FOUNDERS FUNDS
1999 Semiannual Report
For the Six Months Ended June 30, 1999
FOUNDERS FUNDS (Registered Trademark)
Growth Specialists from Dreyfus
<PAGE>
TABLE OF CONTENTS
About this Report....................... 3
A Message from Founders................. 4
Founders Balanced Fund.................. 6
Statement of Investments............ 9
Founders Discovery Fund................. 12
Statement of Investments............ 15
Founders Frontier Fund.................. 18
Statement of Investments............ 21
Founders Government Securities
Fund................................. 24
Statement of Investments............ 26
Founders Growth Fund.................... 27
Statement of Investments............ 30
Founders Growth and Income Fund......... 33
Statement of Investments............ 36
Founders International Equity Fund...... 39
Statement of Investments............ 42
Founders Mid-Cap Growth Fund............ 45
Statement of Investments............ 48
Founders Money Market Fund
Statement of Investments............ 51
Founders Passport Fund.................. 53
Statement of Investments............ 56
Founders Worldwide Growth Fund.......... 59
Statement of Investments............ 62
Statements of Assets and Liabilities.... 66
Statements of Operations................ 68
Statements of Changes in Net Assets..... 70
Financial Highlights.................... 74
Notes to Financial Statements........... 85
Other Information....................... 90
<PAGE>
ABOUT THIS REPORT
HISTORICAL RETURNS
All total returns mentioned in this report account for both the change in a
Fund's per-share price and reinvestment of any dividends or capital gain
distributions made by that Fund. If your account is set up to pay out Fund
distributions rather than reinvest them, your return may differ from the figures
listed here.
The comparative indexes included with each Fund's performance chart are meant
to provide a basis for judging a Fund's performance against its peer group
and/or a specific securities market index [provided by Lipper Analytical
Services, Inc., Morgan Stanley Capital International (MSCI), and Russell]. Each
index shown accounts for both change in security price and reinvestment of any
dividends or coupon payments. The Lipper indexes reflect the expenses of
managing the mutual funds included in each index. The securities indexes are
unmanaged groups of securities; they do not reflect the costs of managing a
mutual fund. An investor may not invest in any of these indexes.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
GUIDE TO UNDERSTANDING FOREIGN HOLDINGS OF THE FOUNDERS FUNDS
The following acronyms are used throughout the Statements of Investments to
indicate the country of origin of non-U.S. holdings:
AT Austria
BE Belgium
BR Brazil
CA Canada
DE Denmark
FI Finland
FR France
GE Germany
GR Greece
HK Hong Kong
IE Ireland
IS Israel
IT Italy
JA Japan
KR South Korea
LU Luxembourg
MX Mexico
NE Netherlands
NW Norway
PO Portugal
RU Russian Federation
SG Singapore
SP Spain
SW Sweden
SZ Switzerland
TW Taiwan
UK United Kingdom
3
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A MESSAGE FROM FOUNDERS
RICHARD W. SABO
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Dear Fellow Shareholder:
The approaching millennium has put our society in a retrospective mood,
reflecting upon how far we've come and how far we've yet to go. As I look back
over decades past, it seems to me that the only thing that has stayed constant
is change itself.
Today, major manufacturing stocks have waned in influence, more than half of
the world's market capitalization lies outside of our borders, and small
companies are the great engines of information-age innovation.
Since our inception in 1938, we've been aware that change is part of our
business, and we've been on a constant lookout for trends that may shape the way
you invest. Just as importantly, we've been ready to adapt to those changes:
adding new funds, expanding our management team, and moving onto the World Wide
Web. But it's the market that really keeps us on our toes, and the first half of
1999 certainly served as a reminder that the market is a constantly changing
organism.
THE FIRST HALF BY THE NUMBERS
The first six months of 1999 comprised another period of excellent performance
by domestic equities and select foreign markets. The Standard & Poor's 500
Index, an unmanaged group of 500 of the largest companies traded in the U.S.
markets, rose 12.32% for the six-month period ended June 30, 1999.
This strength was not limited to large companies. The Russell 2000 Index,
which tracks the returns of small-capitalization stocks, advanced 9.28% in the
six months ended June 30. Thanks to this trend and careful stock selection,
Founders Discovery Fund outperformed the Russell 2000 Index during the period.
Despite the abundance of good news, we realize the wisdom of constant vigilance
when it comes to your Funds.
MARKET IMPACTS
In the first quarter, investors expected that the U.S. economy would slow on its
own, without any intervention by the Federal Reserve. Growth stocks from many
sectors of the market flourished, as these companies' profits tend to not be
directly dependent on the progress of the economy. As a result, several of the
Founders Funds posted strong first-quarter performance.
By April, it appeared that the economy was quite robust. In this environment,
investors both here and abroad turned to value-oriented and cyclical stocks,
which have historically tended to prosper in times of economic strength.
Unfortunately, this depressed the prices of many large-capitalization growth
stocks, and several of the Funds suffered.
4
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The market's dollars also began to move from large-capitalization stocks into
the mid-and small-cap realm, as investors sought growth potential at lower
valuations than had been offered lately by large companies. This proved to be
beneficial for our Funds that concentrate on these areas of the market.
FOUNDERS' OUTLOOK
We believe that inflation will remain low as companies turn to technology to
help offset rising labor costs, and that interest rates will remain stable as a
result. We also feel the U.S. economy will continue growing at a healthy pace
through the end of the year. Finally, many major international markets
(especially in Europe) appear to be in a very constructive economic environment.
That's why we believe investors will continue turning back to growth
opportunities. Over the long run, investor interest follows corporate earnings,
not short-term trends. The Founders Funds, with their focus on finding stocks
with the best growth potential available, seek to be well positioned over the
coming six months.
MOVING TOWARD THE YEAR 2000
Given the market's twists and turns, being prepared for the future can present
something of a challenge, but it's one we're up to. As of June 30, 1999,
Founders has completed remediation and testing of systems for the turn of the
clock as we enter the new millennium.
Testing included simulating "current" system dates prior to, during, and
after the century change. As we approach the New Year we will be working with
our service providers to assure their Year 2000 readiness. In addition,
securities in which the Funds invest may be adversely affected by Y2K-related
problems, which could have an impact on the value of the Funds' investments and
their share prices. Our investment managers consider this issue among the many
factors they evaluate in making investment decisions.
But once again, it's the market's own predilection for change that occupies
most of our thoughts as we approach the turn of the century. Our best response
to the market's dynamism: staying the course, continuing to follow our
time-tested, growth-oriented philosophies. Over the long term, we feel,
consistency and discipline may be the surest ways to help you pursue your
financial goals.
Thank you for your continued confidence in Founders Funds.
Sincerely,
/s/RICHARD W. SABO
Richard W. Sabo
President and Chief Executive Officer
Founders Asset Management LLC
5
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FOUNDERS BALANCED FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
1 Year 5 Years 10 Years 20 Years
------ ------- -------- --------
5.26% 15.53% 12.77% 13.40%
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS S & P LIPPER CONSUMER
BALANCED 500 BALANCED PRICE
FUND INDEX FUND INDEX INDEX
-------- -------- ---------- --------
6/89...... $ 10,000 $ 10,000 $ 10,000 $ 10,000
6/90...... $ 10,728 $ 11,644 $ 10,976 $ 10,475
6/91...... $ 11,121 $ 12,500 $ 11,971 $ 10,958
6/92...... $ 12,447 $ 14,177 $ 13,664 $ 11,297
6/93...... $ 14,778 $ 16,097 $ 15,625 $ 11,635
6/94...... $ 16,160 $ 16,331 $ 15,751 $ 11,925
6/95...... $ 18,194 $ 20,587 $ 18,194 $ 12,288
6/96...... $ 23,068 $ 25,935 $ 20,890 $ 12,626
6/97...... $ 27,405 $ 34,923 $ 25,165 $ 12,917
6/98...... $ 31,602 $ 45,447 $ 29,754 $ 13,134
6/99...... $ 33,265 $ 55,792 $ 33,189 $ 13,392
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
PORTFOLIO MANAGER
BRIAN KELLY
HOW DID THE FUND PERFORM DURING THE FIRST PART OF 1999?
Founders Balanced Fund returned 1.01% for the six months ended June 30, 1999.
This was less than the 6.17% return posted by the Lipper Balanced Fund Index and
lower than the 12.32% year-to-date growth in the broad-market Standard & Poor's
500 Index.
WHAT FACTORS IMPACTED THE FUND'S PERFORMANCE?
The primary factor impacting Balanced Fund's performance was its asset
allocation. By the Fund's guidelines, Balanced Fund may invest a maximum of just
75% of its portfolio in equities; therefore, the Fund will generally
underperform the S&P 500 Index in a rising market. The Fund also owned a lower
percentage of technology stocks than
The unmanaged Standard & Poor's (S&P) 500 Index is composed of 500 common stocks
from a wide range of industries. It is widely regarded by investors as
representative of the stock market in general.
The Lipper Balanced Fund Index is an average of the performance of the 30
largest balanced funds tracked by Lipper Analytical Services, Inc.
6
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the market indexes because of concerns surrounding the valuations associated
with stocks in the technology sector. Instead, we favored a more defensive
approach, opting for growth opportunities in pharmaceuticals and cyclical
stocks.
Throughout the half, the Fund owned a high proportion of fixed-income instru-
ments, particularly Treasury securities, and these sold off sharply during the
past six months. In response, we increasingly moved the portfolio's assets into
shorter-maturity issues.
TOP 10 EQUITY HOLDINGS
--------------------------------------------
1. Schering-Plough Corporation 4.53%
2. Duke Energy Corporation 3.48%
3. XL Capital Ltd. Class A 2.95%
4. Columbia Energy Group 2.89%
5. Merck & Company, Inc. 2.71%
6. Eli Lilly and Company 2.59%
7. Bayer AG 2.24%
8. Albertsons, Inc. 1.98%
9. Merck KGaA 1.68%
10. American Home Products
Corporation 1.63%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
WHAT SECURITIES EXCEEDED YOUR EXPECTATIONS IN THE FIRST HALF?
DUKE ENERGY CORPORATION, one of the Fund's largest holdings during the period,
has also delivered this year. The second-largest utility holding company in the
U.S., Duke provides interstate transportation and storage of natural gas,
servicing customers in New England and the Mid-Atlantic states. In addition, the
firm owns several power plants in Asia and Latin America. We're pleased with the
company's growth in earnings, and the stock also yields about 4%, which is 3.3
times the market average.
We're optimistic about the potential of XL CAPITAL LTD., a Bermuda-based
reinsurance company. In another acquisition story, the company has agreed to
merge with NAC Re Corporation, a reinsurance firm based in Connecticut.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $1.3 BILLION
NAV ON 6/30/99: $12.17
SIX-MONTH TOTAL RETURN: 1.01%
NET EXPENSE RATIO (AS OF 12/31/98): 0.99%
INCEPTION DATE: 2/19/63
-----------------------------------------
WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF THE YEAR?
Based on the Federal Reserve's rate increase in June, one is tempted to conclude
that the Fed sees some inflationary pressures on the horizon, despite slim
evidence of these pressures today.
7
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FOUNDERS BALANCED FUND (CONTINUED)
In addition to the Fed's June rate increase, the bond market across all
durations has been selling off all year, thus driving rates ever higher. At this
juncture, bonds are increasingly presenting stiffer competition to stocks.
/S/BRIAN KELLY
Brian Kelly
Portfolio Manager
------------------------------------------------
PORTFOLIO COMPOSITION
U.S. Bonds &
Treasuries ........ 42.1%
Healthcare ......... 24.3%
Cash & Equivalents.. 7.7%
Energy ............. 5.9%
Basic Materials .... 5.3%
Financial .......... 3.5%
Utilities .......... 3.4%
Consumer Staples.... 3.0%
Foreign Bonds ...... 1.7%
Capital Goods ...... 1.4%
Technology ......... 1.3%
Consumer Cyclicals.. 0.4%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
------------------------------------------------
8
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FOUNDERS BALANCED FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- -------------------------------------------------------------
COMMON STOCKS (DOMESTIC)-41.9%
AEROSPACE-0.5%
140,700 Precision Castparts Corporation $ 5,979,750
-------------
BANKING-1.6%
274,425 Citigroup, Inc. 13,035,188
89,700 The Chase Manhattan Corporation 7,770,263
-------------
20,805,451
-------------
CHEMICALS-2.2%
463,600 The B.F. Goodrich Company 19,703,000
125,100 E.I. du Pont de Nemours and Company 8,545,894
-------------
28,248,894
-------------
CONSUMER PRODUCTS-0.6%
203,150 The Dial Corporation 7,554,641
-------------
ELECTRONICS-1.0%
115,900 General Electric Company 13,096,700
-------------
INSURANCE-5.0%
191,200 The St. Paul Companies, Inc. 6,082,550
174,900 The Allstate Corporation 6,274,538
187,075 The Chubb Corporation 13,001,713
672,407 XL Capital Limited Class A 37,990,967
-------------
63,349,768
-------------
SHARES MARKET VALUE
- -------------------------------------------------------------
LEISURE & ENTERTAINMENT-0.4%
290,800 Mirage Resorts, Inc.* $ 4,870,900
-------------
MEDICAL SUPPLIES & EQUIPMENT-1.2%
96,500 Baxter International, Inc. 5,850,313
342,900 Becton, Dickinson and Company 10,287,000
-------------
16,137,313
-------------
OIL & GAS-6.0%
367,600 The Coastal Corporation 14,704,000
592,700 Columbia Energy Group 37,154,881
233,100 Conoco, Inc. 6,497,663
122,500 Phillips Petroleum Company 6,163,281
213,400 Texaco, Inc. 13,337,500
-------------
77,857,325
-------------
PHARMACEUTICALS-16.1%
129,600 Abbott Laboratories 5,896,800
365,200 American Home Products Corporation 20,999,000
200,600 Bristol-Myers Squibb Company 14,129,763
465,975 Eli Lilly and Company 33,375,459
140,100 Mallinckrodt, Inc. 5,096,138
471,000 Merck & Company, Inc. 34,854,000
361,100 Pharmacia & Upjohn, Inc. 20,514,994
1,100,500 Schering-Plough Corporation 58,326,500
198,900 Warner-Lambert Company 13,798,688
-------------
206,991,342
-------------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
9
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FOUNDERS BALANCED FUND
SHARES MARKET VALUE
- -------------------------------------------------------------
SEMICONDUCTORS & EQUIPMENT-1.1%
235,800 Intel Corporation $ 14,015,363
-------------
SUPERMARKETS-2.5%
494,435 Albertsons, Inc. 25,494,305
257,000 The Kroger Company* 7,179,938
-------------
32,674,243
-------------
TELECOMMUNICATIONS EQUIPMENT-0.2%
91,200 Qwest Communications International,
Inc.* 3,015,300
-------------
UTILITIES-3.5%
823,600 Duke Energy Corporation 44,783,250
-------------
TOTAL COMMON STOCKS
(DOMESTIC)
(COST-$498,532,209) 539,380,240
-------------
COMMON STOCKS (FOREIGN)-7.8%
CHEMICALS-3.2%
300,300 Akzo Nobel NV (NE) 12,630,056
692,300 Bayer AG (GE) 28,839,760
-------------
41,469,816
-------------
PHARMACEUTICALS-4.6%
300,425 Glaxo Wellcome PLC Sponsored ADR (UK) 17,011,566
663,236 Merck KGaA (GE) 21,569,321
575,300 Sankyo Company Limited (JA) 14,496,359
98,000 SmithKline Beecham PLC Sponsored ADR
Class A (UK) 6,473,954
-------------
59,551,200
-------------
TOTAL COMMON STOCKS
(FOREIGN)
(COST-$98,814,777) 101,021,016
-------------
PRINCIPAL AMOUNT MARKET VALUE
- -------------------------------------------------------------
FOREIGN GOVERNMENT BONDS-1.7%
$10,493,339 Province of Ontario 6.125%
Due 09/12/07 (CA) $10,887,404
10,404,074 Province of Ontario 6.50%
Due 03/08/29 (CA) 11,020,046
-----------
21,907,450
-----------
TOTAL FOREIGN GOVERNMENT BONDS
(COST-$21,756,759) 21,907,450
-----------
U.S. GOVERNMENT SECURITIES-44.9%
U.S. AGENCIES-4.4%
22,500,000 Federal Home Loan Mortgage
Corporation 6.45% Due 04/29/09 21,748,613
36,500,000 Federal National Mortgage Association
6.00% Due 05/15/08 35,295,902
-----------
57,044,515
-----------
10
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
PRINCIPAL AMOUNT MARKET VALUE
- --------------------------------------------------------------
U.S. TREASURY NOTES-40.5%
$16,300,000 U.S. Treasury Note 5.625%
Due 04/30/00 $16,345,852
9,500,000 U.S. Treasury Note 5.75%
Due 10/31/00 9,535,625
24,600,000 U.S. Treasury Note 6.625%
Due 11/30/00 24,323,250
16,200,000 U.S. Treasury Note 5.625%
Due 05/15/01 16,230,375
10,800,000 U.S. Treasury Note 6.25%
Due 10/31/01 10,951,880
12,700,000 U.S. Treasury Note 6.625%
Due 03/31/02 13,017,500
30,900,000 U.S. Treasury Note 6.625%
Due 04/30/02 31,672,500
48,200,000 U.S. Treasury Note 6.25%
Due 06/30/02 48,968,212
14,600,000 U.S. Treasury Note 6.00%
Due 07/31/02 14,746,000
16,500,000 U.S. Treasury Note 6.25%
Due 02/15/03 16,778,438
68,100,000 U.S. Treasury Note 4.25%
Due 11/15/03 64,248,128
53,425,000 U.S. Treasury Note 5.875%
Due 02/15/04 53,708,847
13,200,000 U.S. Treasury Note 7.25%
Due 08/15/04 14,020,882
19,600,000 U.S. Treasury Note 5.875%
Due 11/15/05 19,587,750
PRINCIPAL AMOUNT MARKET VALUE
- --------------------------------------------------------------
U.S. TREASURY NOTES (CONTINUED)
$ 8,700,000 U.S. Treasury Note 5.625%
Due 02/15/06 $8,566,786
42,150,000 U.S. Treasury Note 6.875%
Due 05/15/06 44,376,068
37,100,000 U.S. Treasury Note 6.25%
Due 02/15/07 37,795,625
53,500,000 U.S. Treasury Note 5.50%
Due 02/15/08 52,028,750
24,500,000 U.S. Treasury Note 5.625%
Due 05/15/08 23,994,688
-------------
520,897,156
-------------
TOTAL U.S. GOVERNMENT SECURITIES
(COST-$583,513,675) 577,941,671
-------------
PRINCIPAL AMOUNT AMORTIZED COST
- --------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-5.2%
$66,600,000 FHLB Discount Note 4.47% 07/01/99 $ 66,600,000
--------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$66,600,000) 66,600,000
--------------
TOTAL INVESTMENTS-101.5%
(COST-$1,269,217,420) 1,306,850,377
OTHER ASSETS &
LIABILITIES-(1.5%) (19,809,783)
--------------
NET ASSETS-100% $1,287,040,594
==============
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
11
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FOUNDERS DISCOVERY FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
Since Inception
1 Year 5 Years (12/31/89)
------ ------- ---------------
33.39% 23.21% 19.81%
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS RUSSELL LIPPER SMALL CONSUMER
DISCOVERY 2000 COMPANY FUND PRICE
FUND INDEX INDEX INDEX
--------- -------- ------------ --------
12/89........ $ 10,000 $ 10,000 $ 10,000 $ 10,000
6/90........ $ 11,780 $ 10,146 $ 10,360 $ 10,284
6/91........ $ 13,576 $ 10,280 $ 10,538 $ 10,759
6/92........ $ 16,760 $ 11,775 $ 11,859 $ 11,091
6/93........ $ 21,239 $ 14,838 $ 14,840 $ 11,424
6/94........ $ 19,610 $ 15,482 $ 15,173 $ 11,708
6/95........ $ 25,446 $ 18,596 $ 19,111 $ 12,064
6/96........ $ 33,974 $ 23,038 $ 24,856 $ 12,397
6/97........ $ 34,562 $ 26,799 $ 26,433 $ 12,681
6/98........ $ 41,737 $ 31,223 $ 30,532 $ 12,895
6/99........ $ 55,673 $ 31,692 $ 31,121 $ 13,148
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
PORTFOLIO MANAGER
ROB AMMANN
HOW HAS DISCOVERY PERFORMED YEAR-TO-DATE?
The year began with a first quarter atmosphere that was challenging for small-
caps and a second quarter where small-caps outperformed. In both of these very
different environments, Discovery Fund has excelled. Thanks in large part to
successful stockpicking, the Fund rose 26.43% for the six months ended June 30,
well ahead of the 9.28% return posted by small-cap stocks (as measured by the
Russell 2000 Index). Moreover, Discovery outperformed its peers: the average
small-capitalization stock fund (as measured by the Lipper Small Company Fund
Index) returned only 8.56% over the first half.
The Russell 2000 Index is an unmanaged index comprising common stocks of the
2,000 U.S. public companies next in size after the largest 1,000 publicly traded
U.S. companies.
The Lipper Small Company Fund Index is an average of the performance of 30
largest small company funds tracked by Lipper Analytical Services.
12
<PAGE>
WHAT MARKET FACTORS AFFECTED THE FUND'S PERFORMANCE IN THE FIRST SIX MONTHS OF
1999?
Instead of trying to predict the short-term gyrations of the market, we rely on
our bottom-up process to lead us to the individual companies with the best
earnings growth visibility. We believe this discipline should help us position
the portfolio in the market sectors that may perform well. We entered the year
with a heavy weighting of technology relative to the index, and this sector was
one of the stronger performing segments of the small-cap market.
TOP 10 HOLDINGS
--------------------------------------------
1. Zomax, Inc. 3.16%
2. Digital Microwave Corporation 2.68%
3. ChiRex, Inc. 2.16%
4. NCO Group, Inc. 1.79%
5. Applied Micro Circuits
Corporation 1.75%
6. Insight Enterprises, Inc. 1.71%
7. Sawtek, Inc. 1.67%
8. Macrovision Corporation 1.66%
9. Fairfield Communities, Inc. 1.63%
10. American Xtal Technology, Inc. 1.57%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
During April, investors' expectations of stronger economic growth led to a
migration of assets into cyclical stocks, such as energy and durable goods
companies. This was a positive development for small-cap investors--the overall
market was broadened by a shift in focus away from the small number of large-cap
stocks that have driven the market's performance for some time.
WHICH PORTFOLIO HOLDINGS IMPACTED PERFORMANCE DURING THE PERIOD?
The Fund's performance is the result of our consistent application of Founders'
bottom-up, growth-oriented strategy. Throughout the half, Discovery focused on
promising opportunities in several traditional growth sectors, including
technology, consumer goods, and healthcare.
One of our most productive holdings of the half was AMERICAN XTAL TECHNOLOGY,
Inc., a producer of non-silicon semiconductor substrate materials. As the demand
for faster and more powerful computer chips has grown, silicon's limitations
have become apparent, and electronics manufacturers have turned to firms such as
American Xtal for new
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $288.2 MILLION
NAV ON 6/30/99: $30.81
SIX-MONTH TOTAL RETURN: 26.43%
NET EXPENSE RATIO (AS OF 12/31/98): 1.55%
INCEPTION DATE: 12/31/89
-----------------------------------------
materials. We believe that many "enabling materials" companies exploiting this
theme may post stong growth in the years to come.
Because Discovery's portfolio is not limited to a handful of market sectors,
we were able to find opportunities in areas some
13
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FOUNDERS DISCOVERY FUND (CONTINUED)
funds might overlook. One excellent example this half has been TREX COMPANY,
INC., a manufacturer of a wood-plastic composite material used in residential
and commercial decks. The market for Trex's product has been growing in excess
of 25% annually, and they have been able to post revenue growth of almost 40%
over the past year.
-----------------------------------------------
PORTFOLIO COMPOSITION
Technology .......... 40.2%
Consumer Cyclicals .. 18.5%
Healthcare .......... 10.9%
Capital Goods ....... 10.2%
Cash & Equivalents... 9.1%
Consumer Staples .... 6.4%
Transportation ...... 1.7%
Telecom Services .... 1.6%
Energy .............. 1.4%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
The Fund did experience some setbacks over the past six months, however.
American Bank Note Holographics, for example, fell significantly in the wake of
a January announcement about accounting irregularities. While this had a sharp
short-term impact on the Fund, it only slightly dampened Discovery's strong
performance over the half. We no longer own the stock.
WHAT IS YOUR OUTLOOK FOR THE SMALL-CAP ARENA?
We believe that investor interest in the potential of the small-company market
is long overdue. In addition to the positive signs of healthy economic growth
and low inflation, we believe small companies are still undervalued relative to
their large-cap counterparts. And if investors become more willing to accept the
higher risks inherent to investing in this area, we feel that selected
small-company stocks could end the year even stronger.
Regardless of where investor interest moves, we will stick to our course:
using intensive, hands-on research techniques to find the best potential
small-cap growth opportunities the market has to offer.
/s/ROBERT AMMANN
Robert Ammann, CFA
Portfolio Manager
There are risks associated with small-cap investing such as limited product
lines and small market share.
14
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FOUNDERS DISCOVERY FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- -------------------------------------------------------------
COMMON STOCKS (DOMESTIC)-87.3%
APPAREL-0.9%
150,000 Cutter & Buck, Inc.* $ 2,493,750
------------
BIOTECHNOLOGY-1.2%
117,575 Albany Molecular Research, Inc.* 3,497,856
------------
BUSINESS SERVICES-12.8%
55,550 Corporate Executive Board Company* 1,975,497
100,575 Heidrick & Struggles International,
Inc.* 1,910,925
199,862 Insight Enterprises, Inc.* 4,934,093
40,000 Lason, Inc.* 1,985,000
160,550 The Metzler Group, Inc.* 4,425,159
136,475 NCO Group, Inc.* 5,151,931
126,500 Pre-Paid Legal Services, Inc.* 3,439,219
70,300 Quanta Services, Inc.* 3,093,200
75,000 Realty Information Group, Inc.* 3,215,625
143,406 Tetra Tech, Inc.* 2,366,199
193,638 USWeb Corporation* 4,296,332
------------
36,793,180
------------
COMPUTER SOFTWARE/SERVICES-11.9%
277,050 4Front Technologies, Inc.* 2,718,553
51,175 AdForce, Inc.* 1,199,414
43,775 Advantage Learning
Systems, Inc.* 952,106
15,675 Ariba, Inc.* 1,526,353
10,400 Ask Jeeves, Inc.* 145,600
77,650 BindView Development Corporation* 1,839,334
128,150 Brio Technology, Inc.* 2,563,000
1,800 Clarent Corporation* 27,000
37,750 Concord Communications, Inc.* 1,670,438
82,325 Exchange Applications, Inc.* 3,354,744
8,100 Extreme Networks, Inc.* 470,306
41,300 InfoCure Corporation* 2,183,738
79,250 Peregrine Systems, Inc.* 2,030,781
84,925 Pervasive Software, Inc.* 2,064,739
81,850 Pinnacle Systems, Inc.* 2,752,206
112,250 Sykes Enterprises, Inc.* 3,739,328
52,300 TSI International Software Limited* 1,484,013
79,775 TenFold Corporation* 2,492,969
12,325 Vignette Corporation* 950,566
------------
34,165,188
------------
SHARES MARKET VALUE
- -------------------------------------------------------------
CONSUMER PRODUCTS-0.7%
39,075 Fossil, Inc.* $ 1,880,484
------------
CONSUMER SERVICES-1.3%
124,425 CompuCredit Corporation* 2,348,522
32,500 Flycase Communications Corporation* 615,469
46,750 MapQuest.com, Inc.* 759,688
------------
3,723,679
------------
DISTRIBUTION-0.4%
35,800 Patterson Dental Company* 1,244,050
------------
ELECTRONICS-3.7%
40,475 Cree Research, Inc.* 3,114,046
64,900 MMC Networks, Inc.* 2,896,163
63,900 Macrovision Corporation* 4,784,513
------------
10,794,722
------------
ENVIRONMENTAL SERVICES-2.4%
68,450 IT Group, Inc.* 1,099,478
90,000 Superior Services, Inc.* 2,396,250
117,400 Waste Connections, Inc.* 3,536,675
------------
7,032,403
------------
HEALTHCARE SERVICES-9.6%
78,200 Accredo Health, Inc.* 2,561,050
194,888 ChiRex, Inc.* 6,236,416
235,000 Hanger Orthopedic Group, Inc.* 3,334,063
80,200 Kendle International, Inc.* 1,283,200
70,925 Laser Vision Centers, Inc.* 4,459,409
154,925 LCA-Vision, Inc.* 1,442,739
165,000 Orthodontic Centers of
America, Inc.* 2,330,625
37,900 Sunrise Assisted Living, Inc.* 1,317,025
70,000 TLC The Laser Center, Inc.* 3,351,250
108,100 US Oncology, Inc.* 1,297,200
------------
27,612,977
------------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
15
<PAGE>
FOUNDERS DISCOVERY FUND
SHARES MARKET VALUE
- --------------------------------------------------------------
LEISURE & ENTERTAINMENT-3.6%
61,225 Action Performance Companies, Inc.* $ 2,016,598
291,475 Fairfield Communities, Inc.* 4,700,035
48,125 Hollywood Entertainment Corporation* 938,438
185,000 Image Entertainment, Inc.* 1,202,500
102,000 Sunterra Corporation* 1,421,625
-----------
10,279,196
-----------
MANUFACTURING-5.8%
100,000 AstroPower, Inc.* 1,700,000
103,300 Insituform Technologies, Inc.* 2,214,493
20,750 Optical Coating Laboratory, Inc. 1,733,922
81,650 Trex Company, Inc.* 2,071,869
207,225 Zomax, Inc.* 9,117,900
-----------
16,838,184
-----------
OIL SERVICES-0.8%
39,325 Cal Dive International, Inc.* 1,174,834
86,425 National-Oilwell, Inc.* 1,096,517
-----------
2,271,351
-----------
PHOTOGRAPHY & IMAGING-0.6%
70,925 Analytical Surveys, Inc.* 1,764,259
-----------
PUBLISHING & BROADCASTING-0.2%
14,200 Radio One, Inc.* 656,750
-----------
RESTAURANTS-1.9%
95,675 Dave & Buster's, Inc.* 2,774,575
61,750 Papa John's International, Inc.* 2,755,594
-----------
5,530,169
-----------
RETAIL-6.4%
266,775 Blue Rhino Corporation* 2,450,995
38,175 Cheap Tickets, Inc.* 1,391,002
100,000 The Men's Wearhouse, Inc.* 2,550,000
25,000 O'Reilly Automotive, Inc.* 1,256,250
124,550 Rental Service Corporation* 3,565,244
133,425 Trans World Entertainment
Corporation* 1,484,353
75,000 Tweeter Home Entertainment Group,
Inc.* 2,915,625
81,000 Williams-Sonoma, Inc.* 2,819,813
-----------
18,433,282
-----------
SHARES MARKET VALUE
- --------------------------------------------------------------
SEMICONDUCTORS & EQUIPMENT-12.7%
75,750 ATMI, Inc.* $ 2,234,625
68,700 Advanced Energy Industries, Inc.* 2,782,350
193,575 American Xtal Technology, Inc.* 4,536,914
60,650 Applied Micro Circuits Corporation* 5,049,113
109,975 Brooks Automation, Inc.* 2,976,198
82,175 Credence Systems Corporation* 3,009,659
203,625 EMCORE Corporation* 4,097,953
82,500 PRI Automation, Inc.* 2,990,625
31,800 SDL, Inc.* 1,623,788
81,525 SanDisk Corporation* 3,663,530
220,000 Zoran Corporation* 3,657,500
-----------
36,622,255
-----------
TELECOMMUNICATION SERVICES-1.6%
92,975 Destia Communications, Inc.* 1,144,755
39,275 Dycom Industries, Inc.* 2,199,400
42,850 Time Warner Telecom, Inc.* 1,239,972
-----------
4,584,127
-----------
TELECOMMUNICATIONS EQUIPMENT-7.1%
7,575 Copper Mountain Networks, Inc.* 583,275
609,400 Digital Microwave Corporation* 7,731,763
90,850 Ditech Communications Corporation* 1,817,000
40,350 Harmonic, Inc.* 2,315,081
207,825 REMEC, Inc.* 3,299,222
105,225 Sawtek, Inc.* 4,814,044
-----------
20,560,385
-----------
TRANSPORTATION-1.7%
47,500 C.H. Robinson Worldwide, Inc. 1,733,750
66,800 USFreightways Corporation 3,072,800
-----------
4,806,550
-----------
TOTAL COMMON STOCKS
(DOMESTIC)
(COST-$170,115,738) 251,584,797
-----------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
16
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- --------------------------------------------------------------
COMMON STOCKS (FOREIGN)-2.9%
OIL SERVICES-0.6%
158,050 Stolt Comex Seaway SA Sponsored ADR
(UK)* $1,708,916
-------------
PUBLISHING & BROADCASTING-1.8%
155,000 Cinar Corporation Class B Sponsored
ADR (CA)* 3,778,125
84,000 Flextech PLC (UK)* 1,363,980
-------------
5,142,105
-------------
SEMICONDUCTORS & EQUIPMENT-0.5%
68,900 Genesis Microchip, Inc. Sponsored ADR
(CA)* 1,601,925
-------------
TOTAL COMMON STOCKS (FOREIGN)
(COST-$6,015,775) 8,452,946
-------------
PRINCIPAL AMOUNT AMORTIZED COST
- --------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-8.6%
$ 7,200,000 Ford Motor Credit Company 5.19%
07/01/99 $ 7,200,000
7,500,000 Prudential Funding Corporation 5.10%
07/02/99 7,498,938
10,000,000 Wal-Mart Stores, Inc. 5.50% 07/01/99 10,000,000
-------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$24,698,938)
24,698,938
-------------
TOTAL INVESTMENTS-98.8%
(COST-$200,830,451) 284,736,681
OTHER ASSETS & LIABILITIES-1.2%
3,448,203
-------------
NET ASSETS-100.0% $ 288,184,884
=============
17
<PAGE>
FOUNDERS FRONTIER FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
Since Inception
1 Year 5 Years 10 Years (1/22/87)
------ ------- -------- ---------------
11.96% 17.17% 14.16% 17.38%
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS RUSSELL LIPPER SMALL CONSUMER
FRONTIER 2000 COMPANY FUND PRICE
FUND INDEX INDEX INDEX
--------- -------- ------------ --------
6/89........ $ 10,000 $ 10,000 $ 10,000 $ 10,000
6/90........ $ 11,523 $ 10,872 $ 10,935 $ 10,475
6/91........ $ 12,582 $ 10,935 $ 11,123 $ 10,958
6/92........ $ 14,181 $ 11,859 $ 12,516 $ 11,297
6/93........ $ 17,197 $ 14,284 $ 15,663 $ 11,635
6/94........ $ 17,020 $ 14,406 $ 16,014 $ 11,925
6/95........ $ 22,064 $ 18,134 $ 20,171 $ 12,288
6/96........ $ 28,663 $ 22,938 $ 26,234 $ 12,626
6/97........ $ 30,104 $ 23,994 $ 27,899 $ 12,917
6/98........ $ 33,572 $ 27,159 $ 32,225 $ 13,134
6/99........ $ 37,588 $ 29,413 $ 32,846 $ 13,392
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
PORTFOLIO MANAGER
ROB AMMANN
HOW HAS THE FUND PERFORMED SO FAR THIS YEAR?
After a sluggish first quarter environment for small-cap companies, the Fund
benefited from a more favorable second quarter environment and surged in the
second quarter to a six-month return of 13.29% for the period ending June 30,
1999. This compares quite favorably to the overall performance of
small-capitalization stocks: the Russell 2000 Index returned only 9.28% over the
first half.
WHAT FACTORS IMPACTED THE SMALL-COMPANY MARKET DURING THE HALF?
As Asia began to emerge from its recent economic woes, technology companies once
again began to thrive: technology stocks in the Russell 2000 Index were up 21.5%
through June 30. Since our portfolio was overweight in this sector relative to
its benchmark, this served us well. We did,
18
<PAGE>
however, reduce our exposure to the information technology services industry, in
anticipation of Year 2000-related business slowing as we approach the
millennium.
Additionally, Frontier benefited from renewed market interest in small-
capitalization stocks. Since it is becoming clear that the domestic economy is
TOP 10 HOLDINGS
--------------------------------------------
1. Digital Microwave Corporation 2.81%
2. Gemstar International, Group Ltd. 2.20%
3. Superior Services, Inc. 2.18%
4. Viatel, Inc. 2.12%
5. ChiRex, Inc. 2.05%
6. Sykes Enterprises, Inc. 2.05%
7. Reinsurance Group of America,
Inc. 1.96%
8. Sawtek, Inc. 1.87%
9. NCO Group, Inc. 1.84%
10. Andrx Corporation 1.82%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
growing at a healthy, steady rate, investors are looking for opportunities in
other areas of the marketplace, and many small companies have long offered
promising earnings growth potential at attractive valuations.
WHAT WERE THE FUND'S MOST PROMISING INVESTMENT OPPORTUNITIES?
Several of our best opportunities came from firms who have benefited from
emerging themes in the market.
SANDISK CORPORATION is one such company. As consumers have embraced new
digital technologies in the electronics marketplace, niche companies like
SanDisk have benefited. SanDisk is a supplier of the memory cards used to store
pictures in many of the leading new digital cameras. The company also stands to
benefit from supplying storage technology for the nascent "Internet media
player" market. These devices allow consumers to digitally download music from
the Internet. This new addition to the Fund performed strongly since it was
purchased in the second quarter.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $148.8 MILLION
NAV ON 6/30/99: $28.89
SIX-MONTH TOTAL RETURN: 13.29%
NET EXPENSE RATIO (AS OF 12/31/98): 1.62%
INCEPTION DATE: 1/22/87
-----------------------------------------
CHIREX, INC. is one of a growing number of contract manufacturing
organizations (CMOs) that are benefiting from an outsourcing trend.
Pharmaceutical companies, in an effort to streamline their organizations, have
increasingly turned to CMOs to manufacture their existing products. ChiRex has
been hampered in past efforts by lack of production capacity, but it has
recently opened a new facility which we
19
<PAGE>
FOUNDERS FRONTIER FUND (CONTINUED)
believe will help it meet mounting demand.
WHAT'S YOUR OUTLOOK FOR SMALL COMPANIES FOR THE REMAINDER OF THE YEAR?
We're pleased that investor interest in the potential of the small-company
market is growing. We believe small companies are still undervalued relative to
their large-cap
-----------------------------------------------
PORTFOLIO COMPOSITION
Technology .......... 37.8%
Consumer Cyclicals .. 17.5%
Healthcare .......... 13.4%
Capital Goods ....... 9.9%
Consumer Staples .... 8.7%
Telecom Services .... 4.6%
Transportation ...... 2.3%
Cash & Equivalents... 2.2%
Financial............ 2.0%
Energy .............. 1.6%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
counterparts. And if investors become more willing to accept the higher risks
inherent to investing in this area, we feel that selected small-company stocks
could end the year even stronger.
We continue to maintain our focus on locating the best small companies the
marketplace has to offer.
/s/ROBERT AMMAN
Robert Ammann, CFA
Portfolio Manager
There are risks associated with small-cap investing such as limited product
lines and small market share. Founders Frontier Fund was merged into Founders
Discovery Fund on August 13, 1999.
20
<PAGE>
FOUNDERS FRONTIER FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- ----------------------------------------------------------
COMMON STOCKS (DOMESTIC)-93.1%
AIRLINES-0.7%
40,000 SkyWest, Inc. $ 990,000
----------
BUSINESS SERVICES-15.6%
63,475 AHL Services, Inc.* 1,571,006
60,000 Acxiom Corporation* 1,496,250
54,000 CDW Computer Centers, Inc.* 2,376,000
32,725 Complete Business Solutions, Inc.* 582,914
31,800 Corporate Executive Board Company* 1,130,888
97,650 Insight Enterprises, Inc.* 2,410,734
23,925 Lason, Inc.* 1,187,278
78,475 The Metzler Group, Inc.* 2,162,967
72,675 NCO Group, Inc.* 2,743,481
38,550 Profit Recovery Group International,
Inc.* 1,821,488
133,093 Tetra Tech, Inc.* 2,196,035
105,350 USWeb Corporation* 2,337,453
36,750 Whittman-Hart, Inc.* 1,166,813
----------
23,183,307
----------
COMPUTER SOFTWARE/SERVICES-12.0%
23,325 Advantage Learning Systems, Inc.* 507,319
8,450 Ariba, Inc.* 822,819
5,400 Ask Jeeves, Inc.* 75,600
41,700 BindView Development Corporation* 987,769
55,600 Brio Technology, Inc.* 1,112,000
27,575 Check Point Software Technologies
Limited* 1,476,986
950 Clarent Corporation 14,250
23,075 Concord Communications, Inc.* 1,021,069
17,375 InfoCure Corporation 918,703
50,850 Macromedia, Inc.* 1,805,175
60,000 Mercury Interactive Corporation* 2,122,500
40,000 Micromuse, Inc.* 1,990,000
42,275 Peregrine Systems, Inc.* 1,083,297
91,475 Sykes Enterprises, Inc.* 3,047,261
30,775 TSI International Software Limited* 873,241
----------
17,857,989
----------
SHARES MARKET VALUE
- ----------------------------------------------------------
CONSUMER PRODUCTS-2.8%
20,825 Fossil, Inc. $1,002,203
50,150 Gemstar International Group Limited* 3,272,288
----------
4,274,491
----------
DISTRIBUTION-0.5%
19,550 Patterson Dental Company* 679,363
----------
ELECTRONICS-3.3%
21,450 Cree Research, Inc.* 1,650,310
35,500 MMC Networks, Inc.* 1,584,188
22,400 Sanmina Corporation* 1,699,600
----------
4,934,098
----------
ENVIRONMENTAL SERVICES-4.8%
96,488 Safety-Kleen Corporation* 1,748,836
121,600 Superior Services, Inc.* 3,237,600
71,075 Waste Connections, Inc.* 2,141,134
----------
7,127,570
----------
HEALTHCARE SERVICES-9.8%
35,175 Andrx Corporation* 2,710,673
95,455 ChiRex, Inc.* 3,054,560
67,200 Hanger Orthopedic Group, Inc.* 953,400
82,075 LCA-Vision, Inc. 764,323
190,700 Orthodontic Centers of America, Inc.* 2,693,638
39,475 Pharmaceutical Product Development,
Inc.* 1,078,161
53,050 Renal Care Group, Inc.* 1,369,353
29,550 Sunrise Assisted Living, Inc.* 1,026,863
79,900 US Oncology, Inc. 958,800
----------
14,609,771
----------
INSURANCE-2.0%
82,937 Reinsurance Group of America, Inc. 2,923,529
----------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
21
<PAGE>
FOUNDERS FRONTIER FUND
SHARES MARKET VALUE
- ----------------------------------------------------------
LEISURE & ENTERTAINMENT-3.0%
38,675 Action Performance Companies, Inc.* $1,273,858
26,625 Hollywood Entertainment Corporation* 519,188
40,950 Premier Parks, Inc.* 1,504,913
80,000 Sunterra Corporation* 1,115,000
----------
4,412,959
----------
MANUFACTURING-1.4%
54,725 Insituform Technologies, Inc.* 1,173,167
11,025 Optical Coating Laboratory, Inc. 921,277
----------
2,094,444
----------
OIL SERVICES-0.9%
25,925 Cal Dive International, Inc.* 774,509
48,025 National-Oilwell, Inc.* 609,317
----------
1,383,826
----------
PHARMACEUTICALS-3.6%
19,100 IDEC Pharmaceuticals Corporation* 1,470,700
85,300 King Pharmaceuticals, Inc.* 2,207,138
66,188 Medicis Pharmaceutical Corporation* 1,679,508
----------
5,357,346
----------
PUBLISHING & BROADCASTING-2.2%
17,950 Cox Radio, Inc.* 973,788
30,625 Entercom Communications Corporation* 1,309,219
15,400 Univision Communications, Inc.* 1,016,400
----------
3,299,407
----------
RESTAURANTS-0.8%
28,075 Papa John's International,
Inc.* 1,252,847
----------
SHARES MARKET VALUE
- ----------------------------------------------------------
RETAIL-6.4%
20,500 Cheap Tickets, Inc.* $ 746,969
41,000 Linens 'n Things, Inc.* 1,793,750
43,300 The Men's Wearhouse, Inc.* 1,104,150
81,725 Rental Service Corporation* 2,339,378
73,050 Trans World Entertainment
Corporation* 812,681
39,925 United Rentals, Inc.* 1,177,788
43,475 Williams-Sonoma, Inc.* 1,513,473
----------
9,488,189
----------
SEMICONDUCTORS & EQUIPMENT-8.5%
40,800 ATMI, Inc.* 1,203,600
42,425 Advanced Energy Industries, Inc.* 1,718,213
64,575 American Xtal Technology, Inc.* 1,513,477
46,175 Credence Systems Corporation* 1,691,159
96,925 EMCORE Corporation 1,950,616
44,650 PRI Automation, Inc.* 1,618,563
45,550 SanDisk Corporation* 2,046,903
5,325 Uniphase Corporation* 883,950
----------
12,626,481
----------
TELECOMMUNICATION SERVICES-4.6%
18,850 Allegiance Telecom, Inc.* 1,034,394
51,900 Destia Communications, Inc.* 639,019
23,550 Dycom Industries, Inc.* 1,318,800
23,725 Time Warner Telecom, Inc.* 686,542
56,450 Viatel, Inc.* 3,154,144
----------
6,832,899
----------
TELECOMMUNICATIONS EQUIPMENT-8.6%
328,975 Digital Microwave Corporation* 4,173,870
48,250 Ditech Communications Corporation* 965,000
23,375 Harmonic, Inc.* 1,341,141
31,350 RF Micro Devices, Inc.* 2,339,494
78,625 REMEC, Inc.* 1,248,172
60,950 Sawtek, Inc.* 2,788,463
----------
12,856,140
----------
22
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- -----------------------------------------------------------
TRANSPORTATION-1.6%
21,000 C.H. Robinson Worldwide, Inc. $ 766,500
35,825 USFreightways Corporation 1,647,950
-----------
2,414,450
-----------
TOTAL COMMON STOCKS
(DOMESTIC)
(COST-$99,036,528) 138,599,106
-----------
COMMON STOCKS (FOREIGN)-4.5%
BUILDING MATERIALS-0.8%
35,000 Hunter Douglas NV (NE) 1,201,918
-----------
CONSTRUCTION-0.9%
33,100 IHC Caland NV (NE) 1,297,102
-----------
OIL SERVICES-0.6%
87,450 Stolt Comex Seaway SA Sponsored ADR
(UK) 945,553
-----------
PUBLISHING & BROADCASTING-1.5%
136,175 Flextech PLC (UK) 2,211,191
-----------
SEMICONDUCTORS & EQUIPMENT-0.7%
43,750 Genesis Microchip, Inc. Sponsored ADR
(CA) 1,017,188
-----------
TOTAL COMMON STOCKS
(FOREIGN)
(COST-$5,498,690) 6,672,952
-----------
PRINCIPAL VALUE AMORTIZED COST
- -----------------------------------------------------------
CORPORATE SHORT-TERM NOTES-2.6%
$3,900,000 Wal-Mart Stores, Inc.
5.50% 07/01/99 $ 3,900,000
------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$3,900,000) 3,900,000
------------
TOTAL INVESTMENTS-100.2% 149,172,058
(COST-$108,435,218)
OTHER ASSETS &
LIABILITIES-(0.2%) (378,169)
------------
NET ASSETS-100.0% $148,793,888
============
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
23
<PAGE>
FOUNDERS GOVERNMENT SECURITIES FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
Since Inception
1 Year 5 Years 10 Years (3/1/88)
------ ------- -------- ---------------
2.19% 5.31% 5.67% 6.07%
* PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS
GOVERNMENT LEHMAN BROS. LIPPER U.S. CONSUMER
SECURITIES U.S. TREASURY GOVERNMENT PRICE
FUND COMP. INDEX FUND INDEX INDEX
--------- ------------- ----------- --------
6/89.......... $ 10,000 $ 10,000 $ 10,000 $10,000
6/90.......... $ 10,285 $ 10,674 $ 10,814 $10,475
6/91.......... $ 11,234 $ 11,745 $ 11,555 $10,958
6/92.......... $ 12,636 $ 13,371 $ 12,076 $11,297
6/93.......... $ 13,966 $ 15,109 $ 12,416 $11,635
6/94.......... $ 13,319 $ 14,932 $ 12,768 $11,925
6/95.......... $ 14,114 $ 16,707 $ 13,397 $12,288
6/96.......... $ 14,587 $ 17,470 $ 14,081 $12,626
6/97.......... $ 15,358 $ 18,723 $ 14,706 $12,917
6/98.......... $ 16,931 $ 20,834 $ 15,376 $13,134
6/99.......... $ 17,284 $ 21,448 $ 16,081 $13,392
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
FIXED-INCOME MANAGER
MARGARET DANUSER
HOW DID THE FUND PERFORM IN THE FIRST HALF OF 1999?
Founders Government Securities Fund posted a loss of 3.10% for the six-month
period ended June 30, 1999. This was somewhat greater than the 2.51% loss posted
by the Fund's benchmark, the Lehman Brothers U.S. Treasury Composite Index.
HOW WAS THE FUND'S PORTFOLIO POSITIONED DURING THE HALF?
We opened the year with a large exposure to long-maturity Treasuries, which we
perceived to have superior appreciation potential than shorter issues.
Unfortunately, in February investors became convinced that short-term interest
rates might be on the rise in the near future. The month marked the biggest loss
for Treasuries since 1980, with the bellwether 30-year bond losing 6.9% of its
value.
The Lehman Brothers U.S. Treasury Composite Index is composed of all public
obligations of the U.S. Treasury, excluding flower bonds and foreign-targeted
issues, that have at least one year to maturity and an outstanding par value of
at least $100 million.
24
<PAGE>
In response, we took steps to shorten the portfolio's duration (a measure of
sensitivity to interest-rate changes) in May in anticipation of higher interest
rates. We then took advantage of the oversold market conditions to repurchase
long-dated securities, locking in higher yields. This strategy served us well in
the second quarter. As of June 30, 1999, the Fund's weighted average duration
was 6.1 years.
At the same time, we began to increase our exposure to fixed-income issues of
U.S. government agency issues. These agency bonds have been offering an
incremental yield to U.S. Treasuries with very little additional risk.
WHAT LIES AHEAD FOR THE FIXED-INCOME MARKET IN 1999?
We think that the continued weakness in the bond market is a result of
investors' fears of an inflationary future and subsequent Federal Reserve
interest-rate hikes. Strong economic fundamentals and data suggesting the
emergence of inflationary pressures will most likely elicit action from the
Federal Open Market Committee (FOMC). We feel the bond market has priced in a
25-basis-point rate hike widely anticipated at the FOMC's August meeting. We
believe that, for the balance of the year, the economy will slow gradually and
inflation will remain subdued--an improved environment for fixed-income
investors.
/S/MARGARET R. DANUSER
Margaret Danuser
Fixed-Income Manager
25
<PAGE>
FOUNDERS GOVERNMENT SECURITIES FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
PRINCIPAL AMOUNT MARKET VALUE
- -----------------------------------------------------------
U.S. GOVERNMENT SECURITIES-96.3%
FNMA POOLS-10.6%
$ 681,421 Federal National Mortgage
Association 7.00%
Due 03/01/12 $ 684,562
992,832 Federal National Mortgage
Association 6.50%
Due 04/01/28 961,509
-----------
1,646,071
-----------
U.S. AGENCIES-40.0%
1,025,000 Federal Farm Credit Bank 6.55%
Due 08/19/03 1,036,945
815,000 Federal Farm Credit Bank 8.06%
Due 01/04/05 877,709
1,000,000 Federal Home Loan Mortgage
Corporation Discount Note 4.76%
Due 11/02/99 983,122
1,000,000 Federal Home Loan Mortgage
Corporation 6.45%
Due 04/29/09 966,605
500,000 Federal National Mortgage
Association 5.625%
Due 05/14/04 487,948
1,000,000 Federal National Mortgage
Association 6.00%
Due 05/15/08 967,011
1,000,000 Federal National Mortgage
Association 6.16%
Due 08/07/28 930,447
-----------
6,249,787
-----------
PRINCIPAL AMOUNT MARKET VALUE
- -----------------------------------------------------------
U.S. TREASURY BONDS-18.2%
$ 400,000 U.S. Treasury Bond 7.25%
Due 05/15/16 $ 439,000
400,000 U.S. Treasury Bond 8.125%
Due 08/15/19 482,000
500,000 U.S. Treasury Bond 7.25%
Due 08/15/22 558,594
500,000 U.S. Treasury Bond 6.25%
Due 08/15/23 500,469
800,000 U.S. Treasury Bond 6.875%
Due 08/15/25 863,750
-----------
2,843,813
-----------
U.S. TREASURY NOTES-27.5%
1,000,000 U.S. Treasury Note 6.50%
Due 05/31/01 1,017,500
600,000 U.S. Treasury Note 5.75%
Due 08/15/03 600,000
400,000 U.S. Treasury Note 7.25%
Due 08/15/04 424,875
750,000 U.S. Treasury Note 6.50%
Due 10/15/06 773,906
1,500,000 U.S. Treasury Note 5.625%
Due 05/15/08 1,469,063
-----------
4,285,344
-----------
TOTAL U.S. GOVERNMENT SECURITIES
(COST-$15,205,273)
15,025,015
-----------
PRINCIPAL AMOUNT AMORTIZED COST
- -----------------------------------------------------------
CORPORATE SHORT-TERM NOTES-4.9%
$ 770,000 Sara Lee Corporation 5.50% 07/01/99 $ 770,000
-----------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$770,000) 770,000
-----------
TOTAL INVESTMENTS-101.2%
(COST-$15,975,273) 15,795,015
OTHER ASSETS &
LIABILITIES-(1.2%) (185,207)
-----------
NET ASSETS-100.0% $15,609,808
===========
SEE NOTES TO FINANCIAL STATEMENTS.
26
<PAGE>
FOUNDERS GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
1 Year 5 Years 10 Years 20 Years
------ ------- -------- --------
16.16% 26.49% 18.71% 18.61%
* PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
LIPPER CONSUMER
GROWTH GROWTH FUND PRICE
FUND S&P 500 INDEX INDEX
--------- -------- ------------ ---------
6/89......... $10,000.00 $10,000.00 $10,000.00 $10,000.00
6/90......... $11,212.37 $11,644.51 $11,318.77 $10,475.42
6/91......... $11,490.15 $12,500.65 $11,906.48 $10,958.90
6/92......... $13,230.50 $14,177.10 $13,554.45 $11,297.34
6/93......... $17,679.88 $16,097.47 $15,798.22 $11,635.78
6/94......... $17,166.31 $16,331.65 $16,064.37 $11,925.87
6/95......... $22,774.73 $20,587.55 $19,780.28 $12,288.48
6/96......... $30,554.91 $25,935.97 $23,859.39 $12,626.91
6/97......... $37,413.38 $34,923.28 $29,963.08 $12,917.00
6/98......... $47,853.43 $45,447.35 $37,442.37 $13,134.57
6/99......... $55,588.38 $55,792.27 $39,694.98 $13,392.43
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH PORTFOLIO MANAGERS
TOM ARRINGTON, LEFT, AND SCOTT CHAPMAN
HOW DID THE FUND PERFORM DURING THE FIRST HALF OF THE YEAR?
Founders Growth Fund posted an 11.02% return for the six months ended June 30,
1999. This was similar to the average growth mutual fund, slightly ahead of the
Russell 1000 Growth Index, and somewhat lower than the 12.32% performance of the
Standard & Poor's 500 Index, for the same period.
Our return continued to bolster our strong, long-term performance history, as
is
The Russell 1000 Growth Index is an unmanaged index that measures the
performance of those common stocks of the largest 1,000 publicly traded U.S
companies with higher price-to-book ratios and higher forecasted growth
values.
27
<PAGE>
FOUNDERS GROWTH FUND (CONTINUED)
evidenced by our **** overall rating from Morningstar, with **** for the five-
and 10-year periods, and *** for the three-year period ended 6/30/99, among
1,878, 748, and 3,043 domestic equity funds, respectively.*
TOP 10 HOLDINGS
--------------------------------------------
1. Microsoft Corporation 4.32%
2. Cisco Systems, Inc. 4.16%
3. General Electric Company 3.59%
4. Tyco International Ltd. 3.01%
5. Lucent Technologies, Inc. 2.94%
6. Time Warner, Inc. 2.60%
7. Intel Corporation 2.60%
8. Berkshire Hathaway, Inc. 2.55%
9. Fannie Mae 2.32%
10. The Coca-Cola Company 2.31%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
WHAT WERE THE PREDOMINANT MARKET INFLUENCES ON GROWTH FUND'S PERFORMANCE?
As we opened the year, the Fund's portfolio benefited from its emphasis on
large, high-quality earnings growth companies. We were overweighted in financial
and consumer-products stocks (which posted strong performance) and underweighted
in lagging sectors such as energy, utilities, and basic materials. Technology
stocks also played a large part in the Fund's early success, as investors became
increasingly aware of the promising growth prospects being created by increased
demand for faster transmission of voice, video, and data.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $2.8 BILLION
NAV ON 6/30/99: $22.66
SIX-MONTH TOTAL RETURN: 11.02%
NET EXPENSE RATIO (AS OF 12/31/98): 1.08%
INCEPTION DATE: 1/5/62
-----------------------------------------
However, the market experienced a shift near the beginning of the second
quarter as investors, believing that data suggested a stronger-than-expected
global economy, moved away from large, high-quality companies and into
previously lagging cyclical stocks. While this move depressed the prices of many
of the market's growth-oriented companies (particularly in major sectors such as
technology and healthcare), we did not change our focus. The growth prospects of
cyclical companies may be inextricably tied to the performance of the economy,
not to their own fundamental strengths, and we are committed to finding firms
with the potential to deliver earnings growth in all environments.
* Morningstar proprietary ratings reflect risk-adjusted performance through
6/30/99. The top 10% of the funds in an investment category receive five
stars, the next 22.5% receive four stars, and the next 35% receive three
stars. Subject to change every month, a fund's rating is based on its three-,
five-, and (when available) 10-year average annual total returns (with fee
adjustments) in excess of 90-day Treasury bill returns, and a risk factor that
reflects fund performance below 90-day Treasury bill returns.
28
<PAGE>
WHICH GROWTH-ORIENTED COMPANIES HAVE HELPED THE FUND SO FAR THIS YEAR?
While we have seen excellent performance from many of our holdings, we were very
impressed with TELLABS, INC. (up 76% since we purchased the company in
mid-February), a telecommunications equipment provider. The firm has had a
stellar
-----------------------------------------------
PORTFOLIO COMPOSITION
Technology .......... 26.8%
Financial............ 15.3%
Consumer Staples .... 15.2%
Healthcare .......... 14.3%
Consumer Cyclicals .. 13.7%
Capital Goods ....... 7.8%
Telecom Services .... 2.7%
Cash & Equivalents... 1.9%
Energy .............. 1.6%
Transportation ...... 0.7%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
history of growth--five-year compounded rate of earnings growth of 45% through
the end of 1998--and its future appears promising as domestic and international
telecommunications companies are updating their infrastructure to provide
advanced services.
Another stock we've been particularly pleased with is CISCO SYSTEMS, INC., (up
39% since the beginning of the year), which supplies the hardware that moves
information over the Internet. Not surprisingly, as the volume of data traveling
over the 'net has surged, so has the demand for Cisco's products.
HOW LONG DO YOU EXPECT THE RECENT WEAKNESS IN LARGE-CAP GROWTH STOCKS TO
CONTINUE?
We believe that the market's attraction to cyclical stocks is just what the name
implies: part of a short-term cycle based on recent economic growth information.
But we feel that, over the long term, investor sentiment will follow corporate
earnings, and on that measure, our companies have delivered so far this year.
We believe that the mid- to large-cap marketplace is brimming with
high-quality performers with potential, companies which may be in investor
demand, and Growth Fund will stay focused on finding these promising firms.
/s/THOMAS ARRINGTON
Thomas Arrington, CFA
Co-Portfolio Manager
/s/SCOTT CHAPMAN
Scott Chapman, CFA
Co-Portfolio Manager
29
<PAGE>
FOUNDERS GROWTH FUND
SHARES MARKET VALUE
- -----------------------------------------------------------
COMMON STOCKS (DOMESTIC)-96.7%
BANKING-3.2%
431,614 Citigroup, Inc. $20,501,665
189,561 Fifth Third Bancorp 12,617,654
95,297 Firstar Corporation 2,668,316
175,670 State Street Corporation 14,997,826
166,877 U.S. Bancorp 5,673,818
777,729 Wells Fargo Company 33,247,915
-----------
89,707,194
-----------
BIOTECHNOLOGY INC.*-0.5%
220,777 Amgen, Inc* 13,426,001
-----------
BUSINESS SERVICES-3.0%
258,793 Cintas Corporation 17,371,480
288,955 Computer Sciences Corporation* 19,992,074
387,285 Fiserv, Inc.* 12,126,862
249,595 The Interpublic Group of Companies,
Inc. 21,621,167
505,575 Robert Half International, Inc.* 13,144,950
-----------
84,256,533
-----------
COMPUTER EQUIPMENT-3.3%
628,980 EMC Corporation* 34,593,900
432,624 International Business Machines
Corporation 55,916,652
52,366 Sun Microsystems, Inc.* 3,606,708
-----------
94,117,260
-----------
COMPUTER NETWORKING-4.2%
1,820,182 Cisco Systems, Inc.* 117,287,978
-----------
SHARES MARKET VALUE
- -----------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-5.6%
136,814 @Home Corporation* $ 7,379,405
246,036 Automatic Data Processing, Inc. 10,825,584
118,360 Intuit, Inc.* 10,667,195
1,352,744 Microsoft Corporation* 121,916,053
40,302 Yahoo!, Inc.* 6,939,501
-----------
157,727,738
-----------
CONSUMER PRODUCTS-3.5%
164,728 Avon Products, Inc. 9,142,404
51,835 The Clorox Company 5,536,626
188,628 Colgate-Palmolive Company 18,627,015
490,795 The Dial Corporation 18,251,439
488,764 Gillette Company 20,039,324
446,700 Hasbro, Inc. 12,479,681
153,183 The Procter & Gamble Company 13,671,583
-----------
97,748,072
-----------
CONSUMER SERVICES-0.5%
668,374 DeVry, Inc.* 14,954,868
-----------
DIVERSIFIED-2.5%
31,936 Berkshire Hathaway, Inc.* 71,824,064
-----------
ELECTRONICS-4.6%
896,236 General Electric Company 101,274,668
93,650 Jabil Circuit, Inc.* 4,225,956
128,759 PE Corp-PE Biosystems Group 14,775,095
127,151 Solectron Corporation* 8,479,382
-----------
128,755,101
-----------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
30
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- -----------------------------------------------------------
FINANCIAL SERVICES-6.6%
364,531 American Express Company $47,434,596
622,405 Associates First Capital Corporation
Class A 27,580,322
144,266 The Charles Schwab Corporation 15,851,227
955,321 Fannie Mae 65,320,073
364,359 Franklin Resources, Inc. 14,802,084
145,709 Northern Trust Corporation 14,133,773
-----------
185,122,075
-----------
FOOD & BEVERAGE-3.3%
1,040,537 The Coca-Cola Company 65,033,562
363,550 Pepsico, Inc. 14,019,397
150,560 Tootsie Roll Industries, Inc. 5,815,380
76,457 Wm. Wrigley Jr. Company 6,881,130
-----------
91,749,469
-----------
HEALTHCARE SERVICES-1.2%
1,059,391 IMS Health, Inc. 33,105,969
-----------
INSURANCE-3.0%
382,829 American International Group, Inc. 44,814,920
533,498 Marsh & McLennan Companies, Inc. 40,279,099
-----------
85,094,019
-----------
LEISURE & ENTERTAINMENT-1.6%
263,584 Carnival Corporation
Class A 12,783,824
149,234 Harley Davidson, Inc. 8,114,599
461,515 Mattel, Inc. 12,201,303
401,452 The Walt Disney Company 12,369,740
-----------
45,469,466
-----------
MANUFACTURING-3.9%
336,018 Danaher Corporation 19,531,046
91,377 Illinois Tool Works, Inc. 7,492,914
895,155 Tyco International Limited 84,815,936
-----------
111,839,896
-----------
MEDICAL SUPPLIES & EQUIPMENT-1.8%
292,601 Johnson & Johnson 28,674,898
275,426 Medtronic, Inc. 21,448,800
-----------
50,123,698
-----------
SHARES MARKET VALUE
- -----------------------------------------------------------
OIL SERVICES-1.6%
703,000 Baker Hughes, Inc. $23,550,500
351,100 Schlumberger Limited 22,360,681
-----------
45,911,181
-----------
PHARMACEUTICALS-10.9%
245,300 American Home Products Corporation 14,104,750
794,739 Bristol-Myers Squibb Company 55,979,428
330,538 Eli Lilly and Company 23,674,784
753,540 Merck & Company, Inc. 55,761,960
491,451 Pfizer, Inc. 53,936,747
1,143,116 Schering-Plough Corporation 60,585,148
644,271 Warner-Lambert Company 44,696,301
-----------
308,739,118
-----------
PUBLISHING & BROADCASTING-8.4%
248,312 Chancellor Media Corporation* 13,672,680
195,750 Clear Channel Communications, Inc.* 13,494,516
1,376,428 Comcast Corporation Special Class A 52,906,451
28,350 EchoStar Communications Corporation* 4,349,953
1440,030 Gannett Company, Inc. 31,407,141
119,122 The McGraw-Hill Companies, Inc. 6,425,143
277,771 MediaOne Group, Inc.* 20,659,218
145,190 TCA Cable TV, Inc. 8,039,896
998,781 Time Warner, Inc. 73,410,404
23,750 The Washington Post Company 12,771,563
-----------
237,136,965
-----------
RESTAURANTS-0.5%
322,301 McDonald's Corporation 13,315,060
-----------
31
<PAGE>
FOUNDERS GROWTH FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- -----------------------------------------------------------
RETAIL-8.9%
311,440 Abercrombie & Fitch Company* $14,949,120
207,574 Bed Bath & Beyond, Inc.* 7,965,652
226,002 Best Buy Company, Inc.* 15,255,135
369,741 Costco Companies, Inc.* 29,579,280
547,768 The Gap, Inc. 27,593,813
733,617 The Home Depot, Inc. 47,272,445
146,186 Intimate Brands, Inc.
Class A 6,925,562
233,181 Kohl's Corporation* 17,998,658
225,522 Staples, Inc.* 6,962,992
1,217,615 Wal-Mart Stores, Inc. 58,749,924
631,042 Walgreen Company 18,536,859
-----------
251,789,440
-----------
SEMICONDUCTORS & EQUIPMENT-4.9%
133,150 Broadcom Corporation* 19,240,175
1,233,887 Intel Corporation 73,339,159
197,925 Texas Instruments, Inc. 28,699,125
45,664 Uniphase Corporation* 7,580,224
121,675 Vitesse Semiconductor Corporation 8,258,691
-----------
137,117,374
-----------
SUPERMARKETS-0.6%
323,841 Safeway, Inc.* 16,030,130
-----------
TELECOMMUNICATION SERVICES-1.9%
638,322 MCI WorldCom, Inc.* 54,895,692
-----------
TELECOMMUNICATIONS EQUIPMENT-6.0%
1,228,132 Lucent Technologies, Inc. 82,822,152
156,620 Motorola, Inc. 14,839,745
572,585 Qwest Communications International,
Inc.* 18,931,092
788,680 Tellabs, Inc.* 53,285,193
-----------
169,878,182
-----------
TRANSPORTATION-0.7%
316,713 Kansas City Southern Industries, Inc. 20,210,248
-----------
SHARES MARKET VALUE
- ---------------------------------------------------------------
TOTAL COMMON STOCKS
(DOMESTIC)
(COST-$2,312,952,775) $2,727,332,791
--------------
COMMON STOCKS (FOREIGN)-1.6%
TELECOMMUNICATION SERVICES-0.7%
101,738 Vodafone AirTouch Public PLC
Sponsored ADR (UK) 20,042,386
--------------
TELECOMMUNICATIONS EQUIPMENT-0.9%
278,052 Nokia Oyj Sponsored ADR (FI) 25,457,581
--------------
TOTAL COMMON STOCKS (FOREIGN)
(COST-$28,989,503)
45,499,967
--------------
PRINCIPAL AMOUNT AMORTIZED COST
- ---------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-3.9%
$14,200,000 PPG Industries Inc. 5.75% 07/01/99 $ 14,200,000
50,000,000 Sara Lee Corporation 5.5% 07/01/99 50,000,000
44,900,000 Prudential Funding Corporation 5.03%
07/01/99 44,900,000
--------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$109,100,000) 109,100,000
--------------
TOTAL INVESTMENTS-102.2%
(COST-$2,451,042,278) 2,881,932,758
OTHER ASSETS & LIABILITIES-(2.2%) (60,566,348)
--------------
NET ASSETS-100% $2,821,366,410
==============
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
32
<PAGE>
FOUNDERS GROWTH AND INCOME FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
1 Year 5 Years 10 Years 20 Years
------ ------- -------- ---------
6.68% 19.39% 14.56% 14.88%
* PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS
GROWTH AND LIPPER GROWTH CONSUMER
INCOME AND INCOME PRICE
FUND S&P 500 INDEX FUND INDEX INDEX
--------- ------------- ------------ --------
6/89......... $ 10,000 $ 10,000 $ 10,000 $ 10,000
6/90......... $ 11,973 $ 11,644 $ 10,912 $ 10,475
6/91......... $ 12,535 $ 12,500 $ 11,555 $ 10,958
6/92......... $ 13,430 $ 14,177 $ 13,105 $ 11,297
6/93......... $ 15,259 $ 16,097 $ 15,248 $ 11,635
6/94......... $ 16,049 $ 16,331 $ 15,846 $ 11,925
6/95......... $ 19,345 $ 20,587 $ 18,937 $ 12,288
6/96......... $ 25,085 $ 25,935 $ 23,085 $ 12,626
6/97......... $ 30,426 $ 34,923 $ 29,778 $ 12,917
6/98......... $ 36,487 $ 45,447 $ 37,363 $ 13,134
6/99......... $ 38,924 $ 55,792 $ 43,269 $ 13,392
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
PORTFOLIO MANAGER
TOM ARRINGTON
HOW DID THE GROWTH AND INCOME FUND PERFORM IN THE FIRST HALF OF THE YEAR?
The Fund returned 3.14% for the six-month period ended June 30, 1999. This
performance was lower than the 12.32% return posted by the Fund's benchmark, the
Standard and Poor's 500 Index.
WHAT WERE THE MAJOR MARKET FORCES BEHIND THE FUND'S PERFORMANCE?
The Fund began the year in a defensive position--holding some bonds, cash, and
less-expensive foreign stocks--in anticipation of a market slowdown. As a
result, the Fund did not participate with the market in January as it soared
ahead. During February, as it became clear that our economy remained strong and
in little danger of a slowdown, we moved the portfolio out of its defensive
stance. In the second quarter, we had another market dynamic to contend with:
renewed optimism about the economy led to a shift in
33
<PAGE>
FOUNDERS GROWTH AND INCOME FUND (CONTINUED)
investor assets away from growth-oriented blue chip companies and into
value-oriented cyclical and energy stocks, which had previously lagged. Later in
the quarter, some investor assets began to move out of large-capitalization
stocks altogether in search of opportunities in the small- and mid-cap ranges.
TOP 10 HOLDINGS
--------------------------------------------
1. General Electric Company 4.53%
2. Cisco Systems, Inc. 3.90%
3. Tyco International Ltd. 3.44%
4. Microsoft Corporation 2.89%
5. MediaOne Group, Inc. 2.55%
6. International Business Machines
Corporation 2.55%
7. Berkshire Hathaway, Inc. 2.27%
8. GTE Corporation 2.25%
9. MCI WorldCom, Inc. 2.00%
10. Time Warner, Inc. 2.00%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
WHAT CHANGES HAVE BEEN MADE TO THE MANAGEMENT OF THE FUND?
As of February, I became portfolio manager of the Growth and Income Fund. The
large-cap investment team and I have continued to look for high-quality,
large-capitalization companies with attractive long-term growth prospects. Some
changes were made to the portfolio at that time: we sold most of the foreign
stocks and all of the fixed-income holdings of the Fund in order to enhance its
earnings growth profile. While the Fund trailed the S&P 500 over the first six
months, most of the underperformance occurred in January when the Fund held a
defensive posture. We believe that the changes we made will benefit the Fund in
the long run.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $523.1 MILLION
NAV ON 6/30/99: $7.55
SIX-MONTH TOTAL RETURN: 3.14%
NET EXPENSE RATIO (AS OF 12/31/98): 1.08%
INCEPTION DATE: 7/5/38
-----------------------------------------
WHAT KIND OF GROWTH COMPANIES HELPED OR HURT THE FUND OVER THE FIRST QUARTER?
One stock we have been very pleased with is TYCO INTERNATIONAL LTD. (up 33%
since it was purchased in early February), a diversified manufacturing and
service company that sells valves, disposable medical supplies, fire-sprinkler
equipment, home-security systems, and other electronic devices. We like the
company's financial prospects, and we believe their senior management is one of
the best in the business.
34
<PAGE>
At the same time we believe investors' asset shift in the second quarter
unfairly punished some of the best large companies on the market today,
including such Growth and Income Fund holdings as GENERAL ELECTRIC, MICROSOFT,
AND MCI WORLDCOM. In each of these cases, however, we believe that the
attractive earnings of these companies and their
-----------------------------------------------
PORTFOLIO COMPOSITION
Technology .......... 18.2%
Consumer Staples .... 14.0%
Financial............ 13.9%
Consumer Cyclicals .. 10.9%
Healthcare .......... 10.4%
Capital Goods ....... 9.9%
Telecom Services .... 7.9%
Energy .............. 7.3%
Cash & Equivalents... 2.6%
Utilities............ 2.5%
Basic Materials...... 2.1%
Transportation ...... 0.3%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
long-term fundamentals will ultimately win the day.
WHAT DO YOU SEE FOR THE LARGE-CAP MARKET DURING THE REMAINDER OF THE YEAR?
For us, the bottom line is that, over the long run, investor interest (and stock
appreciation) historically has followed earnings. As we look forward, we are
confident in the potential of the companies we own to produce solid earnings. We
feel that this focus on the long term, and not on short-term issues such as
interest rates or investor sentiment, will serve the Fund admirably as we enter
the 21st century.
/s/THOMAS M. ARRINGTON
Thomas Arrington, CFA
Portfolio Manager
Founders Growth and Income Fund was formerly known as Founders Blue Chip Fund.
35
<PAGE>
FOUNDERS GROWTH AND INCOME FUND
SHARES MARKET VALUE
- ----------------------------------------------------------
COMMON STOCKS (DOMESTIC)-93.5%
AUTOMOTIVE-1.3%
117,125 Ford Motor Company $6,610,242
----------
BANKING-5.1%
70,125 Bank of America Corporation 5,141,039
58,838 Citigroup, Inc. 2,794,757
74,200 Fifth Third Bancorp 4,938,938
26,075 State Street Corporation 2,226,153
33,875 The Chase Manhattan Corporation 2,934,422
39,600 U.S. Bancorp 1,346,400
176,000 Wells Fargo Company 7,529,344
----------
26,911,053
----------
BIOTECHNOLOGY-0.2%
20,850 Amgen, Inc.* 1,267,941
----------
BUSINESS SERVICES-1.0%
17,700 Computer Sciences Corporation* 1,224,619
82,875 Fiserv, Inc.* 2,595,023
16,750 The Interpublic Group of Companies,
Inc. 1,450,969
----------
5,270,611
----------
CHEMICALS-1.2%
55,775 E.I. du Pont de Nemours and Company 3,810,130
56,975 Great Lakes Chemical Corporation 2,624,411
----------
6,434,541
----------
COMPUTER EQUIPMENT-4.0%
70,200 EMC Corporation 3,861,000
17,500 Hewlett-Packard Company 1,758,750
103,175 International Business Machines
Corporation 13,335,369
25,325 Sun Microsystems, Inc.* 1,744,259
----------
20,699,378
----------
COMPUTER NETWORKING-3.9%
316,850 Cisco Systems, Inc.* 20,417,022
----------
SHARES MARKET VALUE
- ----------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-3.4%
25,700 @Home Corporation $1,386,194
30,450 Automatic Data Processing, Inc. 1,339,800
167,725 Microsoft Corporation* 15,116,216
----------
17,842,210
----------
CONSUMER PRODUCTS-2.6%
32,800 Avon Products, Inc. 1,820,400
9,825 The Clorox Company 1,049,433
25,800 Colgate-Palmolive Company 2,547,750
91,850 The Dial Corporation 3,415,672
48,150 Gillette Company 1,974,150
29,300 The Procter & Gamble Company 2,615,025
----------
13,422,430
----------
CONSUMER SERVICES-0.2%
48,350 DeVry, Inc.* 1,081,831
----------
DIVERSIFIED-2.3%
5,275 Berkshire Hathaway, Inc.* 11,863,475
----------
ELECTRONICS-5.1%
209,000 General Electric Company 23,696,100
12,950 PE Corp-PE Biosystems Group 1,486,013
24,450 Solectron Corporation* 1,630,509
----------
26,812,622
----------
FINANCIAL SERVICES-4.4%
48,750 American Express Company 6,343,594
32,075 Associates First Capital Corporation
Class A 1,421,323
22,375 The Charles Schwab Corporation 2,458,453
109,075 Fannie Mae 7,458,003
7,050 Merrill Lynch & Company, Inc. 563,559
5,750 Morgan Stanley Dean Witter and
Company 589,375
43,975 Northern Trust Corporation 4,265,575
----------
23,099,882
----------
FOOD & BEVERAGE-2.4%
30,675 General Mills, Inc. 2,465,503
37,000 PepsiCo, Inc. 2,610,440
102,425 The Coca Cola Company 6,401,563
13,775 Wm. Wrigley Jr. Company 1,239,750
----------
12,717,256
----------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
36
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- ----------------------------------------------------------
HEALTHCARE SERVICES-1.2%
197,475 IMS Health, Inc. $6,171,094
----------
INSURANCE-2.1%
58,100 American International Group, Inc. 6,801,331
53,250 Marsh & McLennan Companies, Inc. 4,020,375
----------
10,821,706
----------
LEISURE & ENTERTAINMENT-1.6%
28,100 Carnival Corporation Class A 1,362,850
47,250 Mattel, Inc. 1,249,172
60,400 Viacom, Inc. Class B* 2,657,600
104,450 The Walt Disney Company 3,218,366
----------
8,487,988
----------
MACHINERY-0.5%
20,950 Caterpillar, Inc. 1,257,000
32,225 Deere & Company 1,276,916
----------
2,533,916
----------
MANUFACTURING-4.5%
49,500 Danaher Corporation 2,877,188
17,350 Illinois Tool Works, Inc. 1,422,700
16,625 Minnesota Mining and Manufacturing
Company 1,445,336
189,775 Tyco International Limited 17,981,181
----------
23,726,405
----------
MEDICAL SUPPLIES & EQUIPMENT-1.7%
19,000 Baxter International, Inc. 1,151,875
57,425 Johnson & Johnson 5,627,650
30,100 Medtronic, Inc. 2,344,038
----------
9,123,563
----------
OIL & GAS-5.2%
51,425 Chevron Corporation 4,895,017
57,900 Conoco, Inc. 1,613,963
69,800 Enron Corporation 5,706,150
120,025 Exxon Corporation 9,256,928
41,725 Mobil Corporation 4,130,775
24,225 Texaco, Inc. 1,514,063
----------
27,116,896
----------
OIL SERVICES-0.6%
45,800 Schlumberger Limited 2,916,888
----------
SHARES MARKET VALUE
- ----------------------------------------------------------
PAPER & FOREST PRODUCTS-0.6%
78,525 The Mead Corporation $3,278,419
----------
PHARMACEUTICALS-7.2%
44,475 American Home Products Corporation 2,557,313
115,250 Bristol-Myers Squibb Company 8,117,922
54,650 Eli Lilly and Company 3,914,306
93,350 Merck & Company, Inc. 6,907,900
51,175 Pfizer, Inc. 5,616,456
46,125 Pharmacia & Upjohn, Inc. 2,620,477
95,050 Schering-Plough Corporation 5,037,650
40,800 Warner-Lambert Company 2,830,500
----------
37,602,524
----------
PHOTOGRAPHY & IMAGING-0.5%
41,250 Xerox Corporation 2,436,328
----------
PUBLISHING & BROADCASTING-8.8%
34,700 CBS Corporation* 1,507,281
49,225 Chancellor Media Corporation* 2,710,452
55,650 Clear Channel
Communications, Inc.* 3,836,372
42,350 Comcast Corporation Special Class A 1,627,828
56,600 Cox Communications, Inc.* 2,083,588
37,725 Gannett Company, Inc. 2,692,622
91,300 The McGraw-Hill Companies, Inc. 4,924,494
179,350 MediaOne Group, Inc.* 13,339,156
47,625 TCA Cable TV, Inc. 2,637,234
142,025 Time Warner, Inc. 10,438,838
----------
45,797,865
----------
RESTAURANTS-1.0%
126,750 McDonald's Corporation 5,236,359
----------
RETAIL-6.3%
59,100 Abercrombie & Fitch Company* 2,836,800
40,825 Bed Bath & Beyond, Inc.* 1,566,659
32,475 Costco Companies, Inc.* 2,598,000
90,450 The Gap, Inc. 4,556,419
115,050 The Home Depot, Inc. 7,413,534
60,191 Intimate Brands, Inc. Class A 2,851,549
39,475 Kohl's Corporation* 3,046,977
170,425 Wal-Mart Stores, Inc. 8,223,006
----------
33,092,944
----------
37
<PAGE>
FOUNDERS GROWTH AND INCOME FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- ------------------------------------------------------------
SEMICONDUCTORS & EQUIPMENT-1.4%
90,650 Intel Corporation $ 5,388,009
13,475 Texas Instruments, Inc. 1,953,875
-----------
7,341,884
-----------
SUPERMARKETS-0.5%
47,150 Safeway, Inc.* 2,333,925
-----------
TELECOMMUNICATION SERVICES-6.6%
20,325 Alltel Corporation 1,453,238
45,875 Bell Atlantic Corporation 2,999,078
55,475 Bellsouth Corporation 2,600,391
155,375 GTE Corporation 11,769,656
121,425 MCI WorldCom, Inc. 10,442,550
39,400 Nextel Communications, Inc.* 1,977,388
27,765 SBC Communications, Inc. 1,605,150
26,400 Sprint Corporation 1,394,250
-----------
34,241,701
-----------
TELECOMMUNICATIONS EQUIPMENT-3.3%
89,350 Lucent Technologies, Inc. 6,025,541
37,300 Motorola, Inc. 3,534,175
74,325 Qwest Communicatons, International,
Inc.* 2,457,370
80,800 Tellabs, Inc.* 5,459,050
-----------
17,476,136
-----------
TRANSPORTATION-0.3%
23,575 Kansas City Southern Industries, Inc. 1,504,380
-----------
UTILITIES-2.5%
178,200 Duke Energy Corporation 9,689,625
15,450 The Montana Power Company 1,089,225
90,150 The Southern Company 2,388,975
-----------
13,167,825
-----------
TOTAL COMMON STOCKS
(DOMESTIC)
(COST-$424,984,688) 488,859,240
-----------
SHARES MARKET VALUE
- ------------------------------------------------------------
COMMON STOCKS (FOREIGN)-3.8%
CHEMICALS-0.2%
24,450 Rhone-Poulenc SA Sponsored ADR (FR) $ 1,124,959
-----------
OIL & GAS-1.6%
136,200 Royal Dutch Petroleum Company
Sponsored ADR (NE) 8,206,050
-----------
TELECOMMUNICATION SERVICES-1.3%
32,800 Nortel Networks Corporation Sponsored
ADR (CA) 2,847,450
21,100 Vodafone AirTouch Public PLC
Sponsored ADR (UK) 4,156,700
-----------
7,004,150
-----------
TELECOMMUNICATIONS EQUIPMENT-0.7%
38,150 Nokia Oyj Sponsored ADR (FI) 3,493,109
-----------
TOTAL COMMON STOCKS
(FOREIGN)
(COST-$16,143,207) 19,828,268
-----------
PRINCIPAL AMOUNT AMORTIZED COST
- ------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-3.4%
$18,000,000 PPG Industries Inc. 5.75% 07/01/99 $ 18,000,000
------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$18,000,000) 18,000,000
------------
TOTAL INVESTMENTS-100.7%
(COST-$459,127,895) 526,687,508
OTHER ASSETS &
LIABILITIES-(0.7%) (3,564,235)
------------
NET ASSETS-100.0% $523,123,273
============
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
38
<PAGE>
FOUNDERS INTERNATIONAL EQUITY FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
Since Inception
1 Year 3 Years (12/29/95)
------ ------- ---------------
2.81% 14.78% 17.01%
* PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS MSCI WORLD CONSUMER
INTERNATIONAL EX U.S. PRICE
EQUITY FUND INDEX* INDEX
------------- ---------- ---------
12/95......... $ 10,000 $ 10,000 $ 10,000
6/96......... $ 11,460 $ 10,469 $ 10,168
6/97......... $ 13,810 $ 11,885 $ 10,402
6/98......... $ 16,855 $ 12,634 $ 10,577
6/99......... $ 17,329 $ 13,565 $ 10,785
* PERFORMANCE SHOWN IS FROM 12/31/95 - 06/30/99.
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
PORTFOLIO MANAGER
DOUG LOEFFLER
HOW DID THE FUND PERFORM DURING THE FIRST SIX MONTHS OF 1999?
Founders International Equity Fund performed well, returning 7.56% for the
six-month period ended June 30, 1999. The Fund outperformed its benchmark, the
Morgan Stanley Capital International World ex U.S. Index, which posted a 4.51%
gain in the first half.
The Fund was recognized for its track record of strong performance.
Morningstar awarded the Fund a **** overall rating, with **** for the three-year
period ended 6/30/99, among 987 international equity funds.*
* Morningstar proprietary ratings reflect risk-adjusted performance through
6/30/99. The top 10% of the funds in an investment category receive five stars
and the next 22.5% receive four stars. Subject to change every month, a fund's
rating is based on its three-, five-, and (when available) 10-year average
annual total returns (with fee adjustments) in excess of 90-day Treasury bill
returns, and a risk factor that reflects fund performance below 90-day
Treasury bill returns.
The Morgan Stanley Capital International (MSCI) World ex U.S. Index is an
arithmetical average of the performance of 1,138 securities listed on the
stock exchanges of Europe, Canada, Australia, New Zealand, and the Far East.
Total return figures for this index assume change in share price and
reinvestment of dividends after the deduction of local taxes.
39
<PAGE>
FOUNDERS INTERNATIONAL EQUITY FUND (CONTINUED)
HOW DID INTERNATIONAL EVENTS AFFECT THE FUND'S RETURN?
Foreign markets were quite volatile at the top of the year, reacting to the
collapse of the Brazilian REAL, but several individual markets--such as France,
Sweden, and Finland--performed well. Despite this
TOP 10 HOLDINGS
--------------------------------------------
1. Altran Technologies SA 2.44%
2. Takefuji Corporation 2.22%
3. Nokia Oyj Sponsored ADR 2.21%
4. Pearson PLC 2.10%
5. Vodafone AirTouch Public Ltd. 2.07%
6. Softbank Corporation 2.05%
7. Kao Corporation 2.01%
8. Konami Company Limited 1.97%
9. Mannesmann AG 1.96%
10. NTT Mobile Communications
Network, Inc. Bonus 1.80%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
global volatility, there was a flood of interest in European stocks in the first
quarter, where strong companies have often been available at lower current
valuations than comparable U.S. firms. As the portfolio has been overweight in
Europe for some time, this demand served the International Equity Fund well.
Near the middle of the period, we began to see signs that investors were
shifting assets away from growth stocks and into value-oriented opportunities.
This, coupled with weakness in the Euro, put a drag on the Fund's performance
(relative to its benchmark) in the second quarter.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $23.7 MILLION
NAV ON 6/30/99: $15.09
SIX-MONTH TOTAL RETURN: 7.56%
NET EXPENSE RATIO (AS OF 12/31/98): 1.80%
INCEPTION DATE: 12/29/95
-----------------------------------------
We typically have been more broadly invested than our benchmark, both in
countries and regions, and have held more positions in smaller countries. This
means we are often underweight in larger countries vs. the index.
During the period, we found excellent growth opportunities in many smaller
countries, and the Fund held a slightly smaller proportion of stocks from Japan
and Britain--two of the world's best-performing developed markets so far this
year--than the MSCI World ex U.S. Index. While International Equity Fund's
British and Japanese allocations helped the Fund in absolute terms, they put us
at a slight disadvantage to the index. We believe that it was our individual
stock selection that contributed most to our benchmark-beating performance.
40
<PAGE>
WHICH STOCKS WORKED PARTICULARLY WELL FOR THE FUND?
One of the Fund's largest holdings throughout the half was Altran Technologies,
a French engineering outsourcing company that is one of our longest-held
positions. The firm "rents" engineers to European companies for medium- and
long-term assignments, a service
-----------------------------------------------
PORTFOLIO COMPOSITION
Japan................ 18.3%
United Kingdom....... 16.0%
Other Countries...... 15.6%
France............... 8.6%
Italy................ 6.9%
Netherlands.......... 6.1%
Germany.............. 5.6%
Finland.............. 5.6%
Canada............... 5.4%
Sweden............... 5.2%
Spain................ 3.4%
Cash & Equivalents... 3.3%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
particularly helpful to businesses engaged in new product development. Altran's
numbers have also been compelling: in 1998 they reported sales and net income
growth of 50% and 56%, respectively.
The telecommunications industry has also generated numerous opportunities such
as ESAT TELECOM GROUP PLC, an Irish company that has a sizable stake in its
country's second cellular-telephone license. Moreover, the firm is also
competing in the Irish local and long-distance markets. Esat is off to a strong
start in tapping into the growth potential of the newly deregulated European
telecom marketplace.
WHAT DO YOU SEE FOR INTERNATIONAL INVESTING LOOKING FORWARD?
As we look for new investment opportunities for the Fund, we must still be aware
of the lingering effects of 1997's Asian currency crisis. European nations may
continue to post healthy growth and be fertile ground for growth companies.
Several economies of the Pacific Rim are beginning to see the light at the end
of the tunnel, and we are once again finding new investment opportunities in
this region.
As always, our emphasis will be placed on careful research and bottom-up
selection of foreign investment opportunities.
/s/DOUGLAS LOEFFLER
Douglas Loeffler, CFA
Portfolio Manager
Investments in foreign securities may entail unique risks, including political,
market, and currency risks.
41
<PAGE>
FOUNDERS INTERNATIONAL EQUITY FUND
SHARES MARKET VALUE
- ---------------------------------------------------------
COMMON STOCKS (FOREIGN)-96.5%
AUTO PARTS & EQUIPMENT-1.1%
10,800 Continental AG (GE) $ 255,927
---------
BANKING-7.9%
13,500 Allied Irish Banks PLC (IE) 178,752
29,600 Banco Santander Central Hispano SA
(BR) 308,234
32,000 Development Bank Singapore Limited
(SG) 390,958
64,000 Merita PLC (FI) 363,659
24,000 Skandinaviska Enskilda Banken (SW) 279,474
7,700 Toronto-Dominion Bank (CA) 347,280
---------
1,868,357
---------
BUSINESS SERVICES-6.1%
2,200 Altran Technologies SA (FR) 579,873
30,850 Compass Group PLC (UK) 305,872
36,000 Securio PLC (UK) 315,787
29,000 WPP Group PLC (UK) 245,237
---------
1,446,769
---------
CHEMICALS-1.6%
2,650 Elf Aquitaine SA (FR) 388,862
---------
COMPUTER EQUIPMENT-0.7%
6,000 Newbridge Networks Corporation
Sponsored ADR (CA)* 172,500
---------
SHARES MARKET VALUE
- ---------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-5.9%
11,300 Konami Company Limited (JA) $ 466,777
3,700 Lernout & Hauspie Speech Products NV
Sponsored ADR (BE)* 130,656
2,400 Softbank Corporation (JA) 486,003
7,700 Tieto Corporation (FI) 320,800
---------
1,404,236
---------
CONSTRUCTION-1.6%
9,150 Brisa-Auto Estradas de Portugal SA
(PO) 377,436
---------
CONSUMER PRODUCTS-6.3%
5,475 Benckiser NV Class B (NE) 292,184
15,100 Electrolux AB-Series B (SW) 316,149
17,000 Kao Corporation (JA) 477,504
27,000 Shiseido Company Limited (JA) 404,656
---------
1,490,493
---------
ELECTRONICS-1.5%
4,000 TDK Corporation (JA) 365,841
---------
ENVIRONMENTAL SERVICES-1.6%
4,700 Vivendi (FR) 380,668
---------
FINANCIAL SERVICES-4.8%
2,900 DePfa Deutsche Pfandbriefbank AG (GE) 263,173
18,500 Skandia Forsakrings AB (SW) 345,990
5,100 Takefuji Corporation (JA) 527,072
---------
1,136,235
---------
42
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- ---------------------------------------------------------
FOOD & BEVERAGE-1.5%
34,000 Diageo PLC (UK) $ 355,600
---------
INSURANCE-1.5%
30,900 Alleanza Assicurazioni (IT) 355,301
---------
LEISURE & ENTERTAINMENT-3.2%
1,400 Accor SA (FR) 351,513
100,675 Hilton Group PLC (UK) 399,114
---------
750,627
---------
MACHINERY-2.0%
3,125 Mannesmann AG (GE) 466,305
---------
OIL & GAS-2.6%
2,600 BP Amoco PLC Sponsored ADR (UK) 282,100
6,342 Preussag AG (GE) 340,719
---------
622,819
---------
OIL SERVICES-1.4%
3,150 Petroleo Brasileiro SA (BR) 339,359
---------
PACKAGING-1.6%
6,700 Coca-Cola West Japan Company Limited
(JA) 380,852
---------
PAPER & FOREST PRODUCTS-0.5%
4,000 UPM-Kymmene Oyi (FI) 114,675
---------
PHARMACEUTICALS-1.0%
9,050 Elan Corporation PLC Sponsored ADR
(IE)* 251,138
---------
SHARES MARKET VALUE
- ---------------------------------------------------------
PUBLISHING & BROADCASTING-9.4%
17,500 Arnoldo Mondadori Editore
SPA (IT) $ 303,187
1,225 Canal Plus (FR) 343,738
24,500 Pearson PLC (UK) 497,801
260,000 Seat-Pagine Gialle SPA (IT) 355,265
900 Societe Europeenne des
Satellites (LU) 130,633
10,000 Telefonica Publicidad e Informacion
SA (SP)*+ 199,546
2,075 United Pan-Europe Communications NV
(NE)* 112,555
7,275 VNU NV (NE) 290,715
---------
2,233,440
---------
RETAIL-2.8%
15,700 Dixons Group PLC (UK) 293,260
1,500 Ryohin Keikaku Company Limited (JA) 377,366
---------
670,626
---------
SEMICONDUCTORS & EQUIPMENT-4.3%
6,500 ASM Lithography Holding NV Sponsored
ADR (NE)* 383,500
5,550 STicroelectronics (NE) 369,728
7,700 Taiwan Semiconductor Manufacturing
Company Limited Sponsored ADR (TW)* 261,800
---------
1,015,028
---------
+ SECURITIES WERE ACQUIRED PURSUANT TO RULE 144A AND MAY BE DEEMED TO BE
RESTRICTED FOR RESALE.
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
43
<PAGE>
FOUNDERS INTERNATIONAL EQUITY FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- ------------------------------------------------------------
TELECOMMUNICATION SERVICES-20.8%
5,725 AT&T Canada,
Inc. (CA)* $ 364,969
3,200 China Telecom Limited Sponsored ADR
(HK)* 182,400
10,000 Energis PLC (UK)* 238,493
7,700 Esat Telecom Group PLC Sponsored ADR
(IE)* 334,950
2,600 Global TeleSystems Group, Inc.
Sponsored ADR (RU)* 210,438
8,600 Korea Telecom Corporation Sponsored
ADR (KR)* 344,000
7,200 Le Groupe Videotron LTEE (CA) 114,324
8 NTT Mobile Communications Network,
Inc. (JA)* 108,397
32 NTT Mobile Communications Network,
Inc. Bonus (JA)* 428,295
675 Swisscom AG (SZ) 253,912
80,000 Telecom Italia Mobile SPA (IT) 294,524
31,500 Telecom Italia SPA (IT)* 327,404
5,968 Telefonica SA (SP)* 287,498
4,350 Telefonos de Mexico SA Sponsored ADR
(MX) 351,534
5,000 Telesudeste Celular Participacoes SA
Sponsored ADR (BR) 145,000
14,900 Telesystem International Wireless,
Inc. (CA)* 269,307
41,000 Telewest Communications PLC (UK)* 183,867
24,950 Vodafone AirTouch Public Ltd. (UK) 491,583
-----------
4,930,895
-----------
SHARES MARKET VALUE
- ------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-4.8%
8,850 Telefonaktiebolaget LM Ericsson
Sponsored ADR Class B (SW) $ 290,944
22 Japan Telecom Company Limited (JA) 312,634
5,725 Nokia Oyj Sponsored ADR (FI) 524,195
-----------
1,127,773
-----------
TOTAL COMMON STOCKS
(FOREIGN)
(COST-$19,633,018) 22,901,762
-----------
PRINCIPAL AMOUNT AMORTIZED COST
- -----------------------------------------------------------
CORPORATE SHORT-TERM NOTES-2.9%
$690,000 Sara Lee Corporation 5.50% 07/01/99 $ 690,000
-----------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$690,000) 690,000
-----------
TOTAL INVESTMENTS-99.4%
(COST-$20,323,018) 23,591,762
OTHER ASSETS &
LIABILITIES-0.6% 150,085
-----------
NET ASSETS-100.0% $23,741,847
===========
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
44
<PAGE>
FOUNDERS MID-CAP GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
1 Year 5 Years 10 Years 20 Years
------ ------- -------- ----------
-4.31% 14.60% 13.65% 15.24%
* PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS
MID-CAP LIPPER CAPITAL CONSUMER
GROWTH S&P MIDCAP APPRECIATION PRICE
FUND 400 INDEX FUND INDEX INDEX
--------- ------------- ------------ --------
6/89.... $ 10,000 $ 10,000 $ 10,000 $ 10,000
6/90.... $ 10,979 $ 11,543 $ 11,270 $ 10,475
6/91.... $ 12,945 $ 13,025 $ 11,777 $ 10,959
6/92.... $ 15,336 $ 15,442 $ 13,266 $ 11,297
6/93.... $ 18,555 $ 18,946 $ 15,784 $ 11,636
6/94.... $ 18,182 $ 18,936 $ 15,947 $ 11,926
6/95.... $ 23,557 $ 23,167 $ 19,707 $ 12,288
6/96.... $ 27,346 $ 28,168 $ 24,421 $ 12,627
6/97.... $ 31,289 $ 34,739 $ 28,072 $ 12,917
6/98.... $ 37,560 $ 44,171 $ 35,027 $ 13,135
6/99.... $ 35,941 $ 51,760 $ 42,132 $ 13,392
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
PORTFOLIO MANAGER
PAUL LAROCCO
HOW DID MID-CAP GROWTH PERFORM IN THE HALF?
The Fund posted a 10.62% return for the six-month period ended June 30, 1999.
This was markedly higher than the 6.87% return posted by the Fund's benchmark,
the Standard & Poor's MidCap 400 Index.
WHAT MARKET FACTORS MOST AFFECTED THE STOCKS IN THE FUND'S PORTFOLIO?
Because of Mid-Cap Growth Fund's strong focus on technology stocks, its
performance during the period was influenced by the shifting fate of the sector.
Technology stocks started the period off strong, and we took profits in select
positions that had met our price targets, reinvesting the proceeds into new
opportunities in the area. Subsequent months saw periods of both outperformance
and underperformance, but we remain confident in the fundamental strengths of
our holdings in the sector.
The S&P MidCap 400 Index is composed of 400 common stocks and measures the
performance of the mid- capitalization segment of the U.S. market.
45
<PAGE>
FOUNDERS MID-CAP GROWTH FUND (CONTINUED)
The coming of the second quarter brought with it a change in investors'
attitudes, and market assets began to rotate away from growth stocks and into
value-oriented investments. In this environment, many of our holdings in the
energy sector (such as oil services stocks) were a source of strength for the
Fund.
TOP 10 HOLDINGS
--------------------------------------------
1. Metris Companies, Inc. 2.34%
2. Compuware Corporation 2.32%
3. ChiRex, Inc. 2.18%
4. Republic Services, Inc. 2.16%
5. Concord EFS, Inc. 2.13%
6. Pharmaceutical Product
Development, Inc. 2.00%
7. Linens 'n Things, Inc. 1.96%
8. Citrix Systems, Inc. 1.96%
9. Rental Service Corporation 1.83%
10. Sykes Enterprises, Inc. 1.75%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
WHICH PORTFOLIO HOLDINGS INFLUENCED THE FUND'S PERFORMANCE?
Founders Mid-Cap Growth Fund is focused on rapidly growing companies with market
capitalizations from $1.5-$8 billion. We search for firms with annual earnings
growth potential of 20% or higher and that may benefit from secular trends we've
identified.
Several of the Fund's portfolio holdings performed particularly well during
the half, including:
o ECHOSTAR COMMUNICATIONS CORPORATION, a direct broadcast satellite (DBS)
provider of video services, an alternative to cable TV. As a result of
industry consolidation, by year-end, EchoStar will offer 300-500 channels,
further strengthening DBS as a powerful competitive product. Near term,
there is a lot of business momentum as EchoStar is showing very strong
subscriber growth even without local channels. It is still early in the
market penetration of DBS services, and we believe there is room for
EchoStar to gain market share.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $219.3 MILLION
NAV ON 6/30/99: $8.23
SIX-MONTH TOTAL RETURN: 10.62%
NET EXPENSE RATIO (AS OF 12/31/98): 1.33%
INCEPTION DATE: 9/8/61
-----------------------------------------
o UNIPHASE CORPORATION, a leading technology company that develops,
manufactures, and distributes a comprehensive range of products for the
fiberoptic communications market. The appetite for high-speed Internet,
data, and video services is increasing, and Uniphase's unique products offer
a solution to higher bandwidth networks.
46
<PAGE>
WHAT IS THE OUTLOOK FOR MID-SIZED COMPANIES?
Recent events have shown that individuals and institutions are beginning to
recognize the numerous investment opportunities available in the small- and
mid-cap realms. We feel this recognition is long overdue. This increased
interest helped boost the prices of select mid-cap
-----------------------------------------------
PORTFOLIO COMPOSITION
Technology .......... 33.1%
Consumer Cyclicals .. 14.7%
Healthcare .......... 12.3%
Capital Goods ....... 9.4%
Consumer Staples .... 8.7%
Energy .............. 6.4%
Cash & Equivalents... 5.0%
Telecom Services .... 4.4%
Financial............ 4.0%
Utilities............ 2.0%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
stocks throughout the half; and as the domestic economy continues to grow at a
healthy, noninflationary pace, we are optimistic about the prospects for these
companies. But regardless of the short-term trends in the market, we will
continue to scour the mid-cap marketplace for the best growth potential it has
to offer.
/s/PAUL LAROCCO
Paul LaRocco, CFA
Portfolio Manager
Founders Mid-Cap Growth Fund was formerly known as Founders Special Fund.
47
<PAGE>
FOUNDERS MID-CAP GROWTH FUND
SHARES MARKET VALUE
- -----------------------------------------------------------
COMMON STOCKS (DOMESTIC)-93.0%
AEROSPACE-1.5%
69,500 L-3 Communications Holdings, Inc.* $ 3,357,719
-----------
BIOTECHNOLOGY-1.1%
47,200 Gilead Sciences, Inc.* 2,460,300
-----------
BUSINESS SERVICES-8.4%
57,275 Affiliated Computer Services, Inc.
Class A* 2,899,547
110,500 Concord EFS, Inc.* 4,675,531
30,587 Fiserv, Inc.* 957,755
126,550 The Metzler Group, Inc.* 3,488,034
30,300 Sterling Commerce, Inc.* 1,105,950
52,700 SunGard Data Systems, Inc.* 1,818,150
160,850 USWeb Corporation* 3,568,859
-----------
18,513,826
-----------
COMPUTER SOFTWARE/SERVICES-10.6%
76,500 Citrix Systems, Inc.* 4,298,344
160,075 Compuware Corporation* 5,082,381
131,375 Convergys Corporation* 2,528,969
45,325 Electronics for Imaging, Inc.* 2,328,572
7,475 Extreme Networks, Inc.* 434,017
6,100 Juniper Networks, Inc.* 908,519
63,600 Peregrine Systems, Inc.* 1,629,750
50,250 Pixar, Inc.* 2,167,031
115,200 Sykes Enterprises, Inc.* 3,837,600
-----------
23,215,183
-----------
CONSUMER SERVICES-3.1%
32,150 MapQuest.com, Inc.* 522,438
125,700 Metris Companies, Inc. 5,122,275
31,525 Sotheby's Holdings, Inc. 1,201,891
-----------
6,846,604
-----------
SHARES MARKET VALUE
- -----------------------------------------------------------
DISTRIBUTION-0.5%
31,050 Patterson Dental Company* $ 1,078,988
-----------
ELECTRONICS-3.6%
51,575 Celestica, Inc.* 2,233,842
58,875 Jabil Circuit, Inc.* 2,656,734
38,425 Sanmina Corporation* 2,915,497
-----------
7,806,073
-----------
ENVIRONMENTAL SERVICES-2.2%
191,325 Republic Services, Inc.* 4,735,294
-----------
FINANCIAL SERVICES-1.7%
56,675 Associates First Capital Corporation
Class A 2,511,411
22,625 The FINOVA Group, Inc. 1,190,641
-----------
3,702,052
-----------
FOOD & BEVERAGE-0.9%
62,400 Keebler Foods Company* 1,895,400
-----------
HEALTHCARE SERVICES-5.5%
149,699 ChiRex, Inc.* 4,790,368
160,500 Pharmaceutical Product Development,
Inc.* 4,383,656
113,175 Renal Care Group, Inc.* 2,921,330
-----------
12,095,354
-----------
LEISURE & ENTERTAINMENT-3.4%
178,250 Fairfield Communities, Inc.* 2,874,282
76,450 Premier Parks, Inc.* 2,809,538
135,075 Sunterra Corporation* 1,882,608
-----------
7,566,428
-----------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
48
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- -----------------------------------------------------------
MANUFACTURING-2.3%
23,100 Tyco International Limited $ 2,188,725
67,275 Zomax, Inc. 2,960,100
-----------
5,148,825
-----------
MEDICAL SUPPLIES & EQUIPMENT-2.1%
58,825 CONMED Corporation* 1,797,839
99,500 Sybron International Corporation* 2,742,469
-----------
4,540,308
-----------
OIL & GAS-2.2%
50,500 Hanover Compressor Company* 1,622,313
89,300 Weatherford International, Inc.* 3,270,613
-----------
4,892,926
-----------
OIL SERVICES-4.2%
100,750 BJ Services Company* 2,965,828
70,775 Baker Hughes, Inc. 2,370,963
57,550 Halliburton Company 2,604,138
55,825 Nabors Industries, Inc.* 1,364,223
-----------
9,305,152
-----------
PHARMACEUTICALS-3.3%
73,850 Alpharma, Inc. 2,626,291
15,850 IDEC Pharmaceuticals Corporation* 1,220,450
130,500 Medicis Pharmaceutical Corporation* 3,311,438
-----------
7,158,179
-----------
PUBLISHING & BROADCASTING-0.7%
9,650 EchoStar Communications Corporation* 1,480,672
-----------
RESTAURANTS-5.6%
82,600 Dave & Busters, Inc.* 2,395,400
57,350 Luby's, Inc. 860,250
80,500 Outback Steakhouse, Inc.* 3,149,563
63,125 Papa John's International, Inc.* 2,816,953
84,650 Starbucks Corporation* 3,163,794
-----------
12,385,960
-----------
SHARES MARKET VALUE
- -----------------------------------------------------------
RETAIL-12.0%
54,800 Abercrombie & Fitch Company* $ 2,630,400
51,625 American Eagle Outfitters, Inc.* 2,348,938
13,400 Best Buy Company, Inc.* 904,500
17,250 Cheap Tickets, Inc.* 628,547
45,175 Fastenal Company 2,363,217
98,475 Linens 'n Things, Inc.* 4,308,280
57,200 Michaels Stores, Inc.* 1,737,450
140,000 Rental Service Corporation* 4,007,500
68,025 The TJX Companies, Inc. 2,266,083
81,859 United Rentals, Inc.* 2,414,841
75,250 Williams-Sonoma, Inc.* 2,619,641
-----------
26,229,397
-----------
SEMICONDUCTORS & EQUIPMENT-9.1%
44,675 Atmel Corporation* 1,167,134
109,025 Brooks Automation, Inc.* 2,950,489
45,275 Flextronics International Limited* 2,501,444
28,275 Lam Research Corporation* 1,318,322
17,800 Maxim Integrated Products, Inc.* 1,183,700
35,200 Novellus Systems, Inc.* 2,400,200
68,225 PRI Automation, Inc.* 2,473,156
28,125 SDL, Inc.* 1,436,133
35,250 Teradyne, Inc.* 2,529,188
11,725 Uniphase Corporation* 1,946,350
-----------
19,906,116
-----------
TELECOMMUNICATION SERVICES-4.4%
29,750 Allegiance Telecom, Inc.* 1,632,531
28,200 McLeodUSA, Inc.* 1,547,475
49,075 RCN Corporation* 2,042,747
37,750 Time Warner Telecom, Inc.* 1,092,391
67,825 WinStar Communications, Inc.* 3,306,469
-----------
9,621,613
-----------
TELECOMMUNICATIONS EQUIPMENT-2.6%
59,475 ANTEC Corporation* 1,895,766
80,025 CIENA Corporation* 2,420,756
6,525 Copper Mountain Networks, Inc.* 502,425
18,050 Sawtek, Inc.* 825,788
-----------
5,644,735
-----------
49
<PAGE>
FOUNDERS MID-CAP GROWTH FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- -----------------------------------------------------------
UTILITIES-2.0%
30,050 The Montana Power Company $ 2,118,525
75,425 Potomac Electric Power Company 2,220,323
-----------
4,338,848
-----------
TOTAL COMMON STOCKS
(DOMESTIC)
(COST-$162,668,748) 203,925,952
-----------
COMMON STOCKS (FOREIGN)-2.6%
COMPUTER EQUIPMENT-1.7%
129,850 Newbridge Networks Corporation
Sponsored ADR (CA)* 3,728,797
-----------
PHARMACEUTICALS-0.4%
20,025 Teva Pharmaceutical Industries
Limited Sponsored ADR (IS)+ 986,231
-----------
SEMICONDUCTORS & EQUIPMENT-0.5%
17,150 ASM Lithography Holding NV Sponsored
ADR (NE)* 1,011,850
-----------
TOTAL COMMON STOCKS
(FOREIGN)
(COST-$5,578,429) 5,726,878
-----------
SHARES MARKET VALUE
- -----------------------------------------------------------
CONVERTIBLE BONDS (DOMESTIC)-0.6%
PHARMACEUTICALS-0.6%
1,117,000 Sanmina Corporation Convertible 4.25%
05/01/04*+ $ 1,237,078
-----------
TOTAL CONVERTIBLE
BONDS (DOMESTIC)
(COST-$1,117,000) 1,237,078
-----------
PRINCIPAL AMOUNT AMORTIZED COST
- ------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-4.4%
$9,600,000 Wal-Mart Stores, Inc. 5.50% 07/01/99 $ 9,600,000
------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$9,600,000) 9,600,000
------------
TOTAL INVESTMENTS-100.6%
(COST-$178,964,177) 220,489,908
OTHER ASSETS & LIABILITIES-(0.6%)
(1,217,179)
------------
NET ASSETS-100.0% $219,272,729
============
+ SECURITIES WERE ACQUIRED PURSUANT TO RULE 144A AND MAY BE DEEMED TO BE
RESTRICTED FOR RESALE.
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
50
<PAGE>
FOUNDERS MONEY MARKET FUND (UNAUDITED)
PRINCIPAL AMOUNT AMORTIZED COST
- ------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-90.3%
AGRICULTURE-3.4%
$3,100,000 Pioneer Hi-Bred International, 4.98%
07/12/99 $3,095,283
----------
CAPTIVE FINANCE AUTOMOTIVE-6.6%
3,000,000 Ford Motor Credit Company 5.12%
08/05/99 2,985,067
3,000,000 Toyota Motor Credit Corporation 4.78%
07/02/99 2,999,602
----------
5,984,669
----------
CHEMICALS-9.2%
4,300,000 Akzo Nobel, Inc. 4.80% 08/03/99 4,281,080
4,000,000 PPG Industries Inc. 5.75% 07/01/99 4,000,000
----------
8,281,080
----------
CONSUMER PRODUCTS-5.3%
4,800,000 Hasbro, Inc. 4.80% 07/09/99 4,794,880
----------
PRINCIPAL AMOUNT AMORTIZED COST
- ------------------------------------------------------------
CAPTIVE FINANCE DIVERSIFIED-1.3%
$1,200,000 General Electric Capital Corporation
4.92% 01/24/00 $1,166,052
----------
FINANCIAL SERVICES-7.0%
2,300,000 Merrill Lynch and Company, Inc. 4.86%
07/08/99 2,297,827
4,000,000 Morgan Stanley Dean Witter 5.00%
07/02/99 3,999,444
----------
6,297,271
----------
FOOD & BEVERAGE-10.9%
1,700,000 Archer Daniels Midland Company 4.88%
07/13/99 1,697,235
3,000,000 California Almond Growers Exchange
4.95% 7/16/99 2,993,813
1,000,000 Campbell's Soup Company 5.00%
07/27/99 996,389
4,100,000 Kellogg Company 4.81% 07/07/99 4,096,713
----------
9,784,150
----------
INSURANCE-3.3%
3,000,000 American General Corporation 5.01%
07/26/99 2,989,563
----------
SEE NOTES TO FINANCIAL STATEMENTS.
51
<PAGE>
FOUNDERS MONEY MARKET FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999
(UNAUDITED)
(CONTINUED)
PRINCIPAL AMOUNT AMORTIZED COST
- -----------------------------------------------------------
CAPTIVE FINANCE INSURANCE-9.0%
$4,000,000 Prudential Funding 5.10% 07/02/99 $ 3,999,433
4,200,000 Transamerica Finance Corporation
4.92% 11/03/99 4,128,250
-----------
8,127,683
-----------
INVESTMENT COMPANIES-2.1%
1,900,000 Ciesco LP 4.87% 07/15/99 1,896,402
-----------
OIL & GAS-4.5%
4,100,000 Consolidated Natural Gas Company
5.05% 07/30/99 4,083,321
-----------
RETAIL-4.6%
4,100,000 Wal-Mart Stores, Inc. 5.50% 07/01/99 4,100,000
-----------
TELECOMMUNICATION SERVICES-11.2%
2,700,000 AT&T Corporation 5.08% 07/06/99 2,698,095
4,500,000 Ameritech Corporation 4.84% 07/06/99 4,496,975
2,900,000 Bellsouth Telecommunications, Inc.
4.93% 07/13/99 2,895,234
-----------
10,090,304
-----------
TRANSPORTATION-4.9%
4,400,000 United Parcel Service of America,
Inc. 4.74% 07/01/99 4,400,000
-----------
PRINCIPAL AMOUNT AMORTIZED COST
- -----------------------------------------------------------
UTILITIES-4.4%
$4,000,000 Potomac Electric Power Company 5.08%
07/01/99 $4,000,000
-----------
CAPTIVE FINANCE UTILITIES-2.6%
2,300,000 Progress Capital Holdings, Inc. 4.94%
07/08/99 2,297,791
-----------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-
$81,388,449) 81,388,449
-----------
U.S. AGENCIES-8.3%
3,400,000 Federal Home Loan Bank Discount Note
4.70% 02/11/00 3,300,125
4,200,000 FHLMC Discount Note 4.97% 09/02/99 4,163,470
-----------
TOTAL U.S. AGENCIES
(AMORTIZED COST-$7,463,595) 7,463,595
-----------
TOTAL INVESTMENTS-98.6%
(AMORTIZED COST-
$88,852,044) 88,852,044
OTHER ASSETS &
LIABILITIES-1.4% 1,301,998
-----------
NET ASSETS-100.0% $90,154,042
===========
SEE NOTES TO FINANCIAL STATEMENTS.
52
<PAGE>
FOUNDERS PASSPORT FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
Since Inception
1 Year 5 Years (11/16/93)
------ ------- ---------------
0.02% 12.73% 10.60%
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS MSCI CONSUMER
PASSPORT WORLD PRICE
FUND EX U.S. INDEX* INDEX
--------- ------------- -----------
11/93.... $ 10,000 $ 10,000 $ 10,000
06/94.... $ 9,670 $ 11,574 $ 10,137
06/95.... $ 10,581 $ 11,837 $ 10,445
06/96.... $ 13,657 $ 13,417 $ 10,733
06/97.... $ 15,204 $ 15,232 $ 10,979
06/98.... $ 17,602 $ 16,191 $ 11,164
06/99.... $ 17,606 $ 17,384 $ 11,384
* PERFORMANCE SHOWN IS FROM 11/30/93 - 06/30/99.
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH
NEW PORTFOLIO MANAGER
TRACY STOUFFER
HOW DID THE FUND PERFORM IN THE FIRST HALF OF 1999?
Under the Fund's prior portfolio manager, Founders Passport Fund returned 9.31%
for the six months ended June 30, 1999. This performance was well ahead of the
4.51% return posted by the Morgan Stanley Capital International (MSCI) World ex
U.S. Index, its benchmark, for the same period.
As a reward for its history of strong past performance, the Fund has been
given a **** overall rating by Morningstar, with **** for its five-year
performance and *** for the three-year period ended June 30, 1999, among 489 and
987 international equity funds, respectively.*
* Morningstar proprietary ratings reflect risk-adjusted performance through
6/30/99. The top 10% of the funds in an investment category receive five
stars, the next 22.5% receive four stars, and the next 35% receive three
stars. Subject to change every month, a fund's rating is based on its three-,
five-, and (when available) 10-year average annual total returns (with fee
adjustments) in excess of 90-day Treasury bill returns, and a risk factor that
reflects fund performance below 90-day Treasury bill returns.
53
<PAGE>
FOUNDERS PASSPORT FUND (CONTINUED)
WHAT FACTORS IMPACTED PASSPORT'S PERFORMANCE OVER THE PAST SIX MONTHS?
Throughout the half, the Fund maintained a strong weighting in Europe and the
United Kingdom (which has a particularly broad small-capitalization
marketplace). In the early part of the year, telecommunications and technology
stocks flourished there, but weakness in the Euro (affected partially by the
Kosovo crisis) had depressed European markets and hindered Fund performance.
TOP 10 HOLDINGS
--------------------------------------------------
1. PizzaExpress PLC 3.70%
2. Porsche AG non-vtg Pfd. 3.52%
3. Altran Technologies SA 3.19%
4. Nippon System Development Company 3.06%
5. Ryanair Holdings PLC Sponsored ADR 2.92%
6. Flextech PLC 2.79%
7. MLP Pfd. 2.77%
8. Cinar Corporation Class B Sponsored ADR 2.75%
9. Psion PLC 2.68%
10. Fuji Soft ABC, Inc. 2.64%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------------
The Fund was substantially underweight in Japanese stocks--which had a strong
first half--relative to its MSCI World ex U.S. Index, and this hurt the Fund
relative to its peers. As many more promising investment opportunities emerge
from Japan, we have been steadily increasing our position there.
WHAT INVESTMENT TRENDS ARE YOU SEEING OUTSIDE THE UNITED STATES?
Certain recurring investment themes have emerged out of our fundamental research
process, allowing us to take advantage of attractive market dynamics. For
instance, the Internet is a strong theme throughout the portfolio, as it is
allowing companies to do business globally without having to create a costly
infrastructure.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $116.8 million
NAV ON 6/30/99: $16.32
SIX-MONTH TOTAL RETURN: 9.31%
NET EXPENSE RATIO (AS OF 12/31/98): 1.52%
INCEPTION DATE: 11/16/93
-----------------------------------------
We see outsourcing as another strong worldwide trend, as companies focus more
sharply on their core competencies and begin to outsource operational and
developmental activities. Other themes are arising in emerging markets, such as
companies benefiting from reflation, deleveraging, and restructuring. Companies
that are beneficiaries of infrastructure development, consumer spending, or
industry deregulation can be attractive investment candidates.
Investments in foreign securities may entail unique risks, including political,
market, and currency risks. There are risks associated with small-cap investing
such as limited product lines and small market share.
54
<PAGE>
We also participate in companies that we believe will benefit from demographic
shifts across the world. As the population ages, retirees begin to take more
advantage of leisure activities, and this area has presented promising
investment opportunities.
WHAT DO YOU SEE AHEAD FOR THE FUND?
While many global
-----------------------------------------------
PORTFOLIO COMPOSITION
United Kingdom....... 20.1%
Other Countries...... 15.8%
Germany.............. 13.8%
Japan................ 9.6%
Netherlands.......... 7.1%
Cash & Equivalents... 7.0%
Italy................ 6.6%
France............... 5.2%
Canada............... 4.6%
Ireland.............. 4.1%
Switzerland.......... 3.1%
Finland.............. 3.0%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
markets are more entrepreneurial than in the past, we find certain countries and
markets such as Sweden, Finland, the United Kingdom to be more structurally
suited to growing small companies or funding start-ups. The international
small-cap universe is becoming more liquid as countries are opening new stock
markets that offer more funding and venture capitalism.
We're more positive on the small-company environment in Asia and have been
steadily increasing the Fund's weight in Japan and adding investments from South
Korea, Singapore, Hong Kong, China and Indonesia. We're also increasing the
Fund's exposure to commodity markets such as Australia, Canada, and South
Africa.
/s/TRACY STOUFFER
Tracy Stouffer, CFA
Portfolio Manager
Ms. Stouffer assumed portfolio management responsibilities for Founders Passport
Fund on July 26, 1999.
55
<PAGE>
FOUNDERS PASSPORT FUND
SHARES MARKET VALUE
- -----------------------------------------------------------
PREFERRED STOCKS (FOREIGN)-6.3%
AUTOMOTIVE-3.5%
1,750 Porsche AG non-voting preferred (GE) $ 4,114,675
-----------
FINANCIAL SERVICES-2.8%
6,800 Marschollek, Lautenschlaeger
und Partner AG non-voting
preferred (MLP preferred)
(GE) 3,239,661
-----------
TOTAL PREFERRED STOCKS
(FOREIGN)
(COST-$2,647,908) 7,354,336
-----------
COMMON STOCKS (FOREIGN)-86.4%
AGRICULTURE-1.7%
57,275 Nutreco Holding NV (NE) 2,031,536
-----------
AIRLINES-2.9%
64,600 Ryanair Holdings PLC Sponsored ADR
(IE)* 3,407,650
-----------
AUTO PARTS & EQUIPMENT-0.6%
55,085 Haldex AB (SW) 719,201
-----------
BUILDING MATERIALS-1.4%
46,825 Hunter Douglas NV (NE) 1,607,995
-----------
BUSINESS SERVICES-7.8%
14.125 Altran Technologies SA (FR) 3,728,268
199,775 Select Appointments Holdings PLC
(UK)* 2,383,822
91,525 Semcon AB (SW) 818,178
30,600 Sixt AG (GE) 2,139,178
-----------
9,069,446
-----------
SHARES MARKET VALUE
- -----------------------------------------------------------
COMPUTER EQUIPMENT-3.8%
8,925 Logitech International SA (SZ)* $ 1,291,754
241,900 Psion PLC (UK) 3,126,702
-----------
4,418,456
-----------
COMPUTER SOFTWARE/SERVICES-10.8%
25,000 BackWeb Technologies Limited (IS)* 678,125
29,525 Dassault Systemes SA (FR) 975,576
70,575 Eidos PLC Sponsored
ADR (UK)* 2,311,331
10,000 FortuneCity. com,
Inc. (GE)* 191,812
51,800 Fuji Soft ABC, Inc. (JA) 3,081,344
6,050 IXOS Software AG (GE)* 1,035,681
60,000 Nippon System Development Company
(JA) 3,569,024
1,291,350 Scoot.com PLC (UK)* 768,418
-----------
12,611,311
-----------
CONSTRUCTION-1.4%
40,725 IHC Caland NV (NE) 1,595,906
-----------
CONSUMER PRODUCTS-5.0%
77,075 Dorel Industries, Inc.
Class B (CA)* 1,669,140
116,125 Ducati Motor Holdings
SPA (IT)* 304,174
11,000 Fancl Corporation (JA) 1,999,363
73,700 Industrie Natuzzi SPA Sponsored ADR
(IT) 1,432,545
8,250 Royal Canin SA (FR) 476,337
-----------
5,881,559
-----------
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
56
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- ----------------------------------------------------------
ELECTRONICS-4.5%
485 Kudelski SA (SZ)* $1,731,474
543,000 Natsteel Electronics
Limited (SG) 2,376,123
9,450 Singulus Technologies
AG (GE)* 1,125,580
----------
5,233,177
----------
ENVIRONMENTAL SERVICES-1.9%
58,725 Tomra Systems ASA (NW) 2,208,099
----------
FOOD & BEVERAGE-4.9%
37,800 Baron de Ley SA (SP)* 1,301,970
50,819 Chipita International SA (GR) 1,326,613
25,480 Ordina Beheer NV (NE)* 735,733
253,400 Raisio Group PLC Class V (FI) 2,351,861
----------
5,716,177
----------
HEALTHCARE SERVICES-1.5%
56,825 ICON PLC Sponsored
ADR (UK)* 1,108,088
5,900 Rhoen-Klinikum AG (GE) 587,140
----------
1,695,228
----------
LEISURE & ENTERTAINMENT-2.4%
2,501,285 Grupo Posadas SA
Class A (MX)* 1,731,469
16,087 KTM Motorradholding
AG (AT) 1,074,691
----------
2,806,160
----------
MACHINERY-1.0%
33,825 KCI Konecranes International
PLC (FI) 1,161,917
----------
MANUFACTURING-2.0%
26,600 Vestas Wind Systems
AS (DE)*+ 2,348,583
----------
SHARES MARKET VALUE
- ----------------------------------------------------------
MEDICAL SUPPLIES & EQUIPMENT-0.7%
50,750 Ortivus AB Class B (SW)* $ 280,562
425 Phonak Holing AG (SZ) 568,635
----------
849,197
----------
OIL SERVICES-1.4%
19,625 Coflexip SA Sponsored
ADR (FR) 858,594
70,500 Stolt Comex Seaway SA Sponsored
ADR (UK)* 762,281
----------
1,620,875
----------
PAPER & FOREST PRODUCTS-1.1%
57,875 Aracruz Celulose SA Sponsored
ADR (BR) 1,273,250
----------
PHARMACEUTICALS-1.5%
38,450 Schwarz Pharma AG (GE) 1,776,106
----------
PUBLISHING & BROADCASTING-11.1%
139,025 Capital Radio PLC (UK) 1,840,624
131,850 Cinar Corporation Class B
Sponsored ADR (CA)* 3,213,844
66,725 Class Editori SPA (IT) 533,217
200,625 Flextech PLC (UK)* 3,257,719
167,025 Gruppo Editoriale
L'Espresso (IT) 2,704,231
6,600 Primacom AG (GE)* 299,474
15,825 United International Holdings,
Inc. (NE)* 1,070,166
----------
12,919,275
----------
RESTAURANTS-7.5%
416,675 J D Wetherspoon PLC (UK) 1,937,565
7,400 Grand Krasnapolsky Hotel NV (NE) 495,648
301,550 PizzaExpress PLC (UK) 4,325,512
338,460 TelePizza SA (SP)* 2,011,003
----------
8,769,728
----------
+ SECURITIES WERE ACQUIRED PURSUANT TO RULE 144A AND MAY BE DEEMED TO BE
RESTRICTED FOR RESALE.
57
<PAGE>
FOUNDERS PASSPORT FUND STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- ------------------------------------------------------------
RETAIL-6.7%
25,290 Beter Bed Holding
NV (NE) $ 730,246
394,850 Bulgari SPA (IT) 2,654,763
33,800 Douglas Holding
AG (GE) 1,516,241
16,525 Narvesen ASA (NW) 384,087
10,000 Ryohin Keikaku
Company Limited (JA) 2,515,776
-----------
7,801,113
-----------
TELECOMMUNICATION SERVICES-1.1%
30,775 Esat Telecom Group PLC
Sponsored ADR (IE)* 1,338,713
-----------
TELECOMMUNICATIONS EQUIPMENT-1.7%
131,100 Filtronic PLC (UK) 1,549,890
22,000 Research in Motion Limited
Sponsorship ADR (CA)* 439,198
-----------
1,989,088
-----------
SHARES MARKET VALUE
- ------------------------------------------------------------
TOTAL COMMON STOCKS
(FOREIGN)
(COST-$70,245,050) $100,849,746
------------
PRINCIPAL VALUE AMORTIZED COST
- ------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-5.6%
$3,000,000 Ford Motor Credit
Company 5.32% 07/02/99 $ 2,999,557
3,600,000 Wal-Mart Stores, Inc.
5.50% 07/01/99 3,600,000
------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$6,599,557) 6,599,557
------------
TOTAL INVESTMENTS-98.3%
(COST-$79,492,515) 114,803,639
OTHER ASSETS & LIABILITIES-1.7% 1,979,101
------------
NET ASSETS-100.0% $116,782,740
============
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
58
<PAGE>
FOUNDERS WORLDWIDE GROWTH FUND
AVERAGE ANNUAL TOTAL RETURN [BAR GRAPH]
AS OF 6/30/99*
Since Inception
1 Year 5 Years (12/31/89)
------ ------- ---------------
0.76% 13.06% 13.28%
* PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
GROWTH OF $10,000 INVESTMENT
FOUNDERS MSCI LIPPER CONSUMER
WORLDWIDE WORLD GLOBAL PRICE
GROWTH FUND INDEX FUND INDEX INDEX
----------- --------- ----------- ----------
12/89.... $ 10,000 $ 10,000 $ 10,000 $ 10,000
06/90.... $ 11,050 $ 9,256 $ 10,316 $ 10,284
06/91.... $ 11,797 $ 8,803 $ 9,733 $ 10,759
06/92.... $ 14,089 $ 9,175 $ 11,033 $ 11,091
06/93.... $ 15,081 $ 10,712 $ 12,108 $ 11,424
06/94.... $ 17,700 $ 11,808 $ 14,032 $ 11,708
06/95.... $ 20,742 $ 13,069 $ 15,230 $ 12,064
06/96.... $ 24,921 $ 15,479 $ 17,862 $ 12,397
06/97.... $ 28,225 $ 18,927 $ 21,532 $ 12,681
06/98.... $ 32,449 $ 22,150 $ 24,661 $ 12,895
06/99.... $ 23,340 $ 25,620 $ 27,009 $ 13,148
- --------------------------------------------------------------------------------
MANAGEMENT OVERVIEW
A DISCUSSION WITH THE NEW PORTFOLIO MANAGEMENT TEAM
TOM ARRINGTON SCOTT CHAPMAN DOUG LOEFFLER
HOW DID WORLDWIDE GROWTH PERFORM DURING THE FIRST HALF?
The Fund posted a 5.80% return for the six-month period ended June 30, 1999
under its prior manager. This trailed the performance of its benchmark, the
Morgan Stanley Capital International World Index, which appreciated 8.51% for
the same period.
Worldwide Growth Fund's long-term performance resulted in it receiving a ****
overall rating from Morningstar, with **** for the five-year period and *** for
the three-year period ended June 30, 1999, among 498 and 987 international
equity funds, respectively.*
* Morningstar proprietary ratings reflect risk-adjusted performance through
6/30/99. The top 10% of the funds in an investment category receive five
stars, the next 22.5% receive four stars, and the next 35% receive three
stars. Subject to change every month, a fund's rating is based on its three-,
five-, and (when available) 10-year average annual total returns (with fee
adjustments) in excess of 90-day Treasury bill returns, and a risk factor that
reflects fund performance below 90-day Treasury bill returns.
The MSCI World Index is an arithmetical average of the performance of 1,472
securities listed on the stock exchanges of the U.S., Europe, Canada, Australia,
New Zealand, and the Far East.
59
<PAGE>
FOUNDERS WORLDWIDE GROWTH FUND (CONTINUED)
WHAT MARKET FACTORS MOST IMPACTED THE FUND'S PERFORMANCE DURING THE HALF?
Early in the first quarter, the Fund's performance was boosted by the strong
showing of European telecommunication stocks and technology companies. We
continue to find many of our most promising opportunities in Europe, and the
TOP 10 HOLDINGS
--------------------------------------------
1. Konami Company Ltd. 3.68%
2. Takefuji Corporation 3.39%
3. Clear Channel Communication, Inc. 3.18%
4. Mannesmann AG 2.71%
5. MCI WorldCom, Inc. 2.57%
6. Kao Corporation 2.53%
7. Pearson PLC 2.46%
8. MLP Pfd. 2.42%
9. Compass Group PLC 2.27%
10. Danone 2.22%
PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE.
--------------------------------------------
Fund was overweight in the region relative to its benchmark index. As the half
progressed, however, these markets began to slow amid concerns about Kosovo and
weakness in the Euro, and our overweighting put a slight drag on the Fund's
performance.
Similarly, the Fund benefited early from strong Japanese holdings--the Fund
was overweight versus its benchmark in Japan for the first time in quite a
while. We are not convinced that all of Japan's economic troubles are behind
them, but we have been finding more and more Japanese companies that have been
able to post growth in earnings, either through exports, exposure to interesting
niches, or corporate restructuring. However, broad international market weakness
later in the second quarter coupled with a slide in the Yen made the last
several weeks of the half more difficult.
PORTFOLIO AT A GLANCE
-----------------------------------------
TOTAL ASSETS: $248.9 million
NAV ON 6/30/99: $23.34
SIX-MONTH TOTAL RETURN: 5.80%
NET EXPENSE RATIO (AS OF 12/31/98): 1.47%
INCEPTION DATE: 12/31/89
-----------------------------------------
Finally, the Fund has long been underweight in the U.S. relative to its
benchmark index, as we have been finding more growth opportunities at more
attractive
Investments in foreign securities may entail unique risks, including
political, market, and currency risks.
60
<PAGE>
valuations outside America's borders (though the U.S. remains our largest
regional exposure). Because of this fact, Worldwide Growth was not able to take
as great advantage of local strength as would a fully domestic equity fund. That
notwithstanding, we have been extremely pleased with the U.S. holdings in
Worldwide Growth's portfolio.
-----------------------------------------------
PORTFOLIO COMPOSITION
United States........ 22.0%
United Kingdom....... 15.9%
Japan................ 15.2%
Germany.............. 10.2%
Other Countries...... 9.0%
Netherlands.......... 6.9%
France............... 6.0%
Italy................ 4.3%
Canada............... 3.4%
Cash & Equivalents... 3.2%
Finland.............. 2.1%
Switzerland.......... 1.8%
PORTFOLIO COMPOSITION IS SUBJECT TO CHANGE.
-------------------------------------------------
WHAT WERE THE FUND'S MAJOR INVESTMENT SUCCESSES OF THE PAST SIX MONTHS?
One firm that has performed admirably is LADBROKE, a British firm that is one of
the world's leading operators of hotels and casinos. The company owns and
manages the Hilton brand outside of the U.S., and recently announced an
agreement to purchase another U.K. hotel chain, improving its position at home.
Last year's earnings were in the vicinity of 20%.
Domestically, we've been pleased with the progress of INTIMATE BRANDS, which
manages two well-known and rapidly growing brands, Victoria's Secret and Bath &
Body Works. Moreover, the company is making a play for the growing yet highly
fragmented home fragrance business through the recent creation of the White Barn
Candle Company, which is already larger than its next-closest competitor.
WHAT DO YOU SEE AHEAD FOR WORLDWIDE GROWTH?
Despite the slowdown of the past few months, we're optimistic about the future.
Europe remains in a very positive economic environment, and we have found many
more growing companies at more reasonable prices there than anywhere else. We
hope to see Asian economies continue to improve, and we're very pleased about
the prospects of our domestic holdings. Whatever the prevailing economic
atmosphere, our bottom-up, growth-oriented philosophy may be the key to finding
the best companies the world has to offer.
This team assumed portfolio management responsibility for Founders Worldwide
Growth Fund on July 26, 1999.
61
<PAGE>
FOUNDERS WORLDWIDE GROWTH FUND
SHARES MARKET VALUE
- ------------------------------------------------------------
PREFERRED STOCKS (FOREIGN)-3.9%
Financial Services-2.4%
12,625 Marschollek, Lautenschlaeger
und Partner AG non-voting
preferred (MLP preferred) (GE) $ 6,014,812
-----------
PUBLISHING & BROADCASTING-1.5%
79,700 ProSieben Media AG preferred (GE)+ 3,616,376
-----------
TOTAL PREFERRED STOCKS (FOREIGN)
(Cost-$4,787,451) 9,631,188
-----------
COMMON STOCKS (DOMESTIC)-21.9%
APPAREL-1.6%
118,175 Jones Apparel Group, Inc.* 4,054,880
-----------
AUTOMOTIVE-0.5%
21,000 General Motors Corporation Class H* 1,181,250
-----------
BANKING-1.7%
87,000 Citigroup, Inc. 4,132,500
-----------
COMPUTER SOFTWARE/SERVICES-0.8%
75,600 CheckFree Holdings Corporation* 2,079,000
-----------
ELECTRONICS-1.9%
76,550 Emerson Electric Company 4,813,081
-----------
FOOD & BEVERAGE-1.0%
67,100 PepsiCo, Inc. 2,595,931
-----------
SHARES MARKET VALUE
- ------------------------------------------------------------
HEALTHCARE SERVICES-1.3%
27,300 Biogen, Inc.* $ 1,755,731
100,000 HEALTHSOUTH Corporation* 1,493,750
-----------
3,249,481
-----------
OIL SERVICES-0.3%
20,000 Baker Hughes, Inc. 670,000
-----------
PHARMACEUTICALS-1.5%
21,500 Pfizer, Inc. 2,359,625
20,000 Warner-Lambert Company 1,387,500
-----------
3,747,125
-----------
PUBLISHING & BROADCASTING-4.5%
114,776 Clear Channel Communications, Inc.* 7,912,371
44,000 Time Warner, Inc. 3,234,000
-----------
11,146,371
-----------
RETAIL-2.5%
159,200 Guitar Center, Inc.* 1,661,650
94,500 Intimate Brands, Inc. Class A 4,476,938
-----------
6,138,588
-----------
TELECOMMUNICATION SERVICES-2.6%
74,475 MCI WorldCom, Inc.* 6,404,850
-----------
TRANSPORTATION-1.7%
79,300 FDX Corporation* 4,302,025
-----------
TOTAL COMMON STOCKS
(DOMESTIC)
(COST-$40,041,731) 54,515,082
-----------
+ SECURITIES WERE ACQUIRED PURSUANT TO RULE 144A AND MAY BE DEEMED RESTRICTED
FOR RESALE.
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
62
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
SHARES MARKET VALUE
- ------------------------------------------------------------
COMMON STOCKS (FOREIGN)-70.7%
AIRLINES-1.5%
203,600 Deutsche Lufthansa
AG (GE) $ 3,691,096
-----------
AUTOMOTIVE-0.5%
12,626 DaimlerChrysler AG Sponsored ADR (GE) 1,122,136
-----------
BANKING-4.6%
194,000 Allied Irish Banks PLC (IE) 2,568,726
2,498,775 Banca di Roma (IT) 3,594,711
915,000 Merita PLC (FI) 5,199,185
-----------
11,362,622
-----------
BUSINESS SERVICES-3.5%
570,075 Compass Group PLC (UK) 5,652,225
375,000 WPP Group PLC (UK) 3,171,110
-----------
8,823,335
-----------
COMPUTER SOFTWARE/SERVICES-6.6%
48,000 Business Objects SA Sponsored ADR
(FR)* 1,752,000
26,000 Cap Gemini SA (FR) 4,085,948
222,000 Konami Company
Limited (JA) 9,170,150
40,000 Lernout & Hauspie Speech Products NV
Sponsored ADR (BE)* 1,412,500
-----------
16,420,598
-----------
SHARES MARKET VALUE
- ------------------------------------------------------------
CONSTRUCTION-1.6%
93,825 Brisa-Auto Estradas de Portugal SA
(PO) $ 3,870,269
-----------
CONSUMER PRODUCTS-5.4%
36,800 Austria Tabak AG (AT) 2,143,895
76,650 Benckiser NV Class B (NE) 4,090,582
52,250 Industrie Natuzzi SPA Sponsored ADR
(IT) 1,015,609
224,000 Kao Corporation (JA) 6,292,022
-----------
13,542,108
-----------
ELECTRONICS-2.8%
36,000 Sony Corporation (JA) 3,881,327
34,000 TDK Corporation (JA) 3,109,648
-----------
6,990,975
-----------
ENVIRONMENTAL SERVICES-0.3%
10,000 Vivendi (FR) 810,044
-----------
FINANCIAL SERVICES-5.5%
97,000 ING Groep NV (NE) 5,251,624
81,600 Takefuji Corporation (JA) 8,433,267
-----------
13,684,891
-----------
63
<PAGE>
FOUNDERS WORLDWIDE GROWTH FUND
SHARES MARKET VALUE
- ------------------------------------------------------------
FOOD & BEVERAGE-2.2%
925 CSM NV (NE) $ 46,980
21,450 Danone (FR) 5,526,702
-----------
5,573,682
-----------
HEALTHCARE SERVICES-0.5%
67,500 Fresenius Medical Care AG Sponsored
ADR (GE) 1,354,219
-----------
INSURANCE-1.3%
370,318 Royal & Sun Alliance Insurance Group
PLC (UK) 3,321,421
-----------
LEISURE & ENTERTAINMENT-2.1%
1,286,225 Hilton Group PLC (UK) 5,099,079
-----------
MACHINERY-2.7%
45,250 Mannesmann AG (GE) 6,751,956
-----------
OIL & GAS-1.3%
70,300 Shell Transport & Trading Company
Sponsored ADR (UK) 3,260,163
-----------
PHARMACEUTICALS-1.4%
60,000 Schwarz Pharma AG (GE) 2,770,967
16,000 Teva Pharmaceutical Industries
Limited Sponsored ADR (IS) 788,000
-----------
3,558,967
-----------
SHARES MARKET VALUE
- ------------------------------------------------------------
PUBLISHING & BROADCASTING-8.2%
116,000 Arnoldo Mondadori Editore SPA (IT) $ 2,009,694
9,275 Canal Plus (FR) 2,601,028
301,550 Pearson PLC (UK) 6,127,017
102,775 Telefonica Publicidad e
Informacion SA (SP)*+ 2,050,837
50,600 United Pan-Europe
Communications NV (NE)* 2,744,725
125,000 VNU NV (NE) 4,993,925
-----------
20,527,226
-----------
RETAIL-2.9%
165,075 Dixons Group PLC (UK) 3,083,447
129,200 Next PLC (UK) 1,568,770
106,750 Superdiplo SA (SP)* 2,366,840
-----------
7,019,057
-----------
SEMICONDUCTORS & EQUIPMENT-1.0%
75,000 Taiwan Semiconductor
Manufacturing Company
Limited Sponsored
ADR (TW)* 2,550,000
-----------
64
<PAGE>
STATEMENT OF INVESTMENTS
JUNE 30, 1999 (UNAUDITED)
(CONTINUED)
SHARES MARKET VALUE
- ------------------------------------------------------------
TELECOMMUNICATION SERVICES-13.7%
84,975 AT&T Canada,
Inc.* (CA) $ 5,417,156
37,500 Global TeleSystems Group, Inc.
Sponsored ADR (RU)* 3,035,156
30,780 Korea Telecom Corporation* Sponsored
ADR (JA) 1,231,200
105,000 Le Groupe Videotron LTEE (CA) 1,667,230
64 NTT Mobile Communications Network,
Inc. (JA) 867,063
256 NTT Mobile Communications Network,
Inc. Bonus (JA) 3,426,413
10,500 Orange PLC (UK)* 153,925
12,000 Swisscom AG (SZ) 4,514,782
393,000 Telecom Italia SPA (IT)* 4,085,222
34,200 Telefonos de Mexico SA Sponsored ADR
(MX) 2,763,788
81,000 Telesystem International Wireless,
Inc. (CA)* 1,464,020
71,000 Telewest Communications PLC Sponsored
ADR (UK)* 3,177,250
11,600 Vodafone AirTouch PLC
Sponsored ADR (UK) 2,285,200
-----------
34,088,405
-----------
SHARES MARKET VALUE
- ------------------------------------------------------------
TELECOMMUNICATIONS EQUIPMENT-1.1%
185 Japan Telecom Company Limited (JA) $2,628,966
-----------
TOTAL COMMON STOCKS
(FOREIGN)
(COST-$132,303,959) 176,051,215
-----------
PRINCIPAL AMOUNT AMORTIZED COST
- -------------------------------------------------------------
CORPORATE SHORT-TERM NOTES-3.6%
$8,900,000 Wal-Mart Stores, Inc.
5.50% 07/01/99 $8,900,000
------------
TOTAL CORPORATE
SHORT-TERM NOTES
(AMORTIZED COST-$8,900,000) 8,900,000
------------
TOTAL INVESTMENTS-100.1%
(COST-$186,033,141) 249,097,485
OTHER ASSETS & LIABILITIES-(0.1%)
(160,479)
------------
NET ASSETS-100.0% $248,937,006
============
* NON-INCOME PRODUCING.
SEE NOTES TO FINANCIAL STATEMENTS.
65
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999 BALANCED DISCOVERY FRONTIER
(IN THOUSANDS) FUND FUND FUND
---------- ---------- ----------
ASSETS
Investment securities, at cost ....... $1,269,217 $ 200,830 $ 108,435
Investment securities, at market ..... 1,306,850 284,737 149,172
Cash ................................. 3,653 2,116 430
Foreign currency, at cost ............ 0 0 0
Foreign currency, at market .......... 0 0 0
Receivables:
Investment securities sold ......... 7,973 7,509 1,671
Capital shares sold ................ 1,837 4,083 374
Dividends and interest ............. 8,554 5 4
From adviser ....................... 0 0 0
Other assets ......................... 0 0 0
---------- ---------- ----------
Total Assets ..................... 1,328,867 298,450 151,651
---------- ---------- ----------
LIABILITIES
Payables:
Investment securities purchased .... 4,885 9,369 2,606
Capital shares redeemed ............ 35,487 555 80
Advisory fees ...................... 602 210 113
Shareholder servicing fees ......... 15 20 19
Accounting fees .................... 25 5 2
Distribution fees .................. 583 77 37
Other .............................. 229 29 0
Dividends .......................... 0 0 0
---------- ---------- ----------
Total Liabilities ................ 41,826 10,265 2,857
---------- ---------- ----------
Net Assets ........................... $1,287,041 $ 288,185 $ 148,794
========== ========== ==========
Capital shares:
Authorized (Par value $0.01 per
share) ........................... 500,000 100,000 100,000
========== ========== ==========
Outstanding ........................ 105,763 9,354 5,150
========== ========== ==========
Net Asset Value, Offering and
Redemption Price Per Share ......... $ 12.17 $ 30.81 $ 28.89
========== ========== ==========
SEE NOTES TO FINANCIAL STATEMENTS.
66
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT GROWTH AND INTERNATIONAL MID-CAP MONEY WORLDWIDE
SECURITIES GROWTH INCOME EQUITY GROWTH MARKET PASSPORT GROWTH
FUND FUND FUND FUND FUND FUND FUND FUND
---------- ---------- ---------- ------------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Investment securities, at cost .. $ 15,975 $2,451,042 $ 459,128 $ 20,323 $178,964 $ 88,852 $ 79,493 $ 186,033
Investment securities, at market 15,795 2,881,933 526,688 23,592 220,490 88,852 114,804 249,097
Cash ............................ 5 5,212 1,011 100 483 102 306 748
Foreign currency, at cost ....... 0 0 0 312 0 0 16 1,223
Foreign currency, at market ..... 0 0 0 309 0 0 16 1,220
Receivables:
Investment securities sold .... 0 32,122 4,135 0 870 0 0 2,513
Capital shares sold ........... 81 6,130 119 17 438 1,875 2,513 1,679
Dividends and interest ........ 226 1,215 299 30 75 0 129 278
From adviser .................. 0 0 0 11 0 0 0 0
Other assets .................... 0 0 10 0 0 0 0 1
---------- ---------- ---------- ------------- -------- ---------- -------- ---------
Total Assets ................ 16,107 2,926,612 532,262 24,059 222,356 90,829 117,768 255,536
---------- ---------- ---------- ------------- -------- ---------- -------- ---------
LIABILITIES
Payables:
Investment securities purchased 0 94,996 8,224 292 1,029 0 53 6,024
Capital shares redeemed ....... 418 7,432 386 0 1,823 300 784 252
Advisory fees ................. 9 1,478 260 14 136 37 93 205
Shareholder servicing fees .... 3 66 39 4 24 12 7 17
Accounting fees ............... 0 52 10 0 4 2 2 5
Distribution fees ............. 2 1,165 130 6 55 0 31 83
Other ......................... 3 57 90 1 12 5 15 13
Dividends ..................... 62 0 0 0 0 319 0 0
---------- ---------- ---------- ------------- -------- ---------- -------- ---------
Total Liabilities ........... 497 105,246 9,139 317 3,083 675 985 6,599
---------- ---------- ---------- ------------- -------- ---------- -------- ---------
Net Assets ...................... $ 15,610 $2,821,366 $ 523,123 $ 23,742 $219,273 $ 90,154 $116,783 $ 248,937
========== ========== ========== ============= ======== ========== ======== =========
Capital shares:
Authorized (Par value $0.01 per
share) ...................... 20,000 400,000 400,000 100,000 180,000 1,000,000 100,000 100,000
========== ========== ========== ============= ======== ========== ======== =========
Outstanding ................... 1,689 124,520 69,316 1,573 26,668 90,154 7,154 10,665
========== ========== ========== ============= ======== ========== ======== =========
Net Asset Value, Offering and
Redemption Price Per Share .... $ 9.24 $ 22.66 $ 7.55 $ 15.09 $ 8.23 $ 1.00 $ 16.32 $ 23.34
========== ========== ========== ============= ======== ========== ======== =========
</TABLE>
67
<PAGE>
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
(IN THOUSANDS)
BALANCED DISCOVERY FRONTIER
FUND FUND FUND
----------- --------- ---------
INVESTMENT INCOME:
Income:
Dividends ........................... $ 7,181 $ 6 $ 93
Interest ............................ 15,750 451 260
Foreign taxes withheld .............. (282) 0 (11)
----------- --------- ---------
Total Investment Income ........... 22,649 457 342
----------- --------- ---------
Expenses:
Advisory fees ....................... 3,661 1,163 697
Shareholder servicing fees .......... 94 128 128
Accounting fees ..................... 155 27 16
Distribution fees ................... 1,645 291 174
Transfer agency expenses ............ 359 47 42
Registration fees ................... 77 21 12
Postage and mailing expenses ........ 50 27 19
Custodian fees and expenses ......... 58 12 8
Printing expenses ................... 40 52 30
Proxy expenses ...................... 90 18 11
Legal and audit fees ................ 41 8 5
Directors' fees and expenses ........ 39 8 5
Line of Credit expenses ............. 0 8 11
Other expenses ...................... 161 48 38
----------- --------- ---------
Total Expenses .................... 6,470 1,858 1,196
Earnings Credits .................. (94) (20) (16)
Reimbursed/Waived Expenses ........ 0 0 0
----------- --------- ---------
Net Expenses ...................... 6,376 1,838 1,180
----------- --------- ---------
Net Investment Income (Loss) ........ 16,273 (1,381) (838)
----------- --------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net Realized Gain (Loss) from
Security Transactions:
Proceeds from long-term securities
sold .............................. 1,082,211 181,502 115,743
Proceeds from long-term U.S.
Government Obligations ............ 336,344 0 0
Cost of securities sold ............. 1,355,693 145,650 90,266
----------- --------- ---------
Net Realized Gain (Loss) from
Security Transactions ............... 62,862 35,852 25,477
Net Realized Gain (Loss) from Foreign
Currency Transactions ............... 0 0 0
Net Change in Unrealized
Appreciation/Depreciation ........... (65,932) 23,185 (8,890)
----------- --------- ---------
Net Realized and Unrealized Gain
on Investments and Foreign
Currency Transactions ............. (3,070) 59,037 16,587
----------- --------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations ........... $ 13,203 $ 57,656 $ 15,749
=========== ========= =========
Purchases of long-term securities ..... $ 1,031,040 $ 163,121 $ 95,293
=========== ========= =========
Purchases of long-term U.S.
Government Obligations .............. $ 418,426 $ 0 $ 0
=========== ========= =========
SEE NOTES TO FINANCIAL STATEMENTS.
68
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT GROWTH AND INTERNATIONAL MID-CAP MONEY WORLDWIDE
SECURITIES GROWTH INCOME EQUITY GROWTH MARKET PASSPORT GROWTH
(IN THOUSANDS) FUND FUND FUND FUND FUND FUND FUND FUND
---------- ----------- ---------- ------------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Income:
Dividends .......................... $ 0 $ 6,963 $ 2,253 $ 262 $ 146 $ 0 $ 623 $ 2,286
Interest ........................... 416 1,519 551 16 181 2,489 133 256
Foreign taxes withheld ............. 0 (34) (36) (20) (2) 0 (93) (229)
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Total Investment Income .......... 416 8,448 2,768 258 325 2,489 663 2,313
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Expenses:
Advisory fees ...................... 48 8,706 1,609 105 837 252 584 1,283
Shareholder servicing fees ......... 15 400 247 21 161 81 44 108
Accounting fees .................... 2 307 61 2 25 12 14 31
Distribution fees .................. 19 3,258 647 26 267 0 146 324
Transfer agency expenses ........... 5 348 80 7 53 25 16 44
Registration fees .................. 11 257 38 9 17 33 13 16
Postage and mailing expenses ....... 1 209 28 1 24 6 19 10
Custodian fees and expenses ........ 2 92 55 21 18 5 47 59
Printing expenses .................. 6 125 91 5 38 18 12 28
Proxy expenses ..................... 1 214 36 1 16 8 11 19
Legal and audit fees ............... 1 48 29 0 3 6 5 9
Directors' fees and expenses ....... 1 89 18 1 8 3 4 31
Line of Credit expenses ............ 0 0 0 0 7 0 4 0
Other expenses ..................... 2 303 73 4 37 10 15 45
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Total Expenses ................... 114 14,356 3,012 203 1,511 459 934 2,007
Earnings Credits ................. (3) (143) (38) (3) (22) (14) (11) (22)
Reimbursed/Waived Expenses ....... (13) 0 0 (11) 0 0 0 0
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Net Expenses ..................... 98 14,213 2,974 189 1,489 445 923 1,985
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Net Investment Income (Loss) ....... 318 (5,765) (206) 69 (1,164) 2,044 (260) 328
---------- ----------- ---------- ------------- --------- ------- -------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Net Realized Gain (Loss) from
Security Transactions:
Proceeds from long-term securities
sold ............................. 0 1,035,241 538,638 17,106 253,649 0 30,017 93,988
Proceeds from long-term U.S.
Government Obligations ........... 10,160 0 53,680 0 0 0 0 0
Cost of securities sold ............ 9,999 787,568 573,796 15,499 221,688 0 23,905 78,596
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Net Realized Gain (Loss) from
Security Transactions .............. 161 247,673 18,522 1,607 31,961 0 6,112 15,392
Net Realized Gain (Loss) from Foreign
Currency Transactions .............. 0 0 0 0 0 0 0 0
Net Change in Unrealized
Appreciation/Depreciation .......... (918) 28,254 (2,812) 17 (11,112) 0 4,709 (402)
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Net Realized and Unrealized Gain
on Investments and Foreign
Currency Transactions ............ (757) 275,927 15,710 1,624 20,849 0 10,821 14,990
---------- ----------- ---------- ------------- --------- ------- -------- ---------
Net Increase (Decrease) in Net Assets
Resulting from Operations .......... $ (439) $ 270,162 $ 15,504 $ 1,693 $ 19,685 $ 2,044 $ 10,561 $ 15,318
========== =========== ========== ============= ========= ======= ======== =========
Purchases of long-term securities .... $ 0 $ 1,250,121 $ 555,489 $ 19,732 $ 198,898 $ 0 $ 18,712 $ 52,875
========== =========== ========== ============= ========= ======= ======== =========
Purchases of long-term U.S.
Government Obligations ............. $ 10,980 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
========== =========== ========== ============= ========= ======= ======== =========
</TABLE>
69
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
BALANCED DISCOVERY
FUND FUND
------------------------- ----------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
(IN THOUSANDS) 06/30/99 12/31/98 06/30/99 12/31/98
----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) ........ $ 16,273 $ 28,619 $ (1,381) $ (1,975)
Net Realized Gain (Loss) from
Security Transactions ............. 62,862 65,428 35,852 23,886
Net Realized Gain (Loss) from Foreign
Currency Transactions ............. 0 (131) 0 0
Net Change in Unrealized
Appreciation/Depreciation ......... (65,932) 53,472 23,185 10,818
----------- ----------- ---------- ---------
Net Increase (Decrease) in Net
Assets Resulting from
Operations ...................... 13,203 147,388 57,656 32,729
----------- ----------- ---------- ---------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income .......... (15,344) (28,641) 0 0
From Net Realized Gains from Security
Transactions and Foreign Currency
Transactions ...................... 0 (42,393) 0 (19,443)
In Excess of Net Investment Income .. 0 (149) 0 0
----------- ----------- ---------- ---------
Net Decrease from Dividends and
Distributions ................... (15,344) (71,183) 0 (19,443)
----------- ----------- ---------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........... 385,731 527,902 128,293 167,199
Reinvested distributions ............ 15,084 69,523 0 16,296
----------- ----------- ---------- ---------
400,815 597,425 128,293 183,495
Cost of Shares Redeemed ............. (355,854) (372,099) (138,888) (201,938)
----------- ----------- ---------- ---------
Net increase (decrease) from
capital share transactions ...... 44,961 225,326 (10,595) (18,443)
----------- ----------- ---------- ---------
Net Increase (Decrease) in Net
Assets .......................... 42,820 301,531 47,061 (5,157)
NET ASSETS
Beginning of period ............... 1,244,221 942,690 241,124 246,281
----------- ----------- ---------- ---------
End of period ..................... $ 1,287,041 $ 1,244,221 $ 288,185 $ 241,124
=========== =========== ========== =========
Net Assets consist of:
Capital (par value and paid-in
surplus) .......................... $ 1,157,812 $ 1,112,851 $ 163,627 $ 174,223
Accumulated undistributed
(distribution in excess of) net
investment income ................. 929 0 (1,381) 0
Accumulated undistributed net
realized gain (loss) from security
transactions ...................... 90,667 27,805 42,033 6,180
Unrealized appreciation
(depreciation) on investments and
foreign currency transactions ..... 37,633 103,565 83,906 60,721
----------- ----------- ---------- ---------
Total ............................. $ 1,287,041 $ 1,244,221 $ 288,185 $ 241,124
=========== =========== ========== =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<PAGE>
<TABLE>
<CAPTION>
FRONTIER GOVERNMENT GROWTH GROWTH AND INCOME
(IN THOUSANDS) FUND SECURITIES FUND FUND FUND
--------------------- --------------------- ------------------------ ---------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
06/30/99 12/31/98 06/30/99 12/31/98 06/30/99 12/31/98 06/30/99 12/31/98
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) ........ $ (838) $ (1,533) $ 318 $ 631 $ (5,765) $ 1,079 $ (206) $ 7,635
Net Realized Gain (Loss) from
Security Transactions ............. 25,477 8,039 161 250 247,673 250,782 18,522 63,627
Net Realized Gain (Loss) from Foreign
Currency Transactions ............. 0 0 0 0 0 0 0 (58)
Net Change in Unrealized
Appreciation/Depreciation ......... (8,890) 2,286 (918) 407 28,254 202,198 (2,812) 18,228
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
Net Increase (Decrease) in Net
Assets Resulting from
Operations ...................... 15,749 8,792 (439) 1,288 270,162 454,059 15,504 89,432
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income .......... 0 0 (318) (630) 0 (1,079) 0 (7,779)
From Net Realized Gains from Security
Transactions and Foreign Currency
Transactions ...................... 0 (21,834) 0 0 0 (124,570) 0 (48,265)
In Excess of Net Investment Income .. 0 0 0 0 0 (86) 0 (51)
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
Net Decrease from Dividends and
Distributions ................... 0 (21,834) (318) (630) 0 (125,735) 0 (56,095)
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........... 15,786 48,255 15,354 20,731 608,202 839,972 18,398 78,226
Reinvested distributions ............ 0 20,679 279 560 0 119,172 0 49,402
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
15,786 68,934 15,633 21,291 608,202 959,144 18,398 127,628
Cost of Shares Redeemed ............. (50,164) (110,573) (14,486) (19,988) (417,178) (684,737) (53,086) (161,826)
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
Net increase (decrease) from
capital share transactions ...... (34,378) (41,639) 1,147 1,303 191,024 274,407 (34,688) (34,198)
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
Net Increase (Decrease) in Net
Assets .......................... (18,629) (54,681) 390 1,961 461,186 602,731 (19,184) (861)
NET ASSETS
Beginning of period ............... 167,423 222,104 15,220 13,259 2,360,180 1,757,449 542,307 543,168
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
End of period ..................... $ 148,794 $ 167,423 $ 15,610 $ 15,220 $ 2,821,366 $ 2,360,180 $ 523,123 $ 542,307
========== ========= ========== ========= =========== =========== ========== =========
Net Assets consist of:
Capital (par value and paid-in
surplus) .......................... $ 79,722 $ 114,100 $ 18,652 $ 17,504 $ 2,009,839 $ 1,818,815 $ 418,764 $ 453,452
Accumulated undistributed
(distribution in excess of) net
investment income ................. (838) 0 5 6 (5,767) (2) (206) 0
Accumulated undistributed net
realized gain (loss) from security
transactions ...................... 29,173 3,696 (2,867) (3,028) 386,403 138,730 37,006 18,484
Unrealized appreciation
(depreciation) on investments and
foreign currency transactions ..... 40,737 49,627 (180) 738 430,891 402,637 67,559 70,371
---------- --------- ---------- --------- ----------- ----------- ---------- ---------
Total ............................. $ 148,794 $ 167,423 $ 15,610 $ 15,220 $ 2,821,366 $ 2,360,180 $ 523,123 $ 542,307
========== ========= ========== ========= =========== =========== ========== =========
</TABLE>
71
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL MID-CAP GROWTH
EQUITY FUND FUND
--------------------- ---------------------
SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED
(IN THOUSANDS) 06/30/99 12/31/98 06/30/99 12/31/98
---------- -------- ---------- ---------
<S> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) ........ $ 69 $ 3 $ (1,164) $ (1,141)
Net Realized Gain (Loss) from
Security Transactions ............. 1,607 366 31,961 1,160
Net Realized Gain (Loss) from Foreign
Currency Transactions ............. 0 0 0 0
Net Change in Unrealized
Appreciation/Depreciation ......... 17 2,094 (11,112) (1,755)
---------- -------- ---------- ---------
Net Increase (Decrease) in Net
Assets Resulting from
Operations ...................... 1,693 2,463 19,685 (1,736)
---------- -------- ---------- ---------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income .......... 0 0 0 0
From Net Realized Gains from Security
Transactions and Foreign Currency
Transactions ...................... 0 (92) 0 (4,577)
In Excess of Net Investment Income .. 0 0 0 0
---------- -------- ---------- ---------
Net Decrease from Dividends and
Distributions ................... 0 (92) 0 (4,577)
---------- -------- ---------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........... 18,696 15,361 38,822 90,913
Reinvested distributions ............ 0 87 0 4,278
---------- -------- ---------- ---------
18,696 15,448 38,822 95,191
Cost of Shares Redeemed ............. (15,585) (14,621) (92,089) (156,209)
---------- -------- ---------- ---------
Net increase (decrease) from
capital share transactions ...... 3,111 827 (53,267) (61,018)
---------- -------- ---------- ---------
Net Increase (Decrease) in Net
Assets .......................... 4,804 3,198 (33,582) (67,331)
NET ASSETS
Beginning of period ............... 18,938 15,740 252,855 320,186
---------- -------- ---------- ---------
End of period ..................... $ 23,742 $ 18,938 $ 219,273 $ 252,855
========== ======== ========== =========
Net Assets consist of:
Capital (par value and paid-in
surplus) .......................... $ 18,599 $ 15,489 $ 146,016 $ 199,284
Accumulated undistributed
(distribution in excess of) net
investment income ................. 72 3 (1,164) 0
Accumulated undistributed net
realized gain (loss) from
security transactions ............. 1,802 194 32,895 933
Unrealized appreciation
(depreciation) on investments and
foreign currency transactions ..... 3,269 3,252 41,526 52,638
---------- -------- ---------- ---------
Total ............................. $ 23,742 $ 18,938 $ 219,273 $ 252,855
========== ======== ========== =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
72
<PAGE>
<TABLE>
<CAPTION>
MONEY MARKET PASSPORT WORLDWIDE
FUND FUND GROWTH FUND
---------------------- ---------------------- ----------------------
SIX MONTHS YEAR SIX MONTHS YEAR SIX MONTHS YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
(IN THOUSANDS) 06/30/99 12/31/98 06/30/99 12/31/98 06/30/99 12/31/98
---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS
Net Investment Income (Loss) ............................ $ 2,044 $ 5,310 $ (260) $ 118 $ 328 $ 1,017
Net Realized Gain (Loss) from
Security Transactions ................................. 0 0 6,112 4,421 15,392 12,478
Net Realized Gain (Loss) from Foreign
Currency Transactions ................................. 0 0 0 0 0 0
Net Change in Unrealized
Appreciation/Depreciation ............................. 0 0 4,709 8,927 (402) 13,892
---------- --------- ---------- --------- ---------- ---------
Net Increase (Decrease) in Net
Assets Resulting from
Operations .......................................... 2,044 5,310 10,561 13,466 15,318 27,387
---------- --------- ---------- --------- ---------- ---------
DIVIDENDS AND DISTRIBUTIONS TO
SHAREHOLDERS
From Net Investment Income .............................. (2,044) (5,310) 0 (84) 0 (1,077)
From Net Realized Gains from Security
Transactions and Foreign Currency
Transactions .......................................... 0 0 0 (3,150) 0 (11,626)
In Excess of Net Investment Income ...................... 0 0 0 0 0 0
---------- --------- ---------- --------- ---------- ---------
Net Decrease from Dividends and Distributions ......... (2,044) (5,310) 0 (3,234) 0 (12,703)
---------- --------- ---------- --------- ---------- ---------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ............................... 112,649 235,921 57,674 134,188 93,738 152,221
Reinvested distributions ................................ 1,868 4,960 0 2,993 0 11,598
---------- --------- ---------- --------- ---------- ---------
114,517 240,881 57,674 137,181 93,738 163,819
Cost of Shares Redeemed ................................. (115,778) (255,539) (76,024) (145,487) (132,172) (215,327)
---------- --------- ---------- --------- ---------- ---------
Net increase (decrease) from
capital share transactions .......................... (1,261) (14,658) (18,350) (8,306) (38,434) (51,508)
---------- --------- ---------- --------- ---------- ---------
Net Increase (Decrease) in Net Assets ................. (1,261) (14,658) (7,789) 1,926 (23,116) (36,824)
NET ASSETS
Beginning of period ................................... 91,415 106,073 124,572 122,646 272,053 308,877
---------- --------- ---------- --------- ---------- ---------
End of period ......................................... $ 90,154 $ 91,415 $ 116,783 $ 124,572 $ 248,937 $ 272,053
========== ========= ========== ========= ========== =========
Net Assets consist of:
Capital (par value and paid-in surplus) ................. $ 90,152 $ 91,413 $ 74,663 $ 93,013 $ 167,953 $ 206,387
Accumulated undistributed
(distribution in excess of) net
investment income ..................................... 3 3 (239) 21 328 0
Accumulated undistributed net
realized gain (loss) from
security transactions ................................. (1) (1) 7,048 936 17,592 2,200
Unrealized appreciation
(depreciation) on investments and
foreign currency transactions ......................... 0 0 35,311 30,602 63,064 63,466
---------- --------- ---------- --------- ---------- ---------
Total ................................................. $ 90,154 $ 91,415 $ 116,783 $ 124,572 $ 248,937 $ 272,053
========== ========= ========== ========= ========== =========
</TABLE>
73
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
Per Share Income and Capital Changes
Selected data for each share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
BALANCED FUND
------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
SIX MONTHS ENDED ---------------------------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- ------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period ..................... $ 12.19 $ 11.35 $ 10.61 $ 9.58 $ 8.56 $ 8.93
Income from investment
operations:
Net investment income
(loss) ................ 0.15 0.30 0.29 0.28 0.28 0.20
Net gains (losses) on
securities (both
realized and
unrealized) ........... (0.03) 1.27 1.48 1.50 2.21 (0.37)
---------------- ------------- ----------- ----------- ----------- -----------
Total from investment
operations ........ 0.12 1.57 1.77 1.78 2.49 (0.17)
Less distributions:
From net investment
income* ............... (0.14) (0.30) (0.30) (0.27) (0.28) (0.20)
From net realized gains . 0.00 (0.43) (0.73) (0.48) (1.19) 0.00
---------------- ------------- ----------- ----------- ----------- -----------
Total distributions . (0.14) (0.73) (1.03) (0.75) (1.47) (0.20)
Net Asset Value, end of
period .................... $ 12.17 $ 12.19 $ 11.35 $ 10.61 $ 9.58 $ 8.56
================ ============= =========== =========== =========== ===========
Total Return/Ratios
Total return ............ 1.01% 13.96% 16.90% 18.76% 29.40% (11.90%)
Net assets, end of period
(000s) ................ $ 1,287,041 $ 1,244,221 $ 942,690 $ 394,896 $ 130,346 $ 95,226
Net expenses to average
net assets# ........... 0.97%** 0.99% 0.99% 1.10% 1.19% 1.26%
Gross expenses to average
net assets# ........... 0.98%** 1.00% 1.01% 1.12% 1.23% n/a
Net investment income
(loss) to average net
assets ................ 2.47%** 2.51% 2.77% 3.09% 2.92% 2.37%
Portfolio turnover
rate@ ................. 223% 211% 203% 146% 286% 258%
</TABLE>
* Distributions in excess of net investment income for the year ended December
31, 1998 aggregated less than $0.01 on a per share basis.
** Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is calculated
by dividing the lesser of purchases or sales of securities, excluding
securities having maturity dates at acquisition of one year or less, by the
average value of the portfolio securities held during the period, which is a
rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
SEE NOTES TO FINANCIAL STATEMENTS.
74
<PAGE>
<TABLE>
<CAPTION>
DISCOVERY FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 24.37 $ 23.45 $ 24.22 $ 21.70 $ 19.88 $ 21.55
Income from investment
operations:
Net investment income
(loss).................. (0.16) (0.07) 0.07 (0.20) (0.12) (0.12)
Net gains (losses) on
securities (both
realized and
unrealized)............. 6.60 3.15 2.69 4.72 6.29 (1.55)
-------- --------- --------- --------- --------- ---------
Total from investment
operations.......... 6.44 3.08 2.76 4.52 6.17 (1.67)
Less distributions:
From net investment
income.................. 0.00 0.00 0.00 0.00 0.00 0.00
From net realized gains... 0.00 (2.16) (3.53) (2.00) (4.35) 0.00
-------- --------- --------- --------- --------- ---------
Total distributions... 0.00 (2.16) (3.53) (2.00) (4.35) 0.00
Net Asset Value, end of
period...................... $ 30.81 $ 24.37 $ 23.45 $ 24.22 $ 21.70 $ 19.88
======== ========= ========= ========= ========= =========
Total Return/Ratios
Total return.............. 26.43% 14.19% 12.00% 21.20% 31.30% (7.80%)
Net assets, end of period
(000s).................. $288,185 $ 241,124 $ 246,281 $ 247,494 $ 216,623 $ 185,310
Net expenses to average
net
assets#................. 1.58%* 1.55% 1.52% 1.58% 1.58% 1.67%
Gross expenses to average
net assets#............. 1.59%* 1.57% 1.54% 1.59% 1.63% n/a
Net investment income
(loss) to average net
assets.................. (1.19%)* (0.91%) (0.55%) (0.85%) (0.60%) (0.62%)
Portfolio turnover
rate@................... 146% 121% 90% 106% 118% 72%
</TABLE>
* Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is calculated
by dividing the lesser of purchases or sales of securities, excluding
securities having maturity dates at acquisition of one year or less, by the
average value of the portfolio securities held during the period, which is a
rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
75
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONTINUED)
Per Share Income and Capital Changes Selected data for each share of capital
stock outstanding throughout each period.
<TABLE>
<CAPTION>
FRONTIER FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 25.50 $ 27.99 $ 32.34 $ 31.08 $ 26.50 $ 27.94
Income from investment
operations:
Net investment income
(loss).................. (0.23) 0.06 (0.15) (0.15) (0.02) (0.07)
Net gains (losses) on
securities (both
realized and
unrealized)............. 3.62 1.01 1.90 4.46 9.76 (0.72)
-------- --------- --------- --------- --------- ---------
Total from investment
operations.......... 3.39 1.07 1.75 4.31 9.74 (0.79)
Less distributions:
From net investment
income.................. 0.00 0.00 0.00 0.00 0.00 0.00
From net realized gains... 0.00 (3.56) (6.10) (3.05) (5.16) (0.65)
-------- --------- --------- --------- --------- ---------
Total distributions... 0.00 (3.56) (6.10) (3.05) (5.16) (0.65)
Net Asset Value, end of
period...................... $ 28.89 $ 25.50 $ 27.99 $ 32.34 $ 31.08 $ 26.50
======== ========= ========= ========= ========= =========
Total Return/Ratios
Total return.............. 13.29% 5.43% 6.20% 14.34% 37.00% (2.80%)
Net assets, end of period
(000s).................. $148,794 $ 167,423 $ 222,104 $ 350,861 $ 331,720 $ 247,113
Net expenses to average
net assets#............. 1.69%* 1.62% 1.54% 1.52% 1.53% 1.62%
Gross expenses to average
net assets#............. 1.72%* 1.65% 1.57% 1.53% 1.57% n/a
Net investment income
(loss) to average net
assets.................. (1.20%)* (0.83%) (0.91%) (0.47%) (0.07%) (0.25%)
Portfolio turnover
rate@................... 136% 112% 54% 85% 92% 72%
</TABLE>
* Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is calculated
by dividing the lesser of purchases or sales of securities, excluding
securities having maturity dates at acquisition of one year or less, by the
average value of the portfolio securities held during the period, which is a
rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
SEE NOTES TO FINANCIAL STATEMENTS.
76
<PAGE>
<TABLE>
<CAPTION>
GOVERNMENT SECURITIES FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period...................... $ 9.74 $ 9.28 $ 9.04 $ 9.29 $ 8.78 $ 10.02
Income from investment
operations:
Net investment income
(loss).................. 0.20 0.43 0.45 0.46 0.45 0.52
Net gains (losses) on
securities (both
realized and
unrealized)............. (0.50) 0.46 0.24 (0.25) 0.51 (1.26)
-------- --------- --------- --------- --------- ---------
Total from investment
operations.......... (0.30) 0.89 0.69 0.21 0.96 (0.74)
Less distributions:
From net investment
income.................... (0.20) (0.43) (0.45) (0.46) (0.45) (0.50)
From net realized gains..... 0.00 0.00 0.00 0.00 0.00 0.00
-------- --------- --------- --------- --------- ---------
Total distributions... (0.20) (0.43) (0.45) (0.46) (0.45) (0.50)
Net Asset Value, end of
period........................ $ 9.24 $ 9.74 $ 9.28 $ 9.04 $ 9.29 $ 8.78
======== ========= ========= ========= ========= =========
Total Return/Ratios
Total return.............. (3.10%) 9.76% 7.90% 2.34% 11.10% (7.50%)
Net assets, end of period
(000s).................. $ 15,610 $ 15,220 $ 13,259 $ 15,190 $ 20,263 $ 21,323
Net expenses to average
net assets#,+........... 1.31%* 1.25% 1.26% 1.26% 1.30% 1.34%
Gross expenses to average
net assets#,+........... 1.35%* 1.28% 1.31% 1.29% 1.30% n/a
Net investment income
(loss) to average net
assets+................. 4.29%* 4.46% 4.99% 5.06% 4.92% 5.52%
Portfolio turnover
rate@................... 106% 90% 147% 166% 141% 379%
</TABLE>
* Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
+ Certain fees were waived by the management company. Had these fees not been
waived, the net expense ratios would have been 1.49% (1999), 1.46% (1998),
1.44% (1997) and 1.46% (1996). The gross expense ratios would have been
1.53% (1999), 1.49% (1998), 1.49% (1997) and 1.49% (1996). The net
investment income ratios would have been 4.11% (1999), 4.25% (1998), 4.81%
(1997) and 4.86% (1996).
@ Portfolio Turnover Rate is a measure of portfolio activity that is
calculated by dividing the lesser of purchases or sales of securities,
excluding securities having maturity dates at acquisition of one year or
less, by the average value of the portfolio securities held during the
period, which is a rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
77
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONTINUED)
Per Share Income and Capital Changes
Selected data for each share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
GROWTH FUND
-------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ----------------------------------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- ------------- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period ........................ $ 20.41 $ 17.28 $ 15.87 $ 14.77 $ 11.63 $ 12.38
Income from investment
operations:
Net investment income
(loss) .................... (0.05) 0.01 0.07 0.02 0.02 (0.02)
Net gains (losses) on
securities (both
realized and
unrealized) ............... 2.30 4.26 4.09 2.40 5.27 (0.39)
---------------- ------------- ------------- ------------- ------------- ------------
Total from investment
operations ............ 2.25 4.27 4.16 2.42 5.29 (0.41)
Less distributions:
From net investment
income* ................... 0.00 (0.01) (0.07) (0.02) (0.02) 0.00
From net realized gains ..... 0.00 (1.13) (2.68) (1.30) (2.13) (0.34)
---------------- ------------- ------------- ------------- ------------- ------------
Total distributions ..... 0.00 (1.14) (2.75) (1.32) (2.15) (0.34)
Net Asset Value, end of
period ........................ $ 22.66 $ 20.41 $ 17.28 $ 15.87 $ 14.77 $ 11.63
================ ============= ============= ============= ============= ============
Total Return/Ratios
Total return ................ 11.02% 25.04% 26.60% 16.57% 45.59% (3.40%)
Net assets, end of period
(000s) .................... $ 2,821,366 $ 2,360,180 $ 1,757,449 $ 1,118,323 $ 655,927 $ 307,988
Net expenses to average
net assets# ............... 1.09%** 1.08% 1.10% 1.19% 1.24% 1.33%
Gross expenses to average
net assets# ............... 1.10%** 1.10% 1.12% 1.20% 1.28% n/a
Net investment income
(loss) to average net
assets .................... (0.44%)** 0.05% 0.48% 0.15% 0.12% (0.17%)
Portfolio turnover
rate@ ..................... 124% 143% 189% 134% 130% 172%
</TABLE>
* Distributions in excess of net investment income for the year ended December
31, 1998 aggregated less than $0.01 on a per share basis.
** Annualized
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is calculated
by dividing the lesser of purchases or sales of securities, excluding
securities having maturity dates at acquisition of one year or less, by the
average value of the portfolio securities held during the period, which is a
rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
SEE NOTES TO FINANCIAL STATEMENTS.
78
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 7.32 $ 6.92 $ 7.23 $ 6.69 $ 6.16 $ 6.49
Income from investment
operations:
Net investment income
(loss)................... 0.00 0.71 0.13 0.09 0.09 0.06
Net gains (losses) on
securities (both realized
and unrealized).......... 0.23 0.51 1.25 1.52 1.70 (0.02)
-------- --------- --------- --------- --------- ---------
Total from investment
operations........... 0.23 1.22 1.38 1.61 1.79 0.04
Less distributions:
From net investment
income*.................. 0.00 (0.11) (0.13) (0.09) (0.09) (0.06)
From net realized gains.... 0.00 (0.71) (1.56) (0.98) (1.17) (0.31)
-------- --------- --------- --------- --------- ---------
Total distributions.... 0.00 (0.82) (1.69) (1.07) (1.26) (0.37)
Net Asset Value, end of
period....................... $ 7.55 $ 7.32 $ 6.92 $ 7.23 $ 6.69 $ 6.16
======== ========= ========= ========= ========= =========
Total Return/Ratios
Total return............... 3.14% 17.78% 19.40% 24.37% 29.06% 0.50%
Net assets, end of period
(000s)................... $523,123 $ 542,307 $ 543,168 $ 535,866 $ 375,200 $ 311,051
Net expenses to average net
assets#.................. 1.15%** 1.08% 1.09% 1.15% 1.17% 1.21%
Gross expenses to average
net assets#.............. 1.16%** 1.10% 1.11% 1.16% 1.22% n/a
Net investment income
(loss) to average net
assets................... (0.08%)** 1.38% 1.84% 1.40% 1.19% 0.88%
Portfolio turnover rate@... 238% 259% 256% 195% 235% 239%
</TABLE>
* Distributions in excess of net investment income for the year ended December
31, 1998 aggregated less than $0.01 on a per share basis.
** Annualized
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is calculated
by dividing the lesser of purchases or sales of securities, excluding
securities having maturity dates at acquisition of one year or less, by the
average value of the portfolio securities held during the period, which is a
rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
79
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONTINUED)
Per Share Income and Capital Changes
Selected data for each share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
-------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995*
---------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 14.03 $ 12.05 $ 11.86 $ 10.00 $ 10.00
Income from investment
operations:
Net investment income
(loss)................... 0.04 0.03 (0.01) (0.01) 0.00
Net gains (losses) on
securities (both realized
and unrealized).......... 1.02 2.02 1.89 1.87 0.00
-------- --------- --------- --------- ---------
Total from investment
operations........... 1.06 2.05 1.88 1.86 0.00
Less distributions:
From net investment income. 0.00 0.00 0.00 0.00 0.00
From net realized gains.... 0.00 (0.07) (1.69) 0.00 0.00
-------- --------- --------- --------- ---------
Total distributions.... 0.00 (0.07) (1.69) 0.00 0.00
Net Asset Value, end of
period....................... $ 15.09 $ 14.03 $ 12.05 $ 11.86 $ 10.00
======== ========= ========= ========= =========
Total Return/Ratios
Total return............... 7.56% 17.01% 16.10% 18.60% 0.00%
Net assets, end of period
(000s)................... $ 23,742 $ 18,938 $ 15,740 $ 10,119 $ 767
Net expenses to average net
assets#,+................ 1.80%** 1.80% 1.85% 1.94% n/a
Gross expenses to average
net assets#,+............ 1.83%** 1.83% 1.89% 2.00% n/a
Net investment income
(loss) to average net
assets+.................. 0.66%** 0.02% (0.21%) (0.15%) n/a
Portfolio turnover rate@... 173% 148% 164% 71% n/a
</TABLE>
* Period December 29, 1995 (inception) to December 31, 1995.
** Annualized
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
+ Certain fees were reimbursed by the management company. Had these fees not
been reimbursed, the net expense ratios would have been 1.91% (1999), 1.89%
(1998), 2.01% (1997) and 2.46% (1996). The gross expense ratios would have
been 1.94% (1999), 1.92% (1998), 2.05% (1997) and 2.52% (1996). The net
investment income ratios would have been 0.55% (1999), (0.07%) (1998),
(0.37%) (1997) and (0.67%) (1996).
@ Portfolio Turnover Rate is a measure of portfolio activity that is
calculated by dividing the lesser of purchases or sales of securities,
excluding securities having maturity dates at acquisition of one year or
less, by the average value of the portfolio securities held during the
period, which is a rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
SEE NOTES TO FINANCIAL STATEMENTS.
80
<PAGE>
<TABLE>
<CAPTION>
MID-CAP GROWTH FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 7.44 $ 7.72 $ 7.66 $ 7.05 $ 7.01 $ 7.67
Income from investment
operations:
Net investment income
(loss)................... (0.05) (0.03) 0.01 (0.02) 0.00 (0.02)
Net gains (losses) on
securities (both realized
and unrealized).......... 0.84 (0.11) 1.21 1.09 1.79 (0.36)
-------- --------- --------- --------- --------- ---------
Total from investment
operations........... 0.79 (0.14) 1.22 1.07 1.79 (0.38)
Less distributions:
From net investment
income................... 0.00 0.00 0.00 0.00 0.00 0.00
From net realized gains.... 0.00 (0.14) (1.16) (0.46) (1.75) (0.28)
-------- --------- --------- --------- --------- ---------
Total distributions.... 0.00 (0.14) (1.16) (0.46) (1.75) (0.28)
Net Asset Value, end of
period....................... $ 8.23 $ 7.44 $ 7.72 $ 7.66 $ 7.05 $ 7.01
======== ========= ========= ========= ========= =========
Total Return/Ratios
Total return............... 10.62% (1.73%) 16.40% 15.33% 25.70% (4.90%)
Net assets, end of period
(000s)................... $219,273 $252,855 $320,186 $363,835 $388,754 $299,190
Net expenses to average net
assets#.................. 1.40%* 1.33% 1.30% 1.34% 1.29% 1.36%
Gross expenses to average
net assets#.............. 1.42%* 1.35% 1.32% 1.36% 1.35% n/a
Net investment income
(loss) to average net
assets................... (1.09%)* (0.39%) (0.05%) (0.28%) 0.00% (0.27%)
Portfolio turnover rate@... 169% 152% 110% 186% 263% 272%
</TABLE>
* Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is
calculated by dividing the lesser of purchases or sales of securities,
excluding securities having maturity dates at acquisition of one year or
less, by the average value of the portfolio securities held during the
period, which is a rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
81
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONTINUED)
Per Share Income and Capital Changes
Selected data for each share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
MONEY MARKET FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment
operations:
Net investment income
(loss)................... 0.02 0.05 0.05 0.05 0.05 0.03
Net gains (losses) on
securities (both realized
and unrealized).......... 0.00 0.00 0.00 0.00 0.00 0.00
-------- --------- --------- --------- --------- ---------
Total from investment
operations........... 0.02 0.05 0.05 0.05 0.05 0.03
Less distributions:
From net investment
income................... (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
From net realized gains.... 0.00 0.00 0.00 0.00 0.00 0.00
-------- --------- --------- --------- --------- ---------
Total distributions.... (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
Net Asset Value, end of
period....................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ========= ========= ========= ========= =========
Total Return/Ratios
Total return............... 2.04% 4.67% 4.70% 4.51% 5.10% 3.40%
Net assets, end of period
(000s)................... $ 90,154 $ 91,415 $ 106,073 $ 109,866 $ 125,646 $ 201,342
Net expenses to average net
assets#.................. 0.88%* 0.85% 0.82% 0.86% 0.89% 0.91%
Gross expenses to average
net assets#.............. 0.91%* 0.87% 0.84% 0.88% 0.89% n/a
Net investment income
(loss) to average net
assets................... 4.06%* 4.67% 4.77% 4.58% 5.11% 3.49%
</TABLE>
* Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
n/a Disclosure not applicable or not required in prior periods.
SEE NOTES TO FINANCIAL STATEMENTS.
82
<PAGE>
<TABLE>
<CAPTION>
PASSPORT FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 14.93 $ 13.64 $ 13.91 $ 11.68 $ 9.42 $ 10.53
Income from investment
operations:
Net investment income
(loss)................... (0.04) 0.00 0.02 0.04 0.04 0.02
Net gains (losses) on
securities (both realized
and unrealized).......... 1.43 1.68 0.22 2.30 2.26 (1.11)
-------- --------- --------- --------- --------- ---------
Total from investment
operations........... 1.39 1.68 0.24 2.34 2.30 (1.09)
Less distributions:
From net investment
income................... 0.00 (0.01) (0.03) (0.02) (0.04) (0.02)
From net realized gains.... 0.00 (0.38) (0.48) (0.09) 0.00 0.00
-------- --------- --------- --------- --------- ---------
Total distributions.... 0.00 (0.39) (0.51) (0.11) (0.04) (0.02)
Net Asset Value, end of
period....................... $ 16.32 $ 14.93 $ 13.64 $ 13.91 $ 11.68 $ 9.42
======== ========= ========= ========= ========= =========
Total Return/Ratios
Total return............... 9.31% 12.50% 1.70% 20.05% 24.39% (10.40%)
Net assets, end of period
(000s)................... $116,783 $ 124,572 $ 122,646 $ 177,921 $ 49,922 $ 16,443
Net expenses to average net
assets#.................. 1.58%* 1.52% 1.53% 1.57% 1.76% 1.88%
Gross expenses to average
net assets#.............. 1.60%* 1.54% 1.55% 1.59% 1.84% n/a
Net investment income
(loss) to average net
assets................... (0.45%)* 0.09% 0.20% 0.40% 0.60% 0.12%
Portfolio turnover rate@... 33% 34% 51% 58% 37% 78%
</TABLE>
* Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is calculated
by dividing the lesser of purchases or sales of securities, excluding
securities having maturity dates at acquisition of one year or less, by the
average value of the portfolio securities held during the period, which is a
rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
83
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (UNAUDITED) (CONTINUED)
Per Share Income and Capital Changes
Selected data for each share of capital stock outstanding throughout each
period.
<TABLE>
<CAPTION>
WORLDWIDE GROWTH FUND
------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------------------
JUNE 30, 1999 1998 1997 1996 1995 1994
---------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period....................... $ 22.06 $ 21.11 $ 21.79 $ 19.87 $ 17.09 $ 17.94
Income from investment
operations:
Net investment income
(loss).................. 0.03 0.08 0.02 0.10 0.09 (0.02)
Net gains (losses) on
securities (both
realized and
unrealized)............. 1.25 1.90 2.22 2.64 3.43 (0.37)
---------------- --------- --------- --------- --------- ---------
Total from investment
operations.......... 1.28 1.98 2.24 2.74 3.52 (0.39)
Less distributions:
From net investment
income*................. 0.00 (0.09) (0.04) (0.07) (0.09) 0.00
From net realized gains... 0.00 (0.94) (2.88) (0.75) (0.65) (0.46)
---------------- --------- --------- --------- --------- ---------
Total distributions... 0.00 (1.03) (2.92) (0.82) (0.74) (0.46)
Net Asset Value, end of
period...................... $ 23.34 $ 22.06 $ 21.11 $ 21.79 $ 19.87 $ 17.09
================ ========= ========= ========= ========= =========
Total Return/Ratios
Total return.............. 5.80% 9.63% 10.60% 13.95% 20.63% (2.20%)
Net assets, end of period
(000s).................. $ 248,937 $ 272,053 $ 308,877 $ 342,079 $ 228,595 $ 104,044
Net expenses to average
net assets#............. 1.53%** 1.47% 1.45% 1.53% 1.56% 1.66%
Gross expenses to average
net assets#............. 1.55%** 1.49% 1.47% 1.55% 1.65% n/a
Net investment income
(loss) to average net
assets.................. 0.25%** 0.33% 0.18% 0.50% 0.61% (0.14%)
Portfolio turnover rate@.. 72% 86% 82% 72% 54% 87%
</TABLE>
* Distributions in excess of net investment income for the year ended December
31, 1998 aggregated less than $0.01 on a per share basis.
** Annualized.
# Ratio of Net Expenses to Average Net Assets reflects reductions in a Fund's
expenses through the use of brokerage commissions and custodial and transfer
agent credits. Ratio of Gross Expenses to Average Net Assets is the total of
a Fund's operating expenses before expense offset arrangements and earnings
credits divided by its average net assets for the stated period.
@ Portfolio Turnover Rate is a measure of portfolio activity that is calculated
by dividing the lesser of purchases or sales of securities, excluding
securities having maturity dates at acquisition of one year or less, by the
average value of the portfolio securities held during the period, which is a
rolling twelve month period.
n/a Disclosure not applicable or not required in prior periods.
SEE NOTES TO FINANCIAL STATEMENTS.
84
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1999
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Founders Funds, Inc. (the "Funds") is a diversified open-end management
investment company registered under the Investment Company Act of 1940. Eleven
series of shares are issued as of June 30, 1999: Balanced, Discovery, Frontier,
Government Securities, Growth, Growth and Income (formerly Blue Chip),
International Equity, Mid-Cap Growth (formerly Special), Money Market, Passport,
and Worldwide Growth (individually a "Fund"). The following significant
accounting policies have been consistently followed by the Funds in the
preparation of their financial statements.
SECURITIES VALUATION--With the exception of Money Market Fund, market value of
investments is determined from closing quotations on national security exchanges
or at the last current bid price in the case of securities traded
over-the-counter or by quotes from dealers making a market for securities not
listed on an exchange or traded over-the-counter. In the event that the closing
price of a foreign security is not available in time to calculate a Fund's net
asset value on a particular day, the Funds' board of directors has authorized
the use of the market price for the security obtained from an approved pricing
service at an established time during the day which may be prior to the close of
regular trading in the security. If market quotations are not readily available,
securities will be valued at their fair values as determined in good faith by
the Funds' board of directors or pursuant to procedures approved by the board of
directors. London closing quotes for exchange rates are used to convert foreign
security values into U.S. dollars. Short-term securities, with maturities of
less than 60 days, and all securities held by Money Market Fund, are valued at
amortized cost, which approximates market.
FOREIGN SECURITIES--Foreign securities may carry more risk than U.S.
securities, such as political, market, and currency risks. All of the Funds may
invest at least a portion of their assets in foreign securities. In the event
that a Fund executes a foreign security transaction, the Fund will enter into a
foreign currency contract to settle the foreign security transaction. The
resultant foreign currency gain or loss from the contract is recorded as foreign
currency gain or loss and is presented as such in the Statements of Operations.
Foreign currency held at June 30, 1999 for settling foreign trades is listed on
the Statements of Assets and Liabilities.
FEDERAL INCOME TAXES--No provision has been made for federal income taxes
since it is the policy of the Funds to comply with the special provisions of
Subchapter M of the Internal Revenue Code applicable to regulated investment
companies, and to make distributions of income and capital gains sufficient to
relieve it from all income taxes. Each Fund is treated as a separate tax entity
for federal income tax purposes.
INVESTMENT INCOME--Dividend income is recorded on the ex-dividend date.
Certain dividends from foreign securities will be recorded as soon as the Fund
is informed of the dividend if such information is obtained subsequent to the
ex-dividend date. Interest income is accrued daily and includes the accretion of
discounts and the amortization of premiums.
DISTRIBUTIONS TO SHAREHOLDERS--For Government Securities and Money Market
Funds, distributions are declared daily and paid monthly from net investment
income, and capital gains (if any) are distributed annually. For Balanced Fund,
distributions from income are declared and distributed quarterly and capital
gains (if any) are distributed annually. All other Funds declare and distribute
dividends and capital gains (if any) annually. All distributions are recorded on
the ex-dividend date.
EXPENSES--Each of the Funds bears expenses incurred specifically on its behalf
and, in addition, each Fund bears a portion of general expenses based
85
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
on the relative net assets, or number of shareholder accounts of each Fund. The
type of expense determines the allocation method.
ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
OTHER--Security transactions are recorded on the date the securities are
purchased or sold (trade date).
2. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
In accordance with the investment advisory agreements between the Funds and
Founders Asset Management LLC ("Founders"), the Funds compensate Founders for
its services as investment adviser by the payment of fees computed daily and
paid monthly at the annual rate equal to a percentage of the average daily value
of the Funds' net assets. For Discovery, Frontier, International Equity,
Passport and Worldwide Growth Funds, the fee is 1% of the first $250 million of
net assets, 0.80% of the next $250 million of net assets, and 0.70% of net
assets in excess of $500 million. For Growth and Mid-Cap Growth Funds, the fee
is 1% of the first $30 million of net assets, 0.75% of the next $270 million of
net assets, 0.70% of the next $200 million of net assets and 0.65% of net assets
in excess of $500 million. For Balanced and Growth and Income Funds, the fee is
0.65% of the first $250 million of net assets, 0.60% of the next $250 million of
net assets, 0.55% of the next $250 million of net assets and 0.50% of net assets
in excess of $750 million. For Government Securities Fund, the fee is 0.65% of
the first $250 million of net assets, and 0.50% of the net assets in excess of
$250 million. For Money Market Fund, the fee is 0.50% of the first $250 million
of net assets, 0.45% of the next $250 million of net assets, 0.40% of the next
$250 million of net assets, and 0.35% of the net assets in excess of $750
million.
Founders limits International Equity Fund's expenses to 1.80% of average net
assets, net of credits earned on uninvested cash held overnight at the
custodian. For the six months ended June 30, 1999, $11,039 was reimbursed to the
Fund.
Investors Fiduciary Trust Company ("IFTC") is the designated transfer and
dividend disbursing agent for each Fund. With the exception of out-of-pocket
charges, the fees charged by IFTC are paid by Founders. The out-of-pocket
charges from IFTC are paid by the Funds. IFTC also serves as custodian for the
Funds. The fees for the custody services are subject to reduction by credits
earned on the cash balances of the Funds held by IFTC as custodian.
The Funds have agreed to compensate Founders for providing certain shareholder
servicing functions in addition to those currently provided by IFTC. The Funds
paid Founders a monthly fee equal on an annual basis to $26.00 per shareholder
account of the Funds considered to be an open account at any time during a given
month.
The Funds have also agreed to compensate Founders for providing accounting
services, administration, compliance monitoring, regulatory and shareholder
reporting, as well as facilities, equipment and clerical help as shall be
necessary to provide these services to the Funds. The fee is computed at the
annual rate of 0.06% of the average daily net assets of the Funds from $0 to
$500 million and 0.02% of the net assets of the Funds in excess of $500 million.
The fee so computed is allocated to each Fund on a pro rata basis based on
relative average daily net assets.
Balanced, Discovery, Frontier, Government Securities, Growth, Growth and
Income, International Equity, Mid-Cap Growth, Passport, and Worldwide Growth
Funds each has adopted a
86
<PAGE>
Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of
1940. Each plan provides that the Fund may pay distribution expenses of up to
0.25% each year on its average daily net assets. During the six months ended
June 30,1999, Founders elected not to collect the full 0.25% from the Government
Securities Fund and waived $13,380, which resulted in the Fund paying 0.07%
under the plan.
Certain shareholders of the Funds are also officers and/or directors of
Founders.
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, N.A. 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 services provided by Founders, are subject to the supervision
and general oversight of the Funds' board of directors.
3. FEDERAL INCOME TAXES
Net investment income distributions and capital gains distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are due to differing
treatments for items such as deferral of wash sales, foreign currency
transactions, net operating losses and capital loss carryforwards.
Net capital loss carryovers and post-October 31 capital losses noted below, if
any, as of December 31, 1998, are available to offset future realized capital
gains and thereby reduce future taxable gains distributions. Post-October 31
foreign currency losses noted below, if any, will offset future net investment
income and thereby reduce future ordinary income distributions. The capital loss
carryover for the Government Securities Fund expires in the years 2002 through
2004. The aggregate cost of investments and the composition of unrealized
appreciation and depreciation of investment securities for federal income tax
purposes as of June 30, 1999 are as follows (in thousands):
<TABLE>
<CAPTION>
NET POST- POST-
CAPITAL OCTOBER OCTOBER
LOSS CAPITAL CURRENCY FEDERAL NET
CARRY- LOSS LOSS TAX UNREALIZED UNREALIZED APPRECIATION/
OVERS DEFERRAL DEFERRAL COST APPRECIATION (DEPRECIATION) (DEPRECIATION)
--------- -------- --------- -------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balanced Fund........................... $ 0 $ 0 $ 0 $1,271,421,361 $56,516,969 $(17,345,696) $39,171,273
Discovery Fund.......................... 0 0 0 201,102,787 88,630,720 (4,996,830) 83,633,890
Frontier Fund........................... 0 0 0 108,466,732 44,268,058 (3,558,858) 40,709,200
Government Securities Fund.............. 3,028,597 0 0 15,975,655 43,810 (223,688) (179,878)
Growth Fund............................. 0 0 (196,022) 2,451,375,683 477,933,157 (47,276,061) 431,223,878
Growth and Income Fund.................. 0 0 0 460,079,986 74,276,061 (7,668,538) 66,607,523
International Equity Fund............... 0 0 (871) 20,417,696 3,691,165 (408,076) 3,283,089
Mid-Cap Growth Fund..................... 0 0 0 179,377,516 43,271,737 (2,117,863) 41,153,874
Money Market Fund....................... 999 (2,868) 0 88,852,042 0 0 0
Passport Fund........................... 0 0 0 79,492,515 38,532,062 (3,220,938) 35,311,124
Worldwide Growth Fund................... 0 0 0 186,033,140 68,820,635 (5,756,291) 63,064,344
</TABLE>
87
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
4. FUND SHARE TRANSACTIONS
Transactions in shares of the Funds for the periods indicated were as follows
(in thousands):
<TABLE>
<CAPTION>
REINVESTED NET INCREASE
SOLD DISTRIBUTIONS REDEEMED (DECREASE)
--------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Balanced Fund:
Six months ended 06/30/99........... 31,898 1,260 (29,482) 3,676
Year ended 12/31/98................. 44,178 5,736 (30,911) 19,003
Discovery Fund:
Six months ended 06/30/99........... 4,908 0 (5,448) (540)
Year ended 12/31/98................. 7,262 744 (8,614) (608)
Frontier Fund:
Six months ended 06/30/99........... 625 0 (2,040) (1,415)
Year ended 12/31/98................. 1,786 913 (4,068) (1,369)
Government Securities Fund:
Six months ended 06/30/99........... 1,635 30 (1,539) 126
Year ended 12/31/98................. 2,146 59 (2,071) 134
Growth Fund:
Six months ended 06/30/99........... 28,070 0 (19,255) 8,815
Year ended 12/31/98................. 43,696 6,112 (35,805) 14,003
Growth and Income Fund:
Six months ended 06/30/99........... 2,519 0 (7,292) (4,773)
Year ended 12/31/98................. 10,345 6,757 (21,455) (4,353)
International Equity Fund:
Six months ended 06/30/99........... 1,289 0 (1,067) 222
Year ended 12/31/98................. 1,136 6 (1,098) 44
Mid-Cap Growth Fund:
Six months ended 06/30/99........... 5,307 0 (12,636) (7,329)
Year ended 12/31/98................. 12,202 624 (20,324) (7,498)
Money Market Fund:
Six months ended 06/30/99........... 112,651 1,868 (115,780) (1,261)
Year ended 12/31/98................. 235,921 4,960 (255,539) (14,658)
Passport Fund:
Six months ended 06/30/99........... 3,730 0 (4,918) (1,188)
Year ended 12/31/98................. 8,672 211 (9,533) (650)
Worldwide Growth Fund:
Six months ended 06/30/99........... 4,098 0 (5,767) (1,669)
Year ended 12/31/98................. 6,762 550 (9,611) (2,299)
</TABLE>
88
<PAGE>
5. LINE OF CREDIT
Discovery, Frontier, Mid-Cap Growth, and Passport Funds have a Line of Credit
Arrangement ("LOC") with State Street Bank and Trust Company, to be used for
extraordinary or emergency purposes, primarily for financing redemption
payments. For Discovery, Frontier and Passport Funds, borrowings will be limited
to 10% of each Fund's net assets computed at the lesser of cost or market value.
Mid-Cap Growth Fund may borrow amounts up to 10% of the market value of the net
assets of the Fund. Combined borrowings will be subject to the $50 million cap
on the total LOC. Each Fund agrees to pay annual fees and interest on the unpaid
balance based on prevailing market rates as defined in the LOC. At June 30, 1999
there were no such borrowings.
89
<PAGE>
OTHER INFORMATION (UNAUDITED)
On March 2, 1999, a special meeting of the shareholders of the Funds was held at
which the shareholders of all the Funds, voting as a single class, elected seven
directors of the Funds and ratified the selection of PricewaterhouseCoopers LLP
as the Funds' independent accountants. In addition, the shareholders of each
Fund, voting separately as a class, approved the revision or elimination of
certain fundamental investment restrictions. In the case of the Founders
Discovery and Passport Funds, the votes on the changes to the investment
restrictions were obtained at an adjournment of the special meeting held on
March 10, 1999. The following is a report on the votes cast:
ELECTION OF DIRECTORS
SHARES SHARES
CANDIDATE FOR WITHHELD
- --------- ---------- ---------
Jay A. Precourt......................... 249,401,694 11,635,841
Eugene H. Vaughan, Jr................... 249,358,621 11,678,914
Alan S. Danson.......................... 249,425,785 11,611,750
Joan D. Manley.......................... 249,408,631 11,628,905
Robert P. Mastrovita.................... 249,459,147 11,577,389
Trygve E. Myhren........................ 249,557,240 11,480,296
George W. Phillips...................... 249,570,517 11,467,019
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
SHARES
-----------
For..................................... 250,301,065
Against................................. 2,049,792
Abstain................................. 8,686,666
90
<PAGE>
PROPOSALS TO AMEND THE FUND'S FUNDAMENTAL INVESTMENT RESTRICTIONS WITH
RESPECT TO:
3.A-PHYSICAL COMMODITIES/CERTAIN FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ----- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced................................ 50,734,091 2,735,141 1,796,637 4,143,284
Discovery............................... 3,480,823 337,095 926,436 75,227
Frontier................................ 2,536,404 301,634 311,355 201,277
Government Securities................... 702,112 87,775 104,639 43,440
Growth.................................. 50,363,848 4,002,766 4,133,208 8,988,731
Growth and Income....................... 33,295,578 3,283,821 3,147,896 1,962,540
International Equity.................... 562,792 43,829 42,688 105,163
Mid-Cap Growth.......................... 13,974,679 1,854,359 1,459,548 872,103
Money Market............................ 45,673,923 4,897,803 2,935,426 126,824
Passport................................ 3,078,891 276,018 295,109 505,267
Worldwide Growth........................ 4,667,506 467,489 419,974 815,749
</TABLE>
3.B-BORROWING MONEY
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,460,214 3,049,477 1,756,178 4,143,284
Discovery............................ 3,391,984 415,366 937,004 75,227
Frontier............................. 2,485,419 353,946 310,029 201,276
Government Securities................ 692,847 108,041 93,638 43,440
Growth............................... 49,305,754 5,212,371 3,981,696 8,988,731
Growth and Income.................... 32,477,605 4,166,616 3,083,074 1,962,540
International Equity................. 556,095 52,865 40,349 105,163
Mid-Cap Growth....................... 13,828,265 2,086,341 1,373,980 872,103
Money Market......................... 45,065,021 5,873,102 2,569,028 126,825
Passport............................. 3,005,665 351,301 293,051 505,268
Worldwide Growth..................... 4,543,652 587,528 423,788 815,750
</TABLE>
3.C-MAKING LOANS
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,645,901 2,868,549 1,751,418 4,143,284
Discovery............................ 3,410,518 400,570 933,266 75,227
Frontier............................. 2,509,098 334,474 305,822 201,276
Government Securities................ 702,002 100,149 92,375 43,440
Growth............................... 49,668,427 4,754,726 4,076,668 8,988,731
Growth and Income.................... 32,832,175 3,757,759 3,137,361 1,962,540
International Equity................. 553,798 52,021 43,490 105,163
Mid-Cap Growth....................... 13,933,408 1,962,333 1,392,845 872,103
Money Market......................... 45,528,136 5,555,984 2,423,032 126,824
Passport............................. 3,023,544 330,946 295,528 505,267
Worldwide Growth..................... 4,589,872 547,052 418,044 815,750
</TABLE>
91
<PAGE>
OTHER INFORMATION (UNAUDITED) (CONTINUED)
3.D-UNDERWRITING SECURITIES
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,909,920 2,596,423 1,759,526 4,143,284
Discovery............................ 3,495,376 319,612 929,366 75,227
Frontier............................. 2,534,172 306,699 308,523 201,276
Government Securities................ 715,028 84,243 95,255 43,440
Growth............................... 50,577,600 3,697,425 4,224,797 8,988,730
Growth and Income.................... 33,794,785 2,828,319 3,104,190 1,962,541
International Equity................. 562,672 43,667 42,970 105,163
Mid-Cap Growth....................... 14,243,731 1,642,994 1,401,861 872,103
Money Market......................... 46,307,989 4,445,203 2,753,960 126,824
Passport............................. 3,080,632 280,107 289,279 505,267
Worldwide Growth..................... 4,718,822 434,063 402,083 815,750
</TABLE>
3.E-SENIOR SECURITIES
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,854,712 2,612,629 1,798,527 4,143,284
Discovery............................ 3,474,209 334,330 935,816 75,226
Frontier............................. 2,534,809 308,975 305,610 201,276
Government Securities................ 706,418 65,496 122,611 43,441
Growth............................... 50,458,517 3,828,292 4,213,013 8,988,730
Growth and Income.................... 33,952,323 2,763,186 3,011,786 1,962,540
International Equity................. 568,409 40,037 40,482 105,164
Mid-Cap Growth....................... 14,182,213 1,641,528 1,464,846 872,102
Money Market......................... 45,108,431 5,671,263 2,727,458 126,824
Passport............................. 3,109,561 253,158 287,299 505,267
Worldwide Growth..................... 4,704,221 441,058 409,690 815,749
</TABLE>
PROPOSALS TO ELIMINATE THE FUNDS' FUNDAMENTAL INVESTMENT RESTRICTIONS WITH
RESPECT TO:
3.F-PURCHASING SECURITIES ON MARGIN
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,350,694 3,116,123 1,799,051 4,143,284
Discovery............................ 3,367,342 459,642 917,371 75,226
Frontier............................. 2,463,983 379,780 305,631 201,276
Government Securities................ 652,278 146,887 95,360 43,441
Growth............................... 48,813,992 5,602,179 4,083,650 8,988,731
Growth and Income.................... 31,960,313 4,578,431 3,188,551 1,962,540
International Equity................. 551,650 57,277 40,382 105,163
Mid-Cap Growth....................... 13,654,520 2,251,401 1,382,666 872,102
Money Market......................... 43,773,114 7,152,197 2,581,842 126,823
Passport............................. 2,981,611 390,438 277,969 505,267
Worldwide Growth..................... 4,510,064 651,199 393,705 815,750
</TABLE>
92
<PAGE>
3.G-SELLING SHORT
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,235,891 3,249,908 1,780,069 4,143,285
Discovery............................ 3,366,655 448,001 929,698 75,227
Frontier............................. 2,472,226 370,341 306,827 201,276
Government Securities................ 653,938 148,057 92,530 43,441
Growth............................... 48,714,867 5,515,609 4,269,346 8,988,730
Growth and Income.................... 32,120,562 4,406,371 3,200,361 1,962,541
International Equity................. 555,551 55,687 38,070 105,164
Mid-Cap Growth....................... 13,794,885 2,146,780 1,346,921 872,103
Money Market......................... 44,054,034 6,892,828 2,560,290 126,824
Passport............................. 2,997,584 375,406 277,027 505,268
Worldwide Growth..................... 4,547,354 603,857 403,757 815,750
</TABLE>
3.H-INVESTMENTS GREATER THAN 5% OF FUND ASSETS
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ----------
<S> <C> <C> <C> <C>
Balanced............................. 50,405,757 3,100,244 1,759,868 4,143,284
Government Securities................ 660,888 134,155 99,482 43,441
Growth............................... 49,427,926 4,886,025 4,185,870 8,988,731
Mid-Cap Growth....................... 13,937,993 1,999,815 1,350,779 872,102
Money Market......................... 44,745,713 6,084,191 2,677,248 126,824
</TABLE>
3.I-HOLDING MORE THAN 10% OF A SINGLE ISSUER
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,218,294 3,292,756 1,754,819 4,143,284
Growth............................... 49,164,915 5,149,567 4,185,340 8,988,731
Mid-Cap Growth....................... 13,814,287 2,156,082 1,318,217 872,103
Money Market......................... 44,332,059 6,676,904 2,498,189 126,824
</TABLE>
93
<PAGE>
OTHER INFORMATION (UNAUDITED) (CONTINUED)
3.J-LENGTH OF ISSUER'S OPERATING RECORD
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,628,405 2,751,110 1,886,354 4,143,284
Growth............................... 49,869,258 4,039,229 4,591,334 8,988,731
Mid-Cap Growth....................... 14,061,003 1,745,576 1,482,008 872,103
Money Market......................... 45,625,871 4,967,778 2,913,503 126,824
</TABLE>
3.K-INVESTMENTS IN OTHER INVESTMENT COMPANIES
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,887,542 2,605,949 1,772,378 4,143,284
Growth............................... 50,080,801 4,254,626 4,164,394 8,988,732
Mid-Cap Growth....................... 14,178,277 1,763,563 1,346,747 872,102
Money Market......................... 46,043,043 4,682,642 2,781,467 126,824
</TABLE>
3.L-INVESTMENTS IN SECURITIES OWNED BY OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced............................. 50,129,078 3,357,093 1,779,697 4,143,285
Growth............................... 48,165,580 6,053,754 4,280,487 8,988,731
Mid-Cap Growth....................... 13,770,045 2,212,283 1,306,258 872,103
Money Market......................... 44,274,577 6,405,825 2,826,750 126,824
</TABLE>
3.M-JOINT TRADING ACCOUNTS
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced................................ 50,673,519 2,730,363 1,861,985 4,143,285
Growth.................................. 50,056,109 4,050,214 4,393,498 8,988,731
Mid-Cap Growth.......................... 14,104,773 1,801,560 1,382,254 872,102
</TABLE>
3.N-INVESTING FOR CONTROL OR MANAGEMENT
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balanced................................ 50,647,990 2,785,707 1,832,171 4,143,284
Growth.................................. 49,429,367 4,730,636 4,339,818 8,988,731
Mid-Cap Growth.......................... 14,018,150 1,910,111 1,360,325 872,103
</TABLE>
3.O-RESTRICTED SECURITIES
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Frontier................................ 2,484,313 349,415 315,668 201,274
Growth and Income....................... 32,383,273 3,965,546 3,378,475 1,962,541
Money Market............................ 44,236,679 6,340,377 2,930,096 126,824
</TABLE>
94
<PAGE>
3.P-PLEDGING ASSETS
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Growth.................................. 48,992,773 5,146,470 4,360,578 8,988,731
</TABLE>
3.Q-REDEMPTION OF SHARES IN KIND
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Growth.................................. 50,255,485 3,785,423 4,458,914 8,988,731
</TABLE>
3.R-OIL, GAS AND MINERAL INTERESTS
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Money Market............................ 45,310,098 5,435,261 2,761,794 126,823
</TABLE>
3.S-EQUITY SECURITIES
<TABLE>
<CAPTION>
SHARES SHARES SHARES BROKER
FUND FOR AGAINST ABSTAIN NON-VOTE
- ---- ---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Money Market............................ 46,480,669 4,315,898 2,710,585 126,824
</TABLE>
95
<PAGE>
[Logo]
Founders Funds
Founders Asset Management LLC
2930 East Third Avenue
Denver, CO 80206-5002
1-800-525-2440
WWW.FOUNDERS.COM
FUND DIRECTORS
Jay A. Precourt, Chairman
Eugene H. Vaughan, Jr., Vice Chairman
Alan S. Danson
Joan D. Manley
Robert P. Mastrovita
Trygve E. Myhren
George W. Phillips
This report is authorized for distribution to prospective investors only if
preceded or accompanied by a current prospectus for Founders Funds, Inc., which
contains more complete information, including management fees and expenses that
apply to a continued investment in the Funds. Please read the prospectus
carefully before you invest or send money.
"Dreyfus" is the umbrella designation for the investment products and services
available from affiliates of Mellon Bank Corporation, including Founders Asset
Management LLC. Founders Funds is a registered trademark and the logo is a
trademark of Founders Asset Management LLC. 1999 Founders Asset Management LLC,
Broker-Dealer. Premier Mutual Fund Services, Inc., Distributor.
Date of first use: August 23, 1999
A-636-SAR
