FOUNDERS FUNDS, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1998
FOUNDERS GROWTH FUND
The description of Founders Growth Fund on page 22 is hereby amended to state
that Scott A. Chapman, CFA and Thomas M. Arrington, CFA have been appointed as
co-portfolio managers for Founders Growth Fund, effective December 7, 1998. The
paragraph entitled "Portfolio Manager" is hereby amended to read as follows:
PORTFOLIO MANAGERS
Scott A. Chapman, Vice President of Investments. Mr. Chapman is a
Chartered Financial Analyst who joined Founders in December 1998 as
co-lead portfolio manager for Founders Growth Fund. Prior to joining
Founders, he was a vice president and director of growth strategy
(1993-1998) and a securities research analyst (1991-1993) for HighMark
Capital Management, Inc., a subsidiary of Union BanCal Corporation. A
graduate of Santa Clara University, Mr. Chapman received an MBA from
Golden Gate University.
Thomas M. Arrington, Vice President of Investments. Mr. Arrington is a
Chartered Financial Analyst who joined Founders in December 1998 as
co-lead portfolio manager for Founders Growth Fund. Prior to joining
Founders, he was a vice president and director of income equity strategy
(1994-1998), a vice president and director of income and growth strategy
(1993-1994), a securities research analyst (1991-1994), and a business
administration manager (1990-1991) for HighMark Capital Management, Inc.,
a subsidiary of Union BanCal Corporation. A graduate of the University of
California, Los Angeles, Mr. Arrington received an MBA from San Francisco
State University.
Edward F. Keely, former portfolio manager of Founders Growth Fund, is no longer
associated with Founders.
FOUNDERS SPECIAL FUND
The description of Founders Special Fund in the second paragraph on page 16 is
hereby amended by the addition of the following as the next to last sentence in
that paragraph:
For more information on our "growth" style of portfolio management, see
"Founders' Investment Philosophy" on page 7.
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INVESTMENT POLICIES
The section of the Funds' prospectus entitled "Investment Policies and Risks -
Other Investments" is hereby amended as set forth below:
The subsection entitled "Government Securities" is hereby amended on page 37 by
the addition of the following new paragraph at the end of that subsection:
All of the Funds with the exception of the Money Market Fund also may
purchase U.S. Treasury STRIPS (Separate Trading of Registered Interest and
Principal of Securities). STRIPS essentially are zero-coupon bonds that
are direct obligations of the U.S. Treasury. These bonds do not make
regular interest payments; rather, they are sold at a discount from face
value, and principal and accrued interest are paid at maturity. STRIPS may
experience greater fluctuations in market value due to changes in interest
rates and other factors than debt securities that make regular interest
payments. A Fund will accrue income on STRIPS for tax and accounting
purposes which must be distributed to Fund shareholders even though no
cash is received at the time of accrual. Therefore, the Fund may be
required to liquidate other portfolio securities in order to meet the
Fund's distribution obligations.
The first paragraph of the subsection entitled "Commercial Paper and Other Cash
Securities" is hereby amended on page 37 to read as follows:
COMMERCIAL PAPER AND OTHER CASH SECURITIES.
Commercial paper purchased by Money Market Fund must be rated by any two
nationally recognized statistical rating organizations (NRSROs), or by the
only NRSRO that has rated the security, in one of the two highest
short-term rating categories, or be comparable unrated securities.
However, the Fund may not invest more than 5% of its total assets in
securities rated in the second highest rating category. For a list of
NRSROs and a description of their ratings, see the Statement of Additional
Information.
YEAR 2000 ISSUES
As described in the section entitled "Computer Systems" on page 47 of the Funds'
prospectus, the Funds could be adversely affected if the computer systems used
by Founders and the Funds' other service providers do not properly process and
calculate date-related information on and after January 1, 2000. Founders is
working to avoid Year 2000-related problems in its systems and to obtain
assurances from other service providers that they are taking similar steps. In
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addition, issuers of securities in which the Funds invest may be adversely
affected by Year 2000-related problems. This could have an impact on the value
of the Funds' investments and their share prices.
The date of this supplement is December 7, 1998.
This supplement supersedes the supplement dated August 24, 1998.
