FOUNDERS FUNDS, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1997
(AS SUPPLEMENTED THROUGH DECEMBER 17, 1997)
ACQUISITION OF FOUNDERS BY MELLON BANK, N.A.
On April 1, 1998, Founders Asset Management, Inc. ("Founders"), the investment
adviser to the Funds, was acquired by Mellon Bank, N.A. This acquisition was
accomplished by a merger of Founders into a subsidiary of Mellon Bank called
Founders Asset Management LLC ("New Founders"). Following the acquisition, a
group of Founders executives and portfolio managers purchased an aggregate 10%
equity interest in New Founders. A new investment advisory agreement between the
Funds and New Founders was approved by the shareholders of each of the Funds at
a special meeting held on February 17, 1998. As a result, beginning April 1,
1998, all references in the Prospectus to "we," "us," "our," or "Founders" refer
to New Founders.
In addition, the section of the Funds' prospectus entitled "General Information
- -- Founders' Services to the Funds" is hereby amended on page 43 by replacing
the second, third and
fourth paragraphs with the following:
Founders serves as investment adviser to each of the Funds. Founders
is a 90%-owned subsidiary of Mellon Bank, N. A., with the remaining 10%
held by certain Founders executives and portfolio managers. Mellon Bank is
a wholly-owned subsidiary of Mellon Bank Corporation, a publicly-owned
multibank holding company which provides a comprehensive range of financial
products and services in domestic and selected international markets. The
affairs of the Funds, including the services provided by Founders, are
subject to the supervision and general oversight of the Funds' Board of
Directors.
(continued)
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In connection with the acquisition, the Funds engaged a new distributor that is
unaffiliated with Founders. Accordingly, the section of the Funds' prospectus
entitled "General Information" is hereby amended on page 47 to add the following
new paragraph before the section entitled "Voting Rights:"
DISTRIBUTOR
The Funds' distributor is Premier Mutual Fund Services, Inc.
("Premier"), located at 60 State Street, Boston, Massachusetts 02109.
Premier's ultimate parent is Boston Institutional Group, Inc. All of
the Funds' officers are affiliated with Premier or with affiliates of
Premier.
FOUNDERS SPECIAL FUND
At a meeting held on March 13, 1998, the Funds' Board of Directors determined to
revise the investment policy of Founders Special Fund. Accordingly, the section
of the description of Founders Special Fund entitled "Investment Objective" is
hereby amended on page 16 to read as follows:
INVESTMENT OBJECTIVE
Capital appreciation
SPECIAL FUND normally invests at least 65% of its total assets in equity
securities of domestic and foreign issuers which we characterize as
"growth" companies. We generally will select securities for the Fund
without regard to an issuer's market capitalization. The Fund may invest up
to 30% of its total assets in foreign securities, with no more than 25% of
its total assets invested in the securities of any one foreign country. For
more information on our "growth" style of portfolio management, see
"Founders' Investment Philosophy." For more information on the Funds'
investment techniques and their related risks, see "Investment Policies and
Risks."
<PAGE>
In order to assist in implementing this new investment approach, Founders has
hired a new portfolio manager for Founders Special Fund. Accordingly, the
section of the description of Founders Special Fund entitled "Portfolio
Managers" is hereby amended on page 16 to read as follows:
PORTFOLIO MANAGER
Paul A. LaRocco, Vice President of Investments. Mr. LaRocco is a Chartered
Financial Analyst who became lead portfolio manager for Founders Special
Fund in March 1998. Prior to joining Founders, Mr. LaRocco was a vice
president and portfolio manager with Oppenheimer Funds Inc. (1993-1998) and
a securities analyst with Columbus Circle Investors (1990-1993). A graduate
of the University of California at Santa Barbara, Mr. LaRocco received an
MBA with a concentration in finance from the University of Chicago.
The biography of Douglas A. Loeffler appearing on page 18 of the Funds'
prospectus is hereby revised to indicate that he no longer serves as co-lead
portfolio manager of Founders Special Fund. In addition, Michael K. Haines no
longer serves as co-lead portfolio manager of Founders Special Fund
The date of this Supplement is April 7, 1998.
<PAGE>
FOUNDERS FUNDS, INC.
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1997
On April 1, 1998, Founders Asset Management, Inc. ("Founders"), the investment
adviser to the Funds, was acquired by Mellon Bank, N.A. This acquisition was
accomplished by a merger of Founders into a subsidiary of Mellon Bank called
Founders Asset Management LLC ("New Founders"). Following the acquisition, a
group of Founders executives and portfolio managers purchased an aggregate 10%
equity interest in New Founders. A new investment advisory agreement between the
Funds and New Founders was approved by the shareholders of each of the Funds at
a special meeting held on February 17, 1998. As a result, beginning April 1,
1998, all references in the Statement of Additional Information to "Founders"
refer to New Founders.
The cover page of the Funds' Statement of Additional Information is hereby
amended by replacing the line "Founders Asset Management, Inc., Distributor"
with "Founders Asset Management LLC, Investment Adviser."
The section of the Funds' Statement of Additional Information entitled
"Directors and Officers" is hereby amended on page 39 to update the following
paragraph:
BJORN K. BORGEN *
2930 E. Third Ave.
Denver, Colorado 80206.
Director and Executive Committee Member
Formerly (1971 to 1998), Chairman, Chief Executive Officer,
Chief Investment Officer, and Director of Founders. Born:
September 22, 1937.
The section of the Funds' Statement of Additional Information entitled
"Directors and Officers" is hereby further amended on page 41 to delete the
references to Jonathan F. Zeschin, David L. Ray, Kenneth R. Christoffersen and
Roberto Galindo, Jr. and replace them with the following:
The officers of the Company and their principal occupations for the
last five years appear below. All of the Company's officers are
affiliated with its distributor, Premier Mutual Fund Services, Inc.,
or with affiliates of Premier. None of the Company's officers is
affiliated with Founders.
<PAGE>
MARIE E. CONNOLLY
60 State Street
Boston, Massachusetts 02109
President and Treasurer
President, Funds Distributor Inc. (since 1992),
an affiliate of Premier Mutual Fund Services,
Inc., the Funds' distributor; Treasurer, Funds
Distributor Inc. (July 1993 to April 1994);
Chief Operating Officer, Funds Distributor Inc.
(since April 1994); Director, Funds Distributor
Inc. (since July 1992); President, Chief
Executive Officer, Chief Compliance Officer and
Director, Premier Mutual Fund Services, Inc.
(since April 1994); Senior Vice President and
Director of Financial Administration, The
Boston Company Advisors, Inc. (December 1988 to
May 1993). President and Treasurer (since
September 1994), and Vice President (March 1994
to September 1994) of the registered investment
companies in the Dreyfus family of funds.
Born: August 1, 1957.
MARGARET W. CHAMBERS
60 State Street
Boston, Massachusetts 02109
Secretary
Senior Vice President and General Counsel of
Funds Distributor Inc. (since April 1998).
From August 1996 to March 1998, Ms. Chambers
was Vice President and Assistant General
Counsel for Loomis, Sayles & Company, L.P.
From January 1986 to July 1996, she was an
associate with the law firm of Ropes & Gray.
Secretary of the registered investment
companies in the Dreyfus family of funds (since
April 1998).
DOUGLAS C. CONROY
60 State Street
Boston, Massachusetts 02109
Vice President and Assistant Secretary
Supervisor of Treasury Services and
Administration of Funds Distributor Inc. From
April 1993 to January 1995, Mr. Conroy was a
Senior Fund Accountant for Investors Bank &
Trust Company. From December 1991 to March
1993, Mr. Conroy was employed as a fund
accountant at The Boston Company. Vice
President and Assistant Secretary of the
registered investment companies in the Dreyfus
family of funds (since July 1996). Born:
March 31, 1969.
<PAGE>
CHRISTOPHER J. KELLEY
60 State Street
Boston, Massachusetts 02109
Vice President and Assistant Secretary
Vice President and Senior Associate General
Counsel of Funds Distributor Inc. and Premier
Mutual Fund Services, Inc. From April 1994 to
July 1996, Mr. Kelley was Assistant Counsel at
Forum Financial Group. From October 1992 to
March 1994, Mr. Kelley was employed by Putnam
Investments in legal and compliance capacities.
Vice President and Assistant Secretary of the
registered investment companies in the Dreyfus
family of funds (since January 1998). Born:
December 24, 1964.
KATHLEEN K. MORRISEY
60 State Street
Boston, Massachusetts 02109
Vice President and Assistant Secretary
Manager of Treasury Operations of Funds
Distributor Inc. From July 1994 to November
1995, Ms. Morrisey was a Fund Accountant II for
Investors Bank & Trust Company. Prior to that
she was a finance student at Stonehill College
in North Easton, MA. Vice President and
Assistant Secretary of the registered
investment companies in the Dreyfus family of
funds (since January 1998). Born: July 5,
1972.
MARY A. NELSON
60 State Street
Boston, Massachusetts 02109
Vice President and Assistant Treasurer
Vice President and Manager of Treasury Services
and Administration of Funds Distributor, Inc.
Vice President of Premier Mutual Fund Services,
Inc. From September 1989 to July 1994, Ms.
Nelson was an Assistant Vice President and
Client Manager for The Boston Company. Vice
President and Assistant Treasurer of the
registered investment companies in the Dreyfus
family of funds (since July 1996). Born:
April 22, 1964.
MICHAEL S. PETRUCELLI
200 Park Avenue
New York, New York 10166
Vice President and Assistant Treasurer
Director of Strategic Client Initiatives for
Funds Distributor Inc. From December, 1989
through November, 1996 Mr. Petrucelli was
employed with GE Investment Services where he
<PAGE>
held various financial, business development and
compliance positions. He also served as treasurer
of the GE Funds and as Director of GE Investment
Services. Vice President and Assistant Treasurer
of the registered investment companies in the
Dreyfus family of funds (since January 1997).
Born: May 18, 1961.
JOSEPH F. TOWER, III
60 State Street
Boston, Massachusetts 02109
Vice President and Assistant Treasurer
Senior Vice President, Treasurer, Chief Financial
Officer and Director of Funds Distributor Inc.
and Premier Mutual Fund Services, Inc. From July
1988 to August 1994, Mr. Tower was employed by
The Boston Company, Inc., where he held various
management positions in the Corporate Finance and
Treasury areas. Vice President and Assistant
Treasurer of the registered investment companies
in the Dreyfus family of funds (since January
1998). Born: June 13, 1962.
ELBA VASQUEZ
200 Park Avenue
New York, New York 10166
Vice President and Assistant Secretary
Assistant Vice President of Funds Distributor
Inc. Ms. Vasquez has been an employee since
May 1996, as a Sales Associate in the
distribution of World Equity Benchmark Shares
("WEBS"). From March 1990 to May 1996, she was
employed by U.S. Trust Company of New York. As
an officer of U.S. Trust, she held various
positions in the sales and marketing of their
proprietary family of mutual funds. Vice
President and Assistant Secretary of the
registered investment companies in the Dreyfus
family of funds (since January 1998). Born:
December 14, 1961.
The section of the Funds' Statement of Additional Information entitled
"Investment Adviser and Distributor" is hereby amended on page 43 to replace the
first paragraph with the following:
INVESTMENT ADVISER
Founders Asset Management LLC ("Founders") serves as investment
adviser to the Funds. Founders is a 90%-owned subsidiary of Mellon Bank, N.
A. ("Mellon"), which is a wholly-owned subsidiary of Mellon Bank
Corporation ("MBC"), a publicly owned multibank holding company
<PAGE>
incorporated under Pennsylvania law in 1971 and registered under the
Federal Bank Holding Company Act of 1956, as amended. Mellon and MBC are
located at One Mellon Bank Center, Pittsburgh, Pennsylvania 15258. MBC
provides a comprehensive range of financial products and services in
domestic and selected international markets. MBC's banking subsidiaries are
located in Pennsylvania, Massachusetts, Delaware, Maryland, New Jersey, and
Florida, while other subsidiaries are located in key business centers
throughout the United States and abroad. MBC currently ranks among the
nation's largest bank holding companies based on market capitalization.
MBC's principal wholly-owned subsidiaries are Mellon, The Boston
Company, Inc., Mellon Bank (DE) National Association, Mellon Bank (MD)
National Association, and a number of companies known as Mellon Financial
Services Corporation. MBC also owns a federal savings bank headquartered in
Pennsylvania, Mellon Bank, F.S.B. The Dreyfus Corporation ("Dreyfus"), one
of the nation's largest mutual fund companies, is a wholly-owned subsidiary
of Mellon. MBC's banking subsidiaries engage in retail financial services,
commercial banking, trust and investment management services, residential
real estate loan financing, mortgage servicing, equipment leasing, mutual
fund activities and various securities-related activities. Through its
subsidiaries, MBC managed more than $300 billion in assets as of December
31, 1997. As of that date various subsidiaries of MBC provided
non-investment services, such as custodial or administration services, for
approximately $1.5 trillion in assets.
Under the investment advisory agreement between the Company, on
behalf of each Fund, and Founders, Founders furnishes investment management
and administrative services to the Funds, subject to the overall
supervision of the Board of Directors of the Company. In addition, Founders
provides office space and facilities for the Funds and pays the salaries,
fees and expenses of all Founders officers and other employees connected
with the operation of the Company. In addition, Founders pays the fees
charged by the Company's distributor, Premier Mutual Fund Services, Inc.
The Funds compensate Founders for its services by the payment of fees
computed daily and paid monthly as follows:
The section of the Funds' Statement of Additional Information entitled
"Investment Adviser and Distributor" is hereby further amended on page 46 to
replace the seventh paragraph on that page with the following:
<PAGE>
The advisory agreement between Founders and the Company on behalf of
each of the Funds was approved by the shareholders of each Fund at a
shareholders' meeting of the Company held on February 17, 1998. The
advisory agreement was approved for an initial term ending May 31, 1999,
and may be continued from year to year thereafter either by the vote of a
majority of the entire board of directors or by the vote of a majority of
the outstanding voting securities of each Fund, and in either case, after
review, by the vote of a majority of the Company's directors who are not
"interested persons" (as defined in the 1940 Act) (the "Independent
Directors") of the Company or Founders, cast in person at a meeting called
for the purpose of voting on such approval.
The section of the Funds' Statement of Additional Information entitled
"Investment Adviser and Distributor" is hereby further amended on page 47 to
replace the first full paragraph on that page with the following:
The Company's shares are sold on a continuous basis at the net asset
value per share next calculated after receipt of a purchase order in proper
order. See "Determination of Net Asset Value." Effective April 1, 1998,
Premier Mutual Fund Services Inc. ("Premier") became the Funds'
distributor. Prior to April 1, 1998, Founders Asset Management, Inc.,
Founders' predecessor corporation ("Old Founders"), acted as the Funds'
distributor at no charge to the Funds. Premier acts as agent of the Company
in the sale of shares of the Funds under an underwriting agreement approved
by the Company's directors on November 18, 1997 for an initial term ending
May 31, 1999. Premier is required to use its best efforts to promote the
sale of shares of the Funds, but is not obligated to sell any specific
number of shares. Premier's compensation for services rendered pursuant to
the underwriting agreement is paid by Founders, not the Funds. The
provisions for the continuation, termination and assignment of this
agreement are identical to those described above with regard to the
investment advisory agreement, except that termination other than upon
assignment or mutual agreement requires six months notice by either party.
The section of the Funds' Statement of Additional Information entitled
"Investment Adviser and Distributor" is hereby further amended on page 48 to
replace the last paragraph of that section with the following:
<PAGE>
Founders and its predecessor companies have been providing investment
management services since 1938. In addition to serving as adviser to the
Funds, Founders serves as investment adviser or sub-adviser to various
other mutual funds and private accounts. The officers of Founders include
Jonathan F. Zeschin, President and Chief Executive Officer; Kenneth R.
Christoffersen, Vice President and General Counsel; Gregory P. Contillo,
Senior Vice President; Frank Gaffney, Vice President; Roberto Galindo, Jr.,
Assistant Vice President; Laurine Garrity, Vice President; Michael W.
Gerding, Vice President; Michael K. Haines, Senior Vice President; Edward
F. Keely, Vice President; Brian F. Kelly, Vice President; Paul A. LaRocco,
Vice President; James P. Rankin, Vice President; David L. Ray, Vice
President and Treasurer; Linda M. Ripley, Vice President; and Steven
Shapiro, Vice President.
The date of this Supplement is April 7, 1998.
