’s returns and yield.
Please refer to the “Explanation of Rating Categories” section of the SAI for a
description of bond rating categories.
16½Janus Detroit Street Trust
Credit Risk Transfer
Securities Risk. CRT securities are unguaranteed and unsecured
debt securities commonly issued by a government sponsored entity. CRTs are not
directly linked to or backed by the underlying mortgage loans so investors such
as the Fund have no recourse to the underlying mortgage loans. The risks
associated with CRTs are different from the risks associated with investments in
mortgage-backed securities issued by government sponsored entities or private
issuers because some or all of the mortgage default or credit risk associated
with the underlying mortgage loans is transferred to investors. Additional risks
associated with investments in CRTs may include valuation risk, mortgage credit
risk, liquidity risk, and prepayment risk.
Derivatives
Risks. Derivatives can be volatile and involve similar risks to
those as the underlying referenced securities or assets. Gains or losses from a
derivative investment can be substantially greater than the derivative’s
original cost, and can therefore involve leverage. Leverage may cause the Fund
to be more volatile than if it had not used leverage because leverage can
exaggerate the effect of any increase or decrease in the value of securities and
other instruments held by the Fund.
The
Fund may use futures and swap agreements (such as interest rate, credit default,
and total return swaps), and other derivative instruments individually or in
combination to “hedge” or protect its portfolio from adverse movements in
securities prices and interest rates. There is no guarantee that the portfolio
management’s use of derivative investments will benefit the Fund. The Fund’s
performance could be worse than if the Fund had not used such instruments. Use
of such investments may instead increase risk to the Fund, rather than reduce
risk. Derivatives can be complex instruments and may involve analysis that
differs from that required for other investment types used by the Fund. If the
value of a derivative does not correlate well with the particular market or
other asset class to which the derivative is intended to provide exposure, the
derivative may not produce the anticipated result. Derivatives can also reduce
the opportunity for gain or result in losses by offsetting positive returns in
other investments. Derivatives also entail the risk that the counterparty will
default on its payment obligations. If the counterparty to a derivative
transaction defaults, the Fund would risk the loss of the net amount of the
payments that it contractually is entitled to receive. To the extent the Fund
enters into short derivative positions, the Fund may be exposed to risks similar
to those associated with short sales, including the risk that the Fund’s losses
are theoretically unlimited.
• |
|
Futures and
Swaps Related to Interest Rate Risk. The Fund’s investments
in interest rate futures, swaps, or futures on interest rate sensitive
securities entail the risk that portfolio management’s prediction of the
direction of interest rates is wrong, and the Fund could incur a loss. In
addition, due to the possibility of price distortions in the interest rate
futures or swaps markets, or an imperfect correlation between the
underlying instrument and the interest rate portfolio management is
seeking to hedge, a correct forecast of general interest rate trends by
portfolio management may not result in the successful use of futures and
swaps related to interest rates. |
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|
Index Credit
Default Swaps Risk. If the Fund holds a long position in a
CDX, the Fund would indirectly bear its proportionate share of any
expenses paid by a CDX. By investing in a CDX, the Fund could be exposed
to illiquidity risk, counterparty risk, and credit risk of the issuers of
the underlying loan obligations and of the CDX markets. If there is a
default by the CDX counterparty, the Fund will have contractual remedies
pursuant to the agreements related to the transaction. A CDX also bears
the risk that the Fund will not be able to meet its obligation to the
counterparty. |
• |
|
Total Return
Swaps Risk. A total return swap is a contract in which one
party agrees to make periodic payments to another party based on the
change in market value of the assets underlying the contract, which may
include a specified security, basket of securities, or securities indices
during the specified period, in return for periodic payments based on a
fixed or variable interest rate or the total return from other underlying
assets. Total return swap agreements may be used to obtain exposure to a
security or market without owning or taking physical custody of such
security or investing directly in such market. Total return swap
agreements may effectively add leverage to a fund’s portfolio because, in
addition to its total net assets, the fund would be subject to investment
exposure on the notional amount of the swap. The primary risks associated
with total returns swaps are credit risks (if the counterparty fails to
meet its obligations) and market risk (if there is no liquid market for
the agreement or unfavorable changes occur to the underlying
asset). |
Exchange-Traded Funds
Risk. The Fund may invest in ETFs, including affiliated ETFs. ETFs
are typically open‑end investment companies, which may seek to track the
performance of a specific index or be actively managed. ETFs are traded on a
national securities exchange at market prices that may vary from the NAV of
their underlying investments. Accordingly, there may be times when an ETF trades
at a premium or discount to its NAV. When the Fund invests in an ETF, in
addition to directly bearing the expenses associated with its own operations, it
will bear a pro rata portion of the ETF’s expenses. As a result, the cost of
investing in the Fund may be higher than the cost of investing directly in the
underlying ETFs and may be higher than other ETFs or mutual funds that invest
directly in stocks and bonds. ETFs also involve the risk that an active trading
market for an
17½Janus Detroit Street Trust
ETF’s
shares may not develop or be maintained. Similarly, because the value of ETF
shares depends on the demand in the market, the Fund may not be able to purchase
or sell an ETF at the most optimal time, which could adversely affect the Fund’s
performance. In addition, ETFs that track particular indices may be unable to
match the performance of such underlying indices due to the temporary
unavailability of certain index securities in the secondary market or other
factors, such as discrepancies with respect to the weighting of securities. The
ETFs in which the Fund invests are subject to specific risks, depending on the
investment strategy of the ETF. In turn, the Fund will be subject to
substantially the same risks as those associated with direct exposure to the
ETFs’ holdings.
Fixed-Income
Securities Risk. Typically, the values of fixed-income securities
change inversely with prevailing interest rates. Therefore, a fundamental risk
of fixed-income securities is interest rate risk, which is the risk that the
value of such securities will generally decline as prevailing interest rates
rise, which may cause the Fund’s NAV to likewise decrease. How specific
fixed-income securities may react to changes in interest rates will depend on
the specific characteristics of each security. For example, while securities
with longer maturities and durations tend to produce higher yields, they also
tend to be more sensitive to changes in prevailing interest rates and are
therefore more volatile than shorter-term securities and are subject to greater
market fluctuations as a result of changes in interest rates. However,
calculations of maturity and duration may be based on estimates and may not
reliably predict a security’s price sensitivity to changes in interest rates. In
addition, different interest rate measures (such as short- and long-term
interest rates and U.S. and non‑U.S. interest rates), or interest rates on
different types of securities or securities of different issuers, may not
necessarily change in the same amount or in the same direction. Investments in
fixed-income securities with very low or negative interest rates may diminish
the Fund’s yield and performance.
Fixed-income
securities are also subject to credit risk, which is the risk that the credit
strength of an issuer of a fixed-income security will weaken and/or that the
issuer will be unable to make timely principal and interest payments and that
the security may go into default. In addition, there is prepayment risk, which
is the risk that during periods of falling interest rates, certain debt
obligations may be paid off quicker than originally anticipated, which may cause
the Fund to reinvest its assets in securities with lower yields, resulting in a
decline in the Fund’s income or return potential. Fixed-income securities may
also be subject to valuation risk and liquidity risk. Valuation risk is the risk
that one or more of the fixed-income securities in which the Fund invests are
priced differently than the value realized upon such security’s sale. In times
of market instability, valuation may be more difficult. Valuation may also be
affected by changes in the issuer’s financial strength, the market’s perception
of such strength, or in the credit rating of the issuer of the security.
Liquidity risk is the risk that fixed-income securities may be difficult or
impossible to sell at the time that portfolio management would like or at the
price portfolio management believes the security is currently worth.
Consequently, the Fund may have to accept a lower price to sell a security, sell
other securities to raise cash, or give an investment opportunity, any of which
could have a negative effect on the Fund’s performance. In unusual market
conditions, even normally liquid securities may be affected by a degree of
liquidity risk. To the extent the Fund invests in fixed-income securities in a
particular industry or economic sector, its share values may fluctuate in
response to events affecting that industry or sector. Securities underlying
mortgage- and asset-backed securities, which may include subprime mortgages,
also may be subject to a higher degree of credit risk, valuation risk, and
liquidity risk. To the extent that the Fund invests in derivatives tied to
fixed-income securities, the Fund may be more substantially exposed to these
risks than a fund that does not invest in such derivatives. The market for
certain fixed-income securities may become illiquid under adverse market or
economic conditions independent of any specific adverse changes in the
conditions of a particular issuer. Similarly, the amount of assets deemed
illiquid remaining within the Fund may also increase, making it more difficult
to meet shareholder redemptions and further adversely affecting the value of the
Fund.
High-Yield Bond
Risk. High-yield bonds (also known as “junk” bonds) are bonds
rated below investment grade by the primary rating agencies such as
Standard & Poor’s, Fitch, and Moody’s or are unrated bonds of similar
quality. The value of lower quality bonds generally is more dependent on credit
risk than investment grade bonds. Issuers of high-yield bonds may not be as
strong financially as those issuing bonds with higher credit ratings and are
more vulnerable to real or perceived economic changes, political changes, or
adverse developments specific to the issuer. In addition, the junk bond market
can experience sudden and sharp price swings.
The
secondary market on which high-yield securities are traded is less liquid than
the market for investment grade securities. The lack of a liquid secondary
market may have an adverse impact on the market price of the security.
Additionally, it may be more difficult to value the securities because valuation
may require more research, and elements of judgment may play a larger role in
the valuation because there is less reliable, objective data available.
Please
refer to the “Explanation of Rating Categories” in Appendix A of the SAI for a
description of bond rating categories.
18½Janus Detroit Street Trust
Impairment of
Collateral Risk. The value of collateral, if any, securing a
floating rate loan can decline, and may be insufficient to meet the borrower’s
obligations or difficult to liquidate. Further, certain floating rate loans may
not be fully collateralized and may decline in value.
Inflation
Risk. Inflation risk is the risk that the value of certain assets
or real income from investments will be worth less in the future as inflation
decreases the value of money. As inflation increases, the present value of a
Fund’s assets and distributions may decline. This risk is more prevalent with
respect to debt securities held by a fund, as applicable. This risk may be
elevated in a low interest rate environment.
Interest Rate
Risk. Generally, a fixed-income security will increase in value
when prevailing interest rates fall and decrease in value when prevailing
interest rates rise. Longer-term securities are generally more sensitive to
interest rate changes than shorter-term securities, but they generally
offer higher yields to compensate investors for the associated risks. High-yield
bond prices and floating rate debt security prices are generally less directly
responsive to interest rate changes than investment grade issues or comparable
fixed rate securities, and may not always follow this pattern. An increase in
interest rates may cause the value of fixed-income securities held by the Fund
to decline. The Fund may be subject to a greater risk of rising interest rates
due to inflationary trends and the effect of government fiscal and monetary
policy initiatives and resulting market reaction to those initiatives. The Fund
may manage interest rate risk by varying the average-weighted effective maturity
of the portfolio to reflect an analysis of interest rate trends and other
factors. The Fund may also use futures, swaps, options, and other derivatives to
manage interest rate risk.
Leverage
Risk. Engaging in transactions using leverage or those having a
leveraging effect subjects the Fund to certain risks. These risks may be
heightened if the Fund invests all, or a significant portion of its assets in
futures, forwards, swaps, and other types of derivatives. Leverage can magnify
the effect of any gains or losses, causing the Fund to be more volatile than if
it had not been leveraged. Through the use of leverage, the Fund’s total
investment exposure could exceed the value of its portfolio securities and its
investment performance could be dependent on securities not directly owned by
the Fund. In addition, the Fund’s assets that are used as collateral to secure
short sale transactions may decrease in value while the short positions are
outstanding, which may force the Fund to use its other, additional assets to
meet its collateral requirements.
Liquidity
Risk. The Fund may invest in securities or instruments that do not
trade actively or in large volumes, and may make investments that are less
liquid than other investments. Also, the Fund may make investments that may
become less liquid in response to market developments or adverse investor
perceptions. Investments that are illiquid or that trade in lower volumes may be
more difficult to value. When there is no willing buyer and investments cannot
be readily sold at the desired time or price, the Fund may have to accept a
lower price or may not be able to sell the security or instrument at all.
Investments in foreign securities, particularly those of issuers located in
emerging market countries, tend to have greater exposure to liquidity risk than
domestic securities. In unusual market conditions, even normally liquid
securities may be affected by a degree of liquidity risk (i.e., if the number
and capacity of traditional market participants is reduced). An inability to
sell one or more portfolio positions can adversely affect the Fund’s value or
prevent the Fund from being able to take advantage of other investment
opportunities. Liquidity risk may be increased to the extent that the Fund
invests in restricted securities that are deemed to be illiquid
investments.
Market
Risk. The value of the Fund’s portfolio may decrease if the value
of one or more issuers in the portfolio decreases. Further, regardless of how
well individual securities perform, the value of the Fund’s portfolio could also
decrease if there are deteriorating economic or market conditions, including,
but not limited to, a decline in commodities prices, or if the market favors
different types of securities than the types of securities in which the Fund
invests. If the value of the Fund’s portfolio decreases, the Fund’s NAV will
also decrease, which means if you sell your shares in the Fund you may lose
money. Market risk may affect a single issuer, industry, economic sector, or the
market as a whole. The increasing interconnectivity between global economies and
financial markets increases the likelihood that events or conditions in one
region or financial market may adversely impact issuers in a different country,
region or financial market. Social, political, economic and other conditions and
events, such as natural disasters, health emergencies (e.g., epidemics and
pandemics), terrorism, conflicts, including related sanctions, and social
unrest, could reduce consumer demand or economic output, result in market
closures, travel restrictions and/or quarantines, and generally have a
significant impact on the global economies and financial markets.
• |
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Armed
Conflict. Recent such examples include conflict, loss of
life, and disaster connected to ongoing armed conflict between Russia and
Ukraine in Europe and Hamas and Israel in the Middle East. The extent and
duration of each conflict, resulting sanctions and resulting future market
disruptions in each region are impossible to predict, but could be
significant and have a severe adverse effect, including significant
negative impacts on the U.S. and broader global economy and the markets
for certain securities and commodities. |
19½Janus Detroit Street Trust
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COVID‑19
Pandemic. The effects of COVID‑19 contributed to increased
volatility in global financial markets and affected and may continue to
affect certain countries, regions, issuers, industries and market sectors
more dramatically than others. Although many global economies have
reopened and measures to mitigate transmission are in place, the duration
of COVID‑19 and its effects remain unclear. Any continued effects could
impact the Fund and its investments, the Fund’s ability to meet redemption
requests, and the processes and operations of the Fund’s service
providers, including the Adviser. |
Market Trading
Risk. The Fund is subject to secondary market trading risks.
Shares of the Fund are listed for trading on an exchange; however, there can be
no guarantee that an active trading market for such shares will develop or
continue. Shares of the Fund may be listed or traded on U.S. and foreign
exchanges other than the Fund’s primary U.S. listing exchange. There can be no
guarantee that the Fund’s shares will continue trading on any exchange or in any
market or that the Fund’s shares will continue to meet the listing or trading
requirements of any exchange or market. The Fund’s shares may experience higher
trading volumes on one exchange as compared to another and investors are subject
to the execution and settlement risks of the market where their broker directs
trades.
Secondary
market trading in the Fund’s shares may be halted by an exchange because of
market conditions. Pursuant to exchange or market rules, trading in the Fund’s
shares on an exchange or in any market may be subject to trading halts caused by
extraordinary market volatility. There can be no guarantee that the Fund’s
exchange listing or ability to trade its shares will continue or remain
unchanged. In the event the Fund ceases to be listed on an exchange, the Fund
may cease operating as an “exchange-traded” fund and operate as a mutual fund,
provided that shareholders are given advance notice.
Shares
of the Fund may trade on an exchange at prices at, above, or below their most
recent NAV. The per share NAV of the Fund is calculated at the end of each
business day, as described below, and fluctuates with changes in the market
value of the Fund’s holdings. The trading prices of the Fund’s shares fluctuate
continuously throughout the trading day based on market supply and demand, and
may not closely track NAV. The trading prices of the Fund’s shares may differ
significantly from NAV during periods of market volatility, which may, among
other factors, lead to the Fund’s shares trading at a premium or discount to
NAV. Buying or selling the Fund’s shares on an exchange may require the payment
of brokerage commissions. In addition, you may also incur the cost of the spread
(the difference between the bid price and the ask price). The commission is
frequently a fixed amount and may be a significant cost for investors seeking to
buy or sell small amounts of shares. The spread varies over time for shares of
the Fund based on its trading volume and market liquidity, and is generally less
if the Fund has more trading volume and market liquidity and more if the Fund
has less trading volume and market liquidity. Due to the costs inherent in
buying or selling the Fund’s shares, frequent trading may detract significantly
from investment returns.
Mortgage- and
Asset-Backed Securities Risk. Rising interest rates tend to extend
the duration of, or reduce the rate of prepayments on, both commercial
mortgage-backed securities (“CMBS”) and residential mortgage-backed securities
(“RMBS”), making them more sensitive to changes in interest rates (“extension
risk”). As a result, in a period of rising interest rates, the price of
mortgage-backed securities may fall, causing the Fund to exhibit additional
volatility. Mortgage-backed securities are also subject to prepayment risk. When
interest rates decline, borrowers may pay off their mortgages sooner than
expected. This can reduce the Fund’s returns because the Fund will have to
reinvest that money at lower prevailing interest rates. Investments in certain
mortgage-backed securities, including those comprised of subprime mortgages, may
be subject to a higher degree of credit risk, valuation risk, and liquidity risk
than various other types of fixed-income securities. Additionally, although
mortgage-backed securities are generally supported by some form of government or
private guarantee and/or insurance, there is no assurance that guarantors or
insurers will meet their obligations.
CMBS
are subject to certain other risks. The market for CMBS developed more recently
than that for RMBS and is relatively small in terms of outstanding principal
amount of issues compared to the RMBS market. CMBS are also subject to risks
associated with a lack of standardized terms, shorter maturities than
residential mortgage loans, and payment of all or substantially all of the
principal at maturity, rather than regular amortization of principal. Moreover,
the type and use of a particular commercial property may add to the risk of CMBS
investments. Adverse changes in economic conditions and circumstances are more
likely to have an adverse impact on mortgage-backed securities secured by loans
on commercial properties than on those secured by residential properties.
Similarly,
the value of the Fund’s investments in asset-backed securities may be adversely
affected by changes in interest rates, factors concerning the interests in and
structure of the issuer or originator of the receivables, the creditworthiness
of the entities that provide any supporting letters of credit, surety bonds, or
other credit or liquidity enhancements, and/or the market’s assessment of the
quality of the underlying assets. Generally, the originating bank or credit
provider is neither the obligor nor the guarantor of the security, and interest
and principal payments ultimately depend upon payment of the underlying loans
by
20½Janus Detroit Street Trust
individuals.
The Fund could incur a loss if the underlying loans are not paid. In addition,
most asset-backed securities are subject to prepayment risk in a declining
interest rate environment. The impact of prepayments on the value of
asset-backed securities may be difficult to predict and may result in greater
volatility. Rising interest rates tend to extend the duration of asset-backed
securities, making them more volatile and sensitive to changing interest
rates.
Mortgage Dollar Roll
Risk. Mortgage dollar roll transactions simulate an investment in
mortgage-backed securities and have the potential to enhance the Fund’s returns
and reduce its administrative burdens, compared with holding mortgage-backed
securities directly. Mortgage dollar roll transactions involve the risk that the
market value of the securities sold by the Fund may decline below the repurchase
price of those securities. Since the counterparty in the transaction is required
to deliver a similar, but not identical, security to the Fund, the security the
Fund is required to buy under the mortgage dollar roll may be
worth less than an identical security. These transactions involve the risk that
portfolio management may not correctly predict mortgage prepayments and interest
rates, which may diminish the Fund’s performance. In addition, investment in
mortgage dollar rolls may increase the Fund’s portfolio turnover rate, which can
increase the Fund’s expenses and decrease returns. Furthermore, there is no
assurance that the Fund’s use of cash it receives from a mortgage dollar roll
will provide a return that exceeds borrowing costs.
Newly Issued
Securities Risk. The credit obligations in which the Fund invests
may include newly issued securities, or “new issues,” such as initial debt
offerings. New issues may have a magnified impact on the performance of the Fund
during periods in which it has a small asset base. The impact of new issues on
the Fund’s performance likely will decrease as the Fund’s asset size increases,
which could reduce the Fund’s returns. New issues may not be consistently
available to the Fund for investing, particularly as the Fund’s asset base
grows. Certain new issues, such as initial debt offerings, may be volatile in
price due to the absence of a prior trading market, limited quantities available
for trading and limited information about the issuer. The Fund may hold new
issues for a short period of time. This may increase the Fund’s portfolio
turnover and may lead to increased expenses for the Fund, such as commissions
and transaction costs. In addition, new issues can experience an immediate drop
in value after issuance if the demand for the securities does not continue to
support the offering price.
Nondiversification
Risk. The Fund is
classified as nondiversified under the 1940 Act, and therefore may hold a
greater percentage of their assets in a smaller number of securities. As a
result, an increase or decrease in the value of a single security held by the
Fund may have a greater impact on the Fund’s NAV and total return. Being
nondiversified may also make the Fund more susceptible to financial, economic,
political, or other developments that may impact a security. Although the Fund
may satisfy the requirements for a diversified fund, the Fund’s nondiversified
classification gives the Fund’s portfolio management more flexibility to hold
larger positions in securities than a fund that is classified as
diversified.
Operational
Risk. An investment in the Fund can involve operational risks
arising from factors such as processing errors, human errors, inadequate or
failed internal or external processes, failures in systems and technology,
changes in key personnel, technology and/or service providers, and errors caused
by third party service providers. Among other things, these errors or failures,
as well as other technological issues, may adversely affect the Fund’s ability
to calculate its NAV, process fund orders, execute portfolio trades or perform
other essential tasks in a timely manner, including over a potentially extended
period of time. These errors or failures may also result in a loss or compromise
of information, regulatory scrutiny, reputational damage or other events, any of
which could have a material adverse effect on the Fund. Implementation of
business continuity plans by the Fund, the Adviser or third-party service
providers in response to disruptive events such as natural disasters, epidemics
and pandemics, terrorism, conflicts and social unrest may increase these
operational risks to the Fund. While the Fund seeks to minimize such events
through internal controls and oversight of third-party service providers, there
is no guarantee that the Fund will not suffer losses if such events occur.
Portfolio Management
Risk. The Fund is an actively managed investment portfolio and is
therefore subject to the risk that the investment strategies and research
process employed for the Fund may fail to produce the intended results. The Fund
may underperform its benchmark index or other funds with similar investment
objectives.
Preferred Stock
Risk. To the extent that the Fund holds preferred stock, it may be
subject to the additional risks associated with preferred stock. Preferred stock
generally has a preference as to dividends and liquidation over an issuer’s
common stock but ranks junior to debt securities in an issuer’s capital
structure. Unlike interest payments on debt securities, preferred stock
dividends are payable only if declared by the issuer’s board of directors.
Preferred stock also may be subject to optional or mandatory redemption
provisions. Because preferred stocks generally pay dividends only after the
issuing company makes required payments to holders of its bonds and other debt,
the value of preferred stocks generally is more sensitive than bonds and other
debt to actual or perceived changes in the company’s financial condition or
prospects.
21½Janus Detroit Street Trust
REIT
Risk. To the extent the Fund holds REITs and REIT-like entities,
it may be subject to the additional risks associated with REIT and REIT-like
investments. REITs and REIT-like entities are subject to heavy cash flow
dependency to allow them to make distributions to their shareholders. The prices
of equity REITs are affected by changes in the value of the underlying property
owned by the REITs, changes in capital markets and interest rates, management
skill in running a REIT, and the creditworthiness of the REIT. The prices of
mortgage REITs are affected by the quality of any credit they extend, the
creditworthiness of the mortgages they hold, as well as by the value of the
property that secures the mortgages. In addition, mortgage REITs (similar to
direct investments in mortgage-backed securities) are subject to prepayment
risk. Equity REITs and mortgage REITs are subject to heavy cash flow dependency,
defaults by borrowers, and self-liquidation. There is also the risk that
borrowers under mortgages held by a REIT or lessees of a property that a REIT
owns may be unable to meet their obligations to the REIT. In the event of a
default by a borrower or lessee, the REIT may incur substantial costs associated
with protecting its investments. While equity REITs and mortgage REITs may
provide exposure to a large number of properties, such properties may be
concentrated in a particular industry, region, or housing type, making such
investments more vulnerable to unfavorable developments to economic or market
events. Certain “special purpose” REITs in which the Fund may invest focus their
assets in specific real property sectors, such as hotels, shopping malls,
nursing homes, or warehouses, and are therefore subject to the specific risks
associated with adverse developments in these sectors. The Fund’s shareholders
will indirectly bear their proportionate share of the REIT’s expenses, in
addition to their proportionate share of the Fund’s expenses. The value of
investments in REOCs will generally be affected by the same factors that
adversely affect REIT investments; however, REOCs may also be adversely affected
by income streams derived from businesses other than real estate
ownership.
Additionally,
a REIT that fails to comply with federal tax requirements affecting REITs may be
subject to federal income taxation, or the federal tax requirement that a REIT
distribute substantially all of its net income to its shareholders may result in
a REIT having insufficient capital for future expenditures. REITs are also
subject to certain provisions under federal tax law and the failure of a company
to qualify as a REIT could have adverse consequences for the Fund, including
significantly reducing the return to the Fund on its investment in such
company.
Restricted Securities
Risk. Securities that have limitations on their resale are
referred to as “restricted securities.” Investments in restricted securities,
including securities issued under Regulation S and Rule 144A, could have the
effect of decreasing the Fund’s liquidity profile or preventing the Fund from
disposing of them promptly at advantageous prices. Restricted securities may be
less liquid than other investments because such securities may not always be
readily sold in broad public markets and may have no active trading market. As a
result, they may be difficult to value because market quotations may not be
readily available.
U.S. Government
Securities Risk. Because of the rising U.S. Government debt
burden, it is possible that the U.S. Government may not be able to meet its
financial obligations or that securities issued or backed by the U.S. Government
may experience credit downgrades. Such a credit event may adversely affect the
financial markets. Certain U.S. Government securities are not guaranteed or
backed by the full faith and credit of the United States. For these securities,
the Fund must look principally to the agency or instrumentality issuing or
guaranteeing the securities for repayment and may not be able to assert a claim
against the United States if the agency or instrumentality does not meet its
commitment. Such securities may involve increased risk of loss of principal and
interest compared to government debt securities that are backed by the full
faith and credit of the United States.
TBA Commitments
Risk. The Fund will typically enter into “to be announced” or
“TBA” commitments for mortgage-backed securities and, at times, the portion of
the Fund’s portfolio allocated to TBA securities may be significant. Although
TBA securities must meet industry-accepted “good delivery” standards, there can
be no assurance that a security purchased on a forward commitment basis will
ultimately be issued or delivered by the counterparty. During the settlement
period, the Fund will still bear the risk of any decline in the value of the
security to be delivered. Because TBA commitments do not require the purchase
and sale of identical securities, the characteristics of the security delivered
to the Fund may be less favorable than the security delivered to the dealer. If
the counterparty to a transaction fails to deliver the securities, the Fund
could suffer a loss. At the time of its acquisition, a TBA security may be
valued at less than the purchase price. When the Fund sells a TBA security prior
to settlement, it does not participate in future gains or losses with respect to
the security. The Fund is generally not required to pay for the TBA security
until the settlement date and, as a result, if the Fund remains substantially
fully invested at a time when TBA commitment purchases are outstanding, the
purchases may result in a form of leverage.
Trading Issues
Risk. Although Fund shares are listed for trading on the Exchange,
there can be no assurance that an active trading market for such shares will
develop or be maintained. Trading in Fund shares may be halted due to market
conditions or for reasons that, in the view of the Exchange, make trading in
shares inadvisable. In addition, trading in shares is subject to
22½Janus Detroit Street Trust
trading
halts caused by extraordinary market volatility pursuant to the Exchange
“circuit breaker” rules. There can be no assurance that the requirements of the
Exchange necessary to maintain the listing of the Fund will continue to be met
or will remain unchanged or that the shares will trade with any volume, or at
all. In addition, during periods of significant volatility, the liquidity of the
underlying securities held by the Fund may affect the Fund’s trading prices.
During a “flash crash,” the market prices of the Fund’s shares may decline
suddenly and significantly. Such a decline may not reflect the performance of
the portfolio securities held by the Fund. Flash crashes may cause APs and other
market makers to limit or cease trading in the Fund’s shares for temporary or
longer periods. Shareholders could suffer significant losses to the extent that
they sell shares at these temporarily low market prices.
Transaction and
Spread Risk. Investors buying or selling Fund shares in the
secondary market will pay brokerage commissions or other charges imposed by
brokers as determined by that broker. Brokerage commissions can be a fixed
amount and may be a significant proportional cost for investors seeking to buy
or sell relatively small amounts of shares. In addition, secondary market
investors will also incur the cost of the difference between the price that an
investor is willing to pay for shares (the “bid” price) and the price at which
an investor is willing to sell shares (the “ask” price). This difference in bid
and ask prices is often referred to as the “spread” or “bid/ask spread.” The
bid/ask spread varies over time for shares based on trading volume and market
liquidity, and is generally lower if the Fund’s shares have more trading volume
and market liquidity and higher if the Fund’s shares have little trading volume
and market liquidity. Further, increased market volatility and trading halts
affecting any of the Fund’s portfolio securities may cause increased bid/ask
spreads. Due to the costs of buying or selling shares, including bid/ask
spreads, frequent trading of shares may significantly reduce investment results
and an investment in shares may not be advisable for investors who anticipate
regularly making small investments.
The
risks are described further in the SAI.
23½Janus Detroit Street Trust
MANAGEMENT OF THE FUND
Janus
Henderson Investors US LLC (the “Adviser”), 151 Detroit Street, Denver, Colorado
80206-4805, is the investment adviser to the Fund. The Adviser is responsible
for the day‑to‑day management of the Fund’s investment portfolio and furnishes
continuous advice and recommendations concerning the Fund’s investments. The
Adviser also provides certain administration and other services and is
responsible for other business affairs of the Fund.
The
Adviser (together with its predecessors and affiliates) has served as investment
adviser to Janus Henderson mutual funds since 1970 and currently serves as
investment adviser to all of the Janus Henderson funds, including Janus
Henderson exchange-traded funds, acts as subadviser for a number of
private-label mutual funds, and provides separate account advisory services for
institutional accounts and other unregistered products.
The
Adviser has received an exemptive order from the SEC that permits the Adviser,
subject to the approval of the Trustees, to appoint or replace certain
subadvisers to manage all or a portion of the Fund’s assets and enter into,
amend, or terminate a subadvisory agreement with certain subadvisers without
obtaining shareholder approval (a “manager‑of‑managers structure”). The
manager‑of‑managers structure applies to subadvisers that are not affiliated
with the Trust or the Adviser (“non‑affiliated subadvisers”), as well as any
subadviser that is an indirect or direct “wholly-owned subsidiary” (as such term
is defined by the 1940 Act) of the Adviser or of another company that,
indirectly or directly, wholly owns the Adviser (collectively, “wholly-owned
subadvisers”).
Pursuant
to the order, the Adviser, with the approval of the Trustees, has the discretion
to terminate any subadviser and allocate and reallocate the Fund’s assets among
the Adviser and any other non‑affiliated subadvisers or wholly-owned subadvisers
(including terminating a non‑affiliated subadviser and replacing it with a
wholly-owned subadviser). The Adviser, subject to oversight and supervision by
the Trustees, has responsibility to oversee any subadviser to the Fund and to
recommend for approval by the Trustees, the hiring, termination, and replacement
of subadvisers for the Fund. The order also permits the Fund to disclose
subadvisers’ fees only in the aggregate in the SAI. In the event that the
Adviser hires a new subadviser pursuant to the manager‑of‑managers structure,
the Fund would provide shareholders with information about the new subadviser
and subadvisory agreement within 90 days.
The
Trustees and the initial shareholder of the Fund have approved the use of a
manager‑of‑managers structure for the Fund.
The
Fund uses a unitary fee structure, under which the Fund pays the Adviser a
“Management Fee” in return for providing certain investment advisory,
supervisory, and administrative services to the Fund, including the costs of
transfer agency, custody, fund administration, legal, audit, and other services.
The Adviser’s fee structure is designed to pay substantially all of the Fund’s
expenses. However, the Fund bears other expenses which are not covered under the
Management Fee which may vary and affect the total level of expenses paid by
shareholders, such as distribution fees (if any), brokerage expenses or
commissions, interest and dividends (including those relating to short positions
(if any)), taxes, litigation expenses, acquired fund fees and expenses (if any),
and extraordinary expenses.
The
Fund’s Management Fee is calculated daily and paid monthly. The Fund’s advisory
agreement details the Management Fee and other expenses that the Fund must
pay.
The
following table reflects the Fund’s contractual Management Fee rate (expressed
as an annual rate). The rates shown are fixed rates based on the Fund’s daily
net assets.
|
|
|
|
|
| |
Fund Name |
|
Daily
Net Assets
of the Fund |
|
Contractual
Management Fee (%)
(annual
rate) |
|
Janus
Henderson Securitized Income ETF |
|
$0-$1 Billion
Next $2 Billion
Over $3 Billion |
|
|
0.49
0.46
0.43 |
|
A
discussion regarding the basis for the Trustees’ approval of the Fund’s
investment advisory agreement will be included in the Fund’s annual report (for
the period ending October 31) or semiannual report (for the period ending April
30) to shareholders that next follows such approval. You can request the Fund’s
annual or semiannual reports (as they become available), free of
24½Janus Detroit Street Trust
charge,
by contacting your broker-dealer, plan sponsor, or financial intermediary, or by
contacting a representative at 1‑800‑668‑0434. The reports are also available,
free of charge, at janushenderson.com/info.
The
Adviser has contractually agreed to waive and/or reimburse a portion of the
Fund’s management fee in an amount equal to the management fee it earns as an
investment adviser to any affiliated ETFs in which the Fund invests. Pursuant to
this agreement, the waiver amount is equal to the amount of Fund assets invested
in the affiliated ETF, multiplied by an amount equal to the current daily
unitary management fee of the affiliated ETF less certain asset-based operating
fees and expenses incurred on a per‑fund basis and paid by the Adviser with
respect to the affiliated ETF (including, but not limited to custody,
sub‑administration and transfer agency fees). The fee waiver agreement will
remain in effect at least through February 28, 2025. The fee waiver
agreement may be modified or terminated prior to this date only at the
discretion of the Board of Trustees.
Janus
Henderson Securitized Income ETF
Co‑Portfolio
Managers Nick Childs and John Kerschner jointly are responsible for the
day‑to‑day management of the Fund, with no limitation on the authority of one
co‑portfolio manager in relation to the other.
Nick
Childs, CFA, is Co‑Portfolio Manager of Janus Henderson
Securitized Income ETF, which he has co‑managed since inception in November
2023. Mr. Childs is also Portfolio Manager of other Janus Henderson
accounts. Prior to joining the Adviser in 2017, he was a portfolio manager at
Proprietary Capital, LLC from 2012 to 2016, where he managed alternative fixed
income strategies specializing in mortgage-backed securities and, absolute
return investing. Mr. Childs holds a Bachelor of Science degree from the
University of Denver. He holds the Chartered Financial Analyst
designation.
John
Kerschner, CFA, is Head of U.S. Securitized Products of Janus
Henderson Investors. He is Co‑Portfolio Manager of Janus Henderson Securitized
Income ETF, which he has co‑managed since inception in November 2023.
Mr. Kerschner is also Portfolio Manager of other Janus Henderson accounts.
He joined the Adviser in December 2010. He holds a Bachelor of Arts degree (cum
laude) in Biology from Yale University and a Master of Business Administration
degree from the Fuqua School of Business at Duke University, where he was
designated a Fuqua Scholar. Mr. Kerschner holds the Chartered Financial
Analyst designation.
Information
about portfolio management’s compensation structure and other accounts managed,
as well as the aggregate range of portfolio management’s individual ownership in
the Fund, is included in the SAI.
Conflicts
of Interest
The
Adviser manages other funds and numerous other accounts, which may include
separate accounts and other pooled investment vehicles, such as hedge funds.
Side‑by‑side management of multiple accounts, including the management of a cash
collateral pool for securities lending and investing the Janus Henderson funds’
cash, may give rise to conflicts of interest among those accounts, and may
create potential risks, such as the risk that investment activity in one account
may adversely affect another account. For example, short sale activity in an
account could adversely affect the market value of long positions in one or more
other accounts (and vice versa). Side‑by‑side management may raise additional
potential conflicts of interest relating to the allocation of investment
opportunities and the aggregation and allocation of trades.
In
addition, from time to time, the Adviser or its affiliates may, subject to
compliance with applicable law, purchase and hold shares of the Fund for their
own accounts, or may purchase shares of the Fund for the benefit of their
clients, including other Janus Henderson funds. Increasing the Fund’s assets may
enhance the Fund’s profile with financial intermediaries and platforms,
investment flexibility and trading volume. The Adviser and its affiliates
reserve the right, subject to compliance with applicable law, to dispose of at
any time some or all of the shares of the Fund acquired for their own accounts
or for the benefit of their clients. A large sale of Fund shares by the Adviser
or its affiliates could significantly reduce the asset size of the Fund, which
might have an adverse effect on the Fund’s investment flexibility or trading
volume. The Adviser considers the effect of redemptions on the Fund and other
shareholders in deciding whether to dispose of its shares of the Fund.
The
Adviser believes it has appropriately designed and implemented policies and
procedures to mitigate these and other potential conflicts of interest. A
further discussion of potential conflicts of interest and policies and
procedures intended to mitigate them is contained in the Fund’s SAI.
25½Janus Detroit Street Trust
OTHER INFORMATION
Creation
Units for the Fund are distributed by ALPS Distributors, Inc. (the
“Distributor”), which is a member of the Financial Industry Regulatory
Authority, Inc. (“FINRA”). To obtain information about FINRA member firms and
their associated persons, you may contact FINRA at www.finra.org, or
1‑800‑289‑9999.
26½Janus Detroit Street Trust
DIVIDENDS,
DISTRIBUTIONS AND TAXES
To
avoid taxation of the Fund, the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”), requires the Fund to distribute all or substantially
all of its net investment income and any net capital gains realized on its
investments at least annually.
Distribution
Schedule
Dividends
from net investment income are generally declared and distributed to
shareholders monthly. Distributions of net capital gains are declared and
distributed at least annually. Dividends may be declared and paid more
frequently to comply with the distribution requirements of the Internal Revenue
Code. The date you receive your distribution may vary depending on how your
intermediary processes trades. Dividend payments are made through Depository
Trust Company (“DTC”) participants and indirect participants to beneficial
owners then of record with proceeds received from the Fund. Please consult your
financial intermediary for details.
How
Distributions Affect the Fund’s NAV
Distributions
are paid to shareholders as of the record date of a distribution of the Fund,
regardless of how long the shares have been held. Undistributed income and net
capital gains are included in the Fund’s daily NAV. The Fund’s NAV drops by the
amount of the distribution, net of any subsequent market fluctuations. For
example, assume that on December 31, the Fund declared a dividend in the
amount of $0.25 per share. If the Fund’s NAV was $10.00 on December 30, the
Fund’s NAV on December 31 would be $9.75, barring market fluctuations. You
should be aware that distributions from a taxable fund do not increase the value
of your investment and may create income tax obligations.
No
dividend reinvestment service is provided by the Trust. Financial intermediaries
may make available the DTC book-entry Dividend Reinvestment Service for use by
beneficial owners of Fund shares for reinvestment of their dividend
distributions. Beneficial owners should contact their financial intermediary to
determine the availability and costs of the service and the details of
participation therein. Financial intermediaries may require beneficial owners to
adhere to specific procedures and timetables. If this service is available and
used, dividend distributions of both income and net capital gains will be
automatically reinvested in additional whole shares of the Fund purchased in the
secondary market.
As
with any investment, you should consider the tax consequences of investing in
the Fund. The following is a general discussion of certain federal income tax
consequences of investing in the Fund. The discussion does not apply to
qualified tax‑advantaged accounts or other non‑taxable entities, nor is it a
complete analysis of the federal income tax implications of investing in the
Fund. You should consult your tax adviser regarding the effect that an
investment in the Fund may have on your particular tax situation, including the
federal, state, local, and foreign tax consequences of your investment.
Taxes
on Distributions
Distributions
by the Fund are subject to federal income tax, regardless of whether the
distribution is made in cash or reinvested in additional shares of the Fund.
Distributions from net investment income (which includes dividends, interest,
and realized net short-term capital gains), other than qualified dividend
income, are taxable to shareholders as ordinary income. Distributions of
qualified dividend income are taxed to individuals and other noncorporate
shareholders at long-term capital gain rates, provided certain holding period
and other requirements are satisfied. Dividends received from REITs, certain
foreign corporations, and income received “in lieu of” dividends in a securities
lending transaction generally will not constitute qualified dividend income.
Because the income of the Fund is primarily derived from investments earning
interest rather than dividend income, generally none or only a small portion of
the income dividends paid by the Fund is anticipated to be qualified dividend
income.
Distributions
of net capital gain (i.e., the excess of net long-term capital gain over net
short-term capital loss) are taxable as long-term capital gain, regardless of
how long a shareholder has held Fund shares. Individuals, trusts, and estates
whose income exceeds certain threshold amounts are subject to an additional 3.8%
Medicare contribution tax on net investment income. Net investment income
includes dividends paid by the Fund and capital gains from any sale or exchange
of Fund shares. The Fund’s net investment income and capital gains are
distributed to (and may be taxable to) those persons who are shareholders of the
Fund at the record date of such payments. Although the Fund’s total net income
and net realized gain are the results of its operations, the per share amount
distributed or taxable to shareholders is affected by the number of Fund shares
outstanding at the record date. Distributions declared to shareholders of record
in October, November, or December and paid on or before January 31 of the
succeeding year will be treated for federal income tax purposes as if received
by shareholders on December 31
27½Janus Detroit Street Trust
of
the year in which the distribution was declared. Generally, account tax
information will be made available to shareholders on or before February 15
of each year. Information regarding distributions may also be reported to the
Internal Revenue Service (“IRS”). A portion of the Fund’s distribution received
from REITs may be classified as a return of capital for federal income tax
purposes. As a result, the Fund is more likely to make distributions that are
treated as returns of capital, and possibly in greater amounts, than a fund that
does not invest in REITs.
Taxes
on Sales
Any
time you sell the shares of the Fund in a taxable account, it is considered a
taxable event. Depending on the purchase price and the sale price, you may have
a gain or loss on the transaction. The gain or loss will generally be treated as
a long-term capital gain or loss if you held your shares for more than one year
and if not held for such period, as a short-term capital gain or loss. Any tax
liabilities generated by your transactions are your responsibility.
U.S.
federal income tax withholding may be required on all distributions payable to
shareholders who fail to provide their correct taxpayer identification number,
fail to make certain required certifications, or who have been notified by the
IRS that they are subject to backup withholding. The current backup withholding
rate is applied.
For
shares purchased and sold from a taxable account, your intermediary will report
cost basis information to you and to the IRS. Your financial intermediary will
permit shareholders to elect their preferred cost basis method. In the absence
of an election, your cost basis method will be your financial intermediary’s
default method, which is often the average cost method. Please consult your tax
adviser to determine the appropriate cost basis method for your particular tax
situation and to learn more about how the cost basis reporting laws apply to you
and your investments.
Taxation
of the Fund
Dividends,
interest, and some capital gains received by the Fund on foreign securities may
be subject to foreign tax withholding or other foreign taxes.
Certain
fund transactions may involve futures, options, swap agreements, hedged
investments, and other similar transactions, and may be subject to special
provisions of the Internal Revenue Code that, among other things, can
potentially affect the character, amount, and timing of distributions to
shareholders, and utilization of capital loss carryforwards. The Fund will
monitor its transactions and may make certain tax elections and use certain
investment strategies where applicable in order to mitigate the effect of these
tax provisions, if possible.
The
Fund does not expect to pay any federal income or excise taxes because it
intends to meet certain requirements of the Internal Revenue Code, including the
distribution each year of substantially all its net investment income and net
capital gains. It is important for the Fund to meet these requirements so that
any earnings on your investment will not be subject to federal income taxes
twice. If the Fund invests in a partnership, however, it may be subject to state
tax liabilities.
If
the Fund redeems Creation Units in cash, it may recognize more capital gains
than it will if it redeems Creation Units in‑kind.
For additional information, see the “Income
Dividends, Capital Gains Distributions, and Tax Status” section of the SAI.
28½Janus Detroit Street Trust
SHAREHOLDER’S
GUIDE
The
Fund issues or redeems its shares at NAV per share only in Creation Units.
Shares of the Fund are listed for trading on a national securities exchange and
trade on the secondary market during the trading day. Shares can be bought and
sold throughout the trading day like shares of other publicly traded companies.
There is no minimum investment. When buying or selling Fund shares through a
broker, you will incur customary brokerage commissions and charges, and you may
pay some or all of the spread between the bid and offered price in the secondary
market on each purchase and sale transaction. Fund shares are traded on the NYSE
Arca, Inc. under the trading symbol JSI. Share prices are reported in dollars
and cents per share.
APs
may acquire Fund shares directly from the Fund, and APs may tender their Fund
shares for redemption directly to the Fund, at NAV per share, only in Creation
Units and in accordance with the procedures described in the Fund’s SAI.
The
per share NAV of the Fund is computed by dividing the total value of the Fund’s
portfolio, less any liabilities, by the total number of outstanding shares of
the Fund. The Fund’s NAV is calculated as of the close of the trading session of
the New York Stock Exchange (“NYSE”) (normally 4:00 p.m. New York time) each day
that the NYSE is open (“Business Day”). However, the NAV may still be calculated
if trading on the NYSE is restricted, provided there is sufficient pricing
information available for the Fund to value its securities, or as permitted by
the SEC. Foreign securities held by the Fund, as applicable, may be traded on
days and at times when the NYSE is closed and the NAV is therefore not
calculated. Accordingly, the value of the Fund’s holdings may change on days
that are not Business Days in the United States and on which you will not be
able to purchase or sell the Fund’s shares.
Securities
held by the Fund are valued in accordance with policies and procedures
established by the Adviser pursuant to Rule 2a‑5 under the Investment Company
Act of 1940 (the “1940 Act”) and approved by and subject to the oversight of the
Trustees (“Valuation Procedures”). To the extent available, equity securities
(including shares of ETFs) are generally valued at readily available market
quotations, which are (i) the official close prices or (ii) last sale
prices on the primary market or exchange in which the securities trade. Most
fixed-income securities are typically valued using an evaluated bid price
supplied by an Adviser-approved pricing service that is intended to reflect
market value. The evaluated bid price is an evaluation that may consider factors
such as security prices, yields, maturities, and ratings. Certain short-term
instruments maturing within 60 days or less may be valued at amortized cost,
which approximates market value. If a market quotation or evaluated price for a
security is not readily available or is deemed unreliable, or if an event that
is expected to affect the value of the security occurs after the close of the
principal exchange or market on which the security is traded, and before the
close of the NYSE, a fair value of the security will be determined in good faith
by the Adviser pursuant to the Valuation Procedures. Such events include, but
are not limited to: (i) a significant event that may affect the securities
of a single issuer, such as a merger, bankruptcy, or significant issuer-specific
development; (ii) an event that may affect an entire market, such as a
natural disaster or significant governmental action; (iii) a
non‑significant event such as a market closing early or not opening, or a
security trading halt; and (iv) pricing of a non‑valued security and a
restricted or non‑public security. This type of fair valuation may be more
commonly used with foreign equity securities, but it may also be used with,
among other things, thinly-traded domestic securities or fixed-income
securities. Special valuation considerations may apply with respect to “odd‑lot”
fixed-income transactions which, due to their small size, may receive evaluated
prices by pricing services which reflect a large block trade and not what
actually could be obtained for the odd‑lot position. For valuation purposes, if
applicable, quotations of foreign portfolio securities, other assets and
liabilities, and forward contracts stated in foreign currency are generally
translated into U.S. dollar equivalents at the prevailing market rates. The
methodologies employed when fair valuing securities may change from time to
time. Because fair value pricing involves subjective judgments, it is possible
that the fair value determination for a security may be different than the value
that could be realized when selling that security.
The
value of the securities of mutual funds held by the Fund, if any, will be
calculated using the NAV of such mutual funds, and the prospectuses for such
mutual funds explain the circumstances under which they use fair valuation and
the effects of using fair valuation. The value of the securities of any cash
management pooled investment vehicles that operate as money market funds held by
the Portfolio, if any, will be calculated using the NAV of such funds.
All
purchases, sales, or other account activity must be processed through your
financial intermediary or plan sponsor.
|
DISTRIBUTION AND SERVICING FEES |
Distribution
and Shareholder Servicing Plan
The
Trust has adopted a Distribution and Servicing Plan for shares of the Fund
pursuant to Rule 12b‑1 under the 1940 Act (the “Plan”). The Plan permits
compensation in connection with the distribution and marketing of Fund shares
and/or the provision
29½Janus Detroit Street Trust
of
certain shareholder services. The Plan permits the Fund to pay the Distributor,
or its designee, a fee for the sale and distribution and/or shareholder
servicing of the shares at an annual rate of up to 0.25% of average daily net
assets of the shares of the Fund (“12b‑1 fee”). However, payment of a 12b‑1 fee
has not been authorized at this time.
Under
the terms of the Plan, the Trust is authorized to make payments to the
Distributor or its designee for remittance to retirement plan service providers,
broker-dealers, bank trust departments, financial advisors, and other financial
intermediaries, as compensation for distribution and/or shareholder services
performed by such entities for their customers who are investors in the
Fund.
The
12b‑1 fee may only be imposed or increased when the Trustees determine that it
is in the best interests of shareholders to do so. Because these fees are paid
out of the Fund’s assets on an ongoing basis, to the extent that a fee is
authorized and payments are made, over time they will increase the cost of an
investment in the Fund. The 12b‑1 fee may cost an investor more than other types
of sales charges.
|
PAYMENTS TO FINANCIAL INTERMEDIARIES BY ADVISER OR ITS AFFILIATES |
From
their own assets, the Adviser or its affiliates pay selected brokerage firms or
other financial intermediaries for making certain funds available to their
clients or for distribution, marketing, promotional, data, or related services.
The Adviser or its affiliates also make payments to one or more intermediaries
for information about transactions and holdings in the funds, such as the amount
of fund shares purchased, sold or held through the intermediary and or its
salespersons, the intermediary platform(s) on which shares are transacted and
other information related to the funds. Payments made by the Adviser and its
affiliates may eliminate or reduce trading commissions that the intermediary
would otherwise charge its customers or its salespersons in connection with the
purchase or sale of certain funds. Payment by the Adviser or its affiliates to
eliminate or reduce a trading commission creates an incentive for salespersons
of the intermediary to sell the Janus Henderson funds over other funds for which
a commission would be charged. The amount of these payments is determined from
time to time by the Adviser, may be substantial, and may differ for different
intermediaries. The Adviser may determine to make payments based on any number
of factors or metrics. For example, the Adviser may make payments at year‑end
and/or other intervals in a fixed amount, an amount based upon an intermediary’s
services at defined levels, an amount based upon the total assets represented by
funds subject to arrangements with the intermediary, or an amount based on the
intermediary’s net sales of one or more funds in a year or other period, any of
which arrangements may include an agreed-upon minimum or maximum payment, or any
combination of the foregoing. Payments based primarily on sales create an
incentive to make new sales of shares, while payments based on assets create an
incentive to retain previously sold shares. The Adviser currently maintains
asset-based agreements with certain intermediaries on behalf of the Trust. The
amount of compensation paid by the Adviser varies from intermediary to
intermediary. More information regarding these payments is contained in the
Fund’s SAI.
With
respect to non‑exchange‑traded Janus Henderson funds not offered in this
Prospectus, the Adviser or its affiliates pay fees, from their own assets, to
selected brokerage firms, banks, financial advisors, retirement plan service
providers, and other financial intermediaries that sell the Janus Henderson
funds for distribution, marketing, promotional, or related services, and/or for
providing recordkeeping, subaccounting, transaction processing, and other
shareholder or administrative services (including payments for processing
transactions via National Securities Clearing Corporation (“NSCC”) or other
means) in connection with investments in the Janus Henderson funds. These fees
are in addition to any fees that may be paid by the Janus Henderson funds for
certain of these types of services or other services. Shareholders investing
through an intermediary should consider whether such arrangements exist when
evaluating any recommendations from an intermediary.
In
addition, the Adviser or its affiliates may also share certain marketing
expenses with intermediaries, or pay for or sponsor informational meetings,
seminars, client awareness events, and support for marketing materials, sales
reporting, or business building programs for such intermediaries to raise
awareness of the Janus Henderson funds. The Adviser or its affiliates make
payments to participate in selected intermediary marketing support programs
which may provide the Adviser or its affiliates with one or more of the
following benefits: attendance at sales conferences, participation in meetings
or training sessions, access to or information about intermediary personnel, use
of an intermediary’s marketing and communication infrastructure, fund analysis
tools, data, business planning and strategy sessions with intermediary
personnel, information on industry- or platform-specific developments, trends
and service providers, and other marketing-related services. Such payments may
be in addition to, or in lieu of, the payments described above. These payments
are intended to promote the sales of Janus Henderson funds and to reimburse
financial intermediaries, directly or indirectly, for the costs that they or
their salespersons incur in connection with educational seminars, meetings, and
training efforts about the Janus Henderson funds to enable the intermediaries
and their
30½Janus Detroit Street Trust
salespersons
to make suitable recommendations, provide useful services, and maintain the
necessary infrastructure to make the Janus Henderson funds available to their
customers.
The
receipt of (or prospect of receiving) payments, reimbursements and other forms
of compensation described above may provide a financial intermediary and its
salespersons with an incentive to favor sales of Janus Henderson funds’ shares
over sales of other funds (or non‑mutual fund investments), with respect to
which the financial intermediary does not receive such payments or receives them
in a lower amount. The receipt of these payments may cause certain financial
intermediaries to elevate the prominence of the Janus Henderson funds within
such financial intermediary’s organization by, for example, placement on a list
of preferred or recommended funds and/or the provision of preferential or
enhanced opportunities to promote the Janus Henderson funds in various ways
within such financial intermediary’s organization.
From
time to time, certain financial intermediaries approach the Adviser to request
that the Adviser make contributions to certain charitable organizations. In
these cases, the Adviser’s contribution may result in the financial
intermediary, or its salespersons, recommending Janus Henderson funds over other
funds (or non‑mutual fund investments).
The
payment arrangements described above will not change the price an investor pays
for shares nor the amount that a Janus Henderson fund receives to invest on
behalf of the investor. You should consider whether such arrangements exist when
evaluating any recommendations from an intermediary to purchase or sell shares
of the Fund. Please contact your financial intermediary or plan sponsor for
details on such arrangements.
|
PURCHASING AND SELLING SHARES |
Shares
of the Fund are listed for trading on a national securities exchange during the
trading day. Shares can be bought and sold throughout the trading day like
shares of other publicly traded companies. However, there can be no guarantee
that an active trading market will develop or be maintained, or that the Fund
shares listing will continue or remain unchanged. The Fund does not impose any
minimum investment for shares of the Fund purchased on an exchange. Buying or
selling the Fund’s shares involves certain costs that apply to all securities
transactions. When buying or selling shares of the Fund through a financial
intermediary, you may incur a brokerage commission or other charges determined
by your financial intermediary. Due to these brokerage costs, if any, frequent
trading may detract significantly from investment returns. In addition, you may
also incur the cost of the spread (the difference between the bid price and the
ask price). The commission is frequently a fixed amount and may be a significant
cost for investors seeking to buy or sell small amounts of shares.
Shares
of the Fund may be acquired through the Distributor or redeemed directly with
the Fund only in Creation Units or multiples thereof, as discussed in the
“Creation and Redemption of Creation Units” section of the Fund’s SAI. Once
created, shares of the Fund generally trade in the secondary market in amounts
less than a Creation Unit.
The
Fund’s primary listing exchange is the NYSE Arca, Inc. (the “Exchange”). The
Exchange is open for trading Monday through Friday and is closed on the
following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Juneteenth, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
A
Business Day with respect to the Fund is each day the Exchange is open. Orders
from APs to create or redeem Creation Units will only be accepted on a Business
Day. On days when the Exchange or bond market closes earlier than normal (or on
days the bond market is closed but the Exchange is open), the Fund may require
orders to create or redeem Creation Units to be placed earlier in the day. In
addition, to minimize brokerage and other related trading costs associated with
securities that cannot be readily transferred in‑kind, the Fund may establish
early trade cut‑off times for APs to submit orders for Creation Units, in
accordance with the 1940 Act. See the Fund’s SAI for more information.
In
compliance with the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT
Act”), your financial intermediary is required to verify certain information on
your account application as part of its Anti-Money Laundering Program. You will
be required to provide your full name, date of birth, social security number,
and permanent street address to assist in verifying your identity. You may also
be asked to provide additional documents that may help to establish your
identity. Until verification of your identity is made, your financial
intermediary may temporarily limit additional share purchases. In addition, your
financial intermediary may close an account if it is unable to verify your
identity. Please contact your financial intermediary if you need additional
assistance when completing your application or additional information about your
financial intermediary’s Anti-Money Laundering Program.
31½Janus Detroit Street Trust
In
an effort to ensure compliance with this law, the Adviser’s Anti-Money
Laundering Program (the “Program”) provides for the development of internal
practices, procedures and controls, designation of anti-money laundering
compliance officers, an ongoing training program, and an independent audit
function to determine the effectiveness of the Program.
Continuous
Offering
The
method by which Creation Units of shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Units of
shares are issued and sold by the Fund on an ongoing basis, a “distribution,” as
such term is used in the Securities Act, may occur at any point. Broker-dealers
and other persons are cautioned that some activities on their part may,
depending on the circumstances, result in their being deemed participants in a
distribution in a manner which could render them statutory underwriters and
subject them to the prospectus delivery requirements and liability provisions of
the Securities Act. For example, a broker-dealer firm or its client may be
deemed a statutory underwriter if it takes Creation Units after placing an order
with the Distributor, breaks them down into constituent shares and sells the
shares directly to customers or if it chooses to couple the creation of a supply
of new shares with an active selling effort involving solicitation of secondary
market demand for shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in shares, whether or not participating in the distribution of
shares, are generally required to deliver a prospectus. This is because the
prospectus delivery exemption in Section 4(a)(3)(C) of the Securities Act
is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note
that dealers who are not “underwriters” but are participating in a distribution
(as contrasted with engaging in ordinary secondary market transactions) and thus
dealing with the shares that are part of an unsold allotment within the meaning
of Section 4(a)(3)(C) of the Securities Act, will be unable to take
advantage of the prospectus delivery exemption provided by Section 4(a)(3)
of the Securities Act. For delivery of prospectuses to exchange members, the
prospectus delivery mechanism of Rule 153 under the Securities Act is only
available with respect to transactions on a national exchange.
Book
Entry
Shares
of the Fund are held in book-entry form, which means that no stock certificates
are issued. The DTC or its nominee is the record owner of all outstanding shares
of the Fund and is recognized as the owner of all shares for all purposes.
Investors
owning shares of the Fund are beneficial owners as shown on the records of DTC
or its participants. DTC serves as the securities depository for shares of the
Fund. DTC participants include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of stock certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any right as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other exchange-traded
securities that you hold in book-entry or “street name” form.
Premiums
and Discounts
There
may be differences between the daily market prices on secondary markets for
shares of the Fund and the Fund’s NAV. NAV is the price per share at which the
Fund issues and redeems shares. See “Pricing of Fund Shares” above. The price
used to calculate market returns (“Market Price”) of the Fund generally is
determined using the midpoint between the highest bid and the lowest offer on
the national securities exchange on which shares of the Fund are primarily
listed for trading, as of the time that the Fund’s NAV is calculated. The Fund’s
Market Price may be at, above, or below its NAV. The NAV of the Fund will
fluctuate with changes in the market value of its portfolio holdings. The Market
Price of the Fund will fluctuate in accordance with changes in its NAV, as well
as market supply and demand.
Premiums
or discounts are the differences (expressed as a percentage) between the NAV and
the Market Price of the Fund on a given day, generally at the time the NAV is
calculated. A premium is the amount that the Fund is trading above the reported
NAV, expressed as a percentage of the NAV. A discount is the amount that the
Fund is trading below the reported NAV, expressed as a percentage of the NAV. A
discount or premium could be significant. Information regarding the Fund’s
premium/discount
to NAV for the most recently completed calendar year and the most recently
completed calendar quarters since that calendar year end (or the life of the
Fund, if shorter) is available at janushenderson.com/performance by selecting
the Fund for additional details.
32½Janus Detroit Street Trust
Bid/Ask
Spread
Investors
purchasing or selling shares of the Fund in the secondary market may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (the “bid”) and the lowest price a seller is
willing to accept for shares of the Fund (the “ask”). The spread varies over
time for shares of the Fund based on its trading volume and market liquidity,
and is generally less if the Fund has more trading volume and market liquidity
and more if the Fund has less trading volume and market liquidity. Historical
information regarding the Fund’s spread over various periods of time can be
accessed at janushenderson.com/performance by selecting the Fund for additional
details.
Investments
by Other Investment Companies
The
Trust and Janus Investment Fund are part of the same “group of investment
companies” for purposes of Section 12(d)(1)(G) of the 1940 Act.
Under
the 1940 Act, purchases or acquisitions by the Fund of shares issued by
registered investment companies (including other ETFs) and BDCs and the purchase
or acquisition of Fund shares by registered investment companies, BDCs, and
investment vehicles relying on Section 3(c)(1) or 3(c)(7) of the 1940 Act
are subject to the restrictions set forth in Section 12(d)(1) of the 1940
Act, except where an exemption is available, including as provided in Sections
12(d)(1)(F) and (G) and Rule 12d1‑4 thereunder. Rule 12d1‑4 permits
registered investment companies and BDCs to invest in Fund shares beyond the
limits in Section 12(d)(1)(A), subject to certain terms and conditions,
including that the registered investment company or BDC first enter into a
written agreement with the Trust regarding the terms of the investment, among
other conditions.
Unlike
traditional mutual funds, the frequent trading of Fund shares generally does not
disrupt portfolio management, increase the Fund’s trading costs, lead to
realization of capital gains by the Fund, or otherwise harm Fund shareholders.
The vast majority of trading in Fund shares occurs on the secondary market.
Because these trades do not involve the Fund, they do not harm the Fund or its
shareholders. A few institutional investors, referred to as Authorized
Participants, are authorized to purchase and redeem Fund shares directly with
the Fund in Creation Units. Creation Unit transactions that are effected using
securities (i.e., in kind) do not cause any of the harmful effects to the
issuing fund (as previously noted). However, Creation Unit transactions effected
using cash can potentially subject the Fund and its shareholders to those
harmful effects. As a result, the Fund requires Authorized Participants to pay
transaction fees to cover brokerage and certain related costs when purchasing or
redeeming Creation Units. Those fees are designed to protect the Fund and its
shareholders from the dilutive costs associated with frequent creation and
redemption activity. For these reasons, the Trustees of the Fund have determined
that it is not necessary to adopt policies and procedures to detect and deter
frequent trading and market timing of Fund shares. However, the Fund’s policies
and procedures regarding frequent purchases and redemptions may be modified by
the Trustees at any time.
|
FUND WEBSITE & AVAILABILITY OF PORTFOLIO HOLDINGS INFORMATION |
Each
Business Day, the Fund’s portfolio holdings information is provided by its
custodian or other agent for dissemination through the facilities of the NSCC
and/or other fee‑based subscription services to NSCC members and/or subscribers
to entities that publish and/or analyze such information in connection with the
process of purchasing or redeeming Creation Units or trading shares of the Fund
in the secondary market. In addition, on each Business Day before commencement
of trading in shares on the Exchange, the Fund will disclose on
janushenderson.com/info the identities and quantities of each portfolio position
held by the Fund that will form the basis for the Fund’s next calculation of the
NAV. The Fund is also required to disclose its complete holdings as an exhibit
to its reports on Form N‑PORT within 60 days of the end of the first and
third fiscal quarters, and in the annual report and semiannual report to Fund
shareholders.
For
additional information on these disclosures and the availability of portfolio
holdings information, please refer to the Fund’s SAI.
|
SHAREHOLDER COMMUNICATIONS |
Statements
and Reports
Your
financial intermediary or plan sponsor is responsible for sending you periodic
statements of all transactions, along with trade confirmations and tax
reporting, as required by applicable law.
33½Janus Detroit Street Trust
Your
financial intermediary or plan sponsor is responsible for providing annual and
semiannual reports, including the financial statements of the Fund. These
reports show the Fund’s investments and the market value of such investments, as
well as other information about the Fund and its operations. Please contact your
financial intermediary or plan sponsor to obtain these reports. The Fund’s
fiscal year ends October 31.
Lost
(Unclaimed/Abandoned) Accounts
It
is important to maintain a correct address for each shareholder. An incorrect
address may cause a shareholder’s account statements and other mailings to be
returned as undeliverable. Based upon statutory requirements for returned mail,
your financial intermediary or plan sponsor is required to attempt to locate the
shareholder or rightful owner of the account. If the financial intermediary or
plan sponsor is unable to locate the shareholder, then the financial
intermediary or plan sponsor is legally obligated to deem the property
“unclaimed” or “abandoned,” and subsequently escheat (or transfer) unclaimed
property (including shares of a fund) to the appropriate state’s unclaimed
property administrator in accordance with statutory requirements. Further, your
account may be deemed “unclaimed” or “abandoned,” and subsequently transferred
to your state of residence if no activity (as defined by that state) occurs
within your account during the time frame specified in your state’s unclaimed
property laws. The shareholder’s last known address of record determines which
state has jurisdiction. Interest or income is not earned on redemption or
distribution check(s) sent to you during the time the check(s) remained
uncashed.
34½Janus Detroit Street Trust
FINANCIAL HIGHLIGHTS
No
financial highlights are presented for the Fund since the Fund is new.
35½Janus Detroit Street Trust
GLOSSARY
OF INVESTMENT TERMS
This
glossary provides a more detailed description of some of the types of
securities, investment strategies, and other instruments in which the Fund may
invest, as well as some general investment terms. The Fund may invest in these
instruments to the extent permitted by its investment objective and policies.
The Fund is not limited by this discussion and may invest in any other types of
instruments not precluded by the policies discussed elsewhere in this
Prospectus.
Asset-backed
securities are shares in a pool of debt instruments. These
securities are generally pass-through securities, which means that principal and
interest payments on the underlying securities (less servicing fees) are passed
through to shareholders on a pro rata basis. These securities involve both
extension risk, where borrowers pay off their debt obligations more slowly in
times of rising interest rates, and prepayment risk, where borrowers pay off
their debt obligations sooner than expected in times of declining interest
rates. In that case, the Fund may have to reinvest the proceeds from the
securities at a lower rate. Potential market gains on a security subject to
prepayment risk may be more limited than potential market gains on a comparable
security that is not subject to prepayment risk. These risks may reduce the
Fund’s returns.
Average-Weighted
Effective Maturity is a measure of a bond’s maturity. The stated
maturity of a bond is the date when the issuer must repay the bond’s entire
principal value to an investor. Some types of bonds may also have an “effective
maturity” that is shorter than the stated date due to prepayment or call
provisions. Securities without prepayment or call provisions generally have an
effective maturity equal to their stated maturity. Average-weighted effective
maturity is calculated by averaging the effective maturity of bonds held by the
Fund with each effective maturity “weighted” according to the percentage of net
assets that it represents.
Bonds
are debt securities issued by a company, municipality, government,
or government agency. The issuer of a bond is required to pay the holder the
amount of the loan (or par value of the bond) at a specified maturity and to
make scheduled interest payments.
Collateralized Loan
Obligations (CLOs) are floating- or fixed-rate securities issued
in different tranches with varying degrees of risk by a trust or other special
purpose vehicle and backed by an underlying portfolio consisting primarily of
below investment grade corporate loans. Such loans may include domestic and
foreign senior secured loans, senior unsecured loans and subordinate corporate
loans, some of which may individually be below investment grade or the
equivalent if unrated.
Collateralized
Mortgage Obligations (“CMOs”) are a type of mortgage-backed
security that are created by dividing the principal and interest payments
collected on a pool of mortgages into several revenue streams (tranches) with
different priority rights to portions of the underlying mortgage payments.
Certain CMO tranches are frequently referred to as “mortgage derivatives” and
may be extremely sensitive to changes in interest rates.
Commercial paper
is a short-term debt obligation with a maturity ranging from 1 to
270 days issued by banks, corporations, and other borrowers to investors seeking
to invest idle cash. The Fund may purchase commercial paper issued in private
placements under Section 4(2) of the Securities Act of 1933, as
amended.
Covenant Lite
Loans are loans which have few or no financial maintenance
covenants. Although loan investments are generally subject to certain
restrictive covenants in favor of the investor, certain of the underlying loans
of a CLO in which the Fund may invest may be issued or offered as “covenant
lite” loans. “Financial maintenance covenants” are those that require a borrower
to maintain certain financial metrics during the life of the loan, such as
maintaining certain levels of cash flow or limiting leverage. In the event of
financial deterioration on the part of the borrower, these covenants are
included to permit the lenders to renegotiate the terms of the loan, such as
increasing the borrowing costs to the borrower, or to take other actions which
would improve the position of the lender.
Credit risk transfer
securities (“CRTs”) are unguaranteed and unsecured mortgage-
related securities issued by a government-related organization or special
purpose vehicle, respectively and therefore are not directly linked to or backed
by the underlying mortgage loans. Unlike mortgage-backed securities, investors
in CRT securities issued by a government related organization have no recourse
to the underlying mortgage loans. In addition, transfer some or all of the
mortgage default risk associated with the underlying mortgage loans transferred
to the noteholder. Therefore, a fund could lose all or part of its investments
in CRT securities in the event of a default by the underlying
mortgages.
Debt securities
are securities representing money borrowed that must be repaid at
a later date. Such securities have specific maturities and usually a specific
rate of interest or an original purchase discount.
Duration
is a measurement of price sensitivity to interest rate changes.
Unlike average maturity, duration reflects both principal and interest payments.
Generally, the higher the coupon rate on a bond, the lower its duration will be.
The duration of a bond portfolio is calculated by averaging the duration of
bonds held by the Fund with each duration “weighted” according to the
36½Janus Detroit Street Trust
percentage
of net assets that it represents. Because duration accounts for interest
payments, the Fund’s duration is usually shorter than its average maturity.
Securities with longer durations tend to be more sensitive to changes in
interest rates, and are usually more volatile than securities with shorter
duration. For example, the price of a bond portfolio with an average duration of
five years would be expected to fall approximately 5% if interest rates rose by
one percentage point. The Fund with a longer portfolio duration is more likely
to experience a decrease in its share price as interest rates rise.
Fixed-income
securities are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate, and
municipal obligations that pay a specified rate of interest, dividends, or
coupons for a specified period of time. Coupon and dividend rates may be fixed
for the life of the issue or, in the case of adjustable and floating rate
securities, for a shorter period.
High-yield bonds
are bonds that are rated below investment grade by the primary
rating agencies (i.e., BB+ or lower by Standard & Poor’s and Fitch, or
Ba or lower by Moody’s). Other terms commonly used to describe such bonds
include “lower rated bonds,” “non‑investment grade bonds,” and “junk
bonds.”
Mortgage- and
asset-backed securities are shares in a pool of mortgages or other
debt instruments. These securities are generally pass-through securities, which
means that principal and interest payments on the underlying securities (less
servicing fees) are passed through to shareholders on a pro rata basis.
Mortgage dollar rolls
are transactions in which the Fund’s sells a mortgage-related
security, such as a security issued by Government National Mortgage Association,
to a dealer and simultaneously agrees to purchase a similar security (but not
the same security) in the future at a predetermined price. A “dollar roll” can
be viewed as a collateralized borrowing in which the Fund pledges a
mortgage-related security to a dealer to obtain cash.
Pass-through
securities are shares or certificates of interest in a pool of
debt obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer.
Real estate
investment trust (“REIT”) is an investment trust that operates
through the pooled capital of many investors who buy its shares. Investments are
in direct ownership of either income property or mortgage loans. A REIT may be
listed on an exchange or traded over‑the‑counter.
Restricted securities
are securities acquired through nonpublic transactions that have
limitations on their resale. Restricted securities are unregistered and may only
be resold under certain circumstances as noted in Rule 144A of the Securities
Act of 1933, as amended.
“To be announced” or
“TBA” commitments are forward agreements for the purchase or sale
of securities, including mortgage-backed securities, for a fixed price, with
payment and delivery on an agreed upon future settlement date. The specific
securities to be delivered are not identified at the trade date. However,
delivered securities must meet specified terms, including issuer, rate, and
mortgage terms. At the time the TBA commitment is made, the transaction is
recorded and thereafter the value of such securities is reflected each day in
determining the Fund’s NAV. Because the Fund is generally not required to pay
for the security until the settlement date, if the Fund remains substantially
fully invested at a time when TBA commitment purchases are outstanding, the
purchases may result in a form of leverage.
U.S. Government
securities include direct obligations of the U.S. Government that
are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year, Treasury notes have initial maturities of one
to ten years, and Treasury bonds may be issued with any maturity but generally
have maturities of at least ten years. U.S. Government securities also include
indirect obligations of the U.S. Government that are issued by federal agencies
and GSEs. Unlike Treasury securities, agency securities generally are not backed
by the full faith and credit of the U.S. Government. Some agency securities are
supported by the right of the issuer to borrow from the Treasury, others are
supported by the discretionary authority of the U.S. Government to purchase the
agency’s obligations, and others are supported only by the credit of the
sponsoring agency.
Variable and floating
rate securities have variable or floating rates of interest and,
under certain limited circumstances, may have varying principal amounts.
Variable and floating rate securities pay interest at rates that are adjusted
periodically according to a specified formula, usually with reference to some
interest rate index or market interest rate. The floating rate tends to decrease
the security’s price sensitivity to changes in interest rates.
37½Janus Detroit Street Trust
|
FUTURES AND OTHER DERIVATIVES |
Credit default swaps
are a specific kind of counterparty agreement that allows the
transfer of third party credit risk from one party to the other. One party in
the swap is a lender and faces credit risk from a third party, and the
counterparty in the credit default swap agrees to insure this risk in exchange
for regular periodic payments.
Derivatives
are instruments that have a value derived from, or directly linked
to, an underlying asset (stock, bond, commodity, currency, interest rate or
market index). Types of derivatives can include, but are not limited to options,
forward contracts, swaps, and futures contracts.
Forward contracts
are contracts to purchase or sell a specified amount of a
financial instrument for an agreed upon price at a specified time. Forward
contracts are not currently exchange-traded and are typically negotiated on an
individual basis. The Fund may enter into forward currency contracts for
investment purposes or to hedge against declines in the value of securities
denominated in, or whose value is tied to, a currency other than the U.S. dollar
or to reduce the impact of currency appreciation on purchases of such
securities. It may also enter into forward contracts to purchase or sell
securities or other financial indices.
Futures contracts
are contracts that obligate the buyer to receive and the seller to
deliver an instrument or money at a specified price on a specified date. The
Fund may buy and sell futures contracts on foreign currencies, securities, and
financial indices including indices of U.S. Government, foreign government,
equity, or fixed-income securities. Futures contracts are standardized and
traded on designated exchanges.
Indexed/structured
securities are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices, commodity prices, or other financial
indicators. Such securities may be positively or negatively indexed (e.g., their
value may increase or decrease if the reference index or instrument
appreciates). Indexed/structured securities may have return characteristics
similar to direct investments in the underlying instruments and may be more
volatile than the underlying instruments.
Interest rate swaps
involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
Inverse floaters
are debt instruments whose interest rate bears an inverse
relationship to the interest rate on another instrument or index. For example,
upon reset, the interest rate payable on the inverse floater may go down when
the underlying index has risen. Certain inverse floaters may have an interest
rate reset mechanism that multiplies the effects of change in the underlying
index. Such mechanism may increase the volatility of the security’s market
value.
Total return swaps
involve an exchange by two parties in which one party makes
payments based on a set rate, either fixed or variable, while the other party
makes payments based on the return of an underlying asset, which includes both
the income it generates and any capital gains over the payment period. A
fixed-income total return swap may be written on many different kinds of
underlying reference assets, and may include different indices for various kinds
of debt securities (e.g., U.S. investment grade bonds, high-yield bonds, or
emerging market bonds).
|
OTHER INVESTMENTS, STRATEGIES, AND/OR TECHNIQUES |
Cash sweep program
is an arrangement in which the Fund’s uninvested cash balance is
used to purchase shares of affiliated or non‑affiliated money market funds or
cash management pooled investment vehicles that operate pursuant to the
provisions of the Investment Company Act of 1940, as amended, that govern the
operation of money market funds at the end of each day.
Diversification
is a classification given to a fund under the Investment Company
Act of 1940, as amended (the “1940 Act”). Funds are classified as either
diversified or nondiversified. To be classified as diversified under the 1940
Act, a fund may not, with respect to 75% of its total assets, invest more than
5% of its total assets in any issuer and may not own more than 10% of the
outstanding voting securities of an issuer. A fund that is classified as
nondiversified under the 1940 Act, on the other hand, has the flexibility to
take larger positions in securities than a fund that is classified as
diversified. However, because the appreciation or depreciation of a single
security may have a greater impact on the NAV of a fund which is classified as
nondiversified, its share price can be expected to fluctuate more than a
comparable fund which is classified as diversified.
Industry
concentration for purposes under the 1940 Act is the investment of
25% or more of the Fund’s total assets in an industry or group of
industries.
38½Janus Detroit Street Trust
Leverage
is investment exposure which exceeds the amount invested. Leverage
occurs when the Fund increases its assets available for investment using reverse
repurchase agreements, derivatives or other similar transactions. In addition,
other investment techniques, such as short sales, can create a leveraging
effect.
Repurchase agreements
involve the purchase of a security by the Fund and a simultaneous
agreement by the seller (generally a bank or dealer) to repurchase the security
from the Fund at a specified date or upon demand. This technique offers a method
of earning income on idle cash.
Reverse repurchase
agreements involve the sale of a security by the Fund to another
party (generally a bank or dealer) in return for cash and an agreement by the
Fund to buy the security back at a specified price and time. This technique may
be used for investment purposes, which may have a leveraging effect on the
Fund’s portfolio. This technique may also be used for other temporary or
emergency purposes.
When-issued, delayed
delivery, and forward commitment transactions generally involve
the purchase of a security with payment and delivery at some time in the future
– i.e., beyond normal settlement. New issues of stocks and bonds, private
placements, and U.S. Government securities may be sold in this manner.
39½Janus Detroit Street Trust
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You
can make inquiries and request other information, including a Statement of
Additional Information, annual report, or semiannual report (as they become
available), free of charge, by contacting your broker-dealer, plan sponsor, or
financial intermediary, or by contacting a representative at 1‑800‑668‑0434. The
Fund’s Statement of Additional Information and most recent annual and semiannual
reports are also available, free of charge, at janushenderson.com/info.
Additional information about the Fund’s investments is available in the Fund’s
annual and semiannual reports. In the Fund’s annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund’s performance during its last fiscal period. Other information
is also available from financial intermediaries that sell shares of the
Fund.
The
Statement of Additional Information provides detailed information about the Fund
and is incorporated into this Prospectus by reference. Reports and other
information about the Fund are available on the Electronic Data Gathering
Analysis and Retrieval (EDGAR) Database on the SEC’s website at
http://www.sec.gov. You may obtain copies of this information, after paying a
duplicating fee, by electronic request at the following e‑mail address:
[email protected].
janushenderson.com/info
151
Detroit Street
Denver,
CO 80206-4805
1‑800‑668‑0434
The
Trust’s Investment Company Act File No. is 811‑23112.