P R O S P E C T U S
AUGUST 12, 1996
as supplemented through January 6, 1997
Discovery Fund
Frontier Fund
Passport Fund
Special Fund
International Equity Fund
Worldwide Growth Fund
Growth Fund
Blue Chip Fund
Balanced Fund
Government Securities Fund
Money Market Fund
[Logo]
FOUNDERS FUNDS
Growth. Plain and Simple.
<PAGE>
[LOGO] FOUNDERS FUNDS
PROSPECTUS
AUGUST 12, 1996 as supplemented through January 6, 1997
FOUNDERS FUNDS OFFER INVESTORS
MANY ADVANTAGES, INCLUDING:
O No commissions
O No deferred sales charges
O No-fee exchanges among the funds
O Automatic investment and withdrawal plans
O 24-hour account information
O No-fee IRAs and other retirement-oriented investment accounts
Founders Discovery, Frontier, Passport and Special Funds offer capital
appreciation as their investment objective. International Equity, Worldwide
Growth and Growth Funds seek long-term growth of capital as their objective.
Blue Chip Fund offers the opportunity for long-term growth of capital and
income, while Balanced Fund seeks current income and capital appreciation as its
objective. Government Securities Fund has the investment objective of current
income. Founders Money Market Fund seeks maximum current income consistent with
the preservation of capital and liquidity as its objective. THERE CAN BE NO
ASSURANCE THAT MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT.
This prospectus briefly tells you information you need to know before
investing. You should read it carefully and keep it for future reference.
A STATEMENT OF ADDITIONAL INFORMATION dated August 12, 1996, has been filed
with the Securities and Exchange Commission and is incorporated herein by
reference. You can obtain a copy without charge by calling Founders Asset
Management, Inc. ("Founders") at 1-800-525-2440. In addition, the Securities and
Exchange Commission maintains a Web site (http://www.sec.gov) that contains the
Statement of Additional Information, material incorporated therein by reference,
and other information regarding the Funds and other registrants that file
electronically with the Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY BANK OR OTHER FINANCIAL INSTITUTION. SHARES OF
THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
<PAGE>
PROSPECTUS
AUGUST 12, 1996 as supplemented through January 6, 1997
FOUNDERS FUNDS, INC. IS A FAMILY OF NO-LOAD MUTUAL FUNDS THAT OFFERS YOU A
VARIETY OF INVESTMENT OPPORTUNITIES. THE DESCRIPTIONS BELOW ARE DESIGNED TO HELP
YOU CHOOSE THE FUND THAT BEST FITS YOUR INVESTMENT OBJECTIVE.
DISCOVERY FUND
OBJECTIVE: CAPITAL APPRECIATION
Discovery Fund invests primarily in common stocks of small, rapidly growing U.S.
companies.
FRONTIER FUND
OBJECTIVE: CAPITAL APPRECIATION
Frontier Fund invests primarily in common stocks of small and medium-sized U.S.
and foreign companies.
PASSPORT FUND
OBJECTIVE: CAPITAL APPRECIATION
Passport Fund invests primarily in common stocks of small, rapidly growing
companies outside of the U.S. These securities may represent companies in
established and emerging economies throughout the world.
SPECIAL FUND
OBJECTIVE: CAPITAL APPRECIATION
Special Fund invests in the common stocks of three categories of companies:
small- to medium-sized companies, large companies, and foreign companies.
INTERNATIONAL EQUITY FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL
International Equity Fund invests primarily in growth stocks of companies in
both emerging and established economies throughout the world, excluding the
United States.
WORLDWIDE GROWTH FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL
Worldwide Growth Fund
invests primarily in growth stocks of companies in both emerging and established
economies throughout the world.
GROWTH FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL
Growth Fund invests primarily in common stocks of well-established, high-quality
growth companies.
BLUE CHIP FUND
OBJECTIVE: LONG-TERM GROWTH OF CAPITAL AND INCOME
Blue Chip Fund invests primarily in common stocks of large, well-established,
stable and mature companies of great financial strength.
BALANCED FUND
OBJECTIVE: CURRENT INCOME AND CAPITAL APPRECIATION
Balanced Fund invests in a balanced portfolio of common stocks, U.S. and foreign
government obligations and a variety of corporate fixed-income securities.
<PAGE>
GOVERNMENT SECURITIES FUND
OBJECTIVE: CURRENT INCOME
Government Securities Fund invests primarily in obligations of the U.S.
government.
MONEY MARKET FUND
OBJECTIVE: MAXIMUM CURRENT INCOME CONSISTENT WITH THE PRESERVATION OF CAPITAL
AND LIQUIDITY
Money Market Fund invests in high-quality money market instruments. THERE CAN BE
NO ASSURANCE MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE
OF $1.00 PER SHARE. AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED
BY THE U.S. GOVERNMENT.
<PAGE>
TABLE OF CONTENTS
How to Contact Us........................................................... 4
Annual Fund Expense Information............................................. 5
Financial Highlights........................................................ 7
Investment Objectives of the Funds.......................................... 18
Investment Management of the Funds.......................................... 20
Investment Policies Involving Special Risks................................. 22
Other Investment Policies................................................... 27
Investing in the Founders Funds............................................. 29
Opening Your Account With Founders..................................... 29
Adding to Your Founders Funds Account.................................. 30
Selling Shares of Your Founders Funds.................................. 31
Exchanging Shares of Your Founders Funds............................... 32
Overall Policies Regarding Transactions................................ 33
Shareholder Services........................................................ 34
Investor Services...................................................... 34
Fund and Market News Updates .......................................... 34
Daily Closing Prices................................................... 34
24-Hour Account Information ........................................... 34
Statements and Reports................................................. 34
Establishing Additional Services....................................... 35
General Information ........................................................ 35
Share Price Determination.............................................. 35
Dividends and Distributions............................................ 35
Dividend and Capital Gain Distribution Options......................... 35
Taxes.................................................................. 36
Founders Funds, Inc. and Its Management................................ 37
Distribution Plans..................................................... 38
Voting Rights.......................................................... 38
Transfer Agent and Custodian........................................... 39
Fund Performance Information........................................... 39
<PAGE>
HOW TO CONTACT US
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER, FUND ACCOUNTANT AND SHAREHOLDER
SERVICE AGENT
Founders Asset Management, Inc.
Founders Financial Center
2930 East Third Avenue
Denver, CO 80206
(303) 394-4404
Fax: (303) 394-4021
MAILING ADDRESS FOR SHAREHOLDER INVESTMENTS AND CORRESPONDENCE
P.O. Box 173655
Denver, CO 80217-3655
DELIVERY ADDRESS FOR CERTIFIED, REGISTERED AND OVERNIGHT MAIL
2930 East Third Avenue
Denver, CO 80206-5002
TOLL-FREE INVESTOR SERVICE NUMBER
1-800-525-2440
Monday through Friday,
7AM to 6:30PM, Mountain time
Saturday, 9AM to 2PM, Mountain time
TOLL-FREE SERVICE FOR EMPLOYER-SPONSORED RETIREMENT PLANS
1-800-934-GOLD (4653)
Monday through Friday,
8AM to 5PM, Mountain time
TOLL-FREE SERVICE FOR DEALER, BROKER AND ADVISER TRADES
1-800-DEALER-3
(1-800-332-5373)
Monday through Friday,
8AM to 5PM, Mountain time
CUSTODIAN AND TRANSFER AGENT
Investors Fiduciary Trust Company
127 West 10th Street
Kansas City, MO
64105-1716
(816) 435-1000
Please do not mail transactions requiring processing to this address.
<PAGE>
ANNUAL FUND EXPENSE INFORMATION
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
Inter- World- Govern-
national wide Blue ment Money
Discovery Frontier Passport Special Equity Growth Growth Chip Balanced Securities Market
Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Load NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE
Imposed on Purchases
Maximum Sales Load NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE
Imposed on
Reinvested Dividends
Deferred Sales Load NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE
Redemption Fee NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE* NONE*
Exchange Fee NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE NONE
<FN>
* A fee of $6.00 will be assessed for wire redemptions.
</FN>
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees.... 1.00% 0.97% 1.00% 0.76% 1.00% 1.00% 0.74% 0.64% 0.65% 0.65% 0.50%
12b-1 Fees*........ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.10%++ ----
(after expense
reimbursements)
Other Expenses**... 0.38% 0.35% 0.59% 0.34% 0.75%+ 0.40% 0.29% 0.33% 0.33% 0.55% 0.39%
(after expense
reimbursements)
Total Fund Operating
Expenses.......... 1.63% 1.57% 1.84% 1.35% 2.00%+ 1.65% 1.28% 1.22% 1.23% 1.30%++ 0.89%
(after expense
reimbursements)
<PAGE>
<FN>
* Long-term shareholders of a 12b-1 Fund may over time pay more in 12b-1
fees than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc., which
currently range from 6.25% to 8.5% of the amount invested. The 12b-1 Funds
may engage in directed-brokerage arrangements which will have no adverse
effect either on the level of brokerage commissions paid by the Funds or
on any Fund's expenses. See the section entitled "Distribution Plans."
** Includes, but is not limited to, fees and expenses of directors, custodian
bank, legal counsel and independent accountants, securities pricing
services, transfer agency fees, costs of services furnished by Founders
under a shareholder servicing agreement and a fund accounting agreement,
costs of registration of Fund shares under applicable laws, and costs of
printing and distributing reports to shareholders.
+ Based on estimated expenses for the current fiscal year, since the
International Equity Fund did not commence the public offering of its
shares until December 29, 1995. Certain expenses of the International
Equity Fund are being reimbursed voluntarily by Founders. In the absence
of this expense limitation, "Other Expenses" and "Total Fund Operating
Expenses" for the fiscal year ending December 31, 1996 are estimated to be
1.75% and 3.00%, respectively, of the Fund's average net assets.
++ Certain expenses of the Government Securities Fund are being reimbursed
voluntarily by Founders. In the absence of this expense limitation, "12b-1
Fees" and "Total Fund Operating Expenses" in the above table would have
been 0.25% and 1.45%, respectively, of the Fund's average net assets based
on its actual expenses for the year ended December 31, 1995.
</FN>
</TABLE>
<PAGE>
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return and no redemption:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Discovery Fund $ 17 $ 52 $ 90 $194
Frontier Fund 16 50 86 188
Passport Fund 19 58 100 217
Special Fund 14 43 74 163
International Equity Fund* 21 63 109 234
Worldwide Growth Fund 17 52 90 197
Growth Fund 13 41 71 155
Blue Chip Fund 13 39 67 148
Balanced Fund 13 39 68 150
Government Securities Fund 13 41 72 158
Money Market Fund 9 29 50 110
* Based on expenses of 2.00%. Expenses are estimated, since the Fund did not
commence the public offering of its shares until December 29, 1995.
The purpose of the foregoing table is to help you understand the various direct
and indirect costs and expenses of investing in shares of Founders Funds, Inc.
an annual fee of $10 may be deducted from accounts with a share value less than
$1,000. The figures are based on fiscal year-end 1995. A more complete
description of each fund's costs and expenses is provided in sections titled
"Founders Funds, Inc. and Its Management," "Distribution Plans," and "Selling
Shares From Your Founders Funds."
Since the assumed 5% annual return is hypothetical, the examples at left should
not be considered a representation of past or future expenses or returns. Actual
fund expenses and returns may vary from year to year and may be higher or lower
than those shown above. Lower expenses benefit Fund shareholders by increasing a
Fund's total return.
<PAGE>
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR EACH SHARE OF CAPITAL STOCK OUTSTANDING THROUGHOUT EACH PERIOD
With the exception of the information concerning the International Equity Fund,
the following financial information has been audited by Smith, Brock & Gwinn,
independent accountants. This information should be read in conjunction with the
audited financial statements and the related Independent Auditor's Report
appearing in the Funds' 1995 Annual Report to Shareholders, which is
incorporated in the Statement of Additional information by reference, and the
unaudited financial statements for the International Equity Fund appearing in
the Statement of Additional Information. Both the annual report and the
Statement of Additional Information may be obtained without charge by writing
Founders at Founders Financial Center, 2930 East Third Avenue, Denver, Colorado
80206 or by calling 1-800-525-2440. The annual report also contains more
information about the Funds' performance. Price Waterhouse LLP has been selected
as the Funds' independent accountants for the year ending December 31, 1996.
<TABLE>
<CAPTION>
DISCOVERY FUND*
Years Ended December 31
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $ 19.88 $21.55 $19.93 $17.52 $11.22 $10.00
---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (0.12) (0.12) (0.15) (0.03) (0.04) 0.10
Net Gains or Losses on
Securities (Both Realized
and Unrealized) 6.29 (1.55) 2.29 2.68 7.02 1.22
------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 6.17 (1.67) 2.14 2.65 6.98 1.32
------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) 0.00 0.00 0.00 0.00 0.00 (0.10)
Distributions (From
Capital Gains) (4.35) 0.00 (0.52) (0.24) (0.68) 0.00
------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (4.35) 0.00 (0.52) (0.24) (0.68) (0.10)
------------------------------------------------------------------------------------
Net Asset Value --
End of Period $21.70 $19.88 $21.55 $19.93 $17.52 $11.22
====================================================================================
TOTAL RETURN 31.3% (7.8%) 10.8% 15.2% 62.5% 13.2%
<PAGE>
RATIOS/SUPPLEMENTAL DATA
Net Assets--End of Period
(000 Omitted) $216,623 $185,310 $226,069 $151,983 $47,678 $7,035
Ratio of Expenses to Average
Net Assets 1.63%++ 1.67% 1.65% 1.85% 1.77% 2.03%
Ratio of Net Income to Average
Net Assets (0.60%) (0.62%) (0.97%) (0.67%) (0.55%) 1.68%
Portfolio Turnover Rate 118% 72% 99% 111% 165% 271%
Average Commission Rate Paid (unaudited) $0.0575 -- -- -- -- --
<FN>
* No activity in inception year of 1989
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.58%.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FRONTIER FUND
Years Ended December 31 Period of
---------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1/22/87-
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $26.50 $27.94 $25.03 $24.21 $16.87 $18.49 $13.45 $11.03 $10.00
---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (0.02) (0.07) (0.12) (0.11) 0.01 0.15 0.12 (0.06) (0.09)
Net Gains or Losses
on Securities (Both
Realized and 9.76 (0.72) 4.23 2.24 8.27 (1.53) 5.81 3.26 1.70
Unrealized)
---------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 9.74 (0.79) 4.11 2.13 8.28 (1.38) 5.93 3.20 1.61
---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (From Net
Investment Income 0.00 0.00 0.00 0.00 (0.01) (0.16) (0.05) 0.00 0.00
Distributions (From
Capital Gains) (5.16) (0.65) (1.20) (1.31) (0.93) (0.08) (0.84) (0.78) (0.58)
---------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (5.16) (0.65) (1.20) (1.31) (0.94) (0.24) (0.89) (0.78) (0.58)
---------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $31.08 $26.50 $27.94 $25.03 $24.21 $16.87 $18.49 $13.45 $11.03
=========================================================================================================
TOTAL RETURN 37.0% (2.8%) 16.5% 8.9% 49.3% (7.5%) 44.3% 29.2% 16.1%
RATIOS/SUPPLEMENTAL DATA
Net Assets--
End of Period
(000 Omitted) $331,720 $247,113 $254,248 $146,484 $103,209 $39,269 $50,318 $8,771 $3,318
Ratio of Expenses to
Average Net Assets 1.57%++ 1.62% 1.66% 1.83% 1.68% 1.71% 1.46% 1.89% 2.25%+
Ratio of Net Income
to Average
Net Assets (0.07%) (0.25%) (0.75%) (0.58%) 0.05% 0.78% 0.38% (0.43%) (0.74%)+
<PAGE>
Portfolio Turnove
Rate 92% 72% 109% 155% 158% 207% 198% 312% 588%
Average Commission
Rate Paid (unaudited) $0.0638 -- -- -- -- -- -- -- ---
<FN>
+ Annualized
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.53%.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
PASSPORT FUND
Years Ended December 31 Period of
-----------------------------------
1995 1994 11/16/93-
12/31/93
PER SHARE DATA
Net Asset Value --
Beginning of Period $9.42 $10.53 $10.00
----------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.04 0.02 0.00
Net Gains or Losses on
Securities (Both Realized
and Unrealized) 2.26 (1.11) 0.53
----------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 2.30 (1.09) 0.53
----------------------------------
LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.04) (0.02) 0.00
Distributions (From
Capital Gains) 0.00 0.00 0.00
----------------------------------
TOTAL DISTRIBUTIONS (0.04) (0.02) 0.00
----------------------------------
Net Asset Value --
End of Period $11.68 $9.42 $10.53
==================================
TOTAL RETURN 24.4% (10.4%) 5.3%
RATIOS/SUPPLEMENTAL DATA
Net Assets--End of Period
(000 Omitted) $49,922 $16,443 $18,567
Ratio of Expenses to Average
Net Assets 1.84%++ 1.88% 1.70%+
Ratio of Net Income to
Average Net Assets 0.60% 0.12% 0.18%+
Portfolio Turnover Rate 37% 78% 6.0%
Average Commission Rate Paid (unaudited) $0.0199 -- --
+ Annualized
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.76%.
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
SPECIAL FUND
Years Ended December 31
-----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987* 1986*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $7.01 $7.67 $7.76 $7.59 $5.03 $6.64 $5.47 $5.14 $5.60 $5.34
-----------------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment 0.00 (0.02) (0.01) (0.01) 0.08 0.09 0.16 0.03 0.04 0.04
Income
Net Gains or Losses
on Securities (Both
Realized and
Unrealized) 1.79 (0.36) 1.25 0.64 3.09 (0.79) 1.97 0.65 0.25 0.97
-----------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 1.79 (0.38) 1.24 0.63 3.17 (0.70) 2.13 0.68 0.29 1.01
-----------------------------------------------------------------------------------------------------------------
LESS
DISTRIBUTIONS
Dividends (From Net
Investment Income) 0.00 0.00 0.00 0.00 (0.04) (0.10) (0.15) (0.04) (0.03) (0.06)
Distributions (From
Capital Gains) (1.75) (0.28) (1.33) (0.46) (0.57) (0.81) (0.81) (0.31) (0.72) (0.69)
-----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.75) (0.28) (1.33) (0.46) (0.61) (0.91) (0.96) (0.35) (0.75) (0.75)
-----------------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $7.05 $7.01 $7.67 $7.76 $7.59 $5.03 $6.64 $5.47 $5.14 $5.60
=================================================================================================================
TOTAL RETURN 25.7% (4.9%) 16.0% 8.3% 63.7% (10.4%) 39.2% 13.2% 5.2% 18.9%
RATIOS/SUPPLE-
MENTAL DATA
Net Assets--End of $388,754 $299,190 $432,710 $456,793 $226,154 $57,951 $94,554 $62,990 $66,797 $70,210
Period (000 Omitted)
Ratio of Expenses to
Average Net Assets 1.35%++ 1.36% 1.33% 1.23% 1.15% 1.20% 1.06% 1.12% 1.14% 1.06%
Ratio of Net Income
to Average Net 0.00% (0.27%) (0.14%) (0.05%) 0.76% 1.54% 1.95% 0.59% 0.45% 0.73%
Assets
<PAGE>
Portfolio Turnover
Rate 263% 272% 285% 223% 102% 146% 151% 160% 210% 138%
Average Commission $0.0648 -- -- -- -- -- -- -- -- --
Rate Paid (unaudited)
<FN>
* Restated to reflect 5-for-1 split on August 31, 1987
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.29%.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
INTERNATIONAL EQUITY FUND* (Unaudited)
Six Months Ended June 30, 1996
------------------------------
PER SHARE DATA
Net Asset Value --
Beginning of Period $10.00
----------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.00
Net Gains or Losses on
Securities (Both Realized
and Unrealized) 1.46
----------
TOTAL FROM INVESTMENT
OPERATIONS 1.46
----------
LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) 0.00
Distributions (From
Capital Gains) 0.00
----------
TOTAL DISTRIBUTIONS 0.00
----------
Net Asset Value --
End of Period $11.46
==========
TOTAL RETURN 14.6%
RATIOS/SUPPLEMENTAL DATA
Net Assets--End of Period
(000 Omitted) $8,158
Ratio of Expenses
to Average
Net Assets 2.00%+
Ratio of Net Income
to Average
Net Assets 0.14%+
Portfolio Turnover Rate 21%
Average Commission
Rate Paid $0.0174
* No activity in inception year of 1995
+ Annualized rates. In the absence of voluntary expense reimbursement and
waivers from Founders, the Expense Ration would have been 3.03% (annualized) and
the Net Income Ratio would have been (0.89%) annualized).
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
WORLDWIDE GROWTH FUND*
Years Ended December 31
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $17.09 $17.94 $14.13 $13.92 $10.38 10.00
--------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.09 (0.02) (0.02) 0.00 0.03 0.29
Net Gains or Losses on
Securities (Both Realized
and Unrealized) 3.43 (0.37) 4.24 0.21 3.58 0.38
--------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 3.52 (0.39) 4.22 0.21 3.61 0.67
--------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.09) 0.00 0.00 0.00 (0.03) (0.29)
Distributions (From
Capital Gains) (0.65) (0.46) (0.41) 0.00 (0.04) 0.00
--------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.74) (0.46) (0.41) 0.00 (0.07) (0.29)
--------------------------------------------------------------------------------------
Net Asset Value --
End of Period $19.87 $17.09 $17.94 $14.13 $13.92 $10.38
======================================================================================
TOTAL RETURN 20.6% (2.2%) 29.9% 1.5% 34.8% 6.7%
RATIOS/SUPPLEMENTAL DATA
Net Assets--End of Period
(000 Omitted) $228,595 $104,044 $85,214 $36,622 $20,305 5,493
Ratio of Expenses
to Average
Net Assets 1.65%++ 1.66% 1.80% 2.06% 1.90% 2.10%
Ratio of Net Incom
to Average
Net Assets 0.61% (0.14%) (0.19%) 0.01% 0.38% 3.21%
<PAGE>
Portfolio Turnover Rate 54% 87% 117% 152% 84% 170%
Average Commission
Rate Paid (unaudited) $0.0446 -- -- -- -- --
<FN>
* No activity in inception year of 1989
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.56%.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GROWTH FUND
Years Ended
Years Ended December 31 Period of October 31
-------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 11/1/87- 1987 1986
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
DATA
Net Asset Value --
Beginning of $11.63 $12.38 $10.54 $11.22 $8.27 $9.41 $7.61 $7.41 $8.91 $9.87 $7.47
Period
------------------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.02 (0.02) (0.01) 0.01 0.07 0.13 0.07 0.13 0.02 0.11 0.10
Net Gains or
Losses on
Securities (Both
Realized and 5.27 (0.39) 2.70 0.48 3.82 (1.13) 3.07 0.22 0.22 0.38 2.47
Unrealized)
------------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 5.29 (0.41) 2.69 0.49 3.89 (1.00) 3.14 0.35 0.24 0.49 2.57
------------------------------------------------------------------------------------------------------------------
LESS
DISTRIBUTIONS
Dividends (From
Net Investment
Income) (0.02) 0.00 0.00 (0.01) (0.07) (0.13) (0.07) (0.15) (0.13) (0.11) (0.17)
Distributions
(From Capital (2.13) (0.34) (0.85) (1.16) (0.87) (0.01) (1.27) 0.00 (1.61) (1.34) 0.00
Gains)
------------------------------------------------------------------------------------------------------------------
TOTAL
DISTRIBUTIONS (2.15) (0.34) (0.85) (1.17) (0.94) (0.14) (1.34) (0.15) (1.74) (1.45) (0.17)
------------------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $14.77 $11.63 $12.38 $10.54 $11.22 $8.27 $9.41 $7.61 $7.41 $8.91 $9.87
==================================================================================================================
TOTAL RETURN 45.6% (3.4%) 25.5% 4.3% 47.4% (10.6%) 41.7% 4.8% 2.6% 6.0% 34.8%
RATIOS/SUPPLE-
MENTAL DATA
Net Assets--End of
Period (000 $655,927 $307,988 $343,423 $145,035 $140,726 $87,669 $111,938 $53,023 $68,920 $58,262 $61,626
Omitted)
<PAGE>
Ratio of Expenses
to Average Net
Assets 1.28%++ 1.33% 1.32% 1.54% 1.45% 1.45% 1.28% 1.38% 1.54%+ 1.25% 1.27%
Ratio of Net
Income to Average
Net Assets 0.12% (0.17%) (0.15%) 0.06% 0.65% 1.53% 0.77% 1.74% 2.43%+ 0.99% 1.19%
Portfolio Turnover
Rate 130% 172% 131% 216% 161% 178% 167% 179% 20% 147% 142%
Average
Commission Rate
Paid (unaudited) $0.0698 -- -- -- -- -- -- -- -- -- --
<FN>
+ Annualized
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.24%.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
BLUE CHIP FUND
Years Ended
Years Ended December 31 Period of September 30
-----------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 10/1/87- 1987 1986
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
DATA
Net Asset
Value --
Beginning of
Period $6.16 $6.49 $6.91 $7.67 $6.67 $7.32 $6.31 $6.14 $9.98 $10.68 $10.01
----------------------------------------------------------------------------------------------------------------------
INCOME
FROM
INVEST-
MENT
OPERA-
TIONS
Net
Investment
Income 0.09 0.06 0.04 0.08 0.11 0.17 0.16 0.18 0.06 0.20 0.28
Net Gains or
Losses on
Securities
(Both
Realized and
Unrealized) 1.70 (0.02) 0.96 (0.10) 1.74 (0.14) 2.05 0.43 (2.14) 2.58 2.56
----------------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 1.79 0.04 1.00 (0.02) 1.85 0.03 2.21 0.61 (2.08) 2.78 2.84
----------------------------------------------------------------------------------------------------------------------
LESS
DISTRIBU-
TIONS
Dividends
(From Net
Investment
Income) (0.09) (0.06) (0.04) (0.08) (0.11) (0.17) (0.16) (0.19) (0.05) (0.26) (0.32)
Distributions
(From
Capital (1.17) (0.31) (1.38) (0.66) (0.74) (0.51) (1.04) (0.25) (1.71) (3.22) (1.85)
Gains)
----------------------------------------------------------------------------------------------------------------------
TOTAL
DISTRIBUTIONS (1.26) (0.37) (1.42) (0.74) (0.85) (0.68) (1.20) (0.44) (1.76) (3.48) (2.17)
----------------------------------------------------------------------------------------------------------------------
Net Asset
Value -- End
of Period $6.69 $6.16 $6.49 $6.91 $7.67 $6.67 $7.32 $6.31 $6.14 $9.98 $10.68
======================================================================================================================
<PAGE>
TOTAL
RETURN 29.1% 0.5% 14.5% (0.3%) 28.3% 0.4% 35.6% 10.1% (21.2%) 35.8% 34.5%
RATIOS
Net Assets--
End of
Period (000 $375,200 $311,051 $306,592 $290,309 $290,155 $233,630 $232,468 $173,342 $174,554 $239,824 $174,999
Omitted)
Ratio of
Expenses to
Average Net
Assets 1.22%++ 1.21% 1.22% 1.23% 1.10% 1.07% 0.98% 1.00% 0.98%+ 0.87% 0.74%
Ratio of Net
Income to
Average Net
Assets 1.19% 0.88% 0.57% 1.13% 1.52% 2.35% 2.03% 2.81% 2.41%+ 2.11% 2.64%
Portfolio
Turnover 235% 239% 212% 103% 95% 82% 64% 58% 31% 56% 42%
Rate
Average
Commission
Rate Paid
(unaudited) $0.0697 -- -- -- -- -- -- -- -- -- --
<FN>
+ Annualized
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.17%.
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
BALANCED FUND
Years Ended
Years Ended December 31 Period of September 30
------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 10/1/87- 1987* 1986*
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $8.56 $8.93 $8.30 $8.19 $7.22 $7.97 $6.89 $6.55 $8.72 $7.89 $7.26
---------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment 0.28 0.20 0.22 0.27 0.31 0.35 0.32 0.38 0.07 0.32 0.32
Income
Net Gains or Losses
on Securities (Both
Realized and
Unrealized) 2.21 (0.37) 1.58 0.21 1.30 (0.75) 1.39 0.34 (1.29) 1.37 0.83
----------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 2.49 (0.17) 1.80 0.48 1.61 (0.40) 1.71 0.72 (1.22) 1.69 1.15
----------------------------------------------------------------------------------------------------------
LESS
DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.28) (0.20) (0.21) (0.28 (0.31) (0.35) (0.32) (0.38) (0.08) (0.42) (0.37)
Distributions (From
Capital Gains) (1.19) 0.00 (0.96) (0.09 (0.33) 0.00 (0.31) 0.00 (0.87) (0.44) (0.15)
----------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.47) (0.20) (1.17) (0.37 (0.64) (0.35) (0.63) (0.38) (0.95) (0.86) (0.52)
----------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $9.58 $8.56 $8.93 $8.30 $8.19 $7.22 $7.97 $6.89 $6.55 $8.72 $7.89
==========================================================================================================
TOTAL RETURN 29.4% (1.9%) 21.9% 6.0% 22.9% (5.0%) 25.3% 11.1% (13.9%) 22.9% 16.8%
RATIOS
Net Assets--End
of Period
(000 Omitted) $130,346 $95,226 $72,859 $31,538 $18,790 $13,650 $15,082 $12,636 $13,159 $16,885 $12,117
Ratio of Expenses to
Average Net Assets 1.23++ 1.26% 1.34% 1.88% 1.73% 1.65% 1.52% 1.64% 1.84%+ 1.66% 1.59%
<PAGE>
Ratio of Net Income
to Average Net 2.92% 2.37% 2.30% 3.57% 4.01% 4.63% 4.19% 5.39% 4.16%+ 4.03% 4.44%
Assets
Portfolio Turnover
Rate 286% 258% 251% 96% 133% 103% 85% 182% 141% 133% 178%
Average Commission
Rate Paid (unaudited) $0.0668 -- -- -- -- -- -- -- -- -- --
<FN>
* Restated to reflect 2-for-1 split on November 30, 1987
+ Annualized
++ Ratio reflects total expenses, including fees paid indirectly with brokerage
commissions and fees offset by earnings credits. Excluding indirectly paid
expenses for the year ended December 31, 1995, the expense ratio was 1.19 </FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
Years Ended December 31 Period of
---------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 3/1/88
12/31/88
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period $8.78 $10.02 $10.19 $10.48 $9.85 $10.13 $9.68 $10.00
----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.45 0.52 0.46 0.51 0.60 0.69 0.78 0.64
Net Gains or Losses on
Securities (Both
Realized and Unrealized) 0.51 (1.26) 0.47 0.03 0.81 (0.28) 0.46 (0.32)
---------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 0.96 (0.74) 0.93 0.54 1.41 0.41 1.24 0.32
---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
Dividends (From
Net Investment Income) (0.45) (0.50) (0.46) (0.51) (0.60) (0.69) (0.79) (0.64)
Distributions
(From Capital Gains) 0.00 0.00 (0.64) (0.32) (0.18) 0.00 0.00 0.00
---------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.45) (0.50) (1.10) (0.83) (0.78) (0.69) (0.79) (0.64)
---------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $9.29 $8.78 $10.02 $10.19 $10.48 $9.85 $10.13 $9.68
=========================================================================================================
TOTAL RETURN 11.1% (7.5%) 9.3% 5.3% 14.9% 4.4% 13.3% 3.2%
RATIOS
Net Assets--
End of Period
(000 Omitted) $20,263 $21,323 $30,465 $25,047 $18,146 $7,424 $6,460 $4,392
Ratio of Expenses
to Average
Net Assets* 1.30% 1.34% 1.18% 1.18% 1.12% 1.03% 0.65% 0.26%+
<PAGE>
Ratio of Net Income
to Average
Net Assets* 4.92% 5.52% 4.33% 4.83% 5.89% 7.15% 7.90% 7.67%+
Portfolio Turnover Rate 141% 379% 429% 204% 261% 103% 195% 194%
<FN>
* In the absence of voluntary expense reimbursements and waivers from Founders,
the Expense Ratios would have been 1.45% (1995), 1.51% (1994), 1.37% (1993),
1.43% (1992), 1.42% (1991), 1.53% (1990), 1.48% (1989) and 1.33% (1988), and the
Net Income Ratios would have been 4.77% (1995), 5.35% (1994), 4.14% (1993),
4.58% (1992), 5.59% (1991), 6.65% (1990), 7.07% (1989) and 6.60% (1988).
+ Annualized
</FN>
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
MONEY MARKET FUND
Years Ended
Years Ended December 31 Period of May 31
------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 6/1/87- 1987 1986
12/31/87
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE DATA
Net Asset Value --
Beginning of Period
$1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-----------------------------------------------------------------------------------------------------------------
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.05 0.03 0.02 0.03 0.05 0.07 0.08 0.07 0.04 0.05 0.07
Net Gains or Losses
on Securities (Both
Realized and
Unrealized) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-----------------------------------------------------------------------------------------------------------------
TOTAL FROM
INVESTMENT
OPERATIONS 0.05 0.03 0.02 0.03 0.05 0.07 0.08 0.07 0.04 0.05 0.07
-----------------------------------------------------------------------------------------------------------------
LESS
DISTRIBUTIONS
Dividends (From Net
Investment Income) (0.05) (0.03) (0.02) (0.03) (0.05) (0.07) (0.08) (0.07) (0.04) (0.05) (0.07)
Distributions (From
Capital Gains) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.05) (0.03) (0.02) (0.03) (0.05) (0.07) (0.08) (0.07) (0.04) (0.05) (0.07)
-----------------------------------------------------------------------------------------------------------------
Net Asset Value --
End of Period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
=================================================================================================================
TOTAL RETURN 5.1% 3.4% 2.2% 2.8% 5.1% 7.3% 8.1% 6.9% 4.0% 5.6% 7.8%
RATIOS
Net Assets--End of
Period (000 $125,646 $201,342 $142,399 $120,295 $99,765 $125,440 $84,281 $54,168 $46,444 $41,471 $22,257
Omitted)
Ratio of Expenses to
Average Net Assets* 0.89% 0.91% 0.95% 0.95% 0.99% 0.94% 0.77% 0.80% 0.90%+ 0.90% 0.90%
<PAGE>
Ratio of Net Income
to Average Net
Assets* 5.11% 3.49% 2.26% 2.78% 5.03% 7.26% 8.22% 6.75% 6.16%+ 5.39% 6.82%
<FN>
* In the absence of voluntary expense reimbursements and waivers from Founders,
the Expense Ratios would have been 0.99% (1993), 1.01% (1992), 1.02% (1991),
0.79% (1989) and 0.81% (1988), and the Net Income Ratios would have been 2.22%
(1993), 2.72% (1992), 5.00% (1991), 8.20% (1989), and 6.74% (1988)
+ Annualized
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVES OF THE FUNDS
THE DESCRIPTIONS OF THE FUNDS BELOW ARE DESIGNED TO HELP YOU CHOOSE THE FUND
THAT BEST FITS YOUR INVESTMENT OBJECTIVES. YOU MAY WANT TO PURSUE YOUR
OBJECTIVES BY INVESTING IN MORE THAN ONE FUND.
AGGRESSIVE GROWTH FUNDS
DISCOVERY FUND
The investment objective of Discovery Fund is capital appreciation.
To achieve its objective, the Fund normally will invest at least 65% of
its total assets in common stocks of small, rapidly growing U.S. companies.
These companies are generally smaller than those selected for Frontier Fund.
Typically, these companies are not listed on a national securities exchange but
trade on the over-the-counter market and generally have either market
capitalizations or annual revenues between $10--$500 million. Although the Fund
will normally invest in common stocks of U.S. companies, it may invest up to 30%
of its total assets in foreign securities. For a further explanation of this
Fund's investment policies, see the sections entitled "Investment Policies
Involving Special Risks" and "Other Investment Policies."
FRONTIER FUND
The investment objective of Frontier Fund is capital appreciation.
To achieve its objective, the Fund normally will invest at least 65% of
its total assets in common stocks of small and medium-sized U.S. and foreign
companies. Ordinarily, these U.S. companies are not listed on a national
securities exchange but will be traded on the over-the-counter market and
generally have either market capitalizations or annual revenues of $200
million--$1 billion. These companies are usually larger than those selected for
Discovery Fund. The Fund will normally be at least 50% invested in U.S.
companies, with no more than 25% invested in any one foreign country. The Fund
has the flexibility to be completely invested in U.S. or foreign securities,
depending on investment opportunities. The Fund will normally invest in small
and medium-sized companies; however, it may also invest in large companies if,
in Founders' opinion, they represent better prospects for capital appreciation.
For a further explanation of this Fund's investment policies, see the sections
entitled, "Investment Policies Involving Special Risks" and "Other Investment
Policies."
PASSPORT FUND
The investment objective of Passport Fund is capital appreciation.
To achieve its objective, the Fund invests primarily in securities
issued by foreign companies which have market capitalizations or annual revenues
of $1 billion or less. These securities may represent companies in both
established and emerging economies throughout the world.
At least 65% of the Fund's total assets will normally be invested in
foreign securities representing a minimum of three countries. The Fund may
invest in larger foreign companies or in U.S.-based companies if, in Founders'
opinion, they represent better prospects for capital appreciation. For a further
explanation of this Fund's investment policies, see the sections entitled
"Investment Policies Involving Special Risks" and "Other Investment Policies."
<PAGE>
SPECIAL FUND
The investment objective of Special Fund is capital appreciation.
To achieve its objective, the Fund normally will invest its assets in the
common stocks of three categories of companies: small- to medium-sized
companies, large companies, and foreign companies. Founders may vary the amount
of the Fund's assets invested in each category from time to time depending on
its evaluation of market, economic, and monetary conditions. However, no more
than 30% of the Fund's total assets will be invested in foreign securities, with
no more than 25% invested in any one foreign country. For a further explanation
of this Fund's investment policies, see the sections entitled "Investment
Policies Involving Special Risks" and "Other Investment Policies."
GROWTH FUNDS
INTERNATIONAL EQUITY FUND
The investment objective of International Equity Fund is long-term growth of
capital.
To achieve its objective, the Fund normally will invest at least 65% of
its total assets in foreign equity securities representing a minimum of three
countries outside of the United States. The Fund will not invest more than 50%
of its assets in the securities of any one foreign country. Normally, the Fund
will invest in companies located throughout the world, except the United States,
including companies in both established and emerging economies.
The Fund will invest principally in equity securities (common stocks and
securities convertible into common stocks, including convertible debt
obligations and convertible preferred stock), although it may also purchase debt
securities of investment-grade or investment grade quality as determined by the
Fund's portfolio manager.
For a further explanation of the Fund's investment policies, see the
sections entitled "Investment Policies Involving Special Risks" and "Other
Investment Policies."
WORLDWIDE GROWTH FUND
The investment objective of Worldwide Growth Fund is long-term growth of
capital.
To achieve its objective, the Fund normally will invest at least 65% of
its total assets in equity securities of growth companies in a variety of
markets throughout the world. The Fund will emphasize common stocks of both
emerging and established growth companies that generally have proven performance
records and strong market positions. The Fund's portfolio will usually consist
of investments in companies in various countries throughout the world, but it
will always invest at least 65% of its total assets in three or more countries.
The Fund will not invest more than 25% of its total assets in the securities of
any one foreign country.
The Fund has the ability to purchase securities in any foreign country
as well as in the United States. For a further explanation of this Fund's
investment policies, see the sections entitled " Investment Policies Involving
Special Risks" and "Other Investment Policies."
<PAGE>
GROWTH FUND
The investment objective of Growth Fund is long-term growth of capital.
To achieve its objective, the Fund normally will invest at least 65% of
its total assets in common stocks of well-established, high-quality growth
companies. These companies tend to have strong performance records, solid market
positions and reasonable financial strength, and have continuous operating
records of three years or more. The Fund may also invest up to 30% of its total
assets in foreign securities, with no more than 25% invested in any one foreign
country. For a further explanation of this Fund's investment policies, see the
sections entitled "Investment Policies Involving Special Risks" and "Other
Investment Policies."
GROWTH AND INCOME FUNDS
BLUE CHIP FUND
The investment objective of Blue Chip Fund is long-term growth of capital and
income.
To achieve its objective, the Fund invests primarily in common stocks of
large, well-established, stable and mature companies of great financial
strength, commonly known as "blue chip" companies. "Blue chip" companies have
long records of profitability and dividend payments and a reputation for quality
management, products and services. The Fund normally invests at least 65% of its
total assets in "blue chip" stocks that (1) are included in the Dow Jones
Industrial Average, the Standard & Poor's Daily Stock Price Index of 500 common
stocks, or the New York Stock Exchange Index, each of which is a widely
recognized index of stock market performance; (2) generally pay regular
dividends; and (3) have a market capitalization of at least $1 billion.
Furthermore, the Fund may also invest in non-dividend paying companies if, in
Founders' opinion, they offer better prospects for capital appreciation. The
Fund may also invest up to 30% of its total assets in foreign securities. For a
further explanation of this Fund's investment policies, see the sections
entitled "Investment Policies Involving Special Risks" and "Other Investment
Policies."
BALANCED FUND
The investment objective of Balanced Fund is current income and capi tal
appreciation.
To achieve its objective, the Fund invests in a balanced portfolio of
common stocks, U.S. and foreign government obligations, and a variety of
corporate fixed-income securities. For the equity portion of its portfolio, the
Fund emphasizes investments in common stocks with the potential for capital
appreciation. These stocks generally pay regular dividends, although the Fund
also may invest in non-dividend-paying companies if, in Founder's opinion, they
offer better prospects for capital appreciation. The Fund will maintain a
minimum of 25% of its total assets in fixed-income, investment-grade securities
rated Baa or higher by Moody's Investors Service, Inc. ("Moody's") or BBB or
higher by Standard & Poor's ("S&P"). Securities rated Baa or BBB are considered
to be of low investment grade by these services.
Up to 5% of the Fund's total assets may be invested in lower-grade (Ba
or less by Moody's, BB or less by S&P) or unrated straight debt securities,
generally referred to as junk bonds, where the investment adviser determines
that such securities present attractive opportunities. The Fund will not invest
in securities rated lower than B. Securities rated B generally lack
<PAGE>
characteristics of a desirable investment and are deemed speculative with
respect to the issuer's capacity to pay interest and repay principal over a long
period of time. See "Appendix" of the STATEMENT OF ADDITIONAL INFORMATION, which
may be obtained without charge by calling Founders at 1-800-525-2440, for a
description of debt security ratings. The Fund may also invest in convertible
corporate obligations and preferred stocks, and may invest up to 30% of its
total assets in foreign securities. The Fund will not invest more than 25% of
its total assets in the securities of any one foreign country. Normally, the
Fund will invest a significant percentage (up to 75%) of its total assets in
common stocks, convertible corporate obligations, and preferred stocks. There
is, however, no limit on the amount of straight debt securities in which the
Fund may invest.
Furthermore, the Fund has the ability to write covered call options on
stocks. For a further explanation of this Fund's investment policies, see the
sections entitled "Investment Policies Involving Special Risks" and "Other
Investment Policies."
INCOME-ORIENTED FUNDS
GOVERNMENT SECURITIES FUND
The investment objective of Government Securities Fund is current income.
To achieve its objective, the Fund invests at least 65% of its total
assets in obligations of the United States government, such as Treasury bills,
notes and bonds and Government National Mortgage Association (GNMA) pass-through
securities, which are supported by the full faith and credit of the United
States Treasury. Additionally, the Fund may invest in obligations of other
agencies and instrumentalities of the United States government and may invest in
securities issued by foreign governments and/or their agencies denominated
either in U.S. currency or in foreign currencies. The Fund will not invest more
than 25% of its total assets in the securities of any one foreign country. The
maturity of the Fund's investments will be long (ten or more years),
intermediate (three to ten years), or short (three years or less). The
proportion invested by the Fund in each category can be expected to vary
depending upon the evaluation of market patterns and trends by Founders. The
market value of the securities in which the Fund invests will fluctuate.
Accordingly, the value of the shares will vary from day to day. For a further
explanation of this Fund's investment policies, see the sections entitled
"Investment Policies Involving Special Risks" and "Other Investment Policies."
MONEY MARKET FUND
The investment objective of Money Market Fund is maximum current income
consistent with the preservation of capital and liquidity.
To achieve its objective, the Fund invests in high-quality money market
instruments with minimal credit risks which mature in twelve months or less. The
Fund may also invest in certain foreign securities. Although no assurances can
be provided, the Fund will use its best efforts, under normal circumstances, to
maintain a constant net asset value of $1.00 per share. The Fund declares
dividends daily. For a further explanation of this Fund's investment policies,
see the sections entitled "Investment Policies Involving Special Risks" and
"Other Investment Policies."
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives of the Funds described above are fundamental and may
not be changed by the Board of Directors without shareholder approval. The means
to be used by the Funds in achieving their respective objectives--including
their policies of investing in designated types of securities--are generally
nonfundamental Fund policies which may be changed by the Board of Directors of
the Funds without the approval of shareholders to the extent permitted by
applicable law, regulation, or regulatory policy. A more detailed explanation of
some of these policies, together with a list of additional fundamental and
nonfundamental investment policies and restrictions, is contained in the
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440. There can be no assurance, of course, that a
Fund will achieve its stated investment objective.
INVESTMENT MANAGEMENT OF THE FUNDS
INVESTMENT PHILOSOPHY
Investment management of the Funds is provided by Founders Asset Management,
Inc. ("Founders"), a registered investment adviser first established as an asset
manager in 1938. Founders is a "growth-style" manager of equity portfolios and
gives priority to the selection of individual securities that have the potential
to provide superior results over time, despite short-term volatility. Under
normal circumstances, Founders' approach to investment management gives greater
emphasis to the fundamental financial, marketing and operating strengths of the
companies whose securities it buys, and is less concerned with the short-term
impact of changes in macroeconomic and market conditions. Founders focuses on
purchasing the stocks of companies with strong management and market positions
that have earnings prospects that are significantly above the average for their
market sectors.
PORTFOLIO MANAGEMENT
To facilitate the day-to-day investment management of the Funds, Founders
employs a unique team-and-lead- manager system for the Funds. The management
team is comprised of several members of the Investment Department, including
Founders' Chief Investment Officer, lead portfolio managers, assistant portfolio
managers, portfolio traders and research analysts. Team members share
responsibility for providing ideas, information, knowledge and expertise in the
management of the Funds. Each team member has one or more areas of expertise
that are applied to the management of the Funds. Daily decisions on portfolio
selection for each Fund rest with a lead portfolio manager assigned to the Fund
who, through participation in the team process, utilizes the input and advice of
the management team in making purchase and sale determinations.
The investment team as a group generally can earn bonus compensation
based on the relative performance of each of the Funds when compared to a group
of funds with similar investment objectives. Bonus compensation is paid by
Founders and not by the Funds. Founders' investment management team consists of
the following individuals:
BJORN K. BORGEN, CHAIRMAN, CHIEF EXECUTIVE OFFICER, AND CHIEF INVESTMENT OFFICER
Mr. Borgen has been Founders' Chief Investment Officer since 1969. He is
responsible for establishing investment policies and strategies for the
Founders Funds and assigning the lead portfolio manager for each Fund. A
graduate of the University of Wisconsin, Mr. Borgen received his MBA
from Harvard Graduate School of Business
<PAGE>
MICHAEL K. HAINES, SENIOR VICE PRESIDENT OF INVESTMENTS
Mr. Haines has been with Founders for nine years, serving as an
assistant portfolio manager, and as lead portfolio manager for Founders
Frontier Fund since 1990. Mr. Haines served as the portfolio or
co-portfolio manager of Founders Discovery Fund from 1989 until July
1995. A graduate of The Colorado College, Mr. Haines received his MBA
from the University of Denver.
MICHAEL W. GERDING, VICE PRESIDENT OF INVESTMENTS
Mr. Gerding is a chartered financial analyst who has been part of
Founders' investment department for six years. Mr. Gerding has served as
the lead portfolio manager for Founders Worldwide Growth and Passport
Funds since 1990 and 1993, respectively. He also has served as lead
portfolio manager for Founders International Equity Fund during 1996 and
as co-lead portfolio manager of that Fund since 1997. Prior to joining
Founders, he served as a portfolio manager and research analyst with
NCNB Texas for several years. Mr. Gerding earned a BBA in finance and
MBA from Texas Christian University.
EDWARD F. KEELY, VICE PRESIDENT OF INVESTMENTS
Mr. Keely is a chartered financial analyst who joined Founders in 1989
and assumed lead portfolio manager responsibilities for Founders Growth
Fund in 1994. From 1992 to 1993, he served as assistant portfolio
manager of Founders Discovery and Frontier Funds. A graduate of The
Colorado College, Mr. Keely holds a bachelor of arts degree in
economics.
BRIAN F. KELLY, PORTFOLIO MANAGER
Mr. Kelly joined Founders in 1996 as the lead portfolio manager of the
Founders Blue Chip and Balanced Funds. Prior to joining Founders, Mr.
Kelly served as a portfolio manager (1993 to 1996) for Invesco Trust
Company, and as a senior equity investment analyst for Sears Investment
Management Company (1986 to 1993). A graduate of the University of Notre
Dame, Mr. Kelly received his MBA and JD from the University of Iowa. He
is also a Certified Public Accountant.
DAVID G. KERN, PORTFOLIO MANAGER
Mr. Kern joined Founders in 1995. He currently serves as the portfolio
manager for Founders Discovery Fund, having assumed responsibility as
the Fund's sole lead portfolio manager during the third quarter of 1995.
Prior to his joining Founders, Mr. Kern served for five years as a vice
president and assistant portfolio manager for Delaware Management
Company. A graduate of Lehigh University with a degree in business and
economics, Mr. Kern is also a chartered financial analyst.
MARGARET DANUSER, FIXED-INCOME MANAGER
Ms. Danuser has been the lead portfolio manager for the Government
Securities and Money Market Funds since 1996, and has served as
Founders' fixed-income specialist since 1995. Previously, she was a an
investment officer with LaSalle Street Capital Management from 1989 to
1994. Ms. Danuser received a bachelor of arts degree from the University
of Colorado.
<PAGE>
DOUGLAS A. LOEFFLER, PORTFOLIO MANAGER
Mr. Loeffler is a chartered financial analyst who has been co-lead
portfolio manager for Founders International Equity and Special Funds
since 1997. Mr. Loeffler joined Founders in 1995 as a senior
international equities analyst and previously served as assistant
portfolio manager for Founders International Equity Fund. Prior to
joining Founders, he served for seven years with Scudder, Stevens &
Clark as an international equities analyst and as a quantitative
analyst. A graduate of Washington State University, Mr. Loeffler
received an MBA in finance from the University of Chicago.
ROBERT T. AMMANN, PORTFOLIO MANAGER
Mr. Ammann is a chartered financial analyst who has been
co-lead portfolio manager for Founders Special Fund since
1997. Mr. Ammann joined Founders in 1993 as a research
analyst, and became a senior research analyst in 1996.
Prior to joining Founders, he was a financial statistician
for Standard & Poor's CompuStat Services, Inc. A graduate
of Colorado State University, Mr. Ammann holds a bachelor's
degree in finance.
JOHN B. JARES, PORTFOLIO MANAGER
Mr. Jares is a chartered financial analyst who has been
co-lead portfolio manager for Founders Special Fund since
1997. Mr. Jares joined Founders in 1994 as a research
analyst. Prior to joining Founders, he worked with Lipper
Analytical Services, Inc., a provider of mutual fund
information. A graduate of Colorado State University, Mr.
Jares received a master's degree in finance from the
University of Colorado at Denver.
INVESTMENT POLICIES INVOLVING SPECIAL RISKS
INVESTMENTS IN SMALL AND MEDIUM-SIZED COMPANIES
Discovery Fund, Frontier Fund, Passport Fund, and Special Fund normally invest a
significant proportion of each Fund's assets in the securities of small and
medium-sized companies. Worldwide Growth Fund and International Equity Fund may
also invest in the securities of such companies. As used in this prospectus,
small and medium-sized companies are those which are still in the developing
stages of their life cycles and are able to achieve rapid growth in both sales
and earnings. Capable management and fertile operating areas are two of the most
important characteristics of such companies. In addition, these companies should
employ sound financial and accounting policies; demonstrate effective research
and successful product development and marketing; provide efficient service; and
possess pricing flexibility. Discovery, Frontier, Passport, Special,
International Equity, and Worldwide Growth Funds try to avoid investing in
companies where operating results may be affected adversely by excessive
competition, severe governmental regulation, or unsatisfactory productivity.
<PAGE>
Investments in small and medium-sized companies involve greater risk
than is customarily associated with more established companies. These companies
often have sales and earnings growth rates which exceed those of large
companies. Such growth rates may in turn be reflected in more rapid share price
appreciation. However, smaller companies often have limited operating histories,
product lines, markets, or financial resources, and they may be dependent upon
one-person management. These companies may be subject to intense competition
from larger entities, and the securities of such companies may have limited
marketability and may be subject to more abrupt or erratic movements in price
than securities of larger companies or the market averages in general.
Therefore, the net asset values of Discovery, Frontier, Passport, Special,
International Equity, and Worldwide Growth Funds' shares may fluctuate more
widely than the popular market averages.
INVESTMENTS IN FIXED-INCOME SECURITIES
Discovery, Frontier, Passport, Special, International Equity, Worldwide Growth,
Growth, Blue Chip, and Balanced Funds (the "Equity Funds") may invest in
convertible securities, preferred stocks, bonds, debentures, and other corporate
obligations when Founders believes that these investments offer opportunities
for capital appreciation. Current income also is a factor in the selection of
these securities by the Balanced Fund, but will not be a substantial factor in
the selection of these securities by the other Equity Funds.
The Equity Funds will only invest in bonds, debentures, and corporate
obligations--other than convertible securities and preferred stock--rated
investment grade (BBB or higher) at the time of purchase. Bonds in the lowest
investment grade category (BBB) have speculative characteristics, with changes
in the economy or other circumstances more likely to lead to a weakened capacity
of the bonds to make principal and interest payments than would occur with bonds
rated in higher categories. Convertible securities and preferred stocks
purchased by the Equity Funds may be rated in medium and lower categories by
Moody's or S&P (Ba or lower by Moody's and BB or lower by S&P) but will not be
rated lower than B. The Equity Funds may also invest in unrated convertible
securities and preferred stocks in instances in which Founders believes that the
financial condition of the issuer or the protection afforded by the terms of the
securities limits risk to a level similar to that of securities eligible for
purchase by the Funds rated in categories no lower than B. Securities rated B
are referred to as "high-risk" securities, generally lack characteristics of a
desirable investment, and are deemed speculative with respect to the issuer's
capacity to pay interest and repay principal over a long period of time. See
"Appendix" of the STATEMENT OF ADDITIONAL INFORMATION, which may be obtained
without charge by calling Founders at 1-800-525-2440, for a description of debt
security ratings.
At no time will any Fund have more than 5% of its total assets invested
in any fixed-income securities which are unrated or are rated below investment
grade either at the time of purchase or as a result of a reduction in rating
after purchase.
<PAGE>
The fixed-income securities in which the Founders Equity Funds and the
Government Securities Fund may invest are generally subject to two kinds of
risk: credit risk and market risk. Credit risk relates to the ability of the
issuer to meet interest or principal payments, or both, as they come due. The
ratings given a security by Moody's and S&P provide a generally useful guide as
to such credit risk. The lower the rating given a security by such rating
service, the greater the credit risk such rating service perceives to exist with
respect to such security. Increasing the amount of Fund assets invested in
unrated or lower-grade securities, while intended to increase the yield produced
by those assets, also will increase the credit risk to which those assets are
subject.
Market risk relates to the fact that the market values of securities in
which the Founders Equity Funds and the Government Securities Fund may invest
generally will be affected by changes in the level of interest rates. An
increase in interest rates will tend to reduce the market values of such
securities, whereas a decline in interest rates will tend to increase their
values. Medium-and lower-rated securities (Baa or BBB and lower) and non-rated
securities of comparable quality tend to be subject to wider fluctuations in
yields and market values than higher-rated securities. Medium-rated securities
(those rated Baa or BBB) have speculative characteristics while lower-rated
securities are predominantly speculative. The Equity Funds are not required to
dispose of debt securities whose ratings are downgraded below these ratings
subsequent to a Fund's purchase of the securities, unless such a disposition is
necessary to reduce a Fund's holdings of such securities to less than 5% of its
total assets. Relying in part on ratings assigned by credit agencies in making
investments will not protect the Equity Funds from the risk that fixed-income
securities in which they invest will decline in value, since credit ratings
represent evaluations of the safety of principal, dividend and interest payments
on preferred stocks and debt securities, not the market values of such
securities, and such ratings may not be changed on a timely basis to reflect
subsequent events.
Founders seeks to reduce overall risk associated with the investments of
the Founders Equity Funds through diversification and consideration of relevant
factors affecting the value of securities. No assurance can be given, however,
regarding the degree of success that will be achieved in this regard or in any
Equity Fund's achieving its investment objectives.
INVESTMENTS IN FOREIGN SECURITIES
Each of the Funds (except Government Securities and Money Market Funds) may
invest without limit in American Depositary Receipts and all of the Funds may
invest in foreign securities. The term "foreign securities" refers to securities
of issuers, wherever organized, which, in the judgment of management, have their
principal business activities outside of the United States. The determination of
whether an issuer's principal activities are outside of the United States will
be based on the location of the issuer's assets, personnel, sales, and earnings,
and specifically on whether more than 50% of the issuer's assets are located, or
more than 50% of the issuer's gross income is earned, outside of the United
States, or on whether the issuer's sole or principal stock exchange listing is
outside of the United States. Foreign securities typically will be traded on the
applicable country's principal stock exchange but may also be traded on regional
exchanges or over-the-counter.
<PAGE>
American Depositary Receipts ("ADRs") are receipts, typically issued by
a U.S. bank or trust company, evidencing ownership of the underlying foreign
securities. ADRs are denominated in U.S. dollars and trade in the U.S.
securities markets. ADRs may be issued in sponsored or unsponsored programs. In
sponsored programs, the issuer makes arrangements to have its securities traded
in the form of ADRs; in unsponsored programs, the issuer may not be directly
involved in the creation of the program. Although the regulatory requirements
with respect to sponsored and unsponsored programs are generally similar, the
issuers of unsponsored ADRs are not obligated to disclose material information
in the United States and, therefore, such information may not be reflected in
the market value of the ADRs. ADRs are subject to certain of the same risks as
direct investments in foreign securities, including the risk that changes in the
value of the currency in which the security underlying an ADR is denominated
relative to the U.S. dollar may adversely affect the value of the ADR.
Money Market Fund's foreign investments are limited to
dollar-denominated obligations of foreign depository institutions or their U.S.
branches, or foreign branches of U.S. depository institutions. Foreign
investments of Government Securities Fund are limited to securities issued by
foreign governments and/or their agencies. Foreign investments of Money Market
and Government Securities Funds will be limited primarily to securities of
issuers from the major industrialized nations, such as the United Kingdom,
France, Canada, Germany and Japan.
Foreign investments of Passport, Worldwide Growth, and International
Equity Funds may include securities issued by companies located in countries not
considered to be major industrialized nations. Such countries are subject to
more economic, political and business risk than major industrialized nations,
and the securities they issue are expected to be more volatile and more
uncertain as to payments of interest and principal. The secondary market for
such securities is expected to be less liquid than for securities of major
industrialized nations. Such countries may include (but are not limited to)
Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Chile, China, Colombia,
Costa Rica, Croatia, Czech Republic, Denmark, Ecuador, Egypt, Finland, Greece,
Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Israel, Jordan, Malaysia,
Mexico, Netherlands, New Zealand, Nigeria, North Korea, Norway, Pakistan,
Paraguay, Peru, Philippines, Poland, Portugal, Singapore, Slovak Republic, South
Africa, South Korea, Spain, Sri Lanka, Sweden, Switzerland, Taiwan, Thailand,
Turkey, Uruguay, Venezuela, Vietnam and the countries of the former Soviet
Union. Investments of Passport, Worldwide Growth, and International Equity Funds
may include securities created through the Brady Plan, a program under which
heavily indebted countries have restructured their bank debt into bonds.
Since Passport, Worldwide Growth, and International Equity Funds' assets
will be invested primarily in foreign securities and since substantially all of
the Funds' revenues will be received in foreign currencies, the Funds' net asset
values will be affected by changes in currency exchange rates. For example, the
dollar equivalent of the Funds' net assets and distributions will be affected
adversely by a reduction in the value of a particular foreign currency relative
to the U.S. dollar. In contrast, in periods during which the U.S. dollar
generally declines, the returns on foreign securities generally are enhanced.
The Funds will pay dividends in dollars and will incur currency conversion
costs.
<PAGE>
Investments in foreign securities involve certain risks which are not
typically associated with U.S. investments. These risks include fluctuations in
exchange rates of foreign currencies, which will affect the value of the assets
of a Fund as measured in U.S. dollars, and the costs incurred by a Fund in
connection with conversion between various currencies. Other considerations
include the possible imposition of exchange control regulations or currency
restrictions which would prevent cash from being brought back to the United
States, and the reduced availability of public information with respect to
issuers of foreign securities. There is less governmental supervision of foreign
stock exchanges, security brokers, and issuers of securities. Accounting,
auditing and financial reporting standards are less uniform than those
applicable to U.S. companies. Foreign markets have substantially less volume
than U.S. markets, and are not generally as liquid as, and may be more volatile
than, those in the United States. Brokerage commissions and other transaction
costs are generally higher than in the United States. Additionally, there exists
the possibility of expropriation or confiscatory taxation; limitations on the
removal of funds or other assets of the Fund; political, economic or social
instability; or diplomatic developments which could affect U.S. investments in
foreign countries. The operating expense ratio of a Fund which invests in
foreign securities may be higher than that of a Fund which invests primarily in
U.S. securities because certain costs (such as custody fees) are higher. A
complete description of these risks is contained in the STATEMENT OF ADDITIONAL
INFORMATION, which may be obtained without charge from Founders at
1-800-525-2440.
FOREIGN CURRENCY TRANSACTIONS
All of the Funds (except for Money Market Fund) currently are permitted to use
forward foreign currency contracts in connection with the purchase or sale of a
specific security.
A forward foreign currency contract ("forward contract") involves an
obligation to purchase or sell a specific foreign currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no margin or other deposit requirement, and no commissions are
charged at any stage for trades.
The current investment policy for the Funds provides that the Funds may
conduct their foreign currency exchange transactions on a spot (I.E., cash)
basis at the spot rate prevailing in the foreign exchange currency market, or on
a forward basis to "lock in" the U.S. dollar price of the security. By entering
into a forward contract for the purchase or sale, for a fixed amount of U.S.
dollars, of the amount of foreign currency involved in the underlying
transactions, the Funds attempt to protect themselves against possible loss
resulting from an adverse change in the relationship between the U.S. dollar and
the applicable foreign currency during the period between the date on which the
security is purchased or sold and the date on which such payments are made or
received.
<PAGE>
In addition, the Discovery, Frontier, Passport, International Equity and
Worldwide Growth Funds are each permitted to enter into forward contracts for
hedging purposes. When Founders believes that the currency of a particular
foreign country may suffer a substantial decline against the U.S. dollar (or
sometimes against another currency), these Funds are permitted to enter into
forward contracts to sell, for a fixed-dollar or other currency amount, foreign
currency approximating the value of some or all of the Funds' portfolio
securities denominated in that currency. The precise matching of the forward
contract amounts and the value of the securities involved will not generally be
possible. The future value of such securities in foreign currencies changes as a
consequence of market movements in the value of those securities between the
date on which the contract is entered into and the date it expires.
The Discovery, Frontier, Passport, International Equity and Worldwide
Growth Funds generally will not enter into forward contracts with a term greater
than one year. In addition, the Funds generally will not enter into forward
contracts or maintain a net exposure to such contracts where the fulfillment of
the contracts would require the Funds to deliver an amount of foreign currency
in excess of the value of the Funds' portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
possibility of changes in currency exchange rates will be incorporated into the
Funds' long-term investment strategies.
While forward contracts will be traded to reduce certain risks, trading
in forward contracts itself entails certain other risks. Thus, while the Funds
may benefit from the use of such contracts, if Founders is incorrect in its
forecast of currency prices, a poorer overall performance may result than if a
Fund had not entered into any forward contracts. Some forward contracts may not
have a broad and liquid market, in which case the contracts may not be able to
be closed at a favorable price. Moreover, in the event of an imperfect
correlation between the forward contract and the portfolio position which it is
intended to protect, the desired protection may not be obtained.
In the event that forward contracts and any securities placed in a
segregated account in an amount at least equal to the value of the total assets
of a Fund committed to the consummation of a forward contract are considered to
be illiquid, the securities would be subject to the applicable Fund's limitation
on investing in illiquid securities, as discussed below.
For additional information regarding risks involved in foreign
securities transactions, including forward contracts, please refer to the Funds'
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440.
ILLIQUID SECURITIES
Each of the Funds except Money Market Fund may invest up to 15% of the market
value of its net assets, measured at the time of purchase, in securities which
are not readily marketable, including repurchase agreements maturing in more
than seven days. Securities which are not readily marketable are those which,
for whatever reason, cannot be disposed of within seven days in the ordinary
course of business at approximately the amount at which the applicable Fund has
valued the investment.
<PAGE>
Restricted securities are securities which cannot be resold or
distributed to the public without an effective registration statement under the
Securities Act of 1933. Founders Blue Chip Fund, Frontier Fund, and Money Market
Fund are prohibited by fundamental investment policies from investing any
percentage of their net assets in restricted securities. All other Founders
Funds may invest a maximum of 5% of their net assets in restricted securities.
Investments in illiquid securities, which may include restricted
securities, involve certain risks to the extent that a Fund may be unable to
dispose of such a security at the time desired or at a reasonable price. In
addition, in order to resell a restricted security, a Fund might have to bear
the expense and incur the delays associated with effecting registration.
Money Market Fund may enter into repurchase agreements if, as a result
thereof, no more than 10% of the market value of its net assets would be subject
to repurchase agreements maturing in more than seven days. Each of the Funds
except Blue Chip Fund, Frontier Fund, and Money Market Fund may invest in Rule
144A securities (securities issued in offerings made pursuant to Rule 144A under
the Securities Act of 1933). Rule 144A securities are restricted securities
which may or may not be deemed to be readily marketable. The Funds' board of
directors has adopted guidelines and procedures for Founders to follow in
determining whether a Rule 144A security may be deemed to be readily marketable.
Factors considered in evaluating whether such a security is readily marketable
include eligibility for trading, trading activity, dealer interest, purchase
interest, and ownership transfer requirements. Founders is required to monitor
the readily marketable nature of each Rule 144A security on a basis no less
frequently than quarterly. The Funds' directors monitor the determinations of
Founders quarterly. Readily marketable Rule 144A securities may be resold to
qualified institutional buyers as defined under Rule 144A. The liquidity of each
Fund's investments in Rule 144A securities could be impaired if institutional
investors become disinterested in purchasing such securities. For more
information concerning Rule 144A securities, see the Funds' STATEMENT OF
ADDITIONAL INFORMATION, which may be obtained without charge by calling Founders
at 1-800-525-2440.
BORROWING
Each Fund may borrow money from banks for extraordinary or emergency purposes in
amounts up to 10% of the Fund's net assets (International Equity Fund may effect
such borrowings in amounts up to 33-1/3% of its net assets). If a Fund borrows
money, its share price may be subject to greater fluctuation until the borrowing
is repaid. Each Fund will attempt to minimize such fluctuations by not
purchasing securities when borrowings are greater than 5% of the value of the
Fund's total assets.
FUTURES CONTRACTS AND OPTIONS
All Funds except Money Market Fund may enter into futures contracts for hedging
purposes. The acquisition or sale of a futures contract could occur, for
example, if a Fund held or considered purchasing equity securities and sought to
protect itself from fluctuations in prices without buying or selling those
securities. The Funds may also enter into interest rate and foreign currency
futures contracts. Interest rate futures contracts currently are traded on a
variety of fixed-income securities. Foreign currency futures contracts currently
are traded on the British pound, Canadian dollar, Japanese yen, Swiss franc,
German mark and on Eurodollar deposits.
<PAGE>
An option is a right to buy or sell a security at a specified price
within a limited period of time. All of the Funds other than the Special,
Growth, Government Securities, and Money Market Funds, may write ("sell")
covered call options on any or all of their portfolio securities from time to
time as Founders shall deem appropriate; provided, however, that Balanced Fund
may write only covered call options on stocks. The extent of the Funds' option
writing activities will vary from time to time depending upon Founders'
evaluation of market, economic and monetary conditions. In addition, all of the
Funds except the Special, Balanced, Government Securities and Money Market Funds
may purchase options on securities.
All Funds except the Balanced, Money Market, and Government Securities
Funds may purchase options on stock indices. Options on stock indices are
similar to options on securities. However, because options on stock indices do
not involve the delivery of an underlying security, the option represents the
holder's right to obtain from the writer in cash a fixed multiple of the amount
by which the exercise price exceeds (in the case of a put) or is less than (in
the case of a call) the closing value of the underlying index on the exercise
date. The purpose of these transactions is not to generate gain, but to "hedge"
against possible loss. Therefore, successful hedging activity will not produce
net gain to the Funds. Any gain in the price of a call option is likely to be
offset by higher prices a Fund must pay in rising markets, as cash reserves are
invested. In declining markets, any increase in the price of a put option is
likely to be offset by lower prices of stocks owned by a Fund. Whether a Fund
will realize a gain or a loss from its option activities depends upon movements
in the level of stock prices generally or in an industry or market segment,
rather than movements in the price of a particular stock. Purchasing call and
put options on stock indices involves the risk that Founders may be incorrect in
its expectations as to the extent of stock market movements or the time within
which the options are based.
All Funds except Special, Balanced, Money Market, and Government
Securities Funds may purchase put and call options on futures contracts. An
option on a futures contract provides the holder with the right to enter into a
"long" position in the underlying futures contract, in the case of a call
option, or a "short" position in the underlying futures contract, in the case of
a put option, at a fixed exercise price to a stated expiration date. Upon
exercise of the option by the holder, a contract market clearing house
establishes a corresponding short position for the writer of the option, in the
case of a call option, or a corresponding long position, in the case of a put
option. In the event an option is exercised, parties will be subject to all the
risks associated with trading of futures contracts. The amount of risk a Fund
would assume if it bought an option on a futures contract would be the premium
paid for the option plus related transaction costs.
A Fund will not, as to any positions, whether long, short or a
combination thereof, enter into futures and options thereon for which the
aggregate initial margins and premiums exceed 5% of the fair market value of its
total assets after taking into account unrealized profits and losses on options
entered into. All of the Funds except Special, Balanced, Money Market, and
Government Securities Funds may buy and sell options on foreign currencies for
hedging purposes in a manner similar to that in which futures on foreign
currencies would be utilized.
<PAGE>
The successful use of the investment practices described above with
respect to futures contracts, options on futures contracts, and options on
securities indices, securities, and foreign currencies draws upon skills and
experience which are different from those needed to select the other securities
in which the Funds invest. All such practices entail risks and can be highly
volatile. Should interest or exchange rates or the prices of securities or
financial indices move in an unexpected manner, the Funds may not achieve the
desired benefits of futures and options or may realize losses and thus be in a
worse position than if such strategies had not been used. The Funds will not use
such practices for speculative purposes. A more detailed explanation of these
practices and securities, some of which are known as derivatives, is located in
the STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440.
OTHER INVESTMENT POLICIES
TEMPORARY INVESTMENTS
Money Market Fund invests in U.S. government obligations, commercial paper, bank
obligations, repurchase agreements relating to each of these securities, and
negotiable U.S. dollar-denominated obligations of domestic and foreign branches
of U.S. depository institutions, U.S. branches of foreign depository
institutions, and foreign depository institutions. Government Securities Fund
invests at least 65% of its total assets in U.S. government obligations and may
also acquire the other types of securities and repurchase agreements in which
Money Market Fund may invest. All or part of the assets of the other Funds may
be invested temporarily in these securities, in such repurchase agreements, in
cash, or in other cash equivalents, if Founders determines it to be appropriate
for purposes of enhancing liquidity or preserving capital in light of prevailing
market or economic conditions. There can be no assurance that any Fund will be
able to achieve its investment objective. While a Fund is in a defensive
position, the opportunity to achieve capital growth will be limited, and, to the
extent that this assessment of market conditions is incorrect, the Fund will be
foregoing the opportunity to benefit from capital growth resulting from
increases in the value of equity investments.
U.S. government obligations include Treasury bills, notes and bonds;
Government National Mortgage Association (GNMA) pass-through securities; and
issues of United States agencies, authorities and instrumentalities. Obligations
of other agencies and instrumentalities of the U.S. government include
securities issued by the Federal Farm Credit Bank System (FFCB), the Federal
Agricultural Mortgage Corporation ("Farmer Mac"), the Federal Home Loan Bank
System (FHLB), the Financing Corporation (FICO), Federal Home Loan Mortgage
Corporation (FHLMC), the Federal National Mortgage Association (FNMA), the
Student Loan Marketing Association (SLMA), the International Bank for
Reconstruction and Development (IBRD or "World Bank"), and the U.S. Small
Business Administration (SBA). Some government obligations, such as GNMA
pass-through certificates, are supported by the full faith and credit of the
United States Treasury. Other obligations, such as securities of the FHLB, are
supported by the right of the issuer to borrow from the United States Treasury;
and others, such as bonds issued by FNMA (a private corporation), are supported
only by the credit of the agency, authority or instrumentality.
<PAGE>
Commercial paper purchased by Money Market Fund must be a First Tier
Security as defined by the Securities and Exchange Commission ("SEC"). First
Tier Securities are securities which are rated by at least two nationally
recognized statistical rating organizations (NRSROs), or by the only NRSRO that
has rated the security, in the highest short-term rating category, or comparable
unrated securities. For a list of NRSROs and a description of their ratings, see
the "Appendix" in the STATEMENT OF ADDITIONAL INFORMATION, which may be obtained
without charge by calling Founders at 1-800-525-2440. A Fund may also acquire
certificates of deposit and bankers' acceptances of banks which meet criteria
established by the Funds' board of directors. A certificate of deposit is a
short-term obligation of a bank. A banker's acceptance is a time draft drawn by
a borrower on a bank, usually relating to an international commercial
transaction.
The obligations of foreign branches of U.S. depository institutions may
be general obligations of the parent depository institution in addition to being
an obligation of the issuing branch. These obligations, and those of foreign
depository institutions, may be limited by the terms of the specific obligation
and by governmental regulation. The payment of these obligations, both interest
and principal, also may be affected by governmental action in the country of
domicile of the institution or branch, such as imposition of currency controls
and interest limitations. In connection with these investments, a Fund will be
subject to the risks associated with the holding of portfolio securities
overseas, such as possible changes in investment or exchange control
regulations, expropriation, confiscatory taxation, or political or financial
instability.
Obligations of U.S. branches of foreign depository institutions may be
general obligations of the parent depository institution in addition to being an
obligation of the issuing branch, or may be limited by the terms of a specific
foreign regulation applicable to the depository institutions and by government
regulation (both domestic and foreign). A repurchase agreement is a transaction
under which the Fund acquires a security and simultaneously promises to sell
that same security back to the seller at a higher price, usually within a
seven-day period. Such agreements may be considered "loans" under the Investment
Company Act of 1940. The Funds may enter into repurchase agreements with banks
or well- established securities dealers meeting the criteria established by the
Funds' board of directors. All repurchase agreements entered into by the Funds
will be fully collateralized and marked to market daily. In the event of default
by the seller under a repurchase agreement, the Fund may experience difficulties
in exercising its rights to the underlying security and may incur costs in
connection with the disposition of that security. None of the Funds has adopted
any limits on the amounts of their total assets that may be invested in
repurchase agreements which mature in less than seven days. See "Investment
Policies Involving Special Risks - Illiquid Securities" for each Fund's limit on
investments in illiquid securities and in repurchase agreements which mature in
more than seven days.
PORTFOLIO TURNOVER
Each Fund reserves the right to sell its portfolio securities, regardless of the
length of time that they have been held, when it is determined by Founders that
those securities have attained or are unable to meet the investment objective of
the Fund. Discovery, Frontier, Passport, Special, International Equity,
Worldwide Growth, and Growth Funds may engage in short-term trading and
therefore normally will have annual portfolio turnover rates in excess of 100%.
In addition, during periods when Balanced Fund engages in option transactions,
its annual portfolio turnover rate is likely to exceed 100%. Portfolio turnover
<PAGE>
rates in excess of 100%, which are considered to be high, often may be greater
than those of other investment companies seeking capital appreciation. Such
turnover rates would cause a Fund to incur greater brokerage commissions than
would otherwise be the case. Such turnover rates may also generate larger
taxable income and taxable capital gains than would result from lower portfolio
turnover rates and may create higher tax liability for the Funds' shareholders.
A 100% portfolio turnover rate would occur if all of the securities in the
portfolio were replaced during the period. Portfolio turnover rates may also
increase as a result of the need for a Fund to effect significant amounts of
purchases or redemptions of portfolio securities due to economic, market, or
other factors that are not within Founders' control. Further information with
respect to the Funds' portfolio turnover rates is discussed in the Funds'
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440. The portfolio turnover rates of all Funds
except Money Market Fund are located in the section entitled "Financial
Highlights."
INVESTING IN THE FOUNDERS FUNDS
OPENING YOUR ACCOUNT WITH FOUNDERS
THE FOLLOWING ACCOUNTS MAY BE ESTABLISHED USING A REGULAR FOUNDERS NEW ACCOUNT
APPLICATION:
* INDIVIDUAL OR JOINT TENANTS. Individual accounts have one owner. Joint
accounts have two or more owners. Unless specified otherwise, joint
accounts are set up with rights of survivorship.
* TRANSFER ON DEATH. A way to provide beneficiaries on an Individual or
Joint Tenant account. CALL 1-800-525-2440 FOR ADDITIONAL INFORMATION.
* UGMA OR UTMA. (Uniform Gifts to Minors Act or Uniform Transfers to
Minors Act) These accounts are a way to give money to a child or to
help a child save on his/her own. Depending on state laws, Founders
will set the account up as an UGMA or UTMA.
* TRUST. The trust needs to be effective before the account may be
established.
* CORPORATION OR OTHER ENTITY. The accounts are owned by the corporation
or entity. Please attach a certified copy of your corporate resolution
showing the person(s) authorized to act on this account.
THE FOLLOWING RETIREMENT ACCOUNTS REQUIRE A SPECIAL APPLICATION:
* IRAS. Any adult under 701/2 who has earned income may contribute up to
$2,000 (or 100% of compensation, which ever is less) per tax year. If
your spouse is not employed, you can contribute up to $2,250 annually
to two IRAs in any manner, as long as no more than $2,000 is
contributed to a single plan. COMPLETE A FOUNDERS IRA APPLICATION.
* ROLLOVER OR CONDUIT IRAS. Distributions from qualified
employer-sponsored retirement plans (and, in most cases, from any IRA)
retain their tax advantages when rolled over to an IRA within 60 days.
You may also request that Founders contact the current holder of your
IRA (or other qualified retirement plan if you are leaving your
current job and wish to avoid a mandatory 20% withholding tax) and
have the money transferred directly to Founders. COMPLETE A FOUNDERS
IRA APPLICATION AND A DIRECT ROLLOVER/TRANSFER FORM.
* SEP-IRAS AND SAR-SEPS. A simplified retirement plan with minimal
reporting and disclosure requirements. Allows employers to make direct
contributions to employees' IRAs. CALL 1-800-525-2440 FOR
INSTRUCTIONS.
<PAGE>
* PROFIT SHARING AND MONEY PURCHASE PENSION PLANS. Allow self-employed
persons or small business owners and their employees to make
tax-deductible contributions for themselves and any eligible employee.
CALL 1-800-934-GOLD (4653) FOR INSTRUCTIONS.
* 403(B) CUSTODIAL ACCOUNTS. Available to employees of most tax-exempt
institutions, such as schools, hospitals, and charitable
organizations. CALL 1-800-934-GOLD (4653) FOR INSTRUCTIONS.
* 401(K) PROGRAMS. Allow employees of corporations (large or small) to
contribute a percentage of their wages on a tax-deferred basis. CALL
1-800-934-GOLD (4653) FOR ADDITIONAL INFORMATION.
The Small Business Job Protection Act, enacted in August 1996, creates
a new retirement plan vehicle for small employers, the Savings
Incentive Match Plan for Employees ("SIMPLE") effective January 1,
1997; provides that the new SAR-SEP plans may not be established after
December 31, 1996; and raises the annual limit on joint IRA
contributions for married couples in which one spouse has no
compensation from $2,250 to $4,000 for tax years beginning after
December 31, 1996. Call 1-800-525-2440 or consult your tax adviser for
more information.
MINIMUM INITIAL INVESTMENTS
* $1,000 minimum for most regular accounts.
* $500 minimum for IRAs and UGMA accounts.
* No minimum with Automatic Investment Plan of $50 or more per month.
* $250 minimum for Founders' employees and their household family
members.
OPENING YOUR ACCOUNT BY MAIL
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
* Complete the application.
* Make your check payable to "Founders Funds, Inc." Founders Funds does
not accept third-party checks.
* Mail to the above address. If you are using an overnight service or
sending your request via certified or registered mail, send your
application and payment to:
Founders Funds
2930 East Third Avenue
Denver, CO 80206-5002
OPENING YOUR ACCOUNT IN PERSON
Founders Financial Center
2930 East Third Avenue
(at Milwaukee)
Denver, CO
* Visit us at the Founders Financial Center at the above address.
* Hours are 8AM to 5PM Mountain time, Monday through Friday.
* Call us at 1-800-525-2440 for directions.
<PAGE>
NEW ACCOUNTS OPENED BY EXCHANGE
1-800-525-2440
If you already have an account with Founders and have exchange privileges, you
can call the above number to open an account in another Founders Fund by
exchange. The names of the account owners (and account registrations) need to be
identical on both accounts.
OPENING YOUR ACCOUNT THROUGH A BROKER
Be sure to read the broker's program materials for disclosures on fees and
service features that may differ from those in this prospectus. A broker may
charge a commission, transaction fee, or have different account minimums. If you
deal directly with Founders, no commission or transaction fee is charged.
ADDING TO YOUR FOUNDERS FUNDS ACCOUNT
MINIMUM ADD-ON INVESTMENT
* $100 for mail, TeleTransfer and wire payments
* $50 for Automatic Investment Plan payments
* $25 for Founders' employees and their household family members
BY MAIL
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
* Make your check payable to "Founders Funds, Inc."
* Enclose the purchase stub (from your most recent confirmation or
quarterly statement); if you do not have one, write the Fund name and
your account number on the check. For IRAs, please state the
contribution year.
* Founders Funds does not normally accept third- party checks. Please
call 1-800-525-2440 for more information.
* Mail it to the above address. If you are sending your request via
registered or certified mail or using an overnight service, direct
your investment to:
Founders Funds
2930 East Third Avenue
Denver, CO 80206-5002
IN PERSON
Founders Financial Center
2930 East Third Avenue (at Milwaukee)
Denver, CO
* Visit us at the Founders Financial Center at the above address.
* Hours are 8AM to 5PM Mountain time, Monday through Friday.
* Call us at 1-800-525-2440 for directions.
BY WIRE Wire funds to:
Investors Fiduciary Trust Company
ABA # 101003621
For Credit to Account # 751-842-0
PLEASE INDICATE THE FUND NAME AND YOUR ACCOUNT NUMBER, AND INDICATE THE NAME(S)
OF THE ACCOUNT OWNER(S).
<PAGE>
BY AUTOMATED TELEPHONE SERVICE
1-800-947-FAST (3278)
* Follow instructions provided
* All purchases through automated telephone service are TeleTransfer
purchases as explained in the TeleTransfer section.
BY AUTOMATIC INVESTMENT PLAN (AIP) AND TELETRANSFER
1-800-525-2440
* AIP allows shareholders to make regular, electronic purchases directly
from a checking or savings account; TeleTransfer allows similar
* AIP and TeleTransfer may be established when your account is opened.
Call Founders at the above number to request a form to add these
features to an existing account.
* Once established, AIP purchases normally take place automatically on
approximately the 5th and/or 20th of the month. In the future, the
Fund expects to offer this service on alternate dates.
* TeleTransfer purchases take place at your request and are executed at
the closing price of the business day you call. Call Founders at the
above number to request such a purchase.
* Shareholders establishing AIP are eligible automatically to make
TeleTransfer transactions; either AIP or TeleTransfer shareholders
automatically receive telephone redemption privileges. See the section
entitled, "Selling Shares of Your Founders Funds - By Phone."
* Founders charges no fee to process AIP or TeleTransfer transactions.
SELLING SHARES OF YOUR FOUNDERS FUNDS
GENERAL REDEMPTION POLICIES
* HOLD ON PURCHASES. Purchases by check or TeleTransfer (other than
those by cashier's check) will be placed on hold for a maximum 10-day
period. During this time, you may make exchanges to another fund but
may not receive the proceeds of redemption until bank clearance of
your purchase check (which may take up to 10 days). Notwithstanding
the fact that payment may be delayed, redemption share pricing shall
be determined in accordance with the procedures outlined in the
section entitled "Share Price Determination" elsewhere in this
prospectus.
* DESTINATION OF REDEMPTIONS. All requests to send funds to an address
that has been changed in the past 30 days, to an address other than
the address of record or to a financial institution/account other than
the banking information we have on file must be accompanied by a
signature guarantee.
* REDEMPTIONS IN EXCESS OF $250,000. For Discovery, Frontier, Passport,
Special, International Equity, Worldwide Growth, Growth, Blue Chip,
Balanced, and Government Securities Funds: shares will normally be
redeemed in cash, although Founders retains the right to redeem shares
in kind by delivery of readily marketable securities selected from a
Fund's assets at its discretion under unusual circumstances, such as a
period with an unusually large number of redemption requests, in order
to protect the interests of the remaining shareholders. However, the
Company has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, pursuant to which the Company is obligated during
any 90-day period to redeem shares for any one shareholder solely in
cash up to the lesser of $250,000 or 1% of the net asset value of the
Fund at the beginning of that period. The method of valuing securities
used to make redemptions in kind will be the same as the method of
<PAGE>
valuing portfolio securities described under "Determination of Net
Asset Value" in the STATEMENT OF ADDITIONAL INFORMATION, which may be
obtained without charge by calling Founders at 1-800-525-2440, and
such valuation will be made as of the same time the redemption price
is determined. The investor will incur brokerage costs in converting
these securities into cash. Fund shares have not been redeemed in kind
during the past ten years.
* INDIVIDUAL, JOINT TENANT, TRANSFER ON DEATH AND UGMA/UTMA ACCOUNTS:
A letter of instruction needs to be signed by all persons required to
sign for transactions. Be sure to sign just as your names appear on
the account or in our records. Please tell us the number of shares or
dollars you wish to redeem, the names of the account owners, the Fund
and account number, and your Social Security or tax identification
number. Requests to sell $50,000 or more require a signature
guarantee.
* RETIREMENT ACCOUNTS: Please call for the appropriate form.
1-800-525-2440.
* TRUST ACCOUNTS: The trustee needs to sign the letter indicating
his/her capacity as trustee. If the trustee's name is not in the
account registration, you will need to provide a certificate of
incumbency dated within the past 60 days. Please tell us the number of
shares or dollars you wish to redeem, the names of the account owners,
the Fund and account number, and your social security or tax
identification number. A signature guarantee is required for
redemptions of $50,000 or more.
* CORPORATION OR OTHER ENTITY: A corporate resolution complete with a
corporate seal or signature guarantee needs to be included. Please
tell us the number of shares or dollars you wish to redeem, the names
of the account owners, the Fund and account number, and your Social
Security or tax identification number. At least one person authorized
to act on the account needs to sign the letter.
REDEMPTIONS BY PHONE
1-800-525-2440
* If we have received written authorization from you for phone
redemption for your account, you merely need to phone us at the above
number to sell shares.
* Proceeds may be sent only to the address or bank of record.
* Minimum redemption by phone - $100 for a redemption delivered by check
or electronic transfer (TeleTransfer); $1,000 for a redemption
delivered by wire.
* Phone redemption is not available on retirement accounts and certain
other accounts.
* Founders may not be responsible for the authenticity of phone
instructions. See the section entitled "Overall Policies Regarding
Transactions - Those Conducted by Phone, Fax, Automated Telephone
Service, or an Online Computer Service" elsewhere in this Prospectus.
IN WRITING
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
Please review the preceding section on redemption policies and mail your request
to the above address. If you are using certified or registered mail or an
overnight service, send your request to:
Founders Funds
2930 East Third Avenue
Denver, CO 80206-5002
<PAGE>
IN PERSON
Founders Financial Center
2930 East Third Avenue (at Milwaukee)
Denver, CO
METHOD PROCEEDS WILL BE DELIVERED TO YOU:
* BY CHECK. Checks are sent to the address of record. Requests that a
check be sent elsewhere require a signature guarantee.
* BY WIRE. $6.00 fee; $1,000 minimum; monies usually received the
business day after the date you sell. Unless otherwise specified, the
fee will be deducted from redemption proceeds.
* TELETRANSFER. No fee; monies usually received two business days after
you sell.
Where not specified, proceeds will be delivered via check.
VIA CHECKWRITING
* Available on Founders Government Securities and Money Market Funds.
* May be established after account is opened.
* Call 1-800-525-2440 to request the appropriate form.
* There is no fee for this service.
* Minimum amount per check: $500
* Maximum amount per check: $250,000
* Founders may perform a credit check on shareholders requesting
checkwriting privileges.
EXCHANGING SHARES OF YOUR FOUNDERS FUNDS Minimum amount for exchanges is $100.
BY PHONE
1-800-525-2440 - Investor Services
1-800-947-FAST (3278) - Automated Telephone Service
* If you have an account with Founders and have not declined telephone
exchange privileges in writing, you may exchange from one fund to
another by calling one of the above numbers. The names of the account
owners (and account registrations) need to be identical on both
accounts.
* Founders may not be responsible for the authenticity of phone
instructions. See the section entitled, "Overall Policies Regarding
Transactions - Those Conducted by Phone, Fax, Automated Telephone
Service, or an Online Computer Service" elsewhere in this Prospectus.
* Founders may not be responsible for the authenticity of fax
instructions. See the section entitled, "Overall Policies Regarding
Transactions - Those Conducted by Phone, Fax, Automated Telephone
Service, or an Online Computer Service" elsewhere in this Prospectus.
IN WRITING VIA U.S. MAIL OR FAX
Founders Funds
P.O. Box 173655
Denver, CO 80217-3655
Fax (303) 394-4021
Kindly include in your letter the names of the account owners, the fund and
account number you wish to exchange from, your Social Security or tax
identification number, the dollar or share amount of the transaction, and the
account you wish to exchange into. Remember that all account owners need to sign
the request exactly as their names appear on the account.
<PAGE>
EXCHANGE POLICIES
To maintain competitive expense ratios and avoid disrupting the management of
each Fund's portfolio, the Funds reserve the right to suspend or terminate the
exchange privilege for any shareholder (including a shareholder whose account is
managed by an adviser) when the total exchanges out of any one of the Funds
exceed four in any calendar year. Founders will provide written notification to
any investor whose exchange privilege is being revoked and will provide an
effective date of revocation, which will not be less than fifteen (15) calendar
days after the notification date.
OVERALL POLICIES REGARDING TRANSACTIONS
* THOSE CONDUCTED BY PHONE, FAX, AUTOMATED TELEPHONE SERVICE, OR AN
ONLINE COMPUTER SERVICE: Neither the Funds, Founders, nor any of their
agents is responsible for the authenticity of exchange or redemption
instructions received by one of the aforementioned methods.
Automatically by signing a "New Account Application" (unless
specifically declined on the Application), by providing other written
(for redemptions) or verbal (for exchanges) authorization, or by
requesting Automatic Investment Plan privileges, you agree to release
the Funds, Founders, and their agents from any and all liability for
acts or omissions done in good faith under the authorizations
contained in the application, including their possibly effecting
fraudulent transactions. As a result of your executing such a release,
you bear the risk of loss from a fraudulent transaction. However, if
the Fund fails to employ reasonable procedures to attempt to confirm
that instructions are genuine, the Fund may be liable for any such
losses. These procedures include, but are not necessarily limited to,
one or more of the following: requiring personal identification prior
to acting upon instructions; providing written confirmation of such
transactions; and/or tape-recording telephone instructions.
* EFFECTIVE DATE OF TRANSACTIONS. Transaction requests received in good
order prior to the close of the New York Stock Exchange on a given
date will be effective that date. However, under certain
circumstances, payment of redemption proceeds may be delayed for up to
seven (7) calendar days to allow for the orderly liquidation of
securities. Also, when the New York Stock Exchange is closed (or when
trading is restricted) for any reason other than its customary weekend
or holiday closing, or under any emergency circumstances, as
determined by the SEC, we may suspend redemptions or postpone
payments. If you are unable to reach us by phone, consider sending
your order by overnight mail. Exchange requests may be faxed to (303)
394-4021.
* FAX TRANSMISSIONS. Redemption requests received by fax will not be
processed.
* CERTIFICATES. If you are selling shares previously issued in
certificate form, you will need to include these certificates along
with your redemption/exchange request.
* U.S. DOLLARS. Purchases need to be made in U.S. dollars, and checks
need to be drawn on U.S. banks. No cash can be accepted.
* TRANSACTION REQUESTS THAT ARE NOT IN GOOD ORDER CANNOT BE EXECUTED.
YOU WILL BE CONTACTED IN WRITING IF THIS OCCURS. CALL FOUNDERS AT
1-800-525-2440 IF YOU HAVE ANY QUESTIONS ABOUT THESE PROCEDURES.
* FOUNDERS CANNOT ACCEPT CONDITIONAL TRANSACTIONS REQUESTING THAT A
TRANSACTION OCCUR ON A SPECIFIC DATE OR AT A SPECIFIC SHARE PRICE.
<PAGE>
* SIGNATURE GUARANTEE REQUIREMENTS. Signature guarantees are required
for certain transactions and are an industry-wide method of
maintaining the security of customer accounts. Such guarantees may be
obtained from a bank, broker, dealer, credit union (if authorized
under state law), securities exchange/association, clearing agency, or
savings association. A NOTARY PUBLIC CANNOT PROVIDE A SIGNATURE
GUARANTEE.
* RETURNED CHECKS. If your check is returned to Founders due to
insufficient funds, your purchase will be canceled and you will be
liable for any losses or fees incurred by the Fund or its agents. If
you are a current shareholder, shares will be redeemed from other
accounts, if needed, to reimburse the Fund.
* TAXES. Remember that, for tax purposes, redemptions in non-tax
deferred accounts may have tax consequences, as you may need to
recognize a gain or loss. Likewise, exchanges from one Fund to another
represent a sale from one Fund and a purchase of another and may
result in a gain or loss that you will need to recognize on your tax
return.
* ACCOUNT MINIMUMS. The Fund requires a minimum of $1,000 per account in
order to maintain competitive expense ratios. (The minimum is $500 for
IRAs and UGMAs/ UTMAs.) If at any time, due to redemptions or
exchanges, or upon the discontinuance of an Automatic Investment Plan,
the total value of your account falls below this minimum, we may
either charge a fee of $10, which will be automatically deducted from
the account, or close your account and mail the proceeds to the
address of record. The decision to levy the fee or close the account
will be based on a determination of the best interests of the Fund. We
will give you at least 60 days' written notice informing you that your
account will be closed or that the $10 fee will be charged, so that
you may make an additional investment to bring the account up to the
required minimum balance.
* TAX IDENTIFICATION. Please make sure to complete the "Signature(s)"
section on your "New Account Application" when you open your account.
If you do not provide us with the above information, federal tax law
requires the Fund to withhold 31% of dividends, capital gain
distributions, redemptions and exchange proceeds. Founders Funds, Inc.
may also refuse to sell shares to any person who does not furnish at
the time of purchase a certified social security or tax identification
number. If Fund shares are purchased by a person who has not provided
a certified taxpayer identification number, certain action may be
taken, as deemed necessary by the Fund, including redeeming some or
all of the shareholder's shares. In addition, your account may be
reduced by $50 to reimburse Founders Funds, Inc. for the penalty that
the Internal Revenue Service will impose on the company for failure to
report your taxpayer identification number on information reports.
* FOUNDERS RESERVATIONS. Founders reserves the right to (1) reject any
investment or application; (2) cancel any purchase due to nonpayment;
(3) modify the conditions of purchase at any time; (4) waive or lower
investment minimums; (5) limit the amount that may be purchased; and
(6) perform a credit check on shareholders establishing a new account
or requesting checkwriting privileges.
<PAGE>
SHAREHOLDER SERVICES
INVESTOR SERVICES
1-800-525-2440
Founders Service Representatives are available at the above number to assist you
from Monday through Friday, from 7AM to 6:30PM, Mountain time, and on Saturday,
from 9AM to 2PM, Mountain time. For your protection, calls to Investor Services
are recorded.
FUND AND MARKET NEWS UPDATES
Founders INSIGHT features the latest news about the Founders Funds and is
available 24 hours a day. Call 1- 800-525-2440 and press option 5 on your
Touchtone phone.
DAILY CLOSING PRICES
Founders QUOTELINE features the latest closing prices for the Founders Funds,
updated each business day. Call 1-800-232-8088.
24-HOUR ACCOUNT INFORMATION
* BY PHONE: 1-800-947-FAST (3278). Founders' automated telephone service
enables you to access account information as well as conduct exchanges
and purchases 24 hours a day with a Touchtone phone. Dial the above
number.
* BY ONLINE COMPUTER SERVICES: Account information is available through
the online computer service America Online(R) (AOL). Contact either
AOL directly or Founders at 1-800-525-2440.
STATEMENTS AND REPORTS
* CONFIRMATION STATEMENTS: Sent after each transaction, except in
certain retirement accounts and where the only transaction is a
monthly dividend repurchase or an Automatic Investment Plan purchase.
* ACCOUNT STATEMENTS: Sent at the end of each quarter.
* SHAREHOLDER REPORTS: Sent twice a year; after the end of June and
after year-end.
* STATEMENT OF ADDITIONAL INFORMATION: A STATEMENT OF ADDITIONAL
INFORMATION dated August 12, 1996 has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. You
can obtain a copy without charge by calling Founders at
1-800-525-2440.
ESTABLISHING ADDITIONAL SERVICES
1-800-525-2440
Shareholders may call to request a form to add or delete the following services:
* CHECKWRITING. Available on Founders Money Market and Government
Securities Funds only.
* TELEPHONE REDEMPTION. Available for regular (nonretirement) accounts
only.
* TELEPHONE EXCHANGE.
* FUND-TO-FUND INVESTMENT PLAN. Allows shareholders to automatically
withdraw a fixed dollar amount each month from one Founders Fund to
purchase shares in another Founders Fund.
* DISTRIBUTION PURCHASE PROGRAM. Permits shareholders to have capital
gains distributions and/or dividends from one Founders Fund
automatically reinvested to purchase shares of another Founders Fund.
* AUTOMATIC INVESTMENT PLAN. Allows shareholders to make automatic
purchases from a bank account once or twice a month.
<PAGE>
* TELETRANSFER PROGRAM. Allows shareholders to purchase or redeem shares
in the Founders Funds with a simple phone call at any time. Purchase
or redemption amounts are automatically transferred to/from the
shareholder's bank account. Shareholders selecting an Automatic
Investment Plan are automatically authorized to participate in the
TeleTransfer program.
* SYSTEMATIC WITHDRAWAL PLAN. Permits the shareholder to receive a fixed
sum on a monthly, quarterly or annual basis from accounts with a value
of $5,000 or more. Payments may be sent electronically to your bank or
to you in check form.
* DIVIDEND AND DISTRIBUTION OPTIONS. Either or both may be paid in cash
or reinvested.
GENERAL INFORMATION
SHARE PRICE DETERMINATION
The daily net asset value per share is determined at the close of regular
trading on the New York Stock Exchange (currently 4PM Eastern time) on each day
such Exchange is open. Net asset value per share is calculated for purchases and
redemptions by dividing the current market value of total assets, less all
liabilities, by the total number of shares outstanding. If market quotations are
not readily available, the Funds' securities or other assets will be valued at
fair value as determined in good faith by the Funds' board of directors. Net
asset value per share at the time of redemption may be more or less than the
price originally paid to purchase shares, depending primarily upon a Fund's
investment performance.
Investments and requests to redeem shares received by Founders or its
agents before the close of business on the New York Stock Exchange are effective
on, and will receive the price determined, that day. Redemption requests
received thereafter are effective on, and receive the price determined, the next
day the New York Stock Exchange ("Exchange") is open.
Investments are considered received only when your check or wired funds
are received by Founders or its agents. Wired funds are considered received on
the day they are deposited in the custodian bank account if your phone call is
received before the close of business on the Exchange, usually 4PM Eastern time,
and the money is deposited that day.
For pricing purposes, investments by telephone are considered received
at the time of your telephone call. However, you will not be able to redeem
these shares until 10 days after Founders receives your payment. See, "Investing
in the Founders Funds-General Redemption Policies."
Founders Funds, Inc. will use its best efforts, under normal
circumstances, to maintain the net asset value of Money Market Fund at $1.00 per
share using the amortized cost method. Additional information concerning the
computation of net asset value appears in the STATEMENT OF ADDITIONAL
INFORMATION, which may be obtained without charge by calling Founders at
1-800-525-2440.
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Discovery, Frontier, Passport, Special, International Equity, Worldwide Growth,
Growth, and Blue Chip Funds intend to distribute net realized investment income
and any net realized capital gains, after utilization of capital loss
carryforwards, in December of every year. Balanced Fund intends to distribute
net realized investment income on a quarterly basis in March, June, September,
and December of every year, and any net realized capital gains, after
utilization of capital loss carryforwards, in December of every year. Government
Securities Fund intends to declare dividends daily and distribute net realized
investment income monthly, and distribute any net realized capital gains, after
utilization of capital loss carryforwards, in December of every year. Money
Market Fund declares dividends daily, which are paid on the first business day
of every month. Shares of Government Securities and Money Market Funds begin
receiving dividends no later than the next business day following the day when
funds are received by Founders. The Funds will be subject to an annual 4% excise
tax if they fail to meet certain calendar-year distribution requirements. In
order to prevent imposition of the excise tax, it may be necessary for the Funds
to make distributions in addition to those described above.
DIVIDEND AND CAPITAL GAIN DISTRIBUTION OPTIONS
You may elect to have your income dividends and capital gains distributions
reinvested in additional shares. We will assign you this option automatically if
you make no choice on the application. Otherwise:
(a) you may elect to have your income dividends and short-term capital
gains paid to you in cash and your long-term capital gain
distributions reinvested; or
(b) you may elect to have your income dividends and short-term capital
gain distributions reinvested and your long-term capital gain
distributions paid to you in cash; or
(c) you may elect to have both your income dividends and capital gain
distributions paid to you in cash.
Income dividends and capital gain distributions will be reinvested
without a sales charge at the net asset value on the ex-dividend date. If you
have elected to receive your dividends or capital gains in cash and the Postal
Service cannot deliver your checks, or if your checks remain uncashed for six
months, Founders reserves the right to reinvest your distribution checks in your
account at the then-current net asset value and to reinvest all the account's
subsequent distributions in shares of that Fund. If your investment is in the
form of a retirement plan, all dividends and capital gain distributions must be
reinvested in your account.
TAXES
Each of the Funds intends to qualify annually as a regulated investment company.
Generally, regulated investment companies are relieved of federal income tax on
the net investment income and net capital gains that they earn and distribute to
their shareholders. As described below, unless your account is not subject to
income taxes, you must include all dividends and capital gain distributions in
taxable income for federal, state and local income tax purposes. Dividends and
other distributions are taxable whether they are received in cash or reinvested
in the same or another Fund.
All dividends of net investment income from the Funds, such as dividends
and interest on their investments, will be taxable to you as ordinary income. A
portion of such dividends may qualify for the dividends-received deduction for
corporations, although distributions from Government Securities and Money Market
Funds generally are not expected to qualify.
<PAGE>
In addition, the Funds realize capital gains and losses when they sell
securities for more or less than they paid. If total gains on sales exceed total
losses (including losses carried forward from prior years), the Fund has a net
realized capital gain. Net realized capital gains are divided into short-term
and long-term capital gains depending on how long the Fund held the security
that gave rise to the gains. The Funds' capital gain distributions consist of
long-term capital gains that are taxable at the capital gains rate. All
distributions of short-term capital gains will be taxable to you as ordinary
income and included in your dividends.
Distributions from each Fund generally will be taxable to you in the tax
year in which they are received. However, generally, dividends declared by a
Fund in October, November or December of any calendar year, with a record date
in such a month, and paid during the following January, will be treated as if
they were paid by the Fund and received by you on December 31 of the calendar
year in which they were declared.
At the end of each calendar year, shareholders are sent full information
on dividends and capital gain distributions, including information as to the
portion taxable as ordinary income and long-term capital gains. Information
concerning the amount of dividends eligible for the dividends-received deduction
available for corporations is contained in the Funds' annual report or may be
obtained upon request by calling Founders.
You also may realize capital gains or losses when you sell Fund shares
at more or less than the price you originally paid. Foreign shareholders may be
subject to federal income tax rules that differ from those described above. All
shareholders are advised to consult their own tax advisers with respect to the
particular tax consequences of an investment in a Fund.
FOUNDERS FUNDS, INC. AND ITS MANAGEMENT
Founders Funds, Inc. is an open-end diversified management investment company
organized as a Maryland corporation on June 19, 1987. Founders serves as
investment adviser to each of the Funds. Founders is owned by Mr. Bjorn K.
Borgen, its Chairman, Chief Executive Officer and Chief Investment Officer. The
affairs of Founders Funds, Inc., including the services provided by Founders,
are subject to the supervision and general oversight of the Funds' board of
directors.
Founders Funds, Inc. and Founders Asset Management, Inc. have adopted a
strict code of ethics which limits directors, officers, investment personnel,
and other Founders employees in investing in securities for their own accounts.
The code of ethics requires pre-clearance of personal securities transactions
and imposes restrictions and reporting requirements upon such transactions. The
code of ethics, which complies in all material respects with the recommendations
set forth in the Report of the Advisory Group on Personal Investing of the
Investment Company Institute, requires maintenance of the highest standards of
integrity and conduct. In engaging in personal business activities, personnel of
Founders and the Funds must act in the best interests of the Funds and their
shareholders. The Funds and Founders carefully monitor compliance with the code
of ethics by their respective personnel.
<PAGE>
Founders, which has acted as an investment adviser since 1938, manages
the investment of each Fund's assets and provides certain administrative
services to each Fund. For these services, each Fund pays Founders an investment
advisory fee which, during the most recent fiscal year, represented the
following percentages of each Fund's average daily net assets: Discovery Fund -
1.00%; Frontier Fund - 0.97%; Passport Fund - 1.00%; Special Fund - 0.76%;
International Equity Fund - 0.00%; Worldwide Growth Fund - 1.00%; Growth Fund
- -0.74%; Blue Chip Fund - 0.64%; Balanced Fund - 0.65%; Government Securities
Fund - 0.65%; and Money Market Fund - 0.50%. Investment advisory fees paid by
International Equity Fund represented 1.00% of the Fund's average daily net
assets during the six months ended June 30, 1996, and are anticipated to
continue at that level. The fees currently paid by Discovery, Frontier,
Passport, Special, International Equity, Worldwide Growth, Growth, and
Government Securities Funds are higher than the fees generally charged by most
investment companies having similar objectives and policies but are, in the
opinion of the Funds' management, comparable to those of numerous other similar
mutual funds.
Each investment advisory agreement between a Fund and Founders provides
that expenses relating to the Fund's operations which are not expressly assumed
by Founders shall be paid by the Fund, including the fee paid to Founders,
shareholder servicing costs, directors fees and expenses, legal and auditing
fees, custodian fees, printing and supplies, taxes, registration fees and
distribution expenses. Each Fund's total expenses for 1995 (excluding brokerage
commissions) represented the following percentages of average daily net assets:
Discovery Fund - 1.63%; Frontier Fund - 1.57%; Passport Fund - 1.84%; Special
Fund - 1.35%; International Equity Fund -0.00%; Worldwide Growth Fund - 1.65%;
Growth Fund - 1.28%; Blue Chip Fund - 1.22%; Balanced Fund - 1.23%; Government
Securities Fund - 1.30%; and Money Market Fund - 0.89%. Total expenses to be
paid by International Equity Fund are anticipated to represent 2.00% of the
Fund's average daily net assets. Certain expenses of the International Equity
and Government Securities Funds are being reimbursed voluntarily by Founders
pursuant to a commitment to the Funds. In the absence of this expense
limitation, the International Equity Fund's total expenses for the fiscal year
ending December 31, 1996 are estimated to be 3.00% of the Fund's average net
assets, and the Government Securities Fund's total expenses for the year ended
December 31, 1995 would have been 1.45% of the Fund's average net assets.
Subject to the policy of seeking the best execution of orders at the
most favorable prices, sales of shares of the Funds may be considered as a
factor in the selection of brokerage firms to execute Fund portfolio
transactions. The STATEMENT OF ADDITIONAL INFORMATION, which may be obtained
without charge by calling Founders at 1-800-525-2440, further explains the
selection of brokerage firms.
In addition, each of the Funds has entered into shareholder services
agreements with Founders, pursuant to which Founders provides certain
shareholder-related and transfer agent services to the Funds. For such services,
Founders Funds, Inc. pays Founders a monthly fee which is combined with fees
charged the Funds by Investors Fiduciary Trust Company, the Funds' transfer
agent. Out-of-pocket reimbursements are also paid by the Funds. In 1995,
Founders received aggregate shareholder services and transfer agent fees of
$25.42 for each shareholder account. Of this amount, $8.05 per shareholder
account was paid to Investors Fiduciary Trust Company. Due to a reduction in
such aggregate fees to $25 per account per annum from June 1, 1995 through May
31, 1996, and to $24 per account per annum effective June 1, 1996, Founders
anticipates that per account fees for providing such services in 1996 will be
less than those paid by the Funds in 1995.
<PAGE>
Transfer agent fees charged by Investors Fiduciary Trust Company and
Founders Asset Management, Inc. are not charged to each shareholder's account,
but are expenses of the Fund to be paid from the Fund's assets. Registered
broker-dealers, third-party administrators of tax-qualified retirement plans,
and other entities which establish omnibus accounts with the Funds may provide
sub-transfer agency, recordkeeping, or similar services to participants in the
omnibus accounts which reduce or eliminate the need for identical services to be
provided on behalf of the participants by Investors Fiduciary Trust Company
and/or Founders. In such cases, Founders is authorized to pay the entity a
sub-transfer agency or recordkeeping fee , and to be reimbursed for such
payments by the Fund based on the number of participants in the entity's omnibus
accoun. Entities receiving such fees may also receive 12b-1 fees described under
"Distribution Plans," below.
Founders Asset Management, Inc. also performs portfolio accounting for
the Funds which includes, among other duties, calculating net asset value,
monitoring compliance with regulatory requirements, and reporting. Founders
Funds, Inc. pays Founders a fee equal to 0.06% of the first $500 million of the
net assets of the Company and 0.02% of the net assets of the Company in excess
of $500 million, allocated on a pro rata basis among the portfolio companies
based on relative net assets, plus out-of-pocket reimbursement. In 1995,
Founders received aggregate portfolio accounting fees of $621,147.
DISTRIBUTION PLANS
Discovery, Frontier, Passport, Special, International Equity, Worldwide Growth,
Growth, Blue Chip, Balanced, and Government Securities Funds each have adopted
Distribution Plans pursuant to Rule 12b-1 under the Investment Company Act of
1940. Each Plan provides that the Fund may pay distribution and related expenses
of up to 0.25 of 1% each year of its average daily net assets. Expenses
permitted to be paid by a Fund under its Plan include: preparation, printing and
mailing of prospectuses, reports to shareholders (such as semiannual and annual
reports, performance reports, and newsletters ), sales literature and other
promotional material to prospective investors; direct mail solicitation;
advertising; public relations; compensation of sales personnel, brokers,
financial planners or others for their assistance with respect to the
distribution of the Fund's shares, including compensation for such services to
personnel of Founders or of affiliates of Founders; providing payments to any
financial intermediary for shareholder support, administrative, and accounting
services with respect to the shareholders of the Fund; and such other expenses
as may be approved from time to time by the Funds' board of directors and as may
be permitted by applicable statute, rule or regulation. Plan payments may be
made only to reimburse expenses incurred during a rolling twelve-month period,
subject to the annual limitation of 0.25 of 1% of average daily net assets. Any
reimbursable expenses incurred by Founders in excess of this limitation are not
reimbursable and will be borne by Founders. In addition, Founders may from time
to time make additional payments from its revenues to securities dealers and
other financial institutions that provide distribution-related, recordkeeping,
and/or other administrative services to the Funds. The Funds' board of directors
reviews a quarterly written report of amounts expended under each Plan and the
purposes of the expenditures. For each Fund's most recent fiscal year (1995),
expenditures under the plan represented the following percentage of average
daily net assets: Discovery Fund - 0.25%; Frontier Fund -0.25%; Passport Fund -
0.25%; Special Fund -0.25%; International Equity Fund - 0.00%; Worldwide Growth
Fund - 0.25%; Growth Fund -0.25%; Blue Chip Fund - 0.25%; Balanced Fund -0.25%;
and Government Securities Fund - 0.10%. Expenditures under the plan paid by
International Equity Fund are anticipated to represent 0.25% of the Fund's daily
net assets.
<PAGE>
12b-1 Fees ("Fee") are paid to broker-dealers and to other entities for
recordkeeping, distribution, accounting, and/or other shareholder-related
services to investors purchasing shares of a 12b-1 Fund through various sales
and/or shareholder services programs. The Fee is computed at an annual rate not
in excess of 0.25 of 1% of the average daily account balances of investments in
each 12b-1 Fund made by the entity on behalf of investors participating in the
entity's program. The directors of the 12b-1 Funds have authorized Founders to
place a portion of the Funds' brokerage transactions with certain of these
entities, which are broker-dealers or affiliates of broker-dealers, if Founders
reasonably believes that the entity is able to provide best execution of orders
at most favorable prices. Commissions earned by the entity from executing
portfolio transactions may be credited by the entity against the Fee charged to
that Fund. 12b-1 fees not expended as a result of the application of such credit
will not be used for other distribution expenses. These directed-brokerage
arrangements have no adverse effect either on the level of brokerage commissions
paid by the Funds or on any Fund's expenses.
VOTING RIGHTS
Each full share of the Funds has one vote and fractional shares have
proportionate voting rights. Shares of the Funds are generally voted in the
aggregate except where voting by each Fund is required by law. Founders Funds,
Inc. is not required to hold regular annual meetings of shareholders and does
not intend to do so; however, the Board of Directors will call special meetings
of shareholders for action by shareholder vote as may be requested in writing
generally by the holders of 10% or more of the outstanding shares of each Fund
or as may be required by applicable law or the Funds' Articles of Incorporation,
and each Fund will assist shareholders in communicating with other shareholders
as required by the Investment Company Act of 1940. Directors may be removed by
action of the holders of a majority or more of the outstanding shares of all of
the Funds.
TRANSFER AGENT AND CUSTODIAN
Investors Fiduciary Trust Company, under contracts with the Funds, performs all
of these functions:
* transfer agent
* dividend disbursing agent
* redemption agent
* custodian of the portfolio securities and cash of each fund
Founders Asset Management, Inc., under contracts with the Funds,
provides selected transfer agency services for the Funds. See "General
Information-Founders Funds, Inc. and Its Management".
FUND PERFORMANCE INFORMATION
Founders Funds, Inc. may, from time to time, include the yield or total return
of the Funds (other than Money Market Fund) in advertisements or reports to
shareholders or prospective investors. Any quotations of yield will be based on
all investment income per share earned during a given 30-day period (including
dividends and interest), less expenses accrued during the period ("net
investment income"), and will be computed by dividing net investment income by
the maximum public offering price per share on the last day of the period.
Quotations of average annual total return for a Fund will be expressed in terms
of the average annual compounded rate of return on a hypothetical investment in
the Fund over a period of 1, 5 and 10 years (up to the life of the Fund); will
reflect the deduction of a proportional share of Fund expenses (on an annual
basis); and will assume that all dividends and distributions are reinvested when
paid.
<PAGE>
Performance information for a Fund may be compared in reports and
advertisements to:
(1) the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, or other unmanaged indices so that investors may compare a Fund's
results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general;
(2) other groups of mutual funds tracked by independent research firms
which rank mutual funds by overall performance, investment objectives and
assets, or tracked by other services, companies, publications, or persons, that
rank mutual funds on overall performance or other criteria, such as Lipper
Analytical Services, MONEY, MORNINGSTAR, KIPLINGER'S PERSONAL FINANCE, CDA
WEISENBERGER, FINANCIAL WORLD, WALL STREET JOURNAL, U.S. NEWS, BARRON'S, USA
TODAY, BUSINESS WEEK, INVESTOR'S BUSINESS DAILY, FORTUNE, MUTUAL FUNDS MAGAZINE
and FORBES; and
(3) the Consumer Price Index (measured for inflation) to assess the real
rate of return from an investment in the Funds. Unmanaged indices may assume the
reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Other unmanaged indices which may be used by the Funds in providing
comparison data of performance and shareholder service include Lehman Brothers,
National Association of Securities Dealers Automated Quotations, Frank Russell
Company, Value Line Investment Survey, American Stock Exchange, Morgan Stanley
Capital International, Wilshire Associates, Financial Times - Stock Exchange,
New York Stock Exchange, the Nikkei Stock Average, and the Deutscher
Aktienindex. Performance information for any Fund reflects only the performance
of a hypothetical investment in the Fund during the particular time period on
which the calculations are based. Performance figures are based upon historical
investment results and are not intended to indicate future performance. See the
STATEMENT OF ADDITIONAL INFORMATION, which may be obtained without charge by
calling Founders at 1-800-525-2440.
Founders Funds, Inc. may also advertise assessments and analyses of the
quality of the Funds' shareholder services published by analytical and other
recognized magazines which compare the quality of such services provided by
mutual fund complexes.
The Lipper Analytical Services mutual fund rankings and comparisons
which may be provided by the Funds in performance reports will be drawn from the
following Lipper mutual fund groupings:
FUND LIPPER MUTUAL FUND GROUPING
- --------------------------------------------------------------------------------
Discovery Small Company Growth Funds
Frontier Small Company Growth Funds
Passport International Small Company Funds
Special Capital Appreciation Funds
International Equity International Funds
Worldwide Growth Global Funds
Growth Growth Funds
Blue Chip Growth and Income Funds
Balanced Balanced Funds
Government Securities U.S. Government Funds
<PAGE>
[Logo]
FOUNDERS FUNDS
FOUNDERS ASSET MANAGEMENT, INC.
INVESTMENT ADVISER AND FUND DISTRIBUTOR
Founders Financial Center
2930 East Third Avenue
Denver, Colorado 80206
www.founders.com
DIRECTORS
John K. Langum, Chairman
William H. Baughn
Bjorn K. Borgen
Alan S. Danson
Trygve E. Myhren
Jay A. Precourt
Eugene H. Vaughan, Jr.
Jonathan F. Zeschin
This wrapper is not part of the prospectus.
Founders Funds is a registered trademark of Founders Asset Management, Inc.
A-236-PRS (1/97)
