As filed with the Securities and Exchange Commission on May 24, 1996
Securities Act Registration No. 33-7604
Investment Company Act Registration No. 811-4769
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
STRONG MUNICIPAL BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)
(414) 359-3400
(Area Code and Telephone Number)
Thomas P. Lemke, Esq.
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
(Name and Address of Agent for Service)
Copies to:
Jane A. Kanter, Esq.
Katten Muchin & Zavis
1025 Thomas Jefferson Street, N.W.
East Lobby, Suite 700
Washington, D.C. 20007
No filing fee is required because an indefinite number of
shares have previously been registered pursuant to Rule 24f-2
under the Investment Company Act of 1940 by a declaration
included on its Form N-1A Registration Statement filed with
the Securities and Exchange Commission on July 28, 1986. The
Registrant's Rule 24f-2 Notice for the fiscal year ended
December 31, 1995 was filed on or about February 21, 1996.
Pursuant to Rule 429 under the Securities Act of 1933, this
Registration Statement relates to shares previously
registered on the aforesaid Registration Statement.
It is proposed that this filing will become effective on
June 23, 1996, pursuant to Rule 488 under the Securities Act
of 1933.
<PAGE>
STRONG MUNICIPAL BOND FUND, INC.
FORM N-14
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
Item No. Location in Combined Proxy
Statement and Prospectus
- ---------- ----------------------------------
Part A
1. Cover Page Cover Page
2. Beginning and Outside Table of Contents
Back Cover Page
3. Synopsis and Risk Summary; Risk Considerations
Factors
4. Information About the Summary; 1. To Approve or
Transaction Disapprove of the
Reorganization Agreement;
2. To Approve or Disapprove
of the Proposed Amendment;
Comparison of the Insured
Fund and Bond Fund
5. Information About the Summary; 1. To Approve or
Registrant Disapprove of the
Reorganization Agreement;
Additional Information About
Each Fund
6. Information About Summary; 1. To Approve or
the Company Being Disapprove of the Reorganization
Acquired Agreement; 2. To Approve or
Disapprove of the Proposed
Amendment; Additional Information
About Each Fund
7. Voting Information Summary; Information Relating
to Voting Matters
8. Interest of Certain Additional Information About
Persons and Experts Each Fund
9. Additional Information Not Applicable
Required for Reoffering
by Persons Deemed to be
Underwriters
Part B
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. Additional Information Statement of Additional Information
About the Registrant of the Bond Fund, dated May 1, 1996,
incorporated by reference
13. Additional Information Statement of Additional
About the Company Being Information of the Insured Fund,
Acquired dated May 1, 1996, incorporated
by reference
14. Financial Statements Annual Report of the Funds,
incorporated by Reference
Part C
15. Indemnification Indemnification
16. Exhibits Exhibits
17. Undertakings Undertakings
<PAGE>
[EXAMPLE OF A LETTER TO SHAREHOLDERS]
Dear Shareholder:
The accompanying Combined Proxy Statement and Prospectus
contains an important proposal for your consideration as a
shareholder of the Strong Insured Municipal Bond Fund, Inc.
(the "Insured Fund"). Your Board of Directors has proposed
that the Insured Fund be merged into the Strong Municipal
Bond Fund, Inc. (the "Bond Fund"). If approved by the
shareholders of the Insured Fund, substantially all of the
Insured Fund's assets (less a reserve for liabilities) will
be exchanged for shares of the Bond Fund on August 30, 1996
(the "Closing Date"). On that date, your Insured Fund shares
will be exchanged for an equal dollar-amount of Bond Fund
shares with no tax effect to you.
The Insured Fund was designed to seek a high level of
federally tax-exempt current income with a moderate amount of
share-price fluctuation. In seeking to achieve that
objective, the Insured Fund has invested primarily in
municipal obligations that are insured as to timely payment
of principal and interest. However, because most municipal
securities are now insurable a fund specializing in insured
municipal obligations is no longer viewed by investors as
unique. As a result, investor interest in the Insured Fund
has lagged its competitive universe.
In light of the Insured 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 Insured Fund into a larger
municipal bond fund. The Bond Fund was considered to be the
most appropriate fund because it has the same investment
objectives, substantially similar investment policies and
restrictions, and the same portfolio manager. The Bond Fund
also offers competitive rates of return and lower expense
ratios than the Insured Fund. ACCORDINGLY, 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 INSURED
FUND.
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-
368-3863.
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 the related Articles of
Amendment by completing, dating, and signing your proxy card,
and mailing it to us today.
Sincerely,
Richard S. Strong
Chairman
<PAGE>
[PRELIMINARY COPY]
STRONG INSURED MUNICIPAL BOND FUND, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that a Special Meeting of
Shareholders of the Strong Insured Municipal Bond Fund, Inc.
(the "Insured Fund") 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 the Insured Fund, the Strong
Municipal Bond Fund, Inc. (the "Bond Fund") and Strong
Capital Management, Inc., and the transactions contemplated
thereby.
ITEM 2. To approve or disapprove an amendment to the
Amended and Restated Articles of Incorporation of the Insured
Fund to cancel all of the outstanding shares of the Insured
Fund and convert them into rights to receive shares of the
Bond Fund in accordance with the Reorganization Agreement.
Such amendment shall be subject to the approval of Proposal 1
above by the Insured Fund's shareholders.
Only shareholders of record 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.
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY CARD PROMPTLY.
- --------------------------------------
AS A SHAREHOLDER OF THE INSURED 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 INSURED 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 FUNDS 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>
[PRELIMINARY COPY]
STRONG MUNICIPAL BOND FUND, INC.
STRONG INSURED MUNICIPAL BOND FUND, INC.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Telephone: (414) 359-1400
Toll Free: (800) 368-3863
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 Insured Municipal Bond
Fund, Inc. (the "Insured Fund") in connection with the
Special Meeting of Shareholders of the Insured Fund (the
"Special Meeting") 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 Insured 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 the
Insured Fund, the Strong Municipal Bond Fund, Inc. (the "Bond
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 the Insured Fund (the "Proposed Amendment")
required in connection with the Reorganization. Such
amendment shall be subject to the approval of Proposal 1
above by the Insured Fund's shareholders.
The Insured Fund and the Bond Fund are open-end management
investment companies. The Board of Directors of the Insured
Fund, including the non-interested Directors, has determined
that it is in the best interests of the Insured Fund and its
shareholders to be reorganized into the Bond Fund. In
reaching that determination, the Board of Directors
considered the small asset size, the lack of expected asset
growth of the Insured 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 Insured Fund with the assets of
the Bond Fund. Further, the Board of Directors concluded
that, among other advantages, the Reorganization will provide
Insured Fund shareholders with an investment vehicle that
has the same investment objectives, substantially similar
policies and restrictions, and the same portfolio manager, as
the Insured Fund and is likely both to reduce the expense
ratios affecting Insured Fund shareholders and provide a
competitive rate of return.
<PAGE>
The Reorganization Agreement provides that, on the
closing date for the Reorganization (the "Closing Date"),
which is currently scheduled to take place August 30, 1996,
substantially all of the property and assets of the Insured
Fund (except a reserve for certain expenses and liabilities)
will be transferred to the Bond Fund. In exchange, the Bond
Fund will simultaneously issue its shares ("Bond Fund
Shares") to the Insured Fund. The Insured Fund will then
make a liquidating distribution of the Bond Fund Shares so
received to the shareholders of the Insured Fund, so that a
holder of shares of the Insured Fund ("Insured Fund Shares")
on the Closing Date will receive that number of full and
fractional Bond Fund Shares having a value equal to the value
of the shareholder's Insured Fund Shares immediately before
the Closing Date. Following the Reorganization, the Insured
Fund will be deregistered as an investment company under
the Investment Company Act of 1940, as amended (the "1940
Act").
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
Insured Fund will be canceled and converted into rights to
receive the liquidating distribution of Bond Fund Shares
contemplated under the Reorganization Agreement. 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.
This Combined Proxy Statement and Prospectus sets forth
concisely the information that a shareholder of the Insured
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 Bond Fund dated May 1, 1996, which
describes the investment program and operation of the Bond
Fund, accompanies this Combined Proxy Statement and
Prospectus. A prospectus for the Insured Fund, dated May 1,
1996, was previously provided to each Insured Fund
shareholder.) Additional information concerning the Bond Fund
and the Insured Fund is set forth in the Statement of
Additional Information for each Fund, dated May 1, 1996.
Moreover, further information concerning 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 Insured Fund or Bond Fund at the
address and telephone numbers shown on the cover page of this
Combined Proxy Statement and Prospectus, or by calling toll-free
at (800) 368-3863. 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 Insured Fund for the Special
Meeting of Shareholders and the prospectus for the Bond Fund
Shares, which have been registered with the SEC and are to
be issued in connection with the Reorganization.
<PAGE>
The Notice, this Combined Proxy Statement and Prospectus,
and the accompanying proxy are expected to first be sent to
shareholders of the Insured 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 THE INSURED FUND,
THE BOND 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 INSURED
FUND SHARES.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY
Proposed Reorganization and Reorganization Agreement..............
Proposed Amendment................................................
Reasons for Reorganization........................................
Federal Income Tax Consequences...................................
Overview of the Insured Fund and the Bond Fund....................
Risk Considerations...............................................
1. TO APPROVE OR DISAPPROVE OF THE REORGANIZATION AGREEMENT..........
Description of the Reorganization Agreement.......................
Board Consideration...............................................
Capitalization....................................................
Federal Income Tax Consequences...................................
Comparison of the Insured Fund and the Bond Fund..................
Investment Objectives and Policies...........................
Investment Limitations.......................................
Purchase and Redemption Information, Exchange Privileges,
Distributions, Pricing, and Organization...................
Other Information............................................
2. TO APPROVE OR DISAPPROVE THE PROPOSED AMENDMENT...................
Description of the Proposed Amendment.............................
Board Consideration...............................................
INFORMATION RELATING TO VOTING MATTERS................................
General Information...............................................
Shareholder and Board Approvals...................................
Appraisal Rights..................................................
Quorum............................................................
Annual Meetings...................................................
ADDITIONAL INFORMATION ABOUT EACH FUND................................
Directors and Officers............................................
Financial Information for the Insured Fund........................
Financial Information for the Bond Fund...........................
FINANCIAL STATEMENTS..................................................
OTHER BUSINESS........................................................
SHAREHOLDER INQUIRIES.................................................
Exhibit A: Agreement and Plan of Reorganization...................
Exhibit B: Advisor's Investment Review for the Funds..............
Exhibit C: Proposed Amendment to Amended and Restated
Articles of Incorporation of the Strong
Insured Municipal Bond Fund, Inc........................
<PAGE>
SUMMARY
The following is a summary of certain information
relating to the proposed Reorganization, 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' Board 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. The Board of
Directors of the Insured Fund recommends the approval of the
Reorganization Agreement by the shareholders of the Insured
Fund at the Special Meeting.
Subject to shareholder approval, the Reorganization
Agreement provides for: (a) the transfer to the Bond Fund of
substantially all of the property and assets of the Insured
Fund (except a reserve for certain expenses and liabilities)
(the "Insured Fund Net Assets") in exchange for Bond Fund
Shares equal in value to the Insured Fund Net Assets; (b) the
distribution of the Bond Fund Shares to the shareholders of
the Insured Fund in liquidation of the Insured Fund; (c) the
cancellation of all outstanding Insured Fund Shares; and (d)
the deregistration of the Insured Fund as an investment
company under the 1940 Act.
As a result of the proposed Reorganization, each
shareholder of the Insured Fund will become a shareholder of
the Bond Fund and will hold, immediately after the Closing
Date, Bond Fund Shares having a net asset value equal to the
net asset value of the Insured Fund Shares held by the
shareholder immediately before the Closing Date with no tax
effect.
For further information, see "1. To Approve or
Disapprove the Reorganization Agreement -- Description of 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 the Insured Fund, including all of the
non-interested Directors, have determined that the Insured
Fund's Amended and Restated Articles of Incorporation should
be amended in conjunction with shareholder approval of the
Reorganization Agreement. The purpose of the Proposed
Amendment is to cancel all of the outstanding shares of the
Insured Fund and to automatically convert them into rights
to receive the liquidating distribution of Bond Fund Shares
contemplated under the Reorganization Agreement. In
<PAGE>
considering this matter, the Board of Directors was advised
that the Proposed Amendment is necessary in order to effect
the purpose 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 Insured Fund will
not be canceled and automatically converted into rights to
receive the liquidating distribution of the Board 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,
the Board of Directors of the Insured Fund, including the
non-interested Directors, has determined that it is in the
best interests of the Insured Fund and its shareholders to
reorganize into the Bond Fund. In making such determination,
the Board of Directors considered, among other things, as
described more fully below under "Board Consideration," the
small asset size and lack of expected asset growth of the
Insured 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 "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, the Board of
Directors of the Insured Fund 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 Insured Fund; (b) likely reduce the overall expense
ratios for the Insured Fund's shareholders; and (c) be a tax-
free event. 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 Insured Fund and its shareholders that
outweigh any possible risks and disadvantages of the
Reorganization. Finally, the Board of Directors concluded
that there are no significant risks or disadvantages to the
Insured Fund or its shareholders from the Reorganization and
that the interests of the Insured Fund's shareholders would
not be diluted.
Similarly, the Board of Directors of the Bond Fund, in
approving the Reorganization, determined that it would be
advantageous for the Bond Fund and its current shareholders
to acquire substantially all of the assets of the Insured
Fund in exchange for Bond Fund Shares and that the interests
of the Bond Fund's existing shareholders would not be diluted.
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES.
Counsel for this transaction will issue an opinion as of
the Closing Date to the effect that the Reorganization will
not give rise to the recognition of income, gain, or loss for
federal income tax purposes to the Insured Fund, the Bond
Fund, or their respective shareholders. See "1. To Approve or
Disapprove the Reorganization Agreement -- Federal Income Tax
Consequences."
OVERVIEW OF THE INSURED FUND AND THE BOND FUND.
Investment Objectives and Policies. The investment
objectives of the Funds are the same and the investment
policies and restrictions are substantially similar. Both
Funds seek total return by investing for a high level of
federally tax-exempt current income with a moderate degree of
share-price fluctuation. Both Funds are designed for long-term
investors who want to pursue higher income than shorter-term
municipal obligations generally provide and who are willing
to accept the fluctuation in principal associated with longer-
term debt obligations. While there are no maturity
restrictions for the Funds' debt obligations, it is anticipated
that each Fund will maintain an average portfolio maturity of
between 15 and 25 years.
The primary distinctions between the Funds are that: (a)
the Insured Fund primarily invests in municipal obligations
that are insured for the timely payment of principal and
interest, whereas the Bond Fund is not required to primarily
invest in municipal obligations that are so insured; and (b)
the Bond Fund may invest in lower-rated securities than are
permissible investments for the Insured Fund. Under normal
market conditions, at least 65% of the Insured Fund's assets
will be invested in insured obligations. Up to 35% of the
Insured Fund's assets may be invested in uninsured municipal
obligations, provided that at the time of purchase they are
rated in the highest rating category by any nationally
recognized statistical rating organization ("NRSRO") (e.g.,
bonds rated AAA by Standard & Poor's Rating Group ("S&P"))
or, if unrated, are determined by the Advisor to be of
comparable quality. The Bond Fund, on the other hand, invests
at least 95% of its net assets in investment-grade debt
obligations, which range from those in the highest rating
category (e.g., bonds rated AAA by S&P) to those that are
rated medium-quality (e.g., bonds rated BBB or higher by
S&P). In addition, unlike the Insured Fund, the Bond Fund may
invest up to 5% of its net assets in non-investment grade
debt obligations and other high yield (high risk) bonds
(e.g., bonds rated as low as C by S&P).
See "Summary - Risk Considerations" and "Comparison of
the Insured Fund and the Bond Fund - Investment Objectives
and Policies" below for a further description of the
similarities and differences between the investment
objectives, policies and risks of the Insured Fund and the
Bond Fund.
Certain Service Provider Arrangements. The Advisor
serves as investment adviser for both Funds and is entitled
to receive a monthly advisory fee from each Fund, computed
on the basis of each Fund's average daily net asset value at
the following annual rates:
<PAGE>
ADVISORY FEE
(% OF AVERAGE
FUND DAILY NET ASSET VALUE)
Insured Fund .50%
Bond Fund .60%
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 Annual Report for the
Funds for the fiscal year ended December 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 $31.50
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 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.
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 costs,
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 Insured Fund and the
Bond Fund as of December 31, 1995. Excluding extraordinary
expenses, the current fees and expenses of the Bond Fund are
expected to remain unchanged as a result of the
Reorganization.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS)
INSURED FUND BOND FUND
Management Fees 0.50% 0.60%
12b-1 Fees NONE NONE
Other Operating Expenses 0.48% 0.23%
Total Fund Operating Expenses* 0.98% 0.83%
*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, however, the Advisor
did not engage in any such voluntary fee waivers or expense
absorptions with respect to either Fund. Excluding
extraordinary expenses, each Fund's "Total Operating
Expenses" as indicated above is substantially consistent
with its current operating expenses.
Example: An investor in the Insured Fund or the Bond 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.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Insured Fund $10 $31 $54 $120
Bond Fund 8 $26 $46 $103
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. Both
Funds are organized as Wisconsin corporations. The
purchase, redemption, dividend, and other practices and
procedures, including exchange rights, of the Funds are
identical, as described further below under "Comparison of
the Insured Fund and the Bond 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 Insured Fund and the
risk factors associated with the Bond Fund.
Medium-Quality Investment Grade Debt Obligations: The
Insured Fund may only invest in municipal debt obligations
that are either (a) insured as to timely payment of principal
and interest as described below or (b) uninsured, but rated
in the highest rating category by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality.
The Bond Fund, however, is permitted to invest in
investment grade securities of lesser credit quality,
including medium-quality debt obligations. Investment-grade
debt obligations are generally believed to have relatively
low degrees of credit risk. However, medium-quality
investment grade debt obligations (e.g., bonds rated BBB or
higher by S&P) may have some speculative characteristics,
since their issuers' capacity for repayment may be more
vulnerable to adverse economic conditions or changing
circumstances than that of higher-rated issuers.
<PAGE>
Insurance: Under normal circumstances the Insured Fund
is required to invest at least 65% of its total assets in
municipal obligations that are insured for the timely payment
of principal and interest. The Insured Fund's insured
municipal obligations will be insured by insurers determined
to have a high claims-paying ability by or under the
authority of the Insured Fund's Board of Directors. The Bond
Fund, however, is not subject to any such requirement.
Accordingly, in the absence of such insurance, securities in
which the Bond Fund invests may involve more financial risk
than the insured securities in which the Insured Fund
invests. On the other hand, while insurance is intended to
reduce financial risk, the cost of such insurance (from
higher purchase prices of portfolio securities or the payment
of insurance premiums) will result in lower yields on the
municipal obligations so insured.
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 at the
Closing Date substantially all of the property and assets of
the Insured Fund will be transferred to the Bond Fund free and
clear of all liens, encumbrances, and claims, 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 accountants, its income dividend payable prior to the
Closing Date, and expenses of its liquidation and
deregistration contemplated under the Reorganization Agreement);
(b) to discharge all of its unpaid liabilities (other than
unamortized organizational expenses) on its books and records
at the Closing Date; and (c) to pay any contingent liabilities,
if any, that the Board of Directors of the Insured Fund may
reasonably deem to exist against the Insured Fund at the Closing
Date. (The property and assets to be transferred to the Bond Fund
are referred to herein as the "Insured 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 Bond Fund. The Advisor will waive,
prior to the Closing Date, all of the remaining unamortized
organizational expense of the Insured Fund reflected on the
Insured Fund's books and records as of the Closing Date.
In exchange for the transfer to the Bond Fund of the
Insured Fund Net Assets as described, the Bond Fund will
simultaneously issue at the Closing Date full and fractional
Bond Fund Shares to the Insured Fund for distribution pro
rata by the Insured Fund to its shareholders. The number of
Bond Fund Shares so issued by the Bond Fund will have an
aggregate net asset value equal to the value of the Insured
Fund Net Assets on the Closing Date.
<PAGE>
Following the close of business on the Closing Date, the
Insured Fund will distribute pro rata to its shareholders the
Bond Fund Shares received by the Insured Fund in liquidation
thereof. Each shareholder owning Insured Fund Shares at the
Closing Date will receive an amount of Bond Fund Shares equal
to the value of their Insured 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 Insured Fund Shares. In connection with the Reorganization,
the Insured Fund will be deregistered as an investment company
under the 1940 Act.
The stock transfer books of the Insured Fund will be
permanently closed as of the close of business on the day
immediately preceding the Closing Date. Redemption requests
received thereafter by the Insured Fund will be deemed to be
redemption requests for Bond Fund Shares. If any Insured Fund
Shares held by a former Insured Fund shareholder are
represented by a share certificate, the certificate must be
surrendered to the Bond 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 Bond Fund Shares issued to the
shareholder in the Reorganization can be redeemed or
transferred.
The Reorganization with respect to the Insured 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 Insured Fund's
shareholders; (b) the receipt of certain legal opinions
described in Sections 7 and 8 of the Reorganization Agreement
(which include a legal opinion that the Bond Fund Shares
issued to Insured Fund shareholders in accordance with the
terms of the Reorganization Agreement will be validly issued,
fully paid, and non-assessable and a legal opinion that the
Reorganization will not give rise to the recognition of
income, gain, or loss for federal income tax purposes to the
Insured Fund, the Bond Fund, or their respective
shareholders); (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 (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, 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 Insured 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 Bond Fund Shares to be distributed to Insured Fund
shareholders under the Reorganization Agreement to the
detriment of the Insured Fund shareholders, unless the
Insured Fund shareholders approve such change or
unless the amendment merely changes the Closing Date.
<PAGE>
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
Insured Fund has unanimously determined that the proposed
Reorganization is in the best interest of the shareholders of
the Insured Fund, and recommends the 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 Insured Fund. The Board of Directors considered
that the relatively small asset size of the Insured Fund (a) 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); and (b) had been a
factor in causing its performance to lag its competitors for
certain more recent periods. The Board of Directors also
considered that, because of heightened competition in the
insurance industry, most municipal securities are now
insurable. As a result, a fund such as the Insured Fund that
seeks to keep most of its assets in insured municipal
instruments is no longer unique and is therefore less
attractive to investors. Accordingly, the Board of Directors
considered that there was little expectation that the
Insured 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 Insured
Fund; and (b) the reorganization of the Insured 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 Insured Fund and the tax
consequences and other effects that each alternative would
have on the Insured 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
Insured Fund shareholders was the reorganization of the
Insured Fund into an investment company with an identical
investment objective and similar investment policies and
restrictions. At a combined meeting of the Board of
Directors of the Funds held on April 24, 1996, the Board of
Directors of the Insured Fund considered the proposed
Reorganization. During the course of their review and
deliberation, the Directors evaluated the potential benefits
and detriments to the Insured Fund and its shareholders. The
Directors requested and received from the Advisor written
materials containing relevant information about the Bond 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 Insured 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 Bond Fund and compared
such expense levels with the current actual and contractual
expense levels of the Insured Fund and considered the
anticipated expenses and charges of the Bond Fund after the
Reorganization that would be borne directly and indirectly by
the shareholders of the Insured Fund. (The Board of Directors
noted that the Advisor will waive all of the unamortized
organizational expenses of $3,600 of the Insured Fund.)
The Board of Directors also considered the additional
efficiencies and benefits for shareholders of the Insured
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 Insured Fund would be subject
to as shareholders of the Bond Fund. The Board of Directors
also considered those provisions of the Reorganization Agreement
relating to the price of shares to be exchanged.
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
Insured Fund's shareholders. The Board of Directors noted further
that no sales or other charges would be imposed on any shares of
the Bond Fund acquired by shareholders of the Insured Fund in
connection with the Reorganization and that it was the Bond Fund's
intention to remain a "no-load" fund.
Finally, the Board of Directors of the Insured Fund reviewed
the terms of the Reorganization Agreement. The Board of Directors
noted that the Insured Fund would be provided with an opinion of
counsel for the transaction with respect to the tax-free treatment
of the Reorganization.
Based upon their evaluation of the relevant information
presented to them, and in light of their fiduciary duties
under federal and state law, the Insured Fund's Board of Directors
unanimously determined that the proposed Reorganization was
in the best interests of the Insured Fund and its shareholders
and that the interests of the Insured 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.
<PAGE>
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 Bond Fund considered the proposed
Reorganization with respect to the Bond 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 Bond Fund and its shareholders and
(b) the interests of the existing Bond Fund shareholders will
not be diluted as a result of the proposed Reorganization.
CAPITALIZATION.
Because the Insured Fund will be combined in the
reorganization with the Bond Fund, the total capitalization
of the Bond Fund after the Reorganization is expected to be
greater than the current capitalization of the Insured Fund.
The following table sets forth as of February 29, 1996: (i)
the capitalization of the Insured Fund; (ii) the
capitalization of the Bond Fund; and (iii) the pro forma
capitalization of the Bond Fund as adjusted to give effect to
the Reorganization. If the Reorganization is consummated,
the capitalization of the Bond Fund is likely to be different
at the Closing Date as a result of daily share purchase and
redemption activity in the Insured Fund and the Bond Fund.
PRO FORMA
INSURED FUND BOND FUND COMBINED
Total Net Assets $37,290,527 $239,294,111 $276,584,638
Shares Outstanding 3,544,370 25,624,596 29,617,818
Net Asset Value Per Share $10.52 $9.34 $9.34
FEDERAL INCOME TAX CONSEQUENCES.
Consummation of the Reorganization is subject to
the condition that the Funds receive an opinion from counsel
to the Funds that for federal income tax purposes: (i) the
transfer of substantially all of the assets of the Insured
Fund (other than the Reserve Account) to the Bond Fund in
exchange for Bond Fund Shares, and the distribution to
shareholders of the Insured Fund of the Bond Fund Shares so
received, as described in the Reorganization Agreement,
will constitute a reorganization within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as
amended ("Code"); (ii) in accordance with Section 361(a),
Section 361(c)(1) and Section 357(a) of the Code, no gain or
loss will be recognized by the Insured Fund or its
shareholders as a result of such transactions; (iii) in
accordance with Section 1032(a) of the Code, no gain or loss
will be recognized by the Bond Fund or its shareholders as a
result of such transactions; (iv) in accordance with Section
354(a)(1) of the Code, no gain or loss will be recognized by
the shareholders of the Insured Fund on the distribution to
them by the Insured Fund of the Bond Fund Shares in exchange
for their Insured Fund Shares; (v) in accordance with Section
358(a)(1) of the Code, the basis of the Bond Fund Shares
received by a shareholder of the Insured Fund will be the
same as the basis of the shareholder's Insured Fund Shares
immediately before the Reorganization; (vi) in accordance
with Section 362(b) of the Code, the basis to the Bond Fund
of the assets of the Insured Fund received pursuant to such
<PAGE>
transactions will be the same as the basis of the assets in
the hands of the Insured Fund immediately before such
transactions; (vii) in accordance with Section 1223(l) of the
Code, a shareholder's holding period for Bond Fund Shares
will be determined by including the period for which the
shareholder held the Insured Fund Shares exchanged therefor,
provided that the shareholder held such Insured Fund Shares
as a capital asset; and (viii) in accordance with Section
1223(2) of the Code, the Bond Fund's holding period with
respect to the assets received in the Reorganization will
include the period for which such assets were held by the
Insured Fund; (ix) subject to the conditions and limitations
specified in Sections 381, 382, 383 and 384 of the Code, the
Bond Fund will succeed to and take into account the items of
the Insured Fund described in Section 381(c) of the Code,
including the earnings and profits, or deficit in earnings
and profits, of the Insured Fund as of the Closing Date, in
accordance with Section 381(a) of the Code and Treasury
Regulation Section 1.381-1(a); and (x) any deficit in
earnings and profits of the Insured Fund will be used only to
offset earnings and profits accumulated after the Closing
Date.
The Funds have not sought a tax ruling from the Internal
Revenue Service ("IRS"). The opinion of counsel is not
binding on the IRS and does not preclude the IRS from
adopting a contrary position. Shareholders should consult
their own tax advisers concerning the potential tax
consequences to them, including state and local income tax
consequences.
<PAGE>
COMPARISON OF THE INSURED FUND AND THE BOND FUND
The investment objectives and investment restrictions of
both Funds are identical and the investment policies 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
Insured Fund and the Bond Fund and certain noteworthy
differences.
Each Fund seeks total return by investing for a high
level of federally tax-exempt current income with a moderate
degree of share-price fluctuation. Both Funds are designed
for long-term investors who wish to pursue higher income than
shorter-term municipal obligations generally provide and who
are willing to accept the fluctuation in principal associated
with longer-term debt obligations. While there are no
maturity restrictions for the Funds' debt obligations, it is
anticipated that each Fund will maintain an average portfolio
maturity of between 15 and 25 years.
The Insured Fund invests primarily in long-term high-quality
debt obligations that are insured for the timely payment of
principal and interest. Under normal market conditions, the
Insured Fund will invest at least 65% of its total assets in
debt obligations that are insured for the timely payment of
principal and interest by an insurer determined by the Advisor
to have high claims-paying ability (generally, only those carrying
the highest credit rating). Insurance, however, does not guarantee
either the price of an individual debt obligation or the share
price of the Insured Fund itself. The Insured Fund may also invest
up to 35% of its total assets in uninsured municipal obligations,
provided they are, at the time of purchase, rated in the highest
rating category by any NRSRO (e.g., bonds rated AAA by S&P) or,
if unrated, are determined by the Advisor to be of comparable quality.
The Bond Fund invests at least 95% of its net assets in
investment-grade debt obligations, which range from those in the
highest rating category to those rated medium-quality. Medium-
quality debt obligations are those rated in the fourth highest
category or obligations determined by the Advisor to be of
comparable quality. Medium-quality debt obligations,
although considered investment-grade, may have some
speculative characteristics. The Bond Fund may also invest up
to 5% of its net assets in non-investment-grade debt
obligations and other "junk" bonds (e.g., bonds rated as low
as C by S&P). Although such bonds generally offer higher
yields than investment-grade securities with similar
maturities, lower-quality securities involve greater risks,
including the possibility of default or bankruptcy.
<PAGE>
Each Fund may also invest in fixed and variable-rate
obligations, debentures, notes, leases, certificates of
deposit, commercial paper, repurchase agreements, banker's
acceptances, other short-term fixed income securities,
structured investments such as mortgage- and asset-
backed securities, loan participation, convertible debt
and zero coupon, step-coupon, and pay-in-kind securities.
Each Fund may also borrow funds and engage in mortgage
dollar roll transactions and reverse repurchase agreements.
In order to facilitate portfolio liquidity, each Fund may
acquire standby commitments from brokers, dealers, or banks
with respect to securities in its portfolio. Each Fund may
also invest without limitation in securities purchased on a
when-issued or delayed delivery basis.
From time to time, each Fund may invest 25% or more of
its total assets in municipal obligations that are related in
such a way that an economic, business, or political development
or change affecting one such security could also affect the
other securities. Such related sectors may include hospitals,
retirement centers, pollution control, single-family housing,
multiple-family housing, industrial development, utilities,
education, and general obligation bonds. Each Fund also may
invest 25% or more of its total assets in municipal obligations
whose issuers are located in the same state.
Derivative instruments may be used by the Funds for
any lawful purpose, including hedging or managing risk, but
not for speculation. Derivative instruments are securities or
agreements whose value is derived from the value of some
underlying asset, for example, securities, reference indexes,
or commodities. Options, futures, and options on futures
transactions are considered derivative transactions.
Please see the prospectus for each Fund for further
information concerning each Fund's investment policies and
risks.
Investment Limitations. Neither the Bond Fund nor
the Insured 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. The
investment limitations of the Bond Fund and the Insured
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 Insured Fund was closed to new investors
and additional investment by existing investors, except in
certain limited circumstances. Accordingly, existing Insured
Fund shareholders may only acquire additional Insured 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.
<PAGE>
Bond 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. Bond Fund Shares are sold on a
100% no-load basis, meaning that shares may be purchased,
redeemed, and 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 Bond Fund Shares. The
purchase price will be net asset value next determined after
the Bond Fund receives the shareholder's request in proper form.
No sales charge will be imposed on the issuance of Bond Fund
Shares in connection with the Reorganization.
The minimum initial investment for the Bond Fund is
$2,500 per account and $250 for UGMA/UTMA Accounts. The
minimum initial investment amount is waived for shareholders
who enroll in the Bond Fund's Automatic Investment Plan. The
minimum subsequent investment for the Bond Fund is $50 per
account. Purchase orders for shares of the Bond Fund are
effected on any "business day", that is, any day on which the
New York Stock Exchange is open for trading. The Bond 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. Please refer to
each prospectus for further information on these subjects.
Other Information. The Funds are registered as
open-end management investment companies under the 1940 Act.
Currently, each Fund offers one investment portfolio.
Each Fund is organized as a Wisconsin corporation
and, as such, is subject to the provisions of its 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, except that shares of the
Insured Fund have a per share par value of $.00001, whereas
shares of the Bond Fund have a per share par value of $.001.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE FOR PROPOSAL 1
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.
<PAGE>
DESCRIPTION OF PROPOSED AMENDMENT.
The purpose of the Proposed Amendment is to, on
the Closing Date of the Reorganization, cancel all of the
outstanding shares of the Insured Fund and to automatically
convert them into the right to receive full or fractional
Bond Fund Shares with a net asset value equal to the value of
the Insured Fund Shares, as described in the Reorganization
Agreement. 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 purpose 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 the Insured Fund have unanimously determined
that the Proposed Amendment is in the best interest of the
shareholders of the Insured 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 Insured
Fund's outstanding shares in connection with the Reorganization
of the Insured Fund and the distribution of Bond Fund Shares to
the Insured Fund's shareholders, as contemplated under the
Reorganization Agreement.
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS
VOTE FOR PROPOSAL 2
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION.
This Combined Proxy Statement and Prospectus is being
furnished in connection with the solicitation of proxies
by the Insured Fund'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 the
Insured Fund a written notice of revocation or a subsequently
executed proxy or by attending the Special Meeting and voting
in person.
Only shareholders of record 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
__________ shares of the Insured Fund. Each share or fraction
thereof is entitled to one vote or fraction thereof.
<PAGE>
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.
<PAGE>
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 Insured Fund. The
approval of the holders of a majority of the outstanding Insured 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 Insured 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 Bond Fund 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 the Funds 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 the
Insured Fund is discussed above under "2. To Approve or Disapprove the
Proposed Amendment--Board Consideration."
On June 18, 1996, the name, address, and share ownership of the
persons who beneficially owned 5% or more of the Insured Fund's
outstanding shares, and the percentage of shares that would be owned
by such persons upon consummation of the Reorganization based upon their
holdings and outstanding shares on _______, 1996, are as follows:
[INFORMATION TO BE PROVIDED BY THE ADVISOR]
On June 18, 1996, the name, address, and share ownership of the
persons who beneficially owned 5% or more of the outstanding shares
of the Bond Fund and the percentage of shares that would be owned by
such persons upon consummation of the Reorganization based upon their
holdings and outstanding shares on ____________, 1996, are as follows:
[INFORMATION TO BE PROVIDED BY THE ADVISOR]
On June 18, 1996, the directors and officers of the Bond Fund,
as a group, owned less than 1% of the outstanding shares of the Bond
Fund. On ________, 1996, the directors and officers of the Insured
Fund, as a group, beneficially owned ______ shares of the Insured
Fund's common stock which was approximately ____% of the Insured
Fund's then outstanding shares.
APPRAISAL RIGHTS.
If the Reorganization is approved by the shareholders of the
Insured 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
the Insured Fund Shares. "Fair value", under the Wisconsin Business
Corporation Law, as applied to the Reorganization, means the value
of the Insured 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.
<PAGE>
Consequently, shareholders have the right to redeem their
Insured Fund Shares at net asset value until the Closing Date and
thereafter former Insured Fund shareholders may redeem their Bond
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 Insured 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.
ANNUAL MEETINGS.
The Bond 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 matter has been requested in writing by the holders of
record of 10% or more of the Bond 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 Bond Fund will assist in shareholder
communications on such matters.
<PAGE>
ADDITIONAL INFORMATION ABOUT EACH FUND
The Insured Fund and the Bond 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, file 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 Bond 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 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 Bond Fund
will continue as directors and officers of the Bond Fund
following the Reorganization. The Bond Fund's officers and
directors also are officers and directors of the Insured
Fund. The current directors and officers of the Insured Fund
will not continue in such positions following the
Reorganization, except to the extent that any action may be
required of them in connection with the winding up and
deregistration of the Insured Fund. Information concerning
such persons is contained in the Statement of Additional
Information for each Fund.
FINANCIAL INFORMATION FOR THE INSURED FUND
Below are financial highlights for the Insured Fund as
of the fiscal year ended December 31, 1995. It is based
on a single share outstanding through such 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
incorporated by reference in the Statement of Additional
Information, dated July 3, 1996, for this Combined Proxy
Statement and Prospectus.
<PAGE>
INSURED FUND
FINANCIAL HIGHLIGHTS
Per Share Data and
Ratios for a Share
Outstanding Throughout
the Period Indicated:
1995 1994 1993 1992 1991<F1>
----- ----- ----- ----- -----
Net asset value,
Beginning of period $ 10.19 $ 11.46 $ 10.82 $ 10.28 $ 10.00
Income from Investment
Operations:
Net Investment Income 0.50 0.54 0.56 0.62 0.06
Net Realized and 0.77 (1.27) 0.80 0.68 0.28
Unrealized Gains (Losses) ------ ------- ------- ------ -------
on Investments
Total From Investment 1.27 (0.73) 1.36 1.30 0.34
Operations
Less Distributions
From Net Investment (0.51) (0.54) (0.56) (0.62) (0.06)
Income<F2>
In Excess of Net (0.28) -- -- -- --
Investment Income
From Net Realized Gains -- -- (0.16) (0.14) --
------ ------ ------ ------ ------
Total Distributions (0.79) (0.54) (0.72) (0.76) (0.06)
------ ------ ------ ------ ------
Net Asset Value, End of $ 10.67 $ 10.19 $ 11.46 $ 10.82 $ 10.28
Period ======= ======= ======= ======= =======
Total Return +12.7% -6.5% +12.8% +13.1% +3.4%
Net Assets, End of $39,473 $51,024 $61,213 $21,367 $ 1,308
Period (In Thousands)
Ratio of Expenses to 1.0% 1.0% 0.6% 0.2% 0.5%*
Average Net Assets
Ratio of Expenses to 1.0% 1.0% 0.9% 1.1% 1.0%*
Average Net Assets
Without Waivers and
Absorptions
Ratio of Net Investment 4.6% 5.0% 4.9% 5.8% 5.6%*
Income to Average Net
Assets
Portfolio Turnover Rate 724.9% 411.1% 110.7% 289.6% 24.2%
* Calculated on an annualized basis.
<F1> Inception date is November 25, 1991. Total return and
portfolio turnover rate are not annualized.
<F2> Tax-exempt for regular Federal income tax purposes.
<PAGE>
FINANCIAL INFORMATION FOR THE BOND FUND
Below are financial highlights for the Bond Fund as of the
fiscal year ended December 31, 1995. 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 incorporated by reference in the Statement of Additional
Information, dated July 3, 1996, for this Combined Proxy Statement and
Prospectus.
<PAGE>
BOND FUND
FINANCIAL HIGHLIGHTS
Per Share Data and
Ratios for a Share
Outstanding Throughout
the Period Indicated:
1995 1994 1993 1992 1991
----- ----- ----- ----- -----
Net asset value, $ 9.23 $10.25 $10.00 $ 9.76 $ 9.22
Beginning of period
Income from Investment
Operations:
Net Investment Income 0.52 0.56 0.58 0.65 0.65
Net Gains or (Losses)
on Securities (both
realized and unrealized) 0.51 (1.02) 0.57 0.50 0.54
------ ------ ------ ------ ------
Total From Investment
Operations 1.03 (0.46) 1.15 1.15 1.19
Less Distributions
From Net Investment
Income,<F4> (0.54) (0.56) (0.58) (0.65) (0.65)
In Excess of Net
Investment Income (0.20) -- -- -- --
From Net Realized Gains -- -- (0.32) (0.26) --
------ ------ ------ ------ ------
Total Distributions (0.74) (0.56) (0.90) (0.91) (0.65)
------ ------ ------ ------ ------
Net Asset Value,
End of Period $ 9.52 $ 9.23 $10.25 $10.00 $ 9.76
====== ====== ====== ====== ======
Total Return: +11.4% -4.6% +11.8% +12.2% +13.4%
Net Assets, End $246,724 $279,808 $398,911 $289,751 $115,230
of Period (In Thousands)
Ratio of Expenses 0.8% 0.8% 0.7% 0.1% 0.1%
to Average Net Assets
Ratio of Expenses 0.8% 0.8% 0.8% 0.9% 1.1%
to Net Assets Without
Waivers and Absorptions
Ratio of Net Investment 5.4% 5.8% 5.6% 6.4% 6.9%
Income to Average Net Assets
Portfolio Turnover Rate 513.8% 311.0% 156.7% 324.0% 465.2%
<PAGE>
Per Share Data and
Ratios for a Share
Outstanding Throughout
the Period Indicated:
1990 1989 1988 1987 1986<F3>
---- ---- ---- ---- ----
Net asset value, $ 9.47 $ 9.35 $ 9.16 $10.01 $10.00
Beginning of period
Income from Investment
Operations:
Net Investment Income 0.66 0.52 0.49 0.67 0.12
Net Gains or (Losses)
on Securities (both
realized and unrealized) (0.25) 0.12 0.19 (0.85) 0.01
------ ------ ------ ------ ------
Total from Investment
Operations 0.41 0.64 0.68 (0.18) 0.13
Less Distributions
From Net Investment
Income<F4> (0.66) (0.52) (0.49) (0.67) (0.12)
In Excess of Net
Investment Income -- -- -- -- --
From Net Realized Gains -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions (0.66) (0.52) (0.49) (0.67) (0.12)
------ ------ ------ ------ ------
Net Asset Value,
End of Period $ 9.22 $ 9.47 $ 9.35 $ 9.16 $10.01
====== ====== ====== ====== ======
Total Return: +4.6% +7.1% +7.6% -1.8% +1.3%
Net Assets End $31,560 $18,735 $18,275 $19,070 $2,212
of Period (In Thousands)
Ratios of Expenses 0.3% 1.7% 1.3% 1.0% 0.4%*
to Average Net Assets
Ratios of Expenses 1.5% 1.8% 1.4% 1.3% 1.0%*
to Net Assets Without
Waivers and Absorptions
Ratio of Net Investment 7.2% 5.6% 5.3% 7.0% 6.4%
Income to Average Net Assets
Portfolio Turnover Rate 586.0% 243.3% 343.6% 284.0% 21.9%
* Calculated on an annualized basis.
<F3> Inception date is October 23, 1986. Total return and portfolio
turnover rate are not annualized.
<F4> Tax-exempt for regular Federal income tax purposes.
<PAGE>
INFORMATION INCLUDED IN THIS COMBINED PROXY STATEMENT AND
PROSPECTUS CONCERNING THE INSURED FUND WAS PROVIDED BY THE
INSURED FUND AND THE ADVISOR. INFORMATION INCLUDED IN THIS
COMBINED PROXY STATEMENT AND PROSPECTUS CONCERNING THE BOND
FUND WAS PROVIDED BY THE BOND FUND AND THE ADVISOR.
<PAGE>
FINANCIAL STATEMENTS
The financial statements and financial highlights of the Funds
for the fiscal year ended December 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 its reports thereon, incorporated
by reference or included in such prospectuses and Statements of Additional
Information. 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
The Board of Directors of the Insured Fund 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 the Insured Fund in
writing at the address on the cover page of this Combined Proxy
Statement and Prospectus or by telephoning 1-800-368-3863.
* * *
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
<PAGE>
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 Insured Municipal Bond Fund, Inc., a
Wisconsin corporation (the "Acquired Fund"), and Strong
Municipal Bond Fund, Inc., a Wisconsin corporation (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 within the meaning of Section
368(a)(1) of the Internal Revenue Code of 1986, as amended
(the "Code"). The reorganization ("Reorganization") will
consist of the transfer of substantially all of the
property, assets, and goodwill of the Acquired Fund to the
Acquiring Fund in exchange solely for shares of the voting
common stock of the Acquiring Fund ("Acquiring Fund
Shares"), 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, the cancellation of all of the
outstanding shares of the Acquired Fund ("Acquired Fund
Shares") pursuant to an amendment of the Acquired Fund's
Amended and Restated Articles of Incorporation, and the
liquidation and deregistration of the Acquired Fund as
provided herein, 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 On the Closing Date for the Reorganization (the
"Closing Date"), the Acquired Fund shall transfer substantially
all of its property and assets (consisting, without limitation,
of portfolio securities and instruments, 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 its 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 and deregistration
contemplated hereunder); (b) to discharge all of the
unpaid liabilities (other than unamortized organizational
expenses) 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 to the Acquiring
<PAGE>
Fund upon the deregistration 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 the 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 time of the closing
provided for in Section 3.1 of this Agreement (the "Closing
Time").
1.2 The Acquired Fund reserves the right to purchase
or sell any of its portfolio securities, except to the
extent such purchases or sales may be limited by the
representations made in connection with issuance of the
tax opinion described in Section 8.9 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 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
the 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, any Acquired Fund Share certificates that remain
outstanding shall be deemed to be canceled. The Acquired
Fund's transfer books 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, the Acquired Fund shall take all steps necessary to
prepare and file with the Securities and Exchange Commission
("SEC") an application pursuant to Section 8(f) of the
Investment Company Act of 1940, as amended, ("1940 Act") for
an order that it has ceased to be an investment company.
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
value of 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.
<PAGE>
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. 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 Portfolio securities that are not held in book-entry
form shall be transferred by Firstar Trust Company (the
"Custodian") or its agents or nominees from the Acquired
Fund's account with the Custodian to the account of the
Acquiring Fund on the Closing Date, duly endorsed in proper
form for transfer, in such condition as to constitute good
delivery thereof in accordance with the custom of brokers,
and shall be accompanied by all necessary federal and state
stock transfer stamps or a check for the appropriate purchase
price thereof. Portfolio securities held of record by the
Custodian or its agents or nominees in book-entry form on
behalf of the Acquired Fund shall be transferred to the
Acquiring Fund by the Custodian by recording the transfer of
beneficial ownership thereof on its records and those of its
agents and nominees. 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.
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 THE ACQUIRED FUND
The Acquired Fund represents and warrants to the
Acquiring Fund as follows:
4.1 The Acquired 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,
subject to approval of the Acquired Fund Shareholders, to
perform its obligations under this Agreement and to
consummate the transactions contemplated herein. The Acquired
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 Acquired 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.
<PAGE>
4.2 The Acquired 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.
4.3 The execution, delivery, and performance of this
Agreement have been duly authorized by all necessary action
on the part of the Acquired Fund's Board of Directors, and
this Agreement constitutes a valid and binding obligation of
the Acquired Fund, 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 The Acquired Fund is not, and the execution,
delivery, and performance of this Agreement by the Acquired
Fund will not result, in violation of any provision of the
Amended and Restated Articles of Incorporation or Bylaws of
the Acquired Fund or of any agreement, indenture, instrument,
contract, lease, or other arrangement or undertaking to which
the Acquired Fund 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 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.
<PAGE>
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 the
Acquired Fund or any of its properties or assets. The
Acquired Fund knows of no facts which might form the basis
for the institution of such proceedings. The Acquired 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 its business or its ability
to consummate the transactions herein contemplated.
4.9 The Acquired Fund 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,
the Acquired Fund 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, the Acquired Fund 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 (a) such imperfections
of title or encumbrances as do not materially detract from
the value or use of the assets subject thereto, or materially
affect title thereto, or (b) such restrictions as might arise
under federal or state securities laws or the rules and
regulations thereunder.
<PAGE>
4.14 No consent, approval, authorization, or order of
any court or governmental authority is required for the
consummation by the Acquired Fund 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 the Funds
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 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 Acquired Fund is not under the jurisdiction of
a Court in Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
4.19 The information to be furnished by the Acquired Fund
for use in preparing applications for orders, the Form N-14
Registration Statement, 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 thereunder applicable thereto.
<PAGE>
4.20 There is no intercorporate indebtedness existing
between the Acquired Fund and the Acquiring Fund that was
issued, acquired, or will be settled at a discount.
5. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING FUND
The Acquiring Fund represents and warrants to the
Acquired Fund 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 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 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
Acquired Fund), 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).
<PAGE>
5.7 The Prospectus of the Acquiring Fund, dated May 1,
1996, and its 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 Acquiring Fund or
any supplement thereto, that is hereafter filed with the SEC
(copies of which documents shall be provided to the Acquired
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.
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 the Acquired Fund 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 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.
<PAGE>
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 the Acquired Fund for inclusion therein as
covered by the Acquired Fund'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
the Acquired Fund.
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 Acquiring Fund is not under the jurisdiction of
a Court in a Title 11 or similar case within the meaning of
Section 368(a)(3)(A) of the Code.
5.18 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.
<PAGE>
5.19 There is no intercorporate indebtedness existing
between the Acquired Fund and the Acquiring Fund that was
issued, acquired, or will be settled at a discount.
5.20 The Acquiring Fund does not own, directly or
indirectly, nor has it owned during the past five years,
directly or indirectly, any stock of the Acquired Fund.
6. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
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 the Acquired Fund shall call, and the
Acquired Fund 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 the Acquired Fund's Amended and Restated
Articles of Incorporation to cancel all of the outstanding
shares of the Acquired Fund, effective as of the Closing) and
the Acquired Fund shall take all other actions reasonably
necessary to obtain approval of the transactions
contemplated herein.
6.3 The Acquired Fund covenants that it 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 The Acquired Fund 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 the Acquired Fund each shall take, or
cause to be taken, all action, and do or cause to be done,
all things reasonably necessary, proper, or advisable to
consummate the transactions contemplated by this Agreement.
6.6 The Acquired Fund 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 the Acquired Fund's Treasurer or Assistant Treasurer. As promptly
as practicable, but in any case within sixty (60) days after
the Closing Date, the Acquired Fund 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 the
<PAGE>
Treasurer or Assistant Treasurer of the Acquired Fund. The
Acquired Fund covenants that it 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. The Acquired Fund shall provide the Acquiring Fund
with all information about the Acquired Fund that is
necessary to prepare the pro forma financial statements. The
Funds 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, the Acquired Fund 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 the Acquired Fund with all
information applicable to the Acquiring Fund required for
inclusion in the Proxy Statement, as described in Section 6.7
hereof.
6.9 The Acquired Fund shall deliver to the Acquiring
Fund at the Closing Date confirmation or other adequate
evidence as to the tax costs and holding periods of the
assets of the Acquired Fund delivered to the Acquiring Fund
in accordance with the terms of this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of 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 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 Acquired Fund Shareholders
in the manner required by the Acquired Fund's Amended and Restated
Articles of Incorporation and Bylaws and applicable laws.
<PAGE>
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 the Acquired
Fund 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, and 7.10 hereof have been fulfilled.
7.6 The Acquired Fund shall have received an opinion or
opinions of counsel regarding the transaction, in a form
reasonably satisfactory to the Acquired Fund, 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 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,
<PAGE>
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 of other counsel to the extent set forth
in such opinion, provided such other counsel is reasonably
acceptable to the Acquired Fund; and (d) shall state that
such opinion is solely for the benefit of the Acquired Fund
and its Board of Directors and officers.
7.7 The Trust shall have received an opinion of counsel
regarding the transaction addressed to the Funds in form
reasonably satisfactory to them and dated as of the Closing
Date, with respect to the matters specified in Section 8.9
hereof.
7.8 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.
7.9 The parties shall have received: (a) a memorandum,
in a 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.
7.10 No action, suit, or other proceeding shall be
threatened or pending before any court or governmental agency
in which is sought to restrain or prohibit, or obtain damages
or other relief in connection with, this Agreement or the
transactions contemplated herein.
7.11 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.
<PAGE>
7.12 The Acquired Fund shall have received from the
Acquiring Fund all such documents, including but not limited
to, checks, share certificates, if any, and receipts, which
the Acquired Fund or its counsel may reasonably request.
7.13 The Acquiring Fund shall have furnished the
Acquired Fund at the Closing Date with a certificate or
certificates of its President and/or Treasurer dated as of
said date to the effect that: (a) the Acquiring Fund has no
plan or intention to reacquire any of the Acquiring Fund
Shares to be issued in the Reorganization, except in the
ordinary course of business; (b) the Acquiring Fund has no
plan or intention to sell or otherwise dispose of any of the
assets of the Acquired Fund acquired in the Reorganization,
except for dispositions made in the ordinary course of business
or transfers described in Section 368(a)(2)(C) of the Code; and
(c) following the Closing, the Acquiring Fund will continue
the historic business of the Acquired Fund or use a
significant portion of the Acquired Fund's assets in a
business.
7.14 SCM, in its capacity as transfer agent for the
Acquiring Fund, shall issue and deliver to the President of
the Acquired Fund a confirmation statement evidencing the
Acquiring Fund Shares to be credited at the Closing Date or
provide evidence satisfactory to the Acquired Fund 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.
7.15 SCM shall have paid or waived all of the then
outstanding unamortized organizational expenses of the
Acquired Fund then reflected on its books and records.
7.16 At the Closing Date, the registration of the
Acquiring Fund with the Commission as an investment company
under the 1940 Act will be in full force and effect.
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 the Acquired Fund and the Acquired Fund
Shareholders in the manner required by the Acquired Fund's
Amended and Restated Articles of Incorporation and Bylaws
and applicable law.
8.2 The Acquired Fund 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, with their respective dates of acquisition and tax
costs, all as of the Closing Date, certified on its behalf by
its 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.
<PAGE>
8.4 All representations and warranties of 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 The Acquired Fund 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 The Acquired Fund 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, 8.13, 8.15 hereof have been
fulfilled.
8.7 The Acquired Fund 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.
Such assets of the Acquired Fund shall be accompanied by all
necessary state stock transfer stamps or cash for the
appropriate purchase price therefor.
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) the Acquired
Fund 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 nonassessable by the Acquired 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; (c) this Agreement and the Transfer
Documents have been duly authorized, executed, and delivered
by the Acquired Fund and represent valid and binding
contracts of the Acquired Fund, 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; (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 Acquired Fund or any
material agreement known to such counsel to which Acquired
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 the Acquired Fund of the transactions
<PAGE>
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; (f) the Acquired 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; and (g) the deregistration of the
Acquired Fund as an investment company under the 1940 Act and
the liquidation of the Acquired Fund under state law do not
require the approval of its shareholders. 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 Acquired Fund with certain officers of the Acquired
Fund 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 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 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 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 Acquiring Fund shall have received an opinion of
counsel regarding the transaction, addressed to the Funds and
in form reasonably satisfactory to them, and dated as of the
Closing Date, to the effect that for federal income tax
purposes: (a) the transfer of all of the assets of the
Acquired Fund to the Acquiring Fund in exchange for Acquiring
Fund Shares, and the distribution of said Acquiring Fund
Shares to the shareholders of the Acquired Fund, as provided
in this Agreement, will constitute a reorganization within
the meaning of Section 368(a)(1)(C) of the Code; (b) in
accordance with Section 361(a), Section 361(c)(1), and
Section 357(a) of the Code, no gain or loss will be
recognized by the Acquired Fund as a result of such
transactions; (c) in accordance with Section 1032(a) of the
Code, no gain or loss will be recognized by the Acquiring
Fund as a result of such transactions; (d) in accordance with
Section 354(a)(1) of the Code, no gain or loss will be
recognized by the Acquired Fund Shareholders on the
distribution to them by the Acquired Fund of Acquiring Fund
Shares in exchange for their shares of the Acquired Fund; (e)
in accordance with Section 358(a)(1) of the Code, the basis
of the Acquiring Fund Shares received by each Acquired Fund
Shareholder will be the same as the basis of the Acquired
Fund Shareholder's shares immediately prior to the
transactions; (f) in accordance with Section 362(b) of the
Code, the basis to the Acquiring Fund of the assets of the
Acquired Fund will be the same as the basis of such assets in
the hands of the Acquired Fund immediately prior to the
exchange; (g) in accordance with Section 1223(1) of the Code,
a shareholder's holding period for Acquiring Fund Shares will
be determined by including the period for which the shareholder
held Acquired Fund Shares exchanged therefor, provided that the
Acquired Fund Shareholder held such Acquired Fund Shares as a
capital asset; (h) in accordance with Section 1223(2) of the Code,
<PAGE>
the holding period of the Acquiring Fund with respect to the
assets transferred by the Acquired Fund will include the
period for which such assets were held by the Acquired Fund;
(i) subject to the conditions and limitations specified in
Sections 381, 382, 383, and 384 of the Code, the Acquiring Fund
will succeed to and take into account the items of the Acquired
Fund described in Section 381(c) of the Code, including the
earnings and profits, or deficit in earnings and profits, of
the Acquired Fund as of the Closing Date, in accordance with
Section 381(a) and Treasury Regulation Section 1.381-1(a);
and (j) any deficit in earnings and profits of the Acquired
Fund will be used only to offset earnings and profits
accumulated after the Closing Date.
8.10 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.
8.11 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.
8.12 The parties shall have received: (a) a memorandum,
in a 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.
8.13 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.
8.14 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.
8.15 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.
8.16 The Acquired Fund shall have furnished the
Acquiring Fund at the Closing Date with a certificate or
certificates of its President and/or Treasurer dated as of
said date to the effect that: (a) the Acquired Fund will
tender for acquisition by the Acquiring Fund its assets
consisting of at least 90% of the fair market value of the
Acquired Fund's net assets and at least 70% of the fair
market value of its gross assets immediately prior to the
<PAGE>
Closing Date. For purposes of this certification, all of
the following shall be considered as assets of the Acquired
Fund held immediately prior to the Closing Date: (i) amounts
used by the Acquired Fund to pay its expenses in connection
with the transactions contemplated hereby and, (ii) all amounts
used to make redemptions of or distributions on the Acquired
Fund Shares (except for redemptions in the ordinary course of
its business as required by Section 22(e) of the 1940 Act
pursuant to a demand for redemption by an Acquired Fund
Shareholder, and distributions of net investment income
and net capital gains). (b) The Acquired Fund will
distribute to Acquired Fund Shareholders in complete
liquidation of the Acquired Fund, the Acquiring Fund Shares
that it will receive in the transactions contemplated hereby
on or as promptly as practicable after the Closing Date and
in pursuance of the plan contemplated by this Agreement and
having made such distributions will take all necessary steps
to liquidate and deregister. (c) To the best knowledge of the
Acquired Fund, after reasonable inquiry, there is no current
plan or intention any of its shareholders who own five
percent (5%) or more of the Acquired Fund Shares, and to the
best of the Acquired Fund's knowledge, there is no current
plan or intention on the part of the remaining shareholders
of the Acquired Fund to sell, exchange, or otherwise dispose
of a number of shares of the Acquiring Fund received in the
Reorganization that would reduce the ownership of the
Acquired Fund Shareholder of Acquiring Fund Shares to a
number of shares having a value, as of the Closing Date, of
less than fifty percent (50%) of the value of all of the
formerly outstanding Acquired Fund Shares as of the Closing
Date. For purposes of this certification, (i) Acquired Fund
Shares surrendered by dissenters will be treated as
outstanding Acquired Fund Shares at the Closing Date; and
(ii) Acquired Fund Shares and the Acquiring Fund Shares held
by Acquired Fund Shareholders and otherwise sold, redeemed,
or disposed of in anticipation of the Reorganization, or
subsequent to the Closing Date pursuant to a current plan or
intention that existed as of the Closing Date, also will be
taken into account.
8.17 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 its President.
8.18 At the Closing Date, the registration of the
Acquired Fund with the SEC as an investment company under the
1940 Act shall be in full force and effect.
9. FINDER'S FEES AND OTHER EXPENSES
9.1 Each Fund 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 liable solely 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.
<PAGE>
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Funds agree that neither Fund 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 Funds
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 the Acquired Fund of any such representation,
warranty, or covenant, the Acquired Fund until the time of its
liquidation and deregistration and SCM jointly and severally shall
be liable to the Acquiring Fund for any such breach.
<PAGE>
11. TERMINATION
11.1 This Agreement may be terminated by the mutual
agreement of the Funds. In addition, either Fund 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 Fund 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 Fund 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 their respective
Boards of Directors or officers, but each shall bear its expenses
incidental to the preparation and carrying out of this Agreement.
12. INDEMNIFICATION
12.1 The Acquiring Fund shall indemnify, defend, and hold
harmless the Acquired Fund, its Board of Directors, officers,
trustees, 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 until the time of its liquidation
and deregistration and SCM on a joint and several basis shall
indemnify, defend, and hold harmless the Acquiring Fund, its Board
of Directors, officers, employees and 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
<PAGE>
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 (i) the indemnified
parties shall have employed such counsel in connection with the
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), (ii) 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 (iii) the
indemnifying party has authorized the employment of counsel for
the indemnified parties at its expenses.
12.4 This Section shall survive the termination of this
Agreement and for a period of three years following the Closing Date.
<PAGE>
13. 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 Funds; provided, however, that following
the Special Meeting of Acquired Fund Shareholders called by the
Board of Directors of the Acquired Fund 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 13
shall be construed to prohibit the parties from amending this
Agreement to change the Closing Date.
14. 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.
15. 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.
16. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
16.1 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.
16.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
16.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin.
<PAGE>
16.4 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.
16.5 It is expressly understood and agreed that the obligations
of the Acquired Fund 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 Acquiring Fund and the Acquired Fund.
<PAGE>
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.
Attest: STRONG MUNICIPAL BOND FUND, INC.
By:
- -------------------------- _______________________________
ATTEST: STRONG INSURED MUNICIPAL BOND FUND, INC.
By:
- -------------------------- -------------------------------
Strong Capital Management, Inc. hereby joins in this Agreement with
respect to and agrees to the matters described in Sections 10.2 and 12.
Attest: STRONG CAPITAL MANAGEMENT, INC.
By:
- ------------------------- -------------------------------
<PAGE>
EXHIBIT B
The Strong
INSURED MUNICIPAL BOND Fund
The Strong
MUNICIPAL BOND Fund
The Strong
HIGH-YIELD MUNICIPAL BOND Fund
MARKET OVERVIEW
The bond market reacted favorably through the year as interest
rates fell and inflation remained under control. Despite
indications that higher inflation might return--including
the robust rate of growth late in 1994, sharp rises in the
producer price index, and increased prices on raw materials
and intermediate goods early in 1995--inflation did not ignite.
The good inflation news stimulated a decline in long-term interest
rates that continued through year end. Accordingly, we positioned
the Funds early in the year to take advantage of the rally.
Municipal bond prices rebounded so sharply early in the year--
as short-term traders sent bond prices into dramatic up-and-
down swings--that by early spring, we felt the market had
greater downside potential than upside. Consequently, we
locked in gains and positioned the Funds more defensively.
The Funds continued to post significant total returns throughout
the year; however, our caution meant that we did not participate
fully in what turned out to be an extended market rally.
We have since repositioned each of the portfolios--without
sacrificing overall credit quality. We have shifted the Funds
to a more aggressive strategy by substantially lengthening our
average maturities. This move was implemented by reducing cash,
increasing longer-duration positions, and eliminating the
Treasury hedge in each of the Funds.
TALK OF TAX REFORM PROMPTS CHANGE IN PORTFOLIOS
The relative attractiveness of longer-term municipal securities
versus taxable alternatives caused many non-traditional buyers
to step into the market as the yield spread between municipals
and treasuries tightened. This tightening was due, in large part,
to talk in Congress of tax reform. Municipal yields--which,
on a longer-term historical basis have tended to range between
84% and 86% of treasury yields--traded at the rarely seen level
of 95% of taxable bond yields this year.
Tax reforms currently under discussion could negatively impact
the municipal markets by eliminating the tax-exempt status of
municipal bonds. We don't believe, however, that tax reform will
occur in 1996--if at all. Rather, we see this anomaly in the
yield spread as an excellent buying opportunity. We believe
that, at these levels, municipal prices have very limited downside
versus the taxable market.
FOCUS ON TRENDS
Going into 1996, we continue to focus our purchases in sectors
within our primary investment themes, which include:
THE AGING OF AMERICA. We view the aging of America as a major
catalyst for long-term trends in the U.S. economy. As the baby
boom generation grows older, there will be an increased need
for health care products and services, and long-term care
facilities. Many of our holdings--including hospitals, nursing
homes and CCRCs (congregate care retirement centers)--reflect
this focus.
RECONSTRUCTION OF AMERICAN INFRASTRUCTURE. As American cities
begin to invest in rebuilding their basic infrastructures, we
often find attractive opportunities to invest in municipal bonds
to rebuild toll roads, airports, bridges, and water systems.
WASTE DISPOSAL. The ongoing dilemma in waste disposal--as
landfills become increasingly overburdened--has presented
opportunities to invest in such industries as solid waste
disposal, resource recovery, and nuclear and medical
waste disposal.
With the recent stabilization in the long end of the municipal
market, and the relative attractiveness of longer-term
securities, we continue to reshape the portfolio. As always,
credit research remains the driving factor behind our security
selection. We strive to keep a long-term perspective, and
we don't attempt to time the market with short-term plays
that are dependent, to a large degree, on market psychology.
STRONG INSURED MUNICIPAL BOND FUND
In the Insured Municipal Bond Fund, we have increased our
holdings in general obligation bonds, which typically command
a slight premium in the market due to their perception as
<PAGE>
stellar performers. We were able to add these securities at
little or no premium due to the large number of these
securities that came to market at year end. We continue to
emphasize single- and multi-family housing, which we believe
offer greater yield potential, and hospitals, which continue
to offer an additional yield premium due to their association
with the health care sector. As of December 31, 1995, the Fund
held the securities of 28 different issuers, with no more than
14.6% of its assets concentrated in any single state.
STRONG MUNICIPAL BOND FUND
In the Municipal Bond Fund, we currently favor bonds that are
trading at a slight discount, those that offer the chance for
price appreciation; and premium callable bonds. By using this
"barbell" approach, we stand to benefit if rates remain stable
or fall, while picking up incremental yield. We continue to
emphasize the health care sector, with hospitals among the
Fund's largest holdings. As always, we are committed to
maintaining a diversified, well-researched portfolio. At year
end, the Fund held the securities of 66 distinct issuers, and
the single largest state, Texas, accounted for 9.3% of assets.
Portfolio Statistics as of 12-29-95
30-day Average Average
Annualized Yield Maturity Quality Rating
------------------------------------------------
Insured Municipal Bond Fund 4.23% 21.7 years AAA
Municipal Bond Fund 5.11% 20.0 years AA
High-Yield Municipal Bond Fund 6.82% 19.8 years BB
When-issued securities are reflected in the Fund's average maturities.
STRONG HIGH-YIELD MUNICIPAL BOND FUND
We remain fairly fully invested in the High-Yield Municipal
Bond Fund, with approximately 64.3% of the holdings in unrated
securities. We believe these securities currently offer the
best value because they don't move in line with the market,
and we believe they are
Equivalent Taxable Yields
as of 12-29-95
- --------------------------------------------------------------------------------
INSURED HIGH-YIELD
BOND FUND BOND FUND BOND FUND
- --------------------------------------------------------------------------------
Your Your Your
Tax-Exempt Tax-Exempt Tax-Exempt
Yield of Yield of Yield of
4.23% is 5.11% is 6.82% is
Equivalent Equivalent Equivalent
Tax to a to a to a
Taxable Taxable Taxable
Joint Return Single Return Rate Yield of Yield of Yield of
- --------------------------------------------------------------------------------
$39,000 and under $23,350 and under 15% 4.98% 6.01% 8.02%
$39,001-94,250 $23,351-56,550 28% 5.88% 7.10% 9.47%
$94,251-143,600 $56,551-117,950 31% 6.13% 7.41% 9.88%
$143,601-256,500 $117,951-256,500 36% 6.61% 7.98% 10.66%
OVER $256,500 OVER $256,500 39.6% 7.00% 8.46% 11.29%
Yields are annualized for the 30 Days ended 12-29-95, are historical,
and will vary. Each Fund's income may be subject to state and local
taxes and, depending on your tax status, the Alternative Minimum Tax.
The chart reflects 1995 marginal federal tax rates before limitations
and phase-outs. Individuals with adjusted gross income in excess of
$114,700 should consult their tax advisor to determine their actual
1995 marginal tax rate.
<PAGE>
Growth of an Assumed $10,000 Investment
The charts at right, provided in accordance with SEC regulations,
compare a $10,000 investment in each Fund, made at its inception,
with a similar investment in a relevant, unmanaged, total-
return performance benchmark. Source of index data is Micropal.
Results include the reinvestment of all dividends and capital
gains. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you
may have a gain or loss when you sell Fund shares.
THE STRONG INSURED MUNICIPAL BOND FUND
from 11-25-91 to 12-31-95
The Lehman Strong Insured
Brothers Insured Municipal Bond
Municipal Bond Index Fund
11-91 10000 10000
12-91 10335 10230
6-92 11082 10658
12-92 11685 11184
6-93 12621 12038
12-93 13186 12641
6-94 12361 11995
12-94 12333 11885
6-95 13073 13096
12-95 13901 14091
Average Annual Total Returns
as of 12-31-95
1-year 12.71%
3-year 5.96%
Since inception (on 11-25-91) 8.37%
THE STRONG MUNICIPAL BOND FUND
from 10-23-86 to 12-31-95
The Lehman Strong
Brothers Insured Municipal Bond
Municipal Bond Index Fund
10-86 10000 10000
12-86 10129 10216
12-87 9949 10370
12-88 10705 11423
12-89 11463 12656
12-90 11995 13578
12-91 13598 15227
12-92 15256 16568
12-93 17052 18602
12-94 16275 17640
12-95 18128 20721
Average Annual Total Returns
as of 12-31-95
1-year 11.38%
3-year 5.92%
5-year 8.61%
Since inception (on 10-23-86) 6.69%
THE STRONG HIGH-YIELD MUNICIPAL BOND FUND
from 10-1-93 to 12-31-95
The Lehman Strong High-Yield
Brothers Baa Municipal Bond
Municipal Bond Index Fund
10-93 10000 10000
12-93 10266 10164
3-94 10007 9627
6-94 10169 9757
9-94 10288 9803
12-94 10165 9609
3-95 10639 10232
6-95 10979 10530
9-95 11239 10869
12-95 11651 11362
Average Annual Total Returns
as of 12-31-95
1-year 14.62%
Since inception (on 10-1-93) 7.02%
<PAGE>
undervalued. These securities will comprise the Fund's core
holdings, and we plan to hold them over the long term. In
addition, we have eliminated hedged securities from the Fund
in order to reduce volatility. At the end of December, the
Fund held securities from 55 different issuers, the largest
holding was Cedar Rapids, Iowa First Mortgage Revenue (6.9%
of net assets), and the largest state representation was
Pennsylvania (21.9% of net assets).
A CONSTRUCTIVE OUTLOOK
Going forward into 1996, we remain positive on the market
but realize that any one of several variables could have a
significant impact on interest rates. Specifically, a
derailment of the budget proposal, a continuation of
December's rise in commodity prices, or continued talk of
tax reform could cause interest rates to rise. However,
several positive factors remain--including low inflation
and slowing growth, positive market psychology, and the
attractiveness of longer-term municipal securities relative
to taxable alternatives.
Thank you for your investment. We appreciate the confidence
you've shown in our management, and we look forward to serving
your investment needs in 1996.
Sincerely,
/s/ Mary-Kay H. Bourbulas
Mary-Kay H. Bourbulas
Portfolio Manager
Strong Insured Municipal Bond Fund
Strong Municipal Bond Fund
Strong High-Yield Municipal Bond Fund
<PAGE>
EXHIBIT C
AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION OF
STRONG INSURED MUNICIPAL BOND FUND, INC.
The undersigned Secretary of Strong Insured Municipal Bond Fund,
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 its shareholders on August 27, 1996 in
order to eliminate the outstanding shares of the Corporation in
connection with a reorganization effected pursuant to the terms
of the Agreement and Plan of Reorganization between the Corporation
and the Strong Municipal Bond Fund, Inc., attached hereto as
Exhibit A (the "Agreement"):
1. Article IV of the Amended and Restated Articles of
Incorporation is hereby amended by adding a new Paragraph, labeled
Paragraph J, and inserting the following language:
"J. On the Closing Date (as defined in the Agreement),
each outstanding share of Common Stock of the Corporation 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 shares of the Corporation 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 status of authorized
but unissued shares, and shall be automatically converted as
noted above."
2. The Amendment herein certified shall become effective
on the date it is received for filing by the Secretary of State
of Wisconsin.
Executed in duplicate this ____ day of August, 1996.
STRONG INSURED MUNICIPAL BOND FUND, INC.
By:
-------------------------------------
Ann E. Oglanian, Secretary
This instrument was drafted by:
Scott A. Moehrke
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
<PAGE>
STRONG INSURED MUNICIPAL BOND FUND, INC
STRONG MUNICIPAL BOND FUND, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
STATEMENT OF ADDITIONAL INFORMATION
(1996 Special Meeting of Shareholders of
Strong Insured Municipal Bond Fund, Inc.)
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 Insured Municipal
Bond Fund, Inc. (the "Insured Fund") to be held on August 27,
1996. Copies of the Combined Proxy Statement and Prospectus
may be obtained at no charge by writing the Insured 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 each Fund is contained in
and incorporated by reference to their respective Statements
of Additional Information, dated May 1, 1996, and the Funds'
Annual Report to Shareholders, dated December 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.
<PAGE>
GENERAL INFORMATION
The shareholders of the Insured Fund are being asked to
approve or disapprove the Reorganization Agreement dated
May 24, 1996, by and among the Insured Fund, the Bond Fund,
and, with respect to certain matters, the Advisor, and the
transactions contemplated thereby. The Reorganization Agreement
contemplates the transfer of substantially all of the property and
assets of the Insured Fund in exchange for Bond Fund Shares.
Following the exchange, the Insured Fund will make a liquidating
distribution of the Bond Fund Shares to the Insured Fund's
shareholders, such that an Insured Fund shareholder at the
Closing Date will receive full and fractional Bond Fund Shares
having an aggregate net asset value equal to the aggregate net
asset value of the shareholder's Insured Fund Shares. In
connection with the Reorganization, the Insured Fund's
Articles of Incorporation will be amended to cancel all
of the Insured Fund's outstanding shares and to convert
them into rights to receive Bond Fund Shares, in accordance
with the Reorganization Agreement. Following the closing
of the Reorganization, the Insured Fund will be deregistered
as an investment company under the 1940 Act.
A Special Meeting of Shareholders of the Insured 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 Insured Fund, or at any adjournment thereof.
For further information about the transaction, see the Combined
Proxy Statement and Prospectus.
<PAGE>
PART C. OTHER INFORMATION
Item 15. Indemnification
Officers and directors are insured under a joint errors
and omissions insurance policy underwritten by American
International Group, First State Insurance Company, Chubb
Group and Gulf Insurance Companies (Aetna Travelers) in the
aggregate amount of $45,000,000, subject to certain deductions.
Pursuant to authority of Wisconsin Business Corporation Law,
("WBCL") Article VII of Registrant's Bylaws provides as follows:
Article VII. Indemnification of Officers and Directors
Section 7.01. Mandatory Indemnification. The
corporation shall indemnify, to the full extent permitted
by the WBCL, as in effect from time to time, the persons
described in Sections 180.0850 through 180.0859 (or
any successor provisions) of the WBCL or other provisions
of the law of the State of Wisconsin relating to
indemnification of directors and officers, as in effect
from time to time. The indemnification afforded such
persons by this section shall not be exclusive of other
rights to which they may be entitled as a matter of law.
Section 7.02. Permissive Supplementary Benefits. The
Corporation may, but shall not be required to, supplement
the right of indemnification under Section 7.01 of (a)
the purchase of insurance on behalf of any one or more
of such persons, whether or not the Corporation would be
obligated to indemnify such person under Section 7.01;
(b) individual or group indemnification agreements with
any one or more such persons; and (c) advances for related
expenses of such a person.
Section 7.03. Amendment. This Article VII may be
amended or repealed only by a vote of the shareholders
and not by a vote of the Board of Directors.
Section 7.04. Investment Company Act. In no event
shall the Corporation indemnify any person hereunder
in contravention of any provision of the Investment
Company Act.
Item 16. Exhibits.
(1) Amended and Restated Articles of Incorporation of
Registrant, dated April 13, 1995. (1)
(2) Restated Bylaws of Registrant, dated October 20,
1995. (2)
(3) None.
<PAGE>
(4) Agreement and Plan of Reorganization. (See
Exhibit A to the Combined Proxy Statement and
Prospectus.)
(5) Specimen copy of stock certificate. (2)
(6)(a) Investment Advisory Agreement between
Registrant and Strong Capital Management,
Inc., dated May 1, 1995. (1)
(7) Distribution Agreement between Registrant
and Strong Distributors, Inc.,
dated December 1, 1993. (2)
(8) None.
(9) Custody Agreement between Registrant and Firstar
Trust Company, dated October 11, 1995. (2)
(10) None.
(11) Opinion of counsel that shares of Registrant are
validly issued, fully paid, and non-assessable
(including consent of such firm).[to be filed by
amendment]
(12) Opinion of counsel as to tax matters and consequences
to shareholders (including consent of such firm).
[to be filed by amendment]
(13) Shareholder Servicing Agent Agreement between
Registrant and Strong Capital Management, Inc.,
dated July 13, 1988. (2)
(14) Consent of Coopers & Lybrand, L.L.P.
(15) None.
(16) Power of Attorney.
(17) (a) Form of Proxy.
(b) Prospectus and Statement of Additional Information of
Registrant, filed on or about May 1,1996, incorporated
herein by reference.
(c) Prospectus and Statement of Additional Information of
the Strong Insured Municipal Bond Fund, Inc., (the
"Insured Fund"), filed on or about May 1, 1996,
incorporated herein by reference.
(d) Proposed Amendment to Amended and Restated Articles
of Incorporation of the Insured Fund. (See Exhibit
C to the Combined Proxy Statement and Prospectus.)
<PAGE>
- --------------------------------------------------------
Key to Exhibit Reference Numbers
(1) Incorporated herein by reference to Post-Effective
Amendment No. 10 to the Registration Statement on
Form N-1A of Registrant, dated as of April 20, 1995.
(2) Incorporated herein by reference to Post-Effective
Amendment No. 11 to the Registration Statement on
Form N-1A of Registrant, dated as of April 26, 1996.
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any
public reoffering of the securities registered through
the use of a prospectus which is a part of this
registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule
145(c) of the Securities Act of 1933, as amended, the
reoffering prospectus will contain the information
called for by the applicable registration form for
reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed
as part of an amendment to the registration statement
and will not be used until the amendment is effective,
and that, in determining any liability under the Securities
Act of 1933, each post-effective amendment shall be deemed
to be a new registration statement for the securities
offered therein, and the offering of the securities at
that time shall be deemed to be the initial bona fide
offering of them.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Registration Statement on Form N-14 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
Village of Menomonee Falls, and State of Wisconsin on the 24th
day of May, 1996.
STRONG MUNICIPAL BOND FUND, INC.
(Registrant)
By: /s/ John Dragisic
John Dragisic, President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement on Form N-14 has been signed below
by the following persons in the capacities and on the date
indicated:
Name Title Date
/s/ John Dragisic President (Principal May 24, 1996
John Dragisic Executive Officer) and
a Director
/s/ Ronald A. Neville Treasurer Principal May 24, 1996
Ronald A. Neville Financial and
Accounting Officer)
/s/ Richard S. Strong Chairman of the Board May 24, 1996
Richard S. Strong and a Director
Marvin E. Nevins* Director May 24, 1996
Marvin E. Nevins
Willie D. Davis* Director May 24, 1996
Willie D. Davis
William F. Vogt* Director May 24, 1996
William F. Vogt
Stanley Kritzik* Director May 24, 1996
Stanley Kritzik
*Thomas P. Lemke signs this document on behalf of each director
marked with an asterisk pursuant to powers of attorney filed as
Exhibit 16 to this Registration Statement.
By: /s/ Thomas P. Lemke
Thomas P. Lemke
<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
(14) Consent of Coopers & Lybrand, L.L.P.
(16) Power of Attorney
(17)(a) Form of Proxy
COOPERS & LYBRAND L.L.P.
411 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202
CONSENT OF INDEPENDENT ACCOUNTANT
To the Board of Directors of
Strong Municipal Bond Fund, Inc.
Strong Insured Municipal Bond Fund, Inc.
We consent to the incorporation by reference in the Initial
Registration Statement of the Strong Municipal Bond Fund,
Inc. and Strong Insured Municipal Bond Fund, Inc. on Form N-14
of our report dated February 6, 1996 on our audit of the
financial statements and financial highlights of Strong Municipal
Bond Fund, Inc. and Strong Insured Municipal Bond Fund, Inc.
which report is included in the Annual Report to Shareholders
for the year ended December 31, 1995 which is also incorporated
by reference in the Registration Statement. We also consent to
the reference to our Firm under the caption "Financial Highlights".
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
May 23, 1996
POWER OF ATTORNEY
Each of the undersigned, all of whom are directors of the
Strong Municipal Bond Fund, Inc., whose signatures appear
below, do hereby constitute and appoint John Dragisic,
Thomas P. Lemke, Lawrence A. Totsky, and John S. Weitzer,
and each of them, as the true and lawful attorney-in-fact
and agent for the undersigned, and each of them, with full
power of substitution and resubstitution, for them and in
their name, place and stead, in any and all capacities, to
sign a Registration Statement on Form N-14 for the Strong
Municipal Bond Fund, Inc., and any and all amendments
thereto, and any and all other instruments such attorneys
and agents may deem necessary or advisable to enable the
Fund to comply with the Securities Act of 1933, as amended,
and any rules, regulations, orders or other requirements of
the Securities and Exchange Commission thereunder in
connection with the registration of shares or additional
shares of common stock of the Fund, and to file the same,
with all exhibits thereto, and any other documents in
connection therewith, with the Securities and Exchange
Commission and any other regulatory body, granting unto said
attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes,
as the undersigned, and each of them might or could do in
person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Signature Title Date
/s/ Marvin E. Nevins Director April 24, 1996
Marvin E. Nevins
/s/ Willie D. Davis Director April 24, 1996
Willie D. Davis
/s/ William F. Vogt Director April 24, 1996
William F. Vogt
/s/ Stanley Kritzik Director April 24, 1996
Stanley Kritzik
WE NEED YOUR VOTE BEFORE AUGUST 27, 1996
- ----------------------------------------------------------
PLEASE, your vote is important and, as a shareholder, you
are asked to be at 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
this proxy card using 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 your
Fund associated with further solicitation. Sending in your
proxy will not prevent you from personally voting your shares
at the Special Meeting and you may revoke your proxy by
advising the Secretary of the Fund in writing (by subsequent
proxy or otherwise) of such revocation at any time before
it is voted.
- ----------------------------------------------------------
THANK YOU FOR YOUR TIME
STRONG INSURED MUNICIPAL BOND FUND, INC.
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS
The undersigned hereby constitutes and appoints John Dragisic,
Thomas P. Lemke, and John S. Weitzer as proxies, each with
power to appoint his, and hereby authorizes them to represent
and to vote by majority, as designated on the reverse side,
all shares of stock of the Fund, which the undersigned is
entitled to vote at the Special Meeting of Shareholders to be
held at Strong Capital Management, Inc., 100 Heritage Reserve,
Menomonee Falls, Wisconsin, on August 27, 1996, at 8:00 a.m.,
local time, and any adjournments thereof, with respect to the
matters set forth on the reverse side and described in the
Notice of Special Meeting and Proxy Statement and Prospectus
dated June 23, 1996, receipt of which is hereby acknowledged.
DATE:
----------------------
NOTE: Please sign exactly as
your name appears on this Proxy. If
joint owners, EITHER may sign this
Proxy. When signing as attorney,
executor, administrator, trustee,
guardian or corporate officer,
please give your full title.
---------------------------
Signature(s) (Title(s),if
applicable)
<PAGE>
WE NEED YOUR VOTE BEFORE AUGUST 27, 1996
- ----------------------------------------------------------
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION
IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF ALL PROPOSALS
AND IN THE DISCRETION OF THE PROXIES UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING. Please indicate by
filling in the appropriate box below, as shown, using blue or
black ink or dark pencil. Do not use red ink.
1. To approve or disapprove an Agreement and Plan of
Reorganization by and among Strong Insured Municipal
Bond Fund, Inc. and Strong Municipal Bond Fund, Inc.,
and, with respect to certain matters, Strong Capital
Management, Inc., and the transactions contemplated
thereby.
FOR AGAINST ABSTAIN
---- ---- ----
2. To approve or disapprove an amendment to the Amended
and Restated Articles of Incorporation of Strong
Insured Municipal Bond Fund, Inc. to cancel all
of its outstanding shares and convert them into rights
to receive shares of the Strong Municipal Bond Fund,
Inc., in accordance with the Reorganization Agreement.
FOR AGAINST ABSTAIN
---- ---- ----
- ---------------------------------------------------------
TO BE COMPLETED AND SIGNED ON REVERSE SIDE OF CARD.
