<PAGE> 1
Dear Shareholder:
The enclosed Combined Proxy Statement and Prospectus contains an important
proposal for your consideration as a shareholder of the Strong U.S. Treasury
Money Fund (the "Treasury Fund"). Your Board of Directors has proposed that the
Treasury Fund be merged into the Strong Money Market Fund, Inc. (the "Money
Fund"). If approved by the shareholders of the Treasury Fund, the Treasury
Fund's assets will be liquidated and substantially all of the liquidation
proceeds (less a reserve for liabilities) will be exchanged for shares of the
Money Fund on August 30, 1996 (the "Closing Date"). On that date, your Treasury
Fund shares will be exchanged for an equal dollar amount of Money Fund shares.
The Treasury Fund was designed to seek current income, a stable share price, and
daily liquidity. In seeking to achieve that objective, the Treasury Fund has
invested only in securities issued directly by the U.S. Government. Because
other money market funds may invest in other types of money market securities,
they have been able to obtain higher returns for their shareholders. One result
is that investor interest in the Treasury Fund has lagged its competitive
universe.
In light of the Treasury Fund's comparatively small asset size, lack of expected
asset growth, and lack of economies of scale, the Board of Directors determined
that it would be appropriate to reorganize the Treasury Fund into the larger
Money Fund. The Money Fund was considered to be the most appropriate fund
because it has the same investment objectives, substantially similar investment
policies and restrictions and is managed by the same portfolio manager. The
Money Fund also offers competitive rates of return and lower expense ratios than
the Treasury Fund. FOR THESE REASONS, THE BOARD OF DIRECTORS STRONGLY URGES YOU
TO VOTE FOR THE PROPOSED REORGANIZATION AND FOR THE RELATED PROPOSAL TO AMEND
THE AMENDED AND RESTATED ARTICLES OF INCORPORATION OF THE STRONG INCOME FUNDS,
INC.
The enclosed materials provide more information about the proposals. Please read
this information carefully and call us if you have any questions. Our toll free
number is 1-800-368-0930.
Please know that your vote is important, no matter how many shares you own. By
voting your shares early you will help us avoid costly follow-up mailings and
telephone solicitations.
After reviewing the enclosed materials, we ask that you vote FOR this proposed
reorganization and related Articles of Amendment by completing, dating, and
signing your proxy card, and mailing it to us today.
Sincerely,
Richard S. Strong
Chairman
029
<PAGE> 2
STRONG INCOME FUNDS, INC. --
STRONG U.S. TREASURY MONEY FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of the Strong
U.S. Treasury Money Fund (the "Treasury Fund"), a series of the Strong Income
Funds, Inc. ("SIF"), will be held at 100 Heritage Reserve, Menomonee Falls,
Wisconsin 53051, on Tuesday, August 27, 1996, at 8:00 a.m., Central Time, to
consider and act upon the proposals noted below and to transact such other
business as may properly come before the Special Meeting or any adjournments
thereof.
ITEM 1. To approve or disapprove an Agreement and Plan of Reorganization by
and among SIF, on behalf of the Treasury Fund and the Strong Money Market
Fund, Inc. (the "Money Fund") and, with respect to certain matters, Strong
Capital Management, Inc., and the transactions contemplated thereby.
ITEM 2. To approve or disapprove an amendment to SIF's Amended and Restated
Articles of Incorporation (a) to cancel all of the outstanding shares of
the Treasury Fund and convert them into rights to receive shares of the
Money Fund in accordance with the Reorganization Agreement and (b) to
eliminate all of SIF's common stock that constitute the shares of the
Treasury Fund. Such amendment shall be subject to the approval of Proposal
1 above by the Treasury Fund's shareholders.
Only shareholders of record of the Treasury Fund at the close of business
on June 18, 1996, the record date for this Special Meeting, shall be entitled to
vote at the Special Meeting or any adjournments thereof.
<PAGE> 3
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
- --------------------------------------------------------------------------------
AS A SHAREHOLDER OF THE TREASURY FUND, YOU ARE ASKED TO ATTEND THE SPECIAL
MEETING EITHER IN PERSON OR BY PROXY. IF YOU ARE UNABLE TO ATTEND THE SPECIAL
MEETING IN PERSON, WE URGE YOU TO COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. YOUR PROMPT RETURN OF THE PROXY
WILL HELP ASSURE A QUORUM AT THE SPECIAL MEETING AND AVOID ADDITIONAL EXPENSES
TO THE TREASURY FUND ASSOCIATED WITH FURTHER SOLICITATION. SENDING IN YOUR PROXY
WILL NOT PREVENT YOU FROM VOTING YOUR SHARES IN PERSON AT THE SPECIAL MEETING
AND YOU MAY REVOKE YOUR PROXY BY ADVISING THE SECRETARY OF THE TREASURY FUND IN
WRITING (BY SUBSEQUENT PROXY OR OTHERWISE) OF SUCH REVOCATION AT ANY TIME BEFORE
IT IS VOTED.
- --------------------------------------------------------------------------------
By Order of the Board of Directors,
ANN E. OGLANIAN
Secretary
Menomonee Falls, Wisconsin
July 3, 1996
<PAGE> 4
STRONG MONEY MARKET FUND, INC.
STRONG INCOME FUNDS, INC. --
STRONG U.S. TREASURY MONEY FUND
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Toll Free: (800) 368-0930
Device for the Hearing Impaired: (800) 999-2780
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated July 3, 1996
This Combined Proxy Statement and Prospectus is furnished in connection
with the solicitation of proxies by the Board of Directors of the Strong Income
Funds, Inc. ("SIF") in connection with the Special Meeting (the "Special
Meeting") of Shareholders of the Strong U.S. Treasury Money Fund, a series of
SIF (the "Treasury Fund"), to be held at 100 Heritage Reserve, Menomonee Falls,
Wisconsin 53051 on Tuesday, August 27, 1996, at 8:00 a.m. Central Time. At the
Special Meeting, the shareholders of the Treasury Fund will be asked to approve
or disapprove the following two proposals:
1. an Agreement and Plan of Reorganization, dated May 24, 1996 (the
"Reorganization Agreement"), by and among SIF, on behalf of the Treasury
Fund, the Strong Money Market Fund, Inc. (the "Money Fund") and, with
respect to certain matters, Strong Capital Management, Inc. (the
"Advisor"), and the transactions contemplated thereby (the
"Reorganization"); and
2. an amendment to the Amended and Restated Articles of Incorporation of
SIF (the "Proposed Amendment") required in connection with the
Reorganization. Such Amendment shall be subject to the approval of Proposal
1 above by the Treasury Fund's shareholders.
SIF and the Money Fund are open-end management investment companies. The
Treasury Fund is one of the two investment portfolios of SIF, interests in which
portfolios are represented by separate series of SIF's shares. SIF's Board of
Directors, including the non-interested Directors, has determined that it is in
the best interests of the Treasury Fund and its shareholders for the Treasury
Fund to be reorganized into the Money Fund. In reaching that determination, the
Board of Directors considered the small asset size, the lack of expected asset
growth of the Treasury Fund, and the problems related to the lack of economies
of scale. The Board of Directors concluded that each of these disadvantages
would be addressed, to different degrees, by the Reorganization as a result of
combining the assets of the Treasury Fund with the assets of the Money Fund.
Further, the Board of Directors concluded that, among other advantages, the
1
<PAGE> 5
Reorganization will provide Treasury Fund shareholders with an investment
vehicle that has the same investment objectives, substantially similar policies
and restrictions, and the same portfolio manager as the Treasury Fund and is
likely both to reduce the expense ratios affecting Treasury Fund shareholders
and to provide a competitive rate of return.
The Reorganization Agreement provides that, by the closing date for the
Reorganization (the "Closing Date"), which is currently scheduled to take place
on August 30, 1996, the Treasury Fund will liquidate its portfolio, securities
and instruments, and to the extent reasonably possible, its other property and
assets, and that on the Closing Date the proceeds of that liquidation and any
remaining property and assets of the Treasury Fund (less a reserve for certain
expenses and liabilities) will be transferred to the Money Fund. In exchange,
the Money Fund will simultaneously issue its shares ("Money Fund Shares") to the
Treasury Fund. The Treasury Fund will then make a liquidating distribution of
the Money Fund Shares so received to the shareholders of the Treasury Fund, so
that a holder of shares of the Treasury Fund ("Treasury Fund Shares") on the
Closing Date will receive that number of full and fractional Money Fund Shares
having a value equal to the value of the shareholder's Treasury Fund Shares
immediately before the Closing Date.
In addition, with respect to the Proposed Amendment, the Reorganization
Agreement provides that upon the closing of the Reorganization, all of the
outstanding shares of the Treasury Fund will be canceled and converted into
rights to receive the liquidating distribution of Money Fund Shares contemplated
under the Reorganization Agreement, and SIF's Amended and Restated Articles of
Incorporation will be amended to eliminate all of SIF's shares that currently
constitute the Treasury Fund Shares. If shareholders approve the Proposed
Amendment but do not approve the Reorganization Agreement, or if for any other
reason the Reorganization is not completed, the Proposed Amendment will not go
into effect.
This Combined Proxy Statement and Prospectus sets forth concisely the
information that a shareholder of the Treasury Fund should know before voting on
the Reorganization Agreement (and the transactions contemplated thereby) and the
Proposed Amendment, and should be retained for future reference. The
Reorganization Agreement is attached to this Combined Proxy Statement and
Prospectus as Exhibit A and is incorporated herein by reference.
A prospectus for the Money Fund dated March 1, 1996, which describes the
investment program and operation of the Money Fund, accompanies this Combined
Proxy Statement and Prospectus. (A prospectus for the Treasury Fund, dated May
1, 1996, was previously provided to each Treasury Fund shareholder.) Additional
information concerning the Money Fund and the Treasury Fund is set forth in the
Statement of Additional Information for each Fund, dated March 1, 1996, and May
1, 1996, respectively. Moreover, further information concerning
2
<PAGE> 6
the matters considered herein is set forth in the Statement of Additional
Information, dated July 3, 1996. Each of these documents is on file with the
Securities and Exchange Commission ("SEC"), and is available without charge upon
oral or written request by writing or calling the Treasury Fund or Money Fund at
the address and telephone numbers shown on the cover page of this Combined Proxy
Statement and Prospectus. The information contained in each of these
prospectuses and Statements of Additional Information is incorporated herein by
reference.
The Combined Proxy Statement and Prospectus constitutes the proxy statement
of the Treasury Fund for the Special Meeting of Shareholders and the prospectus
for the Money Fund Shares, which have been registered with the SEC and are to be
issued in connection with the Reorganization.
The Notice, this Combined Proxy Statement and Prospectus, and the
accompanying proxy are expected to first be sent to shareholders of the Treasury
Fund on or about July 3, 1996.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS COMBINED PROXY STATEMENT AND PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY STATEMENT AND
PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY SIF, THE TREASURY FUND, THE MONEY FUND, THE
ADVISOR, OR THE FUNDS' DISTRIBUTOR, STRONG FUNDS DISTRIBUTORS, INC.
VOTES REQUIRED: PROPOSALS 1 AND 2 SHALL BE APPROVED BY THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE OUTSTANDING TREASURY FUND SHARES.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY
Proposed Reorganization and Reorganization Agreement.......... 6
Proposed Amendment............................................ 6
Reasons for Reorganization.................................... 7
Federal Income Tax Consequences............................... 8
Overview of the Treasury Fund and the Money Fund.............. 8
Investment Objectives and Policies......................... 8
Certain Service Provider Arrangements...................... 9
Comparative Fee Table...................................... 10
Organization and Purchase and Redemption Policies.......... 11
Risk Considerations........................................... 11
1. TO APPROVE OR DISAPPROVE THE REORGANIZATION AGREEMENT........ 12
Description of the Reorganization Agreement................... 12
Board Consideration........................................... 14
Capitalization................................................ 17
Federal Income Tax Consequences............................... 17
Comparison of the Treasury Fund and the Money Fund............ 18
Investment Objectives and Policies......................... 18
Investment Limitations..................................... 19
Purchase and Redemption Information, Exchange Privileges,
Distributions, Pricing and Organization.................. 19
Other Information.......................................... 20
2. TO APPROVE OR DISAPPROVE THE PROPOSED AMENDMENT.............. 21
Description of the Proposed Amendment......................... 21
Board Consideration........................................... 21
INFORMATION RELATING TO VOTING MATTERS.......................... 22
General Information........................................... 22
Shareholder and Board Approvals............................... 22
Appraisal Rights.............................................. 23
Quorum........................................................ 23
Annual Meetings............................................... 24
ADDITIONAL INFORMATION ABOUT SIF AND EACH FUND.................. 24
Directors and Officers........................................ 24
Financial Information for the Treasury Fund................... 24
Financial Information for the Money Fund...................... 25
FINANCIAL STATEMENTS............................................ 27
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
BUSINESS.................27SHAREHOLDER INQUIRIES................ 27
Exhibit A: Agreement and Plan of Reorganization................. A-1
Exhibit B: Advisor's Investment Review for the Funds............ B-1
Exhibit C: Proposed Amendment to Amended and Restated Articles
of Incorporation of the Strong Income Funds, Inc. ... C-1
</TABLE>
5
<PAGE> 9
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization, the Reorganization Agreement, the parties thereto, the
transactions contemplated thereby and the Proposed Amendment, and is qualified
by reference to the more complete information contained elsewhere in this
Combined Proxy Statement and Prospectus and the Statement of Additional
Information hereto, the Prospectus and Statement of Additional Information of
each Fund, and the Reorganization Agreement dated May 24, 1996, attached to this
Combined Proxy Statement and Prospectus as Exhibit A.
PROPOSED REORGANIZATION AND REORGANIZATION AGREEMENT.
Based upon their evaluations of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the Funds'
Boards of Directors, including all of the non-interested Directors, have
determined that the proposed Reorganization is in the best interests of the
shareholders of each Fund. SIF's Board of Directors recommends the approval of
the Reorganization Agreement by the shareholders of the Treasury Fund at the
Special Meeting.
Subject to shareholder approval, the Reorganization Agreement provides for:
(a) the liquidation of the Treasury Fund's portfolio, securities and instruments
and, to the extent reasonably possible, its other property and assets by no
later than the time of the closing of the Reorganization ("Closing Time"); (b)
the transfer to the Money Fund of the liquidation proceeds and any remaining
property and assets of the Treasury Fund (less a reserve for certain expenses
and liabilities) (the "Treasury Fund Net Assets") in exchange for Money Fund
Shares equal in value to the Treasury Fund Net Assets; (c) the distribution of
the Money Fund Shares to the shareholders of the Treasury Fund in liquidation of
the Treasury Fund; and (d) the cancellation of all outstanding Treasury Fund
Shares and the elimination of all SIF's shares that currently constitute the
Treasury Fund Shares.
As a result of the proposed Reorganization, each shareholder of the
Treasury Fund will become a shareholder of the Money Fund and will hold,
immediately after the Closing Date, Money Fund Shares having a net asset value
equal to the net asset value of the Treasury Fund Shares held by the shareholder
immediately before the Closing Date.
For further information, see "1. To Approve or Disapprove the
Reorganization Agreement."
PROPOSED AMENDMENT.
Based upon their evaluation of the information presented to them, and in
light of their fiduciary duties, the Board of Directors of SIF, including all of
the
6
<PAGE> 10
non-interested Directors, have determined that SIF's Amended and Restated
Articles of Incorporation should be amended in conjunction with shareholder
approval of the Reorganization Agreement in order to effect the two purposes
noted below. First, to cancel all of the outstanding shares of the Treasury Fund
and to convert them into rights to receive the liquidating distribution of Money
Fund Shares contemplated under the Reorganization Agreement. Second, to
eliminate that class of SIF's shares that constitutes the Treasury Fund Shares.
In considering this matter, SIF's Board of Directors was advised that the
Proposed Amendment is necessary in order to effect the two purposes stated
above.
If the shareholders approve the Proposed Amendment but do not approve the
Reorganization Agreement, or if for any other reason the Reorganization is not
completed, the Proposed Amendment will not go into effect. Moreover, if
shareholders approve the Reorganization but do not approve the Proposed
Amendment, the outstanding shares of the Treasury Fund will not be canceled and
automatically converted into rights to receive the liquidating distribution of
Money Fund shares contemplated by the Reorganization Agreement.
For further information, see "2. To Approve or Disapprove the Proposed
Amendment."
REASONS FOR REORGANIZATION.
In light of certain potential benefits and other factors, SIF's Board of
Directors, including the non-interested Directors, has determined that it is in
the best interests of the Treasury Fund and its shareholders to reorganize into
the Money Fund. In making such determination, the Board of Directors considered,
among other things, the small asset size and lack of expected asset growth of
the Treasury Fund, and the resulting problems associated with the inability to
achieve adequate economies of scale, including relatively high expense ratios,
as described more fully below under "1. To Approve or Disapprove the
Reorganization Agreement -- Board Consideration." The Board of Directors felt
that each of these problems would be addressed to different degrees by the
Reorganization.
In addition, among other advantages, SIF's Board of Directors felt that the
Reorganization would: (a) provide an investment option that has the same
investment objectives, substantially similar investment policies and
restrictions, and the same portfolio manager as the Treasury Fund; and (b)
likely reduce the overall expense ratios for the Treasury Fund's shareholders.
Moreover, the Board of Directors noted that while the Reorganization will not
qualify as a tax-free reorganization under the Internal Revenue Code, as amended
(the "Code"), for the reasons discussed below it is expected to have minimal tax
consequences. The Board of Directors also considered the possible risks and
disadvantages of the Reorganization and determined that the Reorganization is
likely to provide benefits to the Treasury Fund and its shareholders that
outweigh any possible risks and disadvantages of the Reorganization. Finally,
SIF's Board of Directors
7
<PAGE> 11
concluded that there are no significant risks or disadvantages to the Treasury
Fund or its shareholders from the Reorganization and that the interests of the
Treasury Fund's shareholders would not be diluted.
Similarly, the Board of Directors of the Money Fund, in approving the
Reorganization, determined that it would be advantageous for the Money Fund and
its current shareholders to acquire substantially all of the assets of the
Treasury Fund in exchange for Money Fund Shares and that the interests of the
Money Fund's existing shareholders would not be diluted.
FEDERAL INCOME TAX CONSEQUENCES.
The Reorganization will not qualify as a tax-free reorganization under the
Code. However, in view of the fact that the Reorganization will involve two
money market funds, it is expected to have minimal tax consequences for the
Funds and for each Fund's shareholders. For further information, see "1. To
Approve or Disapprove the Reorganization Agreement -- Federal Income Tax
Consequences."
OVERVIEW OF THE TREASURY FUND AND THE MONEY FUND.
Investment Objectives and Policies. The investment objectives of the Funds
are the same and the investment policies and restrictions of the Funds are
substantially similar. Each Fund seeks current income, a stable share price, and
daily liquidity. The Funds are designed for investors who seek money market
yields with no anticipated fluctuations in principal. Each Fund restricts its
investments to instruments that meet certain maturity and quality standards
required or permitted by Rule 2a-7 under the Investment Company Act of 1940 (the
"1940 Act.") Because each Fund seeks to maintain a constant net asset value of
$1.00 per share, capital appreciation is not expected to play a role in either
Fund's returns, and dividend income alone will provide its entire investment
return.
The primary distinction between the Funds is that while both restrict their
investments to meet the maturity and quality standards of Rule 2a-7 under the
1940 Act, the Treasury Fund invests only in securities issued directly by the
U.S. Government, whereas the Money Fund invests in high-quality corporate, bank,
and government instruments that present minimal credit risk. More specifically,
the Treasury Fund invests only in the highest-quality U.S. Government securities
issued directly by the U.S. Treasury Department, including: Treasury bills,
Treasury notes and Treasury bonds. The Money Fund invests only in high-quality
corporate, bank and government issued money market instruments. At least 95% of
the Money Funds' total assets are invested in "first-tier" securities and the
balance of its portfolio are invested in "second-tier" securities. First-tier
securities generally are defined as those securities that, at the time of
acquisition, are
8
<PAGE> 12
rated in the highest rating category by at least two nationally recognized
statistical rating organizations ("NRSROs").
Another distinction between the Funds is that under federal law, the
interest income earned from U.S. Treasury securities is exempt from state and
local taxes. As a result, the Treasury Fund's distributions to its shareholders
may be exempt in whole or part from state and local taxes depending on the
conditions imposed in certain states. (See "1. To Approve or Disapprove the
Reorganization Agreement -- Comparison of the Treasury Fund and the Money Fund
- -- Purchase and Redemption Information, Exchange Privileges, Distributions,
Pricing and Organization" below for further information about the tax exempt
nature of distributions relating to U.S. Treasury securities.)
See "Summary -- Risk Considerations" and "1. To Approve or Disapprove the
Reorganization Agreement -- Comparison of the Treasury Fund and the Money Fund
- -- Investment Objectives and Policies" below for a further description of the
similarities and differences between the investment objectives, policies, and
risks of the Treasury Fund and the Money Fund.
Certain Service Provider Arrangements. The Advisor serves as investment
adviser for both Funds and is entitled to receive a monthly management fee from
each Fund, computed on the basis of each Fund's average daily net asset value at
the following annual rates:
<TABLE>
<CAPTION>
Management Fee
(% of average
Fund daily net asset value)
<S> <C>
- ------------------------------------------------------------------------
Treasury Fund .40%
Money Fund .50%
</TABLE>
Attached as Exhibit B to this Combined Proxy Statement and Prospectus are
copies of the Advisor's Investment Review for the Funds, which appeared in the
Treasury Fund's Annual Report for the fiscal year ended December 31, 1995, and
in the Money Fund's Annual Report for the ten months ended October 31, 1995.
The Advisor also serves as transfer agent and dividend disbursing agent for
the Funds. In the case of both Funds, the Advisor is compensated based on an
annual fee of $32.50 per open account, plus out-of-pocket expenses. The Advisor
also receives an annual fee per closed account of $4.20. The fees received and
the services provided as transfer agent and dividend disbursing agent are in
addition to those received and provided by the Advisor in its capacity as
investment adviser to the Funds. In addition, the Advisor provides certain
printing and mailing services for the Funds.
From time to time, the Funds, directly or indirectly through arrangements
with the Advisor, may pay amounts to third parties that provide transfer agent
9
<PAGE> 13
and other administrative services relating to the Funds to persons who
beneficially own interests in the Funds. In such cases, the Funds will not pay
fees based on the number of beneficial owners at a rate that is greater than the
rate the Funds are currently paying the Advisor for providing these services to
Fund shareholders.
Custodial services are provided to the Funds by Firstar Trust Company. With
respect to the Money Fund only, the Custodian has entered into a sub-custodial
arrangement with First National Bank of Chicago with respect to certain U.S.
dollar-denominated foreign money market securities purchased by the Money Fund.
Strong Funds Distributors, Inc. (the "Distributor"), an indirect subsidiary
of the Advisor, serves as the distributor of each Fund's shares. Since the Funds
are "no-load" funds, no sales commissions are charged on the purchase of Fund
shares. The Distributor bears certain printing, advertising, and other costs
attributable to the distribution of each Fund's shares.
Comparative Fee Table. The following table sets forth the current fees and
expenses of the Treasury Fund as of December 31, 1995, and of the Money Fund as
of October 31, 1995. Excluding extraordinary expenses, the current fees and
expenses of the Money Fund are expected to remain unchanged as a result of the
Reorganization.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
<TABLE>
<CAPTION>
Treasury Fund Money Fund
- ---------------------------------------------------------------------
<S> <C> <C>
Management Fees 0.40% 0.50%
12b-1 Fees NONE NONE
Other Operating Expenses 0.54% 0.23%
Total Fund Operating Expenses* 0.94% 0.73%
</TABLE>
- ---------------
* From time to time, the Advisor may voluntarily waive its management fee and/or
absorb certain expenses for the Funds. During each Fund's prior fiscal year,
the Advisor waived a portion of its management fee and absorbed certain
expenses. Therefore, the other operating expenses for the Funds have been
restated for the periods specified above to include such management fees
and/or expenses. THE ACTUAL TOTAL FUND OPERATING EXPENSES INCURRED FOR THE
TREASURY FUND AND THE MONEY FUND DURING EACH FUND'S PRIOR FISCAL YEAR, AFTER
WAIVER AND ABSORPTIONS, WERE 0.76% AND 0.04%, RESPECTIVELY. Excluding
extraordinary expenses, each Fund's "Total Operating Expenses" as indicated
above is substantially consistent with its current operating expenses.
10
<PAGE> 14
EXAMPLE: An investor in the Treasury Fund or the Money Fund would pay the
following expenses on a $1,000 investment, assuming (1) 5% annual return, and
(2) redemption at the end of the following periods.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Treasury Fund $ 10 $30 $52 $115
Money Fund $ 7 $23 $41 $ 91
</TABLE>
The Example is based on each Fund's "Total Fund Operating Expenses" before
any waivers and absorptions, as described above. PLEASE REMEMBER THAT THE
EXAMPLE SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF PAST OR FUTURE EXPENSES
AND THAT ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. The assumption
in the Example of 5% annual return is required by regulations of the SEC
applicable to all mutual funds. The assumed 5% annual return is not a prediction
of, and does not represent, the projected or actual performance of a Fund's
shares.
Organization and Purchase and Redemption Policies. The Treasury Fund is a
series of common stock of SIF, a Wisconsin corporation. The Money Fund is a
Wisconsin corporation. The purchase, redemption, dividend, and other practices
and procedures, including exchange rights, of the Funds are virtually identical,
as described further below under "1. To Approve or Disapprove the Reorganization
Agreement -- Comparison of the Treasury Fund and the Money Fund."
RISK CONSIDERATIONS.
The risks involved in investing in each Fund are in many respects similar,
given the similarities in the investment objectives and the types of securities
in which they may invest. There are differences, however, between certain of the
risk factors associated with the Treasury Fund and the risk factors associated
with the Money Fund.
Issuer Creditworthiness. Both Funds may only invest in high-quality
securities that present minimal credit risk, provided that they meet the quality
and maturity standards of Rule 2a-7 under the 1940 Act. While all money market
instruments can change in value for various reasons, including changes in
interest rates, unlike the Treasury Fund the instruments in which the Money Fund
invests may be subject to the risk of changes in the creditworthiness of the
issuer.
Mortgage and Asset-backed Securities. The Money Fund may invest in mortgage
and asset-backed securities that meet the maturity and quality criteria
specified in Rule 2a-7 under the 1940 Act. The yield characteristics of mortgage
and asset-backed securities differ from those of traditional debt obligations.
Among the principal differences are that interest and principal payments are
made more frequently on mortgage and asset-backed securities, usually monthly,
and that principal may be prepaid at any time, because the underlying loans or
11
<PAGE> 15
assets generally may be prepaid at any time. Changes in the actual or expected
prepayment rate will affect the yield to maturity of these securities. Moreover,
if the Money Fund purchases these securities at a premium, accelerated
prepayments may cause a loss of principal, if the premium has not been fully
amortized at the time the principal is repaid in full.
The Money Fund also may invest in stripped mortgage- or asset-backed
securities, which receive differing proportions of the interest and principal
payments from the underlying assets. The market value of such securities
generally is more sensitive to changes in prepayment and interest rates than is
the case with traditional mortgage- and asset-backed securities, and in some
cases the market value may be extremely volatile.
Foreign Securities. The Money Fund may invest up to 25% of its net assets
in U.S. dollar denominated foreign money market instruments. Foreign investments
involve special risks, including: expropriation, confiscatory taxation, and
withholding taxes on dividends and interest; less extensive regulation of
foreign brokers, securities markets, and issuers; less publicly available
information and different accounting standards; possible delays in settlement in
foreign securities markets, limitations on the use or transfer of assets, and
difficulty of enforcing obligations in other countries; and diplomatic
developments and political or social instability. In addition, many foreign
money market instruments may be less liquid and their prices more volatile than
comparable U.S. securities.
1. TO APPROVE OR DISAPPROVE THE REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization may be consummated
are set forth in the Reorganization Agreement. Significant provisions of the
Reorganization Agreement are summarized below; however, this summary is
qualified in its entirety by reference to the Reorganization Agreement, a copy
of which is attached as Exhibit A to this Combined Proxy Statement and
Prospectus and incorporated herein by reference.
DESCRIPTION OF THE REORGANIZATION AGREEMENT.
The Reorganization Agreement provides that, prior to the Closing Time, the
Treasury Fund will dispose of all of its portfolio securities and instruments
and, to the extent reasonably possible, liquidate its other property and assets
at their then-current fair market value, as determined in accordance with the
Treasury Fund's prospectus and Statement of Additional Information. At the
Closing Date, the Treasury Fund will transfer to the Money Fund, free and clear
of all liens, encumbrances, and claims, the liquidation proceeds and all of the
Treasury Fund's remaining property and assets, except for cash or bank deposits
(the "Reserve Account") in an amount necessary: (a) to pay its costs and
expenses of carrying out this Agreement (including but not limited to fees of
counsel and
12
<PAGE> 16
accountants, its income dividend payable prior to the Closing Date, and expenses
of its liquidation contemplated under the Reorganization Agreement); (b) to
discharge all of its unpaid liabilities on its books and records at the Closing
Date; and (c) to pay such contingent liabilities, if any, that the Board of
Directors of the Treasury Fund may reasonably deem to exist against the Treasury
Fund at the Closing Date. (The liquidation proceeds and other property and
assets to be transferred to the Money Fund are referred to herein as the
"Treasury Fund Net Assets.") Upon the satisfaction or other resolution of all
such liabilities and obligations, any amount remaining from the Reserve Account
will be transferred to the Money Fund.
In exchange for the transfer to the Money Fund of the Treasury Fund Net
Assets as described, the Money Fund will simultaneously issue at the Closing
Date full and fractional Money Fund Shares to the Treasury Fund for distribution
pro rata by the Treasury Fund to its shareholders. The number of Money Fund
Shares so issued by the Money Fund will have an aggregate net asset value equal
to the value of the Treasury Fund Net Assets on the Closing Date.
Following the close of business on the Closing Date, the Treasury Fund will
distribute pro rata to its shareholders the Money Fund Shares received by the
Treasury Fund in liquidation thereof. Each shareholder owning Treasury Fund
Shares at the Closing Date will receive an amount of Money Fund Shares equal to
the value of their Treasury Fund Shares, plus the right to receive any dividends
or distributions which were declared before the Closing Date but that remained
unpaid at that time on the Treasury Fund Shares.
The stock transfer books of the Treasury Fund will be permanently closed as
of the close of business on the day immediately preceding the Closing Date.
Redemption requests, including sharedrafts, received thereafter by the Treasury
Fund will be deemed to be redemption requests for Money Fund Shares. If any
Treasury Fund Shares held by a former Treasury Fund shareholder are represented
by a share certificate, the certificate must be surrendered to the Money Fund's
transfer agent for cancellation, or verification of such certificate's loss and
indemnification with respect to such loss must be established, before the Money
Fund Shares issued to the shareholder in the Reorganization can be redeemed or
transferred.
The Reorganization with respect to the Treasury Fund is subject to a number
of conditions, including, among other things: (a) approval of the Reorganization
Agreement and the transactions contemplated thereby described in this Combined
Proxy Statement and Prospectus by the Treasury Fund's shareholders; (b) the
receipt of the legal opinion described in Section 7 of the Reorganization
Agreement that the Money Fund Shares issued to Treasury Fund shareholders in
accordance with the terms of the Reorganization Agreement will be validly
issued, fully paid, and non-assessable; (c) the receipt of certain certificates
from the parties concerning the continuing accuracy of the representations and
warranties in the Reorganization Agreement and other matters; and
13
<PAGE> 17
(d) the parties' performance of their respective agreements and undertakings in
the Reorganization Agreement. Assuming satisfaction of the conditions in the
Reorganization Agreement, the Closing Date will be on August 30, 1996, or such
other date as is agreed to by the parties.
The Reorganization Agreement provides that the parties shall each be
responsible for the payment of their own expenses incurred in connection with
the Reorganization (which expenses include the fees and disbursements of
attorneys and auditors and proxy printing and solicitation expenses) and any
related transfer fees and brokerage fees.
The Reorganization Agreement and the Reorganization described herein may be
abandoned at any time prior to the Closing Date by the mutual consent of the
parties to the Reorganization Agreement. In such event, there shall be no
liability for damages on the part of either Fund, or their respective Boards of
Directors or officers, but each shall bear its own expenses incidental to the
preparation and carrying out of the Reorganization Agreement. The Reorganization
Agreement provides further that at any time prior to or after approval of the
Reorganization Agreement by the Treasury Fund's shareholders, the Funds, by
written agreement, may amend, modify, or supplement the Reorganization
Agreement. The Reorganization Agreement further provides that no such amendment,
modification, or supplement may have the effect of changing the provisions for
determining the number of Money Fund Shares to be distributed to Treasury Fund
shareholders under the Reorganization Agreement to the detriment of the Treasury
Fund shareholders, unless the Treasury Fund shareholders approve such change or
unless the amendment merely changes the Closing Date.
BOARD CONSIDERATION.
Based upon their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the Board of
Directors of the Treasury Fund has unanimously determined that the proposed
Reorganization is in the best interest of the shareholders of the Treasury Fund,
and recommends approval of the Reorganization Agreement by such shareholders at
the Special Meeting. The following is a summary of the information that was
presented to, and considered by, the Board of Directors in making their
determination.
Initially, the Board of Directors, including the non-interested Directors,
reviewed several areas of concern regarding the Treasury Fund. The Board of
Directors considered that (a) the relatively small asset size of the Treasury
Fund had prevented it from realizing significant economies of scale in reducing
its expense ratio (absent waivers of fees and reimbursement of expenses by the
Advisor); (b) the Treasury Fund's perceived universe of competitors includes
mutual funds that can invest in securities other than U.S. Government securities
and thereby achieve higher returns; and (c) for certain more recent periods the
Treasury Fund's performance had lagged its competitors. Accordingly, the Board
14
<PAGE> 18
of Directors considered that there was little expectation that the Treasury
Fund's assets would increase significantly, thereby reducing its expense ratio.
The Board of Directors also considered as alternatives: (a) the complete
liquidation and dissolution of the Treasury Fund; and (b) the reorganization of
the Treasury Fund into another one of the Strong Mutual Funds. The Board of
Directors carefully considered the advantages and disadvantages of each
alternative and, in particular, the likelihood that either alternative would
address the asset size and growth problems of the Treasury Fund and the tax
consequences and other effects that each alternative would have on the Treasury
Fund shareholders.
The alternative that the Board of Directors felt offered the greatest
likelihood of addressing the asset size and growth problem and would be most
beneficial to the Treasury Fund shareholders was the reorganization of the
Treasury Fund into an investment company with identical investment objectives
and similar investment policies and restrictions. At a combined meeting of the
Boards of Directors of the Funds held on April 24, 1996, the Board of Directors
of the Treasury Fund considered the proposed Reorganization. During the course
of their review and deliberation, the Directors evaluated the potential benefits
and detriments to the Treasury Fund and its shareholders. The Directors
requested and received from the Advisor written materials containing relevant
information about the Money Fund and the proposed Reorganization, including fee
structure and expense information, and yield and comparative performance data.
The Advisor also provided the Directors with historical asset growth
information, comparative expense ratio information, analyses of the benefits to
the shareholders of the Treasury Fund resulting from the proposed
Reorganization, and a variety of other information relevant to the consideration
of the proposed Reorganization. In this regard, the Board of Directors evaluated
the current actual and contractual expense levels of the Money Fund and compared
such expense levels with the current actual and contractual expense levels of
the Treasury Fund and considered the anticipated expenses and charges of the
Money Fund after the Reorganization that would be borne directly and indirectly
by the shareholders of the Treasury Fund.
The Board of Directors also considered the additional efficiencies and
benefits for shareholders of the Treasury Fund that are expected to result from
the Reorganization. These benefits include potential asset growth with resulting
economies of scale, such as lower per share expenses.
The Board of Directors considered the compatibility of the Funds'
investment objectives and policies and restrictions. In this regard, the Board
of Directors specifically considered the potential and actual additional risks
that shareholders of the Treasury Fund would be subject to as shareholders of
the Money Fund. The Board of Directors also considered those provisions of the
Reorganization Agreement relating to the price of shares to be exchanged.
15
<PAGE> 19
The Board of Directors further noted that the Reorganization would result
in continuity of investment advisory, transfer agent, and distributor services,
since both Funds currently employ the Advisor as investment adviser and transfer
agent and the Distributor as distributor. The Board of Directors further noted
that the terms of the agreements governing the provision of those services to
the Funds are the same. The Board of Directors also noted that the purchase,
redemption, and shareholder services offered by the Funds are essentially
identical, and that, therefore, the Reorganization would result in continuity in
the level of such services to the Treasury Fund's shareholders. The Board of
Directors noted further that no sales or other charges would be imposed on any
shares of the Money Fund acquired by shareholders of the Treasury Fund in
connection with the Reorganization and that it was the Money Fund's intention to
remain a "no-load" fund.
Moreover, the Board of Directors considered the fact that at all times
throughout the process, up until the Closing Date, current Treasury Fund
shareholders would continue to have the ability to redeem their Treasury Fund
Shares and to make a new and independent investment decision.
Finally, the Board of Directors of the Treasury Fund reviewed the terms of
the Reorganization Agreement. The Board also considered the federal income tax
consequences of the proposed Reorganization and, specifically, the fact that the
Reorganization is not expected to qualify as a tax-free reorganization under the
Code. However, in view of the fact that the Reorganization involves two money
market funds, the Board was advised that the Reorganization is expected to have
minimal tax consequences for the Funds and for each Fund's shareholders. (For
further information, see "Federal Income Tax Consequences" below.)
Based upon their evaluation of the relevant information presented to them,
and in light of their fiduciary duties under federal and state law, the Treasury
Fund's Board of Directors unanimously determined that the proposed
Reorganization was in the best interests of the Treasury Fund and its
shareholders and that the interests of the Treasury Fund shareholders will not
be diluted as a result of the proposed Reorganization, and recommended the
approval of the Reorganization Agreement by shareholders at the Special Meeting.
Similarly, at this same combined meeting of the Boards of Directors of the
Funds held on April 24, 1996, the Board of Directors of the Money Fund
considered the proposed Reorganization with respect to the Money Fund. Based
upon their evaluation of the relevant information provided to them, and in light
of their fiduciary duties under federal and state law, the Board of Directors
unanimously determined that (a) the proposed Reorganization was in the best
interests of the Money Fund and its shareholders and (b) the interests of the
existing Money Fund shareholders will not be diluted as a result of the proposed
Reorganization.
16
<PAGE> 20
CAPITALIZATION.
Because the Treasury Fund will be combined in the Reorganization with the
Money Fund, the total capitalization of the Money Fund after the Reorganization
is expected to be greater than the current capitalization of the Treasury Fund.
The following table sets forth as of February 29, 1996: (i) the capitalization
of the Treasury Fund; (ii) the capitalization of the Money Fund; and (iii) the
pro forma capitalization of the Money Fund as adjusted to give effect to the
Reorganization. If the Reorganization is consummated, the capitalization of the
Money Fund is likely to be different at the Closing Date as a result of daily
share purchase and redemption activity in the Treasury Fund and the Money Fund.
<TABLE>
<CAPTION>
Pro Forma
Treasury Fund Money Fund Combined
<S> <C> <C> <C>
- -------------------------------------------------------------------------
Total Net Assets $36,739,721 $1,998,612,246 $2,035,351,967
Shares Outstanding 36,739,721 1,998,612,246 2,035,351,967
Net Asset Value Per
Share $1.00 $1.00 $1.00
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES.
The Reorganization is not expected to qualify as a tax-free reorganization
under the Code. Nevertheless, because the Reorganization involves two money
market funds, it is expected to have minimal tax consequences to the Funds and
the Treasury Fund shareholders. Because money market funds seek to maintain a
stable net asset value, it is expected that the Treasury Fund will realize
minimal gain or loss on the liquidation of its portfolio securities and
instruments and other property and assets and the exchange of the Treasury Fund
Net Assets for Money Fund Shares. Likewise, it is expected that the Treasury
Fund shareholders will realize no gain or loss on the conversion of the Treasury
Fund Shares with a value of $1 for Money Fund Shares with a value of $1.
However, Treasury Fund shareholders will not be able to include the holding
period for their Treasury Fund Shares in their holding period for the Money Fund
Shares received as a consequence of the Reorganization. In addition, Treasury
Fund shareholders will have an initial tax basis in their Money Fund Shares
equal to the fair market value of those Money Fund Shares on the Closing Date.
The Funds have not sought a tax ruling from the Internal Revenue Service
("IRS"). Shareholders should consult their own tax advisers concerning the
potential tax consequences to them, including state and local income tax
consequences.
17
<PAGE> 21
COMPARISON OF THE TREASURY FUND AND THE MONEY FUND
The investment objectives of both Funds are identical and the investment
policies and restrictions of the Funds are, in many respects, substantially
similar. There are, however, some noteworthy differences. The following
discussion summarizes some of the more significant similarities and differences
in the investment policies of the Funds and is qualified in its entirety by the
discussion elsewhere herein, and in the prospectus and Statement of Additional
Information of each Fund which is incorporated herein by reference.
Investment Objectives and Policies. The investment objectives of the Funds
are fundamental, meaning that they may not be changed without a vote of the
holders of a majority of the particular Fund's outstanding shares. This section
describes certain policies that are common to the Treasury Fund and the Money
Fund and certain noteworthy differences.
Each Fund seeks current income, a stable share price, and daily liquidity.
The Funds are designed for investors who seek money market yields, with no
anticipated fluctuations in principal. Because each Fund seeks to maintain a
constant net asset value of $1.00 per share, capital appreciation is not
expected to play a role in either Fund's returns, and dividend income alone will
provide its entire investment return. All money market instruments, even the
highest quality U.S. government securities, can change in value for a number of
reasons, including when interest rates change dramatically. THE FUNDS CANNOT
GUARANTEE THAT THEY WILL ALWAYS BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF
$1.00 PER SHARE. An investment in neither Fund is insured or guaranteed by the
U.S. Government.
Each Fund limits its investments to those instruments that meet the
maturity and quality standards required or permitted by Rule 2a-7 under the 1940
Act for money market funds. Accordingly, each Fund buys only securities with
remaining maturities of thirteen months or less and maintains an average
portfolio maturity of ninety days or less. Each Fund may invest up to 10% of its
net assets in illiquid securities. Each Fund may invest without limitation in
securities purchased on a when issued or delayed delivery basis.
The primary distinction between the Funds is that the Treasury Fund invests
only in securities issued directly by the U.S. Government, whereas the Money
Fund invests in high-quality corporate, bank, and government instruments that
present minimal credit risk. The government securities in which the Treasury
Fund invests include: Treasury bills, which have initial maturities of one year
or less; Treasury notes, which have initial maturities of between one and ten
years; and Treasury bonds, which have initial maturities of ten years or more.
All U.S. Treasury securities are guaranteed as to the timely payment of
principal and interest by the full faith and credit of the U.S. Government. This
guarantee,
18
<PAGE> 22
however, does not apply to the market value of the securities or to the share
price of the Treasury Fund.
In compliance with Rule 2a-7 under the 1940 Act, the Money Fund buys only
U.S. dollar-denominated securities that represent minimal credit risks and are
"high quality." The Money Fund will invest at least 95% of its total assets in
"first-tier" securities, generally defined as those securities that, at the time
of acquisition, are rated in the highest rating category by at least two NRSROs
or, if unrated, are determined by the Advisor to be of comparable quality. The
balance of the Money Fund, up to 5% of its total assets, may be invested in
securities that are considered "second-tier" securities, generally defined as
those securities that, at the time of acquisition, are rated in the
second-highest category or are determined by the Advisor to be of comparable
quality.
Unlike the Treasury Fund, the Money Fund may invest in mortgage-backed and
asset-backed securities (including stripped mortgage-backed or asset-backed
securities) and U.S. dollar-denominated foreign money market instruments, and
may utilize repurchase agreements as described in the prospectus and Statement
of Additional Information of the Money Fund.
Please see the prospectus for each Fund for further information concerning
each Fund's investment policies and risks.
Investment Limitations. Neither the Money Fund nor the Treasury Fund may
change its fundamental investment limitations without the affirmative vote of
the holders of a majority of its outstanding shares (as defined in the 1940
Act). However, investment limitations which are non-fundamental policies ("non-
fundamental" or "operating" policies) of the Funds may be changed by their
respective Boards of Directors without shareholder approval. Except as described
above, the investment limitations of the Money Fund and the Treasury Fund are
identical and are set forth in the Statements of Additional Information for the
Funds. Please see the Statement of Additional Information for further
information concerning each Fund's investment limitations.
Purchase and Redemption Information, Exchange Privileges, Distributions,
Pricing, and Organization. As of April 1, 1996, the Treasury Fund was closed to
new investors and additional investment by existing investors, except in certain
limited circumstances. Accordingly, existing Treasury Fund shareholders may only
acquire additional Treasury Fund Shares through the reinvestment of dividends
and other distributions. The purchase price for shares acquired through such
reinvestment shall be the net asset price determined as of the close of business
on the record date of the dividend or distribution.
Money Fund Shares are sold on a continuous basis by the Distributor and may
be purchased directly by individuals and institutions or by broker-dealers,
financial institutions, or other service providers. Money Fund Shares are sold
on a 100% no-load basis, meaning that shares may be purchased, redeemed, and
19
<PAGE> 23
exchanged directly at net asset value without paying a sales charge. Broker-
dealers, financial institutions, and other service providers, however, may
charge an administrative fee on the purchase or redemption of Money Fund Shares.
The purchase price will be net asset value next determined after the Money Fund
receives the shareholder's request in proper form.
No sales charge will be imposed on the issuance of Money Fund Shares in
connection with the Reorganization.
The minimum initial investment for the Money Fund is $1,000 per account and
$250 for UGMA/UTMA Accounts. The minimum initial investment amount is waived for
shareholders who enroll in the Money Fund's Automatic Investment Plan. The
minimum subsequent investment for the Money Fund is $50 per account. Purchase
orders for shares of the Money Fund are effected on any "business day", that is,
any day on which the New York Stock Exchange is open for trading. The Money Fund
offers an automatic investment plan, payroll direct deposit plan, automatic
exchange plan, and systematic withdrawal plan in connection with the purchase
and redemption of its shares.
The Funds' policies, procedures, and restrictions concerning share
redemption and exchange, dividend payment, and the determination of net asset
value are identical, as set forth in the prospectus for each Fund.
Under Federal law, the interest income earned from U.S. Treasury securities
is exempt from state and local taxes. All states allow mutual funds to "pass
through" that exemption to their shareholders, although there are conditions to
this treatment in some states. Because the Money Fund, unlike the Treasury Fund,
does not invest exclusively in U.S. Treasury securities, a smaller percentage of
the Money Fund's dividends will be subject to that exemption from state and
local taxation.
Please refer to each prospectus for further information on these subjects.
Other Information. SIF and the Money Fund are registered as open-end
management investment companies under the 1940 Act, and the Treasury Fund is one
of SIF's investment portfolios. Currently, the Money Fund offers one investment
portfolio and SIF offers two investment portfolios.
SIF and the Money Fund are organized as Wisconsin corporations and, as
such, are subject to the provisions of their respective Articles of
Incorporation and Bylaws and to the Wisconsin Business Corporation Law. The
attributes of a share of common stock of each Fund are identical.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE FOR PROPOSAL 1.
20
<PAGE> 24
2. TO APPROVE OR DISAPPROVE THE PROPOSED AMENDMENT.
Summarized below are the reasons for the Proposed Amendment and the
substance of the Proposed Amendment. However, this summary is qualified in its
entirety by reference to the Proposed Amendment, a copy of which is attached as
Exhibit C to this Combined Proxy Statement and Prospectus and incorporated
herein by reference.
DESCRIPTION OF PROPOSED AMENDMENT.
The Proposed Amendment has two purposes: (1) on the Closing Date of the
Reorganization, to cancel all of the outstanding shares of the Treasury Fund and
to automatically convert them into the right to receive full or fractional Money
Fund Shares with a net asset value equal to the value of the Treasury Fund
Shares, as described in the Reorganization Agreement; and (2) following the
Closing Date, to eliminate all of SIF's common stock constituting the Treasury
Fund Shares. If the shareholders approve the Proposed Amendment but do not
approve the Reorganization Agreement, or if for any other reason the
Reorganization is not completed, the Proposed Amendment will not go into effect.
Moreover, if the shareholders approve the Reorganization but do not approve the
Proposed Amendment, the above-stated purposes of the Proposed Amendment in
connection with the Reorganization will not be realized.
BOARD CONSIDERATION.
Based on their evaluation of the information presented to them, and in
light of their fiduciary duties, the Board of Directors of SIF have unanimously
determined that the Proposed Amendment is in the best interest of the
shareholders of the Treasury Fund and recommend the approval of the Proposed
Amendment at the Special Meeting.
The Board was advised by counsel that the Proposed Amendment would be
necessary on the Closing Date to cancel the Treasury Fund's outstanding shares
in connection with the Reorganization of the Treasury Fund and the distribution
of Money Fund Shares to the Treasury Fund's shareholders, as contemplated under
the Reorganization Agreement, and to eliminate all of SIF's common stock
constituting the Treasury Fund Shares following the Closing Date.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE FOR PROPOSAL 2.
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<PAGE> 25
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION.
This Combined Proxy Statement and Prospectus is being furnished in
connection with the solicitation of proxies by SIF's Board of Directors in
connection with the Special Meeting. It is expected that the solicitation of
proxies will be primarily by mail. Officers and service contractors of the Funds
may also solicit proxies by telephone, telegraph, or personal interview. Any
shareholder giving a proxy may revoke it at any time before it is exercised by
submitting to SIF a written notice of revocation or a subsequently executed
proxy or by attending the Special Meeting and voting in person.
Only shareholders of record of the Treasury Fund at the close of business
on June 18, 1996, will be entitled to vote at the Special Meeting. On that date
there were outstanding and entitled to be voted 21,716,192 shares of the
Treasury Fund. Each share or fraction thereof is entitled to one vote or
fraction thereof.
If the accompanying proxy is executed and returned in time for the Special
Meeting, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Special Meeting or any
adjournment thereof. For information on adjournment of the Special Meeting, see
"Quorum" below.
SHAREHOLDER AND BOARD APPROVALS.
The Reorganization Agreement (and the transactions contemplated thereby)
and the Proposed Amendment are being submitted at the Special Meeting for
approval by the shareholders of the Treasury Fund. The approval of the holders
of a majority of the outstanding Treasury Fund Shares is required for the
approval of each proposal, in accordance with the provisions of the Amended and
Restated Articles of Incorporation of the Treasury Fund, and the requirements of
the Wisconsin Business Corporation Law. Abstentions will have the same effect as
casting a vote against the proposal.
The vote of the shareholders of the Money Fund and of SIF's other
investment portfolio is not being solicited, because their approval or consent
is not required for the Reorganization to be consummated or the Proposed
Amendment to be approved.
The approval of the Reorganization Agreement by the respective Boards of
Directors of SIF and of the Money Fund is discussed above under "1. To Approve
or Disapprove the Reorganization Agreement -- Board Consideration." The approval
of the Proposed Amendment by the Board of Directors of SIF is discussed above
under "2. To Approve or Disapprove the Proposed Amendment -- Board
Consideration."
22
<PAGE> 26
On June 18, 1996, no one beneficially owned 5% or more of the Treasury or
Money Fund's outstanding shares.
On June 18, 1996, the directors and officers of the Money Fund, as a group,
beneficially owned less than 1% of the outstanding shares of the Money Fund. On
June 18, 1996, the directors and officers of the Treasury Fund, as a group,
beneficially owned less than 1% of the outstanding shares of the Treasury Fund.
APPRAISAL RIGHTS.
If the Reorganization is approved by the shareholders of the Treasury Fund
at the Special Meeting, in accordance with Sections 180.1301-1331 of the
Wisconsin Business Corporation Law, shareholders will have the right to dissent
and obtain payment of fair value for their Treasury Fund Shares. "Fair value",
under the Wisconsin Business Corporation Law, as applied to the Reorganization,
means the value of the Treasury Fund Shares immediately before the Closing of
the Reorganization. However, the exercise of such appraisal rights by
shareholders is subject to the forward pricing requirements of Rule 22c-1 under
the 1940 Act, and that Rule supersedes contrary provisions of state law.
Consequently, shareholders have the right to redeem their Treasury Fund
Shares at net asset value until the Closing Date and thereafter former Treasury
Fund shareholders may redeem their Money Fund Shares acquired in the
Reorganization at net asset value, subject to the forward pricing requirements
of Rule 22c-1 under the 1940 Act.
QUORUM.
In the event that a quorum is not present at the Special Meeting, or in the
event that a quorum is present at the Special Meeting but sufficient votes to
approve the Reorganization Agreement and the transactions contemplated thereby
are not received, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of those
shares affected by the adjournment that are represented at the Special Meeting
in person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR the Reorganization
Agreement in favor of such adjournments, and will vote those proxies required to
be voted AGAINST such proposal against any adjournment. A quorum is constituted
by the presence in person or by proxy of the holders of more than 50% of the
outstanding Treasury Fund Shares. Proxies properly executed and marked with a
negative vote or an abstention, or broker non-votes, will be considered to be
present at the Special Meeting for the purposes of determining the existence of
a quorum for the transaction of business. Broker non-votes exist where a broker
proxy indicates that the broker is not authorized to vote on a particular
proposal.
23
<PAGE> 27
ANNUAL MEETINGS.
The Money Fund does not presently intend to hold annual meetings of
shareholders for the election of directors and other business unless and until
such time as less than a majority of the directors holding office have been
elected by the shareholders, at which time the directors then in office will
call a shareholders' special meeting for the election of directors. Shareholders
have the right to call a special meeting of the shareholders to consider any
matter on which the shareholders properly may act, provided that such a meeting
has been requested in writing by the holders of record of 10% or more of the
Money Fund's outstanding shares of common stock entitled to vote on any issue
proposed to be considered at the special meeting and upon the payment to the
Fund by such shareholders of the reasonable estimated costs of preparing and
mailing the notice of the special meeting. To the extent required by law, the
Money Fund will assist in shareholder communications on such matters.
ADDITIONAL INFORMATION ABOUT SIF AND EACH FUND
SIF, the Treasury Fund and the Money Fund are each subject to the
informational requirements of the Securities Exchange Act of 1934 and the 1940
Act, as applicable, and, in accordance with such requirements, files proxy
materials, reports, and other information with the SEC. These materials can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, at the offices of the Money Fund
listed on the first page hereof, and at the SEC's Regional Offices at 7 World
Trade Center, Room 1300, New York, New York 10007, and at the Everett McKinley
Dirksen Building, 219 S. Dearborn Street, Room 1204, Chicago, Illinois 60604.
Copies of such materials can also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
DIRECTORS AND OFFICERS
The current directors and officers of the Money Fund will continue as
directors and officers of the Money Fund following the Reorganization. The Money
Fund's officers and directors also are officers and directors of SIF and will
continue in such positions following the Reorganization. Information concerning
such persons is contained in the Statement of Additional Information for each
Fund.
FINANCIAL INFORMATION FOR THE TREASURY FUND
Below are financial highlights for the Treasury Fund as of the fiscal year
ended December 31, 1995. It is based on a single share outstanding through such
24
<PAGE> 28
period. This information is derived from financial statements audited by
Coopers & Lybrand L.L.P., independent accountants to the Funds. The data should
be read in conjunction with the financial statements, related notes, and Coopers
& Lybrand L.L.P.'s report thereon which are included in the Annual Report for
the Treasury Fund incorporated by reference in the Statement of Additional
Information, dated July 3, 1996, for this Combined Proxy Statement and
Prospectus.
TREASURY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER SHARE DATA AND RATIOS FOR A
SHARE OUTSTANDING THROUGHOUT THE
PERIOD INDICATED: 1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.04 0.03 0.04 0.06
Dividends from Net Investment
Income (0.05) (0.04) (0.03) (0.04) (0.06)
------- ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return +4.9% +3.8% +2.9% +3.7% +5.8%
Net Assets, End of Period (In
Thousands) $42,660 $67,527 $41,851 $29,390 $20,431
Ratio of Expenses to Average Net
Assets 0.8% 0.2% 0.2% 0.3% 0.3%
Ratio of Expenses to Average Net
Assets Without Waivers and
Absorptions 0.9% 0.8% 1.0% 0.9% 1.0%
Ratio of Net Investment Income
to Average Net Assets 4.8% 3.8% 2.9% 3.6% 5.4%
</TABLE>
FINANCIAL INFORMATION FOR THE MONEY FUND
Below are financial highlights for the Money Fund as of the ten months
ended October 31, 1995. (During 1995 the Money Fund's fiscal year-end was
changed from December 31 to October 31.) It is based on a single share
outstanding through such period. This information is derived from financial
statements for such period audited by Coopers & Lybrand L.L.P., independent
accountants to the Funds. The data should be read in conjunction with the
financial statements, related notes, and Coopers & Lybrand L.L.P.'s report
thereon which are included in the Annual Report for the Money Fund incorporated
by reference in the Statement of Additional Information dated, July 3, 1996, for
this Combined Proxy Statement and Prospectus.
25
<PAGE> 29
MONEY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PER SHARE DATA AND
RATIOS FOR A
SHARE OUTSTANDING
THROUGHOUT THE
PERIOD INDICATED: 1995(a) 1994 1993 1992 1991 1990 1989 1988 1987 1986
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment
Income 0.05 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06 0.06
Dividends From Net
Investment Income (0.05) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06) (0.06)
---------- -------- -------- -------- -------- -------- -------- -------- -------- -------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ======== ======== ======== ======== ======== ======== ======== ======== =======
Total Return +5.2% +4.0% +2.9% +3.7% +6.1% +8.1% +9.2% +7.5% +6.4% +6.5%
Net Assets, End of
Period (In
Thousands) $1,934,071 $540,983 $329,988 $390,003 $533,869 $768,870 $829,332 $464,459 $194,963 $26,363
Ratio of Expenses
to Average Net
Assets 0.0%* 0.6% 0.7% 0.8% 0.7% 0.7% 0.7% 1.1% 0.8% 0.8%
Ratio of Expenses
to Average Net
Assets Without
Waivers and
Absorptions 0.7%* 0.9% 1.0% 1.1% 1.0% 0.9% 1.0% 1.1% 1.1% 1.3%
Ratio of Net
Investment Income
to Average Net
Assets 6.1%* 4.0% 2.9% 3.7% 6.0% 7.8% 8.8% 7.4% 6.6% 5.8%
</TABLE>
- ---------------
* Calculated on an annualized basis.
(a) For the ten-month period ended October 31, 1995. Total return is not
annualized.
26
<PAGE> 30
Information included in this Combined Proxy Statement and Prospectus
concerning the Treasury Fund was provided by SIF and the Advisor. Information
included in this Combined Proxy Statement and Prospectus concerning the Money
Fund was provided by the Money Fund and the Advisor.
FINANCIAL STATEMENTS
The financial statements and financial highlights of the Treasury Fund for
the fiscal year ended December 31, 1995, and of the Money Fund for the ten
months ended October 31, 1995, that are included in their respective
prospectuses and Statements of Additional Information and in the Statement of
Additional Information related to this Combined Proxy Statement and Prospectus
(and with respect to the financial highlights, that are included in this
Combined Proxy Statement and Prospectus) have been audited by Coopers & Lybrand
L.L.P., independent accountants, to the extent indicated in their reports
thereon, incorporated by reference or included in such prospectuses and
Statements of Additional Information. In 1995, the Board of Directors for the
Money Fund authorized a change in the Money Fund's fiscal year-end from December
31 to October 31. Therefore the financial statements and financial highlights
described above for the Money Fund encompass financial information for the ten
months ended October 31, 1995. The financial statements and financial highlights
audited by Coopers & Lybrand L.L.P. and included in such prospectuses and
Statements of Additional Information have been included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
OTHER BUSINESS
SIF's Board of Directors knows of no other business to be brought before
the Special Meeting. However, if any other matters come before the Special
Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to SIF and the Treasury Fund in
writing at the address on the cover page of this Combined Proxy Statement and
Prospectus or by telephoning 1-800-368-0930.
* * *
27
<PAGE> 31
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING ARE URGED TO
DATE AND SIGN THE ENCLOSED PROXY AND PROMPTLY RETURN IT IN THE ENCLOSED ENVELOPE
WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES. IN ORDER TO AVOID THE EXPENSE OF FURTHER SOLICITATION, WE ASK
YOUR COOPERATION IN COMPLETING AND RETURNING YOUR PROXY PROMPTLY.
By Order of the Board of Directors,
ANN E. OGLANIAN
Secretary
Menomonee Falls, Wisconsin
July 3, 1996
28
<PAGE> 32
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 24th day of May, 1996, by and between Strong Income Funds, Inc. ("SIF"), a
Wisconsin corporation consisting of two investment portfolios, one of which is
the Strong U.S. Treasury Money Fund (the "Acquired Fund"), and Strong Money
Market Fund, Inc., a Wisconsin corporation consisting of one investment
portfolio (the "Acquiring Fund"). (The Acquiring Fund and the Acquired Fund are
sometimes referred to collectively as the "Funds" and individually as a "Fund".)
This Agreement is intended to be and is adopted as a plan of
reorganization. The reorganization ("Reorganization") will consist of the
liquidation, prior to the time of the closing of the Reorganization, of the
Acquired Fund's portfolio securities and instruments and, to the extent
reasonably possible, its other property and assets, and the subsequent transfer
of substantially all of the property and assets (including the proceeds from the
liquidation) and goodwill of the Acquired Fund to the Acquiring Fund in exchange
solely for the issuance of shares of common stock of the Acquiring Fund
("Acquiring Fund Shares") to the Acquired Fund, followed by the distribution by
the Acquired Fund, on or promptly after the Closing Date, as defined herein, of
the Acquiring Fund Shares to the shareholders of the Acquired Fund and the
liquidation of the Acquired Fund, the cancellation of all of its outstanding
shares as provided herein, and the amendment of SIF's Amended and Restated
Articles of Incorporation to eliminate that class of SIF's shares that currently
constitutes the Acquired Fund's shares (the "Acquired Fund Shares"), all upon
the terms and conditions hereinafter set forth in this Agreement.
In consideration of the premises of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES
AND LIQUIDATION OF THE ACQUIRED FUND
1.1 No later than the time of the closing of the Reorganization as provided
in Section 3.1 hereof (the "Closing Time") on the date of the closing of the
Reorganization (the "Closing Date"), the Acquired Fund shall have disposed of
all of its portfolio securities and instruments and, to the extent reasonably
possible, shall liquidate its other property and assets (together the "Portfolio
Liquidation") at their then-current fair market value (as determined in
accordance with the Acquired Fund's Prospectus and Statement of Additional
Information), such that the proceeds of the Portfolio Liquidation shall be held
in
A-1
<PAGE> 33
cash or bank deposits at the Closing Time. Provided that the Portfolio
Liquidation is completed by the Closing Time, the Acquired Fund may purchase or
sell its portfolio securities and instruments in the ordinary course of business
prior to the Closing Time.
1.2 On the Closing Date, the Acquired Fund shall transfer substantially all
of its property and assets (consisting, without limitation, of the proceeds of
the Portfolio Liquidation, dividends and interest, receivables, claims, cash,
cash equivalents, deferred or prepaid expenses shown as assets on the Acquired
Fund's books, goodwill and intangible property, books and records, and other
assets), as set forth in the statement of assets and liabilities referred to in
Section 8.2 hereof (the "Statement of Assets and Liabilities"), to the Acquiring
Fund free and clear of all liens, encumbrances, and claims, except for cash or
bank deposits in an amount necessary: (a) to pay the Acquired Fund's costs and
expenses of carrying out this Agreement (including but not limited to fees of
counsel and independent accountants, any income dividends payable prior to the
Closing Date, and expenses of its liquidation contemplated hereunder); (b) to
discharge all of the unpaid liabilities reflected on its books and records at
the Closing Date; and (c) to pay such contingent liabilities, if any, as the
board of directors of the Acquired Fund shall reasonably deem to exist against
the Acquired Fund at the Closing Date, for which contingent and other
appropriate liability reserves shall be established on the Acquired Fund's
books. Any unspent portion of such cash or bank deposits retained shall be
delivered by SIF to the Acquiring Fund upon the satisfaction of all of the
foregoing liabilities, costs, and expenses of the Acquired Fund. (The property
and assets to be transferred to the Acquiring Fund under this Agreement are
referred to herein as the "Acquired Fund Net Assets".) In exchange for the
transfer of the Acquired Fund Net Assets, the Acquiring Fund shall deliver to
the Acquired Fund, for distribution pro rata by the Acquired Fund to its
shareholders as of the close of business on the Closing Date, a number of
Acquiring Fund Shares having an aggregate net asset value equal to the value of
the Acquired Fund Net Assets all determined as provided in Section 2 of this
Agreement and as of the date and time specified therein. Such transactions shall
take place on the Closing Date at the Closing Time. At and after the Closing
Date, SIF shall not be responsible for the liabilities of the Acquired Fund, and
recourse for such liabilities shall be limited to the Acquiring Fund, except as
provided in Section 1.2 hereof.
1.3 On or promptly after the Closing Date, the Acquired Fund shall
liquidate and distribute pro rata to its shareholders of record at the Closing
Time on the Closing Date (the "Acquired Fund Shareholders") the Acquiring Fund
Shares received by the Acquired Fund pursuant to Section 1.1 hereof. (The date
of such liquidation and distribution is referred to as the "Liquidation Date.")
In addition, each Acquired Fund Shareholder shall have the right to receive any
dividends or other distributions that were declared prior to the Closing Date,
but unpaid at that time, with respect to the Acquired Fund Shares that are held
by
A-2
<PAGE> 34
such Acquired Fund Shareholders on the Closing Date. Such liquidation and
distribution shall be accomplished by Strong Capital Management, Inc. ("SCM"),
in its capacity as transfer agent for the Acquiring Fund, opening accounts on
the share records of the Acquiring Fund in the names of the Acquired Fund
Shareholders and transferring to each such Acquired Fund Shareholder account the
pro rata number of Acquiring Fund Shares due each such Acquired Fund Shareholder
from the Acquiring Fund Shares then credited to the account of the Acquired Fund
on the Acquiring Fund's books and records. The Acquiring Fund shall not issue
certificates representing Acquiring Fund Shares in connection with such
exchange, except in accordance with the procedures set forth in the Acquiring
Fund's then-current Prospectus and Statement of Additional Information or as
provided in Section 1.4 hereof.
1.4 The Acquired Fund Shareholders holding certificates representing their
ownership of Acquired Fund Shares may be requested to surrender such
certificates or deliver an affidavit with respect to lost certificates, in such
form and accompanied by such surety bonds as the Acquired Fund may require
(collectively, an "Affidavit"), to the Acquired Fund prior to the Closing Date.
On the Closing Date, all Acquired Fund Share certificates that remain
outstanding shall be deemed to be canceled. SIF's transfer books with respect to
the Acquired Fund's shares shall be closed permanently as of the close of
business on the day immediately prior to the Closing Date. All unsurrendered
Acquired Fund Share certificates shall no longer evidence ownership of common
stock of the Acquired Fund and shall be deemed for all corporate purposes to
evidence ownership of the number of Acquiring Fund Shares into which the
Acquired Fund Shares were effectively converted. Unless and until any such
certificate shall be so surrendered or an Affidavit relating thereto shall be
delivered to the Acquiring Fund, dividends and other distributions payable by
the Acquiring Fund subsequent to the Liquidation Date with respect to such
Acquiring Fund Shares shall be paid to the holder of such certificate(s), but
such Shareholders may not redeem or transfer Acquiring Fund Shares received in
the Reorganization with respect to unsurrendered Acquired Fund Share
certificates.
1.5 Any transfer taxes payable upon issuance of Acquiring Fund Shares in a
name other than the registered holder of the Acquiring Fund Shares on the books
of the Acquired Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such Acquiring Fund Shares are to be
issued and transferred.
1.6 As soon as practicable following the Liquidation Date, SIF shall take
all steps necessary to end the existence of the Acquired Fund, including (a) the
payment or other satisfaction of the Acquired Fund's remaining outstanding
costs, expenses and other liabilities from the cash and bank deposits retained
for that purpose pursuant to Section 1.2 hereof, and (b) the amendment of SIF's
A-3
<PAGE> 35
Amended and Restated Articles of Incorporation to eliminate the class of SIF's
common stock constituting the Acquired Fund Shares.
2. VALUATION
2.1 The net asset value of the Acquiring Fund Shares and the value of the
Acquired Fund Net Assets shall in each case be determined as of the close of
regular trading on the New York Stock Exchange ("NYSE") on the Closing Date,
provided that on such date (a) the NYSE is open for unrestricted trading and (b)
no significant changes in interest rates are announced or otherwise occur. The
net asset value per share of Acquiring Fund Shares shall be computed in
accordance with the policies and procedures set forth in the then-current
Prospectus and Statement of Additional Information of the Acquiring Fund and
shall be computed to not fewer than two (2) decimal places. The value of the
Acquired Fund Net Assets shall be computed in accordance with the policies and
procedures set forth in the then-current Prospectus and Statement of Additional
Information of the Acquired Fund.
2.2 In the event that on the proposed Closing Date trading or the reporting
of trading on the NYSE or elsewhere shall be disrupted (including as noted in
Section 2.1 concerning interest rates) so that accurate appraisal of the net
asset value of the Acquiring Fund or the value of the Acquired Fund Net Assets
is impracticable, the Closing Date shall be postponed until the first business
day when regular trading on the NYSE shall have been fully resumed and reporting
shall have been restored and other trading markets are otherwise stabilized.
2.3 The number of Acquiring Fund Shares to be issued (including fractional
shares, if any) in exchange for the Acquired Fund Net Assets shall be determined
by dividing the Acquired Fund Net Assets by the Acquiring Fund's net asset value
per share, both as determined in accordance with Section 2.1 hereof.
2.4 All computations of value regarding the Funds shall be provided by SCM
and shall be certified by the Treasurer for each Fund.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be August 30, 1996, or such earlier or later
date as the parties may agree. The Closing Time shall be at 3:30 p.m., Central
Time, and the Closing shall be held at the offices of SCM, 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051, or at such other time and/or place as the
parties may agree.
3.2 Any cash of the Acquired Fund delivered on the Closing Date shall be in
the form of currency or shall be delivered on the Closing Date by the Custodian
crediting the Acquiring Fund's account maintained with the Custodian with
immediately available funds.
A-4
<PAGE> 36
3.3 If any of the Acquired Fund Net Assets, for any reason, are not
transferred on the Closing Date, the Acquired Fund shall cause such assets to be
transferred to the Acquiring Fund in accordance with this Agreement at the
earliest practicable date thereafter.
3.4 SCM, in its capacity as transfer agent for the Acquired Fund, shall
deliver to the Acquiring Fund at the Closing Time a list of the names,
addresses, federal taxpayer identification numbers, and backup withholding and
nonresident alien withholding status of Acquired Fund Shareholders and the
number of outstanding shares of common stock of the Acquired Fund owned by each
such Acquired Fund Shareholder, all as of the close of regular trading on the
NYSE on the Closing Date, certified by an appropriate officer of SCM (the
"Shareholder List"). SCM, in its capacity as transfer agent for the Acquiring
Fund, shall issue and deliver to the Acquired Fund a confirmation evidencing the
Acquiring Fund Shares to be credited to each Acquired Fund Shareholder on the
Liquidation Date, or provide evidence satisfactory to the Acquired Fund that
such Acquiring Fund Shares have been credited to each Acquired Fund
Shareholder's account on the books of the Acquiring Fund. At the Closing, each
Fund shall deliver to the other Fund such bills of sale, checks, assignments,
certificates, receipts, or other documents as the other Fund or its counsel may
reasonably request.
4. REPRESENTATIONS AND WARRANTIES OF SIF, ON BEHALF OF THE ACQUIRED FUND
SIF, on behalf of the Acquired Fund, represents and warrants to the
Acquiring Fund as follows:
4.1 SIF is a corporation duly organized, validly existing, and in "good
standing" under the laws of the State of Wisconsin (meaning it has filed its
most recent annual report and has not filed articles of dissolution) and has the
power to own all of its properties and assets and, subject to approval of the
Acquired Fund Shareholders, to perform its obligations under this Agreement and
to consummate the transactions contemplated herein. SIF is not required to
qualify to do business in any jurisdiction in which it is not so qualified or
where failure to qualify would not subject it to any material liability or
disability. SIF has all necessary federal, state, and local authorizations,
consents, and approvals required to own all of its properties and assets and to
carry on its business as now being conducted and to consummate the transactions
contemplated herein.
4.2 SIF is a registered investment company classified as a management
company of the open-end diversified type and its registration with the SEC as an
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), is in full force and effect.
A-5
<PAGE> 37
4.3 The execution, delivery, and performance of this Agreement have been
duly authorized by all necessary action on the part of SIF's Board of Directors
on behalf of the Acquired Fund, and this Agreement constitutes a valid and
binding obligation of SIF, subject to the approval of the Acquired Fund
Shareholders, enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium,
and other similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
4.4 SIF is not, and the execution, delivery, and performance of this
Agreement by SIF will not result, in violation of any provision of the Amended
and Restated Articles of Incorporation or Bylaws of SIF or of any agreement,
indenture, instrument, contract, lease, or other arrangement or undertaking to
which SIF is a party or by which it is bound.
4.5 The Acquired Fund has elected to be treated as a regulated investment
company ("RIC") for federal income tax purposes under Part I of Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code"), has qualified as a
RIC for each taxable year of its operations, and will continue to qualify as a
RIC as of the Closing Date and with respect to its final taxable year ending
upon its liquidation.
4.6 The financial statements of the Acquired Fund for the fiscal year ended
December 31, 1995, and each of its previous two fiscal years (which were audited
by its independent accountants) (copies of which have been furnished to the
Acquiring Fund), present fairly the financial position of the Acquired Fund as
of the date indicated and the results of its operations and changes in net
assets for the respective stated periods (in accordance with generally accepted
accounting principles consistently applied).
4.7 The Prospectus of the Acquired Fund, dated May 1, 1996, and the
corresponding Statement of Additional Information, dated May 1, 1996, do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and any
amended, revised, or new Prospectus or Statement of Additional Information of
the Acquired Fund or any supplement thereto, that is hereafter filed with the
SEC (copies of which documents shall be provided to the Acquiring Fund promptly
after such filing), shall not contain any untrue statement of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.8 No material legal or administrative proceeding or investigation of or
before any court or governmental body is currently pending or, to its knowledge,
threatened as to SIF or the Acquired Fund or any of their properties or assets.
SIF and the Acquired Fund know of no facts which might form the basis for the
A-6
<PAGE> 38
institution of such proceedings. SIF and the Acquired Fund are not parties to or
subject to the provisions of any order, decree, or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated.
4.9 SIF has furnished the Acquiring Fund with copies or descriptions of all
agreements or other arrangements to which the Acquired Fund is a party. The
Acquired Fund has no material contracts or other commitments (other than this
Agreement or agreements for the purchase of securities entered into in the
ordinary course of business and consistent with its obligations under this
Agreement) which will not be terminated by the Acquired Fund in accordance with
its terms at or prior to the Closing Date.
4.10 The Acquired Fund does not have any known liabilities of a material
amount, contingent or otherwise, other than those reflected in the financial
statements referred to in Section 4.6 hereof and those incurred in the ordinary
course of business as an investment company since the dates of those financial
statements. On the Closing Date, SIF shall advise the Acquiring Fund in writing
of all of the Acquired Fund's known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued
at such time.
4.11 Since December 31, 1995, there has not been any material adverse
change in the Acquired Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of its business.
4.12 At the date hereof and by the Closing Date, all federal, state, and
other tax returns and reports, including information returns and payee
statements, of the Acquired Fund required by law to have been filed or furnished
by such dates shall have been filed or furnished, or extensions concerning such
tax returns and reports shall have been obtained, and all federal, state, and
other taxes, interest, and penalties shall have been paid so far as due, or
adequate provision shall have been made on the Acquired Fund's books for the
payment thereof, and to the best of the Acquired Fund's knowledge no such tax
return is currently under audit and no tax-deficiency or liability has been
asserted with respect to such tax returns or reports by the Internal Revenue
Service or any state or local tax authority.
4.13 At the Closing Date, SIF will have good and marketable title to the
Acquired Fund Net Assets, and subject to approval by the Acquired Fund
Shareholders, full right, power, and authority to sell, assign, transfer, and
deliver such assets hereunder, and upon delivery and in payment for such assets,
the Acquiring Fund will acquire good and marketable title thereto subject to no
liens or encumbrances of any nature whatsoever or restrictions on the ownership
or transfer thereof, except such imperfections of title or encumbrances as do
not
A-7
<PAGE> 39
materially detract from the value or use of the assets subject thereto, or
materially affect title thereto.
4.14 No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by SIF of the
transactions contemplated by this Agreement, except such as may be required
under the federal or state securities laws or the rules and regulations
thereunder.
4.15 The Combined Proxy Statement/Prospectus of SIF and the Acquiring Fund
referred to in Section 6.8 hereof (the "Proxy Statement/Prospectus") to be
included in the Form N-14 Registration Statement referred to in Section 6.7
hereof and any Prospectus or Statement of Additional Information of the Acquired
Fund contained or incorporated by reference in the Form N-14 Registration
Statement, and any supplement or amendment to such documents (other than written
information furnished by the Acquiring Fund for inclusion therein, as covered by
the Acquiring Fund's warranty in Section 5.18 hereof), on the effective and
clearance dates of the Form N-14 Registration Statement, on the date of the
Special Meeting of Acquired Fund Shareholders, and on the Closing Date: (a)
shall comply in all material respects with the provisions of the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act, the rules and regulations
thereunder, and all applicable state securities laws and rules and regulations
thereunder; and (b) shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein in light of the circumstances under which such
statements were made, not misleading.
4.16 All of the issued and outstanding shares of common stock of the
Acquired Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable except to the extent provided in
Section 180.0622(2)(b) of the Wisconsin Statutes, or any successor provision,
which provides that shareholders of a corporation organized under Chapter 180 of
the Wisconsin Statutes may be assessed up to the par value of their shares to
satisfy the obligations of such corporation to its employees for services
rendered, but not exceeding six months service in the case of any individual
employee. All of the issued and outstanding shares of common stock of the
Acquired Fund will, at the time of Closing, be held by the persons and in the
amounts set forth in the Shareholder List.
4.17 All of the issued and outstanding shares of common stock of the
Acquired Fund have been offered for sale and sold in conformity, in all material
respects, with all applicable federal and state securities laws, including the
registration or exemption from registration of such shares, except as may have
been previously disclosed in writing to the Acquiring Fund.
4.18 The information to be furnished by SIF for use in preparing
applications for orders, the Form N-14 Registration Statement, proxy materials,
and
A-8
<PAGE> 40
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto.
4.19 The Acquired Fund does not have any unamortized or unpaid
organizational fees or expenses.
5. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING FUND
The Acquiring Fund represents and warrants to SIF as follows:
5.1 The Acquiring Fund is a corporation duly organized, validly existing,
and in "good standing" under the laws of the State of Wisconsin (meaning it has
filed its most recent annual report and has not filed articles of dissolution)
and has the power to own all of its properties and assets and to perform its
obligations under this Agreement and to consummate the transactions contemplated
herein. The Acquiring Fund is not required to qualify to do business in any
jurisdiction in which it is not so qualified or where failure to qualify would
not subject it to any material liability or disability. The Acquiring Fund has
all necessary federal, state, and local authorizations, consents, and approvals
required to own all of its properties and assets and to carry on its business as
now being conducted and to consummate the transactions contemplated herein.
5.2 The Acquiring Fund is a registered investment company classified as a
management company of the open-end diversified type and its registration with
the SEC as an investment company under the 1940 Act is in full force and effect.
5.3 The execution, delivery, and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring Fund's
Board of Directors, and this Agreement constitutes a valid and binding
obligation of the Acquiring Fund enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
5.4 The Acquiring Fund is not, and the execution, delivery, and performance
of this Agreement by the Acquiring Fund will not result, in violation of any
provisions of the Amended and Restated Articles of Incorporation or Bylaws of
the Acquiring Fund or of any agreement, indenture, instrument, contract, lease,
or other arrangement or undertaking to which the Acquiring Fund is a party or by
which it is bound.
5.5 The Acquiring Fund has elected to be treated as a RIC for federal
income tax purposes under Part I of Subchapter M of the Code, has qualified as a
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<PAGE> 41
RIC for each taxable year since its inception, and will qualify as a RIC as of
the Closing Date.
5.6 The financial statements of the Acquiring Fund, for the ten months
ended October 31, 1995, and each of its previous two fiscal years (which were
audited by its independent accountants) (copies of which have been furnished to
SIF), present fairly the financial position of the Acquiring Fund as of the
dates indicated and the results of its operations and changes in net assets for
the respective stated periods (in accordance with generally accepted accounting
principles consistently applied).
5.7 The Prospectus of the Acquiring Fund, dated March 1, 1996, and its
Statement of Additional Information, dated March 1, 1996, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and any amended,
revised, or new Prospectus or Statement of Additional Information or any
supplement thereto with respect to the Acquiring Fund that is hereafter filed
with the SEC (copies of which documents shall be provided to SIF promptly after
such filing) shall not contain any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
5.8 No material legal or administrative proceeding, or investigation of or
before any court or governmental body is currently pending or, to its knowledge,
threatened as to the Acquiring Fund or any of its properties or assets. The
Acquiring Fund knows of no facts which might form the basis for the institution
of such proceedings. The Acquiring Fund is not a party to or subject to the
provisions of any order, decree, or judgment of any court or governmental body
which materially and adversely affects the Acquiring Fund's business or its
ability to consummate the transactions herein contemplated.
5.9 The Acquiring Fund does not have any known liabilities of a material
amount, contingent or otherwise, other than those reflected in the financial
statements referred to in Section 5.6 hereof and those incurred in the ordinary
course of business as an investment company since the dates of those financial
statements. On the Closing Date, the Acquiring Fund shall advise SIF in writing
of all of the Acquiring Fund's known liabilities, contingent or otherwise,
whether or not incurred in the ordinary course of business, existing or accrued
at such time.
5.10 Since December 31, 1995, there has not been any material adverse
change in the Acquiring Fund's financial condition, assets, liabilities, or
business other than changes occurring in the ordinary course of its business.
5.11 At the date hereof and by the Closing Date, all federal, state, and
other tax returns and reports, including information returns and payee
statements, of
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<PAGE> 42
the Acquiring Fund required by law to have been filed or furnished by such dates
shall have been filed or furnished, or extensions concerning such tax returns
and reports shall have been obtained, and all federal, state, and other taxes,
interest, and penalties shall have been paid so far as due, or adequate
provision shall have been made on the Acquiring Fund's books for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such tax return is
currently under audit and no tax deficiency or liability has been asserted with
respect to such tax returns or reports by the Internal Revenue Service or any
state or local tax authority.
5.12 No consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquiring Fund of
the transactions contemplated by the Agreement, except for the registration of
the Acquiring Fund Shares under the Securities Act of 1933 (the "1933 Act"), the
1940 Act, and under state securities laws, or as may otherwise be required under
the federal and state securities laws or the rules and regulations thereunder.
5.13 The Form N-14 Registration Statement referred to in Section 6.7 hereof
(other than written information furnished by SIF for inclusion therein as
covered by SIF's warranty in Section 4.19 hereof) and any Prospectus or
Statement of Additional Information of the Acquiring Fund contained or
incorporated therein by reference, and any supplement or amendment to the Form
N-14 Registration Statement or any such Prospectus or Statement of Additional
Information, on the effective and clearance dates of the Form N-14 Registration
Statement, on the date of the Special Meeting of the Acquired Fund Shareholders,
and on the Closing Date: (a) shall comply in all material respects with the
provisions of the 1934 Act, the 1940 Act, the rules and regulations thereunder,
and all applicable state securities laws and the rules and regulations
thereunder; and (b) shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which the
statements were made, not misleading.
5.14 All of the issued and outstanding shares of common stock of the
Acquiring Fund are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and nonassessable except to the extent provided in
Section 180.0622(2)(b) of the Wisconsin Statutes (which is summarized in Section
4.16 of this Agreement), or any successor provision.
5.15 All of the issued and outstanding shares of common stock of the
Acquiring Fund have been offered for sale and sold in conformity, in all
material respects, with all applicable federal and state securities laws,
including the registration or exemption from registration of such shares, except
as may previously have been disclosed in writing to SIF.
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5.16 The Acquiring Fund Shares to be issued and delivered to the Acquired
Fund pursuant to the terms of this Agreement, when so issued and delivered, will
be duly and validly issued shares of common stock of the Acquiring Fund, will be
fully paid and nonassessable by the Acquiring Fund, except to the extent
provided in Section 180.0622(2)(b) of the Wisconsin Statutes (which is
summarized in Section 4.16 of this Agreement), or any successor provision, and
will be duly registered in conformity with all applicable federal and state
securities laws, and no shareholder of the Acquiring Fund shall have any option,
warrant, or preemptive right of subscription or purchase with respect thereto.
5.17 The information to be furnished by the Acquiring Fund for use in
preparing the Proxy Statement/Prospectus, proxy materials, and other documents
which may be necessary in connection with the transactions contemplated hereby
shall be accurate and complete and shall comply in all material respects with
federal securities and other laws and regulations applicable thereto.
6. COVENANTS OF THE ACQUIRING FUND AND SIF
6.1 Except as expressly contemplated herein to the contrary, each Fund
shall operate its business in the ordinary course between the date hereof and
the Closing Date, it being understood that such ordinary course of business will
include customary dividends and distributions and any other distribution
necessary or desirable to avoid federal income or excise taxes.
6.2 After the effective date of the Form N-14 Registration Statement
referred to in Section 6.7 hereof, and before the Closing Date and as a
condition thereto, the Board of Directors of SIF shall call, and SIF shall hold,
a Special Meeting of the Acquired Fund Shareholders to consider and vote upon
this Agreement and the transactions contemplated hereby (including the amendment
of SIF's Amended and Restated Articles of Incorporation to cancel all of the
outstanding shares of the Acquired Fund and to eliminate the class of SIF's
common stock constituting the Acquired Fund Shares, effective as of the Closing
of the Reorganization), and SIF shall take all other actions reasonably
necessary to obtain approval of the transactions contemplated herein.
6.3 SIF and the Acquired Fund covenant that they shall not sell or
otherwise dispose of any of the Acquiring Fund Shares to be received in the
transactions contemplated herein, except in distribution to the Acquired Fund
Shareholders as contemplated herein.
6.4 SIF shall provide such information within its possession or reasonably
obtainable as the Acquiring Fund may reasonably request concerning the
beneficial ownership of the Acquired Fund Shares.
6.5 Subject to the provisions of this Agreement, the Acquiring Fund and SIF
each shall take, or cause to be taken, all action, and do or cause to be done,
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all things reasonably necessary, proper, or advisable to consummate the
transactions contemplated by this Agreement.
6.6 SIF shall furnish to the Acquiring Fund on the Closing Date the
Statement of the Assets and Liabilities of the Acquired Fund as of the Closing
Date, which statement shall be prepared in accordance with generally accepted
accounting principles consistently applied and shall be certified by SIF's
Treasurer or Assistant Treasurer. As promptly as practicable, but in any case
within sixty (60) days after the Closing Date, SIF shall furnish to the
Acquiring Fund, in such form as is reasonably satisfactory to the Acquiring
Fund, a statement of the earnings and profits of the Acquired Fund for federal
income tax purposes, and of any capital loss carryovers and other items that
will be carried over to the Acquiring Funds as a result of Section 381 of the
Code, which statement shall be certified by SIF's Treasurer or Assistant
Treasurer. SIF covenants that the Acquired Fund has no earnings and profits that
were accumulated by it or any acquired entity during a taxable year when it or
such entity did not qualify as a RIC under the Code or, if it has such earnings
and profits, shall distribute them to its shareholders prior to the Closing
Date.
6.7 The Acquiring Fund shall prepare and file with the SEC a Registration
Statement on Form N-14 (the "Form N-14 Registration Statement"), as promptly as
practicable in connection with the issuance of the Acquiring Fund Shares as
contemplated herein. The Acquiring Fund shall prepare any pro forma financial
statement that may be required under applicable law to be included in the Form
N-14 Registration Statement. SIF shall provide the Acquiring Fund with all
information about SIF and the Acquired Fund that is necessary to prepare the pro
forma financial statements. SIF and the Acquiring Fund shall cooperate with each
other and shall furnish each other with any information relating to itself that
is required by the 1933 Act, the 1934 Act, and the 1940 Act, the rules and
regulations thereunder, and applicable state securities laws, to be included in
the Form N-14 Registration Statement and the Proxy Statement/ Prospectus
referred to in Section 6.8 hereof.
6.8 As promptly as practicable, SIF shall prepare the Proxy Statement/
Prospectus and provide it to the Acquiring Fund, for inclusion in the Form N-14
Registration Statement, in connection with the Special Meeting of Acquired Fund
Shareholders to consider approval of this Agreement. The Acquiring Fund agrees
to provide SIF with all information applicable to the Acquiring Fund required
for inclusion in the Proxy Statement, as described in Section 6.7 hereof.
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<PAGE> 45
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SIF AND THE ACQUIRED FUND
The obligations of SIF and the Acquired Fund hereunder shall be subject to
the following conditions precedent:
7.1 This Agreement and the transactions contemplated by this Agreement
shall have been approved by the Board of Directors of the Acquiring Fund in the
manner required by the Acquiring Fund's Amended and Restated Articles of
Incorporation and applicable laws, and this Agreement, the transaction
contemplated by this Agreement, and the proposed amendment to SIF's Amended and
Restated Articles of Incorporation described in Section 6.2 hereof shall have
been approved by the Acquired Fund Shareholders in the manner required by SIF's
Amended and Restated Articles of Incorporation and Bylaws and applicable laws.
7.2 As of the Closing Date, there shall have been no material adverse
change in the financial position, assets, or liabilities of the Acquiring Fund
since the dates of the financial statements referred to in Section 5.6 hereof.
For purposes of this Section 7.2, a decline in the net asset value per share of
the Acquiring Fund due to the effect of normal market conditions on liquid
securities shall not constitute a material adverse change.
7.3 All representations and warranties of the Acquiring Fund made in this
Agreement, except as they may be affected by the transactions contemplated by
this Agreement, shall be true and correct in all material respects as if made at
and as of the Closing Date.
7.4 The Acquiring Fund shall have performed and complied in all material
respects with its obligations, agreements, and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date.
7.5 The Acquiring Fund shall have furnished SIF at the Closing Date with a
certificate or certificates of its President and/or Treasurer as of the Closing
Date to the effect that the conditions precedent set forth in the Sections 7.2,
7.3, 7.4, 7.9, and 7.14 hereof have been fulfilled.
7.6 SIF shall have received an opinion or opinions of counsel regarding the
transaction, in form reasonably satisfactory to SIF, and dated as of the Closing
Date, to the effect that: (a) the Acquiring Fund is a corporation duly organized
and validly existing under the laws of the State of Wisconsin; (b) the shares of
the Acquiring Fund issued and outstanding at the Closing Date are duly
authorized, validly issued, fully paid, and non-assessable by the Acquiring
Fund, except to the extent provided in Section 180.0622(2)(b) of the Wisconsin
Statutes (which is summarized in Section 4.16 of this Agreement), or any
successor provision, and the Acquiring Fund Shares to be delivered to the
Acquired Fund, as provided for by this Agreement, are duly authorized and upon
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<PAGE> 46
delivery pursuant to the terms of this Agreement will be validly issued, fully
paid, and non-assessable by the Acquiring Fund, except to the extent provided in
Section 180.0622(2)(b) of the Wisconsin Statutes (which is summarized in Section
4.16 of this Agreement), or any successor provision, and to such counsel's
knowledge, no shareholder of the Acquiring Fund has any option, warrant, or
preemptive right to subscription or purchase in respect thereof; (c) this
Agreement has been duly authorized, executed, and delivered by the Acquiring
Fund and represents a valid and binding contract of Acquiring Fund, enforceable
in accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and similar laws relating to
or affecting creditors' rights generally and court decisions with respect
thereto and to the exercise of judicial discretion in accordance with general
principles of equity, whether in a proceeding at law or in equity; provided,
however, that no opinion need be expressed with respect to provisions of this
Agreement relating to indemnification; (d) the execution and delivery of this
Agreement did not, and the consummation of the transactions contemplated by this
Agreement will not, violate the Amended and Restated Articles of Incorporation
or Bylaws of the Acquiring Fund or any material agreement known to such counsel
to which the Acquiring Fund is a party or by which it is bound; (e) to the
knowledge of such counsel, no consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by Acquiring
Fund of the transactions contemplated by this Agreement, except such as have
been obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those statutes and such as may be required by state securities
laws, rules, and regulations; and (f) the Acquiring Fund is registered as an
investment company under the 1940 Act and such registration with the SEC as an
investment company under the 1940 Act is in full force and effect. Such opinion:
(a) shall state that while such counsel have not verified, and are not passing
upon and do not assume responsibility for, the accuracy, completeness, or
fairness of any portion of the Form N-14 Registration Statement or any amendment
thereof or supplement thereto, they have generally reviewed and discussed
certain information included therein with respect to the Acquiring Fund with
certain of its officers and that in the course of such review and discussion no
facts came to the attention of such counsel which caused them to believe that,
on the respective effective or clearance dates of the Form N-14 Registration
Statement and any amendment thereof or supplement thereto and only insofar as
they relate to information with respect to the Acquiring Fund, the Form N-14
Registration Statement or any amendment thereof or supplement thereto contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; (b) shall state that such counsel does not express any opinion or
belief as to the financial statements, other financial data, statistical data,
or information relating to the Acquiring Fund contained or incorporated by
reference in the Form N-14 Registration Statement; (c) may rely on the opinion
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of other counsel to the extent set forth in such opinion, provided such other
counsel is reasonably acceptable to SIF; and (d) shall state that such opinion
is solely for the benefit of SIF and its Board of Directors and officers.
7.7 The Form N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending the effectiveness shall have been
instituted, or to the knowledge of the Acquiring Fund, contemplated by the SEC.
7.8 The parties shall have received: (a) a memorandum, in form reasonably
satisfactory to each of them, prepared by counsel regarding the transaction or
another person approved by the parties, concerning the registration of shares to
be issued by the Acquiring Fund pursuant to this Agreement under applicable
state securities laws or the exemption from registration under such laws; and
(b) assurance reasonably satisfactory to them that all permits and other
authorizations necessary under state securities laws to consummate the
transactions contemplated herein have been obtained.
7.9 No action, suit, or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transactions contemplated herein.
7.10 The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceedings seeking to enjoin
consummation of the transactions contemplated by this Agreement under Section
25(c) of the 1940 Act.
7.11 SIF shall have received from the Acquiring Fund: all other documents,
including but not limited to, checks, share certificates, if any, and receipts,
which SIF or its counsel may reasonably request.
7.12 SCM, in its capacity as transfer agent for the Acquiring Fund, shall
issue and deliver to the President of SIF, on behalf of the Acquired Fund, a
confirmation statement evidencing the Acquiring Fund Shares to be credited at
the Closing Date or provide evidence satisfactory to SIF that the Acquiring Fund
Shares have been credited to the accounts of each of the Acquired Fund
Shareholders on the books of the Acquiring Fund.
7.13 At the Closing Date, the registration of the Acquiring Fund with the
SEC as an investment company under the 1940 Act will be in full force and
effect.
7.14 After giving effect to the transactions contemplated by this
Agreement, the Acquiring Fund on the Closing Date will be in compliance with
Rule 2a-7 under the 1940 Act.
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<PAGE> 48
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund hereunder shall be subject to the
following conditions precedent:
8.1 This Agreement, the transactions contemplated by this Agreement, and
the proposed amendment to the Acquired Fund's Amended and Restated Articles of
Incorporation described in Section 6.2 hereof shall have been approved by the
Board of Directors of SIF and the Acquired Fund Shareholders in the manner
required by SIF's Amended and Restated Articles of Incorporation and Bylaws and
applicable law.
8.2 SIF shall have furnished the Acquiring Fund with the Statement of
Assets and Liabilities of the Acquired Fund, with values determined as provided
in Section 2 hereof, all as of the Closing Date, certified on its behalf by the
SIF's Treasurer or Assistant Treasurer.
8.3 As of the Closing Date, there shall have been no material adverse
change in the financial position, assets, or liabilities of the Acquired Fund
since the dates of the financial statements referred to in Section 4.6 hereof.
For purposes of this Section 8.3, a decline in the value of the Acquired Fund
Net Assets due to the effect of normal market conditions on liquid securities
shall not constitute a material adverse change.
8.4 All representations and warranties of SIF and the Acquired Fund made in
this Agreement, except as they may be affected by the transactions contemplated
by this Agreement, shall be true and correct in all material respects as if made
at and as of the Closing Date.
8.5 SIF shall have performed and complied in all material respects with
each of its obligations, agreements, and covenants required by this Agreement to
be performed or complied with by it prior to or at the Closing Date.
8.6 SIF shall have furnished the Acquiring Fund at the Closing Date with a
certificate or certificates of its President and/or Treasurer, dated as of the
Closing Date, to the effect that the conditions precedent set forth in Sections
8.1, 8.3, 8.4, 8.5, 8.12, 8.14, and 8.17 hereof have been fulfilled.
8.7 SIF shall have duly executed and delivered to the Acquiring Fund: (a)
bills of sale, assignments, certificates and other instruments of transfer
("Transfer Documents") as the Acquiring Fund may deem necessary or desirable to
transfer all of the Acquired Fund's right, title, and interest in and to the
Acquired Fund Net Assets; and (b) all such other documents, including but not
limited to, checks, share certificates, if any, and receipts, which the
Acquiring Fund may reasonably request.
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<PAGE> 49
8.8 The Acquiring Fund shall have received an opinion or opinions of
counsel regarding the transaction, in form reasonably satisfactory to the
Acquiring Fund, and dated as of the Closing Date, to the effect that: (a) SIF is
a Wisconsin corporation duly organized and validly existing under the laws of
the State of Wisconsin; (b) the shares of the Acquired Fund issued and
outstanding at the Closing Date are duly authorized, validly issued, fully paid
and non-assessable by SIF, except to the extent provided in Section
180.0622(2)(b) of the Wisconsin Statutes (which is summarized in Section 4.16 of
this Agreement), or any successor provision; (c) this Agreement and the Transfer
Documents have been duly authorized, executed, and delivered by SIF and
represent valid and binding contracts of SIF, enforceable in accordance with
their terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto and to the
exercise of judicial discretion in accordance with general principles of equity,
whether in a proceeding at law or in equity; provided, however, that no opinion
need be expressed with respect to provisions of this Agreement relating to
indemnification nor with respect to provisions of this Agreement intended to
limit liability for particular matters to the Acquired Fund and its assets; (d)
the execution and delivery of this Agreement did not, and the consummation of
the transactions contemplated by this Agreement will not, violate the Amended
and Restated Articles of Incorporation or Bylaws of SIF or any material
agreement known to such counsel to which SIF is a party or by which it is bound;
(e) to the knowledge of such counsel, no consent, approval, authorization, or
order of any court or governmental authority is required for the consummation by
SIF of the transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those statutes and such as may be required under state
securities laws, rules, and regulations; and (f) SIF is registered as an
investment company under the 1940 Act and such registration with the SEC as an
investment company under the 1940 Act is in full force and effect. Such opinion:
(a) shall state that while such counsel have not verified, and are not passing
upon and do not assume responsibility for, the accuracy, completeness, or
fairness of any portion of the Form N-14 Registration Statement or any amendment
thereof or supplement thereto, they have generally reviewed and discussed
certain information included therein with respect to SIF and the Acquired Fund
with certain officers of SIF and that in the course of such review and
discussion no facts came to the attention of such counsel which caused them to
believe that, on the respective effective or clearance dates of the Form N-14
Registration Statement, and any amendment thereof or supplement thereto and only
insofar as they relate to information with respect to SIF and the Acquired Fund,
the Form N-14 Registration Statement or any amendment thereof or supplement
thereto contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements therein not
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<PAGE> 50
misleading; (b) shall state that such counsel does not express any opinion or
belief as to the financial statements, other financial data, statistical data,
or any information relating to SIF or the Acquired Fund contained or
incorporated by reference in the Form N-14 Registration Statement; (c) may rely
upon the opinion of other counsel to the extent set forth in the opinion,
provided such other counsel is reasonably acceptable to the Acquiring Fund; and
(d) shall state that such opinion is solely for the benefit of the Acquiring
Fund and its Board of Directors and officers.
8.9 The property and assets to be transferred to the Acquiring Fund under
this Agreement shall include no assets which the Acquiring Fund may not properly
acquire.
8.10 The Form N-14 Registration Statement shall have become effective under
the 1933 Act and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of the Funds, contemplated by the SEC.
8.11 The parties shall have received: (a) a memorandum, in form reasonably
satisfactory to each of them, prepared by counsel regarding the transaction or
another person approved by the parties concerning the registration of shares to
be issued by the Acquiring Fund pursuant to this Agreement under applicable
state securities laws or the exemption from registration under such laws; and
(b) assurance reasonably satisfactory to them that all permits and other
authorizations necessary under state securities laws to consummate the
transactions contemplated by this Agreement have been obtained.
8.12 No action, suit, or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to restrain or
prohibit, or obtain damages or other relief in connection with, this Agreement
or the transactions contemplated herein.
8.13 The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking to enjoin
consummation of the transactions contemplated by this Agreement under Section
25(c) of the 1940 Act.
8.14 Prior to the Closing Date, the Acquired Fund shall have declared a
dividend or dividends, which, together with all previous dividends, shall have
the effect of distributing to its shareholders all of its net investment company
income, if any, for each taxable period or year ending prior to the Closing Date
and for the periods from the end of each such taxable period or year to and
including the Closing Date (computed without regard to any deduction for
dividends paid), and all of its net capital gain, if any, realized in each
taxable period or year ending prior to the Closing Date and in the periods from
the end of each such taxable period or year to and including the Closing Date.
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8.15 SCM, in its capacity as transfer agent for the Acquired Fund, shall
have furnished to the Acquiring Fund immediately prior to the Closing Date a
list of the names and addresses of the Acquired Fund Shareholders and the number
and percentage ownership of outstanding Acquired Fund Shares owned by each such
shareholder as of the close of regular trading on the NYSE on the Closing Date,
certified on behalf of the Acquired Fund by SIF's President.
8.16 At the Closing Date, the registration of SIF with the SEC as an
investment company under the 1940 Act with respect to each series of shares that
it offers, shall be in full force and effect.
8.17 After giving full effect to the transactions contemplated by this
Agreement, the Acquiring Fund on the Closing Date will be in full compliance
with Rule 2a-7 under the 1940 Act.
9. FINDER'S FEES AND OTHER EXPENSES
9.1 Each party represents and warrants to the other that there is no person
or entity entitled to receive any finder's fees or other similar fees or
commission payments in connection with the transactions provided for herein.
9.2 Each Fund shall be solely liable for its own expenses incurred in
connection with entering into and carrying out the transactions contemplated by
this Agreement, whether or not the transactions contemplated hereby are
consummated.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The parties agree that neither party has made any representation,
warranty, or covenant not set forth herein or referred to in Sections 4 and 5
hereof, and that this Agreement constitutes the entire agreement between the
parties and supersedes any and all prior agreements, arrangements, and
undertakings relating to the matters provided for herein.
10.2 The representations, warranties, and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder for a
period of three years following the Closing Date. In the event of a breach by
SIF or the Acquired Fund of any such representation, warranty, or covenant, the
Acquired Fund, with respect to any such claim asserted prior to the Closing
Date, and SCM jointly and severally shall be liable to the Acquiring Fund for
any such breach.
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11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
parties. In addition, either party may at its option terminate this Agreement at
or prior to the Closing Date because of:
11.1(a) a material breach by the other party of any representation,
warranty, or agreement contained herein to be performed at or prior to the
Closing Date; or
11.1(b) a condition precedent to the obligations of either party has
not been met and which reasonably appears will not or cannot be met.
11.2 In the event of any such termination, there shall be no liability for
damages on the part of either Fund or SIF, or their respective Boards of
Directors or officers, but each shall bear its own expenses incidental to the
preparation and carrying out of this Agreement.
12. INDEMNIFICATION
12.1 The Acquiring Fund shall indemnify, defend, and hold harmless SIF, its
Board of Directors, officers, employees, and agents (collectively "Acquired Fund
Indemnified Parties") against all losses, claims, demands, liabilities, and
expenses, including reasonable legal and other expenses incurred in defending
third party claims, actions, suits, or proceedings, whether or not resulting in
any liability to such Acquired Fund Indemnified Parties and including amounts
paid by any one or more of the Acquired Fund Indemnified Parties in a compromise
or settlement of any such claim, action, suit, or proceeding, or threatened
third party claim, suit, action, or proceeding, made with the consent of the
Acquiring Fund, arising from any untrue statement or alleged untrue statement of
a material fact contained in the Form N-14 Registration Statement, as filed and
in effect with the SEC, or any application prepared by the Acquiring Fund with
any state regulatory agency in order to register or qualify the Acquiring Fund
Shares to be issued in connection with the transactions contemplated by this
Agreement under the securities laws thereof ("Application"); or which arises out
of or is based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Acquiring Fund shall only be liable
in such case to the extent that any such loss, claim, demand, liability, or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission about the Acquiring Fund or the
transactions contemplated by this Agreement made in the Form N-14 Registration
Statement or any Application.
12.2 The Acquired Fund, with respect to any claim asserted prior to the
Closing Date, and SCM on a joint and several basis shall indemnify, defend, and
hold harmless the Acquiring Fund, its Board of Directors, officers, employees
and
A-21
<PAGE> 53
agents ("Acquiring Fund Indemnified Parties") against all losses, claims,
demands, liabilities, and expenses, including reasonable legal and other
expenses incurred in defending third party claims, actions, suits, or
proceedings, whether or not resulting in any liability to such Acquiring Fund
Indemnified Parties and including amounts paid by any one or more of the
Acquiring Fund Indemnified Parties in a compromise or settlement of any such
claim, suit, action, or proceeding, made with the consent of the Acquired Fund
(if it still exists) or SCM, arising from any untrue statement or alleged untrue
statement of a material fact contained in the Form N-14 Registration Statement,
as filed and in effect with the SEC or any Application; or which arises out of
or is based upon any omission or alleged omission to state therein a material
fact required to be stated therein and necessary to make the statements therein
not misleading; provided, however, that the Acquired Fund and SCM shall only be
liable in such case to the extent that any such loss, claim, demand, liability,
or expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission about the Acquired Fund or about the
transactions contemplated by this Agreement made in the Form N-14 Registration
Statement or any Application.
12.3 A party seeking indemnification hereunder is hereinafter called the
"indemnified party" and the party from whom the indemnified party is seeking
indemnification hereunder is hereinafter called the "indemnifying party." Each
indemnified party shall notify the indemnifying party in writing within ten days
of the receipt by one or more of the indemnified parties of any notice of legal
process of any suit brought against or claim made against such indemnified party
as to any matters covered by this Section, but the failure to notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have to any indemnified party otherwise than under this Section.
The indemnifying party shall be entitled to participate at its own expense in
the defense of any claim, action, suit, or proceeding covered by this Section,
or, if it so elects, to assume at its own expense the defense thereof with
counsel satisfactory to the indemnified parties; provided, however, if the
defendants in any such action include both the indemnifying party and any
indemnified party and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it which are different from or
additional to those available to the indemnifying party, the indemnified party
shall have the right to select separate counsel to assume such legal defense and
to otherwise participate in the defense of such action on behalf of such
indemnified party.
Upon receipt of notice from the indemnifying party to the indemnified
parties of the election by the indemnifying party to assume the defense of such
action, the indemnifying party shall not be liable to such indemnified parties
under this Section for any legal or other expenses subsequently incurred by such
indemnified parties in connection with the defense thereof unless (a) the
indemnified parties shall have employed such counsel in connection with the
A-22
<PAGE> 54
assumption of legal defenses in accordance with the provision of the immediately
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel), (b) the
indemnifying party does not employ counsel reasonably satisfactory to the
indemnified parties to represent the indemnified parties within a reasonable
time after notice of commencement of the action, or (c) the indemnifying party
has authorized the employment of counsel for the indemnified parties at its
expenses.
12.4 This Section will survive the termination of this Agreement and for a
period of three years following the Closing Date.
13. LIABILITY OF SIF
Each party acknowledges and agrees that all obligations of SIF under this
Agreement are binding only with respect to the Acquired Fund; that any liability
of SIF under this Agreement with respect to the Acquired Fund, or in connection
with the transactions contemplated herein with respect to the Acquired Fund,
shall be discharged only out of the assets of the Acquired Fund; and that no
other portfolio or series of SIF shall be liable with respect to this Agreement
or in connection with the transactions contemplated herein.
14. AMENDMENTS
This Agreement may be amended, modified, or supplemented in such manner as
may be mutually agreed upon in writing by the authorized officers of the
Acquiring Fund and SIF; provided, however, that following the Special Meeting of
Acquired Fund Shareholders called by SIF's Board of Directors pursuant to
Section 6.2 hereof, no such amendment may have the effect of changing the
provisions for determining the number of Acquiring Fund Shares to be issued to
Acquired Fund Shareholders under this Agreement to the detriment of such
shareholders without their further approval, provided that nothing contained in
this Section 14 shall be construed to prohibit the parties from amending this
Agreement to change the Closing Date.
15. NOTICES
Any notice, report, statement, or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed to be
properly given when delivered personally or by telecopier to the party entitled
to receive the notice or when sent by certified or registered mail, postage
prepaid, or delivered to a recognized overnight courier service, in each case
properly addressed to the party entitled to receive such notice or communication
at 100 Heritage Reserve, Menomonee Falls, Wisconsin 53051, or such other address
as may hereafter be furnished in writing by notice similarly given by one party
to the other.
A-23
<PAGE> 55
16. FAILURE TO ENFORCE
The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or any
part hereof as the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
17. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
17.1 The article and Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17.2 This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
17.3 This Agreement shall be governed by and construed in accordance with
the laws of the State of Wisconsin.
17.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm, or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
17.5 It is expressly understood and agreed that the obligations of SIF and
the Acquiring Fund under this Agreement, including but not limited to any
liability as a result of the breach of any of their respective representations
and warranties, are not binding on their respective Board of Directors,
shareholders, nominees, officers, agents, or employees individually, but bind
only the respective assets of the Acquired Fund and the Acquiring Fund.
A-24
<PAGE> 56
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its President and its seal to be affixed thereto and attested by
its Secretary.
<TABLE>
<S> <C>
Attest: Strong Money Market Fund, Inc.
By:
----------------------------
Attest: Strong Income Funds, Inc.
By:
----------------------------
</TABLE>
Strong Capital Management, Inc. hereby joins in this Agreement with respect
to and agrees to the matters described in Sections 10.2 and 12.
<TABLE>
<S> <C>
Attest: Strong Capital Management, Inc.
By:
----------------------------
</TABLE>
A-25
<PAGE> 57
EXHIBIT B
FEDERAL RESERVE
INTEREST RATES
THE STRONG U.S. TREASURY MONEY FUND
The Strong U.S. Treasury Money Fund seeks current income, a stable share
price, and daily liquidity. The Fund invests only in securities issued directly
by the U.S. government.
SHORT RATES TREND DOWN IN 1995
1995 was a year of changing expectations for the bond market. As the year
began, investors were cautious, anticipating continued economic strength and
higher inflation. In fact, the Federal Reserve actually raised the federal funds
rate (the rate it charges banks for overnight loans) from 5.50% to 6.00% in
February in an effort to cool what it perceived as too-rapid economic growth and
the threat of inflation. But soon after this tightening, evidence of a
significant slowdown in economic activity began to emerge. While the U.S.
economy grew at a fairly strong pace in the first quarter of 1995, data from
April and May suggested that the second quarter's growth rate would be low or
possibly negative, and that inflationary pressures were not being generated.
The abrupt slowdown surprised financial markets and compelled the Fed to
cut the federal funds rate back to 5.75% in early July. Additional signs of
economic lethargy appeared in the fourth quarter, and the Fed again reduced the
rate in December to 5.50%. Short-term rates (as measured by 3-month Treasury
Bills) also fell from a high of 6% in January to a low of about 5% in December.
However, as the chart on the next page shows, the path was not a smooth one,
reflecting a fair amount of uncertainty as investors attempted to divine the
economy's future growth track.
FUND STRATEGY: GO LONG
Following the Federal Reserve's February rate hike, we believed that short-
term rates had reached their peak, at least for the near term. Accordingly, we
gradually lengthened the Fund's average maturity target to a fairly bullish
60-70 days in anticipation of a possible interest-rate cut by the Fed (a 40- to
45-day maturity is considered neutral). Extending the Fund's maturity helped us
lock in higher yields for a longer period of time-and gave the Fund the
potential to maintain an attractive level of income in case short-term interest
rates began to fall.
At the end of December, the Fund's average maturity was 84 days.
B-1
<PAGE> 58
WE EXPECT RATES TO DRIFT LOWER
Our current economic view remains positive. With the economy on a modest
growth track and inflation apparently stifled, we look for short-term interest
rates to gradually drift lower, impelled by additional rate cuts by the Federal
Reserve.
YIELD SUMMARY*
THROUGH 12/29/95
7-DAY CURRENT YIELD
4.92%
7-DAY EFFECTIVE YIELD
5.04%
AVERAGE MATURITY
84 DAYS
Variables that may alter this outlook include a disappointment on the
budget front. Right now, the market appears to expect a meaningful budget
agreement, an expectation partially reflected in current prices. Should progress
not be achieved on the budget, or should the market get an agreement that it
feels is lackluster, we could see a temporary bump up in yields.
Factors that may help improve the U.S. economy in 1996 might come from
abroad. Germany reduced its interest rates late in 1995, allowing other European
nations to follow suit. If less restrictive monetary policies enable the
economies of Europe to break out of their current stagnation, the result could
be more investment and trade with the U.S. and better prospects for the American
economy.
Investors should note that continued slow economic growth in the U.S. won't
be smooth and steady, but is more likely to be a bit bumpy, with indications of
a strong turnaround one quarter and signs of recession the next (1995 was a good
example of such a "choppy" environment). Taken as a whole, however, we expect
modest growth coupled with modest inflation-a favorable combination for income
investors.
B-2
<PAGE> 59
As always, we thank you for your confidence and remain committed to meeting
your investment needs in the future.
Cordially,
/s/ Jay N. Mueller
Jay N. Mueller
Portfolio Manager
Short-term rates took a bumpy path down in 1995
3-MONTH T-BILL YIELDS THROUGH DECEMBER
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 3-MONTH T-
(FISCAL YEAR COVERED) BILL
<S> <C>
12/94 5.69
1/95 6.00
2/95 5.94
3/95 5.87
4/95 5.87
5/95 5.80
6/95 5.57
7/95 5.58
8/95 5.45
9/95 5.41
10/95 5.50
11/95 5.49
12/95 5.08
</TABLE>
- ---------------
Source: Bloomberg
* Yields are annualized for the 7-day period ended December 29, 1995. Effective
yield reflects the compounding of income. As of December 29, 1995, the Advisor
temporarily waived fees of .40% and absorbed expenses of .21%. Otherwise, the
Fund's current and effective yields would have been 4.31% and 4.43%,
respectively. An investment in the Fund is neither insured nor guaranteed by
the U.S. government. There can be no assurance that the Fund will be able to
maintain its stable net asset value of $1.00 per share. Yields are historical
and do not represent future yields, which will fluctuate.
B-3
<PAGE> 60
THE STRONG MONEY MARKET FUND
The Strong Money Market Fund seeks current income, a stable share price,
and daily liquidity. The Fund invests in corporate, bank, and government
instruments that present minimal credit risk.
THE FUND PROVIDED OUTSTANDING PERFORMANCE IN 1995
Year-to-date, the Strong Money Market Fund was the best performing general
purpose money fund tracked by Lipper, based on total return. This performance
was achieved through a combination of prudent management and a temporary waiver
of fees and expenses.
SHORT RATES STABLE SO FAR IN 1995
Short-term interest rates remained relatively stable through October 1995,
fluctuating in a narrow range, generally around 5.5%. The "stuck in neutral"
environment was reflected in the actions of the Federal Reserve, which in
February voted to raise the federal funds rate -- a critical determining factor
of short-term lending rates -- by 0.25% to 6%. However, soon after the February
tightening, evidence of a significant slowdown in economic activity began to
emerge. While the U.S. economy grew at a fairly strong pace in the first quarter
of 1995, data from April and May suggested that the second quarter's growth rate
would be low or possibly negative.
The abrupt slowdown surprised financial markets and compelled the Fed to
cut the federal funds rate back to 5.75% in early July, where it remained
through October.
B-4
<PAGE> 61
Short-term rates have traded in a narrow range in 1995
3-MONTH T-BILL YIELDS THROUGH OCTOBER
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 3-MONTH T-
(FISCAL YEAR COVERED) BILL
<S> <C>
12/94 5.68
1/95 5.99
2/95 5.93
3/95 5.87
4/95 5.86
5/95 5.80
6/95 5.56
7/95 5.57
8/95 5.44
9/95 5.41
10/95 5.50
</TABLE>
As of 10-31-95
7-Day Current Yield (1) 5.82%
7-Day Effective Yield 5.99%
Average Maturity 71 DAYS
FUND STRATEGY: GO LONG
Following the Federal Reserve's February rate hike, we believed that short-
term rates had reached their peak, at least for the near term. Accordingly, we
gradually lengthened the Fund's average maturity target to a fairly bullish
60-70 days in anticipation of a possible interest-rate cut by the Fed. Extending
the Fund's maturity helped us lock in higher yields for a longer period of time
- -- and gave the Fund the potential to maintain an attractive level of income in
case short-term interest rates began to fall.
- ---------------
(1) Yields are annualized for the 7-day period ended October 31, 1995. Effective
yield reflects the compounding of income. An investment in the Fund is neither
insured nor guaranteed by the U.S. government. There can be no assurance that
the Fund will be able to maintain a stable net asset value of $1.00 per share.
Yields are historical and do not represent future yields, which will fluctuate.
The Fund's advisor temporarily waived fees of .31% and absorbed expenses of .22%
during the 7-day period ended 10-31-95. Otherwise, the Fund's current yield
would have been 5.29%, and its effective yield would have been 5.46%.
B-5
<PAGE> 62
In addition, we tended to emphasize fixed-rate securities, which offered a
slight yield advantage over floating-rate paper. This strategy also enhanced the
portfolio's ability to sustain its yield had rates moved significantly lower. At
the end of October, the Fund's average maturity was 71 days.
WE EXPECT RATES TO DRIFT LOWER
Our current economic view remains largely unchanged from the beginning of
the year. With the economy on a modest growth track and inflation apparently
stifled, we look for short-term interest rates to gradually drift lower,
impelled by further federal funds rate reductions by the Fed, possibly beginning
as soon as the last quarter of 1995.
Variables that may alter this outlook include a disappointment on the
budget front. Right now, the market appears to expect a meaningful budget
agreement, an expectation partially reflected in current prices. Should progress
not be achieved on the budget, we could see a temporary bump up in yields.
Investors should also note that 2.5% annual GDP growth won't be smooth and
steady, but is more likely to be a bit bumpy, with indications of strong growth
one quarter and signs of recession the next. Taken as a whole, however, we
expect slow growth with modest inflation -- a favorable environment for income
investors.
We began to gradually phase in the Strong Money Market Fund's fees and
expenses on August 2, 1995. While the fee and expense waivers were in part
responsible for the Fund's top ranking in 1995, we will strive to continue
providing you with the kind of superior investment value that has helped the
Fund produce consistently outstanding long-term performance since its inception
ten years ago.
As always, we thank you for your confidence and remain committed to meeting
your investment needs in the future.
Cordially,
/s/ Jay N. Mueller
Jay N. Mueller
Portfolio Manager
B-6
<PAGE> 63
Lipper Rankings as of 10-31-95 (2) (based on total return)
<TABLE>
<CAPTION>
Rank
among Money Market
Time Period Instrument Funds Percentage
- ---------------------------------------------------------------------
<S> <C> <C>
Year-to-date #1 of 258 Top Fund
1-year #1 of 250 Top 1%
5-year #5 of 171 Top 3%
Since inception (10-22-85) #3 of 106 Top 3%
</TABLE>
Rankings are historical and do not represent future performance.
- ---------------
(2) Lipper Analytical Services, Inc., rankings are based on total return with
dividends reinvested. All performance rankings are historical and do not
represent future results. From time to time, the Fund's Advisor has waived its
management fee and absorbed Fund expenses, resulting in higher returns.
B-7
<PAGE> 64
EXHIBIT C
AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
STRONG INCOME FUNDS, INC.
The undersigned Secretary of Strong Income Funds, Inc. (the "Corporation"),
hereby certifies that, in accordance with Section 180.1003 of the Wisconsin
Statutes, the following Amendment was duly adopted by the Board of Directors of
the Corporation on April 24, 1996 and approved by the shareholders of the Strong
U.S. Treasury Money Fund (the "Fund"), a class of the Corporation, on August 27,
1996 in order to eliminate the outstanding shares of the Fund in connection with
a reorganization effected pursuant to the terms of the Agreement and Plan of
Reorganization between the Corporation and the Strong Money Market Fund, Inc.,
attached hereto as Exhibit A (the "Agreement"):
1. Paragraph A of Article IV of the Amended and Restated Articles of
Incorporation is hereby amended by deleting Paragraph A thereof and inserting
the following as a new paragraph:
"A. The aggregate number of shares which the Corporation shall have
the authority to issue is Ten Billion (10,000,000,000) shares of Common
Stock with a par value of $.00001 per share. Subject to the following
paragraph the authorized shares are classified as follows:
<TABLE>
<CAPTION>
Class Authorized Number of Shares
- ----------------------------- ----------------------------
<S> <C>
Strong High-Yield Bond Fund 300,000,000
</TABLE>
The remaining Nine Billion, Seven Hundred Million (9,700,000,000) shares of
Common Stock shall remain unclassified until action is taken by the Board of
Directors pursuant to the following paragraph."
2. The Amendment herein certified shall become effective on the date it is
received for filing by the Secretary of State of Wisconsin. On the Closing Date
(as defined in the Agreement), each outstanding share of the Fund shall be
deemed canceled and restored to the status of authorized but unissued shares,
and shall be automatically converted into the right to receive Acquiring Fund
Shares (as defined in the Agreement) in accordance with the terms of the
Agreement. Certificates representing Fund shares shall be surrendered at the
time and in the manner set forth in the Agreement. Any such certificates that
remain outstanding on the Closing Date shall be deemed to be automatically
canceled, and shares represented by such certificates shall be restored to the
C-1
<PAGE> 65
status of authorized but unissued shares, and shall be automatically converted
as noted above.
Executed in duplicate this 30th day of August, 1996.
STRONG INCOME FUNDS, INC.
By:
-------------------------------
Ann E. Oglanian, Secretary
C-2
<PAGE> 66
STRONG MONEY MARKET FUND, INC.
STRONG INCOME FUNDS, INC. - STRONG U.S. TREASURY MONEY FUND
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
STATEMENT OF ADDITIONAL INFORMATION
(Special Meeting of Shareholders of Strong U.S. Treasury Money Fund)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Combined Proxy Statement and Prospectus, dated
July 3, 1996, for the Special Meeting of Shareholders of Strong U.S. Treasury
Money Fund (the "Treasury Fund") to be held on Tuesday, August 27, 1996.
Copies of the Combined Proxy Statement and Prospectus may be obtained at no
charge by writing the Treasury Fund at the address shown above or by calling
1-800-368-3863.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Combined
Proxy Statement and Prospectus.
Further information about SIF, the Treasury Fund, and the Money Fund is
contained in and incorporated by reference to the Statements of Additional
Information of the Treasury Fund and the Money Fund, dated May 1, 1996, and
March 1, 1996, respectively, the Treasury Fund's Annual Report to Shareholders,
dated December 31, 1995, and the Money Fund's Annual Report to Shareholders,
dated October 31, 1995, all of which are included herewith. Each of the
aforementioned documents may be obtained without charge by writing to the
address shown above or by calling 1-800-368-3863.
The date of this Statement of Additional Information is July 3, 1996.
1
<PAGE> 67
GENERAL INFORMATION
The shareholders of the Treasury Fund are being asked to approve or
disapprove the Reorganization Agreement dated May 24, 1996, by and among the
SIF, the Treasury Fund, the Money Fund, and, with respect to certain matters,
the Advisor, and the transactions contemplated thereby. The Reorganization
Agreement contemplates the liquidation of the Treasury Fund's portfolio
securities and instruments and, to the extent reasonably possible, its other
property and assets and the transfer of the liquidation proceeds and the
Treasury Fund's remaining assets (less a reserve for certain costs and
liabilities) in exchange for Money Fund Shares. Following the exchange, the
Treasury Fund will make a liquidating distribution of the Money Fund Shares to
the Treasury Fund's shareholders, such that a Treasury Fund shareholder at the
Closing Date will receive full and fractional Money Fund Shares having an
aggregate net asset value equal to the aggregate net asset value of the
shareholder's Treasury Fund Shares. In connection with the Reorganization, the
Treasury Fund's Amended and Restated Articles of Incorporation will be amended
to cancel all of the Treasury Fund's outstanding shares and to automatically
convert them into rights to receive Money Fund Shares, in accordance with the
Reorganization Agreement, and to eliminate that class of SIF's common stock
that constitutes the shares of the Treasury Fund.
A Special Meeting of Shareholders of the Treasury Fund to consider the
Reorganization Agreement and the transactions contemplated thereby will be held
at 100 Heritage Reserve, Menomonee Falls, Wisconsin, on Tuesday, August 27,
1996, at 8:00 a.m. Central Time, or at such other location, date, or time as
may be selected by the Chairman of the Board or the President of the Treasury
Fund, or at any adjournment thereof. For further information about the
transaction, see the Combined Proxy Statement and Prospectus.
2
