FOUNDERS FUNDS, INC.
SUPPLEMENT TO PROSPECTUS DATED MAY 1, 1998
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.
FOUNDERS GROWTH FUND
The description of Founders Growth Fund on page 22 is hereby amended to state
that the Founders large-/mid-cap investment management team, under the interim
leadership of Paul LaRocco, CFA, has replaced Edward F. Keely as portfolio
manager for Founders Growth Fund. Mr. Keely is no longer associated with
Founders.
Mr. LaRocco, vice president of investments for Founders, became lead portfolio
manager for Founders Special Fund in March 1998. Prior to joining Founders, he
was a vice president and portfolio manager with Oppenheimer Funds Inc.
(1993-1998) and a securities analyst with Columbus Circle Investors (1990-1993).
Since April 1998, Mr. LaRocco also has served as a portfolio manager for The
Dreyfus Corporation. 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.
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
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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.
The date of this supplement is August 24, 1998.
This supplement supersedes the supplement dated July 7, 1998.
<PAGE>
FOUNDERS FUNDS, INC.
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION
DATED MAY 1, 1998
The section of the Funds' Statement of Additional Information entitled
"Directors and Officers" is hereby amended on page 40 to add the following
information concerning two new directors of Founders Funds, Inc. elected in May
1998:
ROBERT P. MASTROVITA**
88 Upland Road
Duxbury, Massachusetts
Director
Private investor; Chairman of private foundation. Formerly (1982 to
1997), Chairman and Director, Hagler, Mastrovita & Hewitt, Inc.,
Boston, Massachusetts, a registered investment adviser. Member,
Boston Society of Security Analysts. Overseer and Investment
Committee Member, Boston Children's Hospital. Born: November
6, 1944.
GEORGE W. PHILLIPS
101 Chestnut Street
Boston, Massachusetts
Director
Retired. Director and Chairman, Strategic Planning Committee,
Warren Bancorp, Inc., Peabody, Massachusetts, a state-chartered
bank holding company. Formerly (1991 to 1997), Mr. Phillips was
President and Chief Executive Officer of Warren Bancorp, Inc. and
Warren Five Cents Savings Bank. Trustee and Chairman of the Finance
and Investment Committees, Children's Medical Center of Boston
Boston, Massachusetts. Born: April 5, 1938.
** Mr. Mastrovita served as a non-employee director of The Boston
Company, Inc. and Boston Safe Deposit and Trust Company until March 15,
1998. Since both of these companies are indirect subsidiaries of
Mellon Bank Corporation, it is possible that, for a period of time,
he might be determined to be an interested director as defined in the
Investment Company Act of 1940. However, the Funds do not concede that
these prior directorships would make Mr. Mastrovita an interested
director of the Funds.
The section of the Funds' Statement of Additional Information entitled
"Directors and Officers" is hereby amended on page 42 to add the following
information concerning two new officers of Founders Funds, Inc. elected in
August 1998:
STEPHANIE D. PIERCE
200 Park Avenue
New York, NY 10166
Vice President, Assistant Treasurer and Assistant Secretary
<PAGE>
Ms. Pierce has been an employee of Funds Distributor, Inc., since
April 1998, as Vice President, Client Development Manager in the New
York office. From April 1997 to March 1998, she was employed by
Citibank, NA. As an officer of Citibank, she was the Relationship
Manager on the Business and Professional Banking team. Born: August
18, 1968.
GEORGE A. RIO
60 State Street
Boston, MA 02109
Vice President and Assistant Treasurer
Executive Vice President and Client Service Director of Funds
Distributor, Inc. (since April 1998). From June 1995 to March 1998,
he was Senior Vice President, Senior Key Account Manager for Putnam
Mutual Funds. From May 1994 to June 1995, he was Director of
Business Development for First Data Corporation. From September 1983
to May 1994, he was Senior Vice President & Manager of Client
Services and Director of Internal Audit at The Boston Company. Born:
January 2, 1955
The section of the Funds' Statement of Additional Information entitled
"Investment Adviser and Distributor -- Investment Adviser" is hereby amended on
pages 48-49 to replace the last paragraph on page 48, which carries over to the
top of page 49, with the following:
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
Stephen E. Canter, Acting Chief Executive Officer; Robert T. Ammann, Vice
President; Angelo Barr, Vice President and National Sales Manager; Kenneth
R. Christoffersen, Vice President, General Counsel and Secretary; Gregory
P. Contillo, Senior Vice President and Chief Marketing Officer; Frank
Gaffney, Vice President; Roberto Galindo, Jr., Vice President; Laurine
Garrity, Vice President; Michael W. Gerding, Senior Vice President; Michael
K. Haines, Senior Vice President; Brian F. Kelly, Vice President; Paul A.
LaRocco, Vice President; Douglas A. Loeffler, Vice President; John B.
Mezger, Vice President and Director of Private Advisory Services; David L.
Ray, Senior Vice President and Treasurer; and Linda M. Ripley, Vice
President.
The date of this Supplement is August 24, 1998.
This Supplement supersedes the Supplement dated June 3, 1998.
