FOUNDERS FUNDS INC, 485BPOS, 1996-07-26

FOUNDERS FUNDS INC
485BPOS, 1996-07-26

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As filed with the Securities and Exchange Commission on July 26, 1996

Registration No. 2-17531
Registration No. 811-1018
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No. _____ ___

Post-Effective Amendment No. 61 X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 X

Amendment No. 32 X

FOUNDERS FUNDS, INC.
____________________________________________________
(Exact Name of Registrant as Specified in Charter)

Founders Financial Center
2930 East Third Avenue
DENVER, COLORADO 80206
____________________________________________________
(Address of Principal Executive Offices)(Zip Code)

Registrant's Telephone Number, including Area Code: (303) 394-4404

Bjorn K. Borgen
Founders Financial Center
2930 East Third Avenue
DENVER, COLORADO 80206
_________________________________________
(Name and Address of Agent for Service)

Approximate Date of Proposed Public Offering: As soon as
practicable after this post-effective amendment becomes effective.

It is proposed that this filing will become effective
(check appropriate box)

___ Immediately upon filing pursuant to paragraph (b)

_ X_ On August 12, 1996 pursuant to paragraph (b)

____ 60 days after filing pursuant to paragraph (a)(1)
____ On _______________ pursuant to paragraph (a)(1)
____ 75 days after filing pursuant to paragraph (a)(2)
____ On ______________ pursuant to paragraph (a)(2) of rule 485

If appropriate, check the following box:

____ This post-effective amendment designates a new effective date
for a previously filed post-effective amendment

Registrant has registered an indefinite number of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. The Rule 24f-2 Notice for Registrant's most recent
fiscal year was filed on or about February 14, 1996.

<PAGE>

FOUNDERS FUNDS, INC.

CROSS REFERENCE SHEET

Item No. Caption
- -------- -------

Part A Prospectus
------ ----------

1.................................. Cover Page

2.................................. Annual Fund Expense Information

3.................................. Financial Highlights; General
Information

4.................................. Investment Objectives of the Funds;
Investment Management of the Funds;
Investment Policies Involving
Special Risks; Other Investment
Policies; General Information

5.................................. Investment Management of the
Funds; General Information

5A................................. Not Applicable

6.................................. Shareholder Services; General
Information

7.................................. Investing in the Founders Funds;
Shareholder Services; General
Information

8.................................. Investing in the Founders Funds

9.................................. Not Applicable

Part B Statement of Additional
------ Information
-----------------------
10................................. Cover Page

11................................. Table of Contents

12................................. Not Applicable

13................................. Investment Objectives and Policies;
Investment Restrictions; Brokerage
Allocation and Portfolio Turnover
Rates

<PAGE>

Item No. Caption
- -------- -------
Part B
------

14................................. Directors and Officers

15................................. Directors and Officers; Additional
Information

16................................. Investment Adviser and Distributor;
Directors and Officers; Additional
Information

17................................. Brokerage Allocation and Portfolio
Turnover Rates

18................................. Additional Information

19................................. Determination of Net Asset Value;
Redemption Payments

20................................. Dividends, Distributions and Taxes

21................................. Investment Adviser and Distributor

22................................. Yield and Performance Information

23................................. Additional Information

PART C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Registration Statement.

<PAGE>

P R O S P E C T U S

AUGUST 12, 1996

Discovery Fund
Frontier Fund
Passport Fund
Special Fund
International Equity Fund
Worldwide Growth Fund
Growth Fund
Blue Chip Fund
Balanced Fund
Government Securities Fund
Money Market Fund

[Logo]
FOUNDERS FUNDS

<PAGE>

[LOGO] FOUNDERS FUNDS
PROSPECTUS

AUGUST 12, 1996

FOUNDERS FUNDS OFFER INVESTORS
MANY ADVANTAGES, INCLUDING:
O No commissions
O No deferred sales charges
O No-fee exchanges among the funds
O Automatic investment and withdrawal plans
O 24-hour account information
O No-fee IRAs and other retirement-oriented investment accounts

Founders Discovery, Frontier, Passport and Special Funds offer capital
appreciation as their investment objective. International Equity, Worldwide
Growth and Growth Funds seek long-term growth of capital as their objective.
Blue Chip Fund offers the opportunity for long-term growth of capital and
income, while Balanced Fund seeks current income and capital appreciation as its
objective. Government Securities Fund has the investment objective of current
income. Founders Money Market Fund seeks maximum current income consistent with
the preservation of capital and liquidity as its objective. THERE CAN BE NO
ASSURANCE THAT MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT.

This prospectus briefly tells you information you need to know before
investing. You should read it carefully and keep it for future reference.

A STATEMENT OF ADDITIONAL INFORMATION dated August 12, 1996, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. You can obtain a copy without charge by calling Founders Asset
Management, Inc. ("Founders") at 1-800-525-2440. In addition, the Securities and
Exchange Commission maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated therein by reference,
and other information regarding the Funds and other registrants that file
electronically with the Commission.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. SHARES OF
THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.

<PAGE>

PROSPECTUS

AUGUST 12, 1996

FOUNDERS FUNDS, INC. IS A FAMILY OF NO-LOAD MUTUAL FUNDS THAT OFFERS YOU A
VARIETY OF INVESTMENT OPPORTUNITIES. THE DESCRIPTIONS BELOW ARE DESIGNED TO HELP
YOU CHOOSE THE FUND THAT BEST FITS YOUR INVESTMENT OBJECTIVE.

DISCOVERY FUND
OBJECTIVE: CAPITAL APPRECIATION
Discovery Fund invests primarily in common stocks of small, rapidly growing U.S.
companies.

FRONTIER FUND
OBJECTIVE: CAPITAL APPRECIATION
Frontier Fund invests primarily in common stocks of small and medium-size U.S.
and foreign companies.

PASSPORT FUND
OBJECTIVE: CAPITAL APPRECIATION
Passport Fund invests primarily in common stocks of small, rapidly growing
companies outside of the U.S. These securities may represent companies in
established and emerging economies throughout the world.

SPECIAL FUND
OBJECTIVE: CAPITAL APPRECIATION
Special Fund invests primarily in common stocks of medium- size U.S. companies.

INTERNATIONAL EQUITY FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL
International Equity Fund invests primarily in growth stocks of companies in
both emerging and established economies throughout the world, excluding the
United States.

WORLDWIDE GROWTH FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL
Worldwide Growth Fund
invests primarily in growth stocks of companies in both emerging and established
economies throughout the world.

GROWTH FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL
Growth Fund invests primarily in common stocks of well-established, high-quality
growth companies.

BLUE CHIP FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL AND INCOME
Blue Chip Fund invests primarily in common stocks of large, well-established,
stable and mature companies of great financial strength.

BALANCED FUND
OBJECTIVE: CURRENT INCOME AND CAPITAL APPRECIATION
Balanced Fund invests in a balanced portfolio of dividend- paying common stocks,
U.S. and foreign government obligations and a variety of corporate fixed-income
securities.

GOVERNMENT SECURITIES FUND
OBJECTIVE: CURRENT INCOME
Government Securities Fund invests primarily in obligations of the U.S.
government.

MONEY MARKET FUND
OBJECTIVE: MAXIMUM CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL
AND LIQUIDITY
Money Market Fund invests in high-quality money market instruments. THERE CAN BE
NO ASSURANCE MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT.

<PAGE>

TABLE OF CONTENTS

How to Contact Us........................................................... 4

Annual Fund Expense Information............................................. 5

Financial Highlights........................................................ 7

Investment Objectives of the Funds.......................................... 18

Investment Management of the Funds.......................................... 20

Investment Policies Involving Special Risks................................. 22

Other Investment Policies................................................... 27

Investing in the Founders Funds............................................. 29

Opening Your Account With Founders..................................... 29

Adding to Your Founders Funds Account.................................. 30

Selling Shares From Your Founders Funds................................ 31

Exchanging Shares of Your Founders Funds............................... 32

Overall Policies Regarding Transactions................................ 33

Shareholder Services........................................................ 34

Investor Services...................................................... 34

Fund and Market News Updates .......................................... 34

Daily Closing Prices................................................... 34

24-Hour Account Information ........................................... 34

Statements and Reports................................................. 34

Establishing Additional Services....................................... 35

General Information ........................................................ 35

Share Price Determination.............................................. 35

Dividends and Distributions............................................ 35

Dividend and Capital Gain
Distribution Options................................................... 35

Taxes.................................................................. 36

Founders Funds, Inc. and Its Management................................ 37

Distribution Plans..................................................... 38

Voting Rights.......................................................... 38

Transfer Agent and Custodian........................................... 39

Fund Performance Information........................................... 39

<PAGE>

HOW TO CONTACT US

INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, FUND ACCOUNTANT AND SHAREHOLDER
SERVICE AGENT
Founders Asset Management, Inc.
Founders Financial Center
2930 East Third Avenue
Denver, CO 80206
(303) 394-4404
Fax: (303) 394-4021

MAILING ADDRESS FOR SHAREHOLDER INVESTMENTS AND CORRESPONDENCE
P.O. Box 173655
Denver, CO 80217-3655

DELIVERY ADDRESS FOR CERTIFIED, REGISTERED AND OVERNIGHT MAIL
2930 East Third Avenue
Denver, CO 80206-5002

TOLL-FREE INVESTOR SERVICE NUMBER
1-800-525-2440
Monday through Friday,
7AM to 6:30PM, Mountain time
Saturday, 9AM to 2PM, Mountain time

TOLL-FREE SERVICE FOR EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-934-GOLD (4653)
Monday through Friday,
8AM to 5PM, Mountain time

TOLL-FREE SERVICE FOR DEALER, BROKER AND ADVISER TRADES
1-800-DEALER-3
(1-800-332-5373)
Monday through Friday,
8AM to 5PM, Mountain time

CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO
64105-1716
(816) 435-1000
Please do not mail transactions requiring processing to this address.

<PAGE>
ANNUAL FUND EXPENSE INFORMATION
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES

Inter- World- Govern-
national wide Blue ment Money
Discovery Frontier Passport Special Equity Growth Growth Chip Balanced Securities Market
Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

Maximum Sales Load NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE
Imposed on Purchases

Maximum Sales Load NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE
Imposed on
Reinvested Dividends

Deferred Sales Load NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE

Redemption Fee NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE*

Exchange Fee NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE

<FN>
* A fee of $6.00 will be assessed for wire redemptions.
</TABLE>

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)

Management Fees.... 1.00% 0.97% 1.00% 0.76% 1.00% 1.00% 0.74% 0.64% 0.65% 0.65% 0.50%

12b-1 Fees*........ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.10%++ ----
(after expense
reimbursements)

Other Expenses**... 0.38% 0.35% 0.59% 0.34% 0.75%+ 0.40% 0.29% 0.33% 0.33% 0.55% 0.39%
(after expense
reimbursements)

Total Fund Operating
Expenses.......... 1.63% 1.57% 1.84% 1.35% 2.00%+ 1.65% 1.28% 1.22% 1.23% 1.30%++ 0.89%
(after expense
reimbursements)

<FN>
* Long-term shareholders of a 12b-1 Fund may over time pay more in 12b-1
fees than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc., which
currently range from 6.25% to 8.5% of the amount invested. The 12b-1 Funds
may engage in directed-brokerage arrangements which will have no adverse
effect either on the level of brokerage commissions paid by the Funds or
on any Fund's expenses. See the section entitled "Distribution Plans."

** Includes, but is not limited to, fees and expenses of directors, custodian
bank, legal counsel and independent accountants, securities pricing
services, transfer agency fees, costs of services furnished by Founders
under a shareholder servicing agreement and a fund accounting agreement,
costs of registration of Fund shares under applicable laws, and costs of
printing and distributing reports to shareholders.

+ Based on estimated expenses for the current fiscal year, since the
International Equity Fund did not commence the public offering of its
shares until December 29, 1995. Certain expenses of the International
Equity Fund are being reimbursed voluntarily by Founders. In the absence
of this expense limitation, "Other Expenses" and "Total Fund Operating
Expenses" for the fiscal year ending December 31, 1996 are estimated to be
1.75% and 3.00%, respectively, of the Fund's average net assets.

++ Certain expenses of the Government Securities Fund are being reimbursed
voluntarily by Founders. In the absence of this expense limitation, "12b-1
Fees" and "Total Fund Operating Expenses" in the above table would have
been 0.25% and 1.45%, respectively, of the Fund's average net assets based
on its actual expenses for the year ended December 31, 1995.

</TABLE>

<PAGE>

EXAMPLE:

You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and no redemption:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------

Discovery Fund $ 17 $ 52 $ 90 $194
Frontier Fund 16 50 86 188
Passport Fund 19 58 100 217
Special Fund 14 43 74 163
International Equity Fund* 21 63 109 234
Worldwide Growth Fund 17 52 90 197
Growth Fund 13 41 71 155
Blue Chip Fund 13 39 67 148
Balanced Fund 13 39 68 150
Government Securities Fund 13 41 72 158
Money Market Fund 9 29 50 110

* Based on expenses of 2.00%. Expenses are estimated, since the Fund did not
commence the public offering of its shares until December 29, 1995.

The purpose of the foregoing table is to help you understand the various
direct and indirect costs and expenses of investing in shares of Founders Funds,
Inc. an annual fee of $10 may be deducted from accounts with a share value less
than $1,000. The figures are based on fiscal year-end 1995. A more complete
description of each fund's costs and expenses is provided in sections titled
"Founders Funds, Inc. and Its Management," "Distribution Plans," and "Selling
Shares From Your Founders Funds."

Since the assumed 5% annual return is hypothetical, the examples at left should
not be considered a representation of past or future expenses or returns. Actual
fund expenses and returns may vary from year to year and may be higher or lower
than those shown above. Lower expenses benefit Fund shareholders by increasing a
Fund's total return.

<PAGE>
FINANCIAL HIGHLIGHTS

SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD

With the exception of the information concerning the International Equity Fund,
the following financial information has been audited by Smith, Brock & Gwinn,
independent accountants. This information should be read in conjunction with the
audited financial statements and the related Independent Auditor's Report
appearing in the Funds' 1995 Annual Report to Shareholders, which is
incorporated in the Statement of Additional information by reference, and the
unaudited financial statements for the International Equity Fund appearing in
the Statement of Additional Information. Both the annual report and the
Statement of Additional Information may be obtained without charge by writing
Founders at Founders Financial Center, 2930 East Third Avenue, Denver, Colorado
80206 or by calling 1-800-525-2440. The annual report also contains more
information about the Funds' performance. Price Waterhouse LLP has been selected
as the Funds' independent accountants for the year ending December 31, 1996.

<TABLE>
<CAPTION>
DISCOVERY FUND*

Years Ended December 31
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990

PER SHARE DATA
Net Asset Value --
Beginning of Period $ 19.88 $21.55 $19.93 $17.52 $11.22 $10.00

---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (0.12) (0.12) (0.15) (0.03) (0.04) 0.10
Net Gains or Losses on
Securities (Both Realized
and Unrealized) 6.29 (1.55) 2.29 2.68 7.02 1.22
------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 6.17 (1.67) 2.14 2.65 6.98 1.32

------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) 0.00 0.00 0.00 0.00 0.00 (0.10)
Distributions (From
Capital Gains) (4.35) 0.00 (0.52) (0.24) (0.68) 0.00
------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (4.35) 0.00 (0.52) (0.24) (0.68) (0.10)
------------------------------------------------------------------------------------
Net Asset Value --
End of Period $21.70 $19.88 $21.55 $19.93 $17.52 $11.22
====================================================================================

TOTAL RETURN 31.3% (7.8%) 10.8% 15.2% 62.5% 13.2%

RATIOS/SUPPLEMENTAL DATA

Net Assets--End of Period
(000 Omitted) $216,623 $185,310 $226,069 $151,983 $47,678 $7,035

Ratio of Expenses to Average
Net Assets 1.63%++ 1.67% 1.65% 1.85% 1.77% 2.03%

Ratio of Net Income to Average
Net Assets (0.60%) (0.62%) (0.97%) (0.67%) (0.55%) 1.68%

Portfolio Turnover Rate 118% 72% 99% 111% 165% 271%

Average Commission Rate Paid (unaudited) $0.0575 -- -- -- -- --

<FN>
* No activity in inception year of 1989
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.58%.
</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>

FRONTIER FUND

PER SHARE DATA
Net Asset Value --
Beginning of Period $26.50 $27.94 $25.03 $24.21 $16.87 $18.49 $13.45 $11.03 $10.00
---------------------------------------------------------------------------------------------------------

INCOME FROM INVESTMENT
OPERATIONS

Net Investment Income (0.02) (0.07) (0.12) (0.11) 0.01 0.15 0.12 (0.06) (0.09)

Net Gains or Losses
on Securities (Both
Realized and 9.76 (0.72) 4.23 2.24 8.27 (1.53) 5.81 3.26 1.70
Unrealized)
---------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 9.74 (0.79) 4.11 2.13 8.28 (1.38) 5.93 3.20 1.61
---------------------------------------------------------------------------------------------------------

LESS DISTRIBUTIONS
Dividends (From Net
Investment Income 0.00 0.00 0.00 0.00 (0.01) (0.16) (0.05) 0.00 0.00

Distributions (From
Capital Gains) (5.16) (0.65) (1.20) (1.31) (0.93) (0.08) (0.84) (0.78) (0.58)
---------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (5.16) (0.65) (1.20) (1.31) (0.94) (0.24) (0.89) (0.78) (0.58)
---------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $31.08 $26.50 $27.94 $25.03 $24.21 $16.87 $18.49 $13.45 $11.03
=========================================================================================================

TOTAL RETURN 37.0% (2.8%) 16.5% 8.9% 49.3% (7.5%) 44.3% 29.2% 16.1%

RATIOS/SUPPLEMENTAL DATA
Net Assets--
End of Period
(000 Omitted) $331,720 $247,113 $254,248 $146,484 $103,209 $39,269 $50,318 $8,771 $3,318

Ratio of Expenses to
Average Net Assets 1.57%++ 1.62% 1.66% 1.83% 1.68% 1.71% 1.46% 1.89% 2.25%+

Ratio of Net Income
to Average
Net Assets (0.07%) (0.25%) (0.75%) (0.58%) 0.05% 0.78% 0.38% (0.43%) (0.74%)+

Portfolio Turnove
Rate 92% 72% 109% 155% 158% 207% 198% 312% 588%

Average Commission
Rate Paid (unaudited) $0.0638 -- -- -- -- -- -- -- ---

<FN>

+ Annualized

++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.53%.

</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

PASSPORT FUND

Years Ended December 31 Period of
-----------------------------------

1995 1994 11/16/93-
12/31/93
PER SHARE DATA
Net Asset Value --
Beginning of Period $9.42 $10.53 $10.00
----------------------------------

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.02 0.00

Net Gains or Losses on
Securities (Both Realized
and Unrealized) 2.26 (1.11) 0.53
----------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 2.30 (1.09) 0.53
----------------------------------

LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.04) (0.02) 0.00

Distributions (From
Capital Gains) 0.00 0.00 0.00
----------------------------------
TOTAL DISTRIBUTIONS (0.04) (0.02) 0.00
----------------------------------
Net Asset Value --
End of Period $11.68 $9.42 $10.53
==================================

TOTAL RETURN 24.4% (10.4%) 5.3%

RATIOS/SUPPLEMENTAL DATA
Net Assets--End of Period
(000 Omitted) $49,922 $16,443 $18,567

Ratio of Expenses to Average
Net Assets 1.84%++ 1.88% 1.70%+

Ratio of Net Income to
Average Net Assets 0.60% 0.12% 0.18%+

Portfolio Turnover Rate 37% 78% 6.0%

Average Commission Rate Paid (unaudited) $0.0199 -- --

+ Annualized

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>

SPECIAL FUND

Years Ended December 31
-----------------------------------------------------------------------------------------------------------------

1995 1994 1993 1992 1991 1990 1989 1988 1987* 1986*

<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $7.01 $7.67 $7.76 $7.59 $5.03 $6.64 $5.47 $5.14 $5.60 $5.34
-----------------------------------------------------------------------------------------------------------------

INCOME FROM
INVESTMENT
OPERATIONS
Net Investment 0.00 (0.02) (0.01) (0.01) 0.08 0.09 0.16 0.03 0.04 0.04
Income

Net Gains or Losses
on Securities (Both
Realized and
Unrealized) 1.79 (0.36) 1.25 0.64 3.09 (0.79) 1.97 0.65 0.25 0.97
-----------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 1.79 (0.38) 1.24 0.63 3.17 (0.70) 2.13 0.68 0.29 1.01
-----------------------------------------------------------------------------------------------------------------
LESS
DISTRIBUTIONS
Dividends (From Net
Investment Income) 0.00 0.00 0.00 0.00 (0.04) (0.10) (0.15) (0.04) (0.03) (0.06)

Distributions (From
Capital Gains) (1.75) (0.28) (1.33) (0.46) (0.57) (0.81) (0.81) (0.31) (0.72) (0.69)
-----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.75) (0.28) (1.33) (0.46) (0.61) (0.91) (0.96) (0.35) (0.75) (0.75)
-----------------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $7.05 $7.01 $7.67 $7.76 $7.59 $5.03 $6.64 $5.47 $5.14 $5.60
=================================================================================================================

TOTAL RETURN 25.7% (4.9%) 16.0% 8.3% 63.7% (10.4%) 39.2% 13.2% 5.2% 18.9%

RATIOS/SUPPLE-
MENTAL DATA
Net Assets--End of $388,754 $299,190 $432,710 $456,793 $226,154 $57,951 $94,554 $62,990 $66,797 $70,210
Period (000 Omitted)

Ratio of Expenses to
Average Net Assets 1.35%++ 1.36% 1.33% 1.23% 1.15% 1.20% 1.06% 1.12% 1.14% 1.06%

Ratio of Net Income
to Average Net 0.00% (0.27%) (0.14%) (0.05%) 0.76% 1.54% 1.95% 0.59% 0.45% 0.73%
Assets

Portfolio Turnover
Rate 263% 272% 285% 223% 102% 146% 151% 160% 210% 138%

Average Commission $0.0648 -- -- -- -- -- -- -- -- --
Rate Paid (unaudited)

<FN>
* Restated to reflect 5-for-1 split on August 31, 1987

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

INTERNATIONAL EQUITY FUND* (Unaudited)

Six Months Ended June 30, 1996
------------------------------

PER SHARE DATA
Net Asset Value --
Beginning of Period $10.00
----------

INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.00

Net Gains or Losses on
Securities (Both Realized
and Unrealized) 1.46
----------
TOTAL FROM INVESTMENT
OPERATIONS 1.46
----------

LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) 0.00

Distributions (From
Capital Gains) 0.00
----------
TOTAL DISTRIBUTIONS 0.00
----------
Net Asset Value --
End of Period $11.46
==========

TOTAL RETURN 14.6%

RATIOS/SUPPLEMENTAL DATA
Net Assets--End of Period
(000 Omitted) $8,158

Ratio of Expenses
to Average
Net Assets 2.00%+

Ratio of Net Income
to Average
Net Assets 0.14%+

Portfolio Turnover Rate 21%

Average Commission
Rate Paid $0.0174

* No activity in inception year of 1995
+ Annualized rates. In the absence of voluntary expense reimbursement and
waivers from Founders, the Expense Ration would have been 3.03% (annualized) and
the Net Income Ratio would have been (0.89%) annualized).

11
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>

WORLDWIDE GROWTH FUND*

Years Ended December 31
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $17.09 $17.94 $14.13 $13.92 $10.38 10.00
--------------------------------------------------------------------------------------

INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.09 (0.02) (0.02) 0.00 0.03 0.29

Net Gains or Losses on
Securities (Both Realized
and Unrealized) 3.43 (0.37) 4.24 0.21 3.58 0.38
--------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 3.52 (0.39) 4.22 0.21 3.61 0.67
--------------------------------------------------------------------------------------

LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.09) 0.00 0.00 0.00 (0.03) (0.29)

Distributions (From
Capital Gains) (0.65) (0.46) (0.41) 0.00 (0.04) 0.00
--------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.74) (0.46) (0.41) 0.00 (0.07) (0.29)
--------------------------------------------------------------------------------------
Net Asset Value --
End of Period $19.87 $17.09 $17.94 $14.13 $13.92 $10.38
======================================================================================

TOTAL RETURN 20.6% (2.2%) 29.9% 1.5% 34.8% 6.7%

RATIOS/SUPPLEMENTAL DATA
Net Assets--End of Period
(000 Omitted) $228,595 $104,044 $85,214 $36,622 $20,305 5,493

Ratio of Expenses
to Average
Net Assets 1.65%++ 1.66% 1.80% 2.06% 1.90% 2.10%

Ratio of Net Incom
to Average
Net Assets 0.61% (0.14%) (0.19%) 0.01% 0.38% 3.21%

Portfolio Turnover Rate 54% 87% 117% 152% 84% 170%

Average Commission
Rate Paid (unaudited) $0.0446 -- -- -- -- --

<FN>
* No activity in inception year of 1989

12
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH FUND
Years Ended
Years Ended December 31 Period of October 31
-------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 11/1/87- 1987 1986
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
DATA
Net Asset Value --
Beginning of $11.63 $12.38 $10.54 $11.22 $8.27 $9.41 $7.61 $7.41 $8.91 $9.87 $7.47
Period
------------------------------------------------------------------------------------------------------------------

INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.02 (0.02) (0.01) 0.01 0.07 0.13 0.07 0.13 0.02 0.11 0.10

Net Gains or
Losses on
Securities (Both
Realized and 5.27 (0.39) 2.70 0.48 3.82 (1.13) 3.07 0.22 0.22 0.38 2.47
Unrealized)
------------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 5.29 (0.41) 2.69 0.49 3.89 (1.00) 3.14 0.35 0.24 0.49 2.57
------------------------------------------------------------------------------------------------------------------
LESS
DISTRIBUTIONS
Dividends (From
Net Investment
Income) (0.02) 0.00 0.00 (0.01) (0.07) (0.13) (0.07) (0.15) (0.13) (0.11) (0.17)

Distributions
(From Capital (2.13) (0.34) (0.85) (1.16) (0.87) (0.01) (1.27) 0.00 (1.61) (1.34) 0.00
Gains)
------------------------------------------------------------------------------------------------------------------
TOTAL
DISTRIBUTIONS (2.15) (0.34) (0.85) (1.17) (0.94) (0.14) (1.34) (0.15) (1.74) (1.45) (0.17)
------------------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $14.77 $11.63 $12.38 $10.54 $11.22 $8.27 $9.41 $7.61 $7.41 $8.91 $9.87
==================================================================================================================

TOTAL RETURN 45.6% (3.4%) 25.5% 4.3% 47.4% (10.6%) 41.7% 4.8% 2.6% 6.0% 34.8%

RATIOS/SUPPLE-
MENTAL DATA
Net Assets--End of
Period (000 $655,927 $307,988 $343,423 $145,035 $140,726 $87,669 $111,938 $53,023 $68,920 $58,262 $61,626
Omitted)

Ratio of Expenses
to Average Net
Assets 1.28%++ 1.33% 1.32% 1.54% 1.45% 1.45% 1.28% 1.38% 1.54%+ 1.25% 1.27%

Ratio of Net
Income to Average
Net Assets 0.12% (0.17%) (0.15%) 0.06% 0.65% 1.53% 0.77% 1.74% 2.43%+ 0.99% 1.19%

Portfolio Turnover
Rate 130% 172% 131% 216% 161% 178% 167% 179% 20% 147% 142%

Average
Commission Rate
Paid (unaudited) $0.0698 -- -- -- -- -- -- -- -- -- --

<FN>
+ Annualized

<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
BLUE CHIP FUND
Years Ended
Years Ended December 31 Period of September 30
-----------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 10/1/87- 1987 1986
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
DATA
Net Asset
Value --
Beginning of
Period $6.16 $6.49 $6.91 $7.67 $6.67 $7.32 $6.31 $6.14 $9.98 $10.68 $10.01
----------------------------------------------------------------------------------------------------------------------
INCOME
FROM
INVEST-
MENT
OPERA-
TIONS
Net
Investment
Income 0.09 0.06 0.04 0.08 0.11 0.17 0.16 0.18 0.06 0.20 0.28

Net Gains or
Losses on
Securities
(Both
Realized and
Unrealized) 1.70 (0.02) 0.96 (0.10) 1.74 (0.14) 2.05 0.43 (2.14) 2.58 2.56
----------------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 1.79 0.04 1.00 (0.02) 1.85 0.03 2.21 0.61 (2.08) 2.78 2.84
----------------------------------------------------------------------------------------------------------------------
LESS
DISTRIBU-
TIONS
Dividends
(From Net
Investment
Income) (0.09) (0.06) (0.04) (0.08) (0.11) (0.17) (0.16) (0.19) (0.05) (0.26) (0.32)

Distributions
(From
Capital (1.17) (0.31) (1.38) (0.66) (0.74) (0.51) (1.04) (0.25) (1.71) (3.22) (1.85)
Gains)
----------------------------------------------------------------------------------------------------------------------
TOTAL
DISTRIBUTIONS (1.26) (0.37) (1.42) (0.74) (0.85) (0.68) (1.20) (0.44) (1.76) (3.48) (2.17)
----------------------------------------------------------------------------------------------------------------------
Net Asset
Value -- End
of Period $6.69 $6.16 $6.49 $6.91 $7.67 $6.67 $7.32 $6.31 $6.14 $9.98 $10.68
======================================================================================================================
TOTAL
RETURN 29.1% 0.5% 14.5% (0.3%) 28.3% 0.4% 35.6% 10.1% (21.2%) 35.8% 34.5%

RATIOS
Net Assets--
End of
Period (000 $375,200 $311,051 $306,592 $290,309 $290,155 $233,630 $232,468 $173,342 $174,554 $239,824 $174,999
Omitted)

Ratio of
Expenses to
Average Net
Assets 1.22%++ 1.21% 1.22% 1.23% 1.10% 1.07% 0.98% 1.00% 0.98%+ 0.87% 0.74%

Ratio of Net
Income to
Average Net
Assets 1.19% 0.88% 0.57% 1.13% 1.52% 2.35% 2.03% 2.81% 2.41%+ 2.11% 2.64%

Portfolio
Turnover 235% 239% 212% 103% 95% 82% 64% 58% 31% 56% 42%
Rate

Average
Commission
Rate Paid
(unaudited) $0.0697 -- -- -- -- -- -- -- -- -- --

<FN>
+ Annualized
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.17%.
</TABLE>
14

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
BALANCED FUND
Years Ended
Years Ended December 31 Period of September 30
------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 10/1/87- 1987* 1986*
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>

PER SHARE DATA
Net Asset Value --
Beginning of Period $8.56 $8.93 $8.30 $8.19 $7.22 $7.97 $6.89 $6.55 $8.72 $7.89 $7.26
---------------------------------------------------------------------------------------------------------

INCOME FROM
INVESTMENT
OPERATIONS
Net Investment 0.28 0.20 0.22 0.27 0.31 0.35 0.32 0.38 0.07 0.32 0.32
Income

Net Gains or Losses
on Securities (Both
Realized and
Unrealized) 2.21 (0.37) 1.58 0.21 1.30 (0.75) 1.39 0.34 (1.29) 1.37 0.83
----------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 2.49 (0.17) 1.80 0.48 1.61 (0.40) 1.71 0.72 (1.22) 1.69 1.15
----------------------------------------------------------------------------------------------------------

LESS
DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.28) (0.20) (0.21) (0.28 (0.31) (0.35) (0.32) (0.38) (0.08) (0.42) (0.37)

Distributions (From
Capital Gains) (1.19) 0.00 (0.96) (0.09 (0.33) 0.00 (0.31) 0.00 (0.87) (0.44) (0.15)
----------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.47) (0.20) (1.17) (0.37 (0.64) (0.35) (0.63) (0.38) (0.95) (0.86) (0.52)
----------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $9.58 $8.56 $8.93 $8.30 $8.19 $7.22 $7.97 $6.89 $6.55 $8.72 $7.89
==========================================================================================================

TOTAL RETURN 29.4% (1.9%) 21.9% 6.0% 22.9% (5.0%) 25.3% 11.1% (13.9%) 22.9% 16.8%

RATIOS
Net Assets--End
of Period
(000 Omitted) $130,346 $95,226 $72,859 $31,538 $18,790 $13,650 $15,082 $12,636 $13,159 $16,885 $12,117

Ratio of Expenses to
Average Net Assets 1.23++ 1.26% 1.34% 1.88% 1.73% 1.65% 1.52% 1.64% 1.84%+ 1.66% 1.59%

Ratio of Net Income
to Average Net 2.92% 2.37% 2.30% 3.57% 4.01% 4.63% 4.19% 5.39% 4.16%+ 4.03% 4.44%
Assets

Portfolio Turnover
Rate 286% 258% 251% 96% 133% 103% 85% 182% 141% 133% 178%

Average Commission
Rate Paid (unaudited) $0.0668 -- -- -- -- -- -- -- -- -- --

<FN>
* Restated to reflect 2-for-1 split on November 30, 1987
+ Annualized

</TABLE>

15
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>

GOVERNMENT SECURITIES FUND

Years Ended December 31 Period of
---------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 3/1/88
12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $8.78 $10.02 $10.19 $10.48 $9.85 $10.13 $9.68 $10.00
----------------------------------------------------------------------------------------------------------

INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.45 0.52 0.46 0.51 0.60 0.69 0.78 0.64

Net Gains or Losses on
Securities (Both
Realized and Unrealized) 0.51 (1.26) 0.47 0.03 0.81 (0.28) 0.46 (0.32)
---------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 0.96 (0.74) 0.93 0.54 1.41 0.41 1.24 0.32
---------------------------------------------------------------------------------------------------------

LESS DISTRIBUTIONS
Dividends (From
Net Investment Income) (0.45) (0.50) (0.46) (0.51) (0.60) (0.69) (0.79) (0.64)

Distributions
(From Capital Gains) 0.00 0.00 (0.64) (0.32) (0.18) 0.00 0.00 0.00
---------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.45) (0.50) (1.10) (0.83) (0.78) (0.69) (0.79) (0.64)
---------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $9.29 $8.78 $10.02 $10.19 $10.48 $9.85 $10.13 $9.68
=========================================================================================================

TOTAL RETURN 11.1% (7.5%) 9.3% 5.3% 14.9% 4.4% 13.3% 3.2%

RATIOS
Net Assets--
End of Period
(000 Omitted) $20,263 $21,323 $30,465 $25,047 $18,146 $7,424 $6,460 $4,392

Ratio of Expenses
to Average
Net Assets* 1.30% 1.34% 1.18% 1.18% 1.12% 1.03% 0.65% 0.26%+

Ratio of Net Income
to Average
Net Assets* 4.92% 5.52% 4.33% 4.83% 5.89% 7.15% 7.90% 7.67%+

Portfolio Turnover Rate 141% 379% 429% 204% 261% 103% 195% 194%

<FN>
* In the absence of voluntary expense reimbursements and waivers from Founders,
the Expense Ratios would have been 1.45% (1995), 1.51% (1994), 1.37% (1993),
1.43% (1992), 1.42% (1991), 1.53% (1990), 1.48% (1989) and 1.33% (1988), and the
Net Income Ratios would have been 4.77% (1995), 5.35% (1994), 4.14% (1993),
4.58% (1992), 5.59% (1991), 6.65% (1990), 7.07% (1989) and 6.60% (1988).

+ Annualized

</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET FUND
Years Ended
Years Ended December 31 Period of May 31
------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 6/1/87- 1987 1986
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------------------------------------

INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.05 0.03 0.02 0.03 0.05 0.07 0.08 0.07 0.04 0.05 0.07

Net Gains or Losses
on Securities (Both
Realized and
Unrealized) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-----------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 0.05 0.03 0.02 0.03 0.05 0.07 0.08 0.07 0.04 0.05 0.07
-----------------------------------------------------------------------------------------------------------------

LESS
DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.05) (0.03) (0.02) (0.03) (0.05) (0.07) (0.08) (0.07) (0.04) (0.05) (0.07)

Distributions (From
Capital Gains) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.05) (0.03) (0.02) (0.03) (0.05) (0.07) (0.08) (0.07) (0.04) (0.05) (0.07)
-----------------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=================================================================================================================

TOTAL RETURN 5.1% 3.4% 2.2% 2.8% 5.1% 7.3% 8.1% 6.9% 4.0% 5.6% 7.8%

RATIOS
Net Assets--End of
Period (000 $125,646 $201,342 $142,399 $120,295 $99,765 $125,440 $84,281 $54,168 $46,444 $41,471 $22,257
Omitted)

Ratio of Expenses to
Average Net Assets* 0.89% 0.91% 0.95% 0.95% 0.99% 0.94% 0.77% 0.80% 0.90%+ 0.90% 0.90%

Ratio of Net Income
to Average Net
Assets* 5.11% 3.49% 2.26% 2.78% 5.03% 7.26% 8.22% 6.75% 6.16%+ 5.39% 6.82%

<FN>
* In the absence of voluntary expense reimbursements and waivers from Founders,
the Expense Ratios would have been 0.99% (1993), 1.01% (1992), 1.02% (1991),
0.79% (1989) and 0.81% (1988), and the Net Income Ratios would have been 2.22%
(1993), 2.72% (1992), 5.00% (1991), 8.20% (1989), and 6.74% (1988)

+ Annualized

</TABLE>

<PAGE>
INVESTMENT OBJECTIVES OF THE FUNDS

THE DESCRIPTIONS OF THE FUNDS BELOW ARE DESIGNED TO HELP YOU CHOOSE THE FUND
THAT BEST FITS YOUR INVESTMENT OBJECTIVES. YOU MAY WANT TO PURSUE YOUR
OBJECTIVES BY INVESTING IN MORE THAN ONE FUND.

AGGRESSIVE GROWTH FUNDS

DISCOVERY FUND
The investment objective of Discovery Fund is capital appreciation.

To achieve its objective, the Fund normally will invest at least 65% of
its total assets in common stocks of small, rapidly growing U.S. companies.
These companies are generally smaller than those selected for Frontier Fund.
Typically, these companies are not listed on a national securities exchange but
trade on the over-the-counter market and generally have either market
capitalizations or revenues between $10--$500 million. Although the Fund will
normally invest in common stocks of U.S. companies, it may invest up to 30% of
its total assets in foreign securities. For a further explanation of this Fund's
investment policies, see the sections entitled "Investment Policies Involving
Special Risks" and "Other Investment Policies."

FRONTIER FUND
The investment objective of Frontier Fund is capital appreciation.

To achieve its objective, the Fund normally will invest at least 65% of
its total assets in common stocks of small and medium-sized U.S. and foreign
companies. Ordinarily, these U.S. companies are not listed on a national
securities exchange but will be traded on the over-the-counter market and
generally have either market capitalizations or revenues of $200 million--$1
billion. These companies are usually larger than those selected for Discovery
Fund. The Fund will normally be at least 50% invested in U.S. companies, with no
more than 25% invested in any one foreign country. The Fund has the flexibility
to be completely invested in U.S. or foreign securities, depending on investment
opportunities. The Fund will normally invest in small and medium-size companies;
however, it may also invest in large companies if, in Founders' opinion, they
represent better prospects for capital appreciation. For a further explanation
of this Fund's investment policies, see the sections entitled, "Investment
Policies Involving Special Risks" and "Other Investment Policies."

PASSPORT FUND
The investment objective of Passport Fund is capital appreciation.

To achieve its objective, the Fund invests primarily in securities
issued by foreign companies which have market capitalizations or annual revenues
of $1 billion or less. These securities may represent companies in both
established and emerging economies throughout the world.

At least 65% of the Fund's total assets will normally be invested in
foreign securities representing a minimum of three countries. The Fund may
invest in larger foreign companies or in U.S.-based companies if, in Founders'
opinion, they represent better prospects for appreciation. For a further
explanation of this Fund's investment policies, see the sections entitled
^"Investment Policies Involving Special Risks" and "Other Investment Policies."

SPECIAL FUND
The investment objective of Special Fund is capital appreciation.

To achieve its objective, the Fund normally will invest at least 65% of
its total assets in common stocks of medium-size U.S. companies. These companies
are usually larger than those selected for Frontier Fund. The Fund may also own
large companies if, in Founders' opinion, they represent better prospects for
capital appreciation. Furthermore, the Fund may invest up to 30% of its total
assets in foreign securities, with no more than 25% invested in any one foreign
country. For a further explanation of this Fund's investment policies, see the
sections entitled "Investment Policies Involving Special Risks" and "Other
Investment Policies."

GROWTH FUNDS

INTERNATIONAL EQUITY FUND
The investment objective of International Equity Fund is long-term growth of
capital.

To achieve its objective, the Fund normally will invest at least 65% of
its total assets in foreign equity securities representing a minimum of three
countries outside of the United States. The Fund will not invest more than 50%
of its assets in the securities of any one foreign country. Normally, the Fund
will invest in companies located throughout the world, except the United States,
including companies in both established and emerging economies.

<PAGE>
The Fund will invest principally in equity securities (common stocks and
securities convertible into common stocks, including convertible debt
obligations and convertible preferred stock), although it may also purchase debt
securities of investment grade or investment grade quality as determined by the
Fund's portfolio manager.

For a further explanation of the Fund's investment policies, see the
sections entitled "Investment Policies Involving Special Risks" and "Other
Investment Policies."

WORLDWIDE GROWTH FUND
The investment objective of Worldwide Growth Fund is long-term growth of
capital.

To achieve its objective, the Fund normally will invest at least 65% of
its total assets in equity securities of growth companies in a variety of
markets throughout the world. The Fund will emphasize common stocks of both
emerging and established growth companies that generally have proven performance
records and strong market positions. The Fund's portfolio will usually consist
of investments in companies in various countries throughout the world, but it
will always invest at least 65% of its total assets in three or more countries.
The Fund will not invest more than 25% of its total assets in the securities of
any one foreign country.

The Fund has the ability to purchase securities in any foreign country
as well as in the United States. For a further explanation of this Fund's
investment policies, see the sections entitled " Investment Policies Involving
Special Risks" and "Other Investment Policies."

GROWTH FUND
The investment objective of Growth Fund is long-term growth of capital.

To achieve its objective, the Fund normally will invest at least 65% of
its total assets in common stocks of well-established, high-quality growth
companies. These companies tend to have strong performance records, solid market
positions and reasonable financial strength, and have continuous operating
records of three years or more. The Fund may also invest up to 30% of its total
assets in foreign securities, with no more than 25% invested in any one foreign
country. For a further explanation of this Fund's investment policies, see the
sections entitled "Investment Policies Involving Special Risks" and "Other
Investment Policies."

GROWTH AND INCOME FUNDS

BLUE CHIP FUND
The investment objective of Blue Chip Fund is long-term growth of capital and
income.

To achieve its objective, the Fund invests primarily in common stocks of
large, well-established, stable and mature companies of great financial
strength, commonly known as "blue chip" companies. "Blue chip" companies have
long records of profitability and dividend payments and a reputation for quality
management, products and services. The Fund normally invests at least 65% of its
total assets in "blue chip" stocks that (1) are included in the Dow Jones
Industrial Average, the Standard & Poor's Daily Stock Price Index of 500 common
stocks, or the New York Stock Exchange Index, each of which is a widely
recognized index of stock market performance; (2) generally pay regular
dividends; and (3) have a market capitalization of at least $1 billion.
Furthermore, the Fund may also invest in non-dividend paying companies if, in
Founders' opinion, they offer better prospects for capital appreciation. The
Fund may also invest up to 30% of its total assets in foreign securities. For a
further explanation of this Fund's investment policies, see the sections
entitled "Investment Policies Involving Special Risks" and "Other Investment
Policies."

BALANCED FUND
The investment objective of Balanced Fund is current income and capi tal
appreciation.

To achieve its objective, the Fund invests in a balanced portfolio of
dividend-paying common stocks, U.S. and foreign government obligations and a
variety of corporate fixed-income securities. The Fund emphasizes investment in
common stocks with the potential for increased dividends, as well as capital
appreciation. The Fund will maintain a minimum of 25% of its total assets in
fixed-income, investment-grade securities rated Baa or higher by Moody's
Investors Service, Inc. ("Moody's") or BBB or higher by Standard & Poor's
("S&P"). Securities rated Baa or BBB are considered to be of low investment
grade by these services.

Up to 5% of the Fund's total assets may be invested in lower-grade (Ba
or less by Moody's, BB or less by S&P) or unrated straight debt securities,
generally referred to as junk bonds, where the investment adviser determines
that such securities present attractive opportunities. The Fund will not invest
in securities rated lower than B. Securities rated B generally lack

<PAGE>
characteristics of a desirable investment and are deemed speculative with
respect to the issuer's capacity to pay interest and repay principal over a long
period of time. See "Appendix" of the STATEMENT OF ADDITIONAL INFORMATION, which
may be obtained without charge by calling Founders at 1-800-525-2440, for a
description of debt security ratings. The Fund may also invest in convertible
corporate obligations and preferred stocks, and may invest up to 30% of its
total assets in foreign securities that pay current dividends or interest. The
Fund will not invest more than 25% of its total assets in the securities of any
one foreign country. Normally, the Fund will invest a significant percentage (up
to 75%) of its total assets in dividend-paying common stocks, convertible
corporate obligations, and preferred stocks. There is, however, no limit on the
amount of straight debt securities in which the Fund may invest.

Furthermore, the Fund has the ability to write covered call options on
stocks. However, this investment practice is not currently in use. If it is
implemented, you will be notified. For a further explanation of this Fund's
investment policies, see the sections entitled "Investment Policies Involving
Special Risks" and "Other Investment Policies."

INCOME-ORIENTED FUNDS

GOVERNMENT SECURITIES FUND
The investment objective of Government Securities Fund is current income.

To achieve its objective, the Fund invests at least 65% of its total
assets in obligations of the United States government, such as Treasury bills,
notes and bonds and Government National Mortgage Association (GNMA) pass-through
securities, which are supported by the full faith and credit of the United
States Treasury. Additionally, the Fund may invest in obligations of other
agencies and instrumentalities of the United States government and may invest in
securities issued by foreign governments and/or their agencies denominated
either in U.S. currency or in foreign currencies. The Fund will not invest more
than 25% of its total assets in the securities of any one foreign country. The
maturity of the Fund's investments will be long (ten or more years),
intermediate (three to ten years), or short (three years or less). The
proportion invested by the Fund in each category can be expected to vary
depending upon the evaluation of market patterns and trends by Founders. The
market value of the securities in which the Fund invests will fluctuate.
Accordingly, the value of the shares will vary from day to day. For a further
explanation of this Fund's investment policies, see the sections entitled
"Investment Policies Involving Special Risks" and "Other Investment Policies."

MONEY MARKET FUND
The investment objective of Money Market Fund is maximum current income
consistent with the preservation of capital and liquidity.

To achieve its objective, the Fund invests in high-quality money market
instruments with minimal credit risks which mature in twelve months or less. The
Fund may also invest in certain foreign securities. Although no assurances can
be provided, the Fund will use its best efforts, under normal circumstances, to
maintain a constant net asset value of $1.00 per share. The Fund declares
dividends daily. For a further explanation of this Fund's investment policies,
see the sections entitled "Investment Policies Involving Special Risks" and
"Other Investment Policies."

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives of the Funds described above are fundamental and may
not be changed by the Board of Directors without shareholder approval. The means
to be used by the Funds in achieving their respective objectives--including
their policies of investing in designated types of securities--are generally
nonfundamental Fund policies which may be changed by the Board of Directors of
the Funds without the approval of shareholders to the extent permitted by
applicable law, regulation, or regulatory policy. A more detailed explanation of
some of these policies, together with a list of additional fundamental and
nonfundamental investment policies and restrictions, is contained in the
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440. There can be no assurance, of course, that a
Fund will achieve its stated investment objective.

INVESTMENT MANAGEMENT OF THE FUNDS

INVESTMENT PHILOSOPHY

Investment management of the Funds is provided by Founders Asset
Management, Inc. ("Founders"), a registered investment adviser first established
as an asset manager in 1938. Founders is a "growth-style" manager of equity
portfolios and gives priority to the selection of individual securities that
have the potential to provide superior results over time, despite short-term
volatility. Under normal circumstances, Founders' approach to investment
management gives greater emphasis to the fundamental financial, marketing and
operating strengths of the companies whose securities it buys, and is less

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concerned with the short-term impact of changes in macroeconomic and market
conditions. Founders focuses on purchasing the stocks of companies with strong
management and market positions that have earnings prospects that are
significantly above the average for their market sectors.

PORTFOLIO MANAGEMENT

To facilitate the day-to-day investment management of the Funds, Founders
employs a unique team-and-lead- manager system for the Funds. The management
team is comprised of several members of the Investment Department, including
Founders' Chief Investment Officer, lead portfolio managers, assistant portfolio
managers, portfolio traders and research analysts. Team members share
responsibility for providing ideas, information, knowledge and expertise in the
management of the Funds. Each team member has one or more areas of expertise
that are applied to the management of the Funds. Daily decisions on portfolio
selection for each Fund rest with a lead portfolio manager assigned to the Fund
who, through participation in the team process, utilizes the input and advice of
the management team in making purchase and sale determinations.

The investment team as a group generally can earn bonus compensation
based on the relative performance of each of the Funds when compared to a group
of funds with similar investment objectives. Bonus compensation is paid by
Founders and not by the Funds. Founders' investment management team consists
of the following individuals:

BJORN K. BORGEN, CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND CHIEF INVESTMENT OFFICER
Mr. Borgen has been Founders' Chief Investment Officer since 1969. He is
responsible for establishing investment policies and strategies for the
Founders Funds and assigning the lead portfolio manager for each Fund. A
graduate of the University of Wisconsin, Mr. Borgen received his MBA
from Harvard Graduate School of Business

MICHAEL K. HAINES, SENIOR VICE PRESIDENT OF INVESTMENTS
Mr. Haines has been with Founders for nine years, serving as an
assistant portfolio manager, as lead portfolio manager for Founders
Frontier Fund since 1990 and as co-lead portfolio manager for Founders
Special Fund since 1966. Mr. Haines served as the portfolio or
co-portfolio manager of Founders Discovery Fund from 1989 until July
1995. A graduate of The Colorado College, Mr. Haines received his MBA
from the University of Denver.

MICHAEL W. GERDING, VICE PRESIDENT OF INVESTMENTS
Mr. Gerding is a chartered financial analyst who has been part of
Founders' investment department for six years. Mr. Gerding has served as
the lead portfolio manager for Founders International Equity, Worldwide
Growth, and Passport Funds since 1995, 1990, and 1993, respectively.
Prior to joining Founders, he served as a portfolio manager and research
analyst with NCNB Texas for several years. Mr. Gerding earned a BBA in
finance and an MBA from Texas Christian University.
^
EDWARD F. KEELY, VICE PRESIDENT OF INVESTMENTS
Mr. Keely is a chartered financial analyst who joined Founders in 1989
and assumed lead portfolio manager responsibilities for Founders Growth
Fund in 1994. He also has served as co-lead portfolio manager for
Founders Special Fund since 1996. From 1992 to 1993, he served as
assistant portfolio manager of Founders Discovery and Frontier Funds. A
graduate of The Colorado College, Mr. Keely holds a bachelor of arts
degree in economics.

BRIAN F. KELLY, PORTFOLIO MANAGER
Mr. Kelly joined Founders in 1996 as the lead portfolio manager of the
Founders Blue Chip and Balanced Funds. Prior to joining Founders, Mr.
Kelly served as a vice president (1994 to 1996) and portfolio manager
(1993 to 1996) for INVESCO Trust Company, and as a senior equity
investment analyst for Sears Investment Management Company (1986 to
1993). A graduate of the University of Notre Dame, Mr. Kelly received
his MBA and JD from the University of Iowa. He is also a Certified
Public Accountant.

DAVID G. KERN, PORTFOLIO MANAGER
Mr. Kern joined Founders in 1995. He currently serves as the portfolio
manager for Founders Discovery Fund, having assumed responsibility as
the Fund's sole lead portfolio manager during the third quarter of 1995.
Prior to his association with Founders, Mr. Kern served for five years
as a vice president and assistant portfolio manager for Delaware
Management Company. A graduate of Lehigh University with a degree in
business and economics, Mr. Kern is also a chartered financial analyst.

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MARGARET DANUSER, FIXED-INCOME MANAGER
Ms. Danuser has been the lead portfolio manager for the Government
Securities and Money Market Funds since 1996, and has served as
Founders' fixed-income specialist since 1995. Previously, she was a an
investment officer with LaSalle Street Capital Management from 1989 to
1994. Ms. Danuser received her BA from the University of Colorado.

DOUGLAS A. LOEFFLER, ASSISTANT PORTFOLIO MANAGER
Mr. Loeffler is a chartered financial analyst who joined Founders in
1995 as a senior international equities analyst. Prior to joining
Founders, he served for seven years with Scudder, Stevens & Clark as an
international equities analyst and as a quantitative analyst. He
currently serves as assistant portfolio manager for Founders
International Equity Fund. A graduate of Washington State University,
Mr. Loeffler received an MBA in finance from the University of Chicago.

INVESTMENT POLICIES INVOLVING SPECIAL RISKS

INVESTMENTS IN SMALL AND MEDIUM-SIZED COMPANIES

Discovery Fund, Frontier Fund, Passport Fund, and Special Fund normally invest a
significant proportion of each Fund's assets in the securities of small and
medium-size companies. Worldwide Growth Fund and International Equity Fund may
also invest in the securities of such companies. As used in this prospectus,
small and medium-size companies are those which are still in the developing
stages of their life cycles and are able to achieve rapid growth in both sales
and earnings. Capable management and fertile operating areas are two of the most
important characteristics of such companies. In addition, these companies should
employ sound financial and accounting policies; demonstrate effective research
and successful product development and marketing; provide efficient service; and
possess pricing flexibility. Discovery, Frontier, Passport, Special,
International Equity, and Worldwide Growth Funds try to avoid investing in
companies where operating results may be affected adversely by excessive
competition, severe governmental regulation, or unsatisfactory productivity.

Investments in small and medium-size companies involve greater risk than
is customarily associated with more established companies. These companies often
have sales and earnings growth rates which exceed those of large companies. Such
growth rates may in turn be reflected in more rapid share price appreciation.
However, smaller companies often have limited operating histories, product
lines, markets, or financial resources, and they may be dependent upon
one-person management. These companies may be subject to intense competition
from larger entities, and the securities of such companies may have limited
marketability and may be subject to more abrupt or erratic movements in price
than securities of larger companies or the market averages in general.
Therefore, the net asset values of Discovery, Frontier, Passport, Special,
International Equity, and Worldwide Growth Funds' shares may fluctuate more
widely than the popular market averages.

INVESTMENTS IN FIXED-INCOME SECURITIES
Discovery, Frontier, Passport, Special, International Equity, Worldwide Growth,
Growth, Blue Chip, and Balanced Funds (the "Equity Funds") may invest in
convertible securities, preferred stocks, bonds, debentures, and other corporate
obligations when Founders believes that these investments offer opportunities
for capital appreciation. Current income also is a factor in the selection of
these securities by the Balanced Fund, but will not be a substantial factor in
the selection of these securities by the other Equity Funds.

The Equity Funds will only invest in bonds, debentures, and corporate
obligations--other than convertible securities and preferred stock--rated
investment grade (BBB or higher) at the time of purchase. Bonds in the lowest
investment grade category (BBB) have speculative characteristics, with changes
in the economy or other circumstances more likely to lead to a weakened capacity
of the bonds to make principal and interest payments than would occur with bonds
rated in higher categories. Convertible securities and preferred stocks
purchased by the Equity Funds may be rated in medium and lower categories by
Moody's or S&P (Ba or lower by Moody's and BB or lower by S&P) but will not be
rated lower than B. The Equity Funds may also invest in unrated convertible
securities and preferred stocks in instances in which Founders believes that the
financial condition of the issuer or the protection afforded by the terms of the
securities limits risk to a level similar to that of securities eligible for
purchase by the Funds rated in categories no lower than B. Securities rated B
are referred to as "high-risk" securities, generally lack characteristics of a
desirable investment, and are deemed speculative with respect to the issuer's
capacity to pay interest and repay principal over a long period of time. See

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"Appendix" of the STATEMENT OF ADDITIONAL INFORMATION, which may be obtained
without charge by calling Founders at 1-800-525-2440, for a description of debt
security ratings.

At no time will any Fund have more than 5% of its total assets invested
in any fixed-income securities which are unrated or are rated below investment
grade either at the time of purchase or as a result of a reduction in rating
after purchase.

The fixed-income securities in which the Founders Equity Funds and the
Government Securities Fund may invest are generally subject to two kinds of
risk: credit risk and market risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments, or both, as they come due. The
ratings given a security by Moody's and S&P provide a generally useful guide as
to such credit risk. The lower the rating given a security by such rating
service, the greater the credit risk such rating service perceives to exist with
respect to such security. Increasing the amount of Fund assets invested in
unrated or lower-grade securities, while intended to increase the yield produced
by those assets, also will increase the credit risk to which those assets are
subject.

Market risk relates to the fact that the market values of securities in
which the Founders Equity Funds and the Government Securities Fund may invest
generally will be affected by changes in the level of interest rates. An
increase in interest rates will tend to reduce the market values of such
securities, whereas a decline in interest rates will tend to increase their
values. Medium-and lower-rated securities (Baa or BBB and lower) and non-rated
securities of comparable quality tend to be subject to wider fluctuations in
yields and market values than higher-rated securities. Medium-rated securities
(those rated Baa or BBB) have speculative characteristics while lower-rated
securities are predominantly speculative. Equity Funds are not required to
dispose of debt securities whose ratings are downgraded below these ratings
subsequent to a Fund's purchase of the securities, unless such a disposition is
necessary to reduce a Fund's holdings of such securities to less than 5% of its
total assets. Relying in part on ratings assigned by credit agencies in making
investments will not protect the Equity Funds from the risk that fixed-income
securities in which they invest will decline in value, since credit ratings
represent evaluations of the safety of principal, dividend and interest payments
on preferred stocks and debt securities, not the market values of such
securities, and such ratings may not be changed on a timely basis to reflect
subsequent events.

Founders seeks to reduce overall risk associated with the investments of
the Founders Equity Funds through diversification and consideration of relevant
factors affecting the value of securities. No assurance can be given, however,
regarding the degree of success that will be achieved in this regard or in any
Equity Fund's achieving its investment objectives.

INVESTMENTS IN FOREIGN SECURITIES

Each of the Funds (except Government Securities and Money Market Funds) may
invest without limit in American Depository Receipts and all of the Funds may
invest in foreign securities. The term "foreign securities" refers to securities
of issuers, wherever organized, which, in the judgment of management, have their
principal business activities outside of the United States. The determination of
whether an issuer's principal activities are outside of the United States will
be based on the location of the issuer's assets, personnel, sales, and earnings,
and specifically on whether more than 50% of the issuer's assets are located, or
more than 50% of the issuer's gross income is earned, outside of the United
States, or on whether the issuer's sole or principal stock exchange listing is
outside of the United States. Foreign securities typically will be traded on the
applicable country's principal stock exchange but may also be traded on regional
exchanges or over-the-counter.

American Depository Receipts ("ADRs") are receipts, typically issued by
a U.S. bank or trust company, evidencing ownership of the underlying foreign
securities. ADRs are denominated in U.S. dollars and trade in the U.S.
securities markets. ADRs may be issued in sponsored or unsponsored programs. In
sponsored programs, the issuer makes arrangements to have its securities traded
in the form of ADRs; in unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although the regulatory requirements
with respect to sponsored and unsponsored programs are generally similar, the
issuers of unsponsored ADRs are not obligated to disclose material information
in the United States and, therefore, such information may not be reflected in
the market value of the ADRs. ADRs are subject to certain of the same risks as
direct investments in foreign securities, including the risk that changes in the
value of the currency in which the security underlying an ADR is denominated
relative to the U.S. dollar may adversely affect the value of the ADR.

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Money Market Fund's foreign investments are limited to
dollar-denominated obligations of foreign depository institutions or their U.S.
branches, or foreign branches of U.S. depository institutions. Foreign
investments of Government Securities Fund are limited to securities issued by
foreign governments and/or their agencies. Foreign investments of Money Market
and Government Securities Funds will be limited primarily to securities of
issuers from the major industrialized nations, such as the United Kingdom,
France, Canada, Germany and Japan.

Foreign investments of Passport, Worldwide Growth, and International
Equity Funds may include securities issued by companies located in countries not
considered to be major industrialized nations. Such countries are subject to
more economic, political and business risk than major industrialized nations,
and the securities they issue are expected to be more volatile and more
uncertain as to payments of interest and principal. The secondary market for
such securities is expected to be less liquid than for securities of major
industrialized nations. Such countries may include (but are not limited to)
Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Chile, China, Colombia,
Costa Rica, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Finland, Greece,
Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Israel, Jordan, Malaysia,
Mexico, Netherlands, New Zealand, Nigeria, North Korea, Norway, Pakistan,
Paraguay, Peru, Philippines, Poland, Portugal, Singapore, Slovak Republic, South
Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand,
Turkey, Uruguay, Venezuela, Vietnam and the countries of the former Soviet
Union. Investments of Passport, Worldwide Growth, and International Equity Funds
may include securities created through the Brady Plan, a program under which
heavily indebted countries have restructured their bank debt into bonds.

Since Passport, Worldwide Growth, and International Equity Funds' assets
will be invested primarily in foreign securities and since substantially all of
the Funds' revenues will be received in foreign currencies, the Funds' net asset
values will be affected by changes in currency exchange rates. For example, the
dollar equivalent of the Funds' net assets and distributions will be affected
adversely by a reduction in the value of a particular foreign currency relative
to the U.S. dollar. In contrast, in periods during which the U.S. dollar
generally declines, the returns on foreign securities generally are enhanced.
The Funds will pay dividends in dollars and will incur currency conversion
costs.

Investments in foreign securities involve certain risks which are not
typically associated with U.S. investments. These risks include fluctuations in
exchange rates of foreign currencies, which will affect the value of the assets
of a Fund as measured in U.S. dollars, and the costs incurred by a Fund in
connection with conversion between various currencies. Other considerations
include the possible imposition of exchange control regulations or currency
restrictions which would prevent cash from being brought back to the United
States, and the reduced availability of public information with respect to
issuers of foreign securities. There is less governmental supervision of foreign
stock exchanges, security brokers, and issuers of securities. Accounting,
auditing and financial reporting standards are less uniform than those
applicable to U.S. companies. Foreign markets have substantially less volume
than U.S. markets, and are not generally as liquid as, and may be more volatile
than, those in the United States. Brokerage commissions and other transaction
costs are generally higher than in the United States. Additionally, there exists
the possibility of expropriation or confiscatory taxation; limitations on the
removal of funds or other assets of the Fund; political, economic or social
instability; or diplomatic developments which could affect U.S. investments in
foreign countries. The operating expense ratio of a Fund which invests in
foreign securities may be higher than that of a fund which invests primarily in
U.S. securities because certain costs (such as custody fees) are higher. A
complete description of these risks is contained in the STATEMENT OF ADDITIONAL
INFORMATION, which may be obtained without charge from Founders at
1-800-525-2440.

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FOREIGN CURRENCY TRANSACTIONS

All of the Funds (except for Money Market Fund) currently are permitted to use
forward foreign currency contracts in connection with the purchase or sale of a
specific security.

A forward foreign currency contract ("forward contract") involves an
obligation to purchase or sell a specific foreign currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no margin or other deposit requirement, and no commissions are
charged at any stage for trades.

The current investment policy for the Funds provides that the Funds may
conduct their foreign currency exchange transactions on a spot (I.E., cash)
basis at the spot rate prevailing in the foreign exchange currency market, or on
a forward basis to "lock in" the U.S. dollar price of the security. By entering
into a forward contract for the purchase or sale, for a fixed amount of U.S.
dollars, of the amount of foreign currency involved in the underlying
transactions, the Funds attempt to protect themselves against possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the applicable foreign currency during the period between the date on which the
security is purchased or sold and the date on which such payments are made or
received.

In addition, the Discovery, Frontier, Passport, International Equity and
Worldwide Growth Funds are each permitted to enter into forward contracts for
hedging purposes. When Founders believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar (or
sometimes against another currency), these Funds are permitted to enter into
forward contracts to sell, for a fixed-dollar or other currency amount, foreign
currency approximating the value of some or all of the Funds' portfolio
securities denominated in that currency. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible. The future value of such securities in foreign currencies changes as a
consequence of market movements in the value of those securities between the
date on which the contract is entered into and the date it expires.

The Discovery, Frontier, Passport, International Equity and Worldwide
Growth Funds generally will not enter into forward contracts with a term greater
than one year. In addition, the Funds generally will not enter into forward
contracts or maintain a net exposure to such contracts where the fulfillment of
the contracts would require the Funds to deliver an amount of foreign currency
in excess of the value of the Funds' portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
possibility of changes in currency exchange rates will be incorporated into the
Funds' long-term investment strategies.

While forward contracts will be traded to reduce certain risks, trading
in forward contracts itself entails certain other risks. Thus, while the Funds
may benefit from the use of such contracts, if Founders is incorrect in its
forecast of currency prices, a poorer overall performance may result than if a
Fund had not entered into any forward contracts. Some forward contracts may not
have a broad and liquid market, in which case the contracts may not be able to
be closed at a favorable price. Moreover, in the event of an imperfect
correlation between the forward contract and the portfolio position which it is
intended to protect, the desired protection may not be obtained.

In the event that forward contracts and any securities placed in a
segregated account in an amount at least equal to the value of the total assets
of a Fund committed to the consummation of a forward contract are considered to
be illiquid, the securities would be subject to the applicable Fund's limitation
on investing in illiquid securities, as discussed below.

For additional information regarding risks involved in foreign
securities transactions, including forward contracts, please refer to the Funds'
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440.

ILLIQUID SECURITIES
Each of the Funds except Money Market Fund may invest up to 15% of the market
value of its net assets, measured at the time of purchase, in securities which
are not readily marketable, including repurchase agreements maturing in more
than seven days and foreign securities not listed on a recognized foreign or
domestic exchange. Securities which are not readily marketable are those which,
for whatever reason, cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the applicable Fund has
valued the investment.

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Restricted securities are securities which cannot be resold or
distributed to the public without an effective registration statement under the
Securities Act of 1933. Founders Blue Chip Fund, Frontier Fund, and Money Market
Fund are prohibited by fundamental investment policies from investing any
percentage of their net assets in restricted securities. All other Founders
Funds may invest a maximum of 5% of their net assets in restricted securities.

Investments in illiquid securities, which may include restricted
securities, involve certain risks to the extent that a Fund may be unable to
dispose of such a security at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, a Fund might have to bear
the expense and incur the delays associated with effecting registration.

Money Market Fund may enter into repurchase agreements if, as a result
thereof, no more than 10% of the market value of its net assets would be subject
to repurchase agreements maturing in more than seven days. Each of the Funds
except Blue Chip Fund, Frontier Fund, and Money Market Fund may invest in Rule
144A securities (securities issued in offerings made pursuant to Rule 144A under
the Securities Act of 1933). Rule 144A securities are restricted securities
which may or may not be deemed to be readily marketable. The Funds' board of
directors has adopted guidelines and procedures for Founders to follow in
determining whether a Rule 144A security may be deemed to be readily marketable.
Factors considered in evaluating whether such a security is readily marketable
include eligibility for trading, trading activity, dealer interest, purchase
interest, and ownership transfer requirements. Founders is required to monitor
the readily marketable nature of each Rule 144A security on a basis no less
frequently than quarterly. The Funds' directors monitor the determinations of
Founders quarterly. Readily marketable Rule 144A securities may be resold to
qualified institutional buyers as defined under Rule 144A. The liquidity of each
Fund's investments in Rule 144A securities could be impaired if institutional
investors become disinterested in purchasing such securities. For more
information concerning Rule 144A securities, see the Funds' STATEMENT OF
ADDITIONAL INFORMATION, which may be obtained without charge by calling Founders
at 1-800-525-2440.

BORROWING
Each Fund may borrow money from banks for extraordinary or emergency purposes in
amounts up to 10% of the Fund's net assets (International Equity Fund may effect
such borrowings in amounts up to 33-1/3% of its net assets). If a Fund borrows
money, its share price may be subject to greater fluctuation until the borrowing
is repaid. Each Fund will attempt to minimize such fluctuations by not
purchasing securities when borrowings are greater than 5% of the value of the
Fund's total assets.

FUTURES CONTRACTS AND OPTIONS
All Funds except Money Market Fund may enter into futures contracts for hedging
purposes. The acquisition or sale of a futures contract could occur, for
example, if a Fund held or considered purchasing equity securities and sought to
protect itself from fluctuations in prices without buying or selling those
securities. The Funds may also enter into interest rate and foreign currency
futures contracts. Interest rate futures contracts currently are traded on a
variety of fixed-income securities. Foreign currency futures contracts currently
are traded on the British pound, Canadian dollar, Japanese yen, Swiss franc,
German mark and on Eurodollar deposits.

An option is a right to buy or sell a security at a specified price
within a limited period of time. All of the Funds other than the Special,
Growth, Government Securities, and Money Market Funds, may write ("sell")
options on any or all of their portfolio securities from time to time as
Founders shall deem appropriate; provided, however, that Balanced Fund may
write only covered call options on stocks. The extent of the Funds' option
writing activities will vary from time to time depending upon Founders'
evaluation of market, economic and monetary conditions. In addition, all of the
Funds except the Special, Balanced, Government Securities and Money Market Funds
may purchase options on securities.

All Funds, except the Balanced, Money Market, and Government Securities
Funds, may purchase options on stock indices. Options on stock indices are
similar to options on securities. However, because options on stock indices do
not involve the delivery of an underlying security, the option represents the
holder's right to obtain from the writer in cash a fixed multiple of the amount
by which the exercise price exceeds (in the case of a put) or is less than (in
the case of a call) the closing value of the underlying index on the exercise
date. The purpose of these transactions is not to generate gain, but to "hedge"
against possible loss. Therefore, successful hedging activity will not produce
net gain to the Funds. Any gain in the price of a call option is likely to be
offset by higher prices a Fund must pay in rising markets, as cash reserves are
invested. In declining markets, any increase in the price of a put option is
likely to be offset by lower prices of stocks owned by a Fund. Whether a Fund

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will realize a gain or a loss from its option activities depends upon movements
in the level of stock prices generally or in an industry or market segment,
rather than movements in the price of a particular stock. Purchasing call and
put options on stock indices involves the risk that Founders may be incorrect in
its expectations as to the extent of stock market movements or the time within
which the options are based.

All Funds except Special, Balanced, Money Market, and Government
Securities Funds may purchase put and call options on futures contracts. An
option on a futures contract provides the holder with the right to enter into a
"long" position in the underlying futures contract, in the case of a call
option, or a "short" position in the underlying futures contract, in the case of
a put option, at a fixed exercise price to a stated expiration date. Upon
exercise of the option by the holder, a contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event an option is exercised, parties will be subject to all the
risks associated with trading of futures contracts. The amount of risk a Fund
would assume if it bought an option on a futures contract would be the premium
paid for the option plus related transaction costs.

The successful use of the investment practices described above with
respect to futures contracts, options on futures contracts, and options on
securities indices, securities, and foreign currencies draws upon skills and
experience which are different from those needed to select the other securities
in which the Funds invest. All such practices entail risks and can be highly
volatile. Should interest or exchange rates or the prices of securities or
financial indices move in an unexpected manner, the Funds may not achieve the
desired benefits of futures and options or may realize losses and thus be in a
worse position than if such strategies had not been used. The Funds will not use
such practices for speculative purposes. A more detailed explanation of these
practices and securities, some of which are known as derivatives, is located in
the STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440.

OTHER INVESTMENT POLICIES

TEMPORARY INVESTMENTS
Money Market Fund invests in U.S. government obligations, commercial paper, bank
obligations, repurchase agreements relating to each of these securities, and
negotiable U.S. dollar-denominated obligations of domestic and foreign branches
of U.S. depository institutions, U.S. branches of foreign depository
institutions, and foreign depository institutions. Government Securities Fund
invests at least 65% of its total assets in U.S. government obligations and may
also acquire the other types of securities and repurchase agreements in which
Money Market Fund may invest. All or part of the assets of the other Funds may
be invested temporarily in these securities, in such repurchase agreements, in
cash, or in other cash equivalents, if Founders determines it to be appropriate
for purposes of enhancing liquidity or preserving capital in light of prevailing
market or economic conditions. There can be no assurance that any Fund will be
able to achieve its investment objective. While a Fund is in a defensive
position, the opportunity to achieve capital growth will be limited, and, to the
extent that this assessment of market conditions is incorrect, the Fund will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of equity investments.

U.S. government obligations include Treasury bills, notes and bonds;
Government National Mortgage Association (GNMA) pass-through securities; and
issues of United States agencies, authorities and instrumentalities. Obligations
of other agencies and instrumentalities of the U.S. government include
securities issued by the Federal Farm Credit Bank System (FFCB), the Federal
Agricultural Mortgage Corporation ("Farmer Mac"), the Federal Home Loan Bank
System (FHLB), the Financing Corporation (FICO), Federal Home Loan Mortgage
Corporation (FHLMC), the Federal National Mortgage Association (FNMA), the
Student Loan Marketing Association (SLMA), the International Bank for
Reconstruction and Development (IBRD or "World Bank"), and the U.S. Small
Business Administration (SBA). Some government obligations, such as GNMA
pass-through certificates, are supported by the full faith and credit of the
United States Treasury. Other obligations, such as securities of the FHLB, are
supported by the right of the issuer to borrow from the United States Treasury;
and others, such as bonds issued by FNMA (a private corporation), are supported
only by the credit of the agency, authority or instrumentality.

<PAGE>
Commercial paper purchased by Money Market Fund must be a First Tier
Security as defined by the Securities and Exchange Commission ("SEC"). First
Tier Securities are securities which are rated by at least two nationally
recognized statistical rating organizations (NRSROs), or by the only NRSRO that
has rated the security, in the highest short-term rating category, or comparable
unrated securities. For a list of NRSROs and a description of their ratings, see
the "Appendix" in the STATEMENT OF ADDITIONAL INFORMATION, which may be obtained
without charge by calling Founders at 1-800-525-2440. A Fund may also acquire
certificates of deposit and bankers' acceptances of banks which meet criteria
established by the Funds' board of directors. A certificate of deposit is a
short-term obligation of a bank. A banker's acceptance is a time draft drawn by
a borrower on a bank, usually relating to an international commercial
transaction.

The obligations of foreign branches of U.S. depository institutions may
be general obligations of the parent depository institution in addition to being
an obligation of the issuing branch. These obligations, and those of foreign
depository institutions, may be limited by the terms of the specific obligation
and by governmental regulation. The payment of these obligations, both interest
and principal, also may be affected by governmental action in the country of
domicile of the institution or branch, such as imposition of currency controls
and interest limitations. In connection with these investments, a Fund will be
subject to the risks associated with the holding of portfolio securities
overseas, such as possible changes in investment or exchange control
regulations, expropriation, confiscatory taxation, or political or financial
instability.

Obligations of U.S. branches of foreign depository institutions may be
general obligations of the parent depository institution in addition to being an
obligation of the issuing branch, or may be limited by the terms of a specific
foreign regulation applicable to the depository institutions and by government
regulation (both domestic and foreign). A repurchase agreement is a transaction
under which the Fund acquires a security and simultaneously promises to sell
that same security back to the seller at a higher price, usually within a
seven-day period. Such agreements may be considered "loans" under the Investment
Company Act of 1940. The Funds may enter into repurchase agreements with banks
or well- established securities dealers meeting the criteria established by the
Funds' board of directors. All repurchase agreements entered into by the Funds
will be fully collateralized and marked to market daily. In the event of default
by the seller under a repurchase agreement, the Fund may experience difficulties
in exercising its rights to the underlying security and may incur costs in
connection with the disposition of that security. None of the Funds has adopted
any limits on the amounts of their total assets that may be invested in
repurchase agreements which mature in less than seven days. See "Investment
Policies Involving Special Risks - Illiquid Securities" for each Fund's limit on
investments in illiquid securities and in repurchase agreements which mature in
more than seven days.

PORTFOLIO TURNOVER

Each Fund reserves the right to sell its portfolio securities, regardless of the
length of time that they have been held, when it is determined by Founders that
those securities have attained or are unable to meet the investment objective of
the Fund. Discovery, Frontier, Passport, Special, International Equity,
Worldwide Growth, and Growth Funds may engage in short-term trading and
therefore normally will have annual portfolio turnover rates in excess of 100%.
In addition, during periods when Balanced Fund engages in option transactions,
its annual portfolio turnover rate is likely to exceed 100%. Portfolio turnover
rates in excess of 100%, which are considered to be high, often may be greater
than those of other investment companies seeking capital appreciation. Such
turnover rates would cause a Fund to incur greater brokerage commissions than
would otherwise be the case. Such turnover rates may also generate larger
taxable income and taxable capital gains than would result from lower portfolio
turnover rates and may create higher tax liability for the Funds' shareholders.
A 100% portfolio turnover rate would occur if all of the securities in the
portfolio were replaced during the period. Portfolio turnover rates may also
increase as a result of the need for a Fund to effect significant amounts of
purchases or redemptions of portfolio securities due to economic, market, or
other factors that are not within Founders' control. Further information with
respect to the Funds' portfolio turnover rates is discussed in the Funds'
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by

<PAGE>
calling Founders at 1-800-525-2440. The portfolio turnover rates of all Funds
except Money Market Fund are located in the section entitled "Financial
Highlights."

INVESTING IN THE FOUNDERS FUNDS

OPENING YOUR ACCOUNT WITH FOUNDERS

THE FOLLOWING ACCOUNTS MAY BE ESTABLISHED USING A REGULAR FOUNDERS NEW ACCOUNT
APPLICATION:
* INDIVIDUAL OR JOINT TENANTS. Individual accounts have one owner. Joint
accounts have two or more owners. Unless specified otherwise, joint
accounts are set up with rights of survivorship.
* TRANSFER ON DEATH. A way to provide beneficiaries on an Individual or
Joint Tenant account. CALL 1-800-525-2440 FOR ADDITIONAL INFORMATION.
* UGMA OR UTMA. (Uniform Gifts to Minors Act or Uniform Transfers to
Minors Act) These accounts are a way to give money to a child or to
help a child save on his/her own. Depending on state laws, Founders
will set the account up as an UGMA or UTMA.
* TRUST. The trust needs to be effective before the account may be
established.
* CORPORATION OR OTHER ENTITY. The accounts are owned by the corporation
or entity. Please attach a certified copy of your corporate resolution
showing the person(s) authorized to act on this account.

THE FOLLOWING RETIREMENT ACCOUNTS REQUIRE A SPECIAL APPLICATION:
* IRAS. Any adult under 701/2 who has earned income may contribute up to
$2,000 (or 100% of compensation, which ever is less) per tax year. If
your spouse is not employed, you can contribute up to $2,250 annually
to two IRAs in any manner, as long as no more than $2,000 is
contributed to a single plan. COMPLETE A FOUNDERS IRA APPLICATION.
* ROLLOVER OR CONDUIT IRAS. Distributions from qualified
employer-sponsored retirement plans (and, in most cases, from any IRA)
retain their tax advantages when rolled over to an IRA within 60 days.
You may also request that Founders contact the current holder of your
IRA (or other qualified retirement plan if you are leaving your
current job and wish to avoid a mandatory 20% withholding tax) and
have the money transferred directly to Founders. COMPLETE A FOUNDERS
IRA APPLICATION AND A DIRECT ROLLOVER/TRANSFER FORM.
* SEP-IRAS AND SAR-SEPS. A simplified retirement plan with minimal
reporting and disclosure requirements. Allows employers to make direct
contributions to employees' IRAs. CALL 1-800-525-2440 FOR
INSTRUCTIONS.
* PROFIT SHARING AND MONEY PURCHASE PENSION PLANS. Allow self-employed
persons or small business owners and their employees to make
tax-deductible contributions for themselves and any eligible employee.
CALL 1-800-934-GOLD (4653) FOR INSTRUCTIONS.
* 403(B) CUSTODIAL ACCOUNTS. Available to employees of most tax-exempt
institutions, such as schools, hospitals, and charitable
organizations. CALL 1-800-934-GOLD (4653) FOR INSTRUCTIONS.
* 401(K) PROGRAMS. Allow employees of corporations (large or small) to
contribute a percentage of their wages on a tax-deferred basis. CALL
1-800-934-GOLD (4653) FOR ADDITIONAL INFORMATION.

MINIMUM INITIAL INVESTMENTS
* $1,000 minimum for most regular accounts.
* $500 minimum for IRAs and UGMA accounts.
* No minimum with Automatic Investment Plan of $50 or more per month.
* $250 minimum for Founders' employees and their household family
members.

OPENING YOUR ACCOUNT BY MAIL
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
* Complete the application.
* Make your check payable to "Founders Funds, Inc." Founders Funds does
not accept third-party checks.
* Mail to the above address. If you are using an overnight service or
sending your request via certified or registered mail, send your
application and payment to:
Founders Funds
2930 East Third Avenue
Denver, CO 80206-5002

<PAGE>
OPENING YOUR ACCOUNT IN PERSON
Founders Financial Center
2930 East Third Avenue
(at Milwaukee)
Denver, CO
* Visit us at the Founders Financial Center at the above address.

* Hours are 8AM to 5PM Mountain time, Monday through Friday.

* Call us at 1-800-525-2440 for directions.

NEW ACCOUNTS OPENED BY EXCHANGE
1-800-525-2440

If you already have an account with Founders and have exchange privileges, you
can call the above number to open an account in another Founders Fund by
exchange. The names of the account owners (and account registrations) need to be
identical on both accounts.

OPENING YOUR ACCOUNT THROUGH A BROKER

Be sure to read the broker's program materials for disclosures on fees and
service features that may differ from those in this prospectus. A broker may
charge a commission, transaction fee, or have different account minimums. If you
deal directly with Founders, no commission or transaction fee is charged.

ADDING TO YOUR FOUNDERS FUNDS ACCOUNT

MINIMUM ADD-ON INVESTMENT
* $100 for mail, TeleTransfer and wire payments
* $50 for Automatic Investment Plan payments
* $25 for Founders' employees and their household family members

BY MAIL
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
* Make your check payable to "Founders Funds, Inc."
* Enclose the purchase stub (from your most recent confirmation or
quarterly statement); if you do not have one, write the Fund name and
your account number on the check. For IRAs, please state the
contribution year.
* Founders Funds does not normally accept third- party checks. Please
call 1-800-525-2440 for more information.
* Mail it to the above address. If you are sending your request via
registered or certified mail or using an overnight service, direct
your investment to:
Founders Funds
2930 East Third Avenue
Denver, CO 80206-5002

IN PERSON
Founders Financial Center
2930 East Third Avenue (at Milwaukee)
Denver, CO
* Visit us at the Founders Financial Center at the above address.
* Hours are 8AM to 5PM Mountain time, Monday through Friday.
* Call us at 1-800-525-2440 for directions.

BY WIRE
Wire funds to:
Investors Fiduciary Trust Company
ABA # 101003621
For Credit to Account # 751-842-0
PLEASE INDICATE THE FUND NAME AND YOUR ACCOUNT NUMBER, AND INDICATE THE NAME(S)
OF THE ACCOUNT OWNER(S).

BY AUTOMATED TELEPHONE SERVICE
1-800-947-FAST (3278)
* Follow instructions provided
* All purchases through automated telephone service are TeleTransfer
purchases as explained in the TeleTransfer section.

BY AUTOMATIC INVESTMENT PLAN (AIP) AND TELETRANSFER
1-800-525-2440
* AIP allows shareholders to make regular, electronic purchases directly
from a checking or savings account; TeleTransfer allows similar
* AIP and TeleTransfer may be established when your account is opened.
Call Founders at the above number to request a form to add these
features to an existing account.
* Once established, AIP purchases normally take place automatically on
approximately the 5th and/or 20th of the month. Later in the year, the
Fund expects to offer this service on alternate dates.
* TeleTransfer purchases take place at your request and are executed at
the closing price of the business day you call. Call Founders at the
above number to request such a purchase.

<PAGE>
* Shareholders establishing AIP are eligible automatically to make
TeleTransfer transactions; either AIP or TeleTransfer shareholders
automatically receive telephone redemption privileges. See the section
entitled, "Selling Shares From Your Founders Funds - By Phone."
* Founders charges no fee to process AIP or TeleTransfer transactions.

SELLING SHARES FROM YOUR FOUNDERS FUNDS

GENERAL REDEMPTION POLICIES

* HOLD ON PURCHASES. Purchases by check or TeleTransfer (other than
those by cashier's check) will be placed on hold for a maximum 10-day
period. During this time, you may make exchanges to another fund but
may not receive the proceeds of redemption until bank clearance of
your purchase check (which may take up to 10 days). Notwithstanding
the fact that payment may be delayed, redemption share pricing shall
be determined in accordance with the procedures outlined in the
section entitled "Share Price Determination" elsewhere in this
prospectus.

* DESTINATION OF REDEMPTIONS. All requests to send funds to an address
that has been changed in the past 30 days, to an address other than
the address of record or to a financial institution/account other than
the banking information we have on file must be accompanied by a
signature guarantee.
* REDEMPTIONS IN EXCESS OF $250,000. For Discovery, Frontier, Passport,
Special, International Equity, Worldwide Growth, Growth, Blue Chip,
Balanced, and Government Securities Funds: Shares will normally be
redeemed in cash, although Founders retains the right to redeem shares
in kind by delivery of readily marketable securities selected from a
Fund's assets at its discretion under unusual circumstances, such as a
period with an unusually large number of redemption requests, in order
to protect the interests of the remaining shareholders. However, the
Company has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, pursuant to which the Company is obligated during
any 90- day period to redeem shares for any one shareholder solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund at the beginning of that period. The method of valuing securities
used to make redemptions in kind will be the same as the method of
valuing portfolio securities described under "Determination of Net
Asset Value" in the STATEMENT OF ADDITIONAL INFORMATION, which may be
obtained without charge by calling Founders at 1-800-525-2440, and
such valuation will be made as of the same time the redemption price
is determined. The investor will incur brokerage costs in converting
these securities into cash. Fund shares have not been redeemed in kind
during the past ten years.
* INDIVIDUAL, JOINT TENANT, TRANSFER ON DEATH AND UGMA/UTMA ACCOUNTS:
Letter of instruction needs to be signed by all persons required to
sign for transactions. Be sure to sign just as your names appear on
the account or in our records. Please tell us the number of shares or
dollars you wish to redeem, the names of the account owners, the fund
and account number, and your social security or tax identification
number. Requests to sell $50,000 or more require a signature
guarantee.
* RETIREMENT ACCOUNTS: Please call for the appropriate form;
1-800-525-2440.
* TRUST ACCOUNTS: The trustee needs to sign the letter indicating
his/her capacity as trustee. If the trustee's name is not in the
account registration, you will need to provide a certificate of
incumbency dated within the past 60 days. Please tell us the number of
shares or dollars you wish to redeem, the names of the account owners,
the fund and account number, and your social security or tax
identification number. A signature guarantee is required for
redemptions of $50,000 or more.
* CORPORATION OR OTHER ENTITY: A corporate resolution complete with a
corporate seal or signature guarantee needs to be included. Please
tell us the number of shares or dollars you wish to redeem, the names
of the account owners, the fund and account number, and your social
security or tax identification number. At least one person authorized
to act on the account needs to sign the letter.

<PAGE>
REDEMPTIONS BY PHONE
1-800-525-2440
* If we have received written authorization from you for phone
redemption for your account, you merely need to phone us at the above
number to sell shares.
* Proceeds may be sent only to the address or bank of record.
* Minimum redemption by phone: $100 for a redemption delivered by check
or electronic transfer (TeleTransfer); $1,000 for a redemption
delivered by wire.
* Phone redemption is not available on retirement accounts and certain
other accounts.
* Founders may not be responsible for the authenticity of phone
instructions. See the section entitled "Overall Policies Regarding
Transactions - Those Conducted by Phone, Fax, Automated Telephone
Service, or an Online Computer Service" elsewhere in this Prospectus.

IN WRITING
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
Please review the preceding section on redemption policies and mail your request
to the above address. If you are using certified or registered mail or an
overnight service, send your request to:
Founders Funds
2930 East Third Avenue
Denver, CO 80206-5002

IN PERSON
Founders Financial Center
2930 East Third Avenue (at Milwaukee)
Denver, CO

METHOD PROCEEDS WILL BE
DELIVERED TO YOU:
* BY CHECK. Checks are sent to the address of record. Requests that a
check be sent elsewhere require a signature guarantee.
* BY WIRE. $6.00 fee; $1,000 minimum; monies usually received the
business day after the date you sell. Unless otherwise specified, fee
will be deducted from redemption proceeds.
* TELETRANSFER. No fee; monies usually received two business days after
you sell.
Where not specified, proceeds will be delivered via check.

VIA CHECKWRITING

* Available on Founders Government Securities and Money Market Funds.

* May be established after account is opened.
* Call 1-800-525-2440 to request the appropriate form.
* There is no fee for this service.
* Minimum amount per check: $500
* Maximum amount per check: $250,000
* Founders may perform a credit check on shareholders requesting
checkwriting privileges.

EXCHANGING SHARES OF YOUR FOUNDERS FUNDS
Minimum amount for exchanges is $100.

BY PHONE
1-800-525-2440: Investor Services
1-800-947-FAST (3278): Automated Telephone Service
* If you have an account with Founders and have not declined telephone
exchange privileges in writing, you may exchange from one fund to
another by calling one of the above numbers. The names of the account
owners (and account registrations) need to be identical on both
accounts.
* Founders may not be responsible for the authenticity of phone
instructions. See the section entitled, "Overall Policies Regarding
Transactions - Those Conducted by Phone, Fax, Automated Telephone
Service, or an Online Computer Service" elsewhere in this Prospectus.
* Founders may not be responsible for the authenticity of fax
instructions. See the section entitled, "Overall Policies Regarding
Transactions - Those Conducted by Phone, Fax, Automated Telephone
Service, or an Online Computer Service" elsewhere in this Prospectus.

IN WRITING VIA U.S. MAIL OR FAX
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
Fax (303) 394-4021
Kindly include in your letter the names of the account owners, the fund and
account number you wish to exchange from, your social security or tax
identification number, the dollar or share amount of the transaction, and the
account you wish to exchange into. Remember that all account owners need to sign
the request exactly as their names appear on the account.

<PAGE>
EXCHANGE POLICIES
To maintain competitive expense ratios and avoid disrupting the management of
each Fund's portfolio, the Funds reserve the right to suspend or terminate this
exchange privilege for any shareholder (including a shareholder whose account is
managed by an adviser) when the total exchanges out of any one of the Funds
exceed four in any calendar year. Founders will provide written notification to
any investor whose exchange privilege is being revoked and will provide an
effective date of revocation, which will not be less than fifteen (15) calendar
days after the notification date.

OVERALL POLICIES REGARDING TRANSACTIONS
* THOSE CONDUCTED BY PHONE, FAX, AUTOMATED TELEPHONE SERVICE, OR AN
ONLINE COMPUTER SERVICE: Neither the Funds, Founders, nor any of their
agents is responsible for the authenticity of exchange or redemption
instructions received by one of the aforementioned methods.
Automatically by signing a "New Account Application" (unless
specifically declined on the Application), by providing other written
(for redemptions) or verbal (for exchanges) authorization, or by
requesting Automatic Investment Plan privileges, you agree to release
the Funds, Founders, and their agents from any and all liability for
acts or omissions done in good faith under the authorizations
contained in the application, including their possibly effecting
fraudulent transactions. As a result of your executing such a release,
you bear the risk of loss from a fraudulent transaction. However, if
the Fund fails to employ reasonable procedures to attempt to confirm
that instructions are genuine, the Fund may be liable for any such
losses. These procedures include, but are not necessarily limited to,
one or more of the following: requiring personal identification prior
to acting upon instructions; providing written confirmation of such
transactions; and/or tape-recording telephone instructions.

* EFFECTIVE DATE OF TRANSACTIONS. Transaction requests received in good
order prior to the close of the New York Stock Exchange on a given
date will be effective that date. However, under certain
circumstances, payment of redemption proceeds may be delayed for up to
seven (7) calendar days to allow for the orderly liquidation of
securities. Also, when the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than its customary weekend
or holiday closing, or under any emergency circumstances, as
determined by the SEC, we may suspend redemptions or postpone
payments. If you are unable to reach us by phone, consider sending
your order by overnight mail; exchange requests may be faxed to (303)
394-4021.

* FAX TRANSMISSIONS. Redemption requests received by fax will not be
processed.
* CERTIFICATES. If you are selling shares previously issued in
certificate form, you will need to include these certificates along
with your redemption/exchange request.
* U.S. DOLLARS. Purchases need to be made in U.S. dollars, and checks
need to be drawn on U.S. banks. No cash can be accepted.
* TRANSACTION REQUESTS THAT ARE NOT IN GOOD ORDER CANNOT BE EXECUTED.
YOU WILL BE CONTACTED IN WRITING IF THIS OCCURS. CALL FOUNDERS AT
1-800-525-2440 IF YOU HAVE ANY QUESTIONS ABOUT THESE PROCEDURES.
* FOUNDERS CANNOT ACCEPT CONDITIONAL TRANSACTIONS REQUESTING THAT A
TRANSACTION OCCUR ON A SPECIFIC DATE OR AT A SPECIFIC SHARE PRICE.
* SIGNATURE GUARANTEE REQUIREMENTS. Signature guarantees are required
for certain transactions and are an industry-wide method of
maintaining the security of customer accounts. Such guarantees may be
obtained from a bank, broker, dealer, credit union (if authorized
under state law), securities exchange/association, clearing agency, or
savings association. A NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE
GUARANTEE.

* RETURNED CHECKS. If your check is returned to Founders due to
insufficient funds, your purchase will be canceled and you will be
liable for any losses or fees incurred by the Fund or its agents. If
you are a current shareholder, shares will be redeemed from other
accounts, if needed, to reimburse the Fund.
* TAXES. Remember that, for tax purposes, redemptions in non-tax
deferred accounts may have tax consequences, as you may need to
recognize a gain or loss. Likewise, exchanges from one Fund to another
represent a sale from one Fund and a purchase of another and may
result in a gain or loss that you will need to recognize on your tax
return.

<PAGE>
* ACCOUNT MINIMUMS. The Fund requires a minimum of $1,000 per account in
order to maintain competitive expense ratios. (The minimum is $500 for
IRAs and UGMAs/ UTMAs.) If at any time, due to redemptions or
exchanges, or upon the discontinuance of an Automatic Investment Plan,
the total value of your account falls below this minimum, we may
either charge a fee of $10, which will be automatically deducted from
the account, or close your account and mail the proceeds to the
address of record. The decision to levy the fee or close the account
will be based on a determination of the best interests of the Fund. We
will give you at least 60 days' written notice informing you that your
account will be closed or that the $10 fee will be charged, so that
you may make an additional investment to bring the account up to the
required minimum balance.

* TAX IDENTIFICATION. Please make sure to complete the "Signature(s)"
section on your "New Account Application" when you open your account.
If you do not provide us with the above information, federal tax law
requires the Fund to withhold 31% of dividends, capital gains
distributions, redemptions and exchange proceeds. Founders Funds, Inc.
may also refuse to sell shares to any person who does not furnish at
the time of purchase a certified social security or tax identification
number. If Fund shares are purchased by a person who has not provided
a certified taxpayer identification number, certain action may be
taken, as deemed necessary by the Fund, including redeeming some or
all of the shareholder's shares. In addition, your account may be
reduced by $50 to reimburse Founders Funds, Inc. for the penalty that
the Internal Revenue Service will impose on the company for failure to
report your taxpayer identification number on information reports.

* FOUNDERS RESERVATIONS. Founders reserves the right to (1) reject any
investment or application; (2) cancel any purchase due to nonpayment;
(3) modify the conditions of purchase at any time; (4) waive or lower
investment minimums; (5) limit the amount that may be purchased; and
(6) perform a credit check on shareholders establishing a new account
or requesting checkwriting privileges.

SHAREHOLDER SERVICES

INVESTOR SERVICES
1-800-525-2440
Founders Service Representatives are available at the above number to assist you
from Monday through Friday, from 7AM to 6:30PM, Mountain time, and on Saturday,
from 9AM to 2PM, Mountain time. For your protection, calls to Investor Services
are recorded.

FUND AND MARKET NEWS UPDATES
Founders INSIGHT features the latest news about the Founders Funds and is
available 24 hours a day. Call 1- 800-525-2440 and press option 5 on your
Touchtone phone.

DAILY CLOSING PRICES
Founders QUOTELINE features the latest closing prices for the Founders Funds,
updated each business day. Call 1-800-232-8088.

24-HOUR ACCOUNT INFORMATION

BY PHONE
1-800-947-FAST (3278)
Founders' automated telephone service enables you to access account information
as well as conduct exchanges and purchases 24 hours a day with a Touchtone
phone. Dial the above number.

BY ONLINE COMPUTER SERVICES
Account information is available through the online computer service America
Online(R) (AOL). Contact either AOL directly or Founders at 1-800-525-2440.

STATEMENTS AND REPORTS
* CONFIRMATION STATEMENTS: Sent after each transaction, except in
certain retirement accounts and where the only transaction is a
monthly dividend repurchase or an Automatic Investment Plan purchase.
* ACCOUNT STATEMENTS: Sent at the end of each quarter.
* SHAREHOLDER REPORTS: Sent twice a year; after the end of June and
after year-end.

* STATEMENT OF ADDITIONAL INFORMATION: A STATEMENT OF ADDITIONAL
INFORMATION dated August 12, 1996 has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. You
can obtain a copy without charge by calling Founders at
1-800-525-2440.

<PAGE>
ESTABLISHING ADDITIONAL SERVICES
1-800-525-2440
Shareholders may call to request a form to add or delete the following services:
* CHECKWRITING. Available on Founders Money Market and Government
Securities Funds only.
* TELEPHONE REDEMPTION. Available for regular (nonretirement) accounts
only.
* TELEPHONE EXCHANGE.
* FUND-TO-FUND INVESTMENT PLAN. Allows shareholders to automatically
withdraw a fixed dollar amount each month from one Founders Fund to
purchase shares in another Founders Fund.
* DISTRIBUTION PURCHASE PROGRAM. Permits shareholders to have capital
gains distributions and/or dividends from one Founders Fund
automatically reinvested to purchase shares of another Founders Fund.
* AUTOMATIC INVESTMENT PLAN. Allows shareholders to make automatic
purchases from a bank account once or twice a month.
* TELETRANSFER PROGRAM. Allows shareholders to purchase or redeem shares
in the Founders Funds with a simple phone call at any time. Purchase
or redemption amounts are automatically transferred to/from the
shareholder's bank account. Shareholders selecting an Automatic
Investment Plan are automatically authorized to participate in the
TeleTransfer program.
* SYSTEMATIC WITHDRAWAL PLAN. Permits the shareholder to receive a fixed
sum on a monthly, quarterly or annual basis from accounts with a value
of $5,000 or more. Payments may be sent electronically to your bank or
to you in check form.
* DIVIDEND AND DISTRIBUTION OPTIONS. Either or both may be paid in cash
or reinvested.

GENERAL INFORMATION

SHARE PRICE DETERMINATION
The daily net asset value per share is determined at the close of regular
trading on the New York Stock Exchange (currently 4PM Eastern time) on each day
such Exchange is open. Net asset value per share is calculated for purchases and
redemptions by dividing the current market value of total assets, less all
liabilities, by the total number of shares outstanding. If market quotations are
not readily available, the Funds' securities or other assets will be valued at
fair value as determined in good faith by the Funds' board of directors. Net
asset value per share at the time of redemption may be more or less than the
price originally paid to purchase shares, depending primarily upon a Fund's
investment performance.

Investments and requests to redeem shares received by Founders or its
agents before the close of business on the New York Stock Exchange are effective
on, and will receive the price determined, that day. Redemption requests
received thereafter are effective on, and receive the price determined, the next
day the New York Stock Exchange ("Exchange") is open.

Investments are considered received only when your check or wired funds
are received by Founders or its agents. Wired funds are considered received on
the day they are deposited in the custodian bank account if your phone call is
received before the close of business on the Exchange, usually 4PM Eastern time,
and the money is deposited that day.

For pricing purposes, investments by telephone are considered received
at the time of your telephone call. However, you will not be able to redeem
these shares until 10 days after Founders receives your payment. See, "Investing
in the Founders Funds-General Redemption Policies."

Founders Funds, Inc. will use its best efforts, under normal
circumstances, to maintain the net asset value of Money Market Fund at $1.00 per
share using the amortized cost method. Additional information concerning the
computation of net asset value appears in the STATEMENT OF ADDITIONAL
INFORMATION, which may be obtained without charge by calling Founders at
1-800-525-2440.

DIVIDENDS AND DISTRIBUTIONS

Discovery, Frontier, Passport, Special, International Equity, Worldwide Growth,
Growth, and Blue Chip Funds intend to distribute net realized investment income
and any net realized capital gains, after utilization of capital loss
carryforwards, in December of every year. Balanced Fund intends to distribute
net realized investment income on a quarterly basis in March, June, September,
and December of every year, and any net realized capital gains, after
utilization of capital loss carryforwards, in December of every year. Government
Securities Fund intends to declare dividends daily and distribute net realized
investment income monthly, and distribute any net realized capital gains, after
utilization of capital loss carryforwards, in December of every year. Money
Market Fund declares dividends daily, which are paid on the first business day
of every month. Shares of Government Securities and Money Market Funds begin
receiving dividends no later than the next business day following the day when

<PAGE>
funds are received by Founders. The Funds will be subject to an annual 4% excise
tax if they fail to meet certain calendar-year distribution requirements. In
order to prevent imposition of the excise tax, it may be necessary for the Funds
to make distributions in addition to those described above.

DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS
You may elect to have your income dividends and capital gains distributions
reinvested in additional shares. We will assign you this option automatically if
you make no choice on the application. Otherwise:
(a) you may elect to have your income dividends and short-term capital
gains paid to you in cash and your long-term capital gain
distributions reinvested; or

(b) you may elect to have your income dividends and short-term capital
gain distributions reinvested and your long-term capital gain
distributions paid to you in cash; or

Income dividends and capital gain distributions will be reinvested
without a sales charge at the net asset value on the ex-dividend date. If you
have elected to receive your dividends or capital gains in cash and the Postal
Service cannot deliver your checks, or if your checks remain uncashed for six
months, Founders reserves the right to reinvest your distribution checks in your
account at the then-current net asset value and to reinvest all the account's
subsequent distributions in shares of that Fund. If your investment is in the
form of a retirement plan, all dividends and capital gain distributions must be
reinvested in your account.

TAXES
Each of the Funds intends to qualify annually as a regulated investment company.
Generally, regulated investment companies are relieved of federal income tax on

the net investment income and net capital gains that they earn and distribute to
their shareholders. As described below, unless your account is not subject to
income taxes, you must include all dividends and capital gain distributions in
taxable income for federal, state and local income tax purposes. Dividends and
other distributions are taxable whether they are received in cash or reinvested
in the same or another Fund.

All dividends of net investment income from the Funds, such as dividends
and interest on their investments, will be taxable to you as ordinary income. A
portion of such dividends may qualify for the dividends received deduction for
corporations, although distributions from Government Securities and Money Market
Funds generally are not expected to qualify.

In addition, the Funds realize capital gains and losses when they sell
securities for more or less than they paid. If total gains on sales exceed total
losses (including losses carried forward from prior years), the Fund has a net
realized capital gain. Net realized capital gains are divided into short-term
and long-term capital gains depending on how long the Fund held the security
that gave rise to the gains. The Funds' capital gains distributions consist of
long-term capital gains that are taxable at the capital gains rate. All
distributions of short-term capital gains will be taxable to you as ordinary
income and included in your dividends.

Distributions from each Fund generally will be taxable to you in the tax
year in which they are received. However, generally, dividends declared by a
Fund in October, November or December of any calendar year, with a record date
in such a month, and paid during the following January will be treated as if
they were paid by the Fund and received by you on December 31 of the calendar
year in which they were declared.

At the end of each calendar year, shareholders are sent full information
on dividends and capital gain distributions, including information as to the
portion taxable as ordinary income and long-term capital gains. Information
concerning the amount of dividends eligible for the dividends-received deduction
available for corporations is contained in the Funds' annual report or may be
obtained upon request by calling Founders.

You also may realize capital gains or losses when you sell Fund shares
at more or less than the price you originally paid. Foreign shareholders may be
subject to federal income tax rules that differ from those described above. All
shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences of an investment in a Fund.

<PAGE>
FOUNDERS FUNDS, INC. AND ITS MANAGEMENT
Founders Funds, Inc. is an open-end diversified management investment company
organized as a Maryland corporation on June 19, 1987. Founders serves as
investment adviser to each of the Funds. Founders is owned by Mr. Bjorn K.
Borgen, its Chairman, Chief Executive Officer and Chief Investment Officer. The
affairs of Founders Funds, Inc., including the services provided by Founders,
are subject to the supervision and general oversight of the Funds' board of
directors.

Founders Funds, Inc. and Founders Asset Management, Inc. have adopted a
strict code of ethics which limits directors, officers, investment personnel,
and other Founders employees in investing in securities for their own accounts.
The code of ethics requires pre-clearance of personal securities transactions
and imposes restrictions and reporting requirements upon such transactions. The
code of ethics, which complies in all material respects with the recommendations
set forth in the Report of the Advisory Group on Personal Investing of the
Investment Company Institute, requires maintenance of the highest standards of
integrity and conduct. In engaging in personal business activities, personnel of
Founders and the Funds must act in the best interests of the Funds and their
shareholders. The Funds and Founders carefully monitor compliance with the code
of ethics by their respective personnel.

Founders, which has acted as an investment adviser since 1938, manages
the investment of each Fund's assets and provides certain administrative
services to each Fund. For these services, each Fund pays Founders an investment
advisory fee which, during the most recent fiscal year, represented the
following percentages of each Fund's average daily net assets: Discovery Fund -
1.00%; Frontier Fund - 0.97%; Passport Fund - 1.00%; Special Fund - 0.76%;
International Equity Fund - 0.00%; Worldwide Growth Fund - 1.00%; Growth Fund
- -0.74%; Blue Chip Fund - 0.64%; Balanced Fund - 0.65%; Government Securities
Fund - 0.65%; and Money Market Fund - 0.50%. Investment advisory fees paid by
International Equity Fund represented 1.00% of the Fund's average daily net
assets during the six months ended June 30, 1996, and are anticipated to
continue at that level. The fees currently paid by Discovery, Frontier,
Passport, Special, International Equity, Worldwide Growth, Growth, and
Government Securities Funds are higher than the fees generally charged by most
investment companies having similar objectives and policies but are, in the
opinion of the Funds' management, comparable to those of numerous other similar
mutual funds.

Each investment advisory agreement between a Fund and Founders provides
that expenses relating to the Fund's operations which are not expressly assumed
by Founders shall be paid by the Fund, including the fee paid to Founders,
shareholder servicing costs, directors fees and expenses, legal and auditing
fees, custodian fees, printing and supplies, taxes, registration fees and
distribution expenses. Each Fund's total expenses for 1995 (excluding brokerage
commissions) represented the following percentages of average daily net assets:
Discovery Fund - 1.63%; Frontier Fund - 1.57%; Passport Fund - 1.84%; Special
Fund - 1.35%; International Equity Fund -0.00%; Worldwide Growth Fund - 1.65%;
Growth Fund - 1.28%; Blue Chip Fund - 1.22%; Balanced Fund - 1.23%; Government
Securities Fund - 1.30%; and Money Market Fund - 0.89%. Total expenses to be
paid by International Equity Fund are anticipated to represent 2.00% of the
Fund's average daily net assets. Certain expenses of the International Equity
and Government Securities Funds are being reimbursed voluntarily by Founders
pursuant to a commitment to the Funds. In the absence of this expense
limitation, the International Equity Fund's total expenses for the fiscal year
ending December 31, 1996 are estimated to be 3.00% of the Fund's average net
assets, and the Government Securities Fund's total expenses for the year ended
December 31, 1995 would have been 1.45% of the Fund's average net assets.

Subject to the policy of seeking the best execution of orders at the
most favorable prices, sales of shares of the Funds may be considered as a
factor in the selection of brokerage firms to execute Fund portfolio
transactions. The STATEMENT OF ADDITIONAL INFORMATION, which may be obtained
without charge by calling Founders at 1-800-525-2440, further explains the
selection of brokerage firms.

In addition, each of the Funds has entered into shareholder services
agreements with Founders, pursuant to which Founders provides certain
shareholder-related and transfer agent services to the Funds. For such services,
Founders Funds, Inc. pays Founders a monthly fee which is combined with fees
charged the Funds by Investors Fiduciary Trust Company, the Funds' transfer
agent. Out-of-pocket reimbursements are also paid by the Funds. In 1995,
Founders received aggregate shareholder services and transfer agent fees of
$25.42 for each shareholder account. Of this amount, $8.05 per shareholder
account was paid to Investors Fiduciary Trust Company. Due to a reduction in
such aggregate fees to $25 per account per annum from June 1, 1995 through May
31, 1996, and to $24 per account per annum effective June 1, 1996, Founders

<PAGE>
anticipates that per account fees for providing such services in 1996 will be
less than those paid by the Funds in 1995.

Transfer agent fees charged by Investors Fiduciary Trust Company and
Founders Asset Management, Inc. are not charged to each shareholder's account,
but are expenses of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third-party administrators of tax-qualified retirement plans,
and other entities which establish omnibus accounts with the Funds may provide
sub-transfer agency, recordkeeping, or similar services to participants in the
omnibus accounts which reduce or eliminate the need for identical services to be
provided on behalf of the participants by Investors Fiduciary Trust Company
and/or Founders. In such cases, Founders is authorized to pay the entity a
sub-transfer agency or recordkeeping fee , and to be reimbursed for such
payments by the Fund based on the number of participants in the entity's omnibus
accoun. Entities receiving such fees may also receive 12b-1 fees described
under "Distribution Plans," below.

Founders Asset Management, Inc. also performs portfolio accounting for
the Funds which includes, among other duties, calculating net asset value,
monitoring compliance with regulatory requirements, and reporting. Founders
Funds, Inc. pays Founders a fee equal to 0.06% of the first $500 million of the
net assets of the Company and 0.02% of the net assets of the Company in excess
of $500 million, allocated on a pro rata basis among the portfolio companies
based on relative net assets, plus out-of-pocket reimbursement. In 1995,
Founders received aggregate portfolio accounting fees of $621,147.

DISTRIBUTION PLANS
Discovery, Frontier, Passport, Special, International Equity, Worldwide Growth,
Growth, Blue Chip, Balanced, and Government Securities Funds each have adopted
Distribution Plans pursuant to Rule 12b-1 under the Investment Company Act of
1940. Each Plan provides that the Fund may pay distribution and related expenses
of up to 0.25 of 1% each year of its average daily net assets. Expenses
permitted to be paid by a Fund under its Plan include: preparation, printing and
mailing of prospectuses, reports to shareholders (such as semiannual and annual
reports, performance reports, and newsletters ), sales literature and other
promotional material to prospective investors; direct mail solicitation;
advertising; public relations; compensation of sales personnel, brokers,
financial planners or others for their assistance with respect to the
distribution of the Fund's shares, including compensation for such services to
personnel of Founders or of affiliates of Founders; providing payments to any
financial intermediary for shareholder support, administrative, and accounting
services with respect to the shareholders of the Fund; and such other expenses
as may be approved from time to time by the Funds' board of directors and as may
be permitted by applicable statute, rule or regulation. Plan payments may be
made only to reimburse expenses incurred during a rolling twelve-month period,
subject to the annual limitation of 0.25 of 1% of average daily net assets. Any
reimbursable expenses incurred by Founders in excess of this limitation are not
reimbursable and will be borne by Founders. In addition, Founders may from time
to time make additional payments from its revenues to securities dealers and
other financial institutions that provide distribution-related, recordkeeping,
and/or other administrative services to the Funds. The Funds' board of directors
reviews a quarterly written report of amounts expended under each Plan and the
purposes of the expenditures. For each Fund's most recent fiscal year (1995),
expenditures under the plan represented the following percentage of average
daily net assets: Discovery Fund - 0.25%; Frontier Fund -0.25%; Passport Fund -
0.25%; Special Fund -0.25%; International Equity Fund - 0.00%; Worldwide Growth
Fund - 0.25%; Growth Fund -0.25%; Blue Chip Fund - 0.25%; Balanced Fund -0.25%;
and Government Securities Fund - 0.10%. Expenditures under the plan paid by
International Equity Fund are anticipated to represent 0.25% of the Fund's daily
net assets.

12b-1 Fees ("Fee") are paid to broker-dealers and to other entities for
recordkeeping, distribution, accounting, and/or other shareholder-related
services to investors purchasing shares of a 12b-1 Fund through various sales
and/or shareholder services programs. The Fee is computed at an annual rate not
in excess of 0.25 of 1% of the average daily account balances of investments in
each 12b-1 Fund made by the entity on behalf of investors participating in the
entity's program. The directors of the 12b-1 Funds have authorized Founders to
place a portion of the Funds' brokerage transactions with certain of these
entities, which are broker-dealers or affiliates of broker-dealers, if Founders
reasonably believes that the entity is able to provide best execution of orders
at most favorable prices. Commissions earned by the entity from executing
portfolio transactions may be credited by the entity against the Fee charged to
that Fund. 12b-1 fees not expended as a result of the application of such credit
will not be used for other distribution expenses. These directed-brokerage
arrangements have no adverse effect either on the level of brokerage commissions
paid by the Funds or on any Fund's expenses.

VOTING RIGHTS
Each full share of the Funds has one vote and fractional shares have
proportionate voting rights. Shares of the Funds are generally voted in the
aggregate except where voting by each Fund is required by law. Founders Funds,

<PAGE>
Inc. is not required to hold regular annual meetings of shareholders and does
not intend to do so; however, the Board of Directors will call special meetings
of shareholders for action by shareholder vote as may be requested in writing
generally by the holders of 10% or more of the outstanding shares of each Fund
or as may be required by applicable law or the Funds' Articles of Incorporation,
and each Fund will assist shareholders in communicating with other shareholders
as required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of all of
the Funds.

TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company, under contracts with the Funds, performs all
of these functions:
* transfer agent
* dividend disbursing agent
* redemption agent
* custodian of the portfolio securities and cash of each fund

Founders Asset Management, Inc., under contracts with the Funds,
provides selected transfer agency services for the Funds. See "General
Information-Founders Funds, Inc. and Its Management".

FUND PERFORMANCE INFORMATION
Founders Funds, Inc. may, from time to time, include the yield or total return
of the Funds (other than Money Market Fund) in advertisements or reports to
shareholders or prospective investors. Any quotations of yield will be based on
all investment income per share earned during a given 30-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the maximum public offering price per share on the last day of the period.
Quotations of average annual total return for a Fund will be expressed in terms
of the average annual compounded rate of return on a hypothetical investment in
the Fund over a period of 1, 5 and 10 years (up to the life of the Fund); will
reflect the deduction of a proportional share of Fund expenses (on an annual
basis); and will assume that all dividends and distributions are reinvested when
paid.

Performance information for a Fund may be compared in reports and
advertisements to:

(1) the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, or other unmanaged indices so that investors may compare a Fund's

results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general;

(2) other groups of mutual funds tracked by independent research firms
which rank mutual funds by overall performance, investment objectives and
assets, or tracked by other services, companies, publications, or persons, that
rank mutual funds on overall performance or other criteria, such as Lipper
Analytical Services, MONEY, MORNINGSTAR, KIPLINGER'S PERSONAL FINANCE, CDA
WEISENBERGER, FINANCIAL WORLD, WALL STREET JOURNAL, U.S. NEWS, BARRON'S, USA
TODAY, BUSINESS WEEK, INVESTOR'S BUSINESS DAILY, FORTUNE, MUTUAL FUNDS MAGAZINE
and FORBES; and

(3) the Consumer Price Index (measured for inflation) to assess the real
rate of return from an investment in the Funds. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.

Other unmanaged indices which may be used by the Funds in providing
comparison data of performance and shareholder service include Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, Financial Times - Stock Exchange,
New York Stock Exchange, the Nikkei Stock Average, and the Deutscher
Aktienindex. Performance information for any Fund reflects only the performance
of a hypothetical investment in the Fund during the particular time period on
which the calculations are based. Performance figures are based upon historical
investment results and are not intended to indicate future performance. See the
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440.

Founders Funds, Inc. may also advertise assessments and analyses of the
quality of the Funds' shareholder services published by analytical and other
recognized magazines which compare the quality of such services provided by
mutual fund complexes.

The Lipper Analytical Services mutual fund rankings and comparisons
which may be provided by the Funds in performance reports will be drawn from the
following Lipper mutual fund groupings:

<PAGE>
FUND LIPPER MUTUAL FUND GROUPING
- --------------------------------------------------------------------------------

Discovery Small Company Growth Funds
Frontier Small Company Growth Funds
Passport International Small Company Funds
Special Capital Appreciation Funds
International Equity International Funds
Worldwide Growth Global Funds
Growth Growth Funds
Blue Chip Growth and Income Funds
Balanced Balanced Funds
Government Securities U.S. Government Funds

40
<PAGE>

[Logo]
FOUNDERS FUNDS

FOUNDERS ASSET MANAGEMENT, INC.
INVESTMENT ADVISER AND FUND DISTRIBUTOR
Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
Toll-Free: 1-800-525-2440

DIRECTORS
John K. Langum, Chairman
William H. Baughn
Bjorn K. Borgen
Alan S. Danson
Jay A. Precourt
Eugene H. Vaughan, Jr.
Jonathan F. Zeschin

This wrapper is not part of the prospectus.

<PAGE>

FOUNDERS
FUNDS, INC.

Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
TOLL FREE 1-800-525-2440

STATEMENT OF ADDITIONAL INFORMATION

^ August 12, 1996

FOUNDERS ASSET MANAGEMENT, INC., DISTRIBUTOR

A prospectus for the Funds dated August 12, 1996 provides the basic information
you should know before investing and may be obtained without charge from
Founders Asset Management, Inc. ("Founders") at the telephone number and address
shown above. This Statement of Additional Information, which is not a
prospectus, contains information in addition to and in more detail than in the
prospectus. It is intended to provide you with additional information regarding
the activities and operations of the Funds, and should be read in conjunction
with the prospectus.

<PAGE>

TABLE OF CONTENTS

INVESTMENT OBJECTIVES AND POLICIES...................................... 1
Options On Stock Indices and Stocks ........................... 1
Futures Contracts.............................................. 3
Options on Futures Contracts................................... 6
Options on Foreign Currencies.................................. 7
Risk Factors of Investing in Futures and Options............... 8
Foreign Securities............................................. 8
Forward Contracts For Purchase or Sale of Foreign Currencies... 9
Illiquid Securities............................................ 10
Rule 144A Securities........................................... 11
Fixed-Income Securities........................................ 12
Repurchase Agreements.......................................... 13
Convertible Securities......................................... 13
Mortgage-Related Securities.................................... 14

INVESTMENT RESTRICTIONS................................................. 16

DIRECTORS AND OFFICERS.................................................. 34

INVESTMENT ADVISER AND DISTRIBUTOR...................................... 37

SHAREHOLDER SERVICING................................................... 42
Fund Accounting and Administrative Services Agreement.......... 42
Shareholder Services Agreement................................. 43
Transfer Agency Agreement...................................... 43

BROKERAGE ALLOCATION AND PORTFOLIO TURNOVER RATES....................... 43

DETERMINATION OF NET ASSET VALUE........................................ 47

YIELD AND PERFORMANCE INFORMATION....................................... 49

REDEMPTION PAYMENTS..................................................... 51

DIVIDENDS, DISTRIBUTIONS AND TAXES...................................... 51

ADDITIONAL INFORMATION.................................................. 55
Capital Stock.................................................. 55
Code of Ethics.................................................. 55
Custodian...................................................... 56
Independent Accountants........................................ 57
Registration Statement......................................... 57
Financial Statements........................................... 57

UNAUDITED FINANCIAL STATEMENTS OF INTERNATIONAL EQUITY FUND............ 58

APPENDIX - CORPORATE BOND, COMMERCIAL PAPER, AND PREFERRED
STOCK RATINGS........................................................... 69
Corporate Bonds................................................ 69
Commercial Paper............................................... 70
Description of Moody's Investors Service, Inc.'s
Preferred Stock Ratings...................................... 70
Description of Standard & Poor's ^ Preferred Stock Ratings..... 71

-i-

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

OPTIONS ON STOCK INDICES AND STOCKS (FOUNDERS DISCOVERY, FRONTIER, PASSPORT,
SPECIAL, INTERNATIONAL EQUITY, WORLDWIDE GROWTH, GROWTH, BLUE CHIP, AND BALANCED
FUNDS)

An option is a right to buy or sell a security at a specified price
within a limited period of time. All of the Funds other than the Special,
Growth, Government Securities and Money Market Funds may write ("sell") options
on any or all of their portfolio securities; provided, however, that Balanced
Fund may write only covered call options on stocks. In addition, all of the
Funds except the Special, Balanced, Government Securities and Money Market Funds
may purchase options on securities. All Funds exceptBalanced, Money Market, and
Government Securities Funds may purchase put and call options on stock indices.

For the right to buy or sell the underlying instrument (e.g.,
individual stocks or stock indices), the buyer pays a premium to the seller (the
"writer" of the option). Options have standardized terms, including the exercise
price and expiration time. The current market value of a traded option is the
last sales price or, in the absence of a sale, the last offering price. The
market value of an option will usually reflect, among other factors, the market
price of the underlying security. When the market value of an option
appreciates, the purchaser may realize a gain by exercising the option and
selling the underlying security, or by selling the option on an exchange
(provided that a liquid secondary market is available). If the underlying
security does not reach a price level which would make exercise profitable, the
option generally will expire without being exercised and the writer will realize
a gain in the amount of the premium. However, the gain may be offset by a
decline in the market value of the underlying security. If an option is
exercised, the proceeds of the sale of the underlying security by the writer are
increased by the amount of the premium and the writer realizes a gain or loss
from the sale of the security.

So long as a secondary market remains available on an exchange, the
writer of an option traded on that exchange ordinarily may terminate his
obligation prior to the assignment of an exercise notice by entering into a
closing purchase transaction. The cost of a closing purchase transaction, plus
transaction costs, may be greater than the premium received upon writing the
original option, in which event the writer will incur a loss on the transaction.
However, because an increase in the market price of an option generally reflects
an increase in the market price of the underlying security, any loss resulting
from a closing purchase transaction is likely to be offset in whole or in part
by appreciation of the underlying security that the writer continues to own.

Transactions in options are subject to limitations, established by each
of the exchanges upon which options are traded, governing the maximum number of
options which may be written or held by a single investor or group of investors
acting in concert, regardless of whether the options are held in one or more
accounts. Thus, the number of options a Fund may hold may be affected by options
held by other advisory clients of Founders. As of the date of this Statement of
Additional Information, Founders believes that these limitations will not affect
the purchase of stock index options by the Funds.

All of the Funds, except the Special, Growth, Government Securities and
Money Market Funds, may write (sell) options on stocks. These Funds retain the
freedom to write options on any or all of their portfolio securities and at such
time and from time to time as Founders shall determine to be appropriate. No
specified percentage of a Fund's assets is invested in securities with respect
to which options may be written. The extent of a Fund's option writing
activities will vary from time to time depending upon Founders' evaluation of
market, economic and monetary conditions.

When a Fund purchases a security with respect to which it intends to
write an option, it is likely that the option will be written concurrently with
or shortly after purchase. The Fund will write an option on a particular

<PAGE>

security only if Founders believes that a liquid secondary market will exist on
an exchange for options of the same series, which will permit the Fund to enter
into a closing purchase transaction and close out its position. If the Fund
desires to sell a particular security on which it has written an option, it will
effect a closing purchase transaction prior to or concurrently with the sale of
the security.

A Fund may enter into closing purchase transactions to reduce the
percentage of its assets against which options are written, to realize a profit
on a previously written option, or to enable it to write another option on the
underlying security with either a different exercise price or expiration time or
both.

Options written by a Fund will normally have expiration dates between
three and nine months from the date written. The exercise prices of options may
be below, equal to or above the current market values of the underlying
securities at the times the options are written. From time to time for tax and
other reasons, the Fund may purchase an underlying security for delivery in
accordance with an exercise notice assigned to it, rather than delivering such
security from its portfolio.

As indicated, all Funds except the Balanced, Money Market and
Government Securities Funds may purchase options on stock indices. A stock index
measures the movement of a certain group of stocks by assigning relative values
to the stocks included in the index. Options on stock indices are similar to
options on securities. However, because options on stock indices do not involve
the delivery of an underlying security, the option represents the holder's right
to obtain from the writer in cash a fixed multiple of the amount by which the
exercise price exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the exercise date. The Funds
purchase put options on stock indices to protect the Funds' portfolios against
decline in value. The Funds purchase call options on stock indices to establish
a position in equities as a temporary substitute for purchasing individual
stocks that then may be acquired over the option period in a manner designed to
minimize adverse price movements. Purchasing put and call options on stock
indices also permits greater time for evaluation of investment alternatives.
When Founders believes that the trend of stock prices may be downward,
particularly for a short period of time, the purchase of put options on stock
indices may eliminate the need to sell less liquid stocks and possibly
repurchase them later. The purpose of these transactions is not to generate
gain, but to "hedge" against possible loss. Therefore, successful hedging
activity will not produce net gain to the Funds. Any gain in the price of a call
option is likely to be offset by higher prices the Funds must pay in rising
markets, as cash reserves are invested. In declining markets, any increase in
the price of a put option is likely to be offset by lower prices of stocks owned
by the Funds.

Upon purchase by all Funds except Balanced, Money Market and Government
Securities Funds of a call on a stock index, the Funds pay a premium and have
the right during the call period to require the seller of such a call, upon
exercise of the call, to deliver to the Funds an amount of cash if the closing
level of the stock index upon which the call is based is above the exercise
price of the call. This amount of cash is equal to the difference between the
closing price of the index and the lesser exercise price of the call. Upon
purchase by the Funds of a put on a stock index, the Funds pay a premium and
have the right during the put period to require the seller of such a put, upon
exercise of the put, to deliver to the Funds an amount of cash if the closing
level of the stock index upon which the put is based is below the exercise price
of the put. This amount of cash is equal to the difference between the exercise
price of the put and the lesser closing level of the stock index. Buying stock
index options permits the Funds, if cash is deliverable to them during the them

<PAGE>

during the option period, either to sell the option or to require delivery of
the cash. If such cash is not so deliverable, and as a result the option is not
exercised or sold, the option becomes worthless at its expiration date.

The Funds may purchase only those put and call options that are listed
on a domestic exchange or quoted on the automatic quotation system of the
National Association of Securities Dealers, Inc. ("NASDAQ"). Options traded on
stock exchanges are either broadly based, such as the Standard & Poor's 500
Stock Index and 100 Stock Index, or involve stocks in a designated industry or
group of industries. The Funds may utilize either broadly based or market
segment indices in seeking a better correlation between the indices and the
Funds' portfolios.

The value of a stock index option depends upon movements in the level
of the stock index rather than the price of a particular stock. Whether a Fund
will realize a gain or a loss from its option activities depends upon movements
in the level of stock prices generally or in an industry or market segment,
rather than movements in the price of a particular stock. Purchasing call and
put options on stock indices involves the risk that Founders may be incorrect in
its expectations as to the extent of the various stock market movements or the
time within which the options are based. To compensate for this imperfect
correlation, a Fund may enter into options transactions in a greater dollar
amount than the securities being hedged if the historical volatility of the
prices of the securities being hedged is different from the historical
volatility of the stock index.

One risk of holding a put or a call option is that if the option is not
sold or exercised prior to its expiration, it becomes worthless. However, this
risk is limited to the premium paid by the Fund. Other risks of purchasing
options include the possibility that a liquid secondary market may not exist at
a time when the Fund may wish to close out an option position. It is also
possible that trading in options on stock indices might be halted at a time when
the securities markets generally were to remain open. In cases where the market
value of an issue supporting a covered call option exceeds the strike price plus
the premium on the call, the portfolio will lose the right to appreciation of
the stock for the duration of the option.

FUTURES CONTRACTS

All Funds except Money Market Fund may enter into futures contracts for
hedging purposes. U.S. futures contracts are traded on exchanges which have been
designated "contract markets" by the Commodity Futures Trading Commission
("CFTC") and must be executed through a futures commission merchant (an "FCM")
or brokerage firm which is a member of the relevant contract market. Although
futures contracts by their terms call for the delivery or acquisition of the
underlying commodities or a cash payment based on the value of the underlying
commodities, in most cases the contractual obligation is offset before the
delivery date of the contract by buying, in the case of a contractual obligation
to sell, or selling, in the case of a contractual obligation to buy, an
identical futures contract on a commodities exchange. Such a transaction cancels
the obligation to make or take delivery of the commodities.

The acquisition or sale of a futures contract could occur, for example,
if a Fund held or considered purchasing equity securities and sought to protect
itself from fluctuations in prices without buying or selling those securities.
For example, if prices were expected to decrease, a Fund could sell equity index
futures contracts, thereby hoping to offset a potential decline in the value of
equity securities in the portfolio by a corresponding increase in the value of
the futures contract position held by the Fund and thereby prevent the Fund's
net asset value from declining as much as it otherwise would have. A Fund also
could protect against potential price declines by selling portfolio securities

<PAGE>

and investing in money market instruments. However, since the futures market is
more liquid than the cash market, the use of futures contracts as an investment
technique would allow the Fund to maintain a defensive position without having
to sell portfolio securities.

Similarly, when prices of equity securities are expected to increase,
futures contracts could be bought to attempt to hedge against the possibility of
having to buy equity securities at higher prices. This technique is sometimes
known as an anticipatory hedge. Since the fluctuations in the value of futures
contracts should be similar to those of equity securities, a Fund could take
advantage of the potential rise in the value of equity securities without buying
them until the market had stabilized. At that time, the futures contracts could
be liquidated and the Fund could buy equity securities on the cash market.

The Funds may also enter into interest rate and foreign currency
futures contracts. Interest rate futures contracts currently are traded on a
variety of fixed-income securities, including long-term U.S. Treasury Bonds,
Treasury Notes, Government National Mortgage Association modified pass-through
mortgage-backed securities, U.S. Treasury Bills, bank certificates of deposit
and commercial paper. Foreign currency futures contracts currently are traded on
the British pound, Canadian dollar, Japanese yen, Swiss franc, West German mark
and on Eurodollar deposits.

Futures contracts entail risks. Although Founders believes that use of
such contracts could benefit the Funds, if Founder's investment judgment were
incorrect, a Fund's overall performance could be worse than if the Fund had not
entered into futures contracts. For example, if a Fund hedged against the
effects of a possible decrease in prices of securities held in the Fund's
portfolio and prices increased instead, the Fund would lose part or all of the
benefit of the increased value of these securities because of offsetting losses
in the Fund's futures positions. In addition, if the Fund had insufficient cash,
it might have to sell securities from its portfolio to meet margin requirements.
Those sales could be at increased prices which reflect the rising market and
could occur at a time when the sales would be disadvantageous to the Fund.

The ordinary spreads between prices in the cash and futures markets,
due to differences in the nature of those markets, are subject to distortions.
First, the ability of investors to close out futures contracts through
offsetting transactions could distort the normal price relationship between the
cash and futures markets. Second, to the extent participants decide to make or
take delivery, liquidity in the futures markets could be reduced and prices in
the futures markets distorted. Third, from the point of view of speculators, the
margin deposit requirements in the futures markets are less onerous than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures markets may cause temporary price distortions. Due to
the possibility of the foregoing distortions, a correct forecast of general
price trends still may not result in a successful use of futures.

The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
the Funds would not match exactly a Fund's current or potential investments. A
Fund might buy or sell futures contracts based on underlying instruments with
different characteristics from the securities in which it would typically invest
- -- for example, by hedging investments in portfolio securities with a futures
contract based on a broad index of securities -- which involves a risk that the
futures position might not correlate precisely with the performance of the
Fund's investments.

<PAGE>

Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with a Fund's
investments. Futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments, and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between a Fund's investments and its futures positions could also
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts. A
Fund would be able to buy or sell futures contracts with a greater or lesser
value than the securities it wished to hedge or was considering purchasing in
order to attempt to compensate for differences in historical volatility between
the futures contract and the securities, although this might not be successful
in all cases. If price changes in the Fund's futures positions were poorly
correlated with its other investments, its futures positions could fail to
produce desired gains or result in losses that would not be offset by the gains
in the Fund's other investments.

A Fund will not, as to any positions, whether long, short or a
combination thereof, enter into futures and options thereon for which the
aggregate initial margins and premiums exceed 5% of the fair market value of its
assets after taking into account unrealized profits and losses on options
entered into. In the case of an option that is "in-the-money," the in-the-money
amount may be excluded in computing such 5%. In general a call option on a
future is "in-the-money" if the value of the future exceeds the exercise
("strike") price of the call; a put option on a future is "in-the-money" if the
value of the future which is the subject of the put is exceeded by the strike
price of the put. The Funds may use futures and options thereon solely for bona
fide hedging or for other non-speculative purposes. As to long positions which
are used as part of a Fund's portfolio strategies and are incidental to its
activities in the underlying cash market, the "underlying commodity value" of
the Fund's futures and options thereon must not exceed the sum of (i) cash set
aside in an identifiable manner, or short-term U.S. debt obligations or other
dollar-denominated high-quality, short-term money instruments so set aside, plus
sums deposited on margin; (ii) cash proceeds from existing investments due in 30
days; and (iii) accrued profits held at the futures commission merchant. The
"underlying commodity value" of a future is computed by multiplying the size of
the future by the daily settlement price of the future. For an option on a
future, that value is the underlying commodity value of the future underlying
the option.

Unlike the situation in which a Fund purchases or sells a security, no
price is paid or received by a Fund upon the purchase or sale of a futures
contract. Instead, the Fund is required to deposit in a segregated asset account
an amount of cash or qualifying securities (currently U.S. Treasury bills),
currently in a minimum amount of $15,000. This is called "initial margin." Such
initial margin is in the nature of a performance bond or good faith deposit on
the contract. However, since losses on open contracts are required to be
reflected in cash in the form of variation margin payments, the Fund may be
required to make additional payments during the term of a contract to its
broker. Such payments would be required, for example, where, during the term of
an interest rate futures contract purchased by the Fund, there was a general
increase in interest rates, thereby making the Fund's portfolio securities less
valuable. In all instances involving the purchase of financial futures contracts
by a Fund, an amount of cash together with such other securities as permitted by
applicable regulatory authorities to be utilized for such purpose, at least
equal to the market value of the future contracts, will be deposited in a
segregated account with the Fund's custodian to collateralize the position. At
any time prior to the expiration of a futures contract, the Fund may elect to
close its position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract.

<PAGE>

Because futures contracts are generally settled within a day from the
date they are closed out, compared with a settlement period of three business
days for most types of securities, the futures markets can provide superior
liquidity to the securities markets. Nevertheless, there is no assurance a
liquid secondary market will exist for any particular futures contract at any
particular time. In addition, futures exchanges may establish daily price
fluctuation limits for futures contracts and may halt trading if a contract's
price moves upward or downward more than the limit in a given day. On volatile
trading days when the price fluctuation limit is reached, it would be impossible
for a Fund to enter into new positions or close out existing positions. If the
secondary market for a futures contract were not liquid because of price
fluctuation limits or otherwise, a Fund would not promptly be able to liquidate
unfavorable futures positions and potentially could be required to continue to
hold a futures position until the delivery date, regardless of changes in its
value. As a result, a Fund's access to other assets held to cover its futures
positions also could be impaired.

OPTIONS ON FUTURES CONTRACTS

All Funds except Special, Balanced, Money Market and Government
Securities Funds may purchase put and call options on futures contracts. An
option on a futures contract provides the holder with the right to enter into a
"long" position in the underlying futures contract, in the case of a call
option, or a "short" position in the underlying futures contract, in the case of
a put option, at a fixed exercise price to a stated expiration date. Upon
exercise of the option by the holder, a contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event that an option is exercised, the parties will be subject to
all the risks associated with the trading of futures contracts, such as payment
of variation margin deposits.

A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's profit
or loss on the transaction.

An option, whether based on a futures contract, a stock index or a
security, becomes worthless to the holder when it expires. Upon exercise of an
option, the exchange or contract market clearing house assigns exercise notices
on a random basis to those of its members which have written options of the same
series and with the same expiration date. A brokerage firm receiving such
notices then assigns them on a random basis to those of its customers which have
written options of the same series and expiration date. A writer therefore has
no control over whether an option will be exercised against it, nor over the
time of such exercise.

The purchase of a call option on a futures contract is similar in some
respects to the purchase of a call option on an individual security. See
"Options on Foreign Currencies" below. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying instrument, ownership of the option may or may not
be less risky than ownership of the futures contract or the underlying
instrument. As with the purchase of futures contracts, when a Fund is not fully
invested it could buy a call option on a futures contract to hedge against a
market advance.

<PAGE>

The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, a Fund would be able to buy a put option on a futures contract to hedge
the Fund's portfolio against the risk of falling prices.

The amount of risk a Fund would assume if it bought an option on a
futures contract would be the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed above, the
purchase of an option also entails the risk that changes in the value of the
underlying futures contract will not fully be reflected in the value of the
options bought.

OPTIONS ON FOREIGN CURRENCIES

All of the Funds except Special, Balanced, Money Market and Government
Securities Funds may buy and sell options on foreign currencies for hedging
purposes in a manner similar to that in which futures on foreign currencies
would be utilized. For example, a decline in the U.S. dollar value of a foreign
currency in which portfolio securities are denominated would reduce the U.S.
dollar value of such securities, even if their value in the foreign currency
remained constant. In order to protect against such diminutions in the value of
portfolio securities, a Fund could buy put options on the foreign currency. If
the value of the currency declines, the Fund would have the right to sell such
currency for a fixed amount in U.S. dollars and would thereby offset, in whole
or in part, the adverse effect on its portfolio which otherwise would have
resulted. Conversely, when a rise is projected in the U.S. dollar value of a
currency in which securities to be acquired are denominated, thereby increasing
the cost of such securities, the Fund could buy call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates.

Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting a Fund to
liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.

The purchase and sale of exchange-traded foreign currency options,
however, is subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities, and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices, or prohibitions on exercise.

<PAGE>

RISK FACTORS OF INVESTING IN FUTURES AND OPTIONS

The successful use of the investment practices described above with
respect to futures contracts, options on futures contracts, and options on
securities indices, securities, and foreign currencies draws upon skills and
experience which are different from those needed to select the other instruments
in which the Funds invest. Should interest or exchange rates or the prices of
securities or financial indices move in an unexpected manner, the Funds may not
achieve the desired benefits of futures and options or may realize losses and
thus be in a worse position than if such strategies had not been used. Unlike
many exchange-traded futures contracts and options on futures contracts, there
are no daily price fluctuation limits with respect to options on currencies and
negotiated or over-the-counter instruments, and adverse market movements could
therefore continue to an unlimited extent over a period of time. In addition,
the correlation between movements in the price of the securities and currencies
hedged or used for cover will not be perfect and could produce unanticipated
losses.

A Fund's ability to dispose of its positions in the foregoing
instruments will depend on the availability of liquid markets in the
instruments. Markets in a number of the instruments are relatively new and still
developing and it is impossible to predict the amount of trading interest that
may exist in those instruments in the future. Particular risks exist with
respect to the use of each of the foregoing instruments and could result in such
adverse consequences to the Funds as the possible loss of the entire premium
paid for an option bought by a Fund, the inability of Balanced Fund, as the
writer of a covered call option, to benefit from the appreciation of the
underlying securities above the exercise price of the option, and the possible
need to defer closing out positions in certain instruments to avoid adverse tax
consequences. As a result, no assurance can be given that the Funds will be able
to use those instruments effectively for the purposes set forth above.

In addition, options on U.S. Government securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges and over-the-counter in foreign
countries. Such transactions are subject to the risk of governmental actions
affecting trading in or the prices of foreign currencies or securities. The
value of such positions also could be affected adversely by (i) other complex
foreign political and economic factors, (ii) lesser availability than in the
United States of data on which to make trading decisions, (iii) delays in a
Fund's ability to act upon economic events occurring in foreign markets during
nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) low trading volume.

FOREIGN SECURITIES

Investments in foreign countries involve certain risks which are not
typically associated with U.S. investments. There may be less publicly available
information about foreign companies comparable to reports and ratings published
about U.S. companies. Foreign companies are not generally subject to uniform
accounting, auditing, and financial reporting standards and requirements
comparable to those applicable to U.S. companies. There also may be less
government supervision and regulation of foreign stock exchanges, brokers and
listed companies than in the United States.

Foreign stock markets may have substantially less volume than the New
York Stock Exchange, and securities of some foreign companies may be less liquid
and may be more volatile than securities of comparable U.S. companies. Brokerage
commissions and other transaction costs on foreign securities exchanges
generally are higher than in the United States.

<PAGE>

Because investment in foreign companies will usually involve currencies
of foreign countries, and because a Fund may temporarily hold funds in bank
deposits in foreign currencies during the course of investment programs, the
value of the assets of the Fund as measured in U.S. dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates and
exchange control regulations, and the Fund may incur costs in connection with
conversion between various currencies. A change in the value of any foreign
currency relative to the U.S. dollar, when the Fund holds that foreign currency
or a security denominated in that foreign currency, will cause a corresponding
change in the dollar value of the Fund assets denominated or traded in that
country. Moreover, there is the possibility of expropriation or confiscatory
taxation, limitations on the removal of funds or other assets of the Fund,
political, economic or social instability or diplomatic developments which could
affect U.S. investments in foreign countries.

Dividends and interest paid by foreign issuers may be subject to
withholding and other foreign taxes, thus reducing the net return on such
investments compared with U.S. investments. The operating expense ratio of a
Fund which invests in foreign securities can be expected to be higher than that
of a fund which invests exclusively in domestic securities, since the expenses
of the Fund, such as foreign custodial costs, are higher. In addition, the Fund
incurs costs in converting assets from one currency to another.

FORWARD CONTRACTS FOR PURCHASE OR SALE OF FOREIGN CURRENCIES

The Funds generally conduct their foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign exchange currency market. When a Fund purchases or sells a security
denominated in a foreign currency, it may enter into a forward foreign currency
contract ("forward contract") for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency involved in the underlying security
transaction. A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the contract. In this manner, a Fund may obtain protection against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar and the foreign currency during the period between the date the security
is purchased or sold and the date upon which payment is made or received.
Although such contracts tend to minimize the risk of loss due to the decline in
the value of the hedged currency, at the same time they tend to limit any
potential gain which might result should the value of such currency increase.
The Funds will not speculate in forward contracts.

Forward contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
Generally a forward contract has no deposit requirement, and no commissions are
charged at any stage for trades. Although foreign exchange dealers do not charge
a fee for conversion, they do realize a profit based on the difference between
the prices at which they buy and sell various currencies. When Founders believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar, Discovery Fund, Frontier Fund, Passport Fund,
International Equity Fund, and Worldwide Growth Fund may each enter into a
forward contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of those Funds' portfolio
securities denominated in such foreign currency. Frontier Fund does not intend
to sell such foreign currencies on a regular or continuous basis, and will not
do so if, as a result, the Fund will have more than 15% of the value of its
total assets committed to the consummation of such foreign currency sales.
Discovery Fund, Frontier Fund, Passport Fund, International Equity Fund, and
Worldwide Growth Fund also will not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the

<PAGE>

contracts would obligate those Funds to deliver an amount of foreign currency in
excess of the value of their portfolio securities or other assets denominated in
that currency. Forward contracts may, from time to time, be considered
illiquid, in which case they would be subject to the respective Funds'
limitation on investing in illiquid securities.

At the consummation of a forward contract for delivery by Discovery
Fund, Frontier Fund, Passport Fund, International Equity Fund, and Worldwide
Growth Fund of a foreign currency, those Funds may either make delivery of the
foreign currency or terminate its contractual obligation to deliver the foreign
currency by purchasing an offsetting contract obligating it to purchase, at the
same maturity date, the same amount of the foreign currency. If the Fund chooses
to make delivery of the foreign currency, it may be required to obtain such
currency through the sale of portfolio securities denominated in such currency
or through conversion of other Fund assets into such currency. It is impossible
to forecast the market value of portfolio securities at the expiration of the
forward contract. Accordingly, it may be necessary for the Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of foreign
currency the Fund is obligated to deliver, and if a decision is made to sell the
security and make delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received on
the sale of the portfolio security if its market value exceeds the amount of
foreign currency the Fund is obligated to deliver.

If Discovery Fund, Frontier Fund, Passport Fund, International Equity
Fund, or Worldwide Growth Fund retain the portfolio security and engage in an
offsetting transaction, they will incur a gain or loss to the extent that there
has been movement in spot or forward contract prices. If any one of those Funds
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund's entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting contract
for the purchase of the foreign currency, the Fund will realize a gain to the
extent the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the Fund
will suffer a loss to the extent the price of the currency it has agreed to
purchase exceeds the price of the currency it has agreed to sell.

Dealings in forward contracts by Discovery Fund, Frontier Fund,
Passport Fund, International Equity Fund, and Worldwide Growth Fund will be
limited to the transactions described above. Of course, those Funds are not
required to enter into such transactions with regard to their foreign
currency-denominated securities and will not do so unless deemed appropriate by
Founders. It also should be realized that this method of protecting the value of
the Funds' portfolio securities against a decline in the value of a currency
does not eliminate fluctuations in the underlying prices of the securities. It
simply establishes a rate of exchange which can be achieved at some future point
in time. Additionally, although such contracts tend to minimize the risk of loss
due to the decline in the value of the hedged currency, at the same time they
tend to limit any potential gain which might result should the value of such
currency increase.

ILLIQUID SECURITIES

As discussed in the Prospectus, certain of the Funds may invest up to
15% of the value of their net assets, measured at the time of investment, in
investments which are not readily marketable. Subject to the overall 15%
limitation upon investments which are not readily marketable, certain of these
Funds may invest up to 5% of the value of their net assets in restricted
securities. Restricted securities are securities that may not be resold to the

<PAGE>

public without registration under the Securities Act of 1933 (the "1933 Act").
Restricted securities (other than liquid Rule 144A securities, discussed below)
and securities which are not readily marketable are illiquid securities.
Illiquid securities are securities which may be subject to resale restrictions
or which, due to their market or the nature of the security, have no readily
available markets for their disposition. These limitations on resale and
marketability may have the effect of preventing a Fund from disposing of such a
security at the time desired or at a reasonable price. In addition, in order to
resell a restricted security, a Fund might have to bear the expense and incur
the delays associated with effecting registration. In purchasing illiquid
securities, no Funds intend to engage in underwriting activities, except to the
extent a Fund may be deemed to be a statutory underwriter under the 1933 Act in
disposing of such securities. Illiquid securities will be purchased for
investment purposes only and not for the purpose of exercising control or
management of other companies.

RULE 144A SECURITIES

In recent years, a large institutional market has developed for certain
securities that are not registered under the 1933 Act. Institutional investors
generally will not seek to sell these instruments to the general public, but
instead will often depend on an efficient institutional market in which such
unregistered securities can readily be resold or on an issuer's ability to honor
a demand for repayment. Therefore, the fact that there are contractual or legal
restrictions on resale to the general public or certain institutions is not
dispositive of the liquidity of such investments.

Rule 144A under the 1933 Act establishes a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Certain of the Funds may invest in Rule 144A
securities which, as disclosed in the Prospectus, are restricted securities
which may or may not be readily marketable. Rule 144A securities are readily
marketable if institutional markets for the securities develop pursuant to Rule
144A which provide both readily ascertainable values for the securities and the
ability to liquidate the securities when liquidation is deemed necessary or
advisable. However, an insufficient number of qualified institutional buyers
interested in purchasing a Rule 144A security held by one of the Funds could
affect adversely the marketability of the security. In such an instance, the
Fund might be unable to dispose of the security promptly or at reasonable
prices.

The board of directors of the Funds has delegated to Founders the
authority to determine that a liquid market exists for securities eligible for
resale pursuant to Rule 144A under the 1933 Act, or any successor to such rule,
and that such securities are not subject to the Funds' limitations on investing
in illiquid securities, securities that are not readily marketable, or
securities which do not have readily available market quotations. Under
guidelines established by the directors, Founders will consider the following
factors, among others, in making this determination: (1) the unregistered nature
of a Rule 144A security; (2) the frequency of trades and quotes for the
security; (3) the number of dealers willing to purchase or sell the security and
the number of additional potential purchasers; (4) dealer undertakings to make a
market in the security; and (5) the nature of the security and the nature of
market place trades (e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfers). As indicated, Rule
144A securities will remain subject to each Fund's respective limitations on
investments in restricted securities, those securities for which there are legal
and contractual restrictions on resale.

<PAGE>

FIXED-INCOME SECURITIES

With the exception of Government Securities and Money Market Funds,
which are prohibited from making such investments, each of the Funds may invest
up to 5% of their assets in convertible securities and preferred stocks which
are unrated or are rated below investment grade either at the time of purchase
or as a result of reduction in rating after purchase. Investments in lower rated
or unrated securities are generally considered to be of high risk. Lower rated
debt securities, commonly referred to as junk bonds, are generally subject to
two kinds of risk, credit risk and market risk. Credit risk relates to the
ability of the issuer to meet interest or principal payments, or both, as they
come due. The ratings given a security by Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's ("S&P") provide a generally useful guide as
to such credit risk. The Appendix to this Statement of Additional Information
provides a description of such debt security ratings. The lower the rating given
a security by a rating service, the greater the credit risk such rating service
perceives to exist with respect to the security. Increasing the amount of a
Fund's assets invested in unrated or lower grade securities, while intended to
increase the yield produced by those assets, will also increase the risk to
which those assets are subject.

Market risk relates to the fact that the market values of debt
securities in which a Fund invests generally will be affected by changes in the
level of interest rates. An increase in interest rates will tend to reduce the
market values of such securities, whereas a decline in interest rates will tend
to increase their values. Medium and lower rated securities (Baa or BBB and
lower) and non-rated securities of comparable quality tend to be subject to
wider fluctuations in yields and market values than higher rated securities and
may have speculative characteristics. In order to decrease the risk in investing
in debt securities, in no event will a Fund ever invest in a debt security rated
below B by Moody's or by S&P. Of course, relying in part on ratings assigned by
credit agencies in making investments will not protect the Funds from the risk
that the securities in which they invest will decline in value, since credit
ratings represent evaluations of the safety of principal, dividend, and interest
payments on debt securities, and not the market values of such securities, and
such ratings may not be changed on a timely basis to reflect subsequent events.

Because investment in medium and lower rated securities involves both
greater credit risk and market risk, achievement of the Funds' investment
objectives may be more dependent on the investment adviser's own credit analysis
than is the case for funds that do not invest in such securities. In addition,
the share price and yield of these Funds may fluctuate more than in the case of
funds investing in higher quality, shorter term securities. Moreover, a
significant economic downturn or major increase in interest rates may result in
issuers of lower rated securities experiencing increased financial stress, which
would adversely affect their ability to service their principal, dividend, and
interest obligations, meet projected business goals, and obtain additional
financing. In this regard, it should be noted that while the market for high
yield debt securities has been in existence for many years and from time to time
has experienced economic downturns in recent years, this market has involved a
significant increase in the use of high yield debt securities to fund highly
leveraged corporate acquisitions and restructurings. Past experience may not,
therefore, provide an accurate indication of future performance of the high
yield debt securities market, particularly during periods of economic recession.
Furthermore, expenses incurred in recovering an investment in a defaulted
security may adversely affect a Fund's net asset value. Finally, while the
Funds' investment adviser attempts to limit purchases of medium and lower rated
securities to securities having an established secondary market, the secondary
market for such securities may be less liquid than the market for higher quality
securities. The reduced liquidity of the secondary market for such securities
may adversely affect the market price of, and ability of a Fund to value,

<PAGE>

particular securities at certain times, thereby making it difficult to make
specific valuation determinations. The Funds do not invest in any medium and
lower rated securities which present special tax consequences, such as zero
coupon bonds or pay-in-kind bonds.

The Funds' investment adviser seeks to reduce the overall risks
associated with the Funds' investments through diversification and consideration
of factors affecting the value of securities it considers relevant. No assurance
can be given, however, regarding the degree of success that will be achieved in
this regard or that the Funds will achieve their investment objectives.

REPURCHASE AGREEMENTS

As discussed in the Funds' Prospectus, the Funds may enter into
repurchase agreements with respect to money market instruments eligible for
investment by the Funds with member banks of the federal reserve system,
registered broker-dealers, and registered government securities dealers. A
repurchase agreement may be considered a loan collateralized by securities. The
resale price reflects an agreed upon interest rate effective for the period the
instrument is held by a Fund and is unrelated to the interest rate on the
underlying instrument. In these transactions, the collateral securities acquired
by a Fund (including accrued interest earned thereon) must have a total value at
least equal to the value of the repurchase agreement, and are held as collateral
by the Funds' custodian bank until the repurchase agreement is completed.
Repurchase agreements maturing in more than seven days are considered illiquid
and will be subject to each Fund's limitation with respect to illiquid
securities. For a further explanation, see "Investment Policies Involving
Special Risks- Illiquid Securities."

None of the Funds have adopted any limits on the amounts of their total
assets that may be invested in repurchase agreements which mature in less than
seven days. Each of the Funds except Money Market Fund may invest up to 15% of
the market value of its net assets, measured at the time of purchase, in
securities which are not readily marketable, including repurchase agreements
maturing in more than seven days. Money Market Fund may enter into repurchase
agreements if, as a result thereof, no more than 10% of the market value of its
net assets would be subject to repurchase agreements maturing in more than seven
days.

CONVERTIBLE SECURITIES

All Funds except Government Securities and Money Market Funds may buy
securities convertible into common stock if, for example, the Fund's investment
adviser believes that a company's convertible securities are undervalued in the
market. Convertible securities eligible for purchase include convertible bonds,
convertible preferred stocks, and warrants. A warrant is an instrument issued by
a corporation which gives the holder the right to subscribe to a specific amount
of the corporation's capital stock at a set price for a specified period of
time. Warrants do not represent ownership of the securities, but only the right
to buy the securities. The prices of warrants do not necessarily move parallel
to the prices of underlying securities. Warrants may be considered speculative
in that they have no voting rights, pay no dividends, and have no rights with
respect to the assets of a corporation issuing them. Warrant positions will not
be used to increase the leverage of a Fund; consequently, warrant positions are
generally accompanied by cash positions equivalent to the required exercise
amount.

<PAGE>

MORTGAGE-RELATED SECURITIES

Government Securities Fund may invest in mortgage-related securities,
which are interests in pools of mortgage loans made to residential home buyers,
including mortgage loans made by savings and loan institutions, mortgage
bankers, commercial banks and others. Pools of mortgage loans are assembled as
securities for sale to investors by various governmental and government-related
organizations (see "Mortgage Pass-Through Securities"). The Fund may also invest
in debt securities which are secured with collateral consisting of
mortgage-related securities (see "Collateralized Mortgage Obligations"), and in
other types of mortgage-related securities.

MORTGAGE PASS-THROUGH SECURITIES. Interests in pools of
mortgage-related securities differ from other forms of debt securities, which
normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or at specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their residential or
commercial mortgage loans, net of any fees paid to the issuer or guarantor of
such securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying property, refinancing or foreclosure,
net of fees or costs which may be incurred. Some mortgage-related securities
(such as securities issued by the Government National Mortgage Association
("GNMA")) are described as "modified pass-through." These securities entitle the
holder to receive all interest and principal payments owed on the mortgage pool,
net of certain fees, at the scheduled payment dates regardless of whether or not
the mortgagor actually makes the payment.

GNMA is the principal governmental guarantor of mortgage-related
securities. GNMA is a wholly owned U.S. government corporation within the
Department of Housing and Urban Development. GNMA is authorized to guarantee,
with the full faith and credit of the U.S. government, the timely payment of
principal and interest on securities issued by institutions approved by GNMA
(such as savings and loan institutions, commercial banks and mortgage bankers)
and backed by pools of FHAinsured or VA-guaranteed mortgages.

Government-related guarantors (i.e., not backed by the full faith and
credit of the U.S. government) include the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"). FNMA is a
government-sponsored corporation owned entirely by private stockholders. It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases conventional (i.e., not insured or guaranteed by any government
agency) residential mortgages from a list of approved seller/servicers which
include state and federally chartered savings and loan associations, mutual
savings banks, commercial banks and credit unions and mortgage bankers.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. government.

FHLMC was created by Congress in 1970 for the purpose of increasing the
availability of mortgage credit for residential housing. It is a
government-sponsored corporation formerly owned by the twelve Federal Home Loan
Banks and now owned entirely by private stockholders. FHLMC issues Participation
Certificates ("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and
ultimate collection of principal, but PCs are not backed by the full faith and
credit of the U.S. government.

<PAGE>

Mortgage-backed securities that are issued or guaranteed by the U.S.
government, its agencies or instrumentalities, are not subject to a Fund's
industry concentration restrictions, by virtue of the exclusion from that test
available to all U.S. government securities. The assets underlying such
securities may be represented by a portfolio of first lien residential mortgages
(including both whole mortgage loans and mortgage participation interests) or
portfolios of mortgage pass-through securities issued or guaranteed by GNMA,
FNMA or FHLMC. Mortgage loans underlying a mortgage-related security may in turn
be insured or guaranteed by the Federal Housing Administration or the Department
of Veterans Affairs.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). A CMO is a hybrid between
a mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, semiannually. CMOs may be
collateralized by whole mortgage loans, but are more typically collateralized by
portfolios of mortgage pass-through securities guaranteed by GNMA, FHLMC, or
FNMA, and their income streams.

CMOs are structured into multiple classes, each bearing a different
stated maturity. Actual maturity and average life will depend upon the
prepayment experience of the collateral. CMOs provide for a modified form of
call protection through a DE FACTO breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been
retired. An investor is partially guarded against a sooner than desired return
of principal because of the sequential payments.

In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering
are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on the Series Z Bond is accrued and added to
principal and a like amount is paid as principal on the Series A, B, or C Bond
currently being paid off. When the Series A, B, and C Bonds are paid in full,
interest and principal on the Series Z Bond begin to be paid currently. With
some CMOs, the issuer serves as a conduit to allow loan originators (primarily
builders or savings and loan associations) to borrow against their loan
portfolios.

FHLMC CMOS. FHLMC CMOs are debt obligations of FHLMC issued in multiple
classes having different maturity dates which are secured by the pledge of a
pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC PCs,
payments of principal and interest on the CMOs are made semiannually, as opposed
to monthly. The amount of principal payable on each semiannual payment date is
determined in accordance with FHLMC's mandatory sinking fund schedule, which, in
turn, is equal to approximately 100% of FHA prepayment experience applied to the
mortgage collateral pool. All sinking fund payments in the CMOs are allocated to
the retirement of the individual classes of bonds in the order of their stated
maturities. Payment of principal on the mortgage loans in the collateral pool in
excess of the amount of FHLMC's minimum sinking fund obligation for any payment
date are paid to the holders of the CMOs as additional sinking fund payments.
Because of the "pass-through" nature of all principal payments received on the
collateral pool in excess of FHLMC's minimum sinking fund requirement, the rate
at which principal of the CMOs is actually repaid is likely to be such that each
class of bonds will be retired in advance of its scheduled maturity date.

<PAGE>

If collection of principal (including prepayments) on the mortgage
loans during any semiannual payment period is not sufficient to meet FHLMC's
minimum sinking fund obligation on the next sinking fund payment date, FHLMC
agrees to make up the deficiency from its general funds.

Criteria for the mortgage loans in the pool backing the FHLMC CMOs are
identical to those of FHLMC PCs. FHLMC has the right to substitute collateral in
the event of delinquencies and/or defaults.

RISKS OF MORTGAGE-RELATED SECURITIES. Investment in mortgage-backed
securities poses several risks, including prepayment, market, and credit risk.
Prepayment risk reflects the risk that borrowers may prepay their mortgages
faster than expected, thereby affecting the investment's average life and
perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely
controlled by the borrower. Borrowers are most likely to exercise prepayment
options at the time when it is least advantageous to investors, generally
prepaying mortgages as interest rates fall, and slowing payments as interest
rates rise. Besides the effect of prevailing interest rates, the rate of
prepayment and refinancing of mortgages may also be affected by home value
appreciation, ease of the refinancing process and local economic conditions.

Market risk reflects the risk that the price of the security may
fluctuate over time. The price of mortgage-backed securities may be particularly
sensitive to prevailing interest rates, the length of time the security is
expected to be outstanding, and the liquidity of the issue. In a period of
unstable interest rates, there may be decreased demand for certain types of
mortgage-backed securities, and a fund invested in such securities wishing to
sell them may find it difficult to find a buyer, which may in turn decrease the
price at which they may be sold.

Credit risk reflects the risk that a Fund may not receive all or part
of its principal because the issuer or credit enhancer has defaulted on its
obligations. Obligations issued by U.S. government-related entities are
guaranteed as to the payment of principal and interest, but are not backed by
the full faith and credit of the U.S. government. With respect to GNMA
certificates, although GNMA guarantees timely payment even if homeowners delay
or default, tracking the "pass-through" payments may, at times, be difficult.

INVESTMENT RESTRICTIONS

The investment restrictions set forth below are fundamental
("Fundamental") policies of each Fund, I.E., they may not be changed with
respect to a Fund without approval of the lesser of (i) 67% or more of the
Fund's shares present at a meeting if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares of the Fund. Other investment practices which
may be changed by the Board of Directors without the approval of shareholders to
the extent permitted by applicable law, regulation or regulatory policy are
considered non-fundamental ("Non-Fundamental"). If a percentage restriction is
adhered to at the time of investment, a later increase or decrease in percentage
beyond the specified limit that results from a change in values or net assets
will not be considered a violation.

Subject to the preceding considerations, as a Fundamental or
Non-Fundamental restriction, each Fund may not:

<PAGE>

FUNDAMENTAL

1. Purchase any securities on margin except to obtain such short-term
credits as may be necessary for the clearance of transactions.

2. Sell securities short. Special Fund may make short sales under
certain circumstances as described elsewhere in this Statement of Additional
Information under the Fund's Fundamental Policies.

3. Make loans to other persons; the purchase of a portion of an issue
of publicly distributed bonds, debentures or other securities is not considered
the making of a loan by a Fund. A Fund may also enter into repurchase agreements
by purchasing U.S. government securities with a simultaneous agreement with
the seller to repurchase them at the original purchase price plus accrued
interest.

4. Underwrite the securities of other issuers.

5. Invest in commodities, commodity futures contracts, real estate,
real estate mortgage loans or other illiquid interests in real estate, including
limited partnership interests therein, except that a Fund may invest in
securities of issuers which invest in commodities, commodity futures, real
estate, real estate mortgage loans or other illiquid interests in real estate,
and in readily marketable interests in real estate investment trusts.

6. Make any investment which would concentrate 25% or more of a Fund's
total assets in the securities of issuers having their principal business
activities in the same industry.

7. Issue any senior securities.

NON-FUNDAMENTAL

1. Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although a Fund may invest in the securities of
issuers which invest in or sponsor such programs or leases.

2. With the exception of Money Market Fund, invest more than 15% of the
market value of its net assets in securities which are not readily marketable,
including repurchase agreements maturing in over seven days and foreign
securities not listed on a recognized foreign or domestic exchange. Money Market
Fund may invest up to 10% of its net assets in repurchase agreements maturing in
over seven days.

As a non-fundamental investment policy, in periods of uncertain market
and economic conditions, as determined by each Fund's investment adviser, each
Fund may depart from its basic investment objective and assume a defensive
position with all or a large portion of its assets temporarily invested in high
quality corporate bonds or notes and government issues, or held in cash.

The following is a list of each Fund's Fundamental and Non-Fundamental
investment restrictions, as indicated. As to each Fund, the Fund may not:

<PAGE>

DISCOVERY FUND

FUNDAMENTAL

1. Invest in commodities, commodity futures contracts, real estate,
real estate mortgage loans or other illiquid interests in real estate, except
that (i) the Fund may invest in securities of issuers which invest in
commodities, commodity futures, real estate, real estate mortgage loans or other
illiquid interests in real estate and (ii) the Fund may enter into forward
foreign currency exchange contracts.

2. Make any investment which would concentrate 25% or more of a Fund's
total assets in the securities of issuers having their principal business
activities in the same industry, provided that this limitation does not apply to
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. In applying this restriction, the Fund uses industry
classifications based, where applicable, on BRIDGE INFORMATION SYSTEMS, REUTERS,
the S&P STOCK GUIDE published by Standard & Poor's, information obtained from
Bloomberg L.P. and Moody's International, and/or the prospectus of the issuing
company. Selection of an appropriate industry classification resource will be
made by the Fund's portfolio manager in the exercise of his or her reasonable
discretion.

3. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

2. Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting securities of any single issuer.

3. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

4. Purchase securities of other investment companies, except that the
Fund may purchase such securities in the open market where no commission or
profit to a sponsor or dealer other than the customary broker's commission
results from such purchase, and only if immediately thereafter (a) no more than
3% of the voting securities of any one investment company is owned in the
aggregate by the Fund and all other Funds, (b) no more than 5% of the value of
the total assets of the Fund would be invested in any one investment company,
and (c) no more than 10% of the value of the total assets of the Fund and all
other Funds would be invested in the securities of all such investment
companies. Should the Fund purchase securities of other investment companies,
shareholders may incur additional management, advisory, and distribution fees.
The Fund may acquire such securities if they are acquired in connection with a
purchase or acquisition in accordance with a plan of reorganization, merger or
consolidation.

5. Invest in companies for the purpose of exercising control or
management.

6. Pledge, mortgage or hypothecate its assets except to secure
permitted borrowings, and then only in an amount up to 15% of the value of the
Fund's net assets taken at the lower of cost or market value at the time of such
borrowings.

<PAGE>

7. Invest more than 5% of the market value of its net assets in
restricted securities.

8. Purchase warrants, valued at the lower of cost or market, in excess
of 5% of total assets, except that the purchase of warrants not listed on the
New York or American Stock Exchanges is limited to 2% of total net assets.

9. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's total assets would be invested
in securities of that issuer.

The Fund may invest up to 30% of the market value of its total assets
in foreign securities. This restriction does not apply to dollar-denominated
American Depository Receipts which are traded in the United States on exchanges
or over-the-counter.

FRONTIER FUND

FUNDAMENTAL

2. Make any investment which would concentrate 25% or more of the
Fund's total assets in the securities of issuers having their principal business
activities in the same industry, provided that this limitation does not apply to
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. In applying this restriction, the Fund uses industry
classifications based, where applicable, on BRIDGE INFORMATION SYSTEMS, REUTERS,
the S&P STOCK GUIDE published by Standard & Poor's, information obtained from
Bloomberg L.P. and Moody's International, and/or the prospectus of the issuing
company. Selection of an appropriate industry classification resource will be
made by the Fund's portfolio manager in the exercise of his or her reasonable
discretion.

3. Invest in restricted securities.

4. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

2. Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting securities of any single issuer.

3. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

<PAGE>

5. Invest in companies for the purpose of exercising control or
management.

7. Purchase warrants, valued at the lower of cost or market, in excess
of 5% of total assets, except that the purchase of warrants not listed on the
New York or American Stock Exchanges is limited to 2% of total net assets.

8. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of the Fund's total assets would be
invested in securities of that issuer.

The Fund may invest without limitation in U.S. or foreign securities,
although it normally will be at least 50% invested in U.S. companies, with no
more than 25% of its total assets invested in any one foreign country.

PASSPORT FUND

FUNDAMENTAL

<PAGE>

3. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

2. Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting securities of any single issuer.

3. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

5. Invest in companies for the purpose of exercising control or
management.

7. Invest more than 5% of the market value of its net assets in
restricted securities.

9. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of the Fund's total assets would be
invested in securities of that issuer.

BLUE CHIP FUND

FUNDAMENTAL

<PAGE>

illiquid interests in real estate and (ii) the Fund may hedge a foreign
securities transaction by entering into forward foreign currency transactions.

3. Invest in restricted securities.

4. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

2. Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting securities of any single issuer.

3. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

5. Invest in companies for the purpose of exercising control or
management.

<PAGE>

SPECIAL FUND

FUNDAMENTAL

1. Sell securities short, except that the Fund may sell securities
short provided that at all times during which a short position is open it owns
an equal amount of such securities or by virtue of ownership of convertible or
exchangeable securities it has the right, without payment of further
consideration, to obtain through the conversion or exchange of such other
securities an equal amount of the securities sold short, and unless not more
than 15% of the Fund's net assets (taken at market or other current value) are
held as collateral for such sales at any one time.

2. Underwrite the securities of other issuers, except in those
instances where the Fund acquires restricted securities which it would not be
free to sell without registering and being deemed an underwriter for purposes of
the Securities Act of 1933.

3. Invest in commodities, commodity futures contracts, real estate,
real estate mortgage loans or other illiquid interests in real estate, except
that (i) the Fund may invest in securities of issuers which invest in
commodities, commodity futures, real estate, real estate mortgage loans or other
illiquid interests in real estate and (ii) the Fund may hedge a foreign
securities transaction by entering into forward foreign currency transactions.

4. Participate in any joint trading account.

5. Purchase or sell puts, calls, straddles, spreads or combinations
thereof except that the Fund may purchase put and call options on stock indices
and enter into closing transactions with respect to such options.

6. Purchase more than 10% of any class of securities or purchase more
than 10% of the voting securities of any single issuer.

7. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

8. Purchase securities of other investment companies, except that the
Fund may purchase such securities in the open market where no commission or
profit to a sponsor or dealer other than the customary broker's commission
results from such purchase, and only if immediately thereafter (a) no more than
3% of the voting securities of any one investment company is owned in the
aggregate by the Fund and all other Funds, (b) no more than 5% of the value of
the total assets of the Fund would be invested in any one investment company,
and (c) no more than 10% of the value of the total assets of the Fund and all
other Funds would be invested in the securities of all such investment

<PAGE>

companies. Should the Fund purchase securities of other investment companies,
shareholders may incur additional management, advisory, and distribution fees.
The Fund may acquire such securities if they are acquired in connection with a
purchase or acquisition in accordance with a plan of reorganization, merger or
consolidation.

9. Acquire or retain the securities of any issuer if any officer or
director of the Company, or any officer or director of its investment adviser or
principal underwriter, owns beneficially more than one-half of 1% of the
issuer's outstanding securities and the aggregate owned by such persons exceeds
5% of such securities.

10. Invest in companies for the purpose of exercising control or
management.

11. Issue any senior securities, except that the Fund may borrow from
banks so long as the requisite asset coverage has been provided.

12. Borrow from banks unless if immediately after such borrowing the
value of the assets of the Fund (including the amount borrowed) less its
liabilities (not including the borrowing) is at least three times the amount of
the borrowing. While borrowings are outstanding, no purchases of securities will
be made. Interest on borrowings will reduce a Fund's income.

13. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. government, its agencies or instrumentalities) if, as
a result, more than 5% of the value of the Fund's total assets would be invested
in securities of that issuer.

NON-FUNDAMENTAL

1. Purchase any securities of other investment companies.

2. Pledge, mortgage or hypothecate its assets except to secure
permitted borrowings, and then only in an amount up to 15% of the value of the
Fund's net assets taken at the lower of cost or market value at the time of such
borrowings.

3. Invest more than 5% of the market value of its net assets in
restricted securities.

4. Purchase warrants, valued at the lower of cost or market, in excess
of 5% of total assets, except that the purchase of warrants not listed on the
New York or American Stock Exchanges is limited to 2% of total net assets.

5. Make any investment which would concentrate 25% or more of a Fund's
total assets in the securities of issuers having their principal business
activities in the same industry, provided that this limitation does not apply to
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. In applying this restriction, the Fund uses industry
classifications based, where applicable, on BRIDGE INFORMATION SYSTEMS, REUTERS,
the S&P STOCK GUIDE published by Standard & Poor's, information obtained from
Bloomberg L.P. and Moody's International Equity, and/or the prospectus of the
issuing company. Selection of an appropriate industry classification resource
will be made by the Fund's portfolio manager in the exercise of his or her
reasonable discretion.

<PAGE>

INTERNATIONAL EQUITY FUND

FUNDAMENTAL

3. Borrow money, except that the Fund may borrow money for temporary or
emergency purposes (not for leveraging or investment) in an aggregate amount not
exceeding 33-1/3% of the value of its total assets (including the amount
borrowed) less liabilities (other than borrowings). Any borrowings that exceed
33-1/3% of the value of the Fund's total assets by reason of a decline in total
assets will be reduced within three days, not including Sundays and holidays, to
the extent necessary to comply with the 33-1/3% limitation. This restriction
shall not prohibit deposits of assets to margin or guarantee positions in
futures, options, or forward contracts, or the segregation of assets in
connection with such contracts.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

2. Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting securities of any single issuer.

3. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

<PAGE>

other Funds would be invested in the securities of all such investment
companies. Should the Fund purchase securities of other investment companies,
shareholders may incur additional management, advisory, and distribution fees.
The Fund may acquire such securities if they are acquired in connection with a
purchase or acquisition in accordance with a plan of reorganization, merger or
consolidation.

5. Invest in companies for the purpose of exercising control or
management.

6. Pledge, mortgage, or hypothecate its assets except to secure
permitted borrowings, and then only in an amount up to 15% of the value of the
Fund's net assets taken at the lower of cost or market value at the time of such
borrowings.

7. Invest more than 5% of the market value of its net assets in
restricted securities.

WORLDWIDE GROWTH FUND

FUNDAMENTAL

3. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

<PAGE>

2. Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting securities of any single issuer.

3. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

5. Invest in companies for the purpose of exercising control or
management.

7. Invest more than 5% of the market value of its net assets in
restricted securities.

GROWTH FUND

FUNDAMENTAL

1. Invest in commodities, commodity futures contracts, real estate,
real estate mortgage loans or other illiquid interests in real estate, except
that (i) the Fund may invest in securities of issuers which invest in
commodities, commodity futures, real estate, real estate mortgage loans or other
illiquid interests in real estate and (ii) the Fund may hedge a foreign
securities transaction by entering into forward foreign currency transactions.

2. Participate in any joint trading account.

3. Purchase more than 10% of any class of securities or purchase more
than 10% of the voting securities of any single issuer.

<PAGE>

4. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

5. Purchase securities of other investment companies, except that the
Fund may purchase such securities in the open market where no commission or
profit to a sponsor or dealer other than the customary broker's commission
results from such purchase, and only if immediately thereafter (a) no more than
3% of the voting securities of any one investment company is owned in the
aggregate by the Fund and all other Funds, (b) no more than 5% of the value of
the total assets of the Fund would be invested in any one investment company,
and (c) no more than 10% of the value of the total assets of the Fund and all
other Funds would be invested in the securities of all such investment
companies. Should the Fund purchase securities of other investment companies,
shareholders may incur additional management, advisory, and distribution fees.
The Fund may acquire such securities if they are acquired in connection with a
purchase or acquisition in accordance with a plan of reorganization, merger or
consolidation.

6. Acquire or retain the securities of any issuer if any officer or
director of the Company, or any officer or director of its investment adviser or
principal underwriter, owns beneficially more than one-half of 1% of the
issuer's outstanding securities and the aggregate owned by such persons exceeds
5% of such securities.

7. Invest in companies for the purpose of exercising control or
management.

8. Pledge, mortgage or hypothecate its assets except to secure
permitted borrowings, and then only in an amount up to 15% of the value of the
Fund's net assets taken at the lower of cost or market value at the time of such
borrowings.

9. Redeem its shares in kind unless the proceeds of cash redemptions
exceed the lesser of $250,000 or 1% of the net asset value of the Fund during
any 90 day period for any one shareholder.

10. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's assets would be invested in
securities of that issuer.

11. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Purchase or sell puts, calls, straddles, spreads or combinations
thereof.

2. Invest more than 5% of the market value of its net assets in
restricted securities.

3. Purchase warrants, valued at the lower of cost or market, in excess
of 5% of total assets, except that the purchase of warrants not listed on the
New York or American Stock Exchanges is limited to 2% of total net assets.

4. Make any investment which would concentrate 25% or more of a Fund's
total assets in the securities of issuers having their principal business
activities in the same industry, provided that this limitation does not apply to

<PAGE>

obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. In applying this restriction, the Fund uses industry
classifications based, where applicable, on BRIDGE INFORMATION SYSTEMS, REUTERS,
the S&P STOCK GUIDE published by Standard & Poor's, information obtained from
Bloomberg L.P. and Moody's International, and/or the prospectus of the issuing
company. Selection of an appropriate industry classification resource will be
made by the Fund's portfolio manager in the exercise of his or her reasonable
discretion.

BALANCED FUND

FUNDAMENTAL

1. Invest in commodities, commodity futures contracts, real estate,
real estate mortgage loans or other illiquid interests in real estate, except
that (i) the Fund may invest in securities of issuers which invest in
commodities, commodity futures, real estate, real estate mortgage loans or other
illiquid interests in real estate and (ii) the Fund may hedge a foreign
securities transaction by entering into forward foreign currency transactions.

2. Participate in any joint trading account.

3. Purchase or sell puts, calls, straddles, spreads or combinations
thereof except that the Fund may sell covered call options with respect to any
or all of its portfolio securities and enter into closing purchase transactions
with respect to such options.

4. Purchase more than 10% of any class of securities or purchase more
than 10% of the voting securities of any single issuer.

5. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

6. Purchase securities of other investment companies, except that the
Fund may purchase such securities in the open market where no commission or
profit to a sponsor or dealer other than the customary broker's commission
results from such purchase, and only if immediately thereafter (a) no more than
3% of the voting securities of any one investment company is owned in the
aggregate by the Fund and all other Funds, (b) no more than 5% of the value of
the total assets of the Fund would be invested in any one investment company,
and (c) no more than 10% of the value of the total assets of the Fund and all
other Funds would be invested in the securities of all such investment
companies. Should the Fund purchase securities of other investment companies,
shareholders may incur additional management, advisory, and distribution fees.
The Fund may acquire such securities if they are acquired in connection with a
purchase or acquisition in accordance with a plan of reorganization, merger or
consolidation.

7. Acquire or retain the securities of any issuer if any officer or
director of the Company, or any officer or director of its investment adviser or

<PAGE>

principal underwriter, owns beneficially more than one-half of 1% of the
issuer's outstanding securities and the aggregate owned by such persons exceeds
5% of such securities.

8. Invest in companies for the purpose of exercising control or
management.

10. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Purchase any securities of other investment companies.

3. Invest more than 5% of the market value of its net assets in
restricted securities.

5. Make any investment which would concentrate 25% or more of a Fund's
total assets in the securities of issuers having their principal business
activities in the same industry, provided that this limitation does not apply to
obligations issued or guaranteed by the U.S. government, its agencies or
instrumentalities. In applying this restriction, the Fund uses industry
classifications based, where applicable, on BRIDGE INFORMATION SYSTEMS, REUTERS,
the S&P STOCK GUIDE published by Standard & Poor's, information obtained from
Bloomberg L.P. and Moody's International, and/or the prospectus of the issuing
company. Selection of an appropriate industry classification resource will be
made by the Fund's portfolio manager in the exercise of his or her reasonable
discretion.

GOVERNMENT SECURITIES FUND

FUNDAMENTAL

1. Invest in commodities, commodity futures contracts, real estate,
real estate mortgage loans or other illiquid interests in real estate, except
that (i) the Fund may invest in securities of issuers which invest in
commodities, commodity futures, real estate, real estate mortgage loans or other
illiquid interests in real estate and (ii) the Fund may hedge a foreign
securities transaction by entering into forward foreign currency transactions.

<PAGE>

3. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States government, its agencies or instrumentalities)
if, as a result, more than 5% of the value of the Fund's total assets would be
invested in securities of that issuer.

4. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

2. Purchase or sell puts, calls, straddles, spreads or combinations
thereof.

3. Purchase more than 10% of any class of securities of any single
issuer or purchase more than 10% of the voting securities of any single issuer.

4. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years.

6. Invest in companies for the purpose of exercising control or
management.

7. Pledge, mortgage or hypothecate its assets except to secure
permitted borrowings, and then only in an amount up to 15% of the value of the
Fund's net assets taken at the lower of cost or market value at the time of such
borrowings.

8. Invest more than 5% of the market value of its net assets in equity
securities.

<PAGE>

MONEY MARKET FUND

FUNDAMENTAL

1. Make loans to other persons; the purchase of a portion of an issue
of publicly distributed bonds, debentures or other securities is not considered
the making of a loan by a Fund. The Fund may also enter into repurchase
agreements by purchasing money market instruments with a simultaneous agreement
with the seller to repurchase them at the original purchase price plus accrued
interest.

2. Purchase or sell puts, calls, straddles, spreads or combinations
thereof.

3. Purchase more than 10% of any class of securities of a single
issuer.

4. Make any investment which would concentrate 25% or more of the
Fund's total assets in the securities of issuers having their principal business
activities in the same industry, provided that (i) this limitation does not
apply to obligations issued or guaranteed by the U.S. government, its agencies
or instrumentalities and (ii) this limitation does not apply to obligations of
domestic commercial banks. In applying this restriction, the Fund uses industry
classifications based, where applicable, on BRIDGE INFORMATION SYSTEMS, REUTERS,
the S&P STOCK GUIDE published by Standard & Poor's, information obtained from
Bloomberg L.P. and Moody's International, and/or the prospectus of the issuing
company. Selection of an appropriate industry classification resource will be
made by the Fund's portfolio manager in the exercise of his or her reasonable
discretion.

5. Invest more than 5% of the market value of its total assets in
securities of companies which with their predecessors have a continuous
operating record of less than three years, except that the Fund may invest in
obligations guaranteed by the U.S. government or issued by its agencies or
instrumentalities.

6. Purchase securities of other investment companies except in
connection with a purchase or acquisition in accordance with a plan of
reorganization, merger or consolidation.

7. Acquire or retain the securities of any issuer if any officer or
director of the Company, or any officer or director of its investment adviser or
principal underwriter, owns beneficially more than one-half of 1% of the
issuer's outstanding securities and the aggregate owned by such persons exceeds
5% of such securities.

8. Invest in interests in oil, gas or other mineral exploration or
development programs or leases, although the Fund may invest in the securities
of issuers which invest in or sponsor such programs or leases.

9. Purchase securities with legal or contractual restrictions on resale
or purchase securities which are not otherwise readily marketable, except that
the Fund may enter into repurchase agreements if, as a result thereof, 10% or
less of its net assets valued at the time of the transaction would be subject to
repurchase agreements maturing in more than seven days.

10. Purchase common stocks, preferred stocks, warrants or other equity
securities.

<PAGE>

11. Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. government, its agencies or instrumentalities) if, as a
result, more than 5% of the value of the Fund's total assets would be invested
in securities of that issuer.

12. Borrow money, except for extraordinary or emergency purposes, and
then only from banks in amounts up to 10% of the Fund's net assets computed at
the lesser of cost or value.

NON-FUNDAMENTAL

1. Participate in any joint trading account.

2. Invest in companies for the purpose of exercising control or
management.

3. Mortgage, pledge or hypothecate any assets except to secure
permitted borrowings.

* * *

Founders Funds, Inc. (the "Company") has given an undertaking to the
State of Arkansas that it will not purchase puts, calls, straddles, spreads or
any combination thereof if, by reason thereof, the value of any Fund's aggregate
investments in such classes of securities would exceed 5% of the Fund's total
assets.

The Company has given the following undertakings to the State of
California: (1) if any Fund purchases or retains securities issued by other
open-end investment companies, the Fund's investment adviser will waive its
advisory fee on the assets of the Fund which are invested in the other open-end
investment company during the time that such assets are so invested; (2) each
Fund's option transactions will comply with Rule 260.140.85(b) under the
California Corporate Securities Law of 1968; (3) the aggregate value of the
securities underlying the calls written by any Fund, or the obligations
underlying the puts written by any Fund, as of the date the options are sold,
shall not exceed 25% of the Fund's net assets; (4) no Fund may engage in the
writing of puts and calls unless the security underlying the put or call is
within the Fund's investment policies and the option is issued by the Options
Clearing Corporation; and (5) no Fund may purchase and sell puts and calls on
securities, stock index futures, or options on stock index futures, or financial
futures, or options on financial futures, unless such options are written by
other persons and the options or futures are offered through the facilities of a
national securities or commodities exchange, or are offered by a broker-dealer
which is on the Federal Reserve Bank's list of primary government securities
dealers.

<PAGE>

DIRECTORS AND OFFICERS

The directors and officers of the Company, their principal occupations
for the last five years and their affiliations, if any, with Founders, are as
follows:

JOHN K. LANGUM
Diamond T. Ranch
9820 East Old Spanish Trail
Tucson, Arizona
Chairman and Executive Committee Member
Economic Consultant. President, Business Economics, Inc., a firm
engaged in economics and business research and publications,
Tucson, Arizona. Born: June 18, 1913

WILLIAM H. BAUGHN
555 Baseline Road
Boulder, Colorado
Director and Executive Committee Member
President Emeritus, University of Colorado. Dean Emeritus,
Graduate School of Business, University of Colorado. Born: August
27, 1918

BJORN K. BORGEN*
President, Executive Committee Member, and Director
Chairman, Chief Executive Officer, Chief Investment Officer,
Secretary, and Director of Founders. Born: September 22, 1937

ALAN S. DANSON
6400 S. Jamaica Circle
Englewood, CO 80111
Director
Independent financial consultant. Between March 1, 1991, and June
30, 1993, Mr. Danson was President and Chief Executive Officer of
ACCI Securities, Inc., a wholly-owned subsidiary of Acciones y
Valores de Mexico, S.A. de C.V., a Mexican brokerage firm. Mr.
Danson was Director of International Relations of Acciones y
Valores between March 1, 1990, and February 28, 1991. Prior to
joining Acciones y Valores, Mr. Danson was President of
Integrated Medical Systems, Inc., a privately held company based
in Golden, Colorado. Born: June 15, 1939

JAY A. PRECOURT
Tejas Gas Corporation
1301 McKinney, Suite 700
Houston, Texas
Director
Chief Executive Officer and Director, Tejas Gas Corporation,
Houston, Texas; Director, Dresser Industries Inc., Dallas, Texas;
Director, Timken Company, Canton, Ohio; Director, Alley Theater,
Houston, Texas; Director and Chairman of the Advisory Board,
Southwest CEO Council, Houston, Texas. Until 1988, President of
the Energy Related Group and Director, Hamilton Oil Corporation,

<PAGE>

Denver, Colorado; President and Chief Executive Officer, Carbon
Coal Company, Gallup, New Mexico; Director, Consolidated Hydro,
Inc., Greenwich, Connecticut; and Director, Children's Hospital
Corporation, Denver, Colorado. Born: July 12, 1937

EUGENE H. VAUGHAN, JR., CFA
6300 Texas Commerce Tower
Houston, Texas
Director
President, Vaughan, Nelson, Scarborough & McConnell, Inc., an
investment counseling firm, Houston, Texas. Past chairman,
Association for Investment Management and Research; past
chairman, Institute of Chartered Financial Analysts; trustee,
Vanderbilt University; Director, Presbyterian Board of Pensions
(USA). Born: October 5, 1933

JONATHAN F. ZESCHIN*
Director
President and Chief Operating Officer of Founders. Formerly,
executive vice president of INVESCO Funds Group, Inc., Denver,
Colorado, from October 1993 to April 15, 1995; prior thereto
(January 1992 to October 1993) senior vice president of INVESCO
Funds Group, Inc.; trust officer of INVESCO Trust Company from
January 1993 to April 15, 1995; senior vice president and
director of marketing of SteinRoe & Farnham, Inc., Chicago,
Illinois, from January 1987 to December 1991. Born: September 4,
1953

DAVID L. RAY
Vice President, Secretary and Treasurer
Vice President, Assistant Secretary, and Treasurer of Founders.
Until January, 1990, President, United Shareholder Services,
Inc., a mutual fund transfer agent, San Antonio, Texas and Vice
President, United Services Advisors, Inc., investment adviser,
San Antonio, Texas. Born: July 10, 1957

*Indicates an interested director as defined in the Investment Company Act of
1940, because of the status as officer and director of the Fund's investment
adviser and principal underwriter.

The address of interested directors and all officers of the Company is
Founders Financial Center, 2930 E. Third Ave., Denver, Colorado 80206.

As of July 1, 1996, the Company's directors and officers as a group
owned less than 1% of the outstanding shares of each Fund, with the exception of
Passport, International Equity, Worldwide Growth, Balanced, Government
Securities and Money Market Funds, in which the ownership interests of the group
totaled 1.00%, 1.02%, 1.01%, 1.04%, 1.19% and 1.52%, respectively.

The committees of the board of directors are the executive committee,
audit committee, and portfolio transactions committee. The Company also has a
committee on directors, composed of all of the non-interested ("independent")
directors and chaired by Dr. Langum, which serves as a nominating committee. So
long as the plans of distribution under SEC Rule 12b-1 of the 1940 Act of
certain of the Company's Funds remain in effect, the selection and nomination of

<PAGE>

the Company's independent directors will be a matter left to the discretion of
such independent directors. Except for certain powers which, under applicable
law, may only be exercised by the full board of directors, the executive
committee may exercise all powers and authority of the board of directors in the
management of the business of the Company.

DIRECTOR COMPENSATION

The following table sets forth, for the fiscal year ended December 31,
1995, the compensation paid by the Company to its independent directors for
services rendered in their capacities as directors of the Company. The table
further sets forth the total compensation paid by all of the mutual funds
distributed by Founders (which are limited to the Company) to these directors
for services in their capacities as directors during the year ended December 31,
1995 (directors' compensation has been increased effective January 1, 1996, by
approximately $10,000 per director per annum). The Company has no plan or other
arrangement pursuant to which any of the Company's independent directors receive
pension or retirement benefits, with the exception of an arrangement with
director Langum, who will receive an annual payment of $30,000 from Founders
commencing with his retirement. This payment is not subject either to
cancellation or amendment of any kind and is one to which Dr. Langum is
automatically entitled upon retirement at any time. Therefore, none of the
Company's independent directors have estimated annual benefits to be paid by the
Company upon retirement.

Compensation Table

================================================================================================================================

(5) Total
(3) Pension compensa-
or retirement tion from
benefits Company
(2) Aggregate accrued as (4) Estimated (11 Funds
compensation part of annual bene- total)
from Company fits upon paid to
(1) Name of Person, Position 1 Company expenses retirement directors 1

<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
John K. Langum, Chairman and $ 31,250 None None $ 31,250
Director
- --------------------------------------------------------------------------------------------------------------------------------
William H. Baughn, Director $ 20,750 None None $ 20,750
- --------------------------------------------------------------------------------------------------------------------------------
Alan S. Danson, Director $ 18,750 None None $ 18,750
- --------------------------------------------------------------------------------------------------------------------------------
Walter Kirch, Director 2 $ 18,750 None None $ 18,750
- --------------------------------------------------------------------------------------------------------------------------------
Ranald H. Macdonald III, $ 19,750 None None $ 19,750
Director 2
- --------------------------------------------------------------------------------------------------------------------------------
Jay A. Precourt, Director $ 17,750 None None $ 17,750
- --------------------------------------------------------------------------------------------------------------------------------
Eugene H. Vaughan, Jr., $ 19,250 None None $ 19,250
Director
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL $146,250 None None $146,250
- --------------------------------------------------------------------------------------------------------------------------------
PERCENT OF NET .006% 0% 0% .006%
ASSETS 3
================================================================================================================================

<PAGE>

Messrs. Borgen and Zeschin, as "interested persons" of the Fund,
receive compensation as officers and employees of Founders, and do not receive
any director's fees or other compensation from the Fund for their service as
officers and/or directors.

- --------------------------

1 The Chairman of the Board, the Chairmen of the Fund's Audit and Portfolio
Transactions Committees, and the members of the Executive and Nominating
Committees each receive and may receive compensation for serving in such
capacities in addition to the compensation paid to all independent directors.
The Fund is the only mutual fund distributed by Founders Asset Management, Inc.

2 Messrs. Kirch and Macdonald died in 1995 and 1996, respectively.

3 Totals as a percentage of the Company's net assets as of December 31,
1995.

</TABLE>

INVESTMENT ADVISER AND DISTRIBUTOR

Under the investment advisory agreements between the Company, on behalf
of each Fund, and Founders, Founders furnishes investment management and
administrative services to the Funds, subject to the overall supervision of the
Board of Directors of the Company. In addition, Founders provides office space
and facilities for the Funds and pays the salaries, fees and expenses of all
officers and other employees connected with the operation of the Company. The
Funds compensate Founders for its services by the payment of fees computed daily
and paid monthly as follows:

<PAGE>

SPECIAL AND GROWTH FUND
-----------------------

On Assets in But Not
EXCESS OF EXCEEDING ANNUAL FEE
- -------------- ------------ ----------

$ 0 $ 30,000,000 1.00%
30,000,000 300,000,000 0.75%
300,000,000 500,000,000 0.70%
500,000,000 ---- 0.65%

BLUE CHIP AND BALANCED FUNDS
----------------------------

On Assets in But Not
EXCESS OF EXCEEDING ANNUAL FEE
- -------------- ------------ ----------

$ 0 $250,000,000 0.65%
250,000,000 500,000,000 0.60%
500,000,000 750,000,000 0.55%
750,000,000 ---- 0.50%

MONEY MARKET FUND
-----------------

On Assets in But Not
EXCESS OF EXCEEDING ANNUAL FEE
- -------------- ------------ ----------

$ 0 $250,000,000 0.50%
250,000,000 500,000,000 0.45%
500,000,000 750,000,000 0.40%
750,000,000 ---- 0.35%

GOVERNMENT SECURITIES FUND
--------------------------

On Assets in But Not
EXCESS OF EXCEEDING ANNUAL FEE
- -------------- ------------ ----------

$ 0 $250,000,000 0.65%
250,000,000 ---- 0.50%

DISCOVERY, FRONTIER, PASSPORT, INTERNATIONAL EQUITY, AND WORLDWIDE GROWTH FUNDS
- -------------------------------------------------------------------------------

On Assets in But Not
EXCESS OF EXCEEDING ANNUAL FEE
- -------------- ------------ ----------

$ 0 $250,000,000 1.00%
250,000,000 500,000,000 0.80%
500,000,000 ---- 0.70%

<PAGE>

The fees of Discovery, Frontier, Passport, Special, International
Equity, Worldwide Growth, Growth, and Government Securities Funds are higher
than the fee schedules of certain investment companies having similar investment
objectives and policies but are, in the opinion of the Company's management,
comparable to those of numerous other similar mutual funds. The net assets of
the Funds at the end of fiscal year 1995 were as follows: Discovery Fund -
$216,622,779; Frontier Fund - $331,720,066; Passport Fund - $49,922,063; Special
Fund - $388,753,751; International Equity Fund - $767,238; Worldwide Growth Fund
- - $228,594,813; Growth Fund - $655,926,989; Blue Chip Fund - $375,200,391;
Balanced Fund - $130,346,354; Government Securities Fund - $20,263,327; and
Money Market Fund - $125,646,123.

The Funds pay all of their expenses not assumed by Founders, including
fees to directors not affiliated with Founders and expenses of all members of
the Board of Directors, of advisory boards or of committees of the Board of
Directors; compensation of the Company's custodian, transfer agent and other
agents; computer equipment charges, computer program charges and related
computer expenses incurred in connection with maintaining the Funds' books and
records; an allocated portion of premiums for insurance required to be
maintained under the Investment Company Act of 1940; expenses of computing the
Funds' daily per share net asset value; legal and accounting expenses; brokerage
commissions and other transaction costs; interest; all federal, state and local
taxes (including stamp, excise, income and franchise taxes); cost of stock
certificates; fees payable under federal and state law to register the Funds'
shares for sale; an allocated portion of fees and expenses incurred in
connection with membership in investment company organizations and trade
associations; preparation of prospectuses (including typesetting) and printing
and distribution thereof to existing shareholders; expenses of local
representation in Maryland; and expenses of shareholder and directors meetings
and of preparing, printing and distributing reports to shareholders. The Company
also has the obligation for expenses, if any, incurred by it in connection with
litigation, proceedings or claims, and the legal obligation it may have to
indemnify its officers and directors with respect thereto.

Each advisory agreement provides that if the total ordinary business
expenses of a Fund for any fiscal year (including the investment advisory fee,
but excluding interest, taxes, brokerage commissions and extraordinary items)
exceed the most restrictive limitation prescribed by any state in which shares
of that Fund are qualified for sale, Founders shall reimburse the Fund for such
excess. The Company has been advised that as of the date of this prospectus, the
most restrictive of such limitations applicable to the Funds is 2 1/2% of the
average annual net assets up to $30,000,000, 2% of the next $70 million and 1-
1/2% of the remaining net assets of the Fund. No payment of the investment
advisory fee will be made that would result in a Fund's expenses exceeding on a
cumulative annualized basis the most restrictive applicable expense limitation
in effect at the time of such payment.

During the fiscal years ended in 1995, 1994, and 1993, the gross
investment advisory fees paid by the Funds were as follows:

DISCOVERY FUND. During the year ended December 31, 1995, 1994, and
1993, the Fund paid advisory fees of $2,004,616, $1,843,813, and $1,879,987,
respectively. For fiscal years 1995, 1994, and 1993, the expenses of the Fund
did not exceed the expense limitation.

FRONTIER FUND. During the years ended December 31, 1995, 1994, and
1993, the Fund paid advisory fees of $2,832,693, $2,454,361, and $2,009,522,
respectively. For those fiscal years, the expenses of the Fund did not exceed
the expense limitation.

<PAGE>

PASSPORT FUND. During the years ended December 31, 1995 and 1994 and
from November 16, 1993 (the date upon which the Fund commenced the offering and
sale of its shares to the public) through December 31, 1993, the Fund paid
advisory fees of $255,733, $225,764 and $19,482, respectively. For these
periods, the expenses of the Fund did not exceed the expense limitation.

SPECIAL FUND. During the years ended December 31, 1995, 1994, and 1993,
the gross investment advisory fees paid by the Fund amounted to $2,869,635,
$2,685,886, and $3,383,842, respectively. For those fiscal years, the expenses
of the Fund did not exceed the expense limitation.

INTERNATIONAL EQUITY FUND. Since the Fund did not commence the public
offering of its shares until December 29, 1995, the Fund paid no advisory fees
in 1995.

WORLDWIDE GROWTH FUND. During the years ended December 31, 1995, 1994,
and 1993, respectively, the Fund paid advisory fees of $1,552,897, $996,680, and
$470,741, respectively. For those fiscal years, the expenses of the Fund did not
exceed the expense limitation.

GROWTH FUND. During the fiscal years ended December 31, 1995, 1994, and
1993, the investment advisory fees paid by the Fund amounted to $3,564,924,
$2,759,812, and $1,941,972, respectively. For those fiscal years, the expenses
of the Fund did not exceed the expense limitation.

BLUE CHIP FUND. During the fiscal years ended December 31, 1995, 1994,
and 1993, the investment advisory fees paid by the Fund amounted to $2,195,095,
$1,996,626, and $1,892,148, respectively. For those fiscal years, the expenses
of the Fund did not exceed the expense limitation.

BALANCED FUND. During the fiscal years ended December 31, 1995, 1994,
and 1993, the investment advisory fees paid by the Fund amounted to $707,570,
$623,403, and $308,535, respectively. For those fiscal years, the expenses of
the Fund did not exceed the expense limitation.

GOVERNMENT SECURITIES FUND. During the years ended December 31, 1995,
1994, and 1993, the Fund paid advisory fees of $139,194, $184,250, and $214,447,
respectively. For those fiscal years, the expenses of the Fund did not exceed
the expense limitation.

MONEY MARKET FUND. For the fiscal years ended December 31, 1995, 1994,
and 1993, the gross investment advisory fees paid by the Fund were $705,221,
$976,835, and $560,628, respectively. For those fiscal years, the expenses of
the Fund did not exceed the expense limitation.

The advisory agreements between Founders and Discovery, Frontier,
Special, Worldwide Growth, Growth, Blue Chip, and Balanced Funds were approved
by the shareholders of each respective Fund at shareholders' meetings of the
Funds held on December 15, 1992. The advisory agreements between Founders and
the Government Securities and Money Market Funds were approved by the
shareholders of each respective Fund at shareholders' meetings held on September
29, 1988 and November 17, 1987, respectively. The advisory agreements of the
Passport and International Equity Funds were approved by Founders, as the then
sole shareholder of the respective Funds, prior to their commencement of
operations. The advisory agreements of all of the Funds were last renewed on May
31, 1996 for a one-year period, and will continue from year to year thereafter
either by the vote of a majority of the entire Board of Directors or by the vote
of a majority of the outstanding voting securities of each Fund, and in either
case, after review, by the vote of a majority of the Company's directors who are

<PAGE>

not "interested persons" (as defined in the Investment Company Act of 1940) (the
"Independent Directors") of the Company or Founders, cast in person at a meeting
called for the purpose of voting on such approval.

With respect to the advisory agreements between Founders and each of
the Funds, each agreement may be terminated without penalty at any time by the
Board of Directors of the Company or by vote of a majority of the outstanding
securities of the Fund on 60 days' written notice to Founders or by Founders on
60 days' written notice to the Company. Each agreement will terminate
automatically if it is assigned, as that term is defined in the Investment
Company Act of 1940. Each agreement provides that the Fund may use the word
"Founders" in its name and business only as long as the agreement remains in
effect. Finally, each agreement provides that Founders shall not be subject to
any liability in connection with matters to which the agreement relates in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of duty.

The Company's shares are sold on a continuous basis at the net asset
value per share next calculated after receipt of a purchase order in proper
order. See "Determination of Net Asset Value." Founders is the principal
underwriter (distributor) for the Company and acts as agent of the Company in
the sale of shares of the Funds, under an agreement last renewed by the
Company's directors on May 31, 1996. Founders is required to use its best
efforts to promote the sale of shares of the Funds, but is not obligated to sell
any specific number of shares. Founders does not receive any compensation for
its services rendered pursuant to the underwriting agreement. The provisions for
the continuation, termination and assignment of this agreement are identical to
those described above with regard to the investment advisory agreements, except
that termination other than upon assignment or mutual agreement requires six
months notice by either party.

Pursuant to Distribution Plans adopted by Discovery Fund, Frontier
Fund, Passport Fund, Special Fund, International Equity Fund, Worldwide Growth
Fund, Growth Fund, Blue Chip Fund, Balanced Fund, and Government Securities
Fund, those Funds pay for distribution and related services expenditures at an
annual rate which may be less than, but which may not exceed, 0.25% of each
Fund's average daily net assets. These fees may be used to pay directly, or to
reimburse Founders for paying expenses in connection with distribution of the
Funds' shares and related activities as are described in the Funds' prospectus.
A report of the amounts expended pursuant to the Distribution Plans, and the
purposes for which such expenditures occurred, must be made to the Board of
Directors at least quarterly. During the fiscal year ended December 31, 1995,
Founders expended the following amounts in marketing the shares of the Funds:
advertising, $2,130,911; printing and mailing of prospectuses to persons other
than current shareholders, $1,032,185; and payment of compensation to third
parties for shareholder support services, $1,870,816.

Each Fund's plan was last approved on May 31, 1996, at a meeting called
for such purpose by a majority of the directors of the Company, including a
majority of the directors who are neither "interested persons" of the Company
nor have any financial interest in the operation of the plan ("12b-1
Directors").

Each Fund's plan provides that it shall continue in effect with respect
to each Fund for so long as such continuance is approved at least annually by
the vote of the board of directors of the Company cast in person at a meeting
called for the purpose of voting on such continuance. Each plan can be
terminated at any time with respect to any Fund, without penalty, if a majority
of the 12b-1 Directors or shareholders of such Fund, vote to terminate the plan.
So long as any Fund's plan is in effect, the selection and nomination of persons
to serve as independent directors of the Company shall be committed to the

<PAGE>

independent directors then in office at the time of such selection or
nomination. Each Fund's plan may not be amended to increase materially the
amount of any Fund's payments thereunder without approval of the shareholders of
that Fund, and all material amendments to the plan must be approved by the board
of directors of the Company, including a majority of the 12b-1 Directors.

Founders was organized in 1938. In addition to serving as adviser to
the Funds, Founders serves as independent adviser to private accounts. The sole
director of Founders is Bjorn K. Borgen. The officers of Founders include Mr.
Borgen, Jonathan F. Zeschin, David L. Ray, Michael K. Haines, Michael W.
Gerding, Edward F. Keely, Linda M. Ripley, Gregory P. Contillo, James P. Rankin,
Kenneth R. Christoffersen, Roberto Galindo, Jr., and Thomas Mauer. The
affiliations of Messrs. Borgen, Zeschin, and Ray with the Company and Founders
are shown under "Directors and Officers." Mr. Borgen owns all of the voting
stock of Founders.

SHAREHOLDER SERVICING

FUND ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT

Founders performs administrative, accounting, and recordkeeping
services for the Funds pursuant to a Fund Accounting and Administrative Services
Agreement which was initially approved in May 1991 (August 25, 1995 for
International Equity Fund), by a vote cast in person by all of the directors of
the Company, including all of the directors who are not "interested persons" of
the Company or of Founders at a meeting called for such purpose. The Agreement,
which was last renewed by the directors on May 31, 1996, is continued from year
to year as long as each such continuance is specifically approved by the board
of directors of the Company, including a majority of the directors who are not
parties to the Agreement or interested persons (as defined in the Investment
Company Act of 1940) of any such party, cast in person at a meeting for the
purpose of voting on such continuance. The Agreement may be terminated at any
time without penalty by the Company on ninety (90) days' written notice, or by
Founders upon ninety (90) days' written notice, and terminates automatically in
the event of its assignment unless the Company's board of directors approves
such assignment.

Pursuant to the Agreement, Founders maintains the portfolios, general
ledgers, and financial statements of the Funds; accumulates data from the Funds'
shareholder servicing and transfer agent, custodian, and manager and calculates
daily the net asset value of the Funds; monitors the data and transactions of
the custodian, transfer agent, shareholder servicing agent, and manager of the
Funds; monitors compliance with tax and federal securities rules and
regulations; provides reports and analyses of portfolio, transfer agent,
shareholder servicing agent, and custodial operations, performance and costs;
and reports on regulatory and other shareholder matters. The Funds pay a fee for
this service which is computed at an annual rate of 0.06 percent of the daily
net assets of the Funds from $0 to $500 million and at an annual rate of 0.02
percent of the daily net assets of the Funds in excess of $500 million, plus
reasonable out-of-pocket expenses. During the fiscal years ended December 31,
1995, 1994 and 1993, the Company paid Fund accounting and administrative
services fees of $630,056, $580,897 and $529,103, respectively.

<PAGE>

SHAREHOLDER SERVICES AGREEMENT

Pursuant to an amended Shareholder Services Agreement, Founders
performs certain telephone, retirement plan, quality control, personnel
training, shareholder inquiry, shareholder account, and other
shareholder-related and transfer agent services for the Funds. The amended
Agreement was initially approved in May 1991 (August 25, 1995 for International
Equity Fund), by a vote cast in person by all of the directors of the Company,
including all of the directors who are not "interested persons" of the Company
or Founders at a meeting called for such purpose. The Agreement was for an
initial one-year term and was last renewed for a one-year term on May 31, 1996.
The Agreement may be continued from year to year as long as such continuance is
specifically approved by the board of directors of the Company, including a
majority of the directors who are not parties to the Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such continuance. The Agreement may
be terminated at any time without penalty by the Company upon ninety (90) days'
written notice to Founders or by Founders upon one hundred eighty (180) days'
written notice to the Company, and terminates automatically in the event of an
assignment unless the Company's board of directors approves such assignment. The
Funds pay to Founders a prorated monthly fee for such services equal on an
annual basis to $24 for each shareholder account of the Funds considered to be
an open account at any time during the applicable month. The fee provides for
the payment not only of services rendered and facilities furnished by Founders
pursuant to the Agreement, but also for services rendered and facilities
furnished by Investors Fiduciary Trust Company ("IFTC") and DST Systems, Inc.
("DST") in performing transfer agent services and in providing hardware and
software system capabilities on behalf of the Funds. In addition to the per
account fee, Founders, IFTC, and DST are reimbursed for all reasonable
out-of-pocket expenses incurred in the performance of their respective services.
During the fiscal years ended December 31, 1995, 1994 and 1993, the Company paid
shareholder services fees of $3,363,000, $3,248,000 and $1,213,000,
respectively.

TRANSFER AGENCY AGREEMENT

The Company has entered into a Transfer Agent Agreement with IFTC,
pursuant to which IFTC provides certain transfer agent services to the Funds
which are not provided to the Funds by Founders. DST provides hardware and
software system capabilities to IFTC and to Founders, to assist IFTC and
Founders in providing transfer agency and related shareholder services to the
Funds. The Transfer Agent Agreement between the Company and IFTC was initially
approved on November 12, 1993, and will continue until terminated at any time
without penalty by either party upon ninety (90) days' written notice. The
Agreement terminates automatically in the event of its assignment. Under the
Agreement, the Funds pay to IFTC various transfer agency transaction fees which,
in 1995, were in the amount of $8.05 per shareholder account. The fees to IFTC
are paid on behalf of the Funds by Founders from the fee of $24 per account per
annum received by Founders for providing shareholder services to the Funds. See
"Shareholder Services Agreement," above.

BROKERAGE ALLOCATION AND PORTFOLIO TURNOVER RATES

It is the policy of the Company, in effecting transactions in portfolio
securities, to seek the best execution of orders at the most favorable prices.
The determination of what may constitute best execution in a securities
transaction involves a number of judgmental considerations, including, without
limitation, the overall direct net economic result to a Fund (involving both
price paid or received and any commissions and other costs), the efficiency with

<PAGE>

which the transaction is effected, the ability to effect the transaction at all
where a large block is involved, the availability of the broker to stand ready
to execute possibly difficult transactions for the Fund in the future, and the
financial strength and stability of the broker.

Because selection of executing brokers is not based solely on net
commissions, a Fund may pay an executing broker a commission higher than that
which might have been charged by another broker for that transaction. Founders
will not knowingly pay higher mark-ups on principal transactions to brokerage
firms as consideration for receipt of research services or products. While it is
not practicable for the Company to solicit competitive bids for commissions on
each portfolio transaction, consideration is regularly given to available
information concerning the level of commissions charged in comparable
transactions by various brokers. Transactions in over the counter securities are
normally placed with principal market makers, except in circumstances where, in
the opinion of Founders, better prices and execution are available elsewhere.

Subject to the policy of seeking best execution of orders at the most
favorable prices, a Fund may execute transactions with brokerage firms which
provide research services and products to Founders. The phrase "research
services and products" includes advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, the availability
of securities or purchasers or sellers of securities, the furnishing of analyses
and reports concerning issuers, industries, securities, economic factors and
trends, portfolio strategy and the performance of accounts, and obtaining
products such as third-party publications, computer and electronic access
equipment, software programs, and other information and accessories that may
assist Founders in furtherance of its investment advisory responsibilities to
the Company. Such services and products permit Founders to supplement its own
research and analysis activities, and provide it with information from
individuals and research staffs of many securities firms. Generally, it is not
possible to place a dollar value on the benefits derived from specific research
services and products. Founders may receive a benefit from these research
services and products which is not passed on to a Fund in the form of a direct
monetary benefit. If Founders determines that any research product or service
has a mixed use, such that it also serves functions that do not assist in the
investment decision-making process, Founders will allocate in good faith the
cost of such service or product accordingly. The portion of the product or
service that Founders determines will assist it in the investment
decision-making process may be paid for in brokerage commission dollars. The
non-research part must be paid for in hard dollars from Founders. Any such
allocation may create a conflict of interest for Founders.

Neither the research services nor the amount of brokerage given to a
particular broker-dealer are made pursuant to any agreement or commitment with
any of the selected broker-dealers that would bind Founders to compensate the
selected broker-dealer for research provided. However, Founders maintains an
internal allocation procedure to identify those broker-dealers which have
provided it with research and endeavors to direct sufficient commissions to them
to ensure continued receipt of research Founders believes is useful.

Research services and products may be useful to Founders in providing
investment advice to any of the Funds or clients it advises. Likewise,
information made available to Founders from brokers effecting securities
transactions for such other Funds and clients may be utilized on behalf of
another Fund. Thus, there may be no correlation between the amount of brokerage
commissions generated by a particular Fund or client and the indirect benefits
received by that Fund or client.

A significant proportion of the total commissions paid by the Funds for
portfolio transactions during the year ended December 31, 1995 was paid to
brokers that provided research services to Founders, and it is expected that, in

<PAGE>

the future, a majority of each Fund's brokerage business will be placed with
firms that provide such services.

Subject to the policy of seeking the best execution of orders at the
most favorable prices, sales of shares of the Funds may also be considered as a
factor in the selection of brokerage firms to execute Fund portfolio
transactions.

A Fund and one or more of the other Funds or clients to which
Founders serves as investment adviser may own the same securities from time to
time. If purchases or sales of securities for a Fund and other Funds or clients
arise for consideration at or about the same time, transactions in such
securities will be made, insofar as feasible, for the respective Funds and
clients in a manner deemed equitable to all by the investment adviser. To the
extent that transactions on behalf of more than one client during the same
period may increase the demand for securities being purchased or the supply of
securities being sold, there may be an adverse effect on the price and amount of
the security being purchased or sold for the Fund. However, the ability of the
Fund to participate in volume transactions may possibly produce better
executions for the Fund in some cases.

Founders has been authorized by the directors of Discovery, Frontier,
Passport, Special, International Equity, Worldwide Growth, Growth, Blue Chip,
Balanced and Government Securities Funds (the "Founders 12b-1 Funds") to apply
dollars generated from each Fund's Rule 12b-1 distribution plan to pay to
brokers and to other entities a fee for distribution, recordkeeping, accounting,
and shareholder-related services provided to investors purchasing shares of a
Founders 12b-1 Fund through various sales and/or shareholder servicing programs.
The fee, which normally is accrued daily and paid periodically, is computed at
an annual rate not in excess of 0.25 of 1% of the average daily account balances
of investments in each Founders 12b-1 Fund made by the entity on behalf of
investors participating in the applicable program. The directors of the Founders
12b-1 Funds have further authorized Founders to place a portion of the Funds'
brokerage transactions with certain of these entities if Founders reasonably
believes that in effecting the Funds' transactions in portfolio securities, the
entity is able to provide the best execution of orders at the most favorable
prices. Commissions earned by the entity from executing portfolio transactions
on behalf of a specific Founders 12b-1 Fund may be credited against the fee
charged to that Fund, on a basis which has resulted from negotiations between
Founders and the entity. Any 12b-1 fees which are not expended as a result of
the application of any such credit will not be used either to pay or to
reimburse Founders for other distribution expenses.

In addition, registered broker-dealers, third-party administrators of
tax-qualified retirement plans, and other entities which establish omnibus
investor accounts with the Funds may provide subtransfer agency, recordkeeping,
or similar services to participants in the omnibus accounts. These services
reduce or eliminate the need for identical services to be provided on behalf of
the participants by Founders, the Funds' shareholder servicing agent, and/or by
IFTC, the Funds' transfer agent. In such instances, Founders is authorized to
pay the entity a sub-transfer agency or recordkeeping fee in an annualized
amount up to $24 per participant in the entity's omnibus account, from transfer
agency fees applicable to each participant's account which are paid to Founders
by the Funds. If commissions are earned by a registered broker-dealer from
executing portfolio transactions on behalf of a specific Founders Fund, the
commissions may be credited by the broker-dealer against the sub-transfer agency
or recordkeeping fee payable with respect to that Fund, on a basis which will
have been negotiated between the broker-dealer and Founders. In such instances,
Founders will apply any such credits to the transfer agency fee which it
receives from the applicable Fund. Thus, the Fund will pay a transfer agency fee
to Founders, and Founders will pay a sub-transfer agency or recordkeeping fee to

<PAGE>

the broker-dealer only to the extent that the fee is not off-set by brokerage
credits. In the event that the transfer agency fee paid by a Fund to Founders
with respect to participants in omnibus accounts in that Fund exceeds the
sub-transfer agent or recordkeeping fee applicable to that Fund, Founders may
carry forward the excess and apply it to future sub-transfer agent or
recordkeeping fees applicable to that Fund which are charged by the
broker-dealer. Such a carry-forward may not go beyond a calendar year.

Decisions relating to purchases and sales of securities for a Fund,
selection of broker-dealers to execute transactions, and negotiation of
commission rates are made by Founders, subject to the general supervision of the
board of directors of the Company.

For the fiscal years ended 1995, 1994, and 1993, respectively, total
brokerage commissions paid by the Funds amounted to the following: Discovery
Fund - $317,246, $199,219, and $270,652; Frontier Fund - $465,748, $301,908, and
$508,521; Special Fund - $2,194,333, $2,157,969, and $2,845,256; Worldwide
Growth Fund - $350,484, $304,175, and $258,200; Growth Fund -$1,187,642,
$1,192,989, and $727,751; Blue Chip Fund - $1,859,470, $1,856,851, and
$1,415,386; Balanced Fund - $535,439, $523,174, and $223,213. For the fiscal
years ended 1995 and 1994, Passport Fund paid total brokerage commissions of
$95,245 and $83,771, respectively. For the period from November 16, 1993 (the
date upon which Passport Fund commenced the offering and sale of its shares to
the public) through December 31, 1993, total brokerage commissions paid by the
Fund amounted to $25,012. For the period from December 29, 1995 (the date upon
which International Equity Fund commenced the offering and sale of its shares to
the public) through December 31, 1995, the Fund paid no brokerage commissions.
During the last three years no officer, director or affiliated person of the
Company or Founders executed any portfolio transactions for a Fund, or received
any commission arising out of such portfolio transactions.

At December 31, 1995, certain of the funds held securities of their
regular brokers or dealers as follows:

FUND BROKER VALUE
---- ------ -----

Special Merrill Lynch & Co., Inc. $ 2,545,220

Growth JP Morgan & Co., Inc. $ 2,808,750
Salomon Brothers, Inc. $ 2,485,000

Blue Chip Merrill Lynch & Co., Inc. $ 2,550,000

Balanced Merrill Lynch & Co., Inc. $ 775,200

During the fiscal years ended 1995 and 1994, respectively, the
portfolio turnover rate for each of the Funds was as follows: Discovery Fund -
118% and 72%; Frontier Fund - 92% and 72%; Passport Fund - 37% and 78% Special
Fund - 263% and 272%; Worldwide Growth Fund - 54% and 87%; Growth Fund - 130%
and 172%; Blue Chip Fund - 235% and 239%; Balanced Fund - 286% and 258%; and
Government Securities Fund - 141% and 379%. For the period from December 29,
1995 (the date upon which International Equity Fund commenced the offering and
sale of its shares to the public) through December 31, 1995, the Fund's
portfolio turnover rate was 0%. Portfolio turnover rates for certain of the
Funds are higher than those of other mutual funds. Although each Fund purchases
and holds securities with the goal of meeting its investment objectives,
portfolio changes are made whenever Founders believes they are advisable,
usually without reference to the length of time that a security has been held.

<PAGE>

Certain of the Funds may, therefore, engage in a significant number of
short-term transactions. Balanced Fund does not anticipate any significant
differences between the portfolio turnover rates of the common stock portion of
its investment portfolios and the rate of turnover of the remainder of its
securities holdings. The increase in the Discovery Fund's portfolio turnover
rate in 1995 resulted primarily from a restructuring of the Fund's portfolio
that occurred during that year. The decrease in the Passport Fund's portfolio
turnover rate in 1995 resulted primarily from a decrease in the Fund's sales of
portfolio securities combined with an increase in the size of the Fund. The
decrease in the Government Securities Fund's portfolio turnover rate in 1995
resulted primarily from the fact that fewer portfolio transactions were required
to position the Fund for anticipated interest rate movements during the year.

DETERMINATION OF NET ASSET VALUE

The Company calculates net asset value per share, and therefore effects
sales, redemptions, and repurchases of its shares, once daily as of the close of
the New York Stock Exchange (the "Exchange") on each day the Exchange is open
for trading. The Exchange is not open for trading on the following holidays: New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day.

FOREIGN SECURITIES. Since regular trading in most foreign securities
markets is completed simultaneously with, or prior to, the close of regular
trading on the Exchange, closing prices for foreign securities usually are
available for purposes of computing each Fund's net asset value. However, in the
event that the closing price of a foreign security is not available in time to
calculate a Fund's net asset value on a particular day, the Company's board of
directors has authorized the use of the market price for the security obtained
from an approved pricing service at an established time during the day which may
be prior to the close of regular trading in the security. If events occur which
are known to Founders to have materially affected the value of foreign
securities which are not reflected in the value obtained through regular
procedures, the securities will be valued at fair market value as determined in
good faith by the Board of Directors. All foreign currencies are converted into
U.S. dollars by utilizing exchange rate closing quotations obtained from the
London Stock Exchange.

DISCOVERY, FRONTIER, PASSPORT, SPECIAL, INTERNATIONAL EQUITY, WORLDWIDE
GROWTH, GROWTH, BLUE CHIP, BALANCED AND GOVERNMENT SECURITIES FUNDS. The net
asset value per share of each Fund is calculated by dividing the value of all
securities held by that Fund and its other assets (including dividends and
interest accrued but not collected), less the Fund's liabilities (including
accrued expenses), by the number of outstanding shares of that Fund. Securities
traded on national securities exchanges and foreign markets are valued at their
last sale prices on the exchanges or markets where such securities are primarily
traded (except as described in the preceding paragraph). Securities traded in
the over-the counter market (including those traded on the NASDAQ National
Market System and the NASDAQ Small Cap Market), and listed securities for which
no sales were reported on a particular date, are valued at their last current
bid prices or, in the case of foreign securities, on the basis of the average of
at least two market maker quotes and/or the PORTAL system. If market quotations
are not readily available, securities will be valued at their fair values as
determined in good faith by the Company's board of directors or pursuant to
procedures approved by the board of directors. The above procedures may include
the use of valuations furnished by pricing services, including services that

<PAGE>

employ a matrix to determine valuations for normal institutional-size trading
units of debt securities. The Company's board of directors periodically reviews
and approves the pricing services used to value the Funds' securities.
Commercial paper with remaining maturities of sixty days or less at the time of
purchase will be valued at amortized cost, absent unusual circumstances.

MONEY MARKET FUND. The Board of Directors has adopted a policy which
requires that the Fund use its best efforts, under normal circumstances, to
maintain a constant net asset value of $1.00 per share using the amortized cost
method. The amortized cost method involves valuing a security at its cost and
thereafter accruing any discount or premium at a constant rate to maturity. By
declaring these accruals to the Fund's shareholders in the daily dividend, the
value of the Fund's assets, and thus its net asset value per share, generally
will remain constant. No assurances can be provided that the Fund will be able
to maintain a stable $1.00 per share net asset value. This method may result in
periods during which the value of the Fund's securities, as determined by
amortized cost, is higher or lower than the price the Fund would receive if it
sold the securities. During periods of declining interest rates, the daily yield
on shares of the Fund computed as described above may tend to be higher than a
like computation made by a similar fund with identical investments utilizing a
method of valuation based upon market prices and estimates of market prices for
all of its portfolio securities. Thus, if the use of amortized cost by the Fund
resulted in a lower aggregate portfolio value on a particular day, a prospective
investor in the Fund would be able to obtain a somewhat higher yield than would
result from investment in a similar fund utilizing market values, and existing
investors in the Fund would receive less investment income. The converse would
apply in a period of rising interest rates.

In connection with its use of the amortized cost method, Money Market
Fund must maintain a dollar-weighted average portfolio maturity of 90 days or
less, purchase only portfolio securities having remaining maturities of one year
or less, and invest only in securities, whether rated or unrated, determined by
the^ board of directors to be of high quality with minimal credit risks. The
board of directors also has established procedures designed to stabilize, to the
extent reasonably possible, the Fund's net asset value per share, as computed
for the purpose of sales and redemptions, at $1.00. Such procedures include
review of the Fund's portfolio holdings by the board of directors at such
intervals as it may deem appropriate to determine whether the Fund's net asset
value calculated by using available market quotations deviates from $1.00 per
share, and, if so, whether such deviation may result in material dilution or may
otherwise be unfair to existing shareholders. In the event the board of
directors determines that such a deviation exists, the Board will take such
corrective action as it deems necessary and appropriate, which action might
include selling portfolio securities prior to maturity to realize capital gains
or losses or to shorten average portfolio maturity, withholding dividends, or
establishing a net asset value per share by using available market quotations.

ALL FUNDS EXCEPT SPECIAL, GROWTH, GOVERNMENT SECURITIES AND MONEY
MARKET FUNDS. When a Fund writes an option, an amount equal to the premium
received is included in the Fund's Statement of Assets and Liabilities as an
asset and an equivalent liability. The amount of the liability is subsequently
marked-to-market to reflect the current market value of the option written.

ALL FUNDS EXCEPT BALANCED, MONEY MARKET AND GOVERNMENT SECURITIES
FUNDS. When these Funds purchase a put or call option on a stock index, the
premium paid is included in the asset section of the Fund's Statement of Assets
and Liabilities and subsequently adjusted to the current market value of the
option. Thus, if the current market value of the option exceeds the premium
paid, the excess is unrealized appreciation and, conversely, if the premium
exceeds the current market value, such excess is unrealized depreciation.

<PAGE>

YIELD AND PERFORMANCE INFORMATION

The Company may, from time to time, include the yield or total return
of the Funds (other than Founders Money Market Fund) in advertisements or
reports to shareholders or prospective investors.

Quotations of yield for Founders Government Securities Fund will be
based on all investment income per share earned during a particular 30-day
period (including dividends and interest), less expenses accrued during the
period ("net investment income"), and are computed by dividing net investment
income by the maximum offering price per share on the last day of the period,
according to the following formula:
6
YIELD = 2[(1 + a-b) - 1]
---
cd
where a = dividends and interest earned during the period,

b = expenses accrued for the period (net of reimbursements),

c = the average daily number of shares outstanding during the
period that were entitled to receive dividends, and

d = the maximum offering price per share on the last day of the
period.

Quotations of average annual total return for each Fund (other than
Founders Money Market Fund) will be expressed in terms of the average annual
compounded rate of return of a hypothetical investment in the Fund over periods
of 1, 5, and 10 years (up to the life of the Fund). These are the annual total
rates of return that would equate the initial amount invested to the ending
redeemable value. These rates of return are calculated pursuant to the following
formula: P (1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T
= the average annual total return, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures reflect the deduction of a proportional share
of Fund expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid.

For the 1, 5, and 10 year periods ended December 31, 1995 the average
annual total returns of the Funds were:
10 year or
1 Year 5 Year Life Of Fund
------ ------ ------------

Discovery Fund 31.30% 20.22% 19.02%+
Frontier Fund 37.03% 20.35% 19.88%*
Passport Fund 24.39% 7.85%** ++
Special Fund 25.69% 19.71% 15.81%
International Equity Fund ++ ++ ++
Worldwide Growth Fund 20.63% 15.97% 14.37%+
Growth Fund 45.59% 22.12% 16.87%
Blue Chip Fund 29.06% 13.71% 13.04%
Balanced Fund 29.41% 15.03% 12.02%
Government Securities Fund 11.12% 6.33% 6.69%***

<PAGE>

+ From inception on 12/31/89 to 12/31/95.

* From inception on 1/22/87 to 12/31/95.

** From inception on 11/16/93 to 12/31/95.

++ The Fund has not been in existence for this length of time.
International Equity Fund commenced the public offering of its shares
on December 29, 1995.

*** From inception on 3/1/88 to 12/31/95.

Performance information for a Fund may be compared in reports and
promotional literature to: (i) the Standard & Poor's 500 Stock Index ("S & P
500"), Dow Jones Industrial Average ("DJIA"), or other unmanaged indices so that
investors may compare a Fund's results with those of a group of unmanaged
securities widely regarded by investors as representative of the securities
markets in general; (ii) other groups of mutual funds tracked by Lipper
Analytical Services, a widely used independent research firm which ranks mutual
funds by overall performance, investment objectives, and assets, or tracked by
other services, companies, publications, or persons who rank mutual funds on
overall performance or other criteria; and (iii) the Consumer Price Index
(measure for inflation), to assess the real rate of return from an investment in
the Fund. Unmanaged indices may assume the reinvestment of dividends but
generally do not reflect deductions for administrative and management costs and
expenses.

Performance information for any Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objectives and policies, characteristics and
quality of the portfolios and the market conditions during the given time
period, and should not be considered as a representation of what may be achieved
in the future.

In conjunction with performance reports, comparative data between the
Funds' performance for a given period and other types of investment vehicles,
including certificates of deposit, may be provided to prospective investors and
shareholders.

Rankings, ratings, and comparisons of investment performance and/or
assessments of the quality of shareholder service made by independent sources
may be used in advertisements, sales literature or shareholder reports,
including reprints of, or selections from, editorials or articles about the
Funds. Sources of Fund performance information and articles about the Funds
include, but are not limited to, the following: AMERICAN ASSOCIATION OF
INDIVIDUAL INVESTORS' JOURNAL; BANXQUOTE; BARRON'S; BUSINESS WEEK; CDA
INVESTMENT TECHNOLOGIES; CNBC; CNN; CONSUMER DIGEST; FINANCIAL TIMES; FINANCIAL
WORLD; FORBES; FORTUNE; IBBOTSON ASSOCIATES, INC.; INDIVIDUAL INVESTOR;
INSTITUTIONAL INVESTOR; INVESTMENT COMPANY DATA, INC.; INVESTOR'S BUSINESS
DAILY; KIPLINGER'S PERSONAL FINANCE; LIPPER ANALYTICAL SERVICES, INC.'S MUTUAL
FUND PERFORMANCE ANALYSIS; MUTUAL FUNDS MAGAZINE; MONEY; MORNINGSTAR; MUTUAL
FUND FORECASTER; NO-LOAD ANALYST; NO-LOAD FUND X; PERSONAL INVESTOR; SMART
MONEY; THE NEW YORK TIMES; THE NO-LOAD FUND INVESTOR; U.S. NEWS AND WORLD
REPORT; UNITED MUTUAL FUND SELECTOR; USA TODAY; WALL STREET JOURNAL;
WEISENBERGER INVESTMENT COMPANIES SERVICE; WORKING WOMAN; and WORTH.

<PAGE>

ALL FUNDS. Investors and shareholders may call Investor Services to
request printed information regarding the holdings of a specific fund as of the
most recent month-end or quarter-end period. Also included in this fund
information sheet are recent performance information, the number of outstanding
shares, diversification data, and other facts as of the most recent month-end or
quarter-end period.

REDEMPTION PAYMENTS

ALL FUNDS. Proceeds of redemptions normally will be forwarded within
three business days after receipt by the Company's transfer agent of the request
for redemption in proper order, although the Company may delay payment of
redemption proceeds under certain circumstances for up to seven calendar days
after receipt of the redemption request. In addition, net asset value
determination for purposes of redemption may be suspended or the date of payment
postponed during periods when (1) trading on the New York Stock Exchange is
restricted, as determined by the Securities and Exchange Commission, or the
Exchange is closed (except for holidays or weekends), (2) the Securities and
Exchange Commission permits such suspension and so orders, or (3) an emergency
exists as defined by the Securities and Exchange Commission so that disposal of
securities or determination of net asset value is not reasonably practicable. In
such a case, a shareholder seeking to redeem shares may withdraw his request or
leave it standing for execution at the per share net asset value next computed
after the suspension has been terminated.

A redemption charge is authorized by the Company's Articles of
Incorporation, but the Company currently has no intent to impose this charge.
Shareholders will be notified in the event of the imposition of any such charge.

DIVIDENDS, DISTRIBUTIONS AND TAXES

Distributions paid from a Fund's investment company taxable income
(which includes, among other items, dividends, interest, and the excess of net
short-term capital gains over net long-term capital losses) are taxable as
ordinary income whether received in cash or additional shares. Distributions of
net capital gain (the excess of net long-term capital gain over net short-term
capital loss) designated by a Fund as capital gain dividends are taxable as
long-term capital gain, regardless of the length of time the shareholder has
held his Fund shares at the time of the distribution, whether received in cash
or additional shares. Shareholders receiving distributions in the form of
additional shares will have a cost basis for federal income tax purposes in each
share received equal to the net asset value of a share of that Fund on the
reinvestment date.

Any loss realized by a shareholder upon the disposition of shares held
for six months or less from the date of his or her purchase will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period. Further, a loss realized on
a disposition will be disallowed to the extent the shares disposed of are
replaced (whether by reinvestment of distributions or otherwise) within a period
of 61 days beginning 30 days before and ending 30 days after the shares are
disposed of. In such a case, the basis of the shares acquired will be adjusted
to reflect the disallowed loss.

A portion of a Fund's dividends may qualify for the corporate
dividends-received deduction; however, the revised alternative minimum tax
applicable to corporations may reduce the value of the dividends-received
deduction.

<PAGE>

All dividends and distributions are regarded as taxable to the
investor, whether or not such dividends and distributions are reinvested in
additional shares. If the net asset value of Fund shares should be reduced below
a shareholder's cost as a result of a distribution of such realized capital
gains, such distribution would be taxable to the shareholder although a portion
would be, in effect, a return of invested capital. The net asset value of each
Portfolio's shares reflects accrued net investment income and undistributed
realized capital gains; therefore, when a distribution is made, the net asset
value is reduced by the amount of the distribution. Distributions generally are
taxable in the year in which they are received, regardless of whether received
in cash or reinvested in additional shares. However, dividends declared in
October, November, or December of a calendar year to shareholders of record on a
date in such a month and paid by a Fund during January of the following calendar
year will be taxable as though received by shareholders on December 31 of the
calendar year in which the dividends were declared.

While the Funds intend to make distributions at the times set forth in
the prospectus, those times may be changed at each Fund's discretion. The Funds
intend to distribute substantially all investment company taxable income and net
realized capital gains. Through such distributions, and by meeting certain other
requirements, each Fund intends to qualify for the tax treatment accorded to
regulated investment companies under Subchapter M of the Internal Revenue Code
(the "Code"). In each year in which a Fund so qualifies, it will not be subject
to Federal income tax upon the amounts so distributed to investors.
Qualification as a regulated investment company does not involve supervision by
any governmental authority either of the Company's management or of the Fund's
investment policies and practices.

Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
prevent application of the excise tax, the Funds intend to make distributions in
accordance with this requirement.

Certain options and forward contracts in which the Funds may invest are
"section 1256 contracts." Gains or losses on section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or losses;
however, foreign currency gains or losses (as discussed below) arising from
certain section 1256 contracts may be treated as ordinary income or loss. Also,
section 1256 contracts held by the Funds at the end of each taxable year (and,
with some exceptions, for purposes of the 4% excise tax, on October 31 of each
year) are "marked-to-market," with the result that unrealized gains or losses
are treated as though they were realized.

Generally, the hedging transactions undertaken by the Funds may result
in "straddles" for Federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Funds. In addition, losses
realized by the Funds on positions that are part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Funds of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by the Funds, which is taxed as ordinary income when
distributed to shareholders.

The Funds may make one or more of the elections available under the
Code which are applicable to straddles. If any of the elections are made, the
amount, character and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according

<PAGE>

to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.

Because application of the straddle rules may affect the character of
gains or losses by deferring losses and/or accelerating the recognition of gains
from the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.

Requirements related to the Funds' status as regulated investment
companies may limit the extent to which any particular Fund will be able to
engage in transactions in options and forward contracts.

The Funds intend to accrue dividend income for Federal income tax
purposes in accordance with Code rules applicable to regulated investment
companies. In some cases, these rules may have the effect of accelerating (in
comparison to other recipients of the dividend) the time at which the dividend
is taken into account by a Fund as income.

Gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time a Fund accrues interest or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time a Fund actually collects such receivables or pays such
liabilities are treated as ordinary income or ordinary loss. Similarly, on
disposition of debt securities denominated in a foreign currency and on
disposition of certain options and forward contracts, gains or losses
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the position and the date of disposition also are treated
as ordinary gain or loss. These gains and losses, referred to under the Code as
"section 988" gains or losses, may increase or decrease the amount of a Fund's
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. If section 988 losses exceed other investment
company taxable income during a taxable year, a Fund generally would not be able
to make any ordinary income dividend distributions. Such distributions made
before the losses were realized generally would be recharacterized as a return
of capital to shareholders, rather than as an ordinary dividend, reducing each
shareholder's basis in his Fund shares.

A Fund may be required to withhold Federal income tax at the rate of
31% of all taxable distributions and gross proceeds from the disposition of Fund
shares payable to shareholders who fail to provide the Fund with their correct
taxpayer identification numbers or to make required certifications, or where a
Fund or a shareholder has been notified by the Internal Revenue Service that a
shareholder is subject to backup withholding. Corporate shareholders and certain
other shareholders specified in the Code generally are exempt from such backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against the shareholder's Federal income tax liability.

Income received by a Fund from sources within foreign countries may be
subject to withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. It is impossible to determine in advance the amount of
foreign taxes that will be imposed on a Fund. If more than 50% of the value of a
Fund's total assets at the close of any taxable year consists of securities of
foreign corporations, the Fund will be eligible to, and may, file an election
with the IRS that will enable its shareholders, in effect, to receive the

<PAGE>

benefit of the foreign tax credit with respect to any foreign and U.S.
possessions' income taxes paid by it. The Fund will report to its shareholders
shortly after each taxable year their respective shares of the Fund's income
from sources within, and taxes paid to, foreign countries and U.S. possessions
if it makes this election.

Certain Funds may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on the stock of a PFIC or of any gain on disposition of the stock (collectively
"PFIC income"), plus interest thereon, even if the Fund distributes the PFIC
income as a taxable dividend to its shareholders. The balance of the PFIC income
will be included in the Fund's investment company taxable income and,
accordingly, will not be taxable to it to the extent that income is distributed
to its shareholders.

Money Market Fund will declare a dividend of its investment company
taxable income on a daily basis, and shareholders of record begin receiving
dividends on the next day following the day when the purchase is effected. The
dividend declared at 4:00 p.m. Eastern time will be deducted immediately before
the net asset value calculation is made. Shareholders will receive dividends in
additional shares, unless they elect to receive cash by notifying the Transfer
Agent in writing. Dividends will be reinvested monthly on the first business day
of each month at the per share net asset value on that date. If cash payment is
requested, checks will be mailed as soon as possible after the end of the month.
If a shareholder redeems his entire account, all dividends declared to the
effective date of redemption will be paid at that time. Shareholders will
receive monthly statements of account activity, including information on
dividends paid or reinvested. Shareholders also will receive statements after
the opening of a new account, each transfer of shares, and each automatic
withdrawal plan payment and redemption (except telephone exchanges). Tax
information will be provided annually.

Money Market Fund's net income consists of all interest income accrued
(including accrued discount earned and premium amortized), plus or minus all
short-term realized gains and losses on portfolio assets, less accrued expenses.
The amount of the daily dividend will fluctuate. To the extent necessary to
attempt to maintain a net asset value of $1.00 per share, the Board of Directors
may consider the advisability of temporarily reducing or suspending payment of
daily dividends.

Founders may provide the Funds' shareholders with information
concerning the average cost basis of their shares to assist them in preparing
their tax returns. This information is intended as a convenience to the Funds'
shareholders and will not be reported to the Internal Revenue Service (the
"IRS"). The IRS permits the use of several methods in determining the cost basis
of mutual fund shares. Cost basis information provided by Founders will be
computed using the single-category average cost method, although neither
Founders nor the Company recommends any particular method of determining cost
basis. Other methods may result in different tax consequences. If a Fund's
shareholder has reported gains or losses from investments in the Fund in past
years, the shareholder must continue to use the method previously used, unless
the shareholder applies to the IRS for permission to change methods.

The treatment of any ordinary dividends and capital gains distributions
to shareholders from a Fund under the various state and local income tax laws
may not parallel that under federal law. In addition, distributions from a
Fund may be subject to additional state, local, and foreign taxes, depending

<PAGE>

upon each shareholder's particular situation. Shareholders are advised to
consult their own tax advisers with respect to the particular tax consequences
to them of an investment in a Fund.

ADDITIONAL INFORMATION

CAPITAL STOCK

The Company has 1,000,000,000 shares of capital stock authorized, with
a par value per share of $0.01. Of these shares, 40,000,000 shares have been
allocated to Discovery Fund, 40,000,000 to Frontier Fund, 30,000,000 to Passport
Fund, 150,000,000 to Special Fund, 20,000,000 to International Equity Fund,
40,000,000 to Worldwide Growth Fund, 125,000,000 to Growth Fund, 100,000,000 to
Blue Chip Fund, 35,000,000 to Balanced Fund, 20,000,000 to Government Securities
Fund, and 400,000,000 to Money Market Fund. The Board of Directors is authorized
to create additional series or classes of shares, each with its own investment
objectives and policies.

As of July 1, 1996, no person owned of record or, to the knowledge of
the Company, beneficially, more than 5% of the capital stock of any Fund then
outstanding except: Charles Schwab & Co., Inc., 101 Montgomery Street, San
Francisco, CA 94104, held of record 32.65%, 37.73%, 56.47%, 25.25%, 21.97%,
38.46%, 35.02%, 10.28%, and 35.42%, of the outstanding shares of Discovery Fund,
Frontier Fund, Passport Fund, Special Fund, International Equity Fund, Worldwide
Growth Fund, Growth Fund, Blue Chip Fund, and Balanced Fund, respectively;
National Financial Services Corp., P. O. Box 3908, Church Street Station, New
York, New York 10008, held of record 5.43%, 15.23%, 5.21%, 15.41%, 9.64% and
7.08% of the outstanding shares of Discovery Fund, Passport Fund, International
Equity Fund, Worldwide Growth Fund, Growth Fund and Balanced Fund, respectively;
Cudd & Co., 1121 Avenue of the Americas, 35th Floor, New York, New York 10036,
held of record 7.01% of the outstanding shares of International Equity Fund; and
Fidelity Management Trust Company for Baker & Hostetler Composite FD, 82
Devonshire Street, Boston, Massachusetts 02109 held of record 7.93% of the
outstanding shares of Balanced Fund.

Shares of each Fund are fully paid and nonassessable when issued. All
shares participate equally in dividends and other distributions by each Fund,
and in the residual assets of a Fund in the event of its liquidation. Shares of
each Fund are redeemable as described herein under "Redemption Payments" and
under "Investing in the Founders Funds" in the prospectus. Fractional shares
have the same rights proportionately as full shares but certificates for
fractional shares are not issued.

Shares of the Company have no conversion, subscription or preemptive
rights. Each full share of the Company has one vote and fractional shares have
proportionate voting rights. Shares of the Company have non-cumulative voting
rights, which means that the holders of more than 50% of the shares voting for
the election of directors can elect 100% of the directors if they choose to do
so, and, in such an event, the holders of the remaining less than 50% of the
shares voting for the election of directors will not be able to elect any person
or persons to the board of directors.

CODE OF ETHICS

The Company and Founders have adopted a strict code of ethics which
limits directors, officers, investment personnel and other Founders employees in
investing in securities for their own accounts. The code of ethics requires
pre-clearance of personal securities transactions and imposes restrictions and
reporting requirements upon such transactions. The Company and Founders
carefully monitor compliance with the code of ethics by their respective

<PAGE>

personnel. Violations or apparent violations of the code of ethics are reported
to the president of the Company or to the Company's legal counsel, and
thereafter to the Company's board of directors. The Company's board of directors
determines whether a violation of the code of ethics has occurred and, if so,the
sanctions, if any, deemed appropriate. Sanctions may include a letter of
censure, suspension, termination of employment, disgorgement of profits from
improper transactions, or other penalties. The code of ethics requires
maintenance of the highest standards of integrity and conduct. In engaging in
personal business activities, personnel of the Company and of Founders must act
in the best interests of the Company and its shareholders. The Company's
shareholders may obtain a copy of the code of ethics without charge by calling
Founders at 1-800- 525-2440.

CUSTODIAN

Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street,
Kansas City, Missouri, is custodian of the portfolio securities and cash of the
Funds. IFTC has entered into a subcustodian agreement with United Missouri Bank
("United"), through which each Fund (other than Money Market Fund) participates
in the Chase Global Custody Unit. The foreign subcustodians of United which have
been approved by the Company's board of directors are as follows: Argentina -
Chase Manhattan Bank, N.A.; Australia - The Chase Manhattan Bank Australia
Limited; Austria -Creditanstalt-Bankverein; Bangladesh - Dhaka branch of
Standard Chartered Bank; Belgium -Generale Bank; Botswana - Barclays Bank of
Botswana; Brazil - Banco Chase Manhattan, S.A.; Canada - Royal Bank of Canada
and Canada Trust Company; Chile - Chase Manhattan Bank, N.A.; China-Shanghai -
HongKong Shanghai Banking Corporation, Ltd.; China-Shenzhen - HongKong Shanghai
Banking Corporation, Ltd.; Colombia Cititrust Colombia S.A. Sociedad Fiduciaria;
Czech Republic - Ceskoslovenska Obchodni Banka, A.S.; Denmark - Den Danske Bank;
Egypt - National Bank of Egypt; Finland - Kansallis-Osake-Pankki; France -
Banque Paribas; Germany - Chase Bank, A.G.; Ghana - Barclays Bank of Ghana Ltd.;
Greece Barclays Bank Plc; Hong Kong - Chase Manhattan Bank, N.A.; Hungary -
Citibank Budapest Rt.; India - HongKong Shanghai Banking Corporation, Ltd. and
Deutsche Bank; Indonesia - HongKong Shanghai Banking Corporation, Ltd.; Ireland
- - Bank of Ireland; Israel - Bank Leumi Le-Israel B.M.; Italy - Chase Manhattan
Bank, N.A.; Japan - Chase Manhattan Bank, N.A.; Jordan - Arab Bank, PLC; Kenya
Barclays Bank of Kenya Ltd.; Malaysia - Chase Manhattan Bank; Mauritius -
HongKong & Shanghai Banking Corporation, Ltd.; Mexico - Chase Manhattan Bank,
N.A.; Morocco - Banque Commerciale du Maroc; Netherlands - ABN-AMRO Bank N.V.;
New Zealand - National Nominees Limited; Norway Den norske Bank; Pakistan -
Citibank, N.A. and Deutsche Bank; Peru - Citibank, N.A.; Philippines HongKong &
Shanghai Banking Corporation, Ltd.; Poland - Bank Handlowy W. Warawie S.A.;
Portugal - Banco Espirito Santo E Commercial de Lisboa, S.A.; Singapore - Chase
Manhattan Bank, N.A.; Slovakia - Ceskoslovenska Obchodni Banks, A.S.; South
Africa - Standard Bank of South Africa; South Korea - HongKong & Shanghai
Banking Corporation, Ltd.; Spain - Chase Manhattan Bank, N.A.; Sri Lanka -
HongKong & Shanghai Banking Corporation, Ltd.; Sweden - Skandinaviska Enskilda
Banken; Switzerland - Union Bank of Switzerland; Taiwan - Chase Manhattan Bank,
N.A.; Thailand - Chase Manhattan Bank, N.A.; Turkey - Chase Manhattan Bank,
N.A.; United Kingdom -Chase Manhattan Bank, N.A. and First National Bank of
Chicago; Uruguay - The First National Bank of Boston; Venezuela - Citibank,
N.A.; Zambia - Barclays Bank of Zambia Ltd; and Zimbabwe - Barclays Bank of
Zimbabwe Ltd. As required by Rule 17f-5 under the Investment Company Act of 1940
(and the notes to the Rule), the board of directors of the Company has approved
the above foreign subcustodians, based on the following: the financial strength
of the foreign subcustodian, its general reputation and standing in the country
in which it is located, its ability to provide efficiently the custodial
services required, the relative cost for these services, the level of safeguards
for maintaining the Fund's assets and whether or not the foreign subcustodian
has branch offices in the United States.

<PAGE>

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP, Denver, Colorado, acts as independent accountants
for the Company. The independent accountants are responsible for auditing the
financial statements of each Fund and meeting with the Audit Committee of the
Board of Directors.

REGISTRATION STATEMENT

A Registration Statement (Form N-1A) under the Securities Act of 1933,
as amended, has been filed with the Securities and Exchange Commission,
Washington, D.C., with respect to the securities to which this Statement of
Additional Information relates. If further information is desired with respect
to the Company or such securities, reference should be made to the Registration
Statement and the exhibits filed as a part thereof.

FINANCIAL STATEMENTS

Financial statements for the Funds as of December 31, 1995, including
notes thereto, and the report of Smith, Brock & Gwinn thereon, the Funds'
independent certified public accountants through December 31, 1995, are
incorporated by reference to the Funds' 1995 Annual Report into this Statement
of Additional Information. A copy of the appropriate Fund's 1995 Annual Report
will be provided to each person receiving a copy of this Statement of Additional
Information. In addition, unaudited financial statements for the International
Equity Fund as of June 30, 1996, including notes thereto, are attached to this
Statement of Additional Information.

<PAGE>

SCHEDULE OF INVESTMENTS
(unaudited) JUNE 30, 1996
INTERNATIONAL EQUITY FUND

SHARES MARKET VALUE
- ------ ------------
Preferred Stocks (Foreign) - 2.5%

Financial Services - 1.3%
100 Marschollek Lautenschlaeger
und Partner AG (GE) $105,118
----------
Publishing & Broadcasting - 1.2%
4,800 News Corporation Sponsored ADR
Representing Prfd Shares (AU) 96,600
----------
Total Preferred Stocks (Foreign) - 2.5% (Cost - $176,791) 201,718
----------
Common Stocks (Foreign) - 81.7%

Airlines - 4.4%
1,600 British Airways ADS (UK) 137,200
3,400 KLM Royal Dutch Airlines (NE) 107,950
11,100 Singapore Airlines (SI) 117,182
----------
362,332
----------
Apparel - 0.6%
1,500 Puma AG Rudolf Dassler Sport 144A (GE)* 53,857
----------
Automobile Manufacturers - 2.0%
7,000 Edaran Otomobil Nasional Berhad (MA) 67,049
1,925 Toyota Motor Corporation ADR (JA) 96,250
----------
163,299
----------
Banking - 4.5%
2,000 Argentaria Corporation Bancaria
de Espana (SP) 87,200
5,400 Banco de A. Edwards Sponsored ADR
Representing Series A (CH) 113,408
10,000 Industrial Finance Corporation
of Thailand (TH)* 44,883
2,200 National Westminster Bank PLC ADR (UK) 126,500
----------
371,991
----------
Basic Industry - 2.8%
3,500 Madeco SA ADS (CH) 98,438
45,000 Semen Gresik Bearer (ID) 130,992
----------
229,430
----------

<PAGE>

Schedule of Investments (Continued)(Unaudited)

Business Services - 0.6%
26,500 Corporate Express Australia
Limited (AU)* $ 47,549
----------
Computer Software - 4.6%
4,000 Baan Company NV (NE)* 136,000
11,000 JBA Holdings PLC (UK) 88,376
200,000 Olivetti SPA (IT)* 107,896
800 Square Company Ltd. (JA) 46,927
----------
379,199
----------
Consumer Products - 3.8%
2,100 Industrie Natuzzi SPA ADR (IT) 107,625
3,000 LVMH Moet Hennessy Louis
Vuitton Sponsored ADR (FR) 141,000
37,000 Vtech Holdings Ltd. (HK) 60,468
----------
309,093
----------
Data Communications - 1.8%
2,000 Reuters Holdings PLC ADR (UK) 144,750
----------
Electronics - 3.9%
4,200 Philips Electronics NV New Shares (NE) 137,025
2,000 SAES Getters SPA (IT) 40,445
2,100 Sony Corporation (JA) 138,458
----------
315,928
----------
Financial Services - 2.5%
2,000 Banco Latinoamericano de
Exportaciones, SA Class E (PA) 112,500
195,000 Manhattan Card Company (HK) 93,211
----------
205,711
----------
Food and Beverages - 1.3%
10,000 Quilmes Industrial SA ADR
Representing 1 Non-voting
Preferred Share (AR) 102,500
----------

Insurance - 0.6%
10,000 Guoco Group Ltd. (HK) 47,671
----------
Leisure & Recreation - 2.2%
30,000 Ladbroke Group PLC (UK) 83,916
20,900 Village Roadshow Limited (AU) 94,918
----------

<PAGE>

Schedule of Investments (Continued)(Unaudited)

Machinery - 5.4%
1400 ABB AB Series A (SW) $148,625
2,800 Konecranes International
Corporation (FI)* 68,103
4,825 Kverneland ASA (NW) 119,182
6,000 Valmet Corporation Class A (FI) 101,380
----------
437,290
----------
Manufacturing - 4.0%
3,000 Hoya Corporation (JA) 96,826
213,600 Republic Glass Holdings Corporation (PH) 82,023
3,000 TT Tieto Cy (Fl) 143,352
----------
322,201
----------
Office Equipment - 1.4%
1,100 OCE Van Der Grinten NV (NE) 116,515
----------
Oil & Gas - 4.8%
950 Eni SPA Sponsored ADR (IT) 47,500
25,000 Gulf Canada Resources Limited (CA) 128,125
2,300 Petroleum Geological Services
Sponsored ADR (NW)* 64,975
4,000 Total SA Sponsored ADR (FR 148,500
----------
389,100
----------
Pharmaceuticals - 2.5%
2,050 Astra, AB Series B (SW) 89,286
1,500 Schwarz Pharma (GE) 112,345
----------
201,631
----------
Publishing & Broadcasting - 5.4%
12,000 Carlton Communications PLC (UK) 96,597
4,300 Nynex Cablecomms Group PLC ADR (UK) * 69,875
3,800 Scandinavian Broadcasting
Systems SA (SW)* 93,100
5,000 Ver Ned Uitgeversbedr Ver Bezit NV (NE) 77,626
925 Wolters Kluwer (NE) 105,078
----------
442,276
----------
Restaurants - 1.4%
7,425 J D Wetherspoon (UK) 116,000
----------

<PAGE>

Schedule of Investments (Continued)(Unaudited)

Retail - 8.6%
6,000 Bulgari SPA (IT) $ 95,893
10,600 Dixons Group PLC (UK) 87,139
800 Gucci Group NV (FR) 51,600
675 Guilbert SA (FR) 98,339
16,900 Next PLC (UK) 147,859
53,000 PT Matahan Putra Prima (ID) 96,781
4,425 Santa Isabel SA Sponsored ADR (CH) 122,794
----------
700,405
----------
Semiconductors - 2.6%
850 Austria Mykrosysteme International (AU) 79,348
2,000 Rohm Company (JA) 132,138
----------
211,486
----------
Telecommunications - 8.3%
3,000 Cellular Communications International
Inc. (IT)* 99,000
10 DDI Corporation (JA) 87,162
6,950 Korea Mobile Telecommunications
Corporation ADR (KO)* 119,019
8,000 Orange PLC ADR (UK)* 139,000
825 SPT Telecom (CZ)* 100,690
1,900 Telecomunicacoes Brasileiras
Sponsored ADR (BR) 132,288
----------
677,159
----------
Transportation - 1.7%
1,375 Copenhagen Airport (DE) 136,307
----------
Total Common Stocks (Foreign) - 81.7% (Cost - $6,177,767) 6,662,514
----------

PRINCIPAL AMOUNT AMORTIZED COST
- ---------------- --------------

Corporate Short -Term Notes - 25.7%
$200,000 Oklahoma Gas & Electric 5.55% 07/01/96 $ 200,000
1,500,000 FNMA Discount Note 5.25% 07/02/96 1,499,782
400,000 Morgan Stanley Group 5.60% 07/01/96 400,000
----------
Total Corporate Short Term Notes - 25.7% (Cost - $2,099,782) 2,099,782
----------
Total Investments - 109.9% 8,964,014
----------
Other Assets & Liabilities - (9.9%) (805,808)
----------
Total Net Assets - 100.0% $8,158,206

* Non-income producing ==========

<PAGE>

STATEMENTS OF ASSETS AND LIABILITIES
unaudited
International
June 30, 1996 Equity
(In Thousands) Fund
------------
Assets

Investment securities, at market
(identified cost of $6,355) $6,865
Corporate short-term notes, at cost
(approximates market) 2,100
Cash on deposit with custodian 74
Receivables:
Investment securities sold 63
Subscriptions and other receivables 54
Dividends and interest 12
Deferred charges 9
----------
Total Assets 9,177
----------
Liabilities

Accounts payable:
Investment securities purchased 1,019
----------
Total Liabilities 1,019
----------

Net Assets Applicable to
Outstanding Shares $8,158
==========

Capital shares:
Authorized (Par value $0.01) 20,000
==========
Outstanding 712
==========

Net Asset Value, Offering and
Redemption Price Per Share $11.46
==========

See notes to financial statements.

<PAGE>

STATEMENTS OF OPERATIONS
unaudited International
June 30, 1996 Equity
(in Thousands) Fund
-------------
Investment Income
Income:
Dividends $30
Interest 20
----------
Income 50
----------
Expenses:
Advisory fees 24
Shareholder servicing fees 8
Accounting fees 8
*Distribution fees 6
Transfer Agency fees and expenses 2
Registration fees 5
Postage & mailing expenses
Custodian fees and expenses 6
Printing expenses 1
Communication expenses
Legal and Audit Fees 1
Other expenses 1
Directors' fees & expenses
Insurance and Membership dues
Custody balances credits
Organization Expenses 9
----------
Expenses 71
Reimbursed expenses (24)
----------
Net Investment Income (Loss) 3
----------
Realized and Unrealized Gain (Loss) on Investments and
Foreign Currency Transactions

Net Realized Gain (Loss) from Security Transactions:
Proceeds from securities sold 971
Cost of securities sold 813
----------
Net Gain (Loss) From Security Transactions 158

Net Gain (Loss) From Foreign Currency Transactions (10)

Net Change in Unrealized Appreciation (Depreciation) 510
----------
Net Realized and Unrealized Gain (Loss) on
Investments and Foreign Currency Transactions 658
----------
Net Increase in Net Assets Resulting from Operations $661
=========
Purchases of securities $7,167
=========
*Percent of average net assets (annualized) 0.25%

See notes to financial statements.

<PAGE>

STATEMENTS OF CHANGES IN NET ASSETS
unaudited
June 30, 1996
(in Thousands) International Equity Fund
--------------------------
Six months
ended 12/29/95-
06/30/96 12/31/95
--------- ---------
Operations
Net Investment Income (Loss) $3 0
Net Gain (Loss) From
Security Transactions 158 0
Net Gain (Loss) From Foreign
Currency Transactions (10) 0
Net Change in Unrealized Appreciation
(Depreciation) on Investments 510 0
---------- ----------
Net Increase (Decrease) in Net Assets
Resulting From Operations 661 0
---------- ----------
Distributions to Shareholders
Net investment income 0 0
Net realized gains from security transactions 0 0
---------- ----------
Net Decrease from Distributions 0 0
---------- ----------
Capital Share Transactions
Proceeds from shares sold 7,231 $767
Reinvested distributions 0 0
---------- ----------
7,231 767
Cost of shares redeemed (501) 0
---------- ----------
Net increase (decrease) from capital
share transactions 6,730 767
---------- ----------
Net Increase (Decrease) in Net Assets 7,391 767
Net Assets
Beginning of period 767 0
---------- ----------
End of period $8,158 $767
========== ==========
Net Assets consist of:
Capital (par value and paid in surplus) $7,497 $767
Undistributed net investment income (loss) 3 0
Undistributed net realized gain (loss)
from security transactions 148 0
Unrealized appreciation (depreciation)
on investments 510 0
---------- ----------
Total $8,158 $767
========== ==========
Distributions per share
From net realized security gains $0.000 $0.000
====== =======
From net investment income $0.000 $0.000
====== =======
See notes to financial statements.

Supplemental Information
unaudited
-----INCOME AND EXPENSES----- -----CAPITAL CHANGES-----
Per Share Income and Capital Changes
Selected data for each share of capital
stock outstanding throughout each period.
----Income From Investment Operations--- -----Less Distributions------
Net Net Realized
NAV Investment & Unrealized Total From From Net From Net
Beginning Income or Gain (Loss) Investment Investment Realized Total
of Period (Loss) On Securities Operations Income Gains Distributions

-----INCOME AND EXPENSES----- -----CAPITAL CHANGES-----

International Equity Fund
Six months ended 06/30/96 $10.00 0.00 1.46 1.46 0.00 0.00 0.00

-----NET ASSET VALUE-----

----------Ratios----------
Total Net
NAV Assets, Expenses Income Potrfolio Avg.
End Total End of Period to Average to Average Turnover Comm.
of Period Return (thousands) Net Assets Net Assets Rate per share

----------Ratios----------

<S> <C> <C> <C> <C> <C> <C> <C>
International Equity Fund
Six months ended 06/30/96 11.46 14.6% $8,158 2.00%** 0.14%** 21% 0.0174

<FN>
* Certain fees were waived by the management company. Had these fees not been
waived, the expense ratios would have been 3.03% for International Equity
Fund.
** Annualized rates

See notes to financial statements.

</TABLE>

<PAGE>

Notes to Financial Statements -- June 30, 1996
unaudited

1. Summary of Significant Accounting Policies

Founders Funds, Inc. ("the Company") is a diversified open-end management
investment company registered under the Investment Company Act of 1940. Eleven
classes of shares are currently issued: Discovery, Frontier, Passport, Special,
International Equity, Worldwide Growth, Growth, Blue Chip, Balanced, Government
Securities and Money Market Funds. The following is a summary of significant
accounting policies consistently followed by the Company in the preparation of
its financial statements.

Securities Valuation - With the exception of Money Market Fund, market
value of investments is determined from closing quotations on national security
exchanges or at the last current bid price in the case of securities traded
over-the-counter or by quotes from dealers making a market for securities not
listed on an exchange or traded over-the-counter. In the event that the closing
price of a foreign security is not available in time to calculate a Fund's net
asset value on a particular day, the Company's board of directors has authorized
the use of the market price for the security obtained from an approved pricing
service at an established time during the day which may be prior to the close of
regular trading in the security. London closing quotes for exchange rates are
used to convert foreign security values into US. dollars. Corporate short-term
notes are valued at amortized cost which approximates market. For Money Market
Fund, the Board of Directors has determined that the best method currently
available for valuing portfolio securities is amortized cost.

Foreign Securities - Foreign securities may carry more risk than US
securities such as currency fluctuations, political stability, economic
stability and regulatory capabilities. All of the Funds may invest at least a
portion of their assets in foreign securities. In the event that a Fund executes
a foreign security transaction, the Fund will enter into a foreign currency
contract to settle the foreign security transaction. The resultant foreign
currency gain or loss from the contract is recorded as foreign currency gain or
loss and is presented as such in the Statements of Operations.

Federal Income Taxes - No provision has been made for federal income taxes
since it is the policy of the Company to comply with the special provisions of
the Internal Revenue Code applicable to regulated investment companies, and to
make distributions of income and capital gains sufficient to relieve it from all
income taxes. Each Fund is treated as a separate tax entity for federal income
tax purposes.

Investment Income - Dividend income is recorded on the ex-dividend date.
Certain dividends from foreign securities will be recorded as soon as the Fund
is informed of the dividend if such information is obtained subsequent to the
ex-dividend date. Interest income is accrued daily and includes the accretion of
discounts and amortization of premiums.

Distributions to Shareholders - Income distributions and capital gain
distributions are determined in accordance with income tax regulations which may
differ from generally accepted accounting principles. These differences are
primarily due to differing treatments for mortgage-backed securities, market
discount, foreign currency transactions, nontaxable dividends, net operating
losses, expiring capital loss carryforwards and deferral of wash sales. For
Government Securities and Money Market Funds, distributions are declared daily
and paid monthly from net investment income, and capital gains (if any) are
distributed annually and are recorded on the ex-dividend date. For Balanced
Fund, distributions from income are declared and distributed quarterly and are
recorded on the ex-dividend date. All other Funds declare and distribute
dividends and capital gains (if any) annually, and such distributions are
recorded on the ex-dividend date.

Other - Security transactions are recorded on the date the securities are
purchased or sold (trade date).

2. Management Fees and Other Transactions with Affiliates

In accordance with the investment advisory agreements between the Company
on behalf of each Fund and Founders Asset Management, Inc. ("Founders"), the
Funds compensate Founders for its services as investment adviser by the payment
of fees computed daily and paid monthly at the annual rate equal to a percentage
of the average daily value of the Funds' net assets. For Discovery, Frontier,
Passport, International Equity and Worldwide Growth Funds, the fee is 1% of the

<PAGE>

first $250 million of net assets, 0.80% of the next $250 million of net assets,
and 0.70% of net assets in excess of $500 million. For Special and Growth Funds,
the fee is 1% of the first $30 million of net assets, 0.75% of the next $270
million of net assets, 0.70% of the next $200 million of net assets and 0.65% of
net assets in excess of $500 million. For Blue Chip and Balanced Funds, the fee
is 0.65% of the first $250 million of net assets, 0.60% of the next $250 million
of net assets, 0.55% of the next $250 of net assets and 0.50% of net assets in
excess of $750 million. For Money Market Fund, the fee is 0.50% of the first
$250 million of net assets, 0.45% of the next $250 million of net assets, 0.40%
of the next $250 million of net assets, and 0.35% of the net assets in excess of
$750 million. For Government Securities Fund, the fee is 0.65% of the first $250
million of net assets, and 0.50% of the net assets in excess of $250 million.

Each agreement provides that if the total ordinary business expenses of a
Fund for any fiscal year (including the investment advisory fee, but excluding
interest, taxes, brokerage commissions and extraordinary items) exceed the most
restrictive limitation prescribed by any state in which shares of the Fund are
qualified for sale, Founders shall reimburse the Fund for such excess. No
payment of the investment advisory fee will be made that would result in a
Fund's expenses exceeding on a cumulative annualized basis the most restrictive
applicable expense limitation in effect at the time of such payment. At this
time, Founders has committed to limit International Equity Fund's expenses to
2.00% of average net assets. As of June 30th, $24,047.87 has been reimbursed to
the Fund.

Investors Fiduciary Trust Company (IFTC) is the designated shareholder
accounting, transfer and dividend disbursing agent for each Fund. With the
exception of "out of pocket" charges, the fees charged by IFTC are paid by
Founders. The out of pocket charges from IFTC are paid by the Funds and these
costs are shown as "Transfer agent fees and expenses" in the Statements of
Operations. IFTC also serves as custodian for the Funds. These costs are shown
as "Custodian fees and expenses" in the Statements of Operations. The fees for
both of these services are subject to reduction by credits earned on the cash
balances of the funds held by IFTC as custodian. These credits are shown as
"Earnings credits" in the Statements of Operations.

The Company has agreed to compensate Founders for providing certain
shareholder servicing functions in addition to those currently provided by the
Company's designated shareholder accounting, transfer and dividend disbursing
agent. The Company paid Founders a monthly fee equal on an annual basis to
$25.00 per shareholder account of the Fund considered to be an open account at
any time during a given month. Effective June 1, 1996, the fee for providing
these services was changed to $24.00. These costs are shown as "Shareholder
servicing fees" in the Statements of Operations.

The Company has also agreed to compensate Founders for providing
accounting services, control and compliance monitoring, regulatory and
shareholder reporting, as well as facilities, equipment and clerical help as
shall be necessary to provide these services to the Company. The fee is computed
at the annual rate of 0.06% of the net assets of the Company from $0 to $500
million and 0.02% of the net assets of the Company in excess of $500 million.
The fee so computed is allocated among the portfolio companies on a pro rata
basis based on relative net assets. This cost is shown as "Accounting fees" in
the Statements of Operations.

Discovery, Frontier, Passport, Special, International Equity, Worldwide
Growth, Growth, Blue Chip, Balanced and Government Securities Funds each have
adopted a Distribution Plan pursuant to Rule 12b-1 under the Investment Company
Act of 1940. Each plan provides that the Fund may pay distribution expenses of
up to one-quarter of one percent each year on its average daily net assets.

An officer, director and shareholder of the Company is also an officer and
director of Founders.

3. A complaint was filed in the U.S. District Court in Colorado in October 1995
by Plaintiff William O. Foster, designating Founders Funds, Inc. and Bjorn K.
Borgen, President and a Director of the Company, as Defendants. The complaint
principally alleges that the Defendants' breach of an oral compensation
agreement damaged the Plaintiff in an amount exceeding $25 million and other
unspecified damages. The Defendants believe the suit to be entirely without
merit and have and will continue vigorously to defend against the allegations.
Defendants' motion to dismiss the suit entirely or move the matter to National
Association of Securities Dealers, Inc. arbitration is currently pending. To
date all litigation costs and expenses have been paid by Founders Asset
Management, Inc., the Company's investment adviser and underwriter.

<PAGE>

4. Security Transactions

As reported in the Statements of Operations, the purchases and sales of
investment securities do not include the acquisition or disposition of
short-term securities.

For federal income tax purposes, the cost of investments owned at December
31, 1995 was the same as identified cost.

Net capital loss carryovers may be used to offset future capital gains and
thereby reduce future distributions. Passport and Government Securities Funds
have such carryover in the following amounts:

Expiration: 2003 2002 2001
Passport Fund (110,305) (1,818,368) (18,415)
Government Securities (12,540) (3,251,897)

As required by various sections of the Investment Company Act of 1940,
direct or indirect control of, or voting power over, 5% or more of the
outstanding voting shares of a public company should be disclosed as
affiliations. As of June 30, 1996 Founders had voting authority of 6.78% and
6.99% of the outstanding shares of Ross Systems and Asyst Technologies, Inc.,
respectively.

At June 30, 1996, the composition of unrealized appreciation (the excess
of value over tax cost) and depreciation (the excess of tax cost over value) was
as follows (in thousands):

Appreciation (Depreciation) Net
International Equity Fund $646,616 ($136,519) $510,097

4. Fund Share Transactions

Transactions in shares of the Funds for the periods indicated were as
follows (in thousands):

Reinvested Net Increase
Sold Distributions Redeemed (Decrease)
International Equity Fund:
Six months ended 06/30/96 681 (46) 635
From 12/28/95 to 12/31/95 77 77

The following acronyms are used throughout the Schedules of Investments
to indicate the country of origin of non U.S. holdings:

AR Argentina IT Italy
AU Australia JA Japan
BA Bahamas KO Korea
BM Bermuda MA Malaysia
BR Brazil MX Mexico
CA Canada NE Netherlands
CH Chili NZ New Zealand
CO Columbia NW Norway
CZ Czechoslovakia PA Panama
DE Denmark PH Philippines
FI Finland PR Peru
FR France SI Singapore
GE Germany SP Spain
HK Hong Kong SW Sweden
HU Hungary SZ Switzerland
IN India TW Taiwan
ID Indonesia TH Thailand
IS Israel UK United Kingdom

<PAGE>

APPENDIX
CORPORATE BOND, COMMERCIAL PAPER, AND PREFERRED STOCK RATINGS

CORPORATE BONDS. Bonds rated Aa by Moody's Investors Service, Inc. are
judged by Moody's to be of high quality by all standards. Together with bonds
rated Aaa (Moody's highest rating) they comprise what are generally known as
high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of
protection may not be as large as those of Aaa bonds, or fluctuations of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than those
applicable to Aaa securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.

Moody's Baa rated bonds are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and may
have speculative characteristics as well. Bonds which are rated Ba are judged to
have speculative elements: their future cannot be considered as well assured.
Often the protection of interest and principal payments may be very moderate and
thereby not well safe-guarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class. Bonds which are rated
B by Moody's generally lack characteristics of a desirable investment. Assurance
of interest and principal payments of, or maintenance of other terms of, the
contract over any long period of time may be small.

Bonds rated AA by Standard & Poor's are judged by Standard & Poor's to be
high-grade obligations and in the majority of instances differ only in small
degree from issues rated AAA (Standard & Poor's highest rating). Bonds rated AAA
are considered by Standard & Poor's to be the highest grade obligations and
possess the ultimate degree of protection as to principal and interest. With AA
bonds, as with AAA bonds, prices move with the long-term money market. Bonds
rated A by Standard & Poor's have a strong capacity to pay principal and
interest, although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions.

Standard & Poor's BBB rated bonds, or medium-grade category bonds, are
borderline between definitely sound obligations and those where the speculative
elements begin to predominate. These bonds have adequate asset coverage and
normally are protected by satisfactory earnings. Their susceptibility to
changing conditions, particularly to depressions, necessitates constant
watching. These bonds generally are more responsive to business and trade
conditions than to interest rates. This group is the lowest which qualifies for
commercial bank investment.

Bonds rated BB or B by Standard & Poor's are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and to repay principal in accordance with the terms of the obligation. BB
indicates the lower degree of speculation. While such bonds will likely have
some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions. Bonds rated "BB"
have less near-term vulnerability to default than other speculative issues.
However, these face major ongoing uncertainties or exposure to adverse business,
financial, or economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The "BB" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BBB-" rating. Bonds rated "B" have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The "B" rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied "BB" or "BB-" rating.

An NRSRO is a nationally recognized statistical rating organization. The
Division of Market Regulation of the Securities and Exchange Commission
currently recognizes six NRSROs: Duff & Phelps, Inc. ("D&P"), Fitch Investors
Services, Inc. ("Fitch"), Moody's Investors Service, Inc. ("Moody's"), Standard
& Poor's Corp. ("S&P"), Thompson Bankwatch, Inc. ("TBW"), and IBCA Limited and
its affiliate, IBCA Inc. ("IBCA").

<PAGE>

Guidelines for Moody's and S&P ratings are described in the first five
paragraphs of this Appendix. For Duff & Phelps, ratings correspond exactly to
S&P's format from AAA through B-. For Fitch, ratings correspond exactly to S&P's
format from AAA through CCC-. For both TBW and IBCA, ratings correspond exactly
to S&P's format in all ratings categories. Because the Funds cannot purchase
securities rated below B-, ratings from D&P, Fitch, TBW, and IBCA can be
compared directly to the S&P ratings scale to determine the suitability of a
particular investment for a given Fund. For corporate bonds, a security must be
rated in the appropriate category by one or more of these six agencies to be
considered a suitable investment.

COMMERCIAL PAPER. The Prime rating is the highest Commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following:

(1) evaluation of the management of the issuer; (2) economic evaluation of the
issuer's industry or industries and an appraisal of speculative-type risks which
may be inherent in certain areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity; (5) amount and
quality of long-term debt; (6) trend of earnings over a period of ten years; (7)
financial strength of a parent company and the relationships which exist with
the issuer; and (8) recognition by management of obligations which may be
present or may arise as a result of public interest questions and preparations
to meet such obligations. Issuers within this Prime category may be given
ratings 1, 2 or 3, depending on the relative strengths of these factors.

Commercial paper rated by Standard & Poor's is graded into several
categories ranging from A for the highest quality obligations to D for the
lowest. Commercial Paper rated A has the following characteristics: (i)
liquidity ratios are adequate to meet cash requirements; (ii) long-term senior
debt rating should be A or better although in some cases BBB credits may be
allowed if other factors outweigh the BBB; (iii) the issuer should have access
to at least two additional channels of borrowing; (iv) basic earnings and cash
flow should have an upward trend with allowances made for unusual circumstances;
and (v) typically the issuer's industry should be well established and the
issuer should have a strong position within its industry and the reliability and
quality of management should be unquestioned. Issuers rated A are further
referred to by use of numbers 1, 2 and 3 to denote relative strength within this
classification.

The SEC recognizes the same six nationally recognized statistical rating
organizations (NRSROs) for commercial paper that it does for corporate bonds:
D&P, Fitch, Moody's, S&P, TBW, and IBCA. The ratings which would constitute the
highest short-term rating category are Duff 1 (D&P), F-1 (Fitch), P-1 (Moody's),
A-1 or A-1+ (S&P), TBW-1 (TBW), and A1 (IBCA).

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S PREFERRED STOCK RATINGS.

"aaa" -- An issue which is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and the least risk
of dividend impairment within the universe of preferred stocks.

"aa" -- An issue which is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance that earnings
and asset protection will remain relatively well maintained in the foreseeable
future.

"a" -- An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat greater than in the
"aaa" and "aa" classification, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.

"baa" -- An issue which is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured. Earnings and asset
protection appear adequate at present but may be questionable over any great
length of time.

<PAGE>

"ba" -- An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings and asset
protection may be very moderate and not well safeguarded during adverse periods.
Uncertainty of position characterizes preferred stocks in this class.

"b" -- An issue which is rated "b" generally lacks the characteristics of
a desirable investment. Assurance of dividend payments and maintenance of other
terms of the issue over any long period of time may be small.

NOTE: Moody's applies numerical modifiers 1, 2 and 3 in each rating
classification: the modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range ranking
and the modifier 3 indicates that the issue ranks in the lower end of its
generic rating category.

DESCRIPTION OF STANDARD & POOR'S PREFERRED STOCK RATINGS.

"AAA" -- This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong capacity to
pay the preferred stock obligations.

"AA" -- A preferred stock issue rated "AA" also qualifies as a
high-quality fixed income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for issues rated
"AAA."

"A" -- An issue rated "A" is backed by a sound capacity to pay the
preferred stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions.

"BBB" -- An issue rated "BBB" is regarded as backed by an adequate
capacity to pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to make payments
for a preferred stock in this category than for issues in the "A" category.

"BB," "B" -- Preferred stocks rated "BB" and "B" are regarded, on balance,
as predominantly speculative with respect to the issuer's capacity to pay
preferred stock obligations. "BB" indicates the lowest degree of speculation and
"B" a higher degree of speculation. While such issues will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.

PLUS (+) OR MINUS (-): To provide more detailed indications of preferred
stock quality, the ratings from "AA" to "B" may be modified by the addition of a
plus or minus sign to show relative standing within the major rating categories.

<PAGE>
PART C

OTHER INFORMATION

Item 24. Financial Statements And Exhibits
- ------- ---------------------------------

(a) Financial Statements:
--------------------

Part A: Financial Highlights for the Discovery, Frontier, Passport,
Special, Worldwide Growth, Growth, Blue Chip, Balanced,
Government Securities and Money Market Funds for each of the
fiscal years or periods in the ten year (or since inception)
period ended December 31, 1995; Financial Highlights for the
International Equity Fund for the six months ended June 30,
1996.

Part B: The following audited financial statements of the Discovery,
Frontier, Passport, Special, International Equity, Worldwide
Growth, Growth, Blue Chip, Balanced, Government Securities
and Money Market Funds and the notes thereto for the fiscal
year ended December 31, 1995, and the report of Smith, Brock
& Gwinn with respect to such financial statements are
incorporated in the Statement of Additional Information by
reference from the Company's annual report to shareholders
for the fiscal year ended December 31, 1995: Schedules of
Investments as of December 31, 1995; Statements of Assets
and Liabilities as of December 31, 1995; Statements of
Operations for the year ended December 31, 1995; Statements
of Changes in Net Assets for each of the two years in the
period ended December 31, 1995; Supplemental Information for
each of the fiscal years or periods in the five year (or
since inception) period ended December 31, 1995. The
following unaudited financial statements of the
International Equity Fund and the notes thereto for the six
months ended June 30, 1996 are included in the Statement of
Additional Information: Schedule of Investments as of June
30, 1996; Statement of Assets and Liabilities as of June 30,
1996; Statement of Operations for the six months ended June
30, 1996; Statement of Changes in Net Assets for the six
months ended June 30, 1996; and the period December 29, 1995
to December 31, 1995; and Supplemental Information for the
six months ended June 30, 1996.

(b) Exhibits
--------

(1) (A)* Articles of Incorporation of Founders Funds, Inc. (Included
in Post-Effective Amendment No. 60 to the Registration
Statement)

(B)* Articles Supplementary (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(C)* Articles Supplementary (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

- ---------------------

*Filed previously and incorporated by reference.
**Filed with this amendment.

C-1

<PAGE>

(D)* Articles Supplementary (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(E)* Articles Supplementary (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(F)* Articles Supplementary (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(G)* Articles Supplementary (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(2)* By-laws of Founders Funds, Inc. (Included in Post-Effective
Amendment No. 60 to the Registration Statement)

(3) Not applicable

(4) Specimen Stock Certificates (Included in Post-Effective
Amendment No. 43 to the Registration Statement)

(5) (A)* Form of Investment Advisory Agreement between Founders
Funds, Inc. on behalf of Founders Discovery, Frontier,
Passport, Special, International Equity, Worldwide Growth,
Growth, Blue Chip, and Balanced Funds and Founders Asset
Management, Inc. (Included in Post-Effective Amendment No.
60 to the Registration Statement)

(B)** Form of Investment Advisory Agreement between Founders
Funds, Inc. on behalf of Founders Money Market Fund and
Founders Asset Management, Inc. (formerly Founders Mutual
Depositor Corporation)

(C)** Form of Investment Advisory Agreement between Founders
Funds, Inc. on behalf of Founders Government Securities Fund
and Founders Asset Management, Inc. (formerly Founders
Mutual Depositor Corporation)

(6)** Underwriting Agreement, dated June 1, 1996, between Founders
Funds, Inc. and Founders Asset Management, Inc.

(7) Not applicable

(8) (A)* Custody Agreement with Investors Fiduciary Trust Company
(Included in Post-Effective Amendment No. 38 to the
Registration Statement)

- ---------------------

* Filed previously and incorporated by reference.
** Filed with this amendment.

C-2

<PAGE>

(B)* Form of Assignment of Custody Agreement to Founders Funds,
Inc. (Included in Post-Effective Amendment No. 43 to the
Registration Statement)

(C)* Revised Fee Schedule (Included in Post-Effective Amendment
No. 54 t the Registration Statement)

(9) (A)** Amended Shareholder Services Agreement between Founders
Funds, Inc. and Founders Asset Management, Inc.

(B)** Addendum to Amended Shareholder Services Agreement between
Founders Funds, Inc. and Founders Asset Management, Inc.

(C)** Fund Accounting and Administrative Services Agreement

(10)** Opinion and consent of Moye, Giles, O'Keefe, Vermeire & Gorrell
was filed with the Securities and Exchange Commission on or about
February 14, 1996 pursuant to Rule 24f-2

(11)** Accountant's Consent

(12)** Independent Auditor's Report

(13) Not applicable

(14) (A)* Prototype Profit Sharing and Money Purchase Pension Plan
(Included in Post-Effective Amendment No. 39 to the
Registration Statement)

(B)* Form of Individual Retirement Custodian Account (Included in
Post-Effective Amendment No. 43 to the Registration
Statement)

(C)* 403(b) Plan (Included in Post-Effective Amendment No. 36 to
the Registration Statement)

(15) (A)** Distribution Plans of Founders Frontier Fund, Founders
Growth Fund, Founders Blue Chip Fund, and Founders Balanced
Fund (Included in Post-Effective Amendment No. 43 to the
to the Registration Statement)

(B)** Distribution Plan of Founders Government Securities Fund
(Included in Post-Effective Amendment No. 45 to the
Registration Statement)

(C)** Distribution Plans of Founders Discovery Fund and Founders
Worldwide Growth Fund (Included in Post-Effective Amendment
No. 48 to the Registration Statement)

(D)** Distribution Plan of Founders Special Fund (Included in
Post-Effective Amendment No. 53 to the Registration
Statement)

- -----------------------

* Filed previously and incorporated by reference.
** Filed with this amendment.

C-3

<PAGE>

(E)** Distribution Plan of Founders Passport Fund (Included in
Post-Effective Amendment No. 55 to the Registration
Statement)

(F)** Distribution Plan of Founders International Equity Fund
(Included in Post-Effective Amendment No. 59 to the
Registration Statement)

(16)* Schedule showing computation of performance quotations provided
in response to Item 22 (unaudited). (Included in Post-Effective
Amendment No. 50 to the Registration Statement)

(17) (1)* Financial Data Schedule for the year ended December 31, 1995
for Discovery Fund. (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(2)* Financial Data Schedule for the year ended December 31, 1995
for Frontier Fund. (Included in Post-Effective Amendment No.
60 to the Registration Statement)

(3)* Financial Data Schedule for the year ended December 31, 1995
for Passport Fund. (Included in Post-Effective Amendment No.
60 to the Registration Statement)

(4)* Financial Data Schedule for the year ended December 31, 1995
for Special Fund. (Included in Post-Effective Amendment No.
60 to the Registration Statement)

(5)* Financial Data Schedule for the year ended December 31, 1995
for International Equity Fund. (Included in Post-Effective
Amendment No. 60 to the Registration Statement)

(6)* Financial Data Schedule for the year ended December 31, 1995
for Worldwide Growth Fund. (Included in Post-Effective
Amendment No. 60 to the Registration Statement)

(7)* Financial Data Schedule for the year ended December 31, 1995
for Growth Fund. (Included in Post-Effective Amendment No.
60 to the Registration Statement)

(8)* Financial Data Schedule for the year ended December 31, 1995
for Blue Chip Fund. (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(9)* Financial Data Schedule for the year ended December 31, 1995
for Balanced Fund. (Included in Post-Effective Amendment No.
60 to the Registration Statement)

- -----------------------

* Filed previously and incorporated by reference.
** Filed with this amendment.

C-4

<PAGE>

(10)* Financial Data Schedule for the year ended December 31, 1995
for Government Securities Fund. (Included in Post-Effective
Amendment No. 60 to the Registration Statement)

(11)* Financial Data Schedule for the year ended December 31, 1995
for Money Market Fund. (Included in Post-Effective Amendment
No. 60 to the Registration Statement)

(12)* Financial Data Schedule for the year ended December 31, 1995
for Opportunity Bond Fund. (Included in Post-Effective
Amendment No. 60 to the Registration Statement)

(13)** Financial Data Schedule for the six months ended June 30,
1996 for International Equity Fund

(18) Not applicable

(19)** Code of Ethics

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
- ------- -------------------------------------------------------------

Registrant knows of no person or group of persons directly or
indirectly controlled by or under common control with the Registrant
within the meaning of this item.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES
- ------- -------------------------------

As of July 1, 1996:

TITLE OF CLASS NUMBER OF RECORD HOLDERS
-------------- ------------------------

Common Stock - Founders Discovery Fund 23,760
Common Stock - Founders Frontier Fund 28,105
Common Stock - Founders Passport Fund 5,314
Common Stock - Founders Special Fund 33,441
Common Stock - Founders International Equity Fund 940
Common Stock - Founders Worldwide Growth Fund 17,945
Common Stock - Founders Growth Fund 35,716
Common Stock - Founders Blue Chip Fund 27,549
Common Stock - Founders Balanced Fund 10,753
Common Stock - Founders Government Securities Fund 4,524
Common Stock - Founders Money Market Fund 27,528

- -----------------------

* Filed previously and incorporated by reference.
** Filed with this amendment.

C-5

<PAGE>

ITEM 27. INDEMNIFICATION
- ------- ---------------

Indemnification provisions for officers, directors, employees, and
agents of the Registrant are set forth in Article XII of the bylaws of
the Registrant, which bylaws were filed as Exhibit 2 to the
Registrant's PostEffective Amendment No. 40. Section 12.01 of Article
XII of the bylaws provides that notwithstanding any provisions in
Article XII to the contrary, no officer, director, employee, and/or
agent of the Registrant shall be indemnified by the Registrant in
violation of sections 17(h) and (i) of the Investment Company Act of
1940, as amended.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
- ------- ----------------------------------------------------

Reference is made to information under "Founders Funds, Inc. and Its
Management" in the Prospectus and "Investment Adviser and Distributor"
and "Directors and Officers" in the Statement of Additional
Information.

ITEM 29. PRINCIPAL UNDERWRITERS
- ------- ----------------------

(a) Not applicable.

(b) The directors and officers of Founders Asset Management, Inc., located
at Founders Financial Center, 2930 East Third Avenue, Denver, Colorado
80206, are as follows:

Name & Principal Positions & Offices Positions & Offices
Business Address With Underwriter With Registrant
- ---------------- ------------------------- ------------------------

B. K. Borgen Chairman, Chief Executive President and Director
Officer, Chief Investment
Officer and Director

Jonathan F. Zeschin President and Chief Director
Operating Officer

David L. Ray Vice President, Assistant Vice President, Secretary
Secretary and Treasurer and Treasurer

Michael K. Haines Senior Vice President N/A

Michael W. Gerding Vice President N/A

Gregory P. Contillo Senior Vice President N/A

James P. Rankin Vice President N/A

Edward F. Keely Vice President N/A

Kenneth R.
Christoffersen Vice President and N/A
General Counsel

Roberto Galindo, Jr. Assistant Vice President N/A

Thomas Mauer Assistant Vice President N/A

Linda M. Ripley Assistant Vice President N/A

C-6

<PAGE>

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
- ------- --------------------------------

Principal executive office of the Registrant, Founders Financial
Center, 2930 East Third Avenue, Denver, Colorado 80206 (David L. Ray,
Treasurer), except records described in Rule 31a-1(b)(2)(iv) under the
Investment Company Act of 1940, which are in the possession of
Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105.

ITEM 31. MANAGEMENT SERVICES
- ------- -------------------

Not applicable.

ITEM 32. UNDERTAKINGS
- ------- ------------

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions of the
Registrant's bylaws or otherwise, the Registrant has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.

The Registrant hereby undertakes that the board of directors will call
such meetings of shareholders for action by shareholder vote,
including acting on the question of removal of a director or directors
and to assist in communications with other shareholders as required by
Section 16(c) of the Investment Company Act of 1940, as may be
requested in writing by the holders of at least 10% of the outstanding
shares of the Registrant or any of its portfolios, or as may be
required by applicable law or the Fund's Articles of Incorporation.

The Registrant shall furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

C-7

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this PostEffective Amendment to its Registration Statement
(File No. 2-17531) to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City and County of Denver, State of Colorado, on the 24th day
of July, 1996.

FOUNDERS FUNDS, INC.

ATTEST: /s/ Bjorn K. Borgen
By:______________________________________
/s/ David L. Ray Bjorn K. Borgen, President
_________________________________
David L. Ray, Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

SIGNATURES TITLE DATE
- ---------- ----- ----

/s/ Bjorn K. Borgen
- -------------------------------- President (Principal July 24, 1996
Bjorn K. Borgen Executive Officer)

/s/ David L. Ray
- --------------------------------- Vice President, July 24, 1996
David L. Ray Secretary & Treasurer
(Principal Financial
and Accounting Officer)

/s/ John K. Langum * Chairman July 24, 1996
- ---------------------------------
John K. Langum

/s/ William H. Baughn * Director July 24, 1996
- ---------------------------------
William H. Baughn

/s/ Bjorn K. Borgen
- --------------------------------- Director July 24, 1996
Bjorn K. Borgen

/s/ Jay A. Precourt * Director July 24, 1996
- ---------------------------------
Jay A. Precourt

/s/ Alan S. Danson * Director July 24, 1996
- --------------------------------
Alan S. Danson

C-8

<PAGE>

/s/ Eugene H. Vaughan * Director July 24, 1996
- -------------------------------
Eugene H. Vaughan

/s/ Jonathan F. Zeschin
- ------------------------------- Director July 24, 1996
Jonathan F. Zeschin

/s/ Bjorn K. Borgen
- ------------------------------- July 24, 1996
By Bjorn K. Borgen
Attorney-in-Fact

*Original Powers of Attorney authorizing Bjorn K. Borgen, Edward F. O'Keefe and
David L. Ray, and each of them, to execute this Post-Effective Amendment to the
Registration Statement of the Registrant on behalf of the above-named directors
and officers of the Registrant (with the exception of Mr. Zeschin) were filed
with Post-Effective Amendment No. 54.

C-9

<PAGE>

EXHIBIT INDEX

EXHIBIT NUMBER DESCRIPTION

5(B) Form of Investment Advisory Agreement
5(C) Form of Investment Advisory Agreement
6 Underwriting Agreement
9(A) Amended Shareholder Services Agreement
9(B) Addendum to Amended Shareholder Services Agreement
9(C) Fund Accounting and Administrative Services
Agreement
10 Rule 24f-2 Opinion of Moye, Giles, O'Keefe,
Vermeire & Gorrell
11 Accountant's Consent
12(A) Independent Auditor's Report
15(A) Amended Distribution Plan of Founders Frontier Fund
15(B) Amended Distribution Plan of Founders Growth Fund
15(C) Amended Distribution Plan of Founders Blue Chip Fund
15(D) Amended Distribution Plan of Founders Balanced Fund
15(E) Amended Distribution Plan of Founders Government
Securities Fund
15(F) Amended Distribution Plan of Founders Discovery Fund
15(G) Amended Distribution Plan of Founders Worldwide
Growth Fund
15(H) Amended Distribution Plan of Founders Special Fund
15(I) Amended Distribution Plan of Founders Passport Fund
15(J) Amended Distribution Plan of Founders International
Equity Fund
17(13) -
(Included in this
EDGAR submission
as Exhitit 27.13) Financial Data Schedule-International Equity Fund

19 Code of Ethics

C-10

FOUNDERS MONEY MARKET FUND

INVESTMENT ADVISORY AGREEMENT

This Investment Advisory Agreement made as of this 30th day of November,
1987, between FOUNDERS FUNDS, INC., a Maryland corporation (the "Company") on
behalf of its series of shares designated FOUNDERS MONEY MARKET FUND (the
"Fund"), and FOUNDERS MUTUAL DEPOSITOR CORPORATION, a Delaware corporation (the
"Adviser").

WHEREAS, the Company has been organized and operates as an investment
company registered under the Investment Company Act of 1940 for the purpose of
investing and reinvesting its assets in securities, as set forth in its Articles
of Incorporation, its By-laws and its Registration Statements under the
Investment Company Act of 1940 and the Securities Act of 1933, all as heretofore
amended and from time to time further amended and supplemented; and the Company
on behalf of the Fund desires to avail itself of the services, information,
advice, assistance and facilities of an investment adviser and to have an
investment adviser perform for it various management, statistical, research,
investment advisory and other services; and,

WHEREAS, the Adviser is engaged in the business of rendering management,
investment advisory, counselling and supervisory services to investment
companies and desires to provide these services to the Company.

NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:

1. EMPLOYMENT OF THE ADVISER. The Company hereby employs the Adviser to
manage the investment and reinvestment of the assets of the Fund and to
administer its affairs, consistent with the Fund's objectives, policies and
restrictions, and subject to the overall supervision of the Board of Directors
of the Company, for the period and on the terms hereinafter set forth. The
Adviser hereby accepts such employment and agrees during such period to render
the services and to assume the obligations herein set forth for the compensation
herein provided. The Adviser shall for all purposes herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Company or the Fund in any way or otherwise be deemed an agent of the Company or
the Fund.

- 1 -

<PAGE>

2. OBLIGATIONS OF AND SERVICES TO BE PROVIDED BY THE ADVISER. In return for
the compensation described in paragraph 4 hereof, the Adviser undertakes to
provide the following services and to assume the following obligations:

A. OFFICE SPACE, FURNISHINGS, FACILITIES, EQUIPMENT AND PERSONNEL. The
Adviser shall furnish to the Company adequate office space, which may be space
within the office of the Adviser or in such other place as may be agreed upon
from time to time. The Adviser also shall furnish to the Company office
furnishings, facilities and equipment, except computer equipment and programs,
as may be reasonably required for managing the corporate affairs and conducting
the business of the Company, including ordinary clerical, bookkeeping and
administrative services. The Adviser shall employ or provide and compensate the
executive, secretarial and clerical personnel necessary to provide such
services. The Adviser shall also compensate all officers and employees of the
Company and, in addition to the services described in subparagraph D of this
paragraph, shall permit officers and employees of the Adviser to serve as
directors or officers of the Company, without compensation from the Company, if
elected to such positions.

B. INVESTMENT ADVISORY SERVICES AND BROKERAGE ALLOCATION.

(1) The Adviser shall recommend from time to time to the officers
and directors of the Company a course of investment for the Fund's assets and
portfolio, subject to and in accordance with the investment objectives and
policies of the Fund and any directions which the Company's Board of Directors
may issue from time to time. The Adviser's recommendations also shall include
the manner in which the voting rights, rights to consent to corporate action and
any other rights pertaining to the Fund's portfolio securities shall be
exercised. Subject to such objectives, policies and directions and subject to
the overall supervision of the Board of Directors of the Company, the Adviser
shall manage the investment and reinvestment of the assets of the Fund. The
Adviser shall render such reports to the Company concerning the investment of
the Fund's assets and portfolio as may be required by the Board of Directors of
the Company.

(2) Decisions with respect to placement of the Fund's portfolio
transactions shall be made by the Adviser. The primary consideration in making
these decisions shall be to seek the best execution of orders at the most
favorable net prices for the Fund, taking into account such factors as the size
of the order, difficulty of execution, and the reliability, financial condition
and capabilities of the broker or dealer. Subject to these objectives, business
may be placed with brokers and dealers who furnish investment research services
to the Adviser or to

- 2 -

<PAGE>

affiliates of the Adviser. Such research services include advice, both directly
and in writing, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities, or
purchasers or sellers of securities, as well as the furnishing of analyses and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy, and the performance of accounts. Such services allow the
Adviser and its affiliates to supplement their own investment research
activities and provide them with information from individuals and research
staffs of many securities firms. The Company acknowledges on behalf of the Fund
that, to the extent portfolio transactions are effected with brokers or dealers
who furnish research services to the Adviser or its affiliates, they receive a
benefit, which generally is not capable of evaluation in dollar amounts, which
is not passed on to the Fund in the form of a direct monetary benefit.

(3) The Adviser shall render such reports regarding allocation of
brokerage business as may be required by the Board of Directors of the Company.

C. PROVISION OF INFORMATION NECESSARY FOR PREPARATION OF SECURITIES
REGISTRATION STATEMENTS, AMENDMENTS AND OTHER MATERIALS. The Adviser shall make
available and provide accounting and statistical information required by the
Company and its principal underwriter in the preparation of registration
statements, reports and other documents required by federal and state securities
laws and such information as the principal underwriter of the Company may
reasonably request for use in the preparation of such documents or of other
materials necessary or helpful for the underwriting and distribution of the
Fund's shares.

D. OTHER OBLIGATIONS AND SERVICES. The Adviser shall keep its
qualifications, facilities and staff fully adequate for performance of its
duties hereunder and will perform such duties in good faith and in the best
interests of the Fund. The Adviser shall comply in all respects with applicable
statutory and regulatory provisions, including the Investment Company Act of
1940 and the Investment Advisers Act of 1940. The Adviser shall make available
its officers and employees to the Board of Directors and officers of the Company
for consultations and discussions regarding the administrative management of the
Fund and its investment activities.

3. EXPENSES OF THE FUND. It is understood that the Fund will pay all of
its expenses other than those expressly assumed by the Adviser herein, which
expenses payable by the Fund shall include:

A. Fees to the Adviser as provided herein;

- 3 -

<PAGE>

B. Expenses of all audits by independent public accountants;

C. The allocated portion of fees and expenses of legal counsel in
connection with legal services rendered to the Company, including the Board of
Directors of the Company, committees of the Board of Directors and those
directors who are not "interested persons" of the Company or the Adviser, as
defined in the Investment Company Act of 1940, and litigation;

D. Brokerage fees and commissions and other transaction costs in
connection with the purchase and sale of portfolio securities for the Fund;

E. Costs, including the interest expense, of borrowing money;

F. All federal, state and local taxes levied against the Fund;

G. The allocated portion of fees of directors of the Company not
affiliated with the Adviser;

H. The allocated portion of costs and expenses of meetings of the Board
of Directors, committees of the Board of Directors and shareholders of the
Company;

I. Fees and expenses of the Company's transfer agent, registrar,
custodian, dividend disbursing agent, shareholder accounting agent and other
agents approved by the Board of Directors of the Company;

J. Cost of printing stock certificates representing shares of the Fund;

K. Fees and expenses of registering and qualifying and maintaining
registration and qualification of the Company, the Fund and its shares under
federal, state and foreign securities laws;

L. Computer equipment charges, computer program charges and related
computer expenses incurred in connection with maintaining the Fund's books and
records;

M. The allocated portion of fees and expenses incident to filing of
reports with regulatory bodies and maintenance of the Company's existence;

N. The allocated portion of premiums for insurance carried by the
Company pursuant to the requirements of Section 17(g) of the Investment Company
Act of 1940;

- 4 -

<PAGE>

O. The allocated portion of fees and expenses incurred in connection
with any investment company organization or trade association of which the
Company may be a member;

P. The allocated portion of expenses of preparation, printing
(including typesetting) and distribution of reports, notices and prospectuses to
existing shareholders of the Company;

Q. Expenses of computing the Fund's daily per share net asset value;
and

R. The allocated portion of expenses incurred by the Company in
connection with litigation proceedings or claims, including any obligation the
Company may have to indemnify its officers and directors with respect thereto.

4. COMPENSATION OF THE ADVISER. As compensation for its services to the
Fund, the Adviser will be paid a monthly management fee by the Fund at an annual
rate equal to the following percentages of the average daily value of the Fund's
net assets, determined in accordance with provisions of the then current
prospectus of the Fund: 0.50% of the first $250,000,000 of the Fund's net
assets, and 0.45% of the next $250,000,000 of the Fund's net assets, 0.40% of
the next $250,000,000 of the Fund's net assets, and 0.35% of the Fund's net
assets in excess of $750,000,000. All fees and expenses are accrued daily and
deducted before payment of dividends to shareholders. The fee is payable monthly
and shall be pro-rated for any portion of a month beginning on the date of this
Agreement or ending on termination of this Agreement.

5. EXPENSE LIMITATION. In the event the total expenses of the Fund for any
fiscal year, including the advisory fee but excluding interest, taxes, brokerage
commissions and extraordinary expenses, should exceed the lowest applicable
annual expense limitation established pursuant to the statutes or regulations of
any jurisdiction in which shares of the Fund are then qualified for offer or
sale, the Adviser shall reimburse the Fund for the full amount of such excess.
Such reimbursement shall be made by the Adviser monthly, subject to annual
reconciliation.

6. ACTIVITIES OF THE ADVISER. Nothing in this Agreement shall limit or
restrict the right of any director, officer or employee of the Adviser who may
also be a director, officer or employee of the Company to engage in any other
business or to devote his time and attention in part to the management or other
aspects of any business, whether of a similar or a dissimilar nature, nor to
limit or restrict the right of the Adviser to engage in any other business or to
render services of any kind to any other corporation, firm, individual or
association. Subject to and in accordance with the Articles of Incorporation and

- 5 -

<PAGE>

By-laws of the Company and to Section 10(a) of the Investment Company Act of
1940, it is understood that directors, officers, agents and shareholders of the
Company are or may be interested in the Adviser or its affiliates as directors,
officers, agents or shareholders of the Adviser or its affiliates and that
directors, officers, agents or shareholders of the Adviser or its affiliates are
or may be interested in the Company as directors, officers, shareholders or
otherwise, and that the effect of any such interests shall be governed by said
Articles of Incorporation, said By-Laws and the Act.

7. LIABILITIES. In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of obligations or duties hereunder on the part
of the Adviser, the Adviser shall not be subject to liability to the Company or
to the Fund hereunder for any act or omission in the course of, or connected
with, rendering services hereunder. No liability to the Adviser hereunder shall
attach individually to the shareholders, directors or officers of the Company.

8. RENEWAL, TERMINATION AND AMENDMENT. This Agreement shall become
effective upon the date first above written and shall continue in effect until
August 31, 1989, unless earlier amended or terminated. This Agreement is
renewable thereafter for successive periods not to exceed one year if such
continuance is approved at least annually by votes of the Company's Board of
Directors, cast in person at a meeting called for the purpose of voting on such
approval, or by a majority of the outstanding voting securities of the Fund and,
in either event, by the vote of a majority of the directors who are not parties
to the Agreement or interested persons of any such party other than as directors
of the Company. In addition, (i) this Agreement may at any time be terminated
without the payment of any penalty, either by vote of the Board of Directors of
the Company or by vote of a majority of the outstanding voting securities of the
Fund, on sixty days' written notice to the Adviser; (ii) this Agreement shall
immediately terminate in the event of its assignment (within the meaning of the
Investment Company Act of 1940); and (iii) this Agreement may be terminated by
the Adviser on sixty days' written notice to the Company. Any notice under this
Agreement shall be given in writing addressed and delivered, or mailed postpaid,
to the other party at any office of such party. This Agreement may be amended at
any time by mutual consent of the parties, provided that such consent on the
part of the Company shall have been approved by vote of a majority of the
outstanding voting securities of the Fund. As used in this paragraph, the term
"vote of a majority of the outstanding voting securities" shall have the meaning
set forth for such term in Section 2(a)(42) of the Investment Company Act of
1940.

- 6 -

<PAGE>

9. NAME. The Company and the Fund may use the word "Founders" in their
names and businesses only so long as the Adviser acts as investment adviser to
the Fund.

10. SEVERABILITY. If any provision of this Agreement is held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.

11. MISCELLANEOUS. This Agreement shall be subject to the laws of the State
of Colorado and shall be interpreted and construed to further and promote the
operation of the Company as an open-end investment company.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the 30th day of November, 1987.

FOUNDERS FUNDS, INC.
on behalf of Founders Money Market
Fund

ATTEST:
By: /s/Bjorn K. Borgen, President

/s/ Jack Manahan, Secretary

FOUNDERS MUTUAL DEPOSITOR CORPORATION

ATTEST:
By: /s/Bjorn K. Borgen, President

/s/ Jack Manahan, Secretary

- 7 -

FOUNDERS GOVERNMENT SECURITIES FUND
AMENDED AND RESTATED
INVESTMENT ADVISORY AGREEMENT

This Amended and Restated Investment Advisory Agreement is executed as of
this 29th day of September, 1988, between FOUNDERS FUNDS, INC., a Maryland
corporation (the "Company") on behalf of its series of shares designated
FOUNDERS GOVERNMENT SECURITIES FUND (the "Fund"), and FOUNDERS MUTUAL DEPOSITOR
CORPORATION, a Delaware corporation (the "Adviser").

NOW, THEREFORE, in consideration of the terms and conditions hereinafter
set forth, it is agreed as follows:

- 1 -

<PAGE>

B. INVESTMENT ADVISORY SERVICES AND BROKERAGE ALLOCATION.

- 2 -

<PAGE>

(3) The Adviser shall render such reports regarding allocation of
brokerage business as may be required by the Board of Directors of the Company.

D. OTHER OBLIGATIONS AND SERVICES. The Adviser shall keep its
qualifications, facilities and staff fully adequate for performance of its
duties hereunder and will perform such duties in good faith and in the best
interests of the Fund. The Adviser shall comply in all respects with applicable
statutory and regulatory provisions, including the Investment Company Act of
1940 and the Investment Advisers Act of 1940. The Adviser shall make available
its officers and employees to the Board of Directors and officers of the Company
for consultation and discussions regarding the administrative management of the
Fund and its investment activities.

3. EXPENSES OF THE FUND. It is understood that the Fund will pay all of
its expenses other than those expressly assumed by the Adviser herein, which
expenses payable by the Fund shall include:

A. Fees to the Adviser as provided herein;
- 3 -

<PAGE>

B. Expenses of all audits by independent public accountants;

D. Brokerage fees and commissions and other transaction costs in
connection with the purchase and sale of portfolio securities for the Fund;

E. Costs, including the interest expense, of borrowing money;

F. All federal, state and local taxes levied against the Fund;

G. The allocated portion of fees of directors of the Company not
affiliated with the Adviser;

H. The allocated portion of costs and expenses of meetings of the
Board of Directors, committees of the Board of Directors and shareholders of the
Company;

I. Fees and expenses of the Company's transfer agent, registrar,
custodian, dividend disbursing agent, shareholder accounting agent and other
agents approved by the Board of Directors of the Company;

J. Cost of printing stock certificates representing shares of the
Fund;

K. Fees and expenses of registering and qualifying and maintaining
registration and qualification of the Company, the Fund and its shares under
federal, state and foreign securities laws;

L. Computer equipment charges, computer program charges and related
computer expenses incurred in connection with maintaining the Fund's books and
records;

M. The allocated portion of fees and expenses incident to filing of
reports with regulatory bodies and maintenance of the Company's existence;

N. The allocated portion of premiums for insurance carried by the
Company pursuant to the requirements of Section 17(g) of the Investment Company
Act of 1940;

- 4 -

<PAGE>

O. The allocated portion of fees and expenses incurred in connection
with any investment company organization or trade association of which the
Company may be a member;

P. The allocated portion of expenses of preparation, printing
(including typesetting) and distribution of reports, notices and prospectuses to
existing shareholders of the Company;

Q. Expenses of computing the Fund's daily per share net asset value;
and

4. COMPENSATION OF THE ADVISER. As compensation for its services to the
Fund, the Adviser will be paid a monthly management fee by the Fund at an annual
rate equal to the following percentages of the average daily value of the Fund's
net assets, determined in accordance with provisions of the then current
prospectus of the Fund: 0.65% of the first $250,000,000 of the Fund's net
assets, and 0.50% of the Fund's net assets in excess of $250,000,000. All fees
and expenses are accrued daily and deducted before payment of dividends to
shareholders. The fee is payable monthly and shall be pro-rated for any portion
of a month beginning on the date of this Agreement or ending on termination of
this Agreement.

- 5 -

<PAGE>

agents and shareholders of the Company are or may be interested in the Adviser
or its affiliates as directors, officers, agents or shareholders of the Adviser
or its affiliates and that directors, officers, agents or shareholders of the
Adviser or its affiliates are or may be interested in the Company as directors,
officers, shareholders or otherwise, and that the effect of any such interests
shall be governed by said Articles of Incorporation, said By-Laws and said Act.

9. NAME. The Company and the Fund may use the word "Founders" in their
names and businesses only so long as the Adviser acts as investment adviser to
the Fund.

- 6 -

<PAGE>

10. SEVERABILITY. If any provision of this Agreement is held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the 29th day of September, 1988.

FOUNDERS FUNDS, INC.
on behalf of Founders Government
Securities Fund

ATTEST:
By: /s/Bjorn K. Borgen, President

/s/ Jack Manahan, Secretary

FOUNDERS MUTUAL DEPOSITOR CORPORATION

ATTEST:
By: /s/Bjorn K. Borgen, President

/s/ Jack Manahan, Secretary

- 7 -

FOUNDERS FUNDS, INC.

UNDERWRITING AGREEMENT

This Agreement made as of the 1st day of June, 1996, by and between
Founders Asset Management, Inc., a Delaware corporation (the "Underwriter"), and
Founders Funds, Inc., a Maryland corporation (the "Company"), on behalf of any
series of its shares which may now exist or hereafter be created (the "Funds").

WITNESSETH:

That in consideration of the mutual covenants herein contained and for
other good and valuable consideration the parties hereto, intending to be
legally bound hereby, agree as follows:

1. APPOINTMENT OF UNDERWRITER. Except as otherwise provided herein, the
Company hereby appoints the Underwriter its exclusive agent to sell and
distribute shares of the Funds without compensation at the public offering price
thereof, which shall be equivalent to their net asset value, calculated as
described in the current prospectus of the Company. The Company agrees that it
will deliver such shares as the Underwriter may sell. The Underwriter agrees to
use its best efforts to promote the sale of shares of the Funds, but is not
obligated to sell any specific number of shares.

2. INDEPENDENT CONTRACTOR. The Underwriter will undertake and discharge
its obligations hereunder as an independent contractor and shall have no
authority of power to obligate or bind the Company by its actions, conduct or
contracts except that it may be authorized to accept orders for the sale or
repurchase of shares of the Funds as the Company's agent. The Underwriter may
appoint subagents or distribute shares of the Funds through dealers or otherwise
as it may determine from time to time, but this Agreement shall not be construed
as authorizing any dealer or other person to accept orders for sale or
repurchase on behalf of the Company or any Fund or otherwise act as their agent
for any purpose.

3. PAYMENT FOR SHARES AND SHARE REGISTRATION. The Underwriter shall
notify the Company or cause the Company to be notified, at the end of each
business day, or as soon thereafter as orders placed during such day have been
compiled, of the number of shares and the prices thereof which the Underwriter
shall have sold on behalf of each Fund. The Underwriter shall use its best
efforts to cause the sums due for shares ordered from a Fund to be collected or
to be advanced to that Fund on behalf of purchasers on or before the third
business day after the shares have been so ordered. The Underwriter shall issue
and deliver on behalf of the Company or cause to be issued and delivered all
confirmations of transactions effected hereunder for the account of a Fund.
Unless otherwise requested by the purchaser, the Company will provide for the

<PAGE>

recording of share purchases in "book accounts." Upon receipt of written request
from a purchaser, a certificate of shares in such names and amount as the
purchaser shall specify in writing will be delivered by the Company's Transfer
Agent as soon as practicable after payment therefor and their registration on
the books of the Company.

4. SUSPENSION OF SALES. The sale of shares of the Funds may be
suspended with or without prior notice whenever in the judgment of the Company
it is in its best interests to do so.

5. REPURCHASE OF SHARES. As the Company's agent, the Underwriter may
buy shares of a Fund offered for repurchase at the next effective net asset
value per share calculated and effective as set forth in Paragraphs 1 and 3
above. Whenever the officers of the Company deem it advisable, for the
protection of the shareholders of a Fund, they may suspend or cancel such
authority. The Underwriter will pay all expenses in connection with the
repurchase of shares.

6. CONDUCT OF BUSINESS. Neither the Underwriter nor any other person is
authorized by the Company or any Fund to give any information or make any
representation relative to the Company or any Fund's shares other than those
contained in the registration statement or prospectus filed with the Securities
and Exchange Commission as the same may be amended from time to time or in any
supplemental information to said prospectus approved by the Company. The
Underwriter agrees that any information or representation other than that
specified above which it or any dealer or other person who purchases shares
through the Underwriter may make in connection with the offer or sale of shares
shall be made entirely without liability on the part of the Company or any Fund.
The Underwriter agrees that in offering or selling shares as agent of the
Company, it will in all respects duly conform to all applicable state and
federal laws. The Underwriter will submit to the Company copies of all sales
literature before using the same and will not use such literature if disapproved
by the Company.

7. ALLOCATION OF EXPENSES. In connection with the sale and distribution
of shares pursuant to this Agreement, the Underwriter shall pay all of its own
expenses and such other expenses as are not specifically assumed by the Company
as hereinafter provided.

The Company specifically assumes and shall pay all fees and expenses,
including legal fees, incurred in (1) the preparation of audited financial
statements to the Company; (2) the preparation and initial printing of all
post-effective amendments, supplements and revisions of its registration
statements; (3) printing and distributing copies of any prospectus to its
shareholders; (4) the preparation and initial printing of shareholder reports

<PAGE>

and communications and distributing copies thereof to its shareholders; (5) the
registration of the Company and its shares with the Securities and Exchange
Commission; and (6) the qualification of the Company and its shares in each
state in which its shares will be qualified for sale.

8. OTHER ACTIVITIES. The Underwriter's services pursuant to this
Agreement shall not be deemed to be exclusive, and it may render similar
services and act as an underwriter, distributor or dealer for other investment
companies in the offering of their shares.

9. Liability. The Underwriter is not to be liable to the Company or any
Fund hereunder for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties imposed on it by this Agreement.

10. TERM OF AGREEMENT. This Agreement shall become effective upon the
date first above written. This Agreement shall continue in effect through May
31, 1997, and thereafter for successive annual periods, provided that its
continuance is specifically approved at least annually by the Company's
directors or, with respect to any Fund, by vote of a majority of that Fund's
outstanding voting securities and, in any event, by a majority of those
directors who are not parties to this Agreement or interested persons of any
party to this Agreement (other than as directors of the Company) at a meeting
called for the purpose of voting on such approval.

This Agreement shall automatically terminate in the event of its
assignment (within the meaning of the Investment Company Act of 1940, as
amended); provided, however, that the Underwriter may employ such other person,
persons, corporation or corporations, as it shall determine, in order to assist
it in carrying out the provisions of this Agreement.

This Agreement may be terminated at any time by either party hereto by
giving six months' written notice to the other party, or at any time by mutual
consent of the parties hereto. Such notice shall be sent by certified mail.
Until further notice, the mailing address of both the Fund and the Underwriter
shall be:

Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206

11. MISCELLANEOUS. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Colorado and shall be
interpreted and construed to further and promote the operation of the Company as
an open-end investment company. As used herein, the terms "Net Asset Value,"

<PAGE>

"Offering Price," "Investment Company," and "Interested Persons" shall have the
meanings set forth in the Investment Company Act of 1940, as amended, and the
Rules, Regulations, Orders, and Forms thereunder.

IN WITNESS WHEREOF, this Agreement has been executed by the Underwriter
and the Company as of the day and year first above written.

FOUNDERS FUNDS, INC.

ATTEST: By:______________________________________
Bjorn K. Borgen, President
______________________________
David L. Ray, Secretary

FOUNDERS ASSET MANAGEMENT, INC.

ATTEST: By:______________________________________
Jonathan F. Zeschin, President
/s/ David L. Ray
______________________________
David L. Ray, Assistant
Secretary

AMENDED
SHAREHOLDER SERVICES AGREEMENT
Between
FOUNDERS FUNDS, INC. and
FOUNDERS ASSET MANAGEMENT, INC.

AGREEMENT made as of the 1st day of June, 1994, in Denver, Colorado, by
and between Founders Funds, Inc., a Maryland corporation (the "Fund"), and
Founders Asset Management, Inc., a Delaware corporation (hereinafter referred to
as "Founders").

WHEREAS, the Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and

WHEREAS, Founders is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, accounting, and
recordkeeping services to the Fund; and

WHEREAS, Founders is registered as a transfer agent under the
Securities Exchange Act of 1934; and

WHEREAS, the Fund and Founders have heretofore entered into a
shareholder services arrangement effective as of the 12th day of November, 1993,
pursuant to which prorated monthly payments from the Fund to Founders equal on
an annual per account basis to $16.25 for the period November 12, 1993 through
December 31, 1993 and $17.35 for the period January 1, 1994 through May 31,
1994, have been and will continue through May 31, 1994 to be made in
consideration of Founders' providing the services outlined herein; and

WHEREAS, the Fund and Founders are desirous of amending the current
arrangement by entering into this amended shareholder services agreement (the
"Agreement"); and

WHEREAS, pursuant to the Agreement and the predecessor agreement,
Founders has rendered and will continue to render certain transfer agent and
related services to the Fund and to the Fund's shareholders (the "Services") in
the manner and on the terms and conditions hereinafter set forth; and

WHEREAS, the Fund has entered into a Transfer Agent Agreement with
Investors Fiduciary Trust Company ("IFTC") (the "TA Agreement"), pursuant to
which IFTC provides certain other transfer agent services to the Fund; and

WHEREAS, Founders has entered into a service agreement with IFTC (the
"Service Agreement"), pursuant to which a computerized data processing
recordkeeping system for securityholder accounting (the "TA2000(TM) System")
using IFTC owned or licensed software

<PAGE>

developed by DST Technologies, Inc., an affiliate of IFTC ("DST") is available
to Founders in providing transfer agent services to the Fund; and

WHEREAS, the Fund has entered into a Software Remote Access and License
Agreement with DST (the "Remote Access Agreement"), pursuant to which image
based application software and related user documentation to be operated in
conjunction with the TA2000(TM) System (the "Auxiliary Software") is available
to Founders in providing other transfer agent services to the Fund; and

WHEREAS, Founders has entered into a Telephone and CRT Input Equipment
Recovery Services Agreement with DST (the "Back-Up Agreement"), pursuant to
which certain computer and backup capabilities will be made available to
Founders for use in providing transfer agent services to the Fund in the event
of a disaster to Founders' telephone and cathode-ray tube input equipment; and

WHEREAS, the Fund has entered into an Agreement for Handling Drafts
with IFTC and DST (the "Drafts Agreement"), pursuant to which the Fund has
established a special account with IFTC to which all drafts drawn by the Fund's
shareholders which are payable through IFTC will be charged; and

WHEREAS, the TA Agreement, the Service Agreement, the Remote Access
Agreement, the Back-Up Agreement, and the Drafts Agreement are collectively
referred to herein as the "Collective Agreements"; and

WHEREAS, the Fund, Founders, IFTC, and DST anticipate that in the next
few years Founders will, on a service-by-service basis and over time, assume the
responsibility for performance of those transfer agent services currently being
provided to the Fund by IFTC; and

WHEREAS, the Fund desires to retain Founders to perform these
additional transfer agent services and Founders desires to perform such services
on the terms and conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, the Fund and Founders agree as follows:

1. Services. The Fund hereby retains Founders to provide the Services
outlined on Exhibit A hereto, which exhibit is incorporated herein by this
reference. Founders shall at all times use reasonable care, due diligence, and
act in good faith in performing its duties under this Agreement.

2. Collective Agreement Obligations. To the extent that the
TA Agreement and any other Collective Agreement (a) may impose

<PAGE>

obligations upon the Fund to ensure that Founders provides services, conforms to
a standard of conduct, adheres to a stipulated process or procedure, or
otherwise undertakes to perform a defined duty or responsibility or (b) provides
that Founders performs the foregoing (collectively, the "Obligations"), Founders
shall perform the Obligations and shall at all times use reasonable care, due
diligence, and act in good faith in performing the Obligations.

3. Staff Maintenance. Founders shall, at its own expense, maintain such
staff and employ or retain such personnel as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, such staff and
personnel may include officers of Founders and persons employed or otherwise
retained by Founders to provide or assist in providing services to the Fund
other than those Services to be provided pursuant to this Agreement.

4. Facilities. Founders shall, at its own expense, provide such office
space, facilities, equipment, and other property or resources as shall be
necessary to provide the Services to the Fund.

5. Fund Information. The Fund will, from time to time, furnish or
otherwise make available to Founders such information relating to the business
and affairs of the Fund as Founders may reasonably require in order to discharge
its duties and obligations hereunder.

6. Fees. The Fund shall pay to Founders a prorated monthly fee equal on
an annual basis to $26.00 for each shareholder account of the Fund considered to
be an open account at any time during the month. This fee shall provide for the
payment of the following:

a. The services rendered and facilities furnished by Founders
under this Agreement; and

b. The services rendered and facilities furnished by IFTC and DST
to the Fund pursuant to the Collective Agreements.

For a one-year period beginning January 1, 1994, in the event the
combined fees of Founders, IFTC, and DST in performing their respective transfer
agent services and/or in providing hardware and software system capabilities on
behalf of the Fund pursuant to the Agreement and the Collective Agreements
exceed $26 per account during the Fund's fiscal year, Founders will rebate any
excess to the Fund within 90 days of the end of that fiscal year-end; provided,
however, that in the event of the occurrence of unforeseen material events which
would result in cost increases to Founders, IFTC, or DST, upon receipt of
approval from the Fund's

<PAGE>

Board of Directors, the per account annual fee of $26.00 may be increased in a
reasonable and appropriate amount. In addition, within 90 days of that fiscal
year-end, Founders will prepare an analysis of the profitability of its services
performed pursuant to the Agreement. If said profitability exceeds 10% of the
costs associated with providing the services described hereunder, Founders will
rebate such excess within 10 days after such analysis is prepared. In the case
of either actual cost overruns or underruns during a year, when material in
nature and when Founders, in its discretion, determines that it is reasonable to
conclude that the cost overrun or underrun will continue for the remainder of
the year, Founders will notify the Board of Directors of the Fund within a
reasonable time period.

In addition to the $26.00 per account fee, Founders, IFTC, and DST will
also be entitled to reimbursement from the Fund for all reasonable out-of-pocket
expenses incurred by Founders, IFTC, and DST in connection with the performance
of Services under the Agreement and services under the Collective Agreements.
Out-of- pocket expenses with respect to the Agreement shall include, but are not
limited to, expenditures for postage, envelopes, banking fees, courier fees,
overnight mail fees, computer hardware and software licensing fees, voice
response unit fees, checks, continuous forms, reports and statements, telephone
line charges, telegraph, stationery, supplies, costs of outside mailing firms,
record storage costs and media for storage of records (e.g., microfilm and
computer tapes). Out-of-pocket expenses incurred by Founders, IFTC, and/or DST
in connection with the performance of services under the Collective Agreements
shall include those out-of-pocket expenses to which each Collective Agreement
makes reference.

Any other expenses incurred by Founders at the request or with the
consent of the Fund will be reimbursed promptly by the Fund.

As provided herein, Founders will use a portion of the $26 account fee
to pay IFTC and DST for services which are performed by each entity pursuant to
the Collective Agreements. Upon assumption by Founders in the future of certain
duties currently performed by IFTC and/or DST pursuant to the terms of the
Collective Agreements, Founders will retain an amount equal to the amount
previously paid to IFTC and/or DST for performing such duties.

In the event any termination fee is appropriately charged to Founders
or to the Fund pursuant to Section 2.02 of the Service Agreement, the fee shall
be paid by the Fund unless circumstances would dictate payment of the fee by
Founders.

In the event any late charges or interest charges are incurred pursuant
to Section 2.03 of the TA Agreement, such charges are the responsibility of
Founders and the Fund will reduce the amount of

<PAGE>

its next payment to Founders pursuant to this Agreement by such amount.

The monthly fee described in this Section 6. and any out-of-pocket
reimbursements due to Founders pursuant to this Section shall be payable to
Founders on the first business day of the calendar month next succeeding the
month in which the services are rendered, or as soon thereafter as such
reimbursements can be determined.

7. Access to Founders' Records. Founders will permit representatives of
the Fund, including the Fund's independent auditors, to have reasonable access
to the personnel and records of Founders in order to enable such representatives
to monitor the quality of services being provided and the level of fees and
reimbursements due Founders pursuant to this Agreement. In addition, Founders
shall promptly deliver to the Board of Directors of the Fund such information as
may reasonably be requested from time to time to permit the Board of Directors
to make an informed determination regarding the rendering of the Services, the
continuation of this Agreement, and the payments contemplated to be made
hereunder.

8. Liability and Indemnification. So long as Founders shall use
reasonable care, due diligence, and act in good faith in performing its duties
under this Agreement, Founders shall not be responsible for, and the Fund shall
indemnify and hold Founders harmless from and against, any and all losses,
liabilities, claims, demands, suits, costs, and expenses (including reasonable
attorneys' fees) which may be asserted against Founders or for which Founders
may be held to be liable, which arise out of, or are attributable to, Founders'
discharge of its responsibilities and obligations imposed by this Agreement.

The Fund shall not be responsible for, and Founders shall indemnify and
hold the Fund harmless from and against, any and all losses, liabilities,
claims, demands, suits, costs, and expenses (including reasonable attorneys'
fees) which may be asserted against the Fund or for which the Fund may be held
to be liable, which arise out of, or are attributable to, any negligence,
willful misconduct, or lack of due care of Founders in discharging the
responsibilities and obligations imposed upon Founders by this Agreement.

Founders and the Fund agree that each shall promptly notify the other
in writing of any situation which represents or appears to involve a claim which
may be the subject of indemnification hereunder, although the failure to provide
such notification shall not relieve the indemnifying party of its liability
pursuant to this Section 8. The indemnifying party shall have the option to
defend against any such claim. In the event the indemnifying party so elects, it
will notify the indemnified party and shall assume

<PAGE>

the defense of such claim, and the indemnified party shall cooperate fully with
the indemnifying party, at the indemnifying party's expense, in the defense of
such claim. Notwithstanding the foregoing, the indemnified party shall be
entitled to participate in the defense of such claim at its own expense through
counsel of its own choosing. The indemnified party shall not enter into any
settlement of such matter without the written consent of the indemnifying party,
which consent shall not unreasonably be withheld. The indemnifying party shall
not be obligated to indemnify the indemnified party for any settlement entered
into without the written consent of the indemnifying party. If the consent of
the indemnified party is required to effectuate any settlement and the
indemnified party refuses to consent to any settlement negotiated by the
indemnifying party, the liability of the indemnifying party for losses arising
out of or due to such matter shall be limited to the amount of the rejected
proposed settlement.

The obligations of Founders and the Fund pursuant to this Section 8
shall survive the termination of this Agreement.

9. Effect of Agreement. Nothing herein contained shall be deemed to
require the Fund to take any action contrary to its Articles of Incorporation or
its By-Laws or any applicable law, regulation or order to which it is subject or
by which it is bound, or to relieve or deprive the directors of the Fund and the
Fund of their overall responsibility for and control of the conduct of the
business and affairs of the Fund.

10. Term and Termination. This Agreement shall remain in effect until
no later than May 31, 1995, and shall remain in effect from year to year
thereafter provided such continuance is approved at least annually by the vote
of a majority of the directors of the Fund who are not parties to this Agreement
or "interested persons" (as defined in the Act) of any such party, which vote
must be cast in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time and without the
payment of any penalty, terminate this Agreement upon 90 days' written notice to
Founders; (b) the Agreement shall immediately terminate in the event of its
assignment (within the meaning of the Act and the Rule thereunder) unless the
Board of Directors of the Fund approves such assignment; and (c) Founders may
terminate this Agreement without payment of penalty on 180 days' written notice
to the Fund. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at the principal
office of such party.

The Fund and Founders recognize that although this Agreement is to
continue through May 31, 1995, the fee schedule outlined in Section 6 ("Fee
Schedule") relates to a one-year period ending December 31, 1994. The Fee
Schedule is thereafter subject to adjustment based upon profitability analyses
to be provided by

<PAGE>

Founders to the Fund by March 31, 1995. The parties agree that until such time
as the Fund's Board of Directors ("Directors") has considered the profitability
analyses and has determined either to modify or maintain the Fee Schedule, the
Fee Schedule shall remain in effect; provided, however, that any modification to
the Fee Schedule determined by the Directors to be appropriate for the Services
to be provided subsequent to December 31, 1994 shall, at the direction of the
Directors, be applied retroactively to January 1, 1995.

11. Application of Law. This Agreement shall be construed in accordance
with the laws of the State of Colorado and the applicable provisions of the Act.
To the extent the applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provision of the Act and other
applicable laws, the latter shall control.

IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement on the day and year first above written.

FOUNDERS FUNDS, INC.

By /s/ Bjorn K. Borgen, President

FOUNDERS ASSET MANAGEMENT, INC.

By /s/ Bjorn K. Borgen, President

<PAGE>

EXHIBIT A
To
SHAREHOLDER SERVICES AGREEMENT
Between
FOUNDERS FUNDS, INC. and
FOUNDERS ASSET MANAGEMENT, INC.

The following Services will be provided by Founders to the Fund:

1. TELEPHONE SERVICES
-------------------

Founders' personnel will receive and process all telephone requests
received by Founders to: purchase, redeem or exchange shares; open an
account, add or delete services for an account, explain Fund or market
conditions and/or performance, perform research into account problems
and correct such problems, and other matters related to account
servicing; change an account address or distribution option; correct a
registration or account error; or send an additional account statement.
Founders will also make available to shareholders a Voice Response Unit
to provide routine account and Fund information.

2. TRANSFER AGENCY SERVICES
------------------------

Founders' personnel will discharge the following duties:

Pick up all incoming mail and scan documents into the DST image system
(the DST image system is that system used by IFTC in performing
transfer agent services on behalf of the Fund).

Open new accounts, purchase shares, and establish services requested by
new shareholders. Contact shareholders in writing or via the phone if
incomplete or inaccurate information is contained in the application.

Make subsequent purchases on behalf of shareholders and 401(k) plans.
Deliver checks to bank, monitor bank account(s), wire funds to
appropriate custodial account.

Receive returned (bounced) checks, cancel purchases, and contact
shareholders regarding any potential losses.

Research all mail returned to Founders by the Post Office and forward
such mail if possible.

Retrieve information from microfilm, microfiche, paper files, and/or
the DST image system needed to respond to inquiries and/or to resolve
research.

<PAGE>

Store previously scanned items as required by the SEC and NASD.

Other routine partial transfer agency functions needed to complete the
duties typically expected of a transfer agent performing the services
outlined in this item 2.

3. RETIREMENT SERVICES
-------------------

a. RETIREMENT PLAN TRANSFERS. Founders' personnel will ensure that
retirement plan transfers are accomplished on a timely basis.
Applications to request transfers will be reviewed to ensure that the
application is in proper order before it is sent to the shareholders'
custodian. A Founders representative will contact the shareholder with
a personal note once the transfer arrives at Founders. Founders will
maintain an updated list of the transfer requirements imposed by
transfer agents. A Founders representative will contact the
appropriate custodian to ensure that the custodian has received the
transfer application and that the transfer occurs on a timely basis.

b. PROTOTYPE RETIREMENT PLANS. Founders' personnel will provide the
following services on prototype non-TRAC2000 retirement plans
(TRAC2000 retirement plans are serviced on behalf of the Fund by a
third party, pursuant to separate contract):

(1) Review previous Adoption Agreements (if applicable) and
assist investors in completing the Founders Adoption Agreement.

(2) Review the Founders Adoption Agreement to ensure compliance
with ERISA and IRS regulations.

(3) Complete the Summary Plan Description for the Founders
Adoption Agreement.

(4) Ensure that employers have all the necessary forms to
administer their plans.

(5) Review employee enrollment forms.

(6) Create documentation which consolidates the information from
the enrollment forms and forward such documentation to the
employer.

(7) Create and maintain documentation reflecting contributions,
loans, terminations and other types of plan transactions.

<PAGE>

(8) Handle all money movements including purchases, exchanges,
redemptions (due to terminations or hardship withdrawals, or
loans), and similar functions.

c. REVIEW OF RETIREMENT ACCOUNTS. Founders' personnel will
periodically review retirement account information and advise
investors before reaching age 70-1/2 that a distribution may be
required.

4. QUALITY CONTROL
---------------

Founders' personnel will periodically conduct a quality control audit
on telephone purchase, redemption and exchange requests, account
changes and applications received by Founders. Founders will provide
quality control with respect to other aspects of the transfer agent's
operations, such as the transfer agent's resolution of shareholder
inquiries. Founders will perform quality control on retirement plans.

5. TRAINING
--------

Founders will periodically train personnel of IFTC on Founders'
products and services using its own training materials and training
workshops conducted at the offices of IFTC by Founders' customer
service representatives. Founders will continually provide training to
its investor services representatives with regard to processing
exchanges and redemptions, maintaining accounts, liquidating accounts,
transferring accounts, providing "B" notices, and servicing mutual
fund accounts.

6. CORRESPONDENCE
--------------

a. SHAREHOLDER INQUIRIES. Founders' personnel will respond to
shareholder inquiries received by Founders and to the extent feasible
will resolve such inquiries.

b. GERMAN SHAREHOLDERS. Founders' personnel will provide specialized
service to German shareholders as may be necessary and appropriate.

c. DUE DILIGENCE. Founders will arrange for the mailing of W-8 and W-9
forms to shareholders to ensure that the Fund is complying with IRS
regulations.

d. REQUESTS FOR INFORMATION. Founders will respond to requests it
receives from shareholders for additional prospectuses and account
statements.

<PAGE>

7. MONITORING CUSTOMER ACCOUNTS
----------------------------

a. TELEPHONE PURCHASES. Founders' personnel will contact shareholders
who have purchased shares by phone but have not paid for such shares
within the allowable settlement period.

b. CANCELLED CHECKS. Founders' personnel will contact shareholders who
have cancelled their checks.

c. DORMANT ACCOUNTS. Founders' personnel will assist in locating
shareholders with dormant accounts.

d. ANNUAL REVIEW. Annually, Founders will review open and closed
accounts and arrange for the purging of certain of these accounts.

e. SHORT-TERM TRADERS. Founders will monitor shareholder accounts to
uncover abuses of the telephone exchange privilege described in the
prospectus.

8. LARGE MONEY MANAGERS
--------------------

Founders will assign a contact person to communicate with large money
managers and to ensure that their transactions are timely and properly
conducted and their accounts are set up correctly and continually
updated.

9. USE OF IFTC'S SYSTEM AND FACILITIES
-----------------------------------

Founders hereby accepts responsibility for compliance with the
requirements of Section 6.06 of the TA Agreement.

10. OTHER SERVICES
--------------

Founders will provide all other customary and reasonable transfer
agent and prototype non-TRAC2000 retirement plan services which are
not being provided to the Fund pursuant to the provisions of this
Agreement, the Collective Agreements, or other agreements to which the
Fund is a party.

ADDENDUM TO
AMENDED SHAREHOLDER SERVICES AGREEMENT
BETWEEN
FOUNDERS FUNDS, INC. AND FOUNDERS ASSET MANAGEMENT, INC.

This Addendum ("Addendum") is made as of the 1st day of June, 1995 to
the Amended Shareholder Services Agreement (the "Agreement") by and between
Founders Funds, Inc., a Maryland corporation (the "Fund"), and Founders Asset
Management, Inc., a Delaware corporation ("Founders").

WHEREAS, Founders and the Fund have heretofore entered into the
Agreement, pursuant to which the Fund pays to Founders a prorated monthly fee
equal on an annual basis to $25 for each shareholder account of the Fund
considered to be an open account at any time during the month (the "$25 Fee");
and

WHEREAS, the $25 Fee is in consideration of services rendered and
facilities furnished by Founders under the Agreement and in further
consideration of certain services rendered and facilities furnished by Investors
Fiduciary Trust Company ("IFTC") and its affiliate, DST Technologies, Inc.
("DST"), which are described in the Agreement (which services are collectively
referred to herein as "Services"); and

WHEREAS, Founders has in the past and will in the future enter into
arrangements with third parties which provide sub- transfer agency,
recordkeeping, investor services, and/or other administrative services (the
"Third Party Services") to participants in 401(k) and other tax-qualified
retirement programs and to participants in other arrangements (the
"Participants"), pursuant to which the third party establishes one or more
omnibus accounts with the Fund, into which investments of the Participants are
pooled; and

WHEREAS, in establishing such omnibus accounts and providing the Third
Party Services, the third parties effectively reduce or eliminate the need for
Services to be provided on behalf of the Participants by Founders; and

WHEREAS, a third party may charge a basis point fee method or other fee
method to Founders or the Funds to compensate it for providing the Third Party
Services to Participants (the "Third Party Fee"); and

WHEREAS, certain of the third parties may be broker-dealers who, in
accordance with applicable federal rules and regulations, may be selected by
Founders to execute portfolio securities transactions on behalf of the Fund; and

WHEREAS, commissions earned by the broker-dealer third party from
executing portfolio transactions on behalf of a specific series fund of the Fund
("Series") may be credited by the broker-dealer against the Third Party Fee
charged to that Series, on a basis which has resulted from negotiations between
Founders and the third party;

<PAGE>

NOW, THEREFORE, in consideration of the covenants herein contained and
for other valuable consideration, the receipt and sufficiency of which is
acknowledged by Founders and the Fund, Founders and the Fund agree as follows:

1. In instances in which third parties establish omnibus accounts with
one or more of the Series which represent pooled accounts of Participants whose
transfer agency, recordkeeping, or similar services are being provided by the
third party or its agent and not by Founders and/or IFTC and/or DST, the Series
will reimburse Founders for an amount which shall not be in excess of the $25
Fee for each Participant account, which amount Founders will have previously
paid to the third party.

2. In instances in which commissions are earned by a broker-dealer
third-party from executing portfolio transactions on behalf of a Series,
Founders is authorized to enter into arrangements pursuant to which the
commissions may be credited by the broker-dealer against the Third Party Fee
otherwise payable by that Series to the broker-dealer, on a basis which will
have been negotiated between the broker-dealer and Founders.

3. Any fees paid by the Fund to Founders as reimbursement for payment
by Founders to a third party in consideration of its providing Third Party
Services shall be paid monthly at the rate of 1/12th of an annual fee not to
exceed $25 per Participant account. Such payments shall be made for a
Participant account in the month that it opens or closes, as well as in each
month in which the Participant account remains open, regardless of its account
balance.

4. In the event that the aggregate of the monthly fees per Participant
may on occasion exceed the aggregate monthly Third Party Fees due to the third
party, the applicable Series will accrue the excess through the applicable
calendar year-end, which excess will be available to reimburse Founders if,
during any remaining month in the calendar year, the aggregate monthly Third
Party Fees applicable to that Series paid by Founders exceed the aggregate
monthly fees per Participant. Any accrual remaining at year-end will be credited
to the respective Series' general ledger expense account.

5. This Addendum shall remain in effect for such period of
time as the Agreement remains in effect.

6. This Addendum shall be construed in accordance with the laws of the
State of Colorado and the applicable provisions of the Investment Company Act of
1940, as amended (the "Act"). To

<PAGE>

the extent the applicable law of the State of Colorado or any other provisions
herein conflict with the applicable provisions of the Act, the latter shall
control.

7. This Addendum may not be modified except by written instrument
executed by the Fund and Founders.

IN WITNESS WHEREOF, the parties have executed and delivered this
Addendum effective on the day and year first above written.

FOUNDERS FUNDS, INC.

By: /s/ Bjorn K. Borgen
President

FOUNDERS ASSET MANAGEMENT, INC.

By: /s/Jonathan F. Zeschin
President

founders\edgar\exhibits\adshrser.9-b

<PAGE>

FUND ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT

AGREEMENT initially made as of June 26, 1991, as last amended effective
August 25, 1995, in Denver, Colorado, by and between Founders Funds, Inc., a
Maryland corporation (the "Fund"), and Founders Asset Management, Inc., a
Delaware corporation (hereinafter referred to as ("Founders").

WHEREAS, the Fund is engaged in business as an open-end management
investment company, is registered as such under the Investment Company Act of
1940, as amended (the "Act"), and is authorized to issue shares representing
interests in the separate portfolios of investments listed on Appendix 1 to this
Agreement, which Appendix 1 is incorporated into this Agreement by this
reference (the "Portfolios"); and

WHEREAS, Founders is registered as an investment adviser under the
Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser and providing certain other administrative, shareholder
servicing, accounting, and record keeping services to the Fund; and

WHEREAS, the Fund desires to retain Founders to render certain additional
administrative, accounting, and recordkeeping services (the "Services") in the
manner and on the terms and conditions hereinafter set forth; and

WHEREAS, Founders desires to be retained to perform such services on said
terms and conditions;

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the Fund and Founders agree as follows:

1. SERVICES. The Fund hereby retains Founders to provide the following
Services to the Portfolios:

A. ACCOUNTING SERVICES.

(1) Prepare and maintain, according to generally accepted
accounting principles, general ledgers and financial statements of the
Fund and the Portfolios, including the following:

(a) DAILY PREPARATION AND MAINTENANCE:

(i) Detailed transaction ledgers listing all
transactions affecting the Fund;

(ii) Trial balance listing by account the beginning
balance, all debits and credits, and the ending balance;

<PAGE>

(iii) Balance sheet, income statement and a portfolio
listing summarizing net assets, net income, capitalization,
and realized and unrealized gains and losses.

(b) MONTHLY PREPARATION AND MAINTENANCE:

Statements of assets and liabilities, operations and
changes in net assets, statements of gains and losses and
statements of sales and redemptions.

The same ledgers as are prepared monthly, plus per
share statements, appreciation/ depreciation statements, and
fund share activity statements.

(2) Obtain such data from the Fund's transfer agent, custodian,
and investment adviser as is necessary to calculate the net asset
value of each Portfolio in the manner, and at such times and
frequencies, as is required by the Act and by the Fund's prospectus
and statement of additional information.

B. CONTROL AND COMPLIANCE.

(1) Audit certain data and transactions of the Fund's custodian,
transfer agent and investment adviser by engaging in the following:

(a) DAILY AUDIT/RECONCILIATION PROCEDURES:

(i) Reconciliation of the custodian's trust account
activity including cash movement, cash balances, settlement
of security purchases and sales, and settlement of Fund
share purchases and sales;

(ii) Reconciliation of the transfer agent's activity in
regard to Fund share move ments and "as of" transactions;

(iii) Monitoring of the investment adviser's trading
activity, including compli ance and brokerage allocations.

(b) MONTHLY AUDIT/RECONCILIATION PROCEDURES:

(i) Audit of the custodian's holding of Fund assets and
assets in transit, audit of

<PAGE>

the custodian's fees charged to the Fund, and audit of
credits for the Fund's compensating balances;

(ii) Audit of the transfer agent's activ ity concerning
dividend and redemption payouts and of the transfer agent's
fees charged to the Fund;

(iii) Audit of the investment adviser's fees charged to
the Funds, including servicing and accounting fees.

(i) Daily monitoring of the investment adviser's
trading activity, including compli ance and brokerage
allocation and commissions; (ii) Periodic monitoring of
disclosures and record keeping.

C. REPORTING AND ANALYSIS.

(1) Provide regulatory (Securities and Exchange Commission),
shareholder and other miscellaneous report ing and, in particular,
prepare and maintain the follow ing required books, records, and other
documents:

(a) journals containing daily itemized records of all
Portfolio securities purchases and sales, receipts and deliveries
of securities, receipts and disbursements of cash, and all other
debits and credits, in the form required by Rule 31a-1(b)(1)
under the Act;

(b) general and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense accounts, in the
form required by Rules 31a-1(b)(1)(i) - (iii) under the Act;

(c) a securities record or ledger reflecting separately for
each portfolio security as of trade date all "long" and "short"
positions, if any, carried by the Portfolios for the accounts of
the Portfolios, and showing the location of all securi ties long
and the off-setting positions of all securities short, in the
form required by Rule 31a-1(b)(3) under the Act;

<PAGE>

(d) a record of all Portfolio purchases or sales, in the
form required by Rule 31a-1(b)(6) under the Act;

(e) a record of all puts, calls, spreads, straddles and
other options, if any, in which the Portfolios have any direct or
indirect interest or which the Portfolios have granted or
guaranteed, in the form required by Rule 31a-1(b)(7) under the
Act;

(f) a record of the proof of money balances in all ledger
accounts maintained pursuant to this Agreement, in the form
required by Rule 31a-1(b)(8) under the Act;

(g) price make-up sheets and such records as are necessary
to reflect the determination of the Portfolios' net asset values;

(h) Regulatory: semi-annual and annual Form N-SARs and
quarterly Form 13-fs.

(i) Shareholder: semi-annual and annual statements of assets
and liabilities, operations, changes in net assets, per share
data, apprecia tion/depreciation, and share activity; and

(j) Media: weekly, monthly, quarterly, semi- annual and
annual statistical data of the Funds, to be provided to
newsletters and other investment industry publications such as
ICI, Donahue, Lipper and the NASD.

The foregoing books and records shall be maintained and preserved by
Founders in accordance with and for the time periods specified by applicable
rules and regulations, including Rule 31a-2 under the Act. All such books and
records shall be the property of the Fund and, upon request therefor, Founders
shall surrender to the Fund such of the books and records so requested.

2. STAFF MAINTENANCE. Founders shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other persons as
it shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, such staff and personnel may include officers of
Founders and persons employed or otherwise retained by Founders to provide or
assist in providing services to the Fund other than those Services to be
provided pursuant to this Agreement.

<PAGE>

3. FACILITIES. Founders shall, at its own expense, provide such office
space, facilities and equipment (including, but not limited to, computer
equipment, communication lines, and supplies) and such clerical help and other
services as shall be necessary to provide the Services to the Portfolios. In
addition, Founders may arrange on behalf of the Fund to obtain pricing
information regarding the Portfolios' investment securities from such company or
companies as are approved by a majority of the Fund's board of directors. The
Fund shall be financially responsible to such company or companies for the
reasonable cost of providing such pricing information.

5. FEES. For the services rendered and facilities furnished by Founders
under this Agreement, the Fund shall pay to Founders a fee computed on a daily
basis and paid on a monthly basis. The fee shall be computed at the annual rate
of 0.06% of the daily net assets of the Fund from $0 to $500 million and at the
annual rate of 0.02% of the daily net assets of the Fund in excess of $500
million. Founders shall also be reimbursed for all out-of-pocket expenses
incurred by it in performing its services pursuant to the Agreement. For
purposes of each daily calculation of this fee, the most recently calculated net
asset value of the Fund, as determined by a valuation made in accordance with
the Fund's procedure for calculating Portfolio net asset value as described in
the Fund's prospectus and/or statement of additional information, shall be used.
During any period when the determination of the Fund's net asset value is
suspended by the directors of the Fund, the net asset value of the Fund as of
the last business day prior to such suspension shall, for the purpose of this
Paragraph 5, be deemed to be the net asset value at the close of each succeeding
business day until it is again determined.

6. ACCESS TO FOUNDERS' RECORDS. Founders will permit representatives of the
Fund, including the Fund's independent auditors, to have reasonable access to
the personnel and records of Founders in order to enable such representatives to
monitor the quality of services being provided and the level of fees due
Founders pursuant to this Agreement. In addition, Founders shall promptly
deliver to the board of directors of the Fund such information as may reasonably
be requested from time to time to permit the board of directors to make an
informed determination regarding continuation of this Agreement and the payments
contem plated to be made hereunder.

7. LIABILITY. Founders shall not be liable to the Fund for any action taken
or omitted to be taken by Founders or its

<PAGE>

employees, agents or contractors in carrying out the provisions of this
Agreement if such action was taken or omitted in good faith and without gross
negligence or willful misconduct on the part of Founders or its employees,
agents or contractors.

8. INDEMNIFICATION BY THE FUND. The Fund shall indemnify Founders and hold
it harmless from and against any and all losses, damages, and expenses,
including reasonable attorneys' fees and expenses, incurred by Founders which
result from: (i) any claim, action, suit or proceeding in connection with
Founders' entry into or performance of this Agreement; (ii) any action taken or
omission to act committed by Founders in the performance of its obligations
hereunder; or (iii) any action of Founders upon instructions reasonably believed
in good faith by it to have been executed by a duly authorized officer or
representative of the Fund; PROVIDED, HOWEVER, that Founders shall not be
entitled to such indemnifica tion in respect of actions or omissions
constituting gross negligence or willful misconduct on the part of Founders or
its employees, agents or contractors. Before confessing any claim against it
which may be subject to indemnification by the Fund hereunder, Founders shall
give the Fund reasonable opportunity to defend against such claim in its own
name or in the name of Founders.

9. INDEMNIFICATION BY FOUNDERS. Founders shall indemnify the Fund and hold
it harmless from and against any and all losses, damages and expenses, including
reasonable attorneys' fees and expenses, incurred by the Fund which result from:
(i) Founders' lack of good faith in performing its obligations hereunder; or
(ii) the gross negligence or willful misconduct of Founders or its employees,
agents or contractors in connection herewith. The Fund shall not be entitled to
such indemnification in respect of actions or omissions constituting gross
negligence or willful misconduct on the part of the Fund or its employees,
agents or contractors other than Founders, unless such gross negligence or
willful misconduct results from or is accompanied by gross negligence or willful
misconduct on the part of Founders, any affiliated person of Founders, or any
affiliated person of an affiliated person of Founders. Before confessing any
claim against it which may be subject to indemnification hereunder, the Fund
shall give Founders reasonable opportunity to defend against such claim in its
own name or in the name of the Fund.

10. EFFECT OF AGREEMENT. Nothing herein contained shall be deemed to
require the Fund to take any action contrary to its Articles of Incorporation or
its By-Laws or any applicable law, regulation or order to which it is subject or
by which it is bound, or to relieve or deprive the directors of the Fund and the
Fund of their overall responsibility for and control of the conduct of the
business and affairs of the Fund.

<PAGE>

11. TERM AND TERMINATION. This Agreement shall remain in effect until no
later than the first anniversary date of its initial effective date and from
year to year thereafter provided such continuance is approved at least annually
by the vote of a majority of the directors of the Fund who are not parties to
this Agreement or "interested persons" (as defined in the Act) of any such
party, which vote must be cast in person at a meeting called for the purpose of
voting on such approval; provided, however, that (a) the Fund may, at any time
and without the payment of any penalty, terminate this Agreement upon ninety
days written notice to Founders; (b) the Agreement shall immediately terminate
in the event of its assignment (within the meaning of the Act and the Rules
thereunder) unless the board of directors of the Fund approves such assignment;
and (c) Founders may terminate this Agreement without payment of penalty on
ninety days written notice to the Fund. Any notice under this Agreement shall be
given in writing, addressed and delivered, or mailed post-paid, to the other
party at the principal office of such party.

12. APPLICATION OF LAW. This Agreement shall be construed in accordance
with the laws of the State of Colorado and the applica ble provisions of the
Act. To the extent the applicable law of the State of Colorado or any of the
provisions herein conflict with the applicable provisions of the Act, the latter
shall control.

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
on the day and year first above written.

FOUNDERS FUNDS, INC.

By: /s/Bjorn K. Borgen, President

FOUNDERS ASSET MANAGEMENT, INC.

By: /s/Jonathan F. Zeschin, President

<PAGE>

APPENDIX 1
TO
FUND ACCOUNTING AND ADMINISTRATIVE SERVICES AGREEMENT

Founders Discovery Fund
Founders Frontier Fund
Founders Passport Fund
Founders International Equity Fund
Founders Special Fund
Founders Worldwide Growth Fund
Founders Growth Fund
Founders Blue Chip Fund
Founders Balanced Fund
Founders Government Securities Fund
Founders Money Market Fund

MOYE, GILES, O'KEEFE, VERMEIRE & GORRELL
A Law Partnership
Including Professional Corporations
29th Floor
1225 Seventeenth Street
Denver, Colorado 80202-5529
Telephone (303) 292-2900
Telecopier (303) 292-4510

February 14, 1996

Founders Funds, Inc.
2930 East Third Avenue
Denver, Colorado 80206

Attn: David L. Ray

Re: Form N-1A Registration Statement Under The
SECURITIES ACT OF 1933; REGISTRATION NO. 2-17531

Gentlemen:

The above-captioned Registration Statement registered an indefinite number
of shares of capital stock (hereafter, "shares") pursuant to Rule 24f-2 under
the Investment Company Act of 1940. In accordance with the provisions of that
Rule, you are filing a "Rule 24f-2 Notice" for the fiscal year ended December
31, 1995. The Notice discloses that:

1. No shares were registered under the Securities Act of 1933 other than
pursuant to Rule 24f-2, and no such shares remained unsold at the beginning of
such fiscal year.

2. No shares were registered during such fiscal year other than pursuant to
Rule 24f-2.

3. 415,018,860 shares, including shares issued in connec tion with dividend
reinvestment plans, were sold during such fiscal year.

4. 415,018,860 shares were sold during such fiscal year in reliance upon
registration pursuant to Rule 24f-2.

You have requested our opinion as to the legality of the 415,018,860 shares
sold during the fiscal year ending December 31, 1995, in reliance upon
registration pursuant to Rule 24f-2.

We have examined a certified copy of the Articles of Incor poration of
Founders Funds, Inc. as approved and received for record by the State Department
of Assessments and Taxation of

<PAGE>

Maryland, Articles Supplementary thereto, the Bylaws and other documents
included in the Registration Statement and all exhibits thereto, and have
conducted such further investigation as deemed appropriate.

Based upon our examination, we are of the opinion that Founders Funds, Inc.
is a Maryland corporation duly organized and existing under and by virtue of the
laws of the State of Maryland with full power to issue its shares of capital
stock, and that the 415,018,860 shares issued and sold during the fiscal year
ended December 31, 1995, in reliance upon registration pursuant to Rule 24f-2,
were legally and validly issued, fully paid and non-assessable.

We hereby consent to the use of this opinion in connection with the filing
of your Rule 24f-2 Notice.

Very truly yours,

MOYE, GILES, O'KEEFE,
VERMEIRE & GORRELL

By: Edward F. O'Keefe, P.C.

By: /s/Edward F. O'Keefe, President

EFO/ljc

SMITH, BROCK & GWINN
Certified Public Accountants
650 South Cherry Street - Suite 425
Denver, CO 80222
(303) 399-8722
Fax (303) 399-8302

ACCOUNTANT'S CONSENT

Founders Fund, Inc.

We hereby consent to the inclusion in Post-Effective Amendment No. 61
to your Registration Statement, (File No. 2-17531) of our opinion
dated January 26, 1996, covering the financial statements to be
incorporated by reference as follows:

Period Covered
--------------

Founders Discovery Fund Year Ended December 31, 1995

Founders Frontier Fund Year Ended December 31, 1995

Founders Passport Fund Year Ended December 31, 1995

Founders Special Fund Year Ended December 31, 1995

Founders International Equity Fund Period Ended December 31, 1995

Founders Worldwide Growth Fund Year Ended December 31, 1995

Founders Growth Fund Year Ended December 31, 1995

Founders Blue Chip Fund Year Ended December 31, 1995

Founders Balanced Fund Year Ended December 31, 1995

Founders Opportunity Bond Fund Period Ended December 15, 1995

Founders Government Securities Fund Year Ended December 31, 1995

Founders Money Market Fund Year Ended December 31, 1995

/s/ Smith, Brock & Gwinn
Denver, Colorado
July 25, 1996

SMITH, BROCK & GWINN
Certified Public Accountants
650 South Cherry Street - Suite 425
Denver, CO 80222
(303) 399-8722
Fax (303) 399-8302

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders
of Founders Funds, Inc.

We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of Founders Funds, Inc. (comprising, respectively,
the Discovery, Frontier Passport, Special, International Equity, Worldwide
Growth, Growth, Blue Chip, Balanced Opportunity Bond, Government Securities and
Money Market Funds) as of December 31, 1995 (December 15, 1995 for Opportunity
Bond Fund), and the related statements of operations for the periods then ended,
the statements of changes in net assets, and the selected per share data and
ratios in the "Financial Highlights" table for each of the periods indicated.
These financial statements and selected per share data and ratios are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and per share data and ratios based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of each of the respective portfolios constituting Founders Funds, Inc.
as of December 31, 1995 (December 15, 1995 for Opportunity Bond Fund), and the
results of their operations for the periods then ended, the changes in their net
assets and the selected per share data and ratios for each of the periods
indicated, in conformity with generally accepted accounting principles.

SMITH, BROCK & GWINN

\s\s Smith, Brock & Gwinn
Denver, Colorado
January 26, 1996

FOUNDERS FUNDS, INC.
FOUNDERS FRONTIER FUND

AMENDED DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Frontier Fund (the
"Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is designed
to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in
Section 8 below, while the Plan is in effect, the Fund is authorized to
reimburse Founders Asset Management, Inc. ("Founders") for out-of-pocket costs
and expenses actually incurred for the distribution of the shares of the Fund
issued by the Company, but only to the extent such expenses do not exceed an
annual rate of 0.25% of the Fund's average daily net assets or such lesser
amount as a majority of the Board of Directors of the Company (the "Board of
Directors"), including a majority of the Independent Directors (as defined
herein), may determine. A majority of the Board of Directors who are not
interested persons of the Company and have no direct or indirect financial
interest in the operation of the Plan ("Independent Directors") may from time to
time reduce the amount of such expenses or may suspend the operation of this
Section 2 for such period or periods as they may determine. Reimbursement
contemplated under this Section shall be paid monthly upon receipt by the Fund
of a written expense report detailing the expenses qualifying for such
reimbursement and the purposes thereof. Expenses permitted to be paid by the
Fund pursuant to this Section shall include and be limited to the following:

(a) payments to any securities dealer, financial institution or other
person (other than Founders) for their assistance with respect to
the distribution of the Fund's shares, and payments to any
financial intermediary for providing administrative and
accounting services with respect to the Fund's shareholders,
provided each recipient of such payment has entered into a
written agreement with Founders, the form of which has been
approved by a majority of the Board of Directors, including a
majority of the Independent Directors; and

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Fund, sales

<PAGE>

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with
respect to the Fund until it has been approved by a majority of the Board of
Directors and by a majority of the Independent Directors, by votes cast in
person at a meeting called for the purpose of voting on the Plan and by a vote
of at least a majority of the outstanding voting securities of the Fund. The
Plan shall continue in effect with respect to the Fund for so long as such
continuance is specifically approved at least annually by a majority of the
Board of Directors and a majority of the Independent Directors, by votes cast at
a meeting called for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys
paid or payable pursuant to the Plan shall furnish at least quarterly to the
Board of Directors, and the Board of Directors shall review, a written report as
to the amounts expended during each quarter and the purposes for which such
amounts were expended, and such other information as the Board of Directors or
the Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all
reports made pursuant to Section 4 above for a period of not less than six years
from the date of the Plan and reports and shall preserve the Plan and reports
for the first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect,
the selection and nomination of those Directors who are not interested persons
of the Company shall be committed to the discretion of the Independent
Directors.

7. EXPENSE LIMITATION. Whether or not any expenditure under the Plan is
subject to a state expense limitation shall depend upon the nature of the
expenditure and the terms of the state law or regulation imposing the
limitation. Any expenditure subject to such limitation shall be included in the
Fund's total expenses for purposes of determining compliance with such
limitation.

8. OTHER EXPENSES OF THE FUND AND FOUNDERS. To the extend that any
payments made by the Company on behalf of the Fund

-2-

<PAGE>

pursuant to its investment advisory agreement with Founders are considered to be
"primarily intended to result in the sale of shares" of the Fund within the
meaning of the Rule, such payments when made by the Company pursuant to the
investment advisory agreement are authorized under the Plan. Any distribution
expenses relating to the sale of shares of the Fund incurred by Founders are in
addition to distribution expenses incurred by the Fund pursuant to Section 2
above. To the extent that any management fee paid by the Fund pursuant to its
investment advisory agreement with Founders might be considered to be indirectly
financing any activity which is "primarily intended to result in the sale of
shares" of the Fund within the meaning of the Rule, the payment of such
management fee is authorized under the Plan. Adoption of the Plan shall not be
deemed to mean that any payments made by the Fund and authorized by the Plan
pursuant to this Section 8 constitute distribution expenses within the meaning
of the Rule, or that payment of distribution expenses by Founders constitutes
the indirect payment of distribution expenses by the Fund.

9. AMENDMENT AND TERMINATION. The Plan may not be amended to increase
materially the amount of distribution expenses to be paid by the Fund as
described in Section 2 above without the approval of a majority of the
outstanding voting securities of the Fund. All material amendments to the Plan
must be approved by a majority of the Board of Directors and a majority of the
Independent Directors, by votes cast in person at a meeting called for the
purpose of voting on such amendment. Amendments required to conform the Plan to
changes in the Rule shall not be deemed to be material amendments.

The Plan may be terminated by the Fund at any time by the vote of a
majority of the Independent Directors or by the vote of a majority of the
outstanding voting securities of the Fund. Upon termination, the Fund will not
reimburse Founders for any expenses incurred by Founders subsequent to the date
of termination which otherwise would have been reimbursed under the Plan. The
Fund will, however, reimburse Founders for any such expenses incurred prior to
the date of termination, but only to the extent that such expenses do not exceed
0.25% of the Fund's average daily net assets in the calendar year of termination
(or such lesser amount as may have been determined prior to termination by the
Board of Directors, including the Independent Directors, in accordance with
Section 2 of the Plan).

10. DEFINITIONS. As used in the Plan, the terms "assignment",
"interested person" and "vote of a majority of the outstanding voting
securities" shall have the respective meaning specified in the Act and the rules
and regulations thereunder.

Last amended May 31, 1991.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS GROWTH FUND

AMENDED DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Growth Fund (the
"Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is designed
to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred for the distribution of the shares of the Fund issued by the
Company, but only to the extent such expenses do not exceed an annual rate of
0.25% of the Fund's average daily net assets or such lesser amount as a majority
of the Board of Directors of the Company (the "Board of Directors"), including a
majority of the Independent Directors (as defined herein), may determine. A
majority of the Board of Directors who are not interested persons of the Company
and have no direct or indirect financial interest in the operation of the Plan
("Independent Directors") may from time to time reduce the amount of such
expenses or may suspend the operation of this Section 2 for such period or
periods as they may determine. Reimbursement contemplated under this Section
shall be paid monthly upon receipt by the Fund of a written expense report
detailing the expenses qualifying for such reimbursement and the purposes
thereof. Expenses permitted to be paid by the Fund pursuant to this Section
shall include and be limited to the following:

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Fund, sales

<PAGE>

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

8. OTHER EXPENSES OF THE FUND AND FOUNDERS. To the extend that any payments
made by the Company on behalf of the Fund

-2-

<PAGE>

10. DEFINITIONS. As used in the Plan, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meaning specified in the Act and the rules and regulations
thereunder.

Last amended May 31, 1991.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS BLUE CHIP FUND

AMENDED DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Blue Chip Fund (the
"Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is designed
to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred for the distribution of the shares of the Fund issued by the
Company, but only to the extent such expenses do not exceed an annual rate of
0.25% of the Fund's average daily net assets or such lesser amount as a majority
of the Board of Directors of the Company (the "Board of Directors"), including a
majority of the Independent Directors (as defined herein), may determine. A
majority of the Board of Directors who are not interested persons of the Company
and have no direct or indirect financial interest in the operation of the Plan
("Independent Directors") may from time to time reduce the amount of such
expenses or may suspend the operation of this Section 2 for such period or
periods as they may determine. Reimbursement contemplated under this Section
shall be paid monthly upon receipt by the Fund of a written expense report
detailing the expenses qualifying for such reimbursement and the purposes
thereof. Expenses permitted to be paid by the Fund pursuant to this Section
shall include and be limited to the following:

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Fund, sales

<PAGE>

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

8. OTHER EXPENSES OF THE FUND AND FOUNDERS. To the extend that any payments
made by the Company on behalf of the Fund

-2-

<PAGE>

10. DEFINITIONS. As used in the Plan, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meaning specified in the Act and the rules and regulations
thereunder.

Last amended May 31, 1991.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS BALANCED FUND

AMENDED DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Balanced Fund (the
"Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is designed
to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred over a rolling twelve-month period for the distribution of the
shares of the Fund issued by the Company, but only to the extent such expenses
do not exceed an annual rate of 0.25 of 1 percent of the Fund's average daily
net assets or such lesser amount as a majority of the Board of Directors of the
Company (the "Board of Directors") including a majority of the Independent
Directors (as defined herein), may determine. A majority of the Board of
Directors who are not interested persons of the Company and have no direct or
indirect financial interest in the operation of the Plan ("Independent
Directors") may from time to time reduce the amount of such expenses or may
suspend the operation of this Section 2 for such period or periods as they may
determine. Reimbursement contemplated under this Section shall be paid monthly
upon receipt by the Fund of a written expense report detailing the expenses
qualifying for such reimbursement and the purposes thereof. Expenses permitted
to be paid by the Fund pursuant to this Section shall include and be limited to
the following:

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Fund, sales

<PAGE>

literature and other promotional material to prospective
investors; direct mail solicitation; television, radio,
newspaper, magazine and other advertising; public relations;
compensation of sales personnel and persons who render
shareholder support services; and such other expenses as may be
approved from time to time by the Board of Directors, including a
majority of the Independent Directors, and as may be permitted by
applicable statute, rule or regulation. Payments by the Fund
hereunder, for any month, may be made only with respect to
expenditures incurred by Founders during the rolling 12-month
period in which that month falls. Any expenditures incurred in
excess of the limitation described above of 0.25 of 1 percent of
the Fund's average daily net assets in any one fiscal year are
not reimbursable.

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

-2-

<PAGE>

8. OTHER EXPENSES OF THE FUND AND FOUNDERS. To the extend that any payments
made by the Company on behalf of the Fund pursuant to its investment advisory
agreement with Founders are considered to be "primarily intended to result in
the sale of shares" of the Fund within the meaning of the Rule, such payments
when made by the Company pursuant to the investment advisory agreement are
authorized under the Plan. Any distribution expenses relating to the sale of
shares of the Fund incurred by Founders are in addition to distribution expenses
incurred by the Fund pursuant to Section 2 above. To the extent that any
management fee paid by the Fund pursuant to its investment advisory agreement
with Founders might be considered to be indirectly financing any activity which
is "primarily intended to result in the sale of shares" of the Fund within the
meaning of the Rule, the payment of such management fee is authorized under the
Plan. Adoption of the Plan shall not be deemed to mean that any payments made by
the Fund and authorized by the Plan pursuant to this Section 8 constitute
distribution expenses within the meaning of the Rule, or that payment of
distribution expenses by Founders constitutes the indirect payment of
distribution expenses by the Fund.

The Plan may be terminated by the Fund at any time by the vote of a
majority of the Independent Directors or by the vote of a majority of the
outstanding voting securities of the Fund. Upon termination, the Fund will not
reimburse Founders for any expenses incurred by Founders subsequent to the date
of termination which otherwise would have been reimbursed under the Plan. The
Fund will, however, reimburse Founders for any such expenses incurred prior to
the date of termination, but only to the extent that such expenses do not exceed
0.25 of 1 percent of the Fund's average daily net assets in the calendar year of
termination (or such lesser amount as may have been determined prior to
termination by the Board of Directors, including the Independent Directors, in
accordance with Section 2 of the Plan).

10. DEFINITIONS. As used in the Plan, the terms "assignment," "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meaning specified in the Act and the rules and regulations
thereunder.

Last amended August 28, 1992.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS GOVERNMENT SECURITIES FUND

AMENDED DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Government
Securities Fund (the "Fund"), has adopted this Distribution Plan (the "Plan").
The Plan is designed to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred for the distribution of the shares of the Fund issued by the
Company, but only to the extent such expenses do not exceed an annual rate of
0.25% of the Fund's average daily net assets or such lesser amount as a majority
of the Board of Directors of the Company (the "Board of Directors"), including a
majority of the Independent Directors (as defined herein), may determine. A
majority of the Board of Directors who are not interested persons of the Company
and have no direct or indirect financial interest in the operation of the Plan
("Independent Directors") may from time to time reduce the amount of such
expenses or may suspend the operation of this Section 2 for such period or
periods as they may determine. Reimbursement contemplated under this Section
shall be paid monthly upon receipt by the Fund of a written expense report
detailing the expenses qualifying for such reimbursement and the purposes
thereof. Expenses permitted to be paid by the Fund pursuant to this Section
shall include and be limited to the following:

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Fund, sales

<PAGE>

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

-2-

<PAGE>

10. DEFINITIONS. As used in the Plan, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meaning specified in the Act and the rules and regulations
thereunder.

Last amended May 31, 1991.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS DISCOVERY FUND

AMENDED DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Discovery Fund (the
"Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is designed
to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred for the distribution of the shares of the Fund issued by the
Company, but only to the extent such expenses do not exceed an annual rate of
0.25% of the Fund's average daily net assets or such lesser amount as a majority
of the Board of Directors of the Company (the "Board of Directors"), including a
majority of the Independent Directors (as defined herein), may determine. A
majority of the Board of Directors who are not interested persons of the Company
and have no direct or indirect financial interest in the operation of the Plan
("Independent Directors") may from time to time reduce the amount of such
expenses or may suspend the operation of this Section 2 for such period or
periods as they may determine. Reimbursement contemplated under this Section
shall be paid monthly upon receipt by the Fund of a written expense report
detailing the expenses qualifying for such reimbursement and the purposes
thereof. Expenses permitted to be paid by the Fund pursuant to this Section
shall include and be limited to the following:

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Fund, sales

<PAGE>

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

8. OTHER EXPENSES OF THE FUND AND FOUNDERS. To the extend that any payments
made by the Company on behalf of the Fund

-2-

<PAGE>

10. DEFINITIONS. As used in the Plan, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meaning specified in the Act and the rules and regulations
thereunder.

Last amended May 31, 1991.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS WORLDWIDE GROWTH FUND

AMENDED DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Worldwide Growth
Fund (the "Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is
designed to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred for the distribution of the shares of the Fund issued by the
Company, but only to the extent such expenses do not exceed an annual rate of
0.25% of the Fund's average daily net assets or such lesser amount as a majority
of the Board of Directors of the Company (the "Board of Directors"), including a
majority of the Independent Directors (as defined herein), may determine. A
majority of the Board of Directors who are not interested persons of the Company
and have no direct or indirect financial interest in the operation of the Plan
("Independent Directors") may from time to time reduce the amount of such
expenses or may suspend the operation of this Section 2 for such period or
periods as they may determine. Reimbursement contemplated under this Section
shall be paid monthly upon receipt by the Fund of a written expense report
detailing the expenses qualifying for such reimbursement and the purposes
thereof. Expenses permitted to be paid by the Fund pursuant to this Section
shall include and be limited to the following:

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Fund, sales

<PAGE>

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

8. OTHER EXPENSES OF THE FUND AND FOUNDERS. To the extend that any payments
made by the Company on behalf of the Fund

-2-

<PAGE>

10. DEFINITIONS. As used in the Plan, the terms "assignment", "interested
person" and "vote of a majority of the outstanding voting securities" shall have
the respective meaning specified in the Act and the rules and regulations
thereunder.

Last amended May 31, 1991.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS SPECIAL FUND

DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Special Fund (the
"Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is designed
to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred over a rolling twelve-month period for the distribution of the
shares of the Fund issued by the Company, but only to the extent such expenses
do not exceed an annual rate of 0.25 of 1 percent of the Fund's average daily
net assets or such lesser amount as a majority of the Board of Directors of the
Company (the "Board of Directors") including a majority of the Independent
Directors (as defined herein), may determine. A majority of the Board of
Directors who are not interested persons of the Company and have no direct or
indirect financial interest in the operation of the Plan ("Independent
Directors") may from time to time reduce the amount of such expenses or may
suspend the operation of this Section 2 for such period or periods as they may
determine. Reimbursement contemplated under this Section shall be paid monthly
upon receipt by the Fund of a written expense report detailing the expenses
qualifying for such reimbursement and the purposes thereof. Expenses permitted
to be paid by the Fund pursuant to this Section shall include and be limited to
the following:

(b) expenses of promoting the sale of shares of the Fund, including
preparation, printing and mailing of prospectuses, reports to
shareholders of the Funds, sales

<PAGE>

literature and other promotional material to prospective
investors; direct mail solicitation; television, radio,
newspaper, magazine and other advertising; public relations;
compensation of sales personnel and persons who render
shareholder support services; and such other expenses as may be
approved from time to time by the Board of Directors, including a
majority of the Independent Directors, and as may be permitted by
applicable statute, rule or regulation. Payments by the Fund
hereunder, for any month, may be made only with respect to
expenditures incurred by Founders during the rolling twelve-month
period in which that month falls. Any expenditures incurred in
excess of the limitation described above of 0.25 of 1 percent of
the Fund's average daily net assets in any one fiscal year are
not reimbursable.

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

-2-

<PAGE>

The Plan may be terminated by the Fund at any time by the vote of a
majority of the Independent Directors or by the vote of a majority of the
outstanding voting securities of the Fund. Upon termination, the Fund will not
reimburse Founders for any expenses incurred by Founders subsequent to the date
of termination which otherwise would have been reimbursed under the Plan. The
Fund will, however, reimburse Founders for any such expenses incurred prior to
the date of termination, but only to the extent that such expenses do not exceed
0.25 of 1 percent of the Fund's average daily net assets in the calendar year of
termination (or such lesser amount as may have been determined prior to
termination by the Board of Directors, including the Independent Directors, in
accordance with Section 2 of the Plan).

Adopted August 27, 1993.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS PASSPORT FUND

DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders Passport Fund (the
"Fund"), has adopted this Distribution Plan (the "Plan"). The Plan is designed
to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred over a rolling twelve-month period for the distribution of the
shares of the Fund issued by the Company, but only to the extent such expenses
do not exceed an annual rate of 0.25 of 1 percent of the Fund's average daily
net assets or such lesser amount as a majority of the Board of Directors of the
Company (the "Board of Directors") including a majority of the Independent
Directors (as defined herein), may determine. A majority of the Board of
Directors who are not interested persons of the Company and have no direct or
indirect financial interest in the operation of the Plan ("Independent
Directors") may from time to time reduce the amount of such expenses or may
suspend the operation of this Section 2 for such period or periods as they may
determine. Reimbursement contemplated under this Section shall be paid monthly
upon receipt by the Fund of a written expense report detailing the expenses
qualifying for such reimbursement and the purposes thereof. Expenses permitted
to be paid by the Fund pursuant to this Section shall include and be limited to
the following:

(a) payments to any securities dealer, financial institution or
other person (other than Founders) for their assistance with
respect to the distribution of the Fund's shares, and
payments to any financial intermediary for providing
administrative and accounting services with respect to the
Fund's shareholders, provided each recipient of such payment
has entered into a written agreement with Founders, the form
of which has been approved by a majority of the Board of
Directors, including a majority of the Independent
Directors; and

(b) expenses of promoting the sale of shares of the Fund,
including preparation, printing and mailing of prospectuses,
reports to shareholders of the Funds, sales

<PAGE>

literature and other promotional material to prospective
investors; direct mail solicitation; television, radio,
newspaper, magazine and other advertising; public relations;
compensation of sales personnel and persons who render
shareholder support services; and such other expenses as may
be approved from time to time by the Board of Directors,
including a majority of the Independent Directors, and as
may be permitted by applicable statute, rule or regulation.
Payments by the Fund hereunder, for any month, may be made
only with respect to expenditures incurred by Founders
during the rolling twelve-month period in which that month
falls. Any expenditures incurred in excess of the limitation
described above of 0.25 of 1 percent of the Fund's average
daily net assets in any one fiscal year are not
reimbursable.

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

-2-

<PAGE>

The Plan may be terminated by the Fund at any time by the vote of a
majority of the Independent Directors or by the vote of a majority of the
outstanding voting securities of the Fund. Upon termination, the Fund will not
reimburse Founders for any expenses incurred by Founders subsequent to the date
of termination which otherwise would have been reimbursed under the Plan. The
Fund will, however, reimburse Founders for any such expenses incurred prior to
the date of termination, but only to the extent that such expenses do not exceed
0.25 of 1 percent of the Fund's average daily net assets in the calendar year of
termination (or such lesser amount as may have been determined prior to
termination by the Board of Directors, including the Independent Directors, in
accordance with Section 2 of the Plan).

Adopted August 27, 1993.

-3-

FOUNDERS FUNDS, INC.
FOUNDERS INTERNATIONAL EQUITY FUND

DISTRIBUTION PLAN

1. THE PLAN. Founders Funds, Inc. (the "Company") is registered as an
open-end management investment company under the Investment Company Act of 1940
(the "Act") and is authorized to issue shares of capital stock in separate
series, with each series representing interests in a separate portfolio of
securities and other assets. Pursuant to Section 12(b) of the Act and the rules
and regulations thereunder as the same may be issued or amended from time to
time, and specifically pursuant to Rule 12b-1 (the "Rule"), the Company, on
behalf of the Company's series of shares designated Founders International
Equity Fund (the "Fund"), has adopted this Distribution Plan (the "Plan"). The
Plan is designed to comply with the requirements of the Rule.

2. AUTHORIZED PAYMENTS. In addition to the expenses described in Section 8
below, while the Plan is in effect, the Fund is authorized to reimburse Founders
Asset Management, Inc. ("Founders") for out-of-pocket costs and expenses
actually incurred over a rolling twelve-month period for the distribution of the
shares of the Fund issued by the Company, but only to the extent such expenses
do not exceed an annual rate of 0.25 of 1 percent of the Fund's average daily
net assets or such lesser amount as a majority of the Board of Directors of the
Company (the "Board of Directors") including a majority of the Independent
Directors (as defined herein), may determine. A majority of the Board of
Directors who are not interested persons of the Company and have no direct or
indirect financial interest in the operation of the Plan ("Independent
Directors") may from time to time reduce the amount of such expenses or may
suspend the operation of this Section 2 for such period or periods as they may
determine. Reimbursement contemplated under this Section shall be paid monthly
upon receipt by the Fund of a written expense report detailing the expenses
qualifying for such reimbursement and the purposes thereof. Expenses permitted
to be paid by the Fund pursuant to this Section shall include and be limited to
the following:

(a) payments to any securities dealer, financial institution or
other person (other than Founders) for their assistance with
respect to the distribution of the Fund's shares, and
payments to any financial intermediary for providing
administrative and accounting services with respect to the
Fund's shareholders, provided each recipient of such payment
has entered into a written agreement with Founders, the form
of which has been approved by a majority of the Board of
Directors, including a majority of the Independent
Directors; and

(b) expenses of promoting the sale of shares of the Fund,
including preparation, printing and mailing of prospectuses,
reports to shareholders of the Funds, sales

<PAGE>

literature and other promotional material to prospective
investors; direct mail solicitation; television, radio,
newspaper, magazine and other advertising; public relations;
compensation of sales personnel and persons who render
shareholder support services; and such other expenses as may
be approved from time to time by the Board of Directors,
including a majority of the Independent Directors, and as
may be permitted by applicable statute, rule or regulation.
Payments by the Fund hereunder, for any month, may be made
only with respect to expenditures incurred by Founders
during the rolling twelve-month period in which that month
falls. Any expenditures incurred in excess of the limitation
described above of 0.25 of 1 percent of the Fund's average
daily net assets in any one fiscal year are not
reimbursable.

3. APPROVAL AND CONTINUANCE. The Plan shall not take effect with respect to
the Fund until it has been approved by a majority of the Board of Directors and
by a majority of the Independent Directors, by votes cast in person at a meeting
called for the purpose of voting on the Plan and by a vote of at least a
majority of the outstanding voting securities of the Fund. The Plan shall
continue in effect with respect to the Fund for so long as such continuance is
specifically approved at least annually by a majority of the Board of Directors
and a majority of the Independent Directors, by votes cast at a meeting called
for the purpose of voting on such continuance.

4. REPORTS. Any person authorized to direct the disposition of moneys paid
or payable pursuant to the Plan shall furnish at least quarterly to the Board of
Directors, and the Board of Directors shall review, a written report as to the
amounts expended during each quarter and the purposes for which such amounts
were expended, and such other information as the Board of Directors or the
Independent Directors may reasonably request from time to time.

5. RECORDS. The Company shall preserve copies of the Plan and all reports
made pursuant to Section 4 above for a period of not less than six years from
the date of the Plan and reports and shall preserve the Plan and reports for the
first two years in an easily accessible place.

6. SELECTION AND NOMINATION OF DIRECTORS. While the Plan is in effect, the
selection and nomination of those Directors who are not interested persons of
the Company shall be committed to the discretion of the Independent Directors.

-2-

<PAGE>

The Plan may be terminated by the Fund at any time by the vote of a
majority of the Independent Directors or by the vote of a majority of the
outstanding voting securities of the Fund. Upon termination, the Fund will not
reimburse Founders for any expenses incurred by Founders subsequent to the date
of termination which otherwise would have been reimbursed under the Plan. The
Fund will, however, reimburse Founders for any such expenses incurred prior to
the date of termination, but only to the extent that such expenses do not exceed
0.25 of 1 percent of the Fund's average daily net assets in the calendar year of
termination (or such lesser amount as may have been determined prior to
termination by the Board of Directors, including the Independent Directors, in
accordance with Section 2 of the Plan).

Adopted August 25, 1995.

-3-

CODE OF ETHICS
FOR
FOUNDERS FUNDS, INC. AND
FOUNDERS ASSET MANAGEMENT, INC.

<PAGE>

TABLE OF CONTENTS

Page

INTRODUCTION....................................................... 1

Entities Subject to This Code of Ethics................... 1
Statement of General Principles........................... 1

SECTION 1: DEFINITIONS............................................ 2

Access Person............................................. 2
Affiliate................................................. 3
Beneficial ownership...................................... 3
Client ................................................... 3
Control................................................... 3
FAMI Employee............................................. 3
Independent Director...................................... 3
Purchase or sale of a security............................ 4
Restricted securities..................................... 4
Security ................................................. 4
A security is being considered for purchase or sale....... 4
A security is being purchased or sold..................... 4

SECTION 2: GENERAL POLICY......................................... 4

SECTION 3: PROHIBITED PURCHASES AND SALES......................... 5

General Prohibition....................................... 5
Initial Public Offering................................... 5

SECTION 4: PRE-TRANSACTION APPROVAL............................... 6

SECTION 5: SHORT-TERM TRADING PROFITS............................. 6

SECTION 6: POTENTIAL CONFLICTS OF INTERESTS....................... 6

Gifts .................................................... 6
Trips .................................................... 7
Preferential Treatment.................................... 7
Investment Advice to Others............................... 7
Outside Affiliations...................................... 7

SECTION 7: INVESTMENT CLUBS....................................... 7

SECTION 8: SERVICE AS A DIRECTOR OF PUBLICLY TRADED COMPANIES..... 8

SECTION 9: BROKER ACCOUNTS AND BROKER CONFIRMATIONS............... 8

SECTION 10: REPORTING REQUIREMENTS................................. 9

A. Initial Report by New Access Person.............. 9
B. Periodic Reports by Access Persons............... 9

<PAGE>

C. Annual Reports by Access Persons................. 10
D. Monitoring of Periodic and Annual Reports by
Reviewing Officer................................ 10
F. Reviewing Officer Report......................... 11

SECTION 11: EXEMPTIONS............................................ 12

A. Exempt Transactions.............................. 12
B. Independent Director Exemptions.................. 12

SECTION 12: DISSEMINATION, CORPORATE RECORD RETENTION,
DISCLOSURE, AND CONFIDENTIALITY....................... 13

SECTION 13: PERSONAL RECORD RETENTION............................. 14

SECTION 14: MATERIAL INSIDE (NON-PUBLIC) INFORMATION.............. 14

SECTION 15: VIOLATIONS............................................ 15

SECTION 16: REVIEW................................................ 16

APPENDIX 1: Rules 16a-1 and 13d-3 of Securities Exchange Act
of 1934 and portions of Section 2(a) of the
Investment Company Act of 1940

APPENDIX 2: List of Access Persons, and Reviewing and Approval
Officers

EXHIBIT A: Form for written approval of trades

EXHIBIT B: Form for submitting notification of investment
club transaction

EXHIBIT C: Report of Securities Transactions

EXHIBIT D: Report of Securities Ownership

<PAGE>

INTRODUCTION

Entities Subject To This Code Of Ethics.
- ----------------------------------------

Founders Funds, Inc. (which, collectively with each of its series
portfolios, is hereinafter referred to as the "Fund") is an open-end,
diversified, externally managed investment company registered under the
Investment Company Act of 1940 (the "Act").

Founders Asset Management, Inc. ("FAMI") serves as the external investment
manager of the Fund pursuant to investment advisory agreements with each series
portfolio ("Portfolio" or collectively, "Portfolios") of the Fund, and further
serves as principle underwriter of the Fund pursuant to a distribution contract
with the Fund. FAMI is an investment adviser registered under the Investment
Advisers Act of 1940 (the "Advisers Act").

Statement Of General Principles.
- --------------------------------

The directors ("directors"), officers, employees, and other access persons
of the Fund ("Access Persons," as hereinafter more specifically defined) and the
directors, officers, and employees of FAMI ("FAMI Employees," as hereinafter
more specifically defined) are cognizant of and committed to the performance of
their fiduciary duties under general corporate law and as more specifically
articulated in the Act and the Advisers Act, including, without limitation,
proscriptions against overreaching, self-dealing, insider trading, and conflicts
of interests. Moreover, with respect to certain legal matters and ethical
questions arising in the course of their deliberations and actions, directors,
other Access Persons, and FAMI Employees regularly seek the advice of counsel.

This Code of Ethics is directed to the particular objective of compliance
with the provisions of Rule 17j-1 under the Act as such provisions are
applicable to Access Persons, of compliance with various provisions of the
Advisers Act as such provisions are applicable to FAMI Employees, and to the
prevention of engagement in any personal securities transactions by Access
Persons and FAMI Employees which might conflict with or adversely affect the
interests and welfare of the Fund and its shareholders and, with respect to FAMI
Employees, of other clients of FAMI ("Clients").

The general principles and procedures which guide the activities of all
Access Persons and FAMI Employees are augmented by this Code of Ethics, which is
based upon the fundamental recognition that Access Persons have a fiduciary
relationship with the Fund and its shareholders and FAMI Employees may have such
a relationship with other Clients, which requires the

<PAGE>

maintenance by all such individuals of the highest standards of integrity and
conduct.

Access Persons must at all times recognize, respect, and act in the best
interests of the shareholders of the Fund, and FAMI Employees must so act with
respect to the Fund and other Clients. In furtherance of their fiduciary
responsibilities, Access Persons and FAMI Employees must ensure that they do not
take any inappropriate advantage of their positions as directors, officers,
employees, or agents of the Fund and of FAMI. Access Persons and FAMI Employees
must avoid any situations which might compromise their exercise of fully
independent judgment in the interests of or on behalf of the Fund and its
shareholders and other Clients, as applicable.

Professional and legal responsibilities to the Fund and its shareholders
and to other Clients dictate that not only conflicts of interests, but the
appearance of conflicts of interests, be avoided. Although compliance by Access
Persons and FAMI Employees with the provisions of this Code of Ethics is
mandatory, codes of ethics cannot define all conflict and potential conflict
situations. Therefore, in addition to assuring that one's conduct comports with
this Code of Ethics, Access Persons and FAMI Employees must avoid engaging in
any conduct that may create a conflict of interest or the potential for a
conflict of interest. Access Persons and FAMI Employees must adhere not only to
the letter but also to the spirit of the Code of Ethics and the principles
articulated herein.

All activities of an Access Person and a FAMI Employee must be governed by
the high fiduciary standard of scrupulous avoidance of serving one's own
personal interests ahead of the interests of the Fund and other Clients, as
applicable. In one's business activities, one must act in all respects in the
best interests of the Fund and its shareholders and of other Clients.

SECTION 1: DEFINITIONS
----------------------

For the purpose of this Code of Ethics, the following general definitions
shall apply:

1. ACESS PERSON shall mean:

a. Any director or officer of the Fund or of FAMI; and

b. Any employee of the Fund or of FAMI who, in connection with his or
her regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by the Fund or a
Client, or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and

<PAGE>

c. Any natural person in a control relationship to the Fund or to FAMI
who obtains information concerning recommendations made to the Fund or a
Client with regard to the purchase or sale of a security.

Access Person shall not include an employee of the Fund or of FAMI who
receives no information about current recommendations or trading or an employee
who obtains information in a single instance, infrequently or inadvertently.

2. AFFILIATE. One is an "Affiliate" of another person or company if he or
she:

(i) is a partner, director, officer, or employee of such other
person or company; or

(ii) directly or indirectly owns, controls or holds with power to
vote 5% or more of the outstanding voting securities of such company;
or

(iii) directly or indirectly controls such company.

3. BENEFICIAL OWNERSHIP shall be interpreted in the same manner as it would
be in determining whether a person is subject to the provisions of Section 16 of
the Securities Exchange Act of 1934 and the rules and regulations thereunder,
except that the determination of direct or indirect beneficial ownership shall
apply to all securities which an Access Person has or acquires. Copies of Rules
16a-1 and 13d-3, which define beneficial ownership in accordance with Section
16, are included on Appendix 1.

4. CLIENT means an investment advisory client of Founders Asset Management,
Inc. other than the Fund.

5. CONTROL shall have the meaning set forth in Section 2(a)(9) of the Act.
A copy of Section 2(a)(9) of the Act is included on Appendix 1.

6. FAMI EMPLOYEE means an officer, director, and/or employee of Founders
Asset Management, Inc.

7. INDEPENDENT DIRECTOR means a director of the Fund who is not an
"interested person" of the Fund within the meaning of Section 2(a)(19) of the
Act and who, in connection with his or her normal and regular responsibilities,
does not make or participate in decisions with respect to the purchase or sale
of a security by the Fund or make any recommendations with respect to such
purchases or sales. An independent director is further defined as one who does
not normally obtain information regarding the purchase or sale of a security by
the Fund within fifteen days before or after the purchase or sale. A copy of
Section 2(a)(19) of the Act is included on Appendix 1.

<PAGE>

8. PURCHASE OR SALE OF A SECURITY shall include the writing of an option to
purchase or sell the security.

9. RESTRICTED SECURITIES shall include securities which are not readily
marketable and securities which cannot be resold or distributed to the public or
to qualified institutional buyers pursuant to Rule 144A under the Securities Act
of 1933, as amended (the "1933 Act"), without an effective registration
statement under the 1933 Act. A security which is not readily marketable is one
which, for whatever reason, cannot be disposed of within seven days in the
ordinary course of business at approximately the amount at which the security is
reasonably valued.

10. SECURITY shall have the meaning set forth in Section 2(a)(36) of the
Act, and shall also include related securities, such as rights and convertible
instruments, and financial instruments such as futures, commodities, and
derivative instruments which are related to, but are not the same as, securities
that may be held or acquired by the Fund or a Client, and which may not be
defined as securities in Section 2(a)(36) of the Act. Security shall not include
securities issued by the United States Government (including all short-term debt
securities which are "government securities" under Section 2(a)(16) of the Act),
bankers' acceptances, bank certificates of deposit, commercial paper, and shares
of registered open-end investment companies. The term security shall include
restricted securities as defined herein. Copies of Sections 2(a)(36) and
2(a)(16) of the Act are included on Appendix 1.

11. A SECURITY IS BEING CONSIDERED FOR PURCHASE OR SALE when a
recommendation to purchase or sell a security has been made and communicated or,
with respect to the person making the recommendation, when such person seriously
considers making such a recommendation.

12. A SECURITY IS BEING PURCHASED OR SOLD when, within the most recent
seven-day period, a transaction in such security has been effected for the Fund
or a Client, or when a transaction in such security is pending or in progress
for the Fund or a Client.

SECTION 2: GENERAL POLICY
-------------------------

Directors and other Access Persons are specifically reminded that it is
unlawful for any of them, in connection with the purchase or sale, directly or
indirectly, of a security held or to be acquired by the Fund:

1. To employ any device, scheme or artifice to defraud the Fund;

<PAGE>

2. To make any untrue statement of a material fact to the Fund or omit to
state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, not misleading;

3. To engage in any act, practice, or course of business which operates or
would operate as a fraud or deceit upon the Fund; or

4. To engage in any manipulative practice with respect to the Fund.

For purposes of this Section 2, a security held or to be acquired by the
Fund means any security as defined herein which, within the most recent 15-day
period, is or has been held by the Fund or is being or has been considered by
the Fund or by FAMI for purchase by the Fund.

These proscriptions apply to FAMI Employees not only with respect to the
Fund but also with respect to Clients.

The provisions of this Code of Ethics have been instituted, in part, in an
effort to ensure that directors, other Access Persons, and FAMI Employees do
not, inadvertently or otherwise, violate the proscriptions outlined above.

SECTION 3: PROHIBITED PURCHASES AND SALES
-----------------------------------------

General Prohibition.
- --------------------

Except as provided in Section 11 of this Code of Ethics, no Access Person
or FAMI Employee shall purchase or sell, directly or indirectly, any security in
which he or she has, or by reason of such transaction acquires, any direct or
indirect beneficial ownership and which to his or her actual knowledge at the
time of such purchase or sale:

1. Is being considered for purchase or sale by the Fund and, as to FAMI
Employees, a Client; or

2. Is being purchased or sold by the Fund and, as to FAMI Employees, a
Client.

Initial Public Offering.
- ------------------------

Except as provided in Section 11 of this Code of Ethics, no Access Person
and no FAMI Employee shall purchase, directly or indirectly, any securities
which are offered in an initial public offering.

<PAGE>

SECTION 4: PRE-TRANSACTION APPROVAL
-----------------------------------

1. Every Access Person and FAMI Employee shall obtain written approval of a
responsible person designated by the president of the Fund (the "Approval
Officer") prior to effecting any transactions in securities for his or her
direct or indirect personal gain or in which he or she may have any beneficial
interest. Such prior written approval shall also be required of any such
transactions effected by, for, or on behalf of any member of the Access Person's
and FAMI Employee's household. Written approval shall be obtained by use of the
form attached hereto as Exhibit A. Such approval shall be effective for three
trading days.

2. Any Access Person or FAMI Employee who has obtained written approval to
purchase a restricted security and who has purchased and continues to maintain
the security in reliance upon such approval must disclose the investment to his
or her Approval Officer in any instance in which the Access Person or FAMI
Employee is involved in consideration by the Fund or a Client of an investment
in the issuer of the restricted security. In any such circumstance, the decision
of a Fund or a Client to purchase an investment in the issuer of the restricted
security must be reviewed independently by one or more investment personnel of
FAMI, selected by the Approval Officer, who have no personal interest in the
issuer, who must execute written approval of the investment in the issuer prior
to the investment's being made.

SECTION 5: SHORT-TERM TRADING PROFITS
-------------------------------------

Every Access Person or FAMI Employee who obtains a profit from a purchase
and sale, or a sale and purchase, of the same or equivalent securities within
sixty (60) calendar days shall disgorge such profit, with the profit to be
allocated in whole or in part among Portfolios of the Fund as determined
equitably by the Fund's board of directors (any portion of the profit not so
allocated shall be allocated among Clients as determined by FAMI's board of
directors); provided, however, that such disgorgement of short-term trading
profits shall not apply to securities transactions of Access Persons or of FAMI
Employees under circumstances, determined in the sole discretion of the board of
directors of the Fund, in which disgorgement of profits would be inequitable.

SECTION 6: POTENTIAL CONFLICTS OF INTERESTS
-------------------------------------------

Gifts.
- ------

No Access Person or FAMI Employee shall give, seek or accept any gift,
favor, or other item of value in excess of $100 to or from any person or entity
having a direct or indirect business

<PAGE>

and/or professional relationship with the Fund or FAMI or any affiliated
entities of the Fund or FAMI. No Access Person or FAMI Employee shall
participate individually or on behalf of FAMI, a Client or the Fund, directly or
indirectly, in any transaction involving the payment or receipt of any bribe or
kickback, or the payment or receipt of any other amount with an understanding
that part or all of such amount will be refunded or delivered to a third party
in violation of any law applicable to the transaction.

Trips.
- ------

Any trip to be taken by an Access Person or a FAMI Employee must be
approved in advance, in the manner specified in Subsection 1. of Section 4 of
this Code, if any portion of trip related expenses is to be paid by a broker, by
a company whose securities are publicly traded, or by any other person or entity
with which FAMI may have a current or anticipated business relationship.

Preferential Treatment.
- -----------------------

No Access Person or FAMI Employee shall give, seek or accept any
preferential treatment in dealings with any broker, dealer, portfolio company,
financial institution, supplier or any other organization with which FAMI
transacts business or anticipates transacting business.

Investment Advice to Others.
- ----------------------------

Access Persons and FAMI Employees are strictly prohibited from acting
jointly or individually in an investment advisory capacity for an account other
than a Fund or Client.

Outside Affiliations.
- ---------------------

Access Persons and FAMI Employees are prohibited from receiving direct or
indirect compensation of more than de minimis value as a result of services
provided to any outside entity or from otherwise engaging in any outside
for-profit business activities without first receiving the written approval of a
responsible person designated by the president of the Fund (the "Reviewing
Officer").

SECTION 7: INVESTMENT CLUBS
---------------------------

Notwithstanding any other provisions of this Code of Ethics to the
contrary, family members, such as husband, wife, and other dependent relatives
of an Access Person or a FAMI Employee may participate in investment clubs or
similar investment groups if, and only if, all of the following conditions are
present and are adhered to:

<PAGE>

a. The Access Person or FAMI Employee does not provide
investment advice to the family member or to other club
participants with respect to any security which is being
considered for purchase or sale by the Fund or a Client or is
being purchased or sold by the Fund or a Client.

b. The family member immediately notifies the Access Person
or FAMI Employee when he or she is aware that the investment club
has purchased or sold or is considering the purchase or sale of a
security.

c. Upon being notified by the family member in accordance
with item (b), the Access Person or FAMI Employee completes
Exhibit B and submits Exhibit B to the Approval Officer.

SECTION 8: SERVICE AS A DIRECTOR OF PUBLICLY TRADED COMPANIES
-------------------------------------------------------------

No Access Person or FAMI Employee shall be permitted to serve on the board
of directors of a publicly traded company unless prior written authorization has
first been obtained from the president of the Fund. Approval of such service by
the president shall be based upon a determination that the service is consistent
with the interests of the Fund and its shareholders and the Clients. In
instances in which authorization to serve is granted, the Access Person or FAMI
Employee serving as a director shall refrain from any direct or indirect
involvement in the consideration for purchase or sale and in the purchase or
sale by the Fund or a Client (i) of any securities of the company on the board
of directors of which the Access Person or the FAMI Employee serves as a
director, or (ii) of any securities of an affiliate of such company.

SECTION 9: BROKER ACCOUNTS AND BROKER CONFIRMATIONS
---------------------------------------------------

1. Each Access Person and FAMI Employee is required to provide his or her
Reviewing Officer with the name, address, and telephone number of any brokerage
firm with which the Access Person or FAMI Employee establishes or maintains a
brokerage account or in which such Access Person or FAMI Employee or any member
of such Access Person's or FAMI Employee's household has any direct or indirect
beneficial ownership, and the account number and registered owner designation of
any such account. Such information as to existing brokerage accounts shall be
provided upon filing of the initial written certification required of an Access
Person and FAMI Employee pursuant to Section 10E of this Code of Ethics. Such
information with respect to the establishment of a new brokerage account not
previously reported to the Reviewing Officer shall be provided by

<PAGE>

the Access Person or FAMI Employee to his or her Reviewing Officer within ten
days of establishment of the account.

2. All Access Persons and FAMI Employees are required to direct any broker
effecting a transaction in any security in which such Access Person or FAMI
Employee or any member of such Access Person's or FAMI Employee's household has
any direct or indirect beneficial ownership to provide the Access Person's or
FAMI Employee's Reviewing Officer with duplicate copies of the applicable trade
confirmations and periodic account statements.

SECTION 10: REPORTING REQUIREMENTS
----------------------------------

A. Initial Report by New Access Person.
-----------------------------------

Within ten (10) days of the date upon which an individual becomes an Access
Person, the new Access Person shall provide his or her Reviewing Officer with a
list of all securities and the name, address and telephone number of the
brokerage firm maintaining any brokerage accounts in which such Access Person or
any member of such Access Person's household has any direct or indirect
beneficial ownership, and the account number and registered owner designation of
any such account. The list shall include the title and number of shares or
interests of each security owned, the date(s) of purchase of the security, and
the price(s) paid for the security.

B. Periodic Reports by Access Persons.
----------------------------------

1. Every Access Person and FAMI Employee other than Independent Directors
shall report to his or her Reviewing Officer the information described in
paragraph 3 of this Section 10B with respect to transactions in any security in
which such Access Person or FAMI Employee or any member of such Access Person's
or FAMI Employee's household has, or by reason of such transaction acquires, any
direct or indirect beneficial ownership in the security. Such report shall be
made by use of a form similar to that attached hereto as Exhibit C not later
than ten days after the date of the transaction.

2. An Independent Director need only report a transaction in a security if
such Director, at the time of that transaction knew or, in the ordinary course
of fulfilling his official duties as a director of the Fund should have known,
that during the 15-day period immediately preceding or after the date of the
transaction by the Director, such security was purchased or sold by the Fund or
was being considered by the Fund or FAMI for purchase or sale by the Fund. Any
such transaction should be reported to the Fund's counsel not later than ten
days after the end of the calendar quarter in which the transaction occurred.

<PAGE>

3. As indicated in paragraphs 1 and 2 of this Section 10B, every report
required by paragraph 1 of this Section 10B shall be made not later than ten
days after the date of the securities transaction and every report required by
paragraph 2 of this Section 10B shall be made within ten days after the end of
the calendar quarter in which the transaction to which the report relates was
effected. All reports shall contain the following information:

a. The title of each security involved in the transaction, the
amount of each security purchased or sold, the date of the
transaction, and the price at which the transaction was executed;

b. The nature of the transaction (i.e., purchase, sale, or any
other type of acquisition or disposition);

c. If the transaction was effected through a brokerage firm, a
broker's confirmation of such transaction; and

d. If no brokerage firm was involved in the transaction, an
explanation of the circumstances surrounding the transaction and the
manner in which the transaction was executed.

4. Such reports and, if applicable, accompanying confirmations shall be
retained by the Fund's counsel or the Reviewing Officer for a period of at least
six years.

5. Any such report may contain a statement that the report shall not be
construed as an admission by the person making such report that he or she has
any direct or indirect beneficial ownership in the security to which the report
relates.

C. Annual Reports by Access Persons.
--------------------------------

On or before February 1 of each calendar year, each Access Person shall
provide to his or her Reviewing Officer a list of all securities in which, as of
the preceding December 31, the Access Person had any direct or indirect
beneficial ownership interest. The list shall include the title and number of
shares or interests of each security owned, the date(s) of purchase of the
security, and the price(s) paid for the security, and shall be provided by use
of a form similar to that attached hereto as Exhibit D.

D. Monitoring of Periodic and Annual Reports by Reviewing Officer.
--------------------------------------------------------------

1. Upon receipt of each periodic report provided pursuant to Section 10B.1
and 10B.2, the Reviewing Officer will review the report to determine whether the
Access Person or FAMI Employee

<PAGE>

may have engaged in possible violations of this Code of Ethics, paying
particular attention to trading patterns and activities of the Access Person or
FAMI Employee which may identify potential infractions of this Code of Ethics.

2. Upon receipt by the Reviewing Officer of each annual report from Access
Persons required by this Code of Ethics to provide such reports, the Reviewing
Officer shall prepare a list of all securities shown on the reports and shall
compare the list with records of securities purchased or sold by the Fund and by
Clients during the prior twelve months. The Reviewing Officer shall determine,
based upon such comparison and upon any further review of any Access Person's
securities transactions deemed necessary, whether any violations of this Code of
Ethics may have occurred.

E. Written Certification.
---------------------

On a basis no less frequently than annually, each Independent Director of
the Fund shall report to the Fund's counsel, and each other Access Person or
FAMI Employee shall be required to provide to his or her Reviewing Officer, a
written certification that the Access Person or FAMI Employee has read and
understands this Code of Ethics and recognizes that he or she is subject to
certain terms and provisions thereof. Each Access Person and FAMI Employee shall
further be required annually to certify in writing that he or she has complied
with the requirements of this Code of Ethics and has disclosed or reported all
personal securities transactions required to be disclosed or reported pursuant
to the requirements of this Code of Ethics.

F. Reviewing Officer Report.
------------------------

1. On a basis no less frequently than semi-annually, each Reviewing Officer
shall prepare a written report to the board of directors of the Fund or to a
standing committee of the board designated by the Independent Directors to
receive such reports, which shall provide the following information:

a. A summary of existing procedures concerning investments in
securities by all Access Persons and FAMI Employees who are required
to report their securities transactions to the Reviewing Officer and
any changes in such procedures which were implemented in the past six
(6) months;

b. Any material violations of this Code of Ethics or of any other
code of behavior (including written codes of conduct and/or written
insider trading procedures) committed by any Access Person or FAMI
Employee during the previous six months; and

<PAGE>

c. Any recommended changes in existing restrictions or procedures
based upon (i) the experience of the Fund and FAMI under this Code of
Ethics, (ii) the experience of any affiliate of the Fund which may
have a separate code of ethics or code of conduct, (iii) evolving
industry practices, or (iv) developments in applicable laws or
regulations.

SECTION 11: EXEMPTIONS
----------------------

A. Exempt Transactions.
-------------------

The prohibitions of Section 3 of this Code of Ethics and the
pre-transaction, short-term trading, and reporting requirements of Sections 4,
5, and 10B of this Code of Ethics shall not apply to:

1. Purchases or sales of securities effected in any account over which an
Access Person or FAMI Employee has no direct or indirect influence or control;

2. Purchases or sales which are non-volitional on the part of an Access
Person or a FAMI Employee, including transactions in accounts in which complete
investment discretion has been delegated to a person or entity not an Access
Person or a member of such Access Person's household;

3. Purchases which are part of an automatic dividend reinvestment plan;

4. Purchases effected upon the exercise of rights issued by an issuer pro
rata to all holders of a class of its securities, to the extent such rights were
acquired from such issuer, and sales of such rights so acquired;

5. Purchases or sales of securities other than restricted securities which
receive the prior approval of the president of the Fund or such other senior
officer as any such president may designate to grant such approval in his
absence, because they are only remotely potentially harmful to the Fund or a
Client since they would be very unlikely to affect a highly institutional
market, or because they clearly are not related economically to the securities
to be purchased, sold, or held by the Fund or a Client.

B. Independent Director Exemptions.
-------------------------------

Notwithstanding any language in this Code of Ethics to the contrary, the
initial public offering prohibition of Section 3, the provisions of subsection 1
of Section 4, the provisions of Section 5, the provisions of Section 6, the
provisions of Section 7, the provisions of Section 8, the provisions of Section
9, the
12

<PAGE>

provisions of Section 10A, and the provisions of Section 10C of this Code of
Ethics shall not apply to Independent Directors.

SECTION 12: DISSEMINATION,
CORPORATE RECORD RETENTION, DISCLOSURE, AND CONFIDENTIALITY
-----------------------------------------------------------

1. FAMI shall provide a copy of this Code of Ethics to all Access Persons
and to all FAMI Employees.

2. The Fund and FAMI shall maintain for a six-year period in an easily
accessible place the following records:

a. A copy of this Code of Ethics;

b. A record of any violation of this Code of Ethics and of any action
taken as a result of such violation;

c. A copy of each report made by an Access Person or FAMI Employee
pursuant to this Code of Ethics;

d. A list of all persons who are, or within the past six years have
been, required to make reports pursuant to this Code of Ethics. FAMI shall
arrange for a list of all current Access Persons to be attached to this
Code of Ethics as Appendix 2 and to be amended when necessary to add or
delete Access Persons; and

e. A list of Reviewing and Approval Officers. FAMI shall arrange for a
list of all current Reviewing and Approval Officers to be included on
Appendix 2 and to be amended when necessary to add or delete Reviewing and
Approval Officers.

3. The prospectuses and/or the statements of additional information of the
Fund shall provide disclosure with respect to the general policies and
procedures applicable to Access Persons by this Code of Ethics, including
specific disclosure with regard to the extent to which Access Persons are
permitted to engage in personal securities transactions. Such disclosure shall
further include a brief description of the procedures initiated by the Fund to
address conflicts of interests occurring as a result of violations of this Code
of Ethics, and shall include the manner in which a Fund investor may obtain a
copy of the Code of Ethics. Legal counsel for FAMI and for the Fund are to
review the disclosure for adequacy and are further directed to attach a copy of
the Code of Ethics as an exhibit to the Fund's registration statement.

4. Reviewing and Approval Officers and other individuals who may receive
(i) reports of securities transactions and/or securities holdings of Access
Persons and (ii) other information with respect to Access Persons' and other
FAMI Employees'

<PAGE>

compliance with or violation of any provisions of this Code of Ethics shall
receive and maintain the information in confidence. Such information shall only
be disclosed to those persons or entities who have either a need or a legal
obligation to receive such information or have the legal authority to be
provided with the information. Persons and entities to whom such information may
appropriately be disclosed include, but are not necessarily limited to, the
directors of the Fund, the president of the Fund and of FAMI, compliance,
accounting, and legal personnel of the Fund and of FAMI, Reviewing and Approval
Officers, state and federal regulatory agencies, and appropriate representatives
of the National Association of Securities Dealers, Inc.

SECTION 13: PERSONAL RECORD RETENTION
-------------------------------------

Each Access Person and FAMI Employee is encouraged to retain in his or her
personal files for a period of at least six years broker's confirmations,
monthly statements, or other appropriate information covering all personal
securities transactions, and all transactions in securities effected by, for, or
on behalf of any member of the Access Person's and FAMI Employee's household,
showing the amount of each security purchased or sold, the date of the
transaction, the price at which it was executed, and the name and address of the
executing broker or dealer, if any.

SECTION 14: MATERIAL INSIDE (NON-PUBLIC) INFORMATION
----------------------------------------------------

1. It is unlawful under the Securities Exchange Act of 1934 and SEC Rule
10b-5 thereunder for any person to trade or recommend trading in securities on
the basis of material, inside (non-public) information.

2. Material inside information is any information about a company or the
market for a company's securities which has not been disclosed generally to the
marketplace, the dissemination of which would be likely to affect the market
price of any of the company's securities or would be likely to be considered
important by reasonable investors, including reasonable speculative investors,
in determining whether or not to trade on such securities.

3. Information should be presumed material if it relates to such matters as
(but is not limited to) significant changes in financial condition, dividend
increases or decreases, earnings estimates, changes in previously released
earnings estimates, significant expansion or curtailment of operations, a
significant increase or decline in orders, significant merger or acquisition
proposals or agreements, significant new products or discoveries, extraordinary
borrowing, major litigation, liquidity problems, extraordinary management
developments, significant new contracts or contract terminations, or the
purchase or sale of substantial

<PAGE>

assets. The words "material" and "significant" should be determined in light of
all the facts and circumstances, including the information's degree of
specificity, the extent to which the information differs from information
previously publicly disseminated, and the information's reliability in light of
its nature and source.

4. "Inside" information is information that has not been publicly
disclosed. Information received about a company under circumstances which
indicate that it is not yet in general circulation should be deemed to be inside
information. As a rule, one should be able to point to some fact to show that
the information is generally available; for example, its announcement on the
broad tape or by Reuters, The Wall Street Journal, or trade publications.

5. Whenever an Access Person or FAMI Employee has any questions at all as
to whether information is material or whether it is inside and non-public, he or
she must resolve the question or questions before trading, recommending trading
or divulging the information, by consultation with his or her Approval Officer,
or, if he or she is not present and an immediate determination is necessary, by
consultation with the president of the Fund or with legal counsel to the Fund or
FAMI.

6. Under certain circumstances, it is unlawful to trade or recommend
trading in securities on the basis of information which is not attributable
directly or indirectly to the company or its insiders but which is "market"
information, "third party" information, or rumors, the origin of which is not
clear. Whenever an Access Person or FAMI Employee receives information of this
type which he or she knows or has reason to know is material non-public
information, he or she must review the matter with his or her Approval Officer
or, if he or she is not present and an immediate determination is necessary,
with the president of the Fund or with legal counsel to the Fund or FAMI.

SECTION 15: VIOLATIONS
----------------------

Any Access Person or FAMI Employee who becomes aware of a violation or
apparent violation of this Code of Ethics shall advise the president of the Fund
or the Fund's legal counsel of the matter. The person to whom the violation or
apparent violation is made known shall thereupon report the matter to the Fund's
board of directors. The board shall determine whether a violation has occurred
and, if so, will impose or, where applicable, recommend such sanctions, if any,
as it deems appropriate, including a letter of censure, suspension, termination
of employment, or other sanctions.

In addition to any other sanctions which may be imposed upon an Access
Person or a FAMI Employee who has violated this Code of

<PAGE>

Ethics, and particularly in circumstances in which the violation involves the
sale or purchase of a security, the Access Person or FAMI Employee having
engaged in the violation may be required either to unwind the purchase or sale
transaction or, if that is impractical, disgorge all profits from the
transaction, with any such profits to be allocated in whole or in part among
Portfolios of the Fund as determined equitably by the Fund's board of directors.
If disgorgement is imposed as a sanction, any profit not so allocated among Fund
Portfolios shall be allocated among Clients as determined by FAMI's board of
directors.

SECTION 16: REVIEW
------------------

This Code of Ethics shall be reviewed by the board of directors of the Fund
and of FAMI no less frequently than annually.

APPROVED AND ADOPTED to be effective as of January 1, 1995, by vote of a
majority of the directors of the Fund and by vote of the board of directors of
FAMI.

<PAGE>

APPENDIX 1
TO
CODE OF ETHICS

Reg. ss. 240.16a-1. Terms defined in this Rule shall apply solely to
Section 16 of the Act and the rules thereunder. These terms shall not be limited
to Section 16(a) of the Act but also shall apply to all other subsections under
Section 16 of the Act.

(a) The term "beneficial owner" shall have the following applications:

(1) Solely for purposes of determining whether a person is a beneficial
owner of more than ten percent of any class of equity securities registered
pursuant to Section 12 of the Act, the term "beneficial owner" shall mean any
person who is deemed a beneficial owner pursuant to Section 13(d) of the Act and
the rules thereunder; provided, however, that the following institutions or
persons shall not be deemed the beneficial owner of securities of such class
held for the benefit of third parties or in customer or fiduciary accounts in
the ordinary course of business (or in the case of an employee benefit plan
specified in subparagraph (vi) below, of securities of such class allocated to
plan participants where participants have voting power) as long as such shares
are acquired by such institutions or persons without the purpose or effect of
changing or influencing control of the issuer or engaging in any arrangement
subject to Rule 13d- 3(b) (ss. 240.13d-3(b)):

(i) A broker or dealer registered under Section 15 of the Act;

(ii) A bank as defined in Section 3(a)(6) of the Act;

(iii) An insurance company as defined in Section 3(a)(19) of the
Act;

(iv) An investment company registered under Section 8 of the
Investment Company Act of 1940 (15 U.S.C. ss. 80a-8); (v) An
investment adviser registered under Section 203 of the Investment
Advisers Act of 1940 (15 U.S.C. ss. 80b-3);

(vi) An employee benefit plan or a pension fund which
is subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. ss. 1001 et
seq. ("Employee Retirement Income Security Act"), or an
endowment fund;

(vii) A parent holding company, provided the aggregate amount
held directly the parent, and directly and indirectly by its
subsidiaries that are not persons

Appendix 1 - Page 1

<PAGE>

specified in ss. 240.16a-1(a)(1)(i) through (vi), does not exceed one
percent of the securities of the subject class; and

(viii) A group, provided that all members are persons specified
in ss. 240.16a-1(a)(1)(i) through (vii).

Note to paragraph (a). Pursuant to this section, a person deemed a beneficial
owner of more than ten percent of any class of equity securities registered
under Section 12 of the Act would file a Form 3 (ss. 249.103), but the
securities holdings disclosed on Form 3, and changes in beneficial ownership
reported on subsequent Forms 4 (ss. 249.104) or 5 (ss. 249.105), would be
determined by the definition of "beneficial owner" in paragraph (a)(2) of this
section.

(2) Other than for purposes of determining whether a person is a
beneficial owner of more than ten percent of any class of equity securities
registered under Section 12 of the Act, the term "beneficial owner" shall mean
any person who, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or indirect
pecuniary interest in the equity securities, subject to the following:

(i) The term "pecuniary interest" in any class of equity
securities shall mean the opportunity, directly or indirectly, to
profit or share in any profit derived from a transaction in the
subject securities.

(ii) The term "indirect pecuniary interest" in any class of
equity securities shall include, but not be limited to:

(A) securities held by members of a person's immediate
family sharing the same household; provided, however, that the
presumption of such beneficial ownership may be rebutted; see
also ss. 240.16a-1(a)(4); [Amended in Release No. 34-29131 (P.
26,086A), effective May 1, 1991, 56 F.R. 19925.]

(B) a general partner's proportionate interest in the
portfolio securities held by a general or limited partnership.
The general partner's proportionate interest, as evidenced by the
partnership agreement in effect at the time of the transaction
and the partnership's most recent financial statements, shall be
the greater of:

(1) the general partner's share of the partnership's
profits, including profits attributed to any limited
partnership interests held by the general partner and any
other interests in profits that arise

Appendix 1 - Page 2

<PAGE>

from the purchase and sale of the partnership's portfolio
securities; or

(2) the general partner's share of the partnership
capital account, including the share attributable to any
limited partnership interest held by the general partner.

(C) a performance-related fee, other than an asset-based
fee, received by any broker, dealer, bank, insurance company,
investment company, investment adviser, investment manager,
trustee or person or entity performing a similar function;
provided, however, that no pecuniary interest shall be present
where:

(1) the performance-related fee, regardless of when
payable, is calculated based upon net capital gains and/or
net capital appreciation generated from the portfolio or
from the fiduciary's overall performance over a period of
one year or more; and

(2) equity securities of the issuer do not account for
more than ten percent of the market value of the portfolio.
A right to a nonperformance-related fee alone shall not
represent a pecuniary interest in the securities;

(D) A person's right to dividends that is separated or
separable from the underlying securities. Otherwise, a right to
dividends alone shall not represent a pecuniary interest in the
securities;

(E) A person's interest in securities held by a trust, as
specified in ss. 240.16a-8(b); and

(F) A person's right to acquire equity securities through
the exercise or conversion of any derivative security, whether or
not presently exercisable.

(iii) A shareholder shall not be deemed to have a pecuniary
interest in the portfolio securities held by a corporation or similar
entity in which the person owns securities if the shareholder is not a
controlling shareholder of the entity and does not have or share
investment control over the entity's portfolio.

(3) Where more than one person subject to Section 16 is deemed to be a
beneficial owner of the same equity securities, all such persons must report as
beneficial owners of the securities. In such cases, the amount of short-swing
profit recoverable shall not be increased above the amount recoverable if there
were only one beneficial owner.

Appendix 1 - Page 3

<PAGE>

(4) Any person filing a statement pursuant to Section 16(a) of the Act may
state that the filing shall not be deemed an admission that such person is, for
purposes of Section 16 of the Act or otherwise, the beneficial owner of any
equity securities covered by the statement.

(5) The following interests are deemed not to confer beneficial ownership
for purposes of Section 16 of the Act:

(i) Interests in portfolio securities held by any holding company
registered under the Public Utility Holding Company Act of 1935 (15
U.S.C. ss. 79a et seq.);

(ii) Interests in portfolio securities held by any investment
company registered under the Investment Company Act of 1940 (15 U.S.C.
ss. 80a-1 et seq.); and

(iii) Interests in securities comprising part of a broad-based,
publicly traded market basket or index of stocks, approved for trading
by the appropriate federal governmental authority.

(b) The term "call equivalent position" shall mean a derivative
security position that increases in value as the value of the underlying equity
increases, including, but not limited to, a long convertible security, a long
call option, and a short put option position.

(c) The term "derivative securities" shall mean any option, warrant,
convertible security, stock appreciation right, or similar right with an
exercise or conversion privilege at a price related to an equity security, or
similar securities with a value derived from the value of an equity security,
but shall not include:

(1) rights of a pledgee of securities to sell the pledged
securities;

(2) rights of all holders of a class of securities of an issuer to
receive securities pro rata, or obligations to dispose of securities, as a
result of a merger, exchange offer, or consolidation involving the issuer of the
securities;

(3) securities that may be redeemed or exercised only for cash and
do not permit the receipt of equity securities in lieu of cash, if the
securities either: (i) are awarded pursuant to an employee benefit plan
satisfying the provisions of ss. 240.16b-3(a)(1), (a)(2) and (c)(2); or (ii) may
be redeemed or exercised only upon a fixed date or dates at least six months
after award, or incident to death, retirement, disability or termination of
employment; [Amended in Release No. 34-29131 (P. 26,086A), effective May 1,
1991, 56 F.R. 19925.]

Appendix 1 - Page 4

<PAGE>

(4) interests in broad-based index options, broad-based index
futures, and broad-based publicly traded market baskets of stocks approved for
trading by the appropriate federal governmental authority;

(5) interests or rights to participate in employee benefit plans of
the issuer; or

(6) rights with an exercise or conversion privilege at a price that
is not fixed.

(d) The term "equity security of such issuer" shall mean any equity
security or derivative security relating to an issuer, whether or not issued by
that issuer.

(e) The term "immediate family" shall mean any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in- law, brother-in-law, or sister-in-law,
and shall include adoptive relationships.

(f) The term "officer" shall mean an issuer's president, principal
financial officer, principal accounting officer (or, if there is no such
accounting officer, the controller), any vice-president of the issuer in charge
of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the issuer. Officers of the issuer's parent(s) or subsidiaries shall be deemed
officers of the issuer if they perform such policy-making functions for the
issuer. In addition, when the issuer is a limited partnership, officers or
employees of the general partner(s) who perform policy-making functions for the
limited partnership are deemed officers of the limited partnership. When the
issuer is a trust, officers or employees of the trustee(s) who perform
policy-making functions for the trust are deemed officers of the trust. [Amended
in Release No. 34-29131 (P. 26,086A), effective May 1, 1991, 56 F.R. 19925.]

NOTE: "Policy-making functions" is not intended to include policy-making
functions that are not significant. If pursuant to Item 401(b) of Regulation S-K
(ss. 229.401(b)) the issuer identifies a person as an "executive officer," it is
presumed that the Board of Directors has made that judgment and that the persons
so identified are the officers for purposes of Section 16 of the Act, as are
such other persons enumerated in this paragraph (f) but not in Item 401(b).

(g) The term "portfolio securities" shall mean all securities owned by
an entity, other than securities issued by the entity.

Appendix 1 - Page 5

<PAGE>

(h) The term "put equivalent position" shall mean a derivative security
position that increases in value as the value of the underlying equity
decreases, including, but not limited to, a long put option and a short call
option position.

Appendix 1 - Page 6

<PAGE>

DETERMINATION OF BENEFICIAL OWNER

Reg.ss. 240.13d-3. (a) For the purpose of Sections 13(d) and 13(g) of the
Act a beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise has or shares:

(1) Voting power which includes the power to vote, or to direct the voting
of, such security; and/or

(2) Investment power which includes the power to dispose, or to direct the
disposition of, such security.

(b) Any person who, directly or indirectly, creates or uses a trust,
proxy, power of attorney, pooling arrangement or any other contract,
arrangement, or device with the purpose or effect of divesting such person of
beneficial ownership of a security or preventing the vesting of such beneficial
ownership as part of a plan or scheme to evade the reporting requirements of
Section 13(d) or 13(g) of the Act shall be deemed for purposes of such sections
to be the beneficial owner of such security.

(c) All securities of the same class beneficially owned by a person,
regardless of the form which such beneficial ownership takes, shall be
aggregated in calculating the number of shares beneficially owned by such
person.

(d) Notwithstanding the provisions of paragraphs (a) and (c) of this
rule:

(1)(i) A person shall be deemed to be the beneficial owner of a
security, subject to the provisions of paragraph (b) of this rule, if that
person has the right to acquire beneficial ownership of such security, as
defined in Rule 13d-3(a) (ss.240.13d-3(a)) within sixty days, including but not
limited to any right to acquire: (A) through the exercise of any option, warrant
or right; (B) through the conversion of a security; (C) pursuant to the power to
revoke a trust, discretionary account, or similar arrangement; or (D) pursuant
to the automatic termination of a trust, discretionary account or similar
arrangement; provided, however, any person who acquires a security or power
specified in paragraphs (A), (B) or (C), above, with the purpose or effect of
changing or influencing the control of the issuer, or in connection with or as a
participant in any transaction having such purpose or effect, immediately upon
such acquisition shall be deemed to be the beneficial owner of the securities
which may be acquired through the exercise or conversion of such security or
power. Any securities not outstanding which are subject to such options,
warrants, rights or conversion privileges shall be deemed to be outstanding for
the purpose of computing the percentage of outstanding securities of the class
owned by such person but shall not be deemed to be

Appendix 1 - Page 7

<PAGE>

outstanding for the purpose of computing the percentage of the class by any
other person.

(ii) Paragraph (i) remains applicable for the purpose of
determining the obligation to file with respect to the underlying security even
though the option, warrant, right or convertible security is of a class of
equity security, as defined in Rule 13d-1(c), and may therefore give rise to a
separate obligation to file.

(2) A member of a national securities exchange shall not be deemed to
be a beneficial owner of securities held directly or indirectly by it on behalf
of another person solely because such member is the record holder of such
securities and, pursuant to the rules of such exchange, may direct the vote of
such securities, without instruction, on other than contested matters or matters
that may affect substantially the rights or privileges of the holders of the
securities to be voted, but is otherwise precluded by the rules of such exchange
from voting without instruction.

(3) A person who in the ordinary course of business is a pledgee of
securities under a written pledge agreement shall not be deemed to be the
beneficial owner of such pledged securities until the pledgee has taken all
formal steps necessary which are required to declare a default and determines
that the power to vote or to direct the vote or to depose or to direct the
disposition of such pledged securities will be exercised, provided that:

(i) The pledgee agreement is bona fide and was not entered into
with the purpose nor with the effect of changing or influencing the control of
the issuer, nor in connection with any transaction having such purpose or
effect, including any transaction subject to Rule 13d-3(b);

(ii) The pledgee is a person specified in Rule 13d-1(b)(ii),
including persons meeting the conditions set forth in paragraph (G) thereof; and

(iii) The pledgee agreement, prior to default, does not grant to
the pledgee:

(A) The power to vote or to direct the vote of the pledged securities;
or

(B) The power to dispose or direct the disposition of the pledged
securities, other than the grant of such power(s) pursuant to a pledge agreement
under which credit is extended subject to Regulation T (12 CFR 220.1 to 220.8)
and in which the pledgee is a broker or dealer registered under section 15 of
the Act. [Subsection (3) amended in Release No. 34-14910 (P. 81,632), June 30,
1978, 43 F. R. 29767.]

Appendix 1 - Page 8

<PAGE>

(4) A person engaged in business as an underwriter of securities who
acquires securities through his participation in good faith in a firm commitment
underwriting registered under the Securities Act of 1933 shall not be deemed to
be the beneficial owner of such securities until the expiration of forty days
after the date of such acquisition.

Appendix 1 - Page 9

<PAGE>

GENERAL DEFINITIONS

Sec. 2.(a) When used in this title, unless the context other requires --

[Control]

(9) "Control" means the power to exercise a controlling influence over the
management or policies of a company, unless such power is solely the result of
an official position with such company.

[Government Security]

(16) "Government security" means any security issued or guaranteed as to
principal or interest by the United States, or by a person controlled or
supervised by and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United States; or
any certificate of deposit for any of the foregoing.

[Interested Person]

(19) "Interested person" of another person means --

(A) when used with respect to an investment company --

(i) any affiliated person of such company,

(ii) any member of the immediate family of any natural person who
is an affiliated person of such company,

(iii) any interested person of any investment adviser of or
principal underwriter for such company,

(iv) any person or partner or employee of any person who at any
time since the beginning of the last two completed fiscal years of
such company has acted as legal counsel for such company,

(v) any broker or dealer registered under the Securities Exchange
Act of 1934 or any affiliated person of such a broker or dealer, and

(vi) any natural person whom the Commission by order shall have
determined to be an interested person by reason of having had, at any
time since the beginning of the last two completed fiscal years of
such company, a material business or professional relationship with
such company or with the principal executive officer of such company
or with any other investment company having the same investment
adviser or principal underwriter or with the principal executive
officer of such other investment company:

Appendix 1 - Page 10

<PAGE>

Provided, That no person shall be deemed to be an interested person of an
investment company solely by reason of (aa) his being a member of its board of
directors or advisory board or an owner of its securities, or (bb) his
membership in the immediate family of any person specified in clause (aa) of
this proviso; and

(B) when used with respect to an investment adviser of or principal
underwriter for any investment company --

(i) any affiliated person of such investment adviser or principal
underwriter,

(ii) any member of the immediate family of any natural person who
is an affiliated person of such investment adviser or principal
underwriter,

(iii) any person who knowingly has any direct or indirect
beneficial interest in, or who is designated as trustee, executor, or
guardian of any legal interest in, any security issued either by such
investment adviser or principal underwriter or by a controlling person
of such investment adviser or principal underwriter,

(iv) any person or partner or employee of any person who at any
time since the beginning of the last two completed fiscal years of
such investment company has acted as legal counsel for such investment
adviser or principal underwriter,

(v) any broker or dealer registered under the Securities Exchange
Act of 1934 or any affiliated person of such a broker or dealer, and

(vi) any natural person whom the Commission by order shall have
determined to be an interested person by reason of having had at any
time since the beginning of the last two completed fiscal years of
such investment company a material business or professional
relationship with such investment adviser or principal underwriter or
with the principal executive officer or any controlling person of such
investment adviser or principal underwriter.

For the purposes of this paragraph (19), "member of the immediate family" means
any parent, spouse of a parent, child, spouse of a child, spouse, brother or
sister, and includes step and adoptive relationships. The Commission may modify
or revoke any order issued under clause (vi) of subparagraph (A) or (B) of this
paragraph whenever it finds that such order is no longer consistent with the
facts. No order issued pursuant to clause (vi) of subparagraph (A) or (B) of
this paragraph shall become effective until at least sixty days after the entry
thereof, and

Appendix 1 - Page 11

<PAGE>

no such order shall affect the status of any person for the purposes of this
title or for any purpose for any period prior to the effective date of such
order.

[Security]

(36) "Security" means any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation in any
profit-sharing agreement, collateral-trust certificate, preorganization
certificate or subscription, transferable share, investment contract,
voting-trust certificate, certificate of deposit for a security, fractional
undivided interest in oil, gas, or other mineral rights, any put, call,
straddle, option, or privilege on any security (including a certificate of
deposit) or on any group or index of securities (including any interest therein
or based on the value thereof), or any put, call, straddle, option, or privilege
entered into on a national securities exchange relating to foreign currency, or,
in general, any interest or instrument commonly known as a "security," or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, guarantee of, or warrant or right to subscribe to or purchase,
any of the foregoing.

Appendix 1 - Page 12

<PAGE>

APPENDIX 2
TO
CODE OF ETHICS

List of Access Persons, and Reviewing and Approval Officers
-----------------------------------------------------------

<PAGE>

EXHIBIT A

REQUEST FOR APPROVAL OF SECURITY TRANSACTION
--------------------------------------------

IN PERSONAL ACCOUNT
-------------------

NAME:___________________________________________________________________________

DATE:_____________________________

BUY:____________________ SELL:___________________

AMOUNT OF SHARES:_________________________ PRICE:_______________________________

NAME OF SECURITY:_______________________________________________________________

BROKER:_________________________________________________________________________

*Address:_____________________________________

*Telephone:___________________________________

*Account No.:_________________________________

*Registered Owner:____________________________

THIS IS A NEW ISSUE:____________YES ____________NO
THIS IS A SECONDARY:____________YES ____________NO

I have not acted on inside information.

I have verified that the security described above is not being considered for
purchase or sale by a Client or Fund and is not being purchased or sold by a
Client or Fund. I have further verified that the security has not been purchased
by a Client or Fund at any time during the seven days prior to the date
described above.

EMPLOYEE SIGNATURE:_____________________________________________________________

APPROVED BY:_______________________________**

DATE:________________________________________

* Complete if not previously provided.

** This Form must be executed by Michael Haines. If Mr. Haines is not present in
Founders Financial Center and an immediate decision is necessary, the Form may
be executed by B. K. Borgen. No other Founders personnel are authorized to
approve this transaction.

<PAGE>
EXHIBIT B
NOTIFICATION OF POSSIBLE SECURITY TRANSACTION
BY
INVESTMENT CLUB OR SIMILAR ENTITY

Name of Investment Club:________________________________________________________

Name of Employee:_______________________________________________________________

Name of Family Member:__________________________________________________________

Name of Security:_______________________________________________________________

____ Buy

____ Sell

Employee Signature:_____________________________________________________________

Date:___________________________________________________________________________

This form must be provided either to Michael K. Haines or to B. K. Borgen.

<PAGE>

REPORT OF SECURITIES TRANSACTIONS EXHIBIT C
OCCURRING WITHIN LAST TEN (10) DAYS

- ------------------------------------------------------------------------------------------------------------------------

CHECK TYPE OF ACCOUNT

AMOUNT Fiduciary or
OR SECURITY DATE NAME OF Household Other Beneficial
SHARES NAME BOUGHT SOLD PRICE DEALER OR BANK Personal Member Ownership
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>

- ------- -------- ------------- ----- -------------- ---------- --------- ----------------

- ------- -------- ------------- ----- -------------- ---------- --------- ----------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

The above is a record of one or more purchase or sale transactions in a security
in which I have acquired or disposed of a direct or indirect beneficial
ownership in the last ten days, as more fully defined in the Fund's and
Founders' Codes of Ethics.

DATE:_________________________ SIGNATURE:_____________________________________
Print Name:____________________________________

Note 1. If the transaction is other than a sale or purchase, please explain the
transaction on a separate page.

Note 2. If no broker or bank was involved in the transaction, describe on a
separate page the circumstances surrounding the transaction and the manner in
which the transaction was executed.

Note 3. If a broker was involved in the transaction, a copy of the broker's
confirmation of the transaction is attached.

Note 4. This report shall not be construed as an admission by me that I have
acquired any direct or indirect beneficial ownership in the securities involved
in the transactions reported, which have been marked by me with an asterisk(*).
Such transactions are reported solely to meet the standards imposed by Rule
17j-1 under the Investment Company Act of 1940.

Note 5. Copies of Trade Authorizations are attached to this signed report in
lieu of or in addition to the above.

REPORT OF SECURITIES OWNERSHIP EXHIBIT D

FOR CALENDAR YEAR ENDING DECEMBER 31, 199__
-------------------------------------------

- --------------------------------------------------------------------------------------------------------------------

CHECK TYPE OF ACCOUNT

AMOUNT Fiduciary or Other
OR DATE Household Beneficial
SHARES SECURITY NAME BOUGHT PRICE Personal Member Ownership
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>

- --------- ----------------------------- ---------- -------- --------- ----------- -------------------

- -------------------------------------------------------------------------------------------------------------------
</TABLE>

The above is a listing of every security in which I have any direct or indirect
beneficial ownership as of the end of the above-described calendar year, as more
fully defined in the Fund's and Founders' Codes of Ethics.

DATE:______________________ SIGNATURE:________________________________________
Print Name:_______________________________________

Note 1. This report shall not be construed as an admission by me that I have
acquired any direct or indirect beneficial ownership in the securities listed
above which have been marked by me with an asterisk(*). Such transactions are
reported solely to meet the standards imposed by Rule 17j-1 under the Investment
Company Act of 1940.

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FOUNDERS
FUNDS STATEMENT OF ADDITIONAL INFORMATION DATED AUGUST 12, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENT OF ADDITIONAL INFORMATION.
</LEGEND>
<SERIES>
<NUMBER> 013
<NAME> INTERNATIONAL EQUITY FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 8,454
<INVESTMENTS-AT-VALUE> 8,964
<RECEIVABLES> 129
<ASSETS-OTHER> 83
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 9,176
<PAYABLE-FOR-SECURITIES> 1,018
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1,018
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,497
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 148
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 510
<NET-ASSETS> 8,158
<DIVIDEND-INCOME> 30
<INTEREST-INCOME> 20
<OTHER-INCOME> 0
<EXPENSES-NET> 47
<NET-INVESTMENT-INCOME> 3
<REALIZED-GAINS-CURRENT> 148
<APPREC-INCREASE-CURRENT> 510
<NET-CHANGE-FROM-OPS> 661
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 681
<NUMBER-OF-SHARES-REDEEMED> 46
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 6,730
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 24
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 71
<AVERAGE-NET-ASSETS> 4,740
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 1.46
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.46
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>