SEMIANNUAL REPORT
For the Six Months Ended June 30, 1996
AGGRESSIVE GROWTH FUNDS
Founders Discovery Fund
Founders Frontier Fund
Founders Passport Fund
Founders Special Fund
GROWTH FUNDS
Founders International Equity Fund
Founders Worldwide Growth Fund
Founders Growth Fund
GROWTH-AND-INCOME FUNDS
Founders Blue Chip Fund
Founders Balanced Fund
FIXED-INCOME FUNDS
Founders Government Securities Fund
MONEY MARKET
Founders Money Market Fund
(LOGO)
FOUNDERS FUNDS
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TABLE OF CONTENTS
A Message From the Chairman............................................ 4
Founders Discovery Fund................................................ 6
Schedule of Investments....................................... 8
Founders Frontier Fund................................................. 11
Schedule of Investments....................................... 13
Founders Passport Fund................................................. 16
Schedule of Investments....................................... 18
Founders Special Fund.................................................. 21
Schedule of Investments....................................... 23
Founders International Equity Fund..................................... 26
Schedule of Investments....................................... 28
Founders Worldwide Growth Fund......................................... 31
Schedule of Investments....................................... 33
Founders Growth Fund................................................... 37
Schedule of Investments....................................... 39
Founders Blue Chip Fund................................................ 42
Schedule of Investments....................................... 44
Founders Balanced Fund................................................. 47
Schedule of Investments....................................... 49
Founders Government Securities Fund.................................... 52
Schedule of Investments....................................... 53
Founders Money Market Fund............................................. 54
Statements of Assets and Liabilities................................... 56
Statements of Operations............................................... 58
Statements of Changes in Net Assets.................................... 60
Financial Highlights................................................... 64
Notes.................................................................. 68
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ABOUT THIS REPORT
HISTORICAL RETURNS
All total returns mentioned in this report account for both the change in a
Fund's per-share price and reinvestment of any dividends or capital gain
distributions made by that Fund. If your account is set up to pay out Fund
distributions rather than reinvest them, your return may differ from the figures
listed here
The comparative indexes included with each Fund's performance chart are
meant to provide a basis for judging a Fund's performance against its peer group
(represented by Lipper Analytical Services indexes) or a specific market area
(provided by Micropal). Each index presented accounts for both change in
security price and reinvestment of any dividends or coupon payments. These
indexes are unmanaged groups of securities; they do not reflect the costs of
managing a mutual fund. An investor may not invest in any of these indexes.
Past performance is no guarantee of future results. Actual total return
and principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
GUIDE TO UNDERSTANDING FOREIGN HOLDINGS OF THE FOUNDERS FUNDS
The abbreviations below are used throughout the following Schedules of
Investments to indicate the country of origin of non-U.S. holdings.
AR Argentina
AU Australia
BA Bahamas
BM Bermuda
BR Brazil
CA Canada
CH Chile
CO Colombia
CZ Czechoslovakia
DE Denmark
FI Finland
FR France
GE Germany
HK Hong Kong
HU Hungary
IN India
ID Indonesia
IS Israel
IT Italy
JA Japan
KO Korea
MA Malaysia
MX Mexico
NE Netherlands
NW Norway
NZ New Zealand
PA Panama
PH Philippines
PO Portugal
PR Peru
SI Singapore
SP Spain
SW Sweden
SZ Switzerland
TW Taiwan
TH Thailand
UK United Kingdom
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A MESSAGE FROM THE CHAIRMAN
Dear Fellow Investor,
Looking at the market indexes, the first half of 1996 was a positive period for
the stock markets. Large companies, as tracked by the Standard & Poor's 500
Index, rose 10.04% for the six months ended this June 30; smaller companies,
those represented in the Russell 2000 Index, rose 10.36% for the same period.
But as you well know, index numbers don't necessarily tell the whole
story. While indexes portrayed a strong picture of the markets at the halfway
mark, this year's gains actually came in fits and starts, thanks to much
uncertainty in the markets.
THE HALF IN REVIEW
At the close of last year, the consensus among many market watchers involved a
slowing rate of economic growth with stable to declining interest rates on the
horizon. By the first quarter of 1996, however, this broad agreement began to
unravel.
February's announcement of job growth--a much higher figure than anyone
expected--brought fears of a rapidly expanding economy and resurgent inflation.
This scenario renewed concerns that the Federal Reserve would "put on the
brakes" as it did in early 1994--by mandating increases in short-term interest
rates. While the Fed chose not to act during the first half of the year, rates
did rise, but fortunately without significant consequences for the market.
FORWARD FOCUS
We enter the second half of the year with both policy makers and investors
carefully watching the economy and the markets.
Founders continues to be cautiously optimistic about the months to
come. The scenario we see involves low inflation and slow, steady economic
growth. In this kind of environment, we believe it is unlikely that the Fed will
increase short-term interest rates anytime soon. Additionally, we expect
corporate earnings, the lifeblood of growth stocks, to continue to grow
throughout the rest of the year.
So while we face what might be a volatile market going forward, we
think the combination of positive macroeconomic factors and positive earnings
growth may result in moderate returns for the markets.
CAUSE FOR CAUTION?
One of the things we've always stressed at Founders is that investors should
take a long-term view of their investments. Data from Ibbotson Associates going
back to 1926 indicate that the annual return for large company stocks has
4
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averaged a little more than 12% for the past seven decades. That's substantially
lower than many of the one-year returns for the S&P 500 we've seen recently.
While we all enjoy years like those of late, you need to prepare for
those periods where the market doesn't have the wind at its back. One of the
best ways to do this may be to ensure that portfolio is well diversified.
BUILDING A DIVERSIFIED FUND PORTFOLIO
The theory behind diversification is firmly rooted in common sense: don't put
all of your eggs in one basket. Diversification was probably one of the reasons
you invested in mutual funds in the first place: each of the Founders Funds
portfolios often comprises more than 50 stocks from a broad range of industries.
Just as it may be wise to diversify your holdings among several stocks,
it may also be wise to spread your assets among several types of mutual funds.
With the markets in a state of flux, now may be an excellent time for
you to reassess the components of your fund portfolio. Are your assets
well-diversified among several types of funds? Are your funds too aggressive or
too conservative for your time horizon or your own risk tolerance?
EXPLORING THE WORLD, MANAGING RISK
Many investors have diversified their portfolios internationally in recent
years, as funds that invest in foreign securities may move in different
directions than purely domestic funds.
In fact, Founders' research shows that, based on market performance in
the last 10 years, a portfolio with a 30% foreign stake would have delivered a
higher return with lower risk than a portfolio composed entirely of U.S.
securities.1
And adding an international component is just one way to diversify. If
your portfolio is overly aggressive, you may want to look at adding a more
conservative fund. If your portfolio is too conservative to meet your investment
goals, consider adding a more aggressive component.
Going forward, we believe that the best years of the market are not behind us.
But if the last six months remind us of anything, it's that the markets never go
straight up. Being prepared may be the surest way to protect all that you've
accomplished.
Sincerely,
Bjorn K. Borgen
Chairman, CEO, and Chief Investment Officer
Founders Asset Management, Inc.
1 Portfolio performance based on returns for the Standard & Poor's 500 Index
and the Morgan Stanley Capital International World Index. Past performance
is no guarantee of future results, and investments in foreign securities
may pose unique risks, including economic, political, and social risk.
5
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FOUNDERS DISCOVERY FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Discovery Fund to a $10,000 investment in each of Lipper Small
Company Growth Fund Index, Russell 2000 Index and Consumer Price Index for
the period beginning December 31, 1989 (inception) through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years Since Inception (12/31/89)
------ ------- --------------------------
33.51% 20.14% 20.70%
PERFORMANCE REVIEW
Despite a slow start to the year and increasing volatility near the close of the
half, Founders Discovery Fund posted a market-beating total return of 19.54% for
the six months ended June 30, 1996--a period during which the benchmark Russell
2000 Index rose only 10.36%.
Questions about the direction of the economy remained in the forefront
of investors' minds during the first half, and lack of a clear consensus led to
an environment of increasing uncertainty in the stock market.
The stocks of many young, small companies, while enjoying broad support
during the opening months of the year, experienced increasing volatility during
the period as investors moved assets to the stocks of larger companies as a
defensive measure.
In an environment such as this, Founders' stock-picking strategy has
become even more crucial. Our focus on bottom-up, company-by-company research
has helped uncover fundamentally strong firms in the small-company arena, firms
with strong managements, competitive market positions, and innovative products
6
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or services. Ideally, these companies are excellent investment opportunities,
yet relatively unknown to the market.
INVESTMENT OPPORTUNITIES
One such company is Genelabs Technologies, which represented 2.12% of
Discovery's portfolio at the end of the half. A biotechnology firm with
long-term potential, it is not currently followed by any Wall Street analysts.
Genelabs hopes to use its unique drug discovery technology--known as
"Merlin"--to pursue treatment options for many diseases. It has also taken care
of the business end, bringing in new, highly recognized industry management.
Another key holding for us during the half was Geoworks, representing
3.51% of the Fund on June 30. A market leader in a field with great growth
prospects, Geoworks provides software enabling cellular phones to incorporate
e-mail, faxes, and even Internet access. A successful August introduction of a
"smart" phone by the telecommunications firm Nokia may well provide an
additional boost for the stock in the months ahead.
ECONOMIC OUTLOOK
Looking forward, we expect the market's uncertainty--and its volatility--to
continue in the months to come. However, we view this volatility as opportunity.
As prices fluctuate in the small-company market, we may have the chance to buy
new positions (or add to existing ones) in fundamentally strong companies with
excellent long-term growth potential.
David Kern, CFA
Portfolio Manager
TOP TEN HOLDINGS
1. Geoworks
2. Checkpoint Systems, Inc.
3. Dave & Busters, Inc.
4. Doubletree Corporation
5. Genelabs Technologies, Inc.
6. Ibah, Inc.
7. J.P. Food Service, Inc.
9. Paraxel International Corporation
10. International Family Entertainment, Inc.
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
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FOUNDERS DISCOVERY FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCKS (DOMESTIC)-81.7%
Apparel-2.7%
107,125 Kenneth Cole Productions, Inc. Class A* $2,115,719
75,000 Quiksilver, Inc.* 2,250,000
93,575 Wolverine World Wide, Inc. 3,041,188
----------
7,406,907
Biotechnology-2.6% ----------
905,000 Genelabs Technologies, Inc.* 5,769,375
15,000 IDEXX Laboratories, Inc.* 585,000
39,975 Sequus Pharmaceuticals, Inc.* 794,503
----------
7,148,878
Business Services-1.3% ----------
221,800 Protection One, Inc.* 3,631,975
----------
Computer Equipment-1.2%
100,000 Radisys Corporation* 3,337,500
----------
Computer Software-17.1%
133,450 Avant Corporation* 3,069,350
15,400 Check Point Software Technologies* 369,600
63,375 CSG Systems International, Inc.* 1,600,219
22,550 Cybercash, Inc.* 1,231,794
20,000 Dendrite International, Inc.* 685,000
60,250 Edify Corporation* 1,566,500
276,175 Geoworks* 9,528,038
65,000 Inso Corporation* 3,315,000
66,800 Integrated Systems, Inc. Class A* 2,621,900
142,000 Metromail Corporation* 3,177,250
65,000 P C Docs Group International, Inc.* 1,283,750
245,000 Premenos Technology Corporation* 4,348,750
40,450 Project Software & Development, Inc* 1,891,038
422,450 Ross Systems, Inc.* 2,325,131
149,110 Scopus Technology, Inc.* 2,310,952
4,800 Siebel Systems, Inc.* 81,600
44,050 Sterling Commerce, Inc.* 1,635,356
184,000 Sync Research, Inc.* 2,535,625
103,675 Verity, Inc.* 2,902,900
----------
46,479,753
Consumer Products-1.6% ----------
87,775 Empire of Carolina, Inc.* 1,053,300
120,000 Galoob Lewis Toys, Inc.* 3,390,000
----------
4,443,300
Electronic Equipment-3.4% ----------
272,000 Checkpoint Systems, Inc.* 9,350,000
----------
Electronics-1.3%
98,725 Sawtek, Inc.* 3,430,694
----------
Environmental Services-1.1%
90,000 United Waste Systems, Inc.* 2,857,500
----------
Financial Services-1.3%
168,000 Jayhawk Acceptance Corporation* 2,289,000
86,600 Union Acceptance Corporation Class A* 1,277,350
----------
3,566,350
Food & Beverages-3.7% ----------
218,850 J.P. Food Service, Inc.* 5,307,112
49,700 Nuco2, Inc.* 1,466,150
100,000 Richfood Holdings, Inc. 3,237,500
----------
10,010,762
Healthcare Services-12.0% ----------
51,000 Gulf South Medical Supply, Inc.* 1,976,250
97,675 Henry Schein, Inc.* 3,723,859
685,000 Ibah, Inc.* 5,477,500
178,500 Multicare Company, Inc.* 3,391,500
40,000 Oacis Healthcare Holdings Corporation* 460,000
86,500 Orthodontic Centers of America* 2,249,000
95,000 Parexel International Corporation* 4,512,500
63,000 Pediatrix Medical Group* 3,055,500
38,275 Pharmaceutical Product Development, Inc.* 1,282,212
110,000 Rural/Metro Corporation* 3,712,500
45,000 Sierra Health Services, Inc.* 1,417,500
58,325 Sunrise Assisted Living, Inc.* 1,399,800
----------
32,658,121
----------
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Shares Market Value
- --------------------------------------------------------------------------------
Insurance-0.5%
33,625 Executive Risk, Inc. $1,286,156
----------
Leisure & Entertainment-4.5%
166,000 Doubletree Corporation* 5,872,250
174,000 Golf Enterprises, Inc.* 2,001,000
155,000 Trump Hotels and Casino Resorts, Inc.* 4,417,500
----------
12,290,750
Medical Supplies & Equipment-5.1% ----------
49,900 Heartport, Inc.* 1,497,000
113,000 Perclose, Inc.* 2,486,000
230,000 Physio Control Holding Corporation* 4,035,000
181,450 ResMed, Inc.* 2,812,475
176,650 Ventritex, Inc.* 3,025,131
----------
13,855,606
Pharmaceuticals-1.4% ----------
465,100 Pharmaceutical Resources, Inc.* 2,325,500
57,500 Sano Corporation* 891,250
18,050 Watson Pharmaceuticals, Inc.* 681,388
----------
3,898,138
Publishing & Broadcasting-2.7% ----------
243,750 International Family Entertainment,
Inc. Class B* 4,509,375
70,150 SFX Broadcasting, Inc. Class A* 2,700,775
----------
7,210,150
Restaurants-2.3% ----------
234,000 Dave and Busters, Inc.* 6,201,000
----------
Retail-5.0%
200,000 Good Guys, Inc.* 1,750,976
50,000 Loehmanns, Inc.* 1,143,750
50,000 Men's Wearhouse, Inc.* 1,612,500
145,000 Proffitt's, Inc.* 5,147,500
75,000 Wet Seal, Inc.* 1,781,250
130,000 Zale Corporation* 2,177,500
----------
13,613,476
Semiconductors & Equipment-3.0% ----------
150,300 Asyst Technologies, Inc.* 2,555,100
219,975 Speedfam International, Inc.* 3,437,109
93,175 Vitesse Semiconductor Corporation* 2,236,200
----------
8,228,409
Telecommunications & Equipment-6.3% ----------
45,000 Cidco, Inc.* 1,575,000
100,000 Colonial Data Technology Corporation* 1,487,500
245,675 Digital Microwave Corporation* 4,048,538
150,875 Inter-Tel, Inc.* 3,941,609
87,850 Intervoice, Inc.* 1,724,056
120,150 P Com, Inc.* 3,724,650
20,000 Premiere Technologies, Inc.* 615,000
----------
17,116,353
Transportation-1.6% ----------
76,875 Celadon Group, Inc.* 595,782
45,000 Eagle USA Airfreight, Inc.* 1,665,000
105,000 Mark VII, Inc.* 2,113,125
----------
4,373,907
----------
TOTAL COMMON STOCKS (DOMESTIC)-81.7%
(COST-$168,127,105) 222,395,685
-----------
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Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCKS (FOREIGN)-6.4%
Computer Networking-1.4%
472,375 Gandalf Technologies, Inc. (CA)* $3,690,430
----------
Computer Software-0.6%
200,000 JBA Holdings PLC (UK) 1,606,620
----------
Pharmaceuticals-1.8%
498,500 Ethical Holdings Limited Sponsored ADR (UK)* 4,798,062
----------
Publishing & Broadcasting-1.2%
152,500 Cinar Films, Inc. Class B (CA)* 3,221,250
----------
Telecommunications & Equipment-1.4%
120,000 Cellular Communications International (IT)* 3,960,000
----------
TOTAL COMMON STOCKS (FOREIGN)-6.4%
(COST-$15,791,363) 17,276,362
-----------
Principal Amount Market Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS (DOMESTIC)-0.0%
Technology-0.0%
$1,783 Surgical Laser Technologies $ 0
----------
TOTAL CONVERTIBLE BONDS (DOMESTIC)-0.0%
(COST-$0) 0
----------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-10.3%
$ 9,000,000 Ford Motor Credit 5.33%
07/01/96 $ 9,000,000
10,400,000 General Electric Capital 5.37%
07/02/96 10,398,449
5,700,000 Pacific Gas & Electric 5.45%
07/03/96 5,698,274
2,866,000 TDK USA 5.33%
07/02/96 2,865,576
-----------
TOTAL CORPORATE SHORT-TERM NOTES-10.3%
(COST-$27,962,299) 27,962,299
-----------
TOTAL INVESTMENTS-98.4% 267,634,346
OTHER ASSETS & LIABILITIES-1.6% 4,399,953
------------
TOTAL NET ASSETS-100.0% $272,034,299
============
* Non-income producing. See notes to financial statements.
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FOUNDERS FRONTIER FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Frontier Fund to a $10,000 investment in each of Lipper Small
Company Growth Fund Index, Russell 2000 Index and Consumer Price Index for
the period beginning January 22, 1987 (inception) through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years Since Inception (1/22/87)
------ ------- -------------------------
29.91% 17.90% 20.01%
PERFORMANCE REVIEW
Due to the fundamental strengths of the companies in its portfolio and a
generally favorable market bias toward small-company stocks, Founders Frontier
Fund posted a 10.62% return for the six months ended June 30, 1996. This return
beat the performance of its benchmark, the Russell 2000 Index, which returned
10.36% for the same period.
The first quarter of 1996 saw a significant shift in market psychology.
Investors at the end of 1995 saw slower economic growth and lower interest rates
on the horizon. But with the announcement of positive economic statistics,
primarily stronger-than-expected job growth, this optimistic view gave way to
fears of higher interest rates and resurgent inflation late in the second
quarter.
These economic statistics continue to give mixed signals, resulting in
a rising level of volatility. However, Frontier continues to use a
stock-by-stock approach to identify small companies with long-term growth
potential.
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INVESTMENT OPPORTUNITIES
The change in market psychology led the market to generally favor larger
companies in cyclical industries over small-capitalization issues. However,
Founders Frontier found successful investments in traditional growth areas such
as technology and healthcare.
Successful technology investments during the half included Ascend
Communication (which provides remote access to the Internet) and Aspect
Communication (which builds and manages automatic call centers for business). In
the healthcare industry, we were pleased with the performance of Healthcare
Compare, which is a provider of medical cost-management services.
ECONOMIC OUTLOOK
The path of the economy and the performance of the stock market continue to
mystify analysts, and such uncertainty rarely benefits the market. However, we
are encouraged by the investment prospects available, and we will take advantage
of market opportunities to add or trim long-term positions as justified.
We believe our focus on fundamental company research remains critical
to Frontier's success. Through this research process, we will keep the fund
well-diversified among fast-growing stocks from many industries. We hope that
this approach will help Frontier Fund manage its risk should market volatility
continue.
Michael K. Haines
Portfolio Manager
TOP TEN HOLDINGS
1. Sylvan Learning System, Inc.
2. Network General Corporation
3. Watson Pharmaceuticals, Inc.
4. Healthcare Compare Corporation
5. Omnicare, Inc.
6. Viking Office Products, Inc.
7. Sterling Commerce, Inc.
8. HBO & Company
9. Frontier Insurance Group, Inc.
10. Oakwood Homes Corporation
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
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FOUNDERS FRONTIER FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCKS (DOMESTIC)-78.2%
Apparel-5.1%
148,695 Authentic Fitness Corporation $2,769,444
126,000 Designer Holdings Ltd.* 3,354,750
85,800 Donna Karan International, Inc.* 2,402,400
65,000 Jones Apparel Group, Inc.* 3,193,125
50,000 Tommy Hilfiger Corporation* 2,681,250
164,350 Warnaco Group Inc. Class A 4,232,012
----------
18,632,981
Banking-1.4% ----------
100,000 Dime Bancorp, Inc.* 1,300,000
134,500 PNC Bank Corporation 4,001,375
----------
5,301,375
Biotechnology-1.0% ----------
65,000 IDEXX Laboratories, Inc.* 2,535,000
60,525 Nexstar Pharmaceuticals, Inc.* 1,316,419
----------
3,851,419
Business Services-6.5% ----------
40,000 Affiliated Computer Services Class A* 1,880,000
115,000 Corporate Express, Inc.* 4,600,000
73,700 Filenet Corporation* 2,616,350
172,650 Sylvan Learning System, Inc.* 6,517,538
66,000 U.S. Office Products Company* 2,755,500
180,000 Viking Office Products, Inc.* 5,625,000
----------
23,994,388
Chemicals-0.2% ----------
50,000 Crompton and Knowles Corporation* 833,249
-----------
Computer Equipment-0.4%
94,775 Mylex Corporation* 1,658,562
----------
Computer Networking-1.7%
299,950 Network General Corporation* 6,373,938
----------
Computer Software-5.4%
50,000 American Management Systems, Inc.* 1,462,500
300,000 Computervision Corporation* 3,000,000
56,525 GT Interactive Software Corporation* 946,794
1,328 Information Resources, Inc.* 15,936
59,835 Integrated Systems, Inc. Class A* 2,348,524
197,000 Mentor Graphics Corporation* 3,176,625
150,000 Sterling Commerce, Inc.* 5,568,750
90,000 Synopsys, Inc.* 3,577,500
----------
20,096,629
Construction-1.5% ----------
260,000 Oakwood Homes Corporation 5,362,500
----------
Diversified-0.9%
50,000 Harsco Corporation 3,362,500
----------
Electronic Equipment-1.8%
66,775 Berg Electronics Corporation* 1,585,906
148,000 Checkpoint Systems, Inc.* 5,087,500
----------
6,673,406
Electronics-0.9% ----------
123,100 Sanmina Corporation* 3,292,925
----------
Environmental Services-3.5%
80,000 Sanifill, Inc.* 3,940,000
150,000 USA Waste Services, Inc. * 4,443,750
140,000 United Waste Systems, Inc.* 4,445,000
----------
12,828,750
Financial Services-2.4% ----------
91,450 Credit Acceptance Corporation* 1,920,450
62,000 First USA Paymentech, Inc.* 2,480,000
200,000 Olympic Financial Services Ltd.* 4,600,000
----------
9,000,450
----------
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Shares Market Value
- --------------------------------------------------------------------------------
Healthcare Services-10.7%
95,000 Apria Healthcare* $ 2,980,625
42,363 Cardinal Health, Inc. 3,055,431
31,000 Community Health Systems, Inc.* 1,604,250
36,750 Express Scripts, Inc. Class A* 1,681,312
80,000 HBO & Company 5,400,000
112,500 Health Management Association Class A* 2,278,125
172,500 Health Care & Retirement Corporation* 4,096,875
120,000 Healthcare Compare Corporation* 5,835,000
125,000 Henry Schein, Inc.* 4,765,625
50,000 Multicare Company, Inc.* 950,000
213,900 Omnicare, Inc. 5,668,350
42,000 Orthodontic Centers of America* 1,092,000
----------
39,407,593
Insurance-4.8% ----------
80,000 Equitable of Iowa Companies 2,840,000
155,568 Frontier Insurance Group, Inc. 5,367,079
133,050 Reinsurance Group of America, Inc. 5,022,638
100,000 Reliastar Financial Corporation 4,312,500
----------
17,542,217
Leisure & Entertainment-3.8% ----------
25,000 Doubletree Corporation* 884,375
130,000 Interstate Hotels Company* 2,892,500
109,200 Sun International Hotels Limited* 5,296,200
170,000 Trump Hotels and Casino Resorts, Inc.* 4,845,000
----------
13,918,075
Medical Supplies & Equipment-1.0% ----------
230,000 Kinetic Concepts, Inc. 3,565,000
----------
Pharmaceuticals-3.8%
100,000 Jones Medical Industries, Inc. 3,287,500
80,000 R.P. Scherer Corporation* 3,630,000
189,075 Watson Pharmaceuticals, Inc.* 7,177,133
----------
14,094,633
Publishing & Broadcasting-3.1% ----------
60,000 Infinity Broadcasting Corporation* 1,800,000
62,500 International Family Entertainment, Inc.
Class B* 1,156,250
105,000 Sinclair Broadcast Group, Inc. Class A* 4,488,750
153,275 World Color Press, Inc.* 3,889,353
----------
11,334,353
Retail-7.0% ----------
101,700 Borders Group, Inc.* 3,279,825
28,000 CDW Computer Center, Inc.* 1,925,000
125,000 Consolidated Stores Corporation* 4,593,750
68,500 MSC Industrial Direct Co., Inc. Class A* 2,209,125
83,375 OfficeMax, Inc.* 1,990,578
115,000 Petco Animal Supplies, Inc.* 3,277,500
90,000 Sports Authority, Inc.* 2,947,500
33,600 Tiffany & Company 2,452,800
130,000 Williams Sonoma, Inc.* 3,055,000
----------
25,731,078
Supermarkets-1.1% ----------
112,500 Vons Companies, Inc.* 4,204,688
----------
Telecommunications & Equipment-9.0%
101,000 American Portable Telecom, Inc.* 1,035,250
80,000 Arch Communications Group, Inc.* 1,470,000
52,500 Ascend Communication, Inc.* 2,946,562
70,000 Aspect Telecommunications Corporation* 3,465,000
82,500 Brooks Fiber Properties, Inc.* 2,701,875
65,000 Cascade Communications Corporation* 4,420,000
24,712 Glenayre Technologies, Inc.* 1,232,511
140,950 LCI International, Inc. 4,422,306
50,000 Mc Leod, Inc. Class A* 1,200,000
95,000 Network Equipment Technologies, Inc.* 2,018,750
115,000 Tel-Save Holdings, Inc.* 2,386,250
121,675 Winstar Communications, Inc.* 3,011,456
50,000 WorldCom, Inc. * 2,762,500
----------
33,072,460
----------
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Shares Market Value
- --------------------------------------------------------------------------------
Transportation-1.2%
133,050 Wisconsin Central Transportation Corporation* $ 4,257,600
-----------
TOTAL COMMON STOCKS (DOMESTIC)-78.2%
(COST-$215,787,166) 288,390,769
-----------
COMMON STOCKS (FOREIGN)-11.7%
Basic Industry-0.5%
70,000 Madeco SA ADS (CH) $ 1,968,750
-----------
Building Materials-0.9%
50,000 Hunter Douglas NV (NE) 3,412,465
-----------
Construction-1.3%
100,000 IHC Caland NV (NE) 4,920,980
-----------
Consumer Products-1.7%
40,000 Industrie Natuzzi SPA ADR (IT) 2,050,000
11,000 Skis Rossignol (FR) 4,057,622
-----------
6,107,622
Financial Services-0.9% -----------
56,000 Banco Latinoamericano de Exportaciones, SA
Class E (PA) 3,150,000
-----------
Insurance-2.0%
700,000 Guoco Group Ltd. (HK) 3,336,970
130,000 Partner Re Holdings Ltd. (BA) 3,883,750
-----------
7,220,720
Leisure & Entertainment-0.3% -----------
280,000 Village Roadshow Limited (AU) 1,271,536
-----------
Manufacturing-0.8%
95,000 Hoya Corporation (JA) 3,066,144
-----------
Oil & Gas-0.8%
110,000 Petroleum Geological Services Sponsored
ADR (NW)* 3,107,500
-----------
Publishing & Broadcasting-1.5%
480,000 Flextech (UK)* 3,766,368
75,000 Scandinavian Broadcasting Systems SA (SW)* 1,837,500
-----------
5,603,868
Retail-1.0% -----------
400,000 Next PLC (UK) 3,499,120
-----------
TOTAL COMMON STOCKS (FOREIGN)-11.7%
(COST-$37,272,115) 43,328,705
-----------
WARRANTS (DOMESTIC)-0.0%
458 Jan Bell Marketing, Inc.
Expires 12/16/98 $ 0
85 Windmere Corporation
Expires 1/19/98 0
----------
TOTAL WARRANTS (DOMESTIC)-0.0%
(COST-$0) 0
----------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-10.7%
$14,400,000 American Express Credit 5.45%
07/01/96 $14,400,000
8,000,000 Ford Motor Credit 5.36%
07/02/96 7,998,810
8,000,000 General Electric Capital 5.35%
07/01/96 8,000,000
9,200,000 Warner Lambert Company 5.40%
07/03/96 9,197,240
-----------
TOTAL CORPORATE SHORT-TERM NOTES-10.7%
(COST-$39,596,050) 39,596,050
-----------
TOTAL INVESTMENTS-100.6% 371,315,524
OTHER ASSETS & LIABILITIES-(0.6%) (2,393,373)
------------
TOTAL NET ASSETS-100.0% $368,922,151
============
* Non-income producing. See notes to financial statements.
15
<PAGE>
FOUNDERS PASSPORT FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Passport Fund to a $10,000 investment in each of Morgan Stanley
Capital International World ex U.S. Index and Consumer Price Index for the
period beginning November 16, 1993 (inception) through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year Since Inception (11/16/93)
------ --------------------------
29.07% 12.65%
PERFORMANCE REVIEW
Small-cap international stocks seemed to be the place for investors to be in the
first half of the year. Founders Passport Fund gained 16.44% for the six months
ended June 30, 1996. This return outperformed the unmanaged Morgan Stanley
Capital International World ex U.S. Index, which gained 4.69% in the first six
months
The performance of markets across the globe was varied during the
period, ranging from losses in several Latin American countries to a 15% rise in
Malaysia. Some economies, particularly Japan, began to improve in the first six
months, while European markets remained sluggish. In general, though, overseas
corporate earnings have been improving.
Despite the ups and downs of individual markets, however, Founders
Passport Fund continues to benefit from our searching the world on a
company-by-company basis. Through diligent research, numerous personal visits to
overseas companies and a commitment to bottom-up stock selection, we analyze
individual companies in every region of the world to uncover the greatest
potential for growth.
16
<PAGE>
FAVORABLE HOLDINGS
Since Founders Passport's stock selection strategy isn't limited by country
borders, market sectors or company size, we are able to target small,
fast-growing companies from any area outside the United States.
Small, successful retail companies made up the leading industry group
for Founders Passport during the period. Retailers as diverse as Paris Miki, a
Japanese eyeglass retailer, to Laox, a rapidly growing Japanese computer
retailer, played an integral part in the Fund's year-to-date performance
Other stocks uncovered by our research process include
o Guilbert, a French office products distributor
o Grolsch, a Dutch brewer
o Vtech, a manufacturer of phones and toys
The Fund continues to capitalize on investments in companies developing
products and services that enhance productivity in our lives. Founders Passport
has benefited from selected holdings in computer software companies such as the
Netherlands-based Baan, and JBA Holdings in the United Kingdom.
ECONOMIC OUTLOOK
Three positive trends on the international economic scene suggest a prosperous
year overseas. First, we expect a general improvement in economies outside the
United States, including those in Europe. Second, we feel that interest rates
internationally may fall in the second half of the year. Finally, we see an
upswing in corporate earnings, the engine that drives growth-stock performance.
These trends should be favorable for the Fund's stock-selection
discipline.
Michael Gerding, CFA
Portfolio Manager
TOP TEN HOLDINGS
1. Salomon
2. Laox Company Ltd.
3. IHC Caland
4. Baan Company
5. Schwarz Pharma
6. Doutor Coffee Company
7. JD Wetherspoon
8. Kverneland
9. JBA Holdings
10. Medeva
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
17
<PAGE>
FOUNDERS PASSPORT FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS (FOREIGN)-2.8%
Apparel-1.1%
1,525 Hugo Boss Non-Voting Preferred (GE) $1,753,393
----------
Financial Services-1.7%
2,700 Marschollek, Lautenschlaeger und
Partner AG (GE) 2,838,184
---------
TOTAL PREFERRED STOCKS (FOREIGN)-2.8%
(COST-$3,341,985) 4,591,577
----------
COMMON STOCKS (FOREIGN)-86.8%
Apparel-0.3%
15,000 Puma AG Rudolf Dassler Sport 144A (GE)*+ $ 538,565
----------
Banking-1.8%
115,000 Banco de A. Edwards Sponsored ADR
Representing Series A (CH) 2,417,513
458,000 Bank Tiara (ID) 535,715
----------
2,953,228
Basic Industry-1.5% ----------
90,000 Madeco SA ADS (CH) 2,531,250
----------
Building Materials-3.6%
42,000 Hunter Douglas NV (NE) 2,866,600
1,200,000 TLG PLC (UK) 2,965,481
----------
5,832,081
Capital Goods-0.9% ----------
30,000 Noritsu Koki Company (JA) 1,520,721
----------
Computer Equipment-2.1%
152,750 Gandalf Technologies Inc. (CA) 1,193,359
400,000 Psion PLC (UK) 2,175,602
----------
3,368,961
Computer Software-4.7% ----------
100,000 Baan Company NV (NE)* 3,400,000
37,500 Dassault Systems (FR)* 1,174,108
385,000 JBA Holdings PLC (UK) 3,092,912
----------
7,667,021
Construction-2.1% ----------
70,000 IHC Caland NV (NE) 3,444,842
----------
Consumer Products-8.8%
110,000 De Rigo SPA ADR (IT)* 2,516,777
50,300 Industrie Natuzzi SPA ADR (IT) 2,577,844
4,500 Salomon SA (FR) 4,112,762
8,000 Skis Rossignol (FR) 2,951,049
1,350,000 Vtech Holdings Ltd. (HK) 2,206,253
----------
14,364,685
Diversified-0.2% ----------
216,500 Shanghai Industrial Holdings Limited 144A (HK)+ 265,713
----------
18
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Electronics-0.3%
28,000 SAES Getters SPA (IT) $ 566,269
Environmental Services-1.6%
250,000 Tomra Systems ASA (NO) 2,539,907
----------
Financial Services-2.9%
50,250 Banco Latinoamericano de Exportaciones, SA
Class E (PA) 2,826,562
4,150,000 Manhattan Card Company (HK) 1,983,722
----------
4,810,284
Food & Beverages-1.8% ----------
70,000 Grolsch NV (NE) 2,870,701
----------
Insurance-1.7%
575,000 Guoco Group Ltd. (HK) 2,741,102
----------
Leisure & Entertainment-4.7%
1,944,000 AAPC Limited (AU) 1,225,083
950,000 Eurodisney SCA (FR)* 2,611,208
1,896,285 Grupo Posadas SA de CV Series A (MX) 865,621
32,000 Ozemail Limited ADR (AU)* 404,000
590,000 Village Roadshow Limited (AU) 2,679,496
----------
7,785,408
Machinery-8.1% ----------
79,700 Konecranes International Corporation (FI)* 1,938,505
128,000 Kverneland ASA (NW) 3,152,564
46,000 Mabuchi Motor Company (JA) 2,927,360
79,000 Turbon International (GE) 2,226,595
177,000 Valmet Corporation Class A (FI) 2,990,701
----------
13,235,725
Manufacturing-1.5% ----------
20,000 Axxicon Group NV (NE) 636,698
4,800,000 Republic Glass Holdings Corporation (PH) 1,832,107
----------
2,468,805
Oil & Gas-3.3% ----------
508,300 Gulf Canada Resources Limited (CA) 2,605,038
100,000 Petroleum Geological Services Sponsored
ADR (NW)* 2,825,000
----------
5,430,038
Pharmaceuticals-3.9% ----------
198,600 Medeva PLC ADR (UK) 3,078,300
45,000 Schwarz Pharma (GE) 3,370,377
----------
6,448,677
Publishing & Broadcasting-6.0% ----------
21,750 Cinar Films, Inc. Class B (CA) 413,250
177,500 Comcast U.K. Cable Partners Ltd.
Series A Shares (UK) 2,220,000
200,000 Dorling Kindersley Holdings PLC (UK) 1,858,586
365,000 Flextech (UK)* 2,864,413
1,170,000 Sistem Televisyen (HK) 2,391,416
----------
9,747,665
Restaurants-1.9% ----------
203,400 J D Wetherspoon (UK) 3,176,653
----------
* Non-income producing. See notes to financial statements.
+ Securities were acquired pursuant to Rule 144A and may be deemed to be
restricted for resale.
19
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Retail-15.5%
160,000 Bulgari SPA (IT) $2,557,160
350,000 DFS Furniture Company (UK) 3,013,459
70,000 Doutor Coffee Company Ltd. (JA) 3,254,882
17,465 Guilbert SA (FR) 2,544,435
150,000 Laox Company Ltd. (JA) 3,583,105
315,000 Next PLC (UK) 2,756,720
1,596,000 PT Matahari Putra Prima (ID) 2,914,379
44,000 Paris Miki Inc. (JA) 2,045,926
100,000 Santa Isabel SA Sponsored ADR (CH) 2,775,000
----------
25,445,066
Semiconductors-1.0% ----------
18,000 Austria Mykrosysteme International (AU) 1,680,314
----------
Telecommunications & Equipment-2.6%
56,000 Asia Satellite Telecom Holdings
Sponsored ADR (HK)* 1,666,000
80,000 Cellular Communications International,
Inc. (IT)* 2,640,000
----------
4,306,000
Transportation-4.0% ----------
133,000 ASG Class B (SW) 2,525,545
30,000 Copenhagen Airport (DE) 2,966,695
76,050 Tranz Rail Holdings Ltd. Sponsored
ADR (NZ)* 1,057,534
----------
6,549,774
COMMON STOCKS (FOREIGN)-86.8% -----------
(COST-$126,347,296) 142,289,454
-----------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-12.9%
$6,300,000 Ford Motor Credit 5.33%
07/01/96 $6,300,000
6,000,000 General Electric Capital Corporation 5.37%
07/02/96 5,999,105
4,400,000 GTE North 5.42%
07/05/96 4,397,350
4,400,000 T.D.K. USA 5.50%
07/09/96 4,394,622
----------
TOTAL CORPORATE SHORT-TERM NOTES-12.9%
(COST-$21,091,077) 21,091,077
----------
TOTAL INVESTMENTS-102.5% 167,972,108
OTHER ASSETS & LIABILITIES-(2.5%) (4,065,907)
------------
TOTAL NET ASSETS-100.0% $163,906,201
============
* Non-income producing. See notes to financial statements.
20
<PAGE>
Founders Special Fund
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Special Fund to a $10,000 investment in each of Standard & Poor's
500 Index, Lipper Capital Appreciation Fund Index, Russell 2000 Index and
Consumer Price Index for the period beginning June 30, 1981 through
December 31, 1995.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years 10 Years 15 Years
------ ------- -------- --------
16.08% 16.13% 14.15% 13.67%
PERFORMANCE REVIEW
Founders Special Fund rose 11.06% for the six months ended June 30, 1996,
outpacing the broad market, which returned 10.04% (as measured by the Standard &
Poor's 500 Index).
Investor uncertainty about the direction of the economy prevented the
market from moving even further and contributed to an increase in volatility.
Last year's worries of an impending recession gave way to fears of an
overheating economy during the first quarter. This was fueled primarily by
accelerating job growth.
With fears of a growing economy come concerns about rising inflation
and interest-rate hikes. While inflation looks like it is well under control for
now, the position of the Federal Reserve toward interest rates is less clear.
INVESTMENT OPPORTUNITIES
A strong and continuing theme in the portfolio is a focus on the data networking
industry, where growth may be in excess of 50% for the third year in a row. Our
21
<PAGE>
investments in this area comprise two of the firms we feel are best poised to
take advantage of this growing market: 3Com Corporation and Cisco Systems.
Our investments during the half have also included the
telecommunications sector. With the passage of the Telecommunications Reform Act
of 1996, the industry is on the brink of sweeping changes that have the
potential to provide investment opportunity for several of our holdings. These
include Tellabs, Inc. and ADC Telecommunications, both of which manufacture a
variety of products used by providers of communications services.
Another holding that served us well in the first half was Newmont
Mining. This company's fundamentals--including very positive supply and demand
characteristics and a strong production profile--are finally being recognized by
investors.
ECONOMIC OUTLOOK
Looking ahead, we believe that the economy, hampered by extraordinarily high
levels of personal consumer debt, will indeed slow in the months to come.
However, while banks may tighten their own credit standards, we do not believe
that the Federal Reserve will choose to raise short-term interest rates any time
soon.
Despite the continued uncertainties in the marketplace, Founders will
continue to play to our strength: picking companies based on their potential for
long-term growth, regardless of the short-term economic picture.
Michael K. Haines
Edward F. Keely, CFA
Co-Lead Portfolio Managers
TOP TEN HOLDINGs
1. United Meridian Corporation
2. Parametric Technologies Corporation
3. Eli Lilly & Company
4. The Home Depot, Inc.
5. Federal Home Loan Mortgage Corporation
6. Newmont Mining Corporation
7. First Data Corporation
8. Nellcor Puritan Bennett, Inc.
9. U.S. Robotics Corporation
10. Pacificare Health Systems, Inc.
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
22
<PAGE>
FOUNDERS SPECIAL FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS (FOREIGN)-0.3%
Computer Software-0.3%
6,500 Systeme, Anwendungen, Produkte
in der Datenverarbeitung
AG PREFERRED (GE)* $ 963,808
-----------
TOTAL PREFERRED STOCKS (FOREIGN)-0.3%
(COST-$425,890) 963,808
-----------
COMMON STOCKS (DOMESTIC)-85.0%
Apparel-0.8%
150,000 Donnkenny, Inc.* $ 2,906,250
-----------
Banking-1.3%
60,000 Citicorp, Inc. 4,957,500
-----------
Basic Industry-5.3%
150,000 Freeport-McMoRan Copper &
Gold, Inc. Class A 4,481,250
155,000 Newmont Mining Corporation 7,653,125
60,000 Nucor Corporation 3,037,500
350,000 Sante Fe Pacific Gold Corporation 4,943,750
-----------
20,115,625
Biotechnology-3.7% -----------
85,000 Biogen, Inc.* 4,632,500
140,000 Centocor, Inc.* 4,182,500
100,000 Genzyme Corporation* 5,025,000
-----------
13,840,000
Business Services-4.0% -----------
94,475 Filenet Corporation* 3,353,862
90,000 First Data Corporation 7,166,250
150,000 Fiserv, Inc.* 4,500,000
-----------
15,020,112
Chemicals-1.8% -----------
70,000 IMC Global, Inc. 2,633,750
230,000 Polymer Group, Inc.* 4,025,000
-----------
6,658,750
Computer Equipment-9.2% -----------
475,000 Applied Magnetics Corporation* 4,987,500
300,000 Data General Corporation* 3,900,000
250,000 E M C Corporation* 4,656,250
60,000 Seagate Technology, Inc.* 2,700,000
145,000 Silicon Graphics, Inc.* 3,480,000
150,000 Stratus Computer, Inc.* 4,350,000
75,000 U.S. Robotics Corporation* 6,393,750
600,000 Unisys Corporation* 4,275,000
-----------
34,742,500
Computer Networking-3.1% -----------
100,000 Cisco Systems, Inc.* 5,662,500
130,000 3Com Corporation* 5,931,250
-----------
11,593,750
Computer Software-6.8% -----------
1,481 Information Resources, Inc.* 17,772
200,000 Informix Corporation* 4,475,000
100,000 Intuit, Inc.* 4,675,000
50,000 Oracle Systems Corporation* 1,968,750
230,000 Parametric Technology Corporation* 9,947,500
100,000 Structural Dynamics Research Corporation* 2,175,000
100,000 Sybase, Inc.* 2,362,500
------------
25,621,522
Consumer Products-0.4% ------------
75,000 Department 56, Inc.* 1,696,875
------------
Consumer Services-1.4%
150,000 CUC International, Inc.* 5,325,000
-----------
Electronic Equipment-1.6%
120,000 Compaq Computer Corporation* 5,910,000
-----------
* Non-income producing. See notes to financial statements.
23
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Financial Services-3.5%
150,000 Associates First Capital Corporation
Class A* $5,643,750
90,000 Federal Home Loan Mortgage Corporation 7,695,000
-----------
13,338,750
Healthcare Services-3.9% -----------
160,000 Healthsource, Inc.* 2,800,000
140,000 Oxford Health Plans, Inc.* 5,740,000
90,000 Pacificare Health Systems, Inc. Class B* 6,097,500
-----------
14,637,500
Leisure & Entertainment-4.9% -----------
60,000 America Online, Inc.* 2,610,000
100,000 Carnival Corporation Class A 2,887,500
125,000 La Quinta Inns, Inc. 4,187,500
110,000 Viacom, Inc. Class B* 4,276,250
180,000 WMS Industries, Inc.* 4,432,500
-----------
18,393,750
Manufacturing-0.9% -----------
100,000 Minerals Technologies, Inc. 3,425,000
-----------
Medical Supplies & Equipment-1.9%
145,000 Nellcor Puritan Bennett, Inc.* 7,032,500
-----------
Oil & Gas-6.9%
110,000 Barrett Resources Corporation* 3,272,500
150,000 Noble Affiliates, Inc. 5,662,500
125,000 Parker & Parsley Petroleum Company 3,468,750
375,000 United Meridian Corporation* 13,500,000
-----------
25,903,750
Paper & Forest Products-0.6% -----------
200,000 Jefferson Smurfit Corporation* 2,175,000
-----------
Pharmaceuticals-4.3%
60,000 Bristol-Myers Squibb Company 5,400,000
130,000 Eli Lilly & Company 8,450,000
130,000 Pharmacyclics, Inc.* 2,242,500
-----------
16,092,500
Publishing & Broadcasting-1.8% -----------
172,500 Infinity Broadcasting Corporation* 5,175,000
100,000 New World Communications, Inc. Class A* 1,450,000
-----------
6,625,000
Restaurants-2.0% -----------
100,000 Lone Star Steakhouse and Saloon, Inc.* 3,762,500
350,000 Shoney's, Inc.* 3,806,250
-----------
7,568,750
Retail-4.6% -----------
200,000 General Nutrition Companies, Inc.* 3,475,000
150,000 The Home Depot, Inc. 8,100,000
250,000 Intimate Brands, Inc. Class A* 5,718,750
-----------
17,293,750
Semiconductor & Equipment-2.4% -----------
75,000 LSI Logic Corporation* 1,950,000
125,000 Maxim Integrated Products, Inc.* 3,390,625
125,000 Teradyne, Inc.* 2,156,250
100,000 VLSI Technology, Inc.* 1,387,500
-----------
8,884,375
Telecommunications & Equipment-7.2% -----------
100,000 360 Communications Company* 2,400,000
100,000 ADC Telecommunications, Inc.* 4,450,000
160,000 Metromedia International Group, Inc.* 1,960,000
300,000 Mobile Telecommunications Technologies
Corporation* 4,350,000
175,000 Network Equipment Technologies, Inc.* 3,718,750
225,000 Paging Network, Inc.* 5,315,625
75,000 Tellabs, Inc.* 5,006,250
-----------
27,200,625
-----------
24
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Transportation-0.7%
135,000 U.S. Freightways Corporation $ 2,632,500
------------
TOTAL COMMON STOCKS (DOMESTIC)-85.0%
(COST-$298,065,222) 319,591,634
------------
COMMON STOCKS (FOREIGN)-6.7%
Chemicals-1.5%
85,000 Potash Corporation of Saskatchewan,
Inc. (CA) 5,631,250
------------
Food & Beverages-0.8%
200,000 Quilmes Industrial SA Registered (AR) 2,050,000
100,000 Quilmes Industrial SA ADR representing
one non-voting preferred share (AR) 1,025,000
------------
3,075,000
Paper & Forest Products-0.5% ------------
750,000 Jefferson Smurfit Group (UK) 2,027,700
------------
Pharmaceuticals-1.4%
100,000 Smithkline Beecham PLC ADR
Ordinary A (UK) 5,437,500
------------
Telecommunications & Equipment-2.5%
200,000 Telefonaktiebolaget L M Ericsson Company
ADR Class B (SW) 4,275,000
140,000 Nokia Corporation Sponsored ADR (FI) 5,180,000
------------
9,455,000
TOTAL COMMON STOCKS (FOREIGN)-6.7% ------------
(COST-$25,398,797) 25,626,450
------------
WARRANTS (DOMESTIC)-0.0%
6,458 Jan Bell Marketing, Inc.
Expires 12/16/98 $ 0
555 Windmere Corporation
Expires 1/19/98 0
-----------
TOTAL WARRANTS (DOMESTIC)-0.0%
(COST-$0) 0
-----------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-8.0%
$ 6,500,000 Allergan Inc. 5.45%
07/02/96 $ 6,499,016
14,800,000 American Express Credit 5.45%
07/01/96 14,800,000
4,400,000 Ford Motor Credit 5.36%
07/01/96 4,400,000
4,200,000 Oklahoma Gas & Electric 5.55%
07/01/96 4,200,000
------------
TOTAL CORPORATE SHORT-TERM NOTES-8.0%
(COST-$29,899,016) 29,899,016
------------
TOTAL INVESTMENTS-100.0% 376,080,908
OTHER ASSETS & LIABILITIES-0.0% (9,491)
------------
TOTAL NET ASSETS-100.0% $376,071,417
============
* Non-income producing. See notes to financial statements.
25
<PAGE>
FOUNDERS INTERNATIONAL EQUITY FUND
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
Since Inception (12/29/95)
--------------------------
14.60%
PERFORMANCE REVIEW
Founders International Equity Fund was launched at the end of 1995 to provide
investors with a fund that pursues long-term growth of capital by investing in
stocks of companies outside the United States. The goal is to find attractively
valued companies whose earnings are growing faster than their industry, their
local competitors, and their own historical growth rates.
Using the same philosophy as Founders Worldwide Growth and Passport,
the Fund gained 14.60% in the first six months of the year. This total return
comfortably outpaced the 4.69% gain of the unmanaged Morgan Stanley Capital
International World ex U.S. Index, a commonly referenced benchmark, for the same
period. As of June 30, $8.1 million had been invested in the new Founders
International Equity Fund.
Several economic factors around the world accounted for the Fund's
performance during the period. The U.S. dollar continued to rise against foreign
currencies, and the gap between U.S. and international interest rates widened.
European economies as a whole were sluggish during the reporting period,
delaying an expected recovery, but Japan began to strengthen, and the Far East
and Latin America remained strong.
INVESTMENT OPPORTUNITIES
Through a deliberate company-by-company research process that includes personal
visits and careful attention to corporate fundamentals, the Fund's management
team quickly put incoming cash to work by investing in more than 65 stocks
representing countries across the globe. We don't limit our view of the world to
26
<PAGE>
certain sectors, industries or markets; rather, we target the best possible
stocks available in any country abroad.
One such company uncovered by this search is SPT Telecom, the national
telecommunications provider for the Czech Republic and one of the more
attractive telecom issues we have found around the world. As telecom service
providers expand into developing countries, additional opportunities in this
industry may emerge.
ECONOMIC OUTLOOK
We continue to find companies around the world that meet our investment
criteria, in industries as diverse as publishing, retail, and
telecommunications. Improving overseas economies and flat to declining interest
rates should boost corporate earnings for the remainder of 1996. We anticipate
this scenario will be positive for our stock selection process, helping us to
find more attractively valued overseas companies that meet our growth
characteristics. Michael Gerding, CFA Portfolio Manager
TOP TEN HOLDINGS
1. Total S.A.
2. Next PLC
3. Reuters Holdings PLC
4. Teito
5. LVMH-Louis Vuitton
6. Orange PLC
7. British Airways
8. Philips Electronics
9. Baan Company
10. Telebras
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
27
<PAGE>
FOUNDERS INTERNATIONAL EQUITY FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
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 preferred
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
Automotive-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
Espa-a (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
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
----------
28
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
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 & Beverages-1.3% ----------
10,000 Quilmes Industrial SA ADR
representing one 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
----------
178,834
Machinery-5.4% ----------
1,400 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 (FI) 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
----------
* Non-income producing. See notes to financial statements.
+ Securities were acquired pursuant to Rule 144A and may be deemed to be
restricted for resale.
29
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
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
----------
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 Matahari 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 & Equipment-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 5.25%
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. See notes to financial statements.
30
<PAGE>
FOUNDERS WORLDWIDE GROWTH FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Worldwide Growth Fund to a $10,000 investment in each of Lipper
Global Fund Index, Morgan Stanley Capital International World Index and and
Consumer Price Index for the period beginning December 31, 1989 (inception)
through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years Since Inception (12/31/89)
------ ------- --------------------------
20.15% 16.13% 15.08%
PERFORMANCE REVIEW
Several economic factors around the world accounted for the Fund's performance
during the period. The U.S. dollar continued to rise against foreign currencies,
and the gap between U.S. and international interest rates widened. European
economies were sluggish during the reporting period, delaying an expected
recovery, but Japan began to strengthen, and the economies of the Far East and
Latin America stayed strong.
These trends have provided a positive environment for the Founders
Worldwide Growth Fund, which returned 11.37% for the six-month period ended June
30, 1996. This total return compares favorably to a commonly used benchmark, the
unmanaged Morgan Stanley Capital International World Index, which gained 7.09%
for the same period.
INVESTMENT PROCESS
Founders Worldwide Growth Fund takes a unique investment approach. Unlike many
other global funds, we do not limit our investments to certain sectors,
31
<PAGE>
countries or industries. We are committed to screening companies one by one, a
process that so far this year has included face-to-face visits with more than
100 companies from more than 20 countries. When we meet with corporate
executives, we review their management strategy and evaluate their ability to
lead the company through phases of growth.
The expansion of telecommunications throughout developing countries has
brought tremendous investment opportunity for the Fund. Companies that are
capitalizing on providing telecom services and equipment to those nations with
previously low telephone usage have seen tremendous growth. One example of an
attractively valued stock discovered through our research process is Korea
Mobile Telecommunications, one of the Fund's largest holdings at the end of the
period.
ECONOMIC OUTLOOK
Corporate earnings of some overseas companies have experienced an upswing, which
has driven growth-stock performance. We anticipate that international interest
rates will remain flat or fall in the second half of the year, possibly at rates
faster than in the United States, and that many economies abroad may continue to
improve. These factors should prove positive for finding companies around the
world that meet the growth criteria of Founders Worldwide Growth Fund. Michael
Gerding, CFA Portfolio Manager
TOP TEN HOLDINGS
1. Ladbroke Group
2. Korea Mobile Telecommunications Corporation
3. Singapore Airlines
4. Wolters Kluwer
5. Telebras
6. Olivetti
7. Dixons Group
8. DDI Corporation
9. Rohm Company
10. Next PLC
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
32
<PAGE>
FOUNDERS WORLDWIDE GROWTH FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS (FOREIGN)-3.9%
Automotive-1.1%
14,000 Volkswagen AG non-voting
preferred (GE) $ 3,840,089
-----------
Computer Software-0.4%
10,000 Systeme, Anwendungen, Produkte in
der Datenverarbeitung
AG Preferred (GE) 1,482,820
-----------
Financial Services-1.3%
4,200 Marschollek, Lautenschlaeger
und Partner AG (GE) 4,414,953
-----------
Publishing & Broadcasting-1.1%
180,000 News Corporation Sponsored
ADR representing preferred
shares (AU) 3,622,500
-----------
TOTAL PREFERRED STOCKS (FOREIGN)-3.9%
(COST-$10,111,021) 13,360,362
-----------
COMMON STOCKS (DOMESTIC)-14.5%
Airlines-1.1%
130,000 Southwest Airlines Company $ 3,786,250
-----------
Apparel-1.9%
119,725 Warnaco Group, Inc. Class A 3,082,919
100,425 Wolverine World Wide, Inc. 3,263,812
-----------
6,346,731
Biotechnology-0.8% -----------
70,000 IDEXX Laboratories, Inc.* 2,730,000
-----------
Business Services-1.3%
115,000 Corporate Express, Inc.* 4,600,000
-----------
Computer Software-1.7%
103,550 Geoworks* 3,572,475
78,950 Verity Corporation* 2,210,600
-----------
5,783,075
Healthcare Services-2.6% -----------
65,200 Columbia/HCA Healthcare Corporation 3,480,050
130,000 Quorum Health Group, Inc.* 3,412,500
60,500 Rural/Metro Corporation* 2,041,875
-----------
8,934,425
Leisure & Recreation-1.0% -----------
114,000 Trump Hotels and Casino Resorts, Inc.* 3,249,000
-----------
Oil & Gas-0.8%
86,000 Apache Corporation 2,827,250
-----------
Publishing & Broadcasting-1.0%
126,000 Gaylord Entertainment Company Class A 3,559,500
-----------
Retail-0.7%
75,000 Sports Authority, Inc.* 2,456,250
-----------
* Non-income producing. See notes to financial statements.
33
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Telecommunications & Equipment-1.5%
71,550 Digital Microwave Corporation* $ 1,180,575
100,000 MCI Communications Corporation 2,550,000
50,000 Panamsat Corporation* 1,437,500
-----------
5,168,075
Transportation-0.1% -----------
31,775 Celadon Group, Inc.* 246,257
-----------
TOTAL COMMON STOCKS (DOMESTIC)-14.5%
(COST-$40,154,676) 49,686,813
-----------
COMMON STOCKS (FOREIGN)-64.5%
Airlines-4.9%
60,000 British Airways ADS (UK) $ 5,145,000
101,463 KLM Royal Dutch Airlines (NE) 3,221,450
163,000 Qantas Airways Ltd. Sponsored
ADR 144A (AU)*+ 2,758,221
525,000 Singapore Airlines (SI) 5,542,369
-----------
16,667,040
Apparel-1.2% -----------
50,000 Adidas AG (GE) 4,201,432
-----------
Automotive-3.1%
397,000 Edaran Otomobil Nasional Berhad (MA) 3,802,621
96,000 Tata Engineering and Locomotive Company GDR
representing one ordinary share (IN)* 1,704,000
100,000 Toyota Motor Corporation ADR (JA) 5,000,000
-----------
10,506,621
Banking-3.8% -----------
101,000 Argentaria Corporation Bancaria de Espa-a (SP) 4,403,604
100,000 Banco de A. Edwards Sponsored
ADR representing Series A (CH) 2,100,000
487,000 Industrial Finance Corporation of Thailand (TH) 2,185,817
75,000 National Westminster Bank PLC ADR (UK) 4,312,500
-----------
13,001,921
Basic Industry-1.7% -----------
54,500 Madeco SA ADS (CH) 1,532,812
1,500,000 Semen Gresik (ID) 4,366,413
-----------
5,899,225
Chemicals-0.2% -----------
60,000 Reliance Industries GDR
representing two ordinary shares (IN)* 780,000
-----------
Computer Networking-0.2%
101,000 Gandalf Technologies, Inc. (CA)* 789,062
-----------
Computer Software-3.3%
100,000 Baan Company NV (NE)* 3,400,000
10,000,000 Olivetti SPA (IT)* 5,394,824
40,700 Square Company Ltd. (JA) 2,388,735
-----------
11,183,559
Consumer Products-2.3% -----------
73,000 Industrie Natuzzi SPA ADR (IT) 3,741,250
90,000 LVMH Moet Hennessy Louis Vuitton
Sponsored ADR (FR) 4,230,000
-----------
7,971,250
-----------
34
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Data Communications-2.7%
150 NTT Data Communications (JA) $ 4,485,720
65,000 Reuters Holdings PLC ADR (UK) 4,704,375
-----------
9,190,095
Electronics-3.8% -----------
225,000 Alpine Electronics, Inc. (JA) 4,205,362
119,000 Philips Electronics NV New York Shares (NE) 3,882,375
75,000 Sony Corporation (JA) 4,931,831
-----------
13,019,568
Financial Services-0.9% -----------
57,750 Banco Latinoamericano de Exportaciones,
SA Class E (PA) 3,248,438
-----------
Food & Beverages-0.8%
122,020 Quilmes Industrial SA Registered (AR) 1,250,705
136,010 Quilmes Industrial SA ADR
representing one non-voting
preferred share (AR) 1,394,102
-----------
2,644,807
Leisure & Recreation-3.5% -----------
28,000 Accor (FR) 3,917,713
2,000,000 Ladbroke Group PLC (UK) 5,594,406
1,518,750 Magnum Corporation Berhad (MA) 2,568,600
-----------
12,080,719
Machinery-1.4% -----------
47,000 ABB AB Series A (SW) 4,981,990
-----------
Manufacturing-1.4%
150,000 Hoya Corporation (JA) 4,841,295
-----------
Mining-1.0%
410,000 Sumitomo Metal Mining Company (JA) 3,547,457
-----------
Office Equipment-1.4%
45,000 OCE Van Der Grinten NV (NE) 4,766,536
-----------
Oil & Gas-2.5%
40,825 Eni SPA Sponsored ADR (IT) 2,041,250
80,000 Petroleum Geological Services
Sponsored ADR (NW)* 2,260,000
118,155 Total SA Sponsored ADR (FR) 4,386,504
-----------
8,687,754
Pharmaceuticals-2.6% -----------
100,000 Astra, AB Series B (SW) 4,355,427
60,000 Schwarz Pharma (GE) 4,493,791
-----------
8,849,218
Publishing & Broadcasting-5.3% -----------
475,000 Carlton Communications PLC (UK) 3,823,621
132,000 Nynex Cablecomms Group PLC ADR representing one
ordinary and one common share (UK)* 2,145,000
98,000 Scandinavian Broadcasting Systems SA (SW)* 2,401,000
290,000 Ver Ned Uitgeversbedr Ver Bezit NV (NE) 4,502,314
48,000 Wolters Kluwer (NE) 5,452,692
-----------
18,324,627
-----------
* Non-income producing. See notes to financial statements.
+ Securities were acquired pursuant to Rule 144A and may be deemed to be
restricted for resale.
35
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Retail-5.7%
650,000 Dixons Group PLC (UK) $ 5,343,434
51,925 Gucci Group NV (FR) 3,349,162
30,000 Guilbert SA (FR) 4,371,395
600,000 Next PLC (UK) 5,251,111
40,000 Santa Isabel SA Sponsored ADR (CH) 1,110,000
----------
19,425,102
Semiconductors & Equipment-1.5% ----------
80,000 Rohm Company (JA) 5,280,750
----------
Telecommunications & Equipment-8.0%
610 DDI Corporation (JA) 5,316,854
323,475 Korea Mobile Telecommunications
Corporation ADR (KO)* 5,539,509
36,100 Newbridge Networks Corporation (CA)* 2,364,550
226,000 Orange PLC ADR (UK)* 3,926,750
40,000 SPT Telecom (CZ)* 4,881,929
78,000 Telecomunicacoes Brasileiras
Sponsored ADR (BR) 5,430,750
-----------
27,460,342
Utilities-1.3% -----------
85,000 Veba AG (GE) 4,516,096
-----------
TOTAL COMMON STOCKS (FOREIGN)-64.5%
(COST-$185,469,392) 221,864,904
-----------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-19.4%
$14,600,000 Aon Corporation 5.33%
07/01/96 $14,600,000
12,100,000 General Electric Capital Corporation 5.35%
07/03/96 12,096,404
11,400,000 GTE North 5.42%
07/05/96 11,393,135
14,400,000 Nestle Capital Corporation 5.22%
07/02/96 14,397,912
14,000,000 Wal-Mart Stores 5.33%
07/05/96 13,991,709
------------
TOTAL CORPORATE SHORT-TERM NOTES-19.4%
(COST-$66,479,160) 66,479,160
------------
TOTAL INVESTMENTS-102.3% 351,391,239
OTHER ASSETS & LIABILITIES-(2.3%) (8,018,235)
------------
TOTAL NET ASSETS-100.0% $343,373,004
============
* Non-income producing. See notes to financial statements.
36
<PAGE>
FOUNDERS GROWTH FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Growth Fund to a $10,000 investment in each of Lipper Growth Fund
Index, Standard & Poor's 500 Index and Consumer Price Index for the period
beginning June 30, 1981 through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years 10 Years 15 Years
------ ------- -------- --------
34.16% 21.60% 15.16% 15.82%
PERFORMANCE REVIEW
During the past six months, the stock market was bolstered by an extended period
of low interest rates, low inflation, steady economic growth, and increasing
corporate earnings. Toward the end of the period, though, strong employment
reports and increasing average hourly wage statistics created fears of higher
inflation. Companies began to report lower-than-expected earnings, causing
investors to worry and scale back on buying stocks.
Tough investing environments such as this require careful stock
selection supported by thorough research. Relying on its disciplined investment
process, Founders Growth Fund posted a 12.59% total return for the six months
ended June 30, 1996, surpassing the 10.04% six-month total return for the
overall stock market (measured by the unmanaged Standard & Poor's 500 Index).
INVESTMENT PROCESS
Before purchasing a stock for the Fund, we usually meet face-to-face with a
company's key executives to understand the firm's management strategy and to
evaluate their ability to navigate the company through phases of growth. After
37
<PAGE>
talking with a company's customers, its suppliers, and even its competitors, we
can analyze its potential for long-term growth.
FAVORABLE HOLDINGS
During the first half of the year, Founders Growth Fund found opportunity in the
telecommunication services and equipment industry.
One of the beneficiaries of Telecommunications Reform Act of 1996 and
one of the Fund's largest positions is WorldCom, the fourth-largest
long-distance company in the United States. We have a thorough understanding of
WorldCom management's vision and goals and are confident of their ability to
develop technologies that will lead the telecom industry.
Apparel retailers have also been strong performers for the Fund so far
this year. While we are still positive on the fundamental outlook of many
retailers, valuations have now risen to a level where we may consider taking
profits from some holdings.
We continue to be favorably disposed toward lodging companies.
Supply/demand dynamics within higher-end hotel properties remain positive. We
have maintained our long-held position in Marriott International and more
recently have initiated positions in ITT Corporation (owner of Sheraton Hotels)
and Host Marriott Corporation (owner and operator of luxury hotels).
ECONOMIC OUTLOOK
Earnings growth, inflation, and interest rates will continue to be the most
influential factors in determining the direction of the equity market. If
economic growth remains moderate and there continues to be little upward
pressure on inflation, we anticipate this scenario will be positive for our
stock selection process. As opportunities arise, we will add or trim our
positions in attractively valued companies that meet our growth characteristics.
Edward F. Keely, CFA
Portfolio Manager
TOP TEN HOLDINGS
1. Ascend Communication
2. U.S. Robotics Corporation
3. Newbridge Networks Corporation
4. WorldCom, Inc.
5. Hospitality Franchise Systems, Inc.
6. Parametric Technology Corporation
7. Guidant Corporation
8. Computer Associates International, Inc.
9. AT&T Corporation
10. The Home Depot, Inc.
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
38
<PAGE>
FOUNDERS GROWTH FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS (FOREIGN)-0.3%
Computer Software-0.3%
18,000 Systeme, Anwendungen, Produkte in
der Datenverarbeitung
AG Preferred (GE) $ 2,669,006
-----------
TOTAL PREFERRED STOCKS (FOREIGN)-0.3%
(COST-$1,473,382) 2,669,006
-----------
COMMON STOCKS (DOMESTIC)-72.3%
Aerospace-0.8%
80,000 Lockheed Martin Corporation $ 6,720,000
-----------
Apparel-1.0%
80,000 Nike, Inc. Class B 8,220,000
-----------
Banking-1.1%
135,200 Chase Manhattan Corporation 9,548,500
-----------
Biotechnology-0.9%
260,000 Centocor, Inc* 7,767,500
-----------
Building Materials-0.6%
175,000 The Stanley Works 5,206,250
-----------
Business Services-2.4%
90,000 Computer Sciences Corporation* 6,727,500
230,000 Fiserv, Inc.* 6,900,000
170,000 Gartner Group, Inc. Class A* 6,226,250
-----------
19,853,750
Capital Goods-0.9% -----------
172,000 Foster Wheeler Corporation 7,718,500
-----------
Chemicals-0.9%
194,000 B.F. Goodrich Company 7,250,750
-----------
Computer Equipment-5.5%
55,000 Applied Magnetics Corporation* 577,500
104,600 Gateway 2000, Inc.* 3,543,325
285,000 Silicon Graphics, Inc.* 6,840,000
150,000 Stratus Computer, Inc.* 4,350,000
190,000 Sun Microsystems, Inc.* 11,162,500
500,000 Unisys Corporation* 3,562,500
195,000 U.S. Robotics Corporation*` 16,623,750
-----------
46,659,575
Computer Networking-2.8% -----------
200,375 Cisco Systems, Inc.* 11,346,234
217,600 Stratacom, Inc.* 12,240,000
-----------
23,586,234
Computer Software-8.0% -----------
170,000 BMC Software, Inc.* 10,115,000
245,000 Cadence Design System, Inc.* 8,268,750
190,000 Computer Associates International, Inc. 13,537,500
70,000 Microsoft Corporation* 8,400,000
340,000 Parametric Technology Corporation* 14,705,000
172,500 PeopleSoft, Inc.* 12,247,500
-----------
67,273,750
Financial Services-3.8% -----------
296,575 Associates First Capital Corporation
Class A* 11,158,634
100,000 Federal Home Loan Mortgage Corporation 8,550,000
240,000 Federal National Mortgage Association 8,040,000
185,525 The Money Store Inc. 4,035,169
-----------
31,783,803
-----------
* Non-income producing. See notes to financial statements.
39
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Healthcare Services-6.1%
123,458 Cardinal Health, Inc. $ 8,904,408
210,000 Columbia/HCA Healthcare Corporation 11,208,750
227,000 Medaphis Corporation* 8,825,554
187,500 Phycor, Inc.* 7,078,125
170,000 Shared Medical Systems Corporation 10,922,500
205,000 Tenet Healthcare Corporation* 4,381,875
-----------
51,321,212
Insurance-0.7% -----------
240,000 Everest Reinsurance Holdings, Inc. 6,210,000
-----------
Leisure & Entertainment-7.2%
100,000 America Online, Inc.* 4,350,000
210,000 Hospitality Franchise Systems, Inc.* 14,700,000
100,000 Harrah's Entertainment, Inc.* 2,825,000
135,000 ITT Corporation* 8,943,750
200,000 Marriott International, Inc. 10,750,000
145,000 Mirage Resorts, Inc.* 7,830,000
228,400 Sun International Hotels Limited* 11,077,400
-----------
60,476,150
Medical Supplies & Equipment-4.7% -----------
185,000 Baxter International, Inc. 8,741,250
290,000 Guidant Corporation 14,282,500
176,000 Johnson & Johnson 8,712,000
160,000 Nellcor Puritan Bennett, Inc.* 7,760,000
-----------
39,495,750
Packaging-0.9% -----------
172,300 Crown Cork & Seal, Inc. 7,753,500
-----------
Pharmaceuticals-1.5%
88,000 Bristol-Myers Squibb Company 7,920,000
80,800 Merck & Company 5,221,700
-----------
13,141,700
Publishing & Broadcasting-0.7% -----------
191,250 Infinity Broadcasting Corporation* 5,737,500
-----------
Retail-7.8%
175,800 Consolidated Stores Corporation* 6,460,650
190,000 Dillards Department Stores, Inc. 6,935,000
255,000 Federated Department Stores, Inc.* 8,701,875
220,000 The Gap, Inc. 7,067,500
249,841 The Home Depot, Inc. 13,490,964
163,175 Saks Holdings, Inc.* 5,568,347
165,000 Sears, Roebuck & Company 8,023,125
300,000 Sunglass Hut International, Inc.* 7,275,000
75,000 Talbots, Inc. 2,428,125
-----------
65,950,586
Semiconductors & Equipment-1.7% -----------
100,000 Intel Corporation 7,337,500
124,000 Linear Technology Corporation 3,704,500
56,500 Maxim Integrated Products, Inc.* 1,532,562
49,975 Xilinx, Inc.* 1,580,460
-----------
14,155,022
Supermarkets-0.9% -----------
183,550 Kroger Company* 7,250,225
-----------
Telecommunications & Equipment-11.4%
170,000 ADC Telecommunications, Inc.* 7,565,000
350,000 Ascend Communication, Inc.* 19,643,750
215,000 AT&T Corporation 13,330,000
90,000 Cascade Communications Corporation* 6,120,000
257,000 General Instrument Corporation 7,420,875
80,000 Octel Communications Corporation* 1,560,000
275,000 Paging Network, Inc.* 6,496,875
298,600 Picturetel Corporation* 11,757,375
90,000 Premisys Communications, Inc.* 5,490,000
20,000 Shiva Corporation* 1,595,000
270,000 WorldCom, Inc. * 14,917,500
-------------
95,896,375
TOTAL COMMON STOCKS (DOMESTIC)-72.3% ------------
(COST-$486,029,648) 608,976,632
------------
40
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
COMMON STOCKS (FOREIGN)-12.3%
Airlines-1.0%
800,000 Singapore Airlines (SI) $ 8,445,200
------------
Apparel-0.8%
79,900 Adidas AG (GE) 6,713,709
------------
Building Materials-1.0%
125,000 Hunter Douglas NV (NE) 8,531,162
------------
Office Supplies & Equipment-0.7%
60,000 OCE Van Der Grinten NV (NE) 6,355,092
------------
Pharmaceuticals-2.1%
200,000 Astra, AB Series B (SW)* 8,710,740
40,000 Astra, AB Series A (SW)* 1,766,264
135,000 Smithkline Beecham PLC ADR
Ordinary A (UK) 7,340,625
------------
17,817,629
Retail-1.0% ------------
129,650 Gucci Group NV (FR) 8,362,425
------------
Telecommunications & Equipment-5.7%
1,000 DDI Corporation (JA) 8,716,147
336,775 Korea Mobile Telecommunications
Corporation ADR (KO) 5,767,272
235,000 Newbridge Networks Corporation (CA)* 15,392,500
465,000 Orange PLC ADR (UK) 8,079,375
140,000 Telecomunicacoes Brasileiras
Sponsored ADR (BR) 9,747,500
------------
47,702,794
TOTAL COMMON STOCKS (FOREIGN)-12.3% ------------
(COST-$79,926,935) 103,928,011
------------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-14.2%
$10,000,000 American Express Credit 5.32%
07/05/96 $ 9,994,089
16,800,000 American Express Credit 5.34%
07/12/96 16,772,588
9,000,000 General Electric Capital 5.37%
07/10/96 8,987,918
8,600,000 Household Finance Corporation 5.38%
07/11/96 8,587,148
5,000,000 Morgan Stanley Group 5.60%
07/01/96 5,000,000
11,300,000 Oklahoma Gas & Electric Co. 5.32%
07/01/96 11,300,000
11,200,000 Raytheon 5.31%
07/02/96 11,198,348
11,400,000 Shell Oil Company 5.35%
07/08/96 11,388,252
13,200,000 Shell Oil Company 5.35%
07/15/96 13,172,537
9,000,000 Warner Lambert Company 5.30%
07/03/96 8,997,350
13,900,000 Warner Lambert Company 5.35%
07/09/96 13,883,473
TOTAL CORPORATE SHORT-TERM NOTES-14.2%
(COST-$119,281,703) 119,281,703
-----------
TOTAL INVESTMENTS-99.1% 834,855,352
OTHER ASSETS & LIABILITIES-0.9% 7,657,871
------------
TOTAL NET ASSETS-100.0% $842,513,223
============
* Non-income producing. See notes to financial statements.
41
<PAGE>
FOUNDERS BLUE CHIP FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Growth Fund to a $10,000 investment in each of Lipper Growth Fund
Index, Standard & Poor's 500 Index and Consumer Price Index for the period
beginning June 30, 1981 through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years 10 Years
------ ------- --------
29.67% 14.88% 12.27%
PERFORMANCE REVIEW
While many areas of the market have moved in and out of favor in the first half
of 1996, large-capitalization issues--those in which Founders Blue Chip Fund
concentrates its investments--enjoyed support throughout the period. As a result
of careful stock selection, the Fund posted a return of 16.29% for the six
months ended June 30, 1996.
This is exceptional when compared to the 10.04% return of the broad
market, measured by the benchmark Standard & Poor's 500 Index.
Investors at the close of 1995 worried that interest-rate increases and,
therefore, a slowing economy loomed on the horizon. Very positive economic news
during the first months of the half--especially in job growth--went very far
toward confirming these suspicions. Seeking safety and liquidity, many investors
shifted dollars to the stocks of larger, more mature companies.
By the second quarter, some investors' predictions began to come true.
Pushed by market forces, interest rates did rise, despite decisions by the
Federal Reserve not to increase key short-term rates.
42
<PAGE>
However, by quarter's end the market had not experienced the kind of
correction that some bears feared would result from this rise.
INVESTMENT OPPORTUNITIES
One area of great success for the Fund has been the retail and apparel industry.
Earlier in the year, retail issues were out of favor with the market; therefore,
we were able to buy the stocks of several promising companies at attractive
prices.
For example, we own the stocks of The Gap (which has capitalized on the
trend toward casual office dressing) and Intimate Brands (which owns the
Victoria's Secret and Bath & Body Works stores), both of which have added
significantly to the Fund's performance.
Leisure and entertainment companies have provided another promising
avenue for investment. We have been impressed with the strong earnings gains of
hotel companies, such as La Quinta Inns.
Current demand for vacation and business-related travel is strong, and
advance bookings for this summer suggest a continuation of the strong sales and
earnings.
ECONOMIC OUTLOOK
Though the Fund's first-half performance has been promising, it is unlikely that
the market will continue its blistering pace throughout the remainder of the
year. The outlook for inflation and corporate earnings seems promising for
stocks; yet, the market has not responded to the second quarter's interest-rate
rises, leaving it in a somewhat vulnerable position.
Whatever happens in the markets, we will keep Founders Blue Chip's
portfolio broadly diversified and continue to scour the markets for attractively
valued companies that meet our growth criteria. By sticking to this fundamental
strategy, we believe that the Fund will be well-positioned over the long term,
regardless of short-term market events.
Brian F. Kelly
Portfolio Manager
TOP TEN HOLDINGS
1. The Home Depot, Inc.
2. Intimate Brands, Inc.
3. Bally Entertainment Corporation
4. International Business Machines
5. AT&T Corporation
6. The Gap, Inc.
7. Cablevision System Corporation
8. Foster Wheeler Corporation
9. Coca-Cola Company
10. Kimberly Clark Corporation
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
43
<PAGE>
FOUNDERS BLUE CHIP FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS (DOMESTIC)-5.2%
Business Services-0.6%
26,900 Ceridian Corporation 5.5
Convertible Preferred $ 2,985,900
-----------
Leisure & Entertainment-3.0%
560,000 Bally Entertainment Corporation 8.0%
Convertible Preferred 14,630,000
-----------
Publishing & Broadcasting-1.6%
285,000 Cablevision System Corporation
Series I Preferred 7,410,000
-----------
TOTAL PREFERRED STOCKS (DOMESTIC)-5.2%
(COST-$14,739,450) 25,025,900
-----------
COMMON STOCKS (DOMESTIC)-70.2%
Airlines-0.2%
20,000 Continental Airlines, Inc. Class B* $ 1,235,000
-----------
Apparel-1.8%
90,800 Fruit of the Loom, Inc. Class A* 2,315,400
55,000 Nine West Group, Inc.* 2,811,875
70,000 Tommy Hilfiger Corporation* 3,753,750
-----------
8,881,025
Banking-1.3% -----------
30,000 Citicorp, Inc. 2,478,750
65,000 First Union Corporation 3,956,875
-----------
6,435,625
Biotechnology-0.4% -----------
60,000 Centocor, Inc* 1,792,500
-----------
Business Services-2.7%
110,000 Ceridian Corporation* 5,555,000
50,000 Electronic Data Systems Corporation 2,687,500
160,000 Fiserv, Inc.* 4,800,000
-----------
13,042,500
Capital Goods-1.5% -----------
159,675 Foster Wheeler Corporation 7,165,416
-----------
Chemicals-1.0%
129,000 Morton International, Inc. 4,805,250
-----------
Computer Equipment-3.5%
134,000 International Business Machines
Corporation 13,266,000
150,000 Silicon Graphics, Inc.* 3,600,000
-----------
16,866,000
Computer Networking-1.2% -----------
70,000 3Com Corporation* 3,193,750
44,000 Cisco Systems, Inc.* 2,491,500
-----------
5,685,250
Computer Software-2.5% -----------
60,000 BMC Software, Inc.* 3,570,000
75,000 Cadence Design System, Inc.* 2,531,250
105,000 Oracle Systems Corporation* 4,134,375
40,000 Parametric Technology Corporation* 1,730,000
-----------
11,965,625
Consumer Products-4.1% -----------
110,000 Hasbro, Inc. 3,932,500
88,000 Kimberly Clark Corporation 6,798,000
50,000 Procter & Gamble Company 4,531,250
155,000 Revlon, Inc. Class A* 4,514,375
-----------
19,776,125
Consumer Services-1.1% -----------
145,000 CUC International, Inc.* 5,147,500
-----------
Electronic Equipment-0.9%
50,000 General Electric Company 4,325,000
-----------
44
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Financial Services-6.3%
21,575 Advanta Corporation Class A $ 1,094,931
158,325 Associates First Capital Corporation
Class A* 5,956,978
70,000 Chase Manhattan Corporation 4,943,750
100,000 Contifinancial Corporation* 2,950,000
215,000 Countrywide Credit Industries, Inc. 5,321,250
124,000 Credit Acceptance Corporation* 2,604,000
58,400 Federal National Mortgage Association 1,956,400
51,000 Household International, Inc 3,876,000
82,250 The Money Store Inc. 1,788,938
-----------
30,492,247
Food & Beverages-3.2% -----------
144,000 Coca-Cola Company 7,038,000
100,000 Dole Food, Inc. 4,300,000
130,000 H. J. Heinz Company 3,948,750
-----------
15,286,750
Healthcare Services-3.2% -----------
71,827 Cardinal Health, Inc. 5,180,522
102,125 Columbia/HCA Healthcare Corporation 5,450,922
176,000 Omnicare, Inc. 4,664,000
-----------
15,295,444
Insurance-1.4% -----------
13,000 Cigna Corporation 1,532,375
60,000 MGIC Investment Corporation 3,367,500
45,000 Travelers Group, Inc. 2,053,125
-----------
6,953,000
Leisure & Entertainment-3.9% -----------
20,000 America Online, Inc.* 870,000
205,000 Carnival Corporation Class A 5,919,375
190,000 La Quinta Inns, Inc. 6,365,000
110,000 Viacom International Inc. Class B* 4,276,250
43,000 Viacom International Inc. Class A* 1,639,375
-----------
19,070,000
Medical Supplies & Equipment-2.1% -----------
125,000 Baxter International, Inc. 5,906,250
87,000 Nellcor Puritan Bennett, Inc.* 4,219,500
-----------
10,125,750
Oil & Gas-0.8% -----------
70,000 Baker Hughes, Inc. 2,301,250
30,000 Halliburton Company 1,665,000
-----------
3,966,250
Pharmaceuticals-1.6% -----------
50,000 Abbot Laboratories 2,175,000
60,000 Bristol-Myers Squibb Company 5,400,000
-----------
7,575,000
Publishing & Broadcasting-1.3% -----------
355,000 Tele-Communications, Inc. Series A* 6,390,000
-----------
REITs-3.0%
100,000 Avalon Properties, Inc. 2,175,000
143,000 Reckson Associates Realty Corporation 4,719,000
188,275 Storage Trust Realty Shares
of Beneficial Interest 3,859,638
187,000 Walden Residential Properties, Inc. 3,810,125
-----------
14,563,763
Restaurants-0.8% -----------
102,275 Lone Star Steakhouse & Saloon, Inc.* 3,848,097
-----------
Retail-11.8%
60,600 AutoZone, Inc.* 2,105,850
40,000 Dayton Hudson Corporation 4,125,000
137,800 Federated Department Stores, Inc.* 4,702,425
260,800 The Gap, Inc. 8,378,200
337,350 The Home Depot, Inc. 18,216,900
762,400 Intimate Brands, Inc. Class A 17,439,900
180,000 Shaw Industries, Inc. 2,362,500
-----------
57,330,775
-----------
45
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Semiconductors & Equipment-2.1%
113,000 Analog Device, Inc.* $ 2,881,500
53,000 Intel Corporation 3,888,875
64,000 Linear Technology Corporation 1,912,000
50,800 Xilinx, Inc.* 1,606,550
-----------
10,288,925
Steel-1.3% -----------
150,000 Ucar International, Inc.* 6,243,750
-----------
Supermarkets-0.7%
87,200 Albertsons, Inc. 3,607,900
-----------
Telecommunications & Equipment-3.7%
172,800 AT&T Corporation 10,713,600
75,000 Glenayre Technologies, Inc.* 3,740,625
150,000 Paging Network, Inc.* 3,543,750
-----------
17,997,975
Transportation-0.8% -----------
60,000 Conrail, Inc. 3,982,500
-----------
TOTAL COMMON STOCKS (DOMESTIC)-70.2%
(COST-$285,270,674) 340,140,942
-----------
COMMON STOCKS (FOREIGN)-7.7%
Airlines-1.0%
450,000 Singapore Airlines (SI) $ 4,750,425
-----------
Office Equipment-0.8%
35,000 OCE Van Der Grinten NV (NE) 3,707,137
-----------
Pharmaceuticals-2.1%
60,000 Astra AB Sponsored ADR representing
Series A Shares (SW) 2,625,000
40,000 Astra, AB Series B (SW) 1,742,148
111,000 Smithkline Beecham PLC ADR Ordinary A (UK) 6,035,625
-----------
10,402,773
Retail-0.7% -----------
50,000 Gucci Group NV (FR) 3,225,000
-----------
Telecommunications & Equipment-3.1%
600 DDI Corporation (JA) 5,229,688
240,000 Orange PLC ADR (UK)* 4,170,000
85,000 Telecomunicacoes Brasileiras
Sponsored ADR (BR) 5,918,125
-----------
15,317,813
Total Common Stocks (Foreign)-7.7% -----------
(Cost-$32,363,563) 37,403,148
-----------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-15.3%
$13,200,000 American Express Credit 5.45%
07/01/96 $13,200,000
8,600,000 Aon Corporation 5.33%
07/01/96 8,600,000
7,000,000 Ciesco LP 5.35%
07/03/96 6,997,919
8,400,000 Corporate Asset Funding 5.35%
07/02/96 8,398,752
8,400,000 Ford Motor Credit 5.36%
07/08/96 8,391,245
8,400,000 General Electric Capital 5.37%
07/09/96 8,389,976
6,000,000 GTE North 5.38%
07/08/96 5,993,723
7,100,000 Pepsico, Inc. 5.36%
07/10/96 7,090,486
6,900,000 Wal-Mart Stores 5.25%
07/05/96 6,895,975
------------
TOTAL CORPORATE SHORT-TERM NOTES-15.3%
(COST-$73,958,076) 73,958,076
------------
TOTAL INVESTMENTS-98.4% 476,528,066
OTHER ASSETS & LIABILITIES-1.6% 7,796,182
------------
TOTAL NET ASSETS-100.0% $484,324,248
============
* Non-income producing. See notes to financial statements.
46
<PAGE>
FOUNDERS BALANCED FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Growth Fund to a $10,000 investment in each of Lipper Growth Fund
Index, Standard & Poor's 500 Index and Consumer Price Index for the period
beginning June 30, 1981 through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years 10 Years 15 Years
------ ------- -------- --------
26.78% 15.71% 12.13% 12.40%
PERFORMANCE REVIEW
Due both to our stock-picking philosophy and portfolio flexibility, Founders
Balanced Fund performed well during the first half of 1996, rising 10.84% for
the six months ended June 30, 1996, and outstripping the benchmark Standard &
Poor' s 500 Index, which rose 10.04% for the period. This is particularly
remarkable since the Balanced Fund is never more than 75% exposed to the equity
market.
The direction of the economy and the markets were in question during the
period. Positive economic news during the first months of the half caused great
concern among investors that interest-rate increases were on the horizon.
Seeking safety and liquidity, many investors' dollars shifted to the stocks of
larger, more mature companies.
Investors' interest-rate fears were only half realized. Rates did rise
in the second quarter due to the market's expectation of more rapid economic
growth, rather than through action by the Federal Reserve. While a market
47
<PAGE>
decline might have been expected as a result of this, stocks continued on their
upward path.
INVESTMENT OPPORTUNITIES
Because of market uncertainties, we adopted a more defensive posture for the
portfolio in the first quarter, keeping approximately 50% of the Fund's assets
in equities and the rest in fixed-income issues and cash equivalents. By the end
of the half, stocks represented about 43% of the portfolio.
During the half, Founders Balanced Fund found many investment
opportunities in the retail and apparel industry, where companies were selling
at attractive valuations and producing better-than-expected earnings. Holdings
such as The Gap, which has capitalized on the trend toward casual office
dressing, and Intimate Brands, which owns the Victoria's Secret and Bath & Body
Works stores, added to the Fund's performance.
ECONOMIC OUTLOOK
Although interest-rate increases are often accompanied by a drop in the value of
equities, this had not occurred as of the end of June. We believe this places
the market in a position where it may be vulnerable to a setback. For the
markets to gain any real strength going forward, this situation may need to be
corrected
Despite this, we see many factors that give us cause for optimism.
Inflation appears to be well under control, and we expect to see healthy
earnings growth for the market as a whole. We believe this environment will be
positive for our stock selection process, as we may be able to find more
attractively valued companies that meet our growth criteria.
Brian F. Kelly
Portfolio Manager
TOP TEN HOLDINGS
1. The Home Depot, Inc.
2. International Business Machines
3. Intimate Brands, Inc.
4. Camden Properties
5. Redwood Trust Inc.
6. AT&T Corporation
7. Bally Entertainment Corporation
8. Everest Reinsurance Holdings
9. GCR Holdings Ltd.
10. Associates First Capital Corporation
PORTFOLIO COMPOSITION AND HOLDINGS ARE SUBJECT TO CHANGE.
48
<PAGE>
FOUNDERS BALANCED FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Shares Market Value
- --------------------------------------------------------------------------------
PREFERRED STOCKS (DOMESTIC)-6.0%
Financial Services-1.3%
65,000 Advanta (Sails) 6.75% Convertible Preferred $ 2,892,500
-----------
Leisure & Entertainment-1.6%
140,000 Bally Entertainment Corporation 8.0%
Convertible Preferred 3,657,500
-----------
Publishing & Broadcasting-0.5%
45,000 Cablevision System Corporation
Series I Preferred 1,170,000
-----------
Retail-0.8%
30,000 Ann Taylor Finance Trust 144A
Convertible Preferred+ 1,772,400
-----------
Telecommunications & Equipment-1.0%
50,000 TCI Communications Preferred 2,206,250
-----------
Utilities-0.8%
70,000 MCN Corporation Preferred 1,785,000
-----------
TOTAL PREFERRED STOCKS (DOMESTIC)-6.0%
(COST-$10,638,200) 13,483,650
-----------
COMMON STOCKS (DOMESTIC)-41.1%
Banking-1.1%
10,000 Citicorp, Inc. $ 826,250
25,000 First Union Corporation 1,521,875
-----------
2,348,125
Business Services-0.4% -----------
15,000 Electronic Data Systems Corporation 806,250
-----------
Capital Goods-1.2%
59,550 Foster Wheeler Corporation 2,672,306
-----------
Chemicals-0.7%
44,000 Morton International, Inc. 1,639,000
-----------
Computer Equipment-2.0%
45,000 International Business
Machines Corporation 4,455,000
-----------
Consumer Products-2.3%
30,000 Hasbro, Inc. 1,072,500
28,500 Kimberly Clark Corporation 2,201,625
20,000 Procter & Gamble Company 1,812,500
-----------
5,086,625
Financial Services-4.3%
81,675 Associates First Capital
Corporation Class A* 3,073,022
25,000 Chase Manhattan Corporation 1,765,625
65,000 Countrywide Credit Industries, Inc. 1,608,750
20,600 Federal National Mortgage Association 690,100
27,000 Household International, Inc. 2,052,000
7,200 Merrill Lynch & Company, Inc. 468,900
-----------
9,658,397
Food & Beverages-0.6% -----------
45,000 H. J. Heinz Company 1,366,875
-----------
Healthcare Services-1.9%
13,000 Cardinal Health, Inc. 937,625
33,475 Columbia/HCA Healthcare Corporation 1,786,728
59,400 Omnicare, Inc. 1,574,100
-----------
4,298,453
Insurance-6.0% -----------
8,000 Aetna Life & Casualty Company 572,000
20,000 Capital Re Corporation 735,000
5,000 Cigna Corporation 589,375
133,000 Everest Reinsurance Holdings, Inc. 3,441,375
120,000 GCR Holdings Limited 3,150,000
20,000 MGIC Investment Corporation 1,122,500
45,000 PMI Group, Inc. 1,912,500
15,000 Travelers Group, Inc. 684,375
41,200 Travelers Aetna Property Casualty
Corporation Class 1,169,050
-----------
13,376,175
Leisure & Entertainment-2.3% -----------
54,000 Carnival Corporation Class A 1,559,250
52,500 Gaylord Entertainment Company Class A 1,483,125
60,000 La Quinta Inns, Inc. 2,010,000
-----------
5,052,375
-----------
* Non-income producing. See notes to financial statements.
+ Securities were acquired pursuant to Rule 144A and may be deemed to be
restricted for resale.
49
<PAGE>
Shares Market Value
- --------------------------------------------------------------------------------
Oil & Gas-0.5%
21,000 Baker Hughes, Inc. $ 690,375
9,000 Halliburton Company 499,500
----------
1,189,875
Pharmaceuticals-1.6% ----------
40,000 Baxter International, Inc. 1,890,000
19,000 Bristol-Myers Squibb Company 1,710,000
----------
3,600,000
REITs-6.7% ----------
30,000 Avalon Properties, Inc. 652,500
162,800 Camden Properties Trust Shares of
Beneficial Interest 3,866,500
60,000 LTC Properties, Inc. 990,000
62,000 Oasis Residential, Inc. 1,356,250
16,400 Omega Health Care Investors, Inc. 453,050
27,650 Reckson Associates Realty Corporation 912,450
135,325 Redwood Trust, Inc. 3,721,438
71,250 Storage Trust Realty Shares of
Beneficial Interest 1,460,625
70,000 Walden Residential Properties, Inc. 1,426,250
-----------
14,839,063
Retail-5.9% -----------
90,400 The Gap, Inc. 2,904,100
90,825 The Home Depot, Inc. 4,904,550
190,000 Intimate Brands, Inc. Class A 4,346,250
80,000 Shaw Industries, Inc. 1,050,000
-----------
13,204,900
Semiconductors & Equipment-0.8% -----------
15,000 Intel Corporation 1,100,625
19,000 Linear Technology Corporation 567,625
-----------
1,668,250
Supermarkets-0.6% -----------
29,900 Albertsons, Inc. 1,237,112
-----------
Telecommunications & Equipment-1.6%
59,000 AT&T Corporation 3,658,000
-----------
Transportation-0.6%
20,000 Conrail, Inc. 1,327,500
-----------
TOTAL COMMON STOCKS (DOMESTIC)-41.1%
(COST-$77,303,537) 91,484,281
-----------
COMMON STOCKS (FOREIGN)-1.0%
Pharmaceuticals-1.0%
39,000 Smithkline Beecham PLC ADR Ordinary A (UK) $ 2,120,625
-----------
TOTAL COMMON STOCKS (FOREIGN)-1.0% (Cost-$1,972,972) 2,120,625
-----------
Principal Amount Market Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS (DOMESTIC)-5.2%
Computer Networking-1.0%
$1,500,000 3Com Corporation Convertible 144A 10.25%
Due 11/01/01+ $ 2,331,893
-----------
Energy Development-0.8%
1,500,000 Analog Devices, Inc. Convertible 3.50%
Due 12/01/00 1,773,716
-----------
Leisure & Entertainment-0.8%
1,500,000 HFS, Inc. Convertible 4.75%
Due 03/01/03 1,798,125
-----------
Pharmaceuticals-1.2%
2,750,000 Alza Corporation Convertible 5.00%
Due 05/01/06 2,660,625
-----------
Retail-1.0%
1,000,000 Federated Department Stores, Inc.
Convertible 5.00% Due 10/01/03 1,160,000
-----------
1,000,000 Sunglass Hut International Convertible 5.25%
Due 06/15/03 1,013,300
-----------
2,173,300
Semiconductors-0.4% -----------
1,000,000 Xilinx, Inc. Convertible 144A 5.25%
Due 11/01/02+ 918,796
-----------
TOTAL CONVERTIBLE BONDS (DOMESTIC)-5.2%
(COST-$10,816,501) 11,656,455
-----------
50
<PAGE>
Principal Amount Market Value
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS (FOREIGN)-0.5%
Banking-0.5%
1,000,000 Mitsubishi Bank Limited Convertible 3.00%
Due 11/30/02 $ 1,162,500
-----------
TOTAL CONVERTIBLE BONDS (FOREIGN)-0.5%
(COST-$1,000,000) 1,162,500
-----------
CORPORATE BONDS (DOMESTIC)-7.7%
Banking-1.0%
200,000 Mellon Bank Corporation 6.30%
Due 6/1/00 $ 196,786
2,000,000 Norwest Corporation 6.125% -----------
Due 10/15/00 1,951,604
-----------
2,148,390
Financial Services-5.3% -----------
4,000,000 Chrysler Financial Corporation 8.26%
Due 11/23/98 4,143,795
4,000,000 Chrysler Financial Corporation 5.875% -----------
Due 02/07/01 3,839,280
4,000,000 Ford Motor Credit Company 6.375% -----------
Due 09/15/99 3,966,095
-----------
11,949,170
Household Products-1.4% -----------
3,200,000 Black & Decker 7.20%
Due 10/07/96 3,213,037
-----------
TOTAL CORPORATE BONDS (DOMESTIC)-7.7%
(COST-$17,098,950) 17,310,597
-----------
U.S. GOVERNMENT SECURITIES-24.6%
U.S. TREASURY NOTES-23.7%
9,000,000 U.S. Treasury Note 6.50%
Due 05/15/05 $ 8,873,344
8,900,000 U.S. Treasury Note 6.75% -----------
Due 04/30/00 8,994,496
9,000,000 U.S. Treasury Note 6.50% -----------
Due 08/15/05 8,865,155
8,500,000 U.S. Treasury Note 6.125% -----------
Due 07/31/00 8,404,579
9,000,000 U.S. Treasury Note 6.25% -----------
Due 02/15/03 8,837,093
8,900,000 U.S. Treasury Note 6.875% -----------
Due 05/15/06 8,997,332
-----------
TOTAL U.S. TREASURY NOTES-23.7% (COST-$52,798,807) 52,971,999
-----------
U.S. AGENCIES-0.9%
FHLB NOTES- 0.9%
2,000,000 Federal Home Loan Bank 5.30%
Due 06/11/97 1,988,364
-----------
TOTAL U.S. GOVERNMENT SECURITIES-24.6%
(COST-$54,795,667) 54,960,363
-----------
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-12.0%
$6,300,000 American Express Credit 5.34%
07/03/96 $ 6,298,131
5,300,000 Bell South Capital Funding 5.34%
07/02/96 5,299,215
3,300,000 General Electric Capital 5.34%
07/01/96 3,300,000
7,500,000 GTE North 5.34%
07/05/96 7,495,483
4,400,000 Morgan Stanley Group 5.60%
07/01/96 4,400,000
------------
TOTAL CORPORATE SHORT-TERM NOTES-12.0%
(COST-$26,792,830) 26,792,829
------------
TOTAL INVESTMENTS-98.1% 218,971,300
OTHER ASSETS & LIABILITIES-1.9% 4,272,538
------------
TOTAL NET ASSETS-100.0% $223,243,838
============
+ Securities were acquired pursuant to Rule 144A and may be deemed to be
restricted for resale.
51
<PAGE>
FOUNDERS GOVERNMENT SECURITIES FUND
Graph:
This line graph compares the change in value of a $10,000 investment in
Founders Government Securities Fund to a $10,000 investment in each of
Lehman Brothers U.S. Treasury Composite Index, Lipper U.S. Government Fund
Index and Consumer Price Index for the period beginning March 1, 1988
(inception) through June 30, 1996.
AVERAGE ANNUAL TOTAL RETURN
as of June 30, 1996
1 Year 5 Years Since Inception (3/1/88)
------ ------- ------------------------
2.92% 5.36% 6.11%
PERFORMANCE REVIEW
The first half of 1996 was a difficult period for bond funds in general.
Founders Government Securities Fund posted a -1.29% return for the six months
ended June 30, 1996.
Positive economic news, including better-than-expected jobs growth and a
surging consumer sector, has resulted in an increase of over 1% in prevailing
interest rates, despite the decision of the Federal Reserve to leave key
short-term rates untouched for the present.
INVESTMENT OPPORTUNITIES
As we believe that the economy will begin to cool off in the months ahead, we
have taken this opportunity to lengthen the maturities of the securities in the
portfolio. The average maturity of the Fund on June 30 was in the intermediate
range, at 7.28 years, compared to an average maturity of about four years at the
end of 1995.
ECONOMIC OUTLOOK
While we expect modest growth in the economy, continued volatility in the bond
markets is also likely. Therefore, we will keep concentrating the Fund's
52
<PAGE>
investments in the intermediate maturity range, and we will continue to use
diligent research to find securities along the yield curve that represent the
most value and price appreciation potential. We believe that this is the best
approach in seeking to maximize income and limit risks to capital going forward.
Margaret Danuser
Portfolio Manager
SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Principal Amount Market Value
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES-99.0%
U.S. TREASURY NOTES-68.3%
$1,000,000 U.S. Treasury Note 6.375% Due 08/15/02 $ 990,607
3,500,000 U.S. Treasury Note 5.875% Due 11/15/05 3,296,645
2,000,000 U.S. Treasury Note 6.25% Due 02/15/03 1,963,755
1,000,000 U.S. Treasury Note 6.25% Due 05/31/00 993,425
1,000,000 U.S. Treasury Note 6.75% Due 04/30/00 1,010,624
1,000,000 U.S. Treasury Note 6.875% Due 08/31/99 1,014,367
1,000,000 U.S. Treasury Note 7.25% Due 05/15/04 1,035,301
1,000,000 U.S. Treasury Note 5.875% Due 03/31/99 984,761
-----------
11,289,485
U.S. Treasury Bonds-12.5% -----------
$1,000,000 U.S. Treasury Bond 7.25% Due 05/15/16 1,024,370
1,000,000 U.S. Treasury Bond 7.625% Due 02/15/07 1,036,843
-----------
2,061,213
GNMA Pools-18.2% -----------
$ 6,144 Government National Mortgage
Association 30-Year Pass-Through
Certificates 9.50% Due 07/15/16
Pool# 162128 $ 6,627
558,899 Government National Mortgage
Association 30-Year Pass-Through
Certificates 9.50% Due 07/15/17
Pool# 219162 602,509
469,217 Government National Mortgage
Association 30-Year Pass-Through
Certificates 9.50% Due 08/15/16
Pool# 174654 506,120
569,612 Government National Mortgage
Association 30-Year Pass-Through
Certificates 9.50% Due 08/15/17
Pool# 208545 614,059
622,468 Government National Mortgage
Association 30-Year Pass-Through
Certificates 9.50% Due 11/15/17
Pool# 234649 671,038
557,308 Government National Mortgage
Association 30-Year Pass-Through
Certificates 9.50% Due 11/15/17
Pool# 229625 600,794
-----------
3,001,147
-----------
TOTAL U.S. GOVERNMENT SECURITIES-99.0% 16,351,845
-----------
TOTAL INVESTMENTS-99.0% 16,351,845
OTHER ASSETS & LIABILITIES-1.0% 169,037
-----------
TOTAL NET ASSETS-100.0% $16,520,882
===========
53
<PAGE>
FOUNDERS MONEY MARKET FUND SCHEDULE OF INVESTMENTS
June 30, 1996 (unaudited)
Principal Amount Amortized Cost
- --------------------------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-99.6%
$3,600,000 Air Products & Chemicals, Inc. 5.26% 07/01/96 $3,600,000
5,000,000 Akzo Nobel 5.30% 07/23/96 4,983,805
5,200,000 Allergan Inc. 5.30% 07/30/96 5,177,799
5,400,000 Allied Domecq North America 5.33% 07/03/96 5,398,401
4,300,000 Ameritech Corporation 5.36% 08/23/96 4,266,068
5,200,000 Associates Corporation of North America
5.36% 07/05/96 5,196,903
5,000,000 Brown-Forman 5.30% 08/01/96 4,977,180
2,000,000 Brown-Forman 5.30% 08/09/96 1,988,517
5,000,000 Fluor Corporation 5.35% 07/25/96 4,982,167
3,000,000 Ford Motor Credit 5.36% 07/01/96 3,000,000
6,000,000 General Electric Capital 5.31% 08/16/96 5,959,290
6,500,000 General Re Corporation 5.35% 07/18/96 6,483,579
3,000,000 Golden Peanut Company 5.33% 10/01/96 2,959,136
5,000,000 Hasbro Inc. 5.45% 10/17/96 4,918,250
5,000,000 Hewlett Packard 5.22% 08/22/96 4,962,300
5,900,000 Kellogg Company 5.25% 08/26/96 5,851,817
6,600,000 Met Life Funding 5.35% 08/02/96 6,568,614
6,900,000 Monsanto Company 5.29% 08/21/96 6,848,291
5,600,000 Morgan Stanley Group 5.36% 07/26/96 5,579,156
7,000,000 Motorola Inc. 5.28% 07/02/96 6,998,973
5,800,000 Nalco Chemical Company 5.30% 07/11/96 5,791,461
6,000,000 Oklahoma Gas & Electric 5.37% 07/08/96 5,993,735
6,500,000 Potomac Electric Power 5.38% 07/17/96 6,484,458
5,100,000 Progress Capital Holdings 5.37% 07/09/96 5,093,914
5,400,000 Safeco Credit Company 5.30% 08/05/96 5,372,175
5,000,000 Sandoz Corporation 5.28% 07/15/96 4,989,734
5,000,000 Sharp Electronics 5.23% 07/12/96 4,992,010
6,000,000 Stanley Works 5.30% 07/16/96 5,986,750
6,200,000 Toshiba America 5.29% 07/19/96 6,183,601
6,000,000 Weyerhauser Company 5.29% 07/24/96 5,979,721
------------
Total Corporate Short-Term Notes-99.6%
(Cost-$157,567,804) 157,567,805
------------
Total Investments-99.6% 157,567,805
Other Assets & Liabilities-0.4% 686,501
------------
Total Net Assets-100.0% $158,254,306
============
54
<PAGE>
This page intentionally left blank.
55
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
(unaudited)
Inter-
national Worldwide Blue Government Money
JUNE 30, 1996 Discovery Frontier Passport Special Equity Growth Growth Chip Balanced Securities Market
(In Thousands) Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
--------- -------- -------- -------- -------- --------- ------ ----- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities,
at market (Identified
cost of $183,918,
$253,059, $129,689,
$323,890, $6,355,
$235,735, $567,430,
$332,374, $173,626,
$16,419, respectively)....... $239,672 $331,719 $146,881 $346,182 $6,865 $284,912 $715,574 $402,570 $192,178 $16,351 0
Corporate short-term notes,
at cost (approximates
market)....................... 27,962 39,596 21,091 29,899 2,100 66,479 119,282 73,958 26,793 0 $157,568
Cash on deposit with custodian... 1,606 1,913 777 2,046 74 1,652 4,364 2,363 1,012 92 836
Receivables:
Investment securities sold.... 5,525 1,855 1,468 2,698 63 52 13,769 2,178 585 0 0
Subscriptions and other
receivables.................. 2,412 816 1,546 282 54 1,736 3,825 2,964 1,117 72 860
Dividends and interest........ 7 83 165 55 12 775 329 783 1,825 221 0
Deferred charges................. 0 0 5 0 9 0 0 0 0 0 0
-------- -------- -------- -------- ------ -------- -------- -------- -------- ------- --------
Total Assets............... 277,184 375,982 171,933 381,162 9,177 355,606 857,143 484,816 223,510 16,736 159,264
-------- -------- -------- -------- ------ -------- -------- -------- -------- ------- --------
LIABILITIES
Accounts payable:
Investment securities
purchased................... 4,176 6,424 7,484 4,542 1,019 11,689 13,317 0 0 0 0
Redemptions and
other payables.............. 663 238 361 190 0 189 623 116 105 136 384
Accrued expenses.............. 311 398 182 359 0 355 690 376 161 20 107
Dividends..................... 0 0 0 0 0 0 0 0 0 59 519
-------- -------- -------- -------- ------ -------- -------- -------- -------- ------- --------
Total Liabilities.......... 5,150 7,060 8,027 5,091 1,019 12,233 14,630 492 266 215 1,010
-------- -------- -------- -------- ------ -------- -------- -------- -------- ------- --------
Net Assets Applicable
to Outstanding Shares............ $272,034 $368,922 $163,906 $376,071 $8,158 $343,373 $842,513 $484,324 $223,244 $16,521 $158,254
======== ======== ======== ======== ====== ======== ======== ======== ======== ======= ========
Capital shares:
Authorized
(Par value $0.01)............. 40,000 40,000 30,000 150,000 20,000 40,000 125,000 100,000 35,000 20,000 400,000
======== ======== ======== ======== ====== ======== ======== ======== ======== ======= ========
Outstanding.................... 10,485 10,732 12,048 48,016 712 15,516 50,661 62,237 21,268 1,846 158,254
======== ======== ======== ======== ====== ======== ======== ======== ======== ======= ========
Net Asset Value, Offering
and Redemption Price
Per Share.................... $25.94 $34.38 $13.60 $7.83 $11.46 $22.13 $16.63 $7.78 $10.50 $8.95 $1.00
======== ======== ======== ======== ====== ======== ======== ======== ======== ======= ========
See notes to financial statements.
</TABLE>
56 and 57
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(In Thousands) Inter-
national Worldwide Blue Government 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>
INVESTMENT INCOME
Income:
Dividends..................... $ 47 $ 713 $ 773 $ 717 $ 30 $ 1,970 $ 1,951 $ 2,730 $ 1,408 $ 0 $ 0
Interest...................... 844 1,623 461 1,147 20 1,385 3,293 1,341 2,074 577 3,569
-------- -------- -------- -------- ------- -------- ------- -------- -------- ------- -------
Income..................... 891 2,336 1,234 1,864 50 3,355 5,244 4,071 3,482 577 3,569
-------- -------- -------- -------- ------- -------- ------- -------- -------- ------- -------
Expenses:
Advisory fees.................. 1,183 1,652 523 1,485 24 1,412 2,684 1,327 535 60 329
Shareholder servicing fees..... 179 248 40 284 8 152 314 255 80 23 120
Accounting fees................ 32 48 14 53 8 50 94 51 18 3 18
Distribution fees*............. 299 438 131 490 6 364 942 527 206 8 0
Transfer agency fees
and expenses................. 56 79 12 92 2 47 96 82 25 7 37
Registration fees.............. 28 27 30 51 5 51 108 31 25 10 30
Postage and mailing expenses... 20 30 5 35 0 19 44 32 10 2 9
Custodian fees and expenses.... 7 13 48 12 6 83 29 13 3 1 2
Printing expenses.............. 30 44 7 51 1 27 61 46 14 4 20
Legal and audit fees........... 15 23 6 27 1 19 45 28 11 2 9
Other expenses................. 58 86 35 97 1 73 161 104 43 4 30
Directors' fees and expenses... 12 18 4 21 0 14 37 21 8 1 7
Earnings credits............... (1) 0 0 (6) 0 0 (3) (5) (5) 0 (2)
Organization Expenses.......... 0 0 1 0 9 0 0 0 0 0 0
-------- ------- --------- ------- -------- -------- -------- -------- -------- ------- -------
Expenses.................... 1,918 2,706 856 2,692 71 2,311 4,612 2,512 973 125 609
Reimbursed Expenses......... 0 0 0 0 (24) 0 0 0 0 0 0
------- -------- -------- -------- -------- -------- -------- -------- -------- ------- -------
Net Investment
Income (Loss)......... (1,027) (370) 378 (828) 3 1,044 632 1,559 2,509 452 2,960
------- -------- -------- -------- -------- -------- -------- -------- --------- ------ -------
REALIZED AND UNREALIZED
GAIN (LOSS)ON INVESTMENTS
AND FOREIGN CURRENCY
TRANSACTIONS
Net Realized Gain (Loss)
from Security Transactions:
Proceeds from securities
sold........................ 129,849 126,445 16,376 377,170 971 73,323 443,526 258,996 60,898 0 0
Proceeds from long-term
U.S. Government
Obligations 0 0 0 0 0 0 0 0 4,619 10,174 0
Cost of securities sold....... 109,337 92,636 14,420 335,765 813 62,835 389,739 223,201 59,681 10,322 0
-------- ------- -------- --------- -------- -------- -------- -------- -------- ------- -------
Net Gain (Loss)
From Security
Transactions............... 20,512 33,809 1,956 41,405 158 10,488 53,787 35,795 5,836 (148) 0
Net Gain (Loss)
From Foreign Currency
Transactions.................... (3) (25) (145) 2 (10) (242) (77) (81) (22) 0 0
Net Change in Unrealized
Appreciation (Depreciation)..... 18,636 2,010 12,633 1,237 510 19,176 33,519 25,113 8,589 (587) 0
-------- ------- -------- --------- -------- -------- -------- -------- -------- ------ --------
Net Realized and Unrealized
Gain (Loss) on
Investments and
Foreign Currency
Transactions............... 39,145 35,794 14,444 42,644 658 29,422 87,229 60,827 14,403 (735) 0
-------- ------- -------- --------- -------- --------- ------- -------- -------- ------ --------
Net Increase (Decrease) in
Net Assets Resulting from
Operations...................... $ 38,118 $ 35,424 $14,822 $41,816 $661 $ 30,466 $ 87,861 $ $2,386 $16,912 ($283) $2,960
======== ======== ======== ========= ======== ======== ======== ======== ======== ====== ========
Purchases of securities.......... $139,094 $149,598 $109,588 $378,269 $ 7,167 $147,090 $513,345 $301,729 $85,769 $0 $0
======== ======== ======== ========= ======== ======== ======== ======== ======== ====== ========
Purchases of long-term U.S.
Government Obligations.......... $0 $0 $0 $0 $0 $0 $0 $0 $52,495 $9,374 $0
======== ======== ======== ========= ================= ======== ======== ======== ====== ========
*Percent of average net
assets (annualized)............. 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.08% 0.00%
See notes to financial statements.
</TABLE>
58 and 59
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
JUNE 30, 1996 Discovery Frontier Passport Special International Worldwide
(In Thousands) Fund Fund Fund Fund Equity Fund Growth Fund
----------------- ----------------- ------------------ ---------------- ------------------ -----------------
Six months Year Six months Year Six months Year Six months Year Six months Six Months Year
ended ended ended ended ended ended ended ended ended 12/29/95- Ended Ended
06/30/96 12/31/95 06/30/96 12/31/95 06/30/96 12/31/95 06/30/96 12/30/95 06/30/96 12/31/95 06/30/96 12/31/95
------------------ ------------------ ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment
Income (Loss)....... ($1,027) ($1,196) ($370) ($196) $ 378 $ 152 ($828) $ 18 $ 3 $ 0 $ 1,044 $ 954
Net Realized Gain
(Loss)From
Security
Transactions........ 20,512 40,209 33,809 47,223 1,956 (36) 41,405 77,526 158 0 10,488 7,367
Net Realized
Gain (Loss) From
Foreign Currency
Transactions........ (3) 0 (25) (31) (145) (74) 2 (25) (10) 0 (242) (166)
Net Change in
Unrealized
Appreciation
(Depreciation)
on Investments...... 18,636 13,488 2,010 44,192 12,633 4,598 1,237 4,867 510 0 19,176 18,535
-------- -------- -------- -------- -------- ------- -------- -------- ------- ------ -------- -------
Net Increase
(Decrease)
in Net Assets
Resulting From
Operations....... 38,118 52,501 35,424 91,188 14,822 4,640 41,816 82,386 661 0 30,466 26,690
-------- -------- -------- -------- -------- ------- -------- -------- ------- ------ -------- -------
DISTRIBUTIONS
TO SHAREHOLDERS
Net investment
income.............. 0 0 0 0 0 (154) 0 0 0 0 0 (959)
Net realized gains
from security
transactions........ 0 (36,838) 0 (47,059) 0 0 0 (77,376) 0 0 0 (7,208)
-------- -------- -------- -------- -------- ------- -------- -------- ------- ------ ------- -------
Net Decrease from
Distributions.... 0 (36,838) 0 (47,059) 0 (154) 0 (77,376) 0 0 0 (8,167)
-------- -------- -------- --------- ------- ------- ----------------- ------- ------- ------- --------
CAPITAL SHARE
TRANSACTIONS
Proceeds from
shares sold......... 139,846 111,895 65,886 128,859 134,762 46,686 63,137 195,291 7,231 767 129,608 190,341
Reinvested
distributions....... 0 32,276 0 45,631 0 148 0 72,687 0 0 0 7,509
-------- -------- -------- -------- -------- ------- -------- -------- ------- ------- -------- --------
139,846 144,171 65,886 174,490 134,762 46,834 63,137 267,978 7,231 767 129,608 197,850
Cost of shares
redeemed............ (122,553) (128,521) (64,108)(134,012) (35,600)(17,841)(117,636)(183,424) (501) 0 (45,296) (91,822)
-------- -------- -------- -------- -------- ------- -------- -------- ------- ------- -------- --------
Net increase
(decrease)
from capital share
transactions...... 17,293 15,650 1,778 40,478 99,162 28,993 (54,499) 84,554 6,730 767 84,312 106,028
-------- -------- -------- -------- -------- ------- -------- -------- ------- ------- -------- --------
Net Increase
(Decrease)
in Net Assets.... 55,411 31,313 37,202 84,607 113,984 33,479 (12,683) 89,564 7,391 767 114,778 124,551
NET ASSETS
Beginning
of period......... 216,623 185,310 331,720 247,113 49,922 16,443 388,754 299,190 767 0 228,595 104,044
-------- -------- -------- -------- -------- ---------------- -------- -------- ------- -------- --------
End of period...... $272,034 $216,623 $368,922 $331,720 $163,906 $49,922 $376,071 $388,754 $8,158 $767 $343,373 $228,595
======== ========= ======== ======== ======== ======= ======== ======== ======== ======= ======== ========
<PAGE>
Net Assets
consist of:
Capital(par value
and paid in
surplus............. $197,223 $179,930 $257,012 $255,234 $146,398 $47,236 $313,946 $368,445 $7,497 $767 $282,906 $198,594
Undistributed net
investment income
(loss).............. (1,027) 0 (350) 20 378 (827) 1 3 0 1,044 0
Undistributed net
realized gain
(loss) from
security
transactions........ 20,084 (424) 33,600 (184) (62) (1,873) 40,660 (747) 148 0 10,246 0
Unrealized
appreciation
(depreciation)
on investments...... 55,754 37,117 78,660 76,650 17,192 4,559 22,292 21,055 510 0 49,177 30,001
-------- -------- -------- -------- -------- ------- -------- -------- -------- ------- -------- --------
Total............. $272,034 $216,623 $368,922 $331,720 $163,906 $49,922 $376,071 $388,754 $8,158 $767 $343,373 $228,595
======== ======== ======== ======== ======== ======= ======== ======== ======== ======= ======== ========
DISTRIBUTIONS
PER SHARE
From net realized
security gains...... $0.000 $4.349 $0.000 $5.156 $0.000 $0.000 $0.000 $1.751 $0.000 $0.000 $0.000 $0.654
======== ======== ======== ======== ======== ======= ======== ======== ======== ======= ======== ========
From net investment
income.............. $0.000 $0.000 $0.000 $0.000 $0.000 $0.037 $0.000 $0.000 $0.000 $0.000 $0.000 $0.087
======== ======== ======== ======== ======== ======= ======== ======== ======== ======= ======= ========
See notes to financial statements.
60 and 61
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
(unaudited) (continued)
JUNE 30, 1996 Growth Blue Chip Balanced Government Money
(In Thousands) Fund Fund Fund Securities Fund Market Fund
------------------ ----------------- ----------------- ----------------- -----------------
Six Months Year Six Months Year Six Months Year Six Months Year Six Months Year
Ended Ended Ended Ended Ended Ended Ended Ended Ended Ended
06/30/96 12/31/95 06/30/96 12/31/95 06/30/96 12/31/95 06/30/96 12/31/95 06/30/96 12/31/95
------------------ ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment
Income (Loss)......................... $ 632 $ 562 $ 1,559 $ 4,120 $ 2,509 $ 3,174 $ 452 $ 1,054 $ 2,960 $ 7,204
Net Realized Gain
(Loss) From Security
Transactions.......................... 53,787 81,832 35,795 55,358 5,836 15,035 (148) (13) 0 0
Net Realized Gain
(Loss) From Foreign
Currency Transactions................. (77) (177) (81) (207) (22) (61) 0 0 0 0
Net Change in
Unrealized Appreciation
(Depreciation) on
Investments........................... 33,519 91,435 25,113 28,160 8,589 10,061 (587) 1,230 0 0
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Net Increase (Decrease)
in Net Assets Resulting
From Operations.................... 87,861 173,652 62,386 87,431 16,912 28,209 (283) 2,271 2,960 7,204
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
DISTRIBUTIONS TO
SHAREHOLDERS
Net investment income.................. 0 (571) 0 (4,097) (2,147) (3,203) (452) (1,062) (2,960) (7,197)
Net realized gains
from security transactions............ 0 (81,093) 0 (55,828) 0 (14,330) 0 0 0 0
-------- -------- -------- -------- ----------------- ------- -------- -------- --------
Net Decrease
from Distributions................. 0 (81,664) 0 (59,925) (2,147) (17,533) (452) (1,062) (2,960) (7,197)
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold.............. 288,183 356,140 82,443 41,063 105,857 49,371 4,353 22,097 217,044 293,433
Reinvested distributions............... 0 77,099 0 53,767 1,985 16,094 418 994 2,716 6,666
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
288,183 433,239 82,443 94,830 107,842 65,465 4,771 23,091 219,760 300,099
Cost of shares redeemed................ (189,458) (177,288) (35,705) (58,187) (29,709) (41,021) (7,778) (25,360)(187,152)(375,802)
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Net increase (decrease)
from capital share
transactions........................ 98,725 255,951 46,738 36,643 78,133 24,444 (3,007) (2,269) 32,608 (75,703)
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Net Increase (Decrease)
in Net Assets...................... 186,586 347,939 109,124 64,149 92,898 35,120 (3,742) (1,060) 32,608 (75,696)
NET ASSETS
Beginning of period.................... 655,927 307,988 375,200 311,051 130,346 95,226 20,263 21,323 125,646 201,342
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
End of period.......................... $842,513 $655,927 $484,324 $375,200 $223,244 $130,346 $16,521 $20,263 $158,254 $125,646
======== ======== ======== ======== ======== ======== ======= ======== ======== ========
Net Assets consist of:
Capital (par value and
paid in surplus)...................... $640,123 $541,397 $377,691 $330,953 $198,604 $120,470 $19,962 $22,968 $158,254 $125,646
Undistributed net
investment income (loss).............. 718 86 1,559 0 362 0 0 0 0 0
Undistributed net
realized gain (loss)
from security transactions............ 53,528 (181) 34,878 (836) 5,726 (88) (3,373) (3,225) 0 0
Unrealized appreciation
(depreciation)
on investments........................ 148,144 114,625 70,196 45,083 18,552 9,964 (68) 520 0 0
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Total............................... $842,513 $655,927 $484,324 $375,200 $223,244 $130,346 $16,521 $20,263 $158,254 $125,646
======== ======== ======== ======== ======== ======== ======= ======== ======== ========
DISTRIBUTIONS PER SHARE
From net realized
security gains........................ $0.000 $2.131 $0.000 $1.172 $0.000 $1.192 $0.000 $0.000 $0.000 $0.000
======== ======== ======== ======= ========= ======== ======== ========= ======= ========
From net investment income............. $0.000 $0.015 $0.000 $0.086 $0.115 $0.108 $0.220 $0.446 $0.022 $0.051
======== ======== ======== ======= ========= ======== ======== ========= ======= ========
See notes to financial statements.
</TABLE>
62 and 63
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(unaudited)
Per Share Income and Capital Changes
Selected data for each share of capital stock
outstanding throughout each period
Income From Investment Operations Less Distributions Total Return/Ratios/Supplemental Data
--------------------------------- ------------------ ---------------------------------------------------
Net
Net Realized
Invest- & Unreal- Expenses Income Port-
NAV ment ized Gain/ Total From Net NAV Total Net to to folio Average
Begin- Income (Loss) on From Invest- From Net Total End Assets, End Average Average Turn- Comm.
ing of or Securi- Investment ment Realized Distribu- of Total of Period Net Net over Per
Period (Loss) ties Operations Income Gains tions Period Return (thousands) Assets Assets Rate Share
------ ------- ---------- ---------- ------- -------- -------- ------ ------ ----------- ------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DISCOVERY FUND
Six months
ended
06/30/96..$21.70 (0.11) 4.35 4.24 0.00 0.00 0.00 $25.94 19.5% $272,034 1.60%**# -0.43%** 121%** $0.0570
Year ended
12/31/95.. 19.88 (0.12) 6.29 6.17 0.00 (4.35) (4.35) 21.70 31.3% 216,623 1.63% -0.60% 118% 0.0595
Year ended
12/31/94.. 21.55 (0.12) (1.55) (1.67) 0.00 0.00 0.00 19.88 -7.8% 185,310 1.67% -0.62% 72%
Year ended
12/31/93.. 19.93 (0.15) 2.29 2.14 0.00 (0.52) (0.52) 21.55 10.8% 226,069 1.65% -0.97% 99%
Year ended
12/31/92.. 17.52 (0.03) 2.68 2.65 0.00 (0.24) (0.24) 19.93 15.2% 151,983 1.85% -0.67% 111%
Year ended
12/31/91.. 11.22 (0.04) 7.02 6.98 0.00 (0.68) (0.68) 17.52 62.5% 47,678 1.77% -0.55% 165%
FRONTIER FUND
Six months
ended
06/30/96..$31.08 (0.02) 3.32 3.30 0.00 0.00 0.00 $34.38 10.6% $368,922 1.53%** -0.10%** 86%** $0.0542
Year ended
12/31/95.. 26.50 (0.02) 9.76 9.74 0.00 (5.16) (5.16) 31.08 37.0% 331,720 1.57% -0.07% 92% 0.0638
Year ended
12/31/94.. 27.94 (0.07) (0.72) (0.79) 0.00 (0.65) (0.65) 26.50 -2.8% 247,113 1.62% -0.25% 72%
Year ended
12/31/93.. 25.03 (0.12) 4.23 4.11 0.00 (1.20) (1.20) 27.94 16.5% 254,248 1.66% -0.75% 109%
Year ended
12/31/92.. 24.21 (0.11) 2.24 2.13 0.00 (1.31) (1.31) 25.03 8.9% 146,484 1.83% -0.58% 155%
Year ended
12/31/91.. 16.87 0.01 8.27 8.28 (0.01 (0.93) (0.94) 24.21 49.3% 103,209 1.68% 0.05% 158%
PASSPORT FUND
Six months
ended
06/30/96..$11.68 0.01 1.91 1.92 0.00 0.00 0.00 $13.60 16.4% $163,906 1.63%** 0.36%** 35%** $0.0174
Year ended
12/31/95.. 9.42 0.04 2.26 2.30 (0.04) 0.00 (0.04) 11.68 24.4% 49,922 1.84% 0.60% 37% 0.0199
Year ended
12/31/94.. 10.53 0.02 (1.11) (1.09) (0.02) 0.00 (0.02) 9.42 -10.4% 16,443 1.88% 0.12% 78%
11/16/93
(incep-
tion)
12/31/93.. 10.00 0.00 0.53 0.53 0.00 0.00 0.00 10.53 5.3% 18,567 1.70%** 0.18%** 6%
SPECIAL FUND
Six months
ended
06/30/96.. $7.05 0.00 0.78 0.78 0.00 0.00 0.00 $7.83 11.1% $376,071 1.37%** -0.21%** 246%** $0.0637
Year ended
12/31/95.. 7.01 0.00 1.79 1.79 0.00 (1.75) (1.75) 7.05 25.7% 388,754 1.35% 0.00% 263% 0.0648
Year ended
12/31/94.. 7.67 (0.02) (0.36) (0.38) 0.00 (0.28) (0.28) 7.01 -4.9% 299,190 1.36% -0.27% 272%
Year ended
12/31/93.. 7.76 (0.01) 1.25 1.24 0.00 (1.33) (1.33) 7.67 16.0% 432,710 1.33% -0.14% 285%
Year ended
12/31/92.. 7.59 (0.01) 0.64 0.63 0.00 (0.46) (0.46) 7.76 8.3% 456,793 1.23% -0.05% 223%
Year ended
12/31/91.. 5.03 0.08 3.09 3.17 (0.04) (0.57) (0.61) 7.59 63.7% 226,154 1.15% 0.76% 102%
INTERNATIONAL
EQUITY FUND
Six months
ended
06/30/96..$10.00 0.00 1.46 1.46 0.00 0.00 0.00 $11.46 14.6% $8,158 2.00%**+ 0.07%** 21%** $0.0174
<PAGE>
WORLDWIDE
GROWTH FUND
Six months
ended
06/30/96..$19.87 0.06 2.20 2.26 0.00 0.00 0.00 $22.13 11.4% $343,373 1.58%** 0.36%** 60%** $0.0236
Year ended
12/31/95.. 17.09 0.09 3.43 3.52 (0.09) (0.65) (0.74) 19.87 20.6% 228,595 1.65% 0.61% 54% 0.0446
Year ended
12/31/94.. 17.94 (0.02 (0.37) (0.39) 0.00 (0.46) (0.46) 17.09 -2.2% 104,044 1.66% -0.14% 87%
Year ended
12/31/93.. 14.13 (0.02) 4.24 4.22 0.00 (0.41) (0.41) 17.94 29.9% 85,214 1.80% -0.19% 117%
Year ended
12/31/92.. 13.92 0.00 0.21 0.21 0.00 0.00 0.00 14.13 1.5% 36,622 2.06% 0.01% 152%
Year ended
12/31/91.. 10.38 0.03 3.58 3.61 (0.03) (0.04) (0.07) 13.92 34.8% 20,305 1.90% 0.38% 84%
GROWTH FUND
Six months
ended
06/30/96..$14.77 0.01 1.85 1.86 0.00 0.00 0.00 $16.63 12.6% $842,513 1.22%** 0.08%** 141%** $0.0674
Year ended
12/31/95.. 11.63 0.02 5.27 5.29 (0.02) (2.13) (2.15) 14.77 45.6% 655,927 1.28% 0.12% 130% 0.0698
Year ended
12/31/94.. 12.38 (0.02) (0.39) (0.41 0.00 (0.34) (0.34) 11.63 -3.4% 307,988 1.33% -0.17% 172%
Year ended
12/31/93.. 10.54 (0.01) 2.70 2.69 0.00 (0.85) (0.85) 12.38 25.5% 343,423 1.32% -0.15% 131%
Year ended
12/31/92.. 11.22 0.01 0.48 0.49 (0.01) (1.16) (1.17) 10.54 4.3% 145,035 1.54% 0.06% 216%
Year ended
12/31/91.. 8.27 0.07 3.82 3.89 (0.07) (0.87) (0.94) 11.22 47.4% 140,726 1.45% 0.65% 161%
+ 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 and 1.51% for Government Securities Fund.
** Annualized rates
# Expense ratios reflected do not include custodial credits. Expense ratios
including the custodial credits were as follows: 1.59% and 1.17% for
Discovery and Balanced Funds, respectively.
</TABLE>
64 and 65
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (unaudited) (continued)
Per Share Income and Capital Changes
Selected data for each share of capital stock
outstanding throughout each period
Income From Investment Operations Less Distributions Total Return/Ratios/Supplemental Data
--------------------------------- ------------------ ----------------------------------------------------
Net
Net Realized
Invest- & Unreal- Expenses Income Port-
NAV ment ized Gain/ Total From Net NAV Total Net to to folio Average
Begin- Income (Loss) on From Invest- From Net Total End Assets, End Average Average Turn- Comm.
ing of or Securi- Investment ment Realized Distribu- of Total of Period Net Net over Per
Period (Loss) ties Operations Income Gains tions Period Return (thousands) Assets Assets Rate Share
------ ------- ---------- ---------- ------- -------- -------- ------ ------ ----------- ------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BLUE CHIP FUND
Six months
ended
06/30/96.. $6.69 0.07 1.02 1.09 0.00 0.00 0.00 $7.78 16.3% $484,324 1.19%** 0.37%** 193%** $0.0660
Year ended
12/31/95.. 6.16 0.09 1.70 1.79 (0.09) (1.17) (1.26) 6.69 29.1% 375,200 1.22% 1.19% 235% 0.0697
Year ended
12/31/94.. 6.49 0.06 (0.02) 0.04 (0.06) (0.31) (0.37) 6.16 0.5% 311,051 1.21% 0.88% 239%
Year ended
12/31/93.. 6.91 0.04 0.96 1.00 (0.04) (1.38) (1.42) 6.49 14.5% 306,592 1.22% 0.57% 212%
Year ended
12/31/92.. 7.67 0.08 (0.10) (0.02) (0.08 (0.66) (0.74) 6.91 -0.3% 290,309 1.23% 1.13% 103%
Year ended
12/31/91.. 6.67 0.11 1.74 1.85 (0.11) (0.74) (0.85) 7.67 28.3% 290,155 1.10% 1.52% 95%
BALANCED FUND
Six months
ended
06/30/96.. $9.58 0.27 0.77 1.04 (0.12) 0.00 (0.12) $10.50 10.8% $223,244 1.18%**# 1.51%** 176%** $0.0629
Year ended
12/31/95.. 8.56 0.28 2.21 2.49 (0.28) (1.19) (1.47) 9.58 29.4% 130,346 1.23% 2.92% 286% 0.0668
Year ended
12/31/94.. 8.93 0.20 (0.37) (0.17) (0.20) 0.00 (0.20) 8.56 -1.9% 95,226 1.26% 2.37% 258%
Year ended
12/31/93.. 8.30 0.22 1.58 1.80 (0.21) (0.96) (1.17) 8.93 21.9% 72,859 1.34% 2.30% 251%
Year ended
12/31/92.. 8.19 0.27 0.21 0.48 (0.28 (0.09) (0.37) 8.30 60.0% 31,358 1.88% 3.57% 96%
Year ended
12/31/91.. 7.22 0.31 1.30 1.61 (0.31) (0.33) (0.64) 8.19 22.9% 18,790 1.73% 4.01% 133%
GOVERNMENT
SECURITIES FUND
Six months
ended
06/30/96.. $9.29 0.79 (0.91) (0.12) (0.22) 0.00 (0.22) $8.95 -1.3% $16,521 1.34%** 2.42%** 144%** n/a
Year ended
12/31/95.. 8.78 0.45 0.51 0.96 (0.45) 0.00 (0.45) 9.29 11.1% 20,263 1.30% 4.92% 141% n/a
Year ended
12/31/94.. 10.02 0.52 (1.26) (0.74) (0.50) 0.00 (0.50) 8.78 -7.5% 21,323 1.34% 5.52% 379% n/a
Year ended
12/31/93.. 10.19 0.46 0.47 0.93 (0.46) (0.64) (1.10) 10.02 9.3% 30,465 1.18% 4.33% 429% n/a
Year ended
12/31/92.. 10.48 0.51 0.03 0.54 (0.51) (0.32) (0.83) 10.19 5.3% 25,047 1.18% 4.83% 204% n/a
Year ended
12/31/91.. 9.85 0.60 0.81 1.41 (0.60) (0.18) (0.78) 10.48 14.9% 18,146 1.12% 5.89% 261% n/a
MONEY
MARKET FUND
Six months
ended
06/30/96.. $1.00 0.02 0.00 0.02 (0.02) 0.00 (0.02) $1.00 4.6%** $158,254 0.93%** 2.24%** n/a n/a
Year ended
12/31/95.. 1.00 0.05 0.00 0.05 (0.05) 0.00 (0.05) 1.00 5.1% 125,646 0.89%+ 5.11% n/a n/a
Year ended
12/31/94.. 1.00 0.03 0.00 0.03 (0.03) 0.00 (0.03) 1.00 3.4% 201,342 0.91% 3.49% n/a n/a
Year ended
12/31/93.. 1.00 0.02 0.00 0.02 (0.02) 0.00 (0.02) 1.00 2.2% 142,399 0.95% 2.26% n/a n/a
Year ended
12/31/92.. 1.00 0.03 0.00 0.03 (0.03) 0.00 (0.03) 1.00 2.8% 120,295 0.95% 2.78% n/a n/a
Year ended
12/31/91.. 1.00 0.05 0.00 0.05 (0.05) 0.00 (0.05) 1.00 5.1% 99,765 0.99% 5.03% n/a n/a
+ 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 and 1.51% for Government Securities Fund.
** Annualized rates
# Expense ratios reflected do not include custodial credits. Expense ratios
including the custodial credits were as follows: 1.59% and 1.17% for
Discovery and Balanced Funds, respectively.
See notes to financial statements.
</TABLE>
66 and 67
<PAGE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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 U.S. 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 U.S.
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 he 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
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
68
<PAGE>
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 Funds' expenses to
2.00% of average net assets, net of any credits used to offset expenses. 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. CONTINGENCY
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.
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
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 June 30, 1996, 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
Discovery Fund $68,056 ($12,302) $55,754
Frontier Fund 85,301 (6,641) 78,660
Passport Fund 20,182 (2,990) 17,192
Special Fund 39,986 (17,694) 22,292
International Equity Fund 647 (137) 510
Worldwide Growth Fund 55,157 (5,980) 49,177
Growth Fund 157,148 (9,004) 148,144
Blue Chip Fund 73,437 (3,241) 70,196
Balanced Fund 19,511 (959) 18,552
Government Securities Fund 148 (216) (68)
5. CHANGE IN INDEPENDENT ACCOUNTANTS
At a meeting held on December 1, 1995, upon the recommendation of the Audit
Committee of the Company's Board of Directors, the Board of Directors selected
Price Waterhouse LLP as the Company's independent accountants for the fiscal
year ending December 31, 1996, replacing the Company's prior independent
accountants, Smith, Brock & Gwinn. The Company's relationship with Smith, Brock
& Gwinn terminated on April 24, 1996 following that firm's completion of the
audit of the Company's financial statements for the year ended December 31,
1995.
70
<PAGE>
6. 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)
---- ------------- -------- ------------
Discovery Fund:
Six months ended 06/30/96.... 5,548 0 (5,043) 505
From 12/28/95 to 12/31/95.... 4,806 1,505 (5,654) 657
Frontier Fund:
Six months ended 06/30/96.... 2,031 0 (1,973) 58
Year ended 12/31/95.......... 4,248 1,490 (4,390) 1,348
Passport Fund:
Six months ended 06/30/96.... 10,510 0 (2,735) 7,775
Year ended 12/31/95.......... 4,155 13 (1,641) 2,527
Special Fund:
Six months ended 06/30/96.... 8,534 0 (15,690) (7,156)
Year ended 12/31/95.......... 24,417 10,369 (22,286) 12,500
International Equity Fund:
Six months ended 06/30/96.... 681 0 (46) 635
From 12/28/95 to 12/31/95.... 77 0 0 77
Worldwide Growth Fund:
Six months ended 06/30/96.... 6,166 0 (2,153) 4,013
Year ended 12/31/95.......... 9,895 380 (4,861) 5,414
Growth Fund:
Six months ended 06/30/96.... 18,383 0 (12,119) 6,264
Year ended 12/31/95.......... 25,006 5,259 (12,349) 17,916
Blue Chip Fund:
Six months ended 06/30/96.... 11,100 0 (4,911) 6,189
Year ended 12/31/95.......... 5,957 8,049 (8,475) 5,531
Balanced Fund:
Six months ended 06/30/96.... 10,437 193 (2,971) 7,659
Year ended 12/31/95.......... 5,141 1,684 (4,344) 2,481
Government Securities Fund:
Six months ended 06/30/96.... 473 45 (853) (335)
Year ended 12/31/95.......... 2,424 108 (2,779) (247)
Money Market Fund:
Six months ended 06/30/96.... 217,050 2,716 (187,152) 32,614
Year ended 12/31/95.......... 293,432 6,647 (375,802) (75,723)
71
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(LOGO)
FOUNDERS FUNDS
Founders Asset Management, Inc.
2930 East Third Avenue
Denver, CO 80206-5002
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 report is not authorized for distribution to prospective investors unless
preceded or accompanied by a current prospectus.
Copyright 1996 Founders Asset Management, Inc., Distributor.
Founders Funds is a registered trademark of Founders Asset Management, Inc.
A-435-SAR
SMITH, BROCK & GWINN
Certified Public Accountants
John J. Smith, C.P.A. 650 South Cherry Street-Suite 425 Established 1962
Roy E. Brock, Jr., C.P.A. Denver, Colorado 80222
Donald E. Gwinn, C.P.A. (303) 399-8722
Charles R. Schlaufman, C.P.A. Fax (303) 399-8302
August 19, 1996
Securities and Exchange Commission
Chief Accountant
Stop 10-5
450 5th Street N.W.
Washington, DC 20549
RE: Founders Funds, Inc.
Dear Sir or Madam:
In connection with the filing of the semi-annual report to the shareholders of
Founders Funds, Inc. for the period ended June 30, 1996 on Form N-1A, Founders
Funds, Inc. has advised us by letter dated August 9, 1996 of their intended
disclosure concerning changes in independent accountants as follows:
Change in Independent Accountants
At a meeting held on December 1, 1995, upon the recommendation of the
Audit Committee of the Company's Board of Directors, the Board of
Directors selected Price Waterhouse LLP as the Company's independent
accountants for the fiscal year ending December 31, 1996, replacing the
Company's prior independent accountants, Smith, Brock & Gwinn. The
Company's relationship with Smith, Brock & Gwinn terminated on April
24, 1996 following that firm's completion of the audit of the Company's
financial statements for the year ended December 31, 1995.
We are in agreement with the statements contained in the above disclosure.
Very truly yours,
SMITH, BROCK & GWINN
/s/ Roy E. Brock, Jr.
