*See Note 5 in Notes to Financial Statements.
60 Janus Growth Funds October 31, 2004
7. Legal Matters
In September 2003, the Securities and Exchange Commission ("SEC") and the Office of the New York State Attorney General
("NYAG") publicly announced that they were investigating trading practices in the mutual fund industry. The investigations were
prompted by the NYAG's settlement with a hedge fund, Canary Capital, which allegedly engaged in irregular trading practices with
certain mutual fund companies. While Janus Capital was not named as a defendant in the NYAG complaint against the hedge fund,
Janus Capital was mentioned in the complaint as having allowed Canary Capital to "market time" certain Janus funds. Market timing is
an investment technique involving frequent short-term trading of mutual fund shares that is designed to exploit market movements or
inefficiencies in the way mutual fund companies price their shares.
Subsequent to the announcements by the SEC and the NYAG, the Colorado Attorney General ("COAG") and the Colorado Division of
Securities announced that they were each initiating investigations into Janus Capital's mutual fund trading practices.
On August 18, 2004, Janus Capital announced that it had reached final settlements with the NYAG, the COAG, the Colorado Division
of Securities and the SEC related to such regulators' investigations into Janus Capital's frequent trading arrangements. Pursuant to such
agreements, Janus Capital agreed to pay $50 million in restoration to compensate investors for any adverse effects of frequent trading
and $50 million in civil penalties. Janus Capital also agreed to reduce its management fees in the amount of $25 million per year for
five years. Specific fee reductions, effective July 1, 2004, were determined on a fund-by-fund basis and were calculated using assets
under management as of May 31, 2004. Therefore, the total reduction in revenue over a five-year period could be greater than or less
than $125 million, depending on whether assets under management