STRONG COMMON STOCK FUND INC, 497, 1997-01-03

STRONG COMMON STOCK FUND INC
497, 1997-01-03

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<PAGE> 1

STRONG GROWTH FUNDS

<TABLE>
<S> <C>
STRONG VALUE FUND STRONG FUNDS
STRONG OPPORTUNITY FUND P.O. Box 2936
STRONG GROWTH FUND Milwaukee, Wisconsin 53201
STRONG COMMON STOCK FUND Telephone: (414) 359-1400
STRONG SMALL CAP FUND Toll-Free: (800) 368-3863
STRONG DISCOVERY FUND Device for the
Hearing-Impaired:
(800) 999-2780
</TABLE>

The Strong Family of Funds ("Strong Funds") is a family of more than
twenty-five diversified and non-diversified mutual funds. All of the Strong
Funds are no-load funds, meaning that you may purchase, redeem, or exchange
shares without paying a sales charge. Strong Funds include growth funds,
conservative equity funds, income funds, municipal income funds, international
funds, and cash management funds. Six Strong Growth Funds are described in this
Prospectus.

This Prospectus contains information you should consider before you invest.
Please read it carefully and keep it for future reference. A Statement of
Additional Information for the Funds, dated May 1, 1996, contains further
information, is incorporated by reference into this Prospectus, and has been
filed with the Securities and Exchange Commission ("SEC"). This Statement, which
may be revised from time to time, is available without charge upon request to
the above-noted address or telephone number. If you would like to electronically
access additional information about the Funds after reading the prospectus, you
may do so by accessing the SEC's World Wide Web site (at http://www.sec.gov)
that contains the Statement of Additional Information regarding the Funds and
other related materials.

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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 PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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Dated May 1, 1996, as

supplemented December 31, 1996

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PROSPECTUS PAGE I-1
<PAGE> 2

STRONG GROWTH FUNDS

The Strong Opportunity Fund, Inc., Strong Common Stock Fund, Inc., and Strong
Discovery Fund, Inc. are separately incorporated, diversified, open-end
management investment companies. The Strong Growth, Value, and Small Cap Funds
are diversified series of Strong Equity Funds, Inc., which is an open-end
management investment company.

STRONG VALUE FUND (the "Value Fund") seeks capital growth. The Fund invests
primarily in equity securities, seeking, through fundamental analysis, those
companies whose share price does not fully reflect the value of the company.
While the Fund may invest in companies of any size, it currently emphasizes
medium- to large-capitalization companies.

STRONG OPPORTUNITY FUND (the "Opportunity Fund") seeks capital growth. The
Fund invests at least 70% of its total assets in equity securities. It currently
emphasizes medium-sized companies that the Fund's Advisor believes are
under-researched and attractively valued.

STRONG GROWTH FUND (the "Growth Fund") seeks capital growth. The Fund invests
primarily in equity securities that the Fund's Advisor believes have
above-average growth prospects.

STRONG COMMON STOCK FUND (the "Common Stock Fund") seeks capital growth. The
Fund invests at least 80% of its total assets in equity securities. It currently
emphasizes small companies that the Fund's Advisor believes are under-researched
and attractively valued. The Common Stock Fund is currently closed to new
investors.

STRONG SMALL CAP FUND (the "Small Cap Fund") seeks capital growth. The Fund
invests primarily in equity securities with small market capitalizations.

STRONG DISCOVERY FUND (the "Discovery Fund") seeks capital growth. The Fund's
Advisor seeks to identify emerging investment trends and attractive growth
opportunities. While the Fund normally emphasizes equity investments, it also
has the flexibility to invest in debt obligations and short-term fixed income
securities.

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PROSPECTUS PAGE I-2
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
EXPENSES................................. I-4
FINANCIAL HIGHLIGHTS..................... I-5
HIGHLIGHTS............................... I-10
INVESTMENT OBJECTIVES AND POLICIES....... I-11
Comparing the Funds ... I-11
Strong Value Fund............... I-12
Strong Opportunity Fund......... I-12
Strong Growth Fund.............. I-13
Strong Common Stock Fund........ I-14
Strong Small Cap Fund........... I-15
Strong Discovery Fund........... I-16
IMPLEMENTATION OF POLICIES AND RISKS..... I-16
ABOUT THE FUNDS.......................... I-24
SHAREHOLDER MANUAL....................... II-1
</TABLE>

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the Statement
of Additional Information, and if given or made, such information or
representations may not be relied upon as having been authorized by the Funds.
This Prospectus does not constitute an offer to sell securities to any person in
any state or jurisdiction in which such offering may not lawfully be made.

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PROSPECTUS PAGE I-3
<PAGE> 4

EXPENSES

The following information is provided in order to help you understand the
various costs and expenses that you, as an investor in the Funds, will bear
directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales Load Imposed on Purchases............. NONE
Sales Load Imposed on Reinvested
Dividends................................. NONE
Deferred Sales Load......................... NONE
Redemption Fees............................. NONE
Exchange Fees............................... NONE
</TABLE>

There are certain charges associated with retirement accounts and with
certain other special shareholder services offered by the Funds. Additionally,
purchases and redemptions may also be made through broker-dealers or others who
may charge a commission or other transaction fee for their services. (See
"Shareholder Manual - How to Buy Shares" and "- How to Sell Shares.")

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Total
Management Other 12b-1 Operating
Fund Fees Expenses Fees Expenses
<S> <C> <C> <C> <C>
Value 1.00% .52% NONE 1.52%
Opportunity 1.00 .31 NONE 1.31
Growth 1.00 .38 NONE 1.38
Common Stock 1.00 .25 NONE 1.25
Small Cap 1.00 .45 NONE 1.45
Discovery 1.00 .39 NONE 1.39
</TABLE>

- ----------------------------------------------------------------------------

From time to time, the Funds' investment advisor, Strong Capital Management,
Inc. (the "Advisor"), may voluntarily waive its management fee and/or absorb
certain expenses for a Fund. Except for the Value and Small Cap Funds, the
expenses specified in the table above are based on actual expenses incurred for
the year ended December 31, 1995. Since the Value and Small Cap Funds are new
and did not begin operations until December 29, 1995, the Other Expenses have
been estimated. For additional information concerning fees and expenses, see
"About the Funds - Management."

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PROSPECTUS PAGE I-4
<PAGE> 5

EXAMPLE. You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Period (in years)
Fund 1 3 5 10
<S> <C> <C> <C> <C>
Value $15 $48 $83 $181
Opportunity 13 42 72 158
Growth 14 44 76 166
Common Stock 13 40 69 151
Small Cap 15 46 79 174
Discovery 14 44 76 167
</TABLE>

- ----------------------------------------------------------------------------

The Example is based on each Fund's "Total Operating Expenses," 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 a 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.

FINANCIAL HIGHLIGHTS

The following annual Financial Highlights for each of the Funds that has
completed a fiscal year has been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants. Their report for the fiscal year ended
December 31, 1995 is included in the Annual Report of the Growth Funds that is
contained in the Funds' Statement of Additional Information. The Financial
Highlights for the Value and Small Cap Funds are not provided because they did
not commence operations until December 29, 1995. The Financial Highlights for
the Funds should be read in conjunction with the Financial Statements and
related notes included in the Funds' Annual Report. Additional information about
each Fund's performance is contained in the Funds' Annual Report, which may be
obtained without charge by calling or writing Strong Funds. The following
presents information relating to a share of common stock of each of the Funds,
outstanding for the entire period.

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PROSPECTUS PAGE I-5
<PAGE> 6

--------------------------------------------------------

<TABLE>
<CAPTION>
STRONG OPPORTUNITY FUND
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 27.71 $ 28.23 $ 24.70 $ 21.24 $ 16.29 $ 19.21 $ 16.90 $ 15.87 $ 15.99 $ 10.00
INCOME FROM
INVESTMENT
OPERATIONS
Net Investment
Income 0.20 0.13 0.06 0.06 0.21 0.63 0.84 1.35 0.27 0.05
Net Realized and
Unrealized
Gains (Losses)
on Investments 7.28 0.76 5.10 3.62 4.93 (2.77) 2.31 1.23 1.65 5.94
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL FROM
INVESTMENT
OPERATIONS 7.48 0.89 5.16 3.68 5.14 (2.14) 3.15 2.58 1.92 5.99
LESS DISTRIBUTIONS
From Net
Investment
Income (0.20) (0.13) (0.06) (0.06) (0.19) (0.74) (0.68) (1.37) (0.24) --
In Excess of Net
Investment
Income (0.01) -- -- -- -- -- -- -- -- --
From Net Realized
Gains (1.63) (1.28) (1.57) (0.16) -- (0.04) (0.16) -- (1.80) --
From Capital -- -- -- -- -- -- -- (0.18) -- --
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.84) (1.41) (1.63) (0.22) (0.19) (0.78) (0.84) (1.55) (2.04) --
---------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD $ 33.35 $ 27.71 $ 28.23 $ 24.70 $ 21.24 $ 16.29 $ 19.21 $ 16.90 $ 15.87 $ 15.99
========= ======== ======== ======== ======== ======== ======== ======== ======== =======
Total Return +27.3% +3.2% +21.2% +17.4% +31.7% -11.3% +18.5% +16.5% +11.9% +59.9%
Net Assets, End of
Period (In
Thousands) $1,327,660 $805,700 $443,503 $193,208 $159,667 $131,919 $205,043 $157,353 $153,573 $ 43,632
Ratio of Expenses
to Average Net
Assets 1.3% 1.4% 1.4% 1.5% 1.7% 1.7% 1.6% 1.6% 1.5% 1.7%
Ratio of Net
Investment Income
to Average Net
Assets 0.7% 0.5% 0.2% 0.3% 1.1% 3.3% 4.3% 7.4% 1.7% 0.7%
Portfolio Turnover
Rate 92.5% 59.2% 109.1% 138.5% 270.5% 275.0% 305.6% 352.4% 371.2% 170.2%
</TABLE>

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PROSPECTUS PAGE I-6
<PAGE> 7

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<TABLE>
<CAPTION>
STRONG DISCOVERY FUND
1995 1994 1993 1992 1991 1990 1989 1988
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.67 $ 18.05 $ 16.01 $ 17.49 $ 12.51 $ 13.18 $ 11.44 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) (0.05) 0.16 (0.01) (0.06) -- 0.27 0.30 0.95
Net Realized and Unrealized Gains
(Losses) on Investments 5.48 (1.17) 3.48 0.23 8.41 (0.63) 2.43 1.49
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 5.43 (1.01) 3.47 0.17 8.41 (0.36) 2.73 2.44
LESS DISTRIBUTIONS
From Net Investment Income -- (0.11) -- -- -- (0.31) (0.28) (0.97)
In Excess of Net Investment Income (0.10) (0.58) (0.45) -- -- -- -- --
From Net Realized Gains (2.04) (0.68) (0.98) (1.65)(1) (3.43)(2) -- (0.71) (0.03)
-------- -------- -------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (2.14) (1.37) (1.43) (1.65) (3.43) (0.31) (0.99) (1.00)
-------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 18.96 $ 15.67 $ 18.05 $ 16.01 $ 17.49 $ 12.51 $ 13.18 $ 11.44
======== ======== ======== ======== ======== ======= ======= =======
Total Return +34.8% -5.7% +22.2% +1.9% +67.6% -2.7% +24.0% +24.5%
Net Assets, End of Period (In
Thousands) $599,060 $388,410 $301,789 $193,276 $162,499 $ 56,260 $ 57,914 $ 13,648
Ratio of Expenses to Average Net
Assets 1.4% 1.5% 1.5% 1.5% 1.6% 1.9% 1.9% 2.0%
Ratio of Net Investment Income
to Average Net Assets (0.4%) 0.7% (0.2%) (0.4%) 0.0% 2.1% 2.4% 11.9%
Portfolio Turnover Rate 516.0% 606.1% 668.2% 1,258.6% 1,059.9% 493.9% 549.6% 441.6%
</TABLE>

(1) Includes $1.50 ordinary income distribution for tax purposes.
(2) Includes $0.83 ordinary income distribution for tax purposes.

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PROSPECTUS PAGE I-7
<PAGE> 8

-----------------------------

------------------------------------------------------------------------------

<TABLE>
<CAPTION>
STRONG GROWTH FUND
STRONG COMMON STOCK FUND
----------------------------------------------------------------- ----------------------
1995 1994 1993 1992 1991 1990 1995 1994
---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.74 $ 17.94 $ 15.07 $ 12.84 $ 10.02 $ 10.00 $ 11.61 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.11 0.04 0.04 0.03 (0.02) 0.07 (0.04) --
Net Realized and Unrealized Gains
(Losses) on Investments 5.25 (0.13) 3.74 2.59 5.42 0.03 4.79 1.72
---------- -------- -------- -------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 5.36 (0.09) 3.78 2.62 5.40 0.10 4.75 1.72
LESS DISTRIBUTIONS
From Net Investment Income (0.10) (0.04) (0.04) (0.01) -- (0.08) -- --
In Excess of Net Investment Income (0.02) -- -- -- -- -- (0.03) (0.11)
From Net Realized Gains (2.21) (1.07) (0.87) (0.38)(1) (2.58)(2) -- (0.16) --
In Excess of Net Realized Gains -- -- -- -- -- -- (0.29) --
---------- -------- -------- -------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (2.33) (1.11) (0.91) (0.39) (2.58) (0.08) (0.48) (0.11)
---------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 19.77 $ 16.74 $ 17.94 $ 15.07 $ 12.84 $ 10.02 $ 15.88 $ 11.61
========= ======== ======== ======== ======== ======= ======== ========
Total Return +32.4% -0.5% +25.2% +20.8% +57.1% +1.0% +41.0% +17.3%
Net Assets, End of Period
(In Thousands) $1,061,010 $790,125 $762,086 $179,113 $ 48,549 $ 2,432 $642,822 $106,009
Ratio of Expenses to Average
Net Assets 1.2% 1.3% 1.4% 1.4% 2.0% 2.0% 1.4% 1.6%
Ratio of Net Investment Income
to Average Net Assets 0.5% 0.3% 0.2% 0.1% (0.5%) 0.9% (0.5%) (0.1%)
Portfolio Turnover Rate 91.5% 83.0% 80.9% 291.7% 2,460.7% 291.2% 321.2% 385.8%
</TABLE>

(1)Includes $0.22 ordinary income distribution for tax purposes.
(2)Ordinary income distribution for tax purposes.

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PROSPECTUS PAGE I-8
<PAGE> 9

INTERIM FINANCIAL HIGHLIGHTS

The following interim Financial Highlights for each of the Funds for the six
months ended June 30, 1996 (unaudited) update the Annual Financial Highlights
for the Funds contained on pages I-5 through I-8. The following presents
information relating to a share of common stock of each of the Funds,
outstanding for the entire period.

-----------------------------------------------------------------------

<TABLE>
<CAPTION>
Strong Strong Strong Strong Strong Strong
Value Opportunity Growth Common Stock Small Cap Discovery
Fund(1) Fund(3) Fund(3) Fund(3) Fund(1) Fund(3)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 33.35 $ 15.88 $ 19.77 $ 10.00 $ 18.96
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.06 0.12 (0.05) 0.03 0.02 0.02
Net Realized and Unrealized Gains (Losses) on
Investments 1.01 2.40 2.83 1.55 2.45 (0.41 )
------- ---------- ---------- ---------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.07 2.52 2.78 1.58 2.47 (0.39 )
LESS DISTRIBUTIONS
From Net Investment Income (0.05 ) (0.17 ) -- (0.08) (0.01 ) (0.32 )
In Excess of Net Investment Income -- -- -- -- -- (0.55 )
From Net Realized Gains -- (0.32 ) -- (0.75) -- (0.59 )
------- ---------- ---------- ---------- ------- --------
TOTAL DISTRIBUTIONS (0.05 ) (0.49 ) 0.00 (0.83) (0.01 ) (1.46 )
------- ---------- ---------- ---------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 11.02 $ 35.38 $ 18.66 $ 20.52 $ 12.46 $ 17.11
======= ========== ========== ========== ======= ========
Total Return +10.7% +7.6% +17.5% +8.0% +24.7% -1.9%
Net Assets, End of Period (In Thousands) $33,228 $1,641,855 $1,114,165 $1,150,120 $ 78,231 $581,910
Ratio of Expenses to Average Net Assets 1.6% * 1.3% * 1.3%* 1.2%* 1.6% * 1.4% *
Ratio of Net Investment Income to Average Net
Assets 1.7% * 0.7% * (0.8)%* 0.3%* (0.3)%* (0.4)%*
Portfolio Turnover Rate 29.9% 50.0% 119.2% 43.1% 69.5% 527.2%
Average Commission Rate Paid(2) $0.0507 $ 0.0495 $ 0.0669 $ 0.0439 $ 0.0555 $ 0.0318
</TABLE>

* Calculated on an annualized basis

(1)Inception date is December 29, 1995. Total return and portfolio turnover rate
are not annualized.

(2)Disclosure required, effective for reporting periods beginning after
September 1, 1995.

(3)Total return and portfolio turnover rate are not annualized.

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PROSPECTUS PAGE I-9
<PAGE> 10

HIGHLIGHTS

INVESTMENT OBJECTIVES AND POLICIES

Each Fund seeks capital growth consistent with its investment policies as set
forth under "Investment Objectives and Policies."

IMPLEMENTATION OF POLICIES AND RISKS

Subject to certain limitations, each Fund may invest in foreign securities
(except the Value Fund may only invest in foreign securities through depositary
receipts) and engage in foreign currency and derivative transactions, including
options, futures, and options on futures transactions. Each Fund may invest in
illiquid securities, engage in substantial short-term trading, and may invest a
significant portion of its assets in small companies, some of which may be
unseasoned. Each Fund may also invest in repurchase agreements and when-issued
securities. These investment practices and techniques involve risks that are
different in some respects from those associated with similar funds that do not
use them. (See "Implementation of Policies and Risks.")

MANAGEMENT

The Advisor, Strong Capital Management, Inc., serves as investment advisor to
the Funds. The Advisor provides investment management services for mutual funds
and other investment portfolios representing assets of over $19 billion. Sloate,
Weisman, Murray & Company, Inc. (the "Subadvisor") is the Subadvisor for the
Value Fund. (See "About the Funds - Management.")

PURCHASE AND REDEMPTION OF SHARES

You may purchase or redeem shares of a Fund at net asset value. There are no
redemption or 12b-1 charges. The net asset values change daily with the value of
each Fund's portfolio. You can locate the net asset value for a Fund in
newspaper listings of mutual fund prices under the "Strong Funds" heading or at
our site on the World Wide Web at http://www.strong-funds.com. (See "Shareholder
Manual - How to Buy Shares" and "- How to Sell Shares.")

SHAREHOLDER SERVICES

Strong shareholder benefits include: telephone purchase, exchange, and
redemption privileges; professional representatives available 24 hours a day;
automatic investment, automatic dividend reinvestment, payroll direct deposit,
automatic exchange and systematic withdrawal plans; and a no-minimum investment
program. (See "Shareholder Manual - Shareholder Services.")

DIVIDENDS AND OTHER DISTRIBUTIONS

The policy of each Fund is to pay dividends from net investment income
quarterly and to distribute substantially all net realized capital gains
annually. (See "About the Funds - Distributions and Taxes.")

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PROSPECTUS PAGE I-10
<PAGE> 11

INVESTMENT OBJECTIVES AND POLICIES

The descriptions that follow are designed to help you choose the Fund that
best fits your investment objective. You may want to pursue more than one
objective by investing in more than one of the Funds or by investing in one of
the other Strong Funds, which are described in separate prospectuses. Each
Growth Fund's investment objective is discussed below in connection with the
Fund's investment policies. Because of the risks inherent in all investments,
there can be no assurance that the Funds will meet their objectives.
The Funds are each required or permitted to invest a substantial portion of
their assets in equity securities. Accordingly, each Fund's net asset value will
fluctuate based upon changes in the value of the securities in its portfolio,
and each Fund's net asset value is likely to fluctuate more than that of a fund
invested principally in fixed income securities. The Funds, therefore, are not
appropriate for investors' short-term financial needs.

COMPARING THE FUNDS

The following summary is intended to distinguish the Funds and help you
determine their suitability for your investments:
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Anticipated Maximum
Equity Debt
Fund Exposure Exposure Focus
<S> <C> <C> <C>
Mid- and Large-Cap
Value 70-100% 30% Value
Opportunity 70-100% 30% Mid-Cap
Growth 65-100% 35% Growth
Common Stock 80-100% 20% Small-Cap
Small Cap 80-100% 20% Small-Cap
Discovery 0-100% 100% Emerging Growth
</TABLE>

- ----------------------------------------------------------------------------

Each Fund has adopted certain fundamental investment restrictions that are
set forth in the Funds' Statement of Additional Information ("SAI"). Those
restrictions, each Fund's investment objective, and any other investment
policies identified as "fundamental" cannot be changed without shareholder
approval. To further guide investment activities, each Fund has also instituted
a number of non-fundamental operating policies, which are described throughout
this Prospectus and in the SAI. Although operating policies may be changed by a
Fund's Board of Directors without shareholder approval, a Fund will promptly
notify shareholders of any material change in operating policies.
Except as limited below, each Fund may invest in a diversified portfolio of
securities without regard to objective investment criteria, such as company
size, exchange listing, earnings history, or other factors. When selecting

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PROSPECTUS PAGE I-11
<PAGE> 12

securities, the Advisor will, except as otherwise limited below, be limited only
by its best judgment as to what will help achieve each Fund's investment
objective.

STRONG VALUE FUND

The Value Fund seeks capital growth. The Fund invests primarily in equity
securities, seeking, through fundamental analysis, those companies whose share
price does not fully reflect the value of the company. While the Fund may invest
in companies of any size, it currently emphasizes medium- to large-
capitalization companies.
The Fund will invest at least 70% of its net assets in equity securities,
including common stocks, preferred stocks, and securities that are convertible
into common or preferred stocks, such as warrants and convertible bonds. Under
normal market conditions, the Fund expects to be fully invested in equities. The
Fund may, however, invest up to 30% of its net assets in debt obligations,
including intermediate- to long-term corporate or U.S. government debt
securities and, when the Subadvisor determines that market conditions warrant a
temporary defensive position, it may use that allowance to invest in cash and
short-term fixed income securities. Although the debt obligations in which it
invests will be primarily investment grade, the Fund may invest up to 5% of its
net assets in non-investment-grade debt obligations. (See "Implementation of
Policies and Risks - Debt Obligations.") The Fund does not intend to invest
directly in foreign securities; however, it may invest up to 10% of its net
assets in foreign securities in domestic markets through depositary receipts.
See "Implementation of Policies and Risks - Foreign Securities and Currencies"
for the special risks associated with foreign investments.
The Subadvisor seeks to maximize long-term total rates of return by investing
in securities that represent excellent value in relation to companies' assets,
earning power, and cash-generating ability. The Subadvisor employs a bottom-up
stock selection process that is based on intensive fundamental research using
early trend analysis in seeking to identify catalysts that will increase the
value of a company. These catalysts include corporate restructuring, significant
management change, cyclical turnaround of a depressed company or industry, or
secular trends.

STRONG OPPORTUNITY FUND

The Opportunity Fund seeks capital growth. The Fund invests primarily in
equity securities and currently emphasizes investments in medium-sized companies
the Advisor believes are under-researched and attractively valued.
The Fund will invest at least 70% of its net assets in equity securities,
including common stocks, preferred stocks, and securities that are convertible
into common or preferred stocks, such as warrants and convertible bonds. Under
normal market conditions, the Fund expects to be fully invested in

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PROSPECTUS PAGE I-12
<PAGE> 13

equities. The Fund may, however, invest up to 30% of its net assets in debt
obligations, including intermediate- to long-term corporate or U.S. government
debt securities and, when the Advisor determines that market conditions warrant
a temporary defensive position, it may use that allowance to invest in cash and
short-term fixed income securities. Although the debt obligations in which it
invests will be primarily investment grade, the Fund may invest up to 5% of its
net assets in non-investment-grade debt obligations. (See "Implementation of
Policies and Risks - Debt Obligations.") The Fund may invest up to 25% of its
net assets in foreign securities, including both direct investments and
investments made through depositary receipts. See "Implementation of Policies
and Risks - Foreign Securities and Currencies" for the special risks associated
with foreign investments.
In selecting its equity investments, the Advisor seeks to identify attractive
investment opportunities that have not become widely recognized by other stock
analysts or the financial press. Through first-hand research that often includes
on-site visits with the leaders of companies, the Advisor looks for companies
with fundamental value or growth potential that is not yet reflected in their
current market prices.
In many cases, companies in the small- and medium-capitalization markets are
underfollowed and, as a result, less efficiently priced than their larger,
better-known counterparts. The Opportunity Fund's investments are therefore
likely to consist, in part, of securities in small- and medium-sized companies.
Many of these companies may have successfully emerged from the start-up phase
and have potential for future growth. Because of their longer track records and
more seasoned management, they generally pose less investment uncertainty than
do the smallest companies. In general, however, smaller-capitalization companies
often involve greater risks than investments in established companies. (See
"Implementation of Policies and Risks - Small Companies.")

STRONG GROWTH FUND

The Growth Fund seeks capital growth. The Fund invests primarily in equity
securities that the Advisor believes have above-average growth prospects.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities, including common stocks, preferred stocks,
and securities that are convertible into common or preferred stocks, such as
warrants and convertible bonds. While the emphasis of the Fund is clearly on
equity securities, the Fund may invest a limited portion of its assets in debt
obligations when the Advisor perceives that they are more attractive than stocks
on a long-term basis. The Fund may invest up to 35% of its total assets in debt
obligations, including intermediate- to long-term corporate or U.S. government
debt securities. When the Advisor determines that market conditions warrant a
temporary defensive position, the Fund may invest without

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PROSPECTUS PAGE I-13
<PAGE> 14

limitation in cash and short-term fixed income securities. Although the debt
obligations in which it invests will be primarily investment grade, the Fund may
invest up to 5% of its net assets in non-investment-grade debt obligations. (See
"Implementation of Policies and Risks - Debt Obligations.")
The Fund may invest up to 25% of its net assets in foreign securities,
including both direct investments and investments made through depositary
receipts. See "Implementation of Policies and Risks - Foreign Securities and
Currencies" for the special risks associated with foreign investments.
The Fund generally will invest in companies whose earnings are believed to be
in a relatively strong growth trend, and, to a lesser extent, in companies in
which significant further growth is not anticipated but whose market value is
thought to be undervalued. In identifying companies with favorable growth
prospects, the Advisor ordinarily looks to certain other characteristics, such
as the following:

- - prospects for above-average sales and earnings growth;
- - high return on invested capital;
- - overall financial strength, including sound financial and accounting policies
and a strong balance sheet;
- - competitive advantages, including innovative products and service;
- - effective research, product development, and marketing; and
- - stable, capable management.

STRONG COMMON STOCK FUND

The Common Stock Fund is closed to new investors, except the Fund may
continue to offer its shares through certain 401(k) plans and similar company-
sponsored retirement plans. Current shareholders of the Fund may continue to add
to existing accounts and open new accounts. (See "Shareholder Manual - How to
Buy Shares.") Although the Fund may resume sales to new investors in the future,
it has no present intention to do so.

The Common Stock Fund seeks capital growth. The Fund invests primarily in
equity securities and currently emphasizes the stocks of small companies the
Advisor believes are under-researched and attractively valued.
The Fund will invest at least 80% of its net assets in equity securities,
including common stocks (which must constitute at least 65% of its total
assets), preferred stocks, and securities that are convertible into common or
preferred stocks, such as warrants and convertible bonds. Under normal market
conditions, the Fund expects to be fully invested in equity securities. The Fund
may, however, invest up to 20% of its net assets in debt obligations, including
intermediate- to long-term corporate or U.S. government debt securities and,
when the Advisor determines that market conditions warrant a temporary defensive
position, it may use that allowance to invest in cash and short-term fixed
income securities. Although the debt obligations in which it invests will be
primarily investment grade, the Fund may invest up to 5% of its net assets in
non-investment-grade debt obligations. (See "Implementation of Policies and
Risks - Debt Obligations.")

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<PAGE> 15

The Fund may invest up to 25% of its net assets in foreign securities,
including both direct investments and investments made through depositary
receipts. See "Implementation of Policies and Risks - Foreign Securities and
Currencies" for the special risks associated with foreign investments.
In selecting its equity investments, the Advisor seeks to identify attractive
investment opportunities that have not become widely recognized by other stock
analysts or the financial press. Through first-hand research that often includes
on-site visits with the leaders of companies, the Advisor looks for companies
with fundamental value or growth potential that is not yet reflected in their
current market prices.
In many cases, companies in the small- and medium-capitalization markets are
underfollowed and, as a result, less efficiently priced than their larger,
better-known counterparts. The Common Stock Fund's investments are therefore
likely to consist, in part, of securities in small- and medium-sized companies.
Many of these companies may have successfully emerged from the start-up phase
and have potential for future growth. Because of their longer track records and
more seasoned management, they generally pose less investment uncertainty than
do the smallest companies. In general, however, smaller-capitalization companies
often involve greater risks than investments in established companies. (See
"Implementation of Policies and Risks - Small Companies.")

STRONG SMALL CAP FUND

The Fund seeks capital growth. The Fund invests primarily in equity
securities of companies that have small market capitalizations.
The Fund will invest at least 80% of its net assets in equity securities,
including common stocks, preferred stocks, and securities that are convertible
into common or preferred stocks, such as warrants and convertible bonds. At
least 65% of the Fund's total assets will normally be invested in equity
securities of small market capitalization companies, which for the purposes of
this Fund, are those companies with a market capitalization of $2 billion or
less at the time of the Fund's investment. In general, smaller-capitalization
companies often involve greater risks than investments in established companies.
(See "Implementation of Policies and Risks - Small Companies.") The Fund may
invest up to 20% of its net assets in debt obligations, including intermediate-
to long-term corporate or U.S. government debt securities. When the Advisor
determines that market conditions warrant a temporary defensive position, the
Fund may use that allowance to invest in cash and short-term fixed income
securities. Although the debt obligations in which it invests will be primarily
investment grade, the Fund may invest up to 5% of its net assets in non-
investment-grade debt obligations. (See "Implementation of Policies and Risks -
Debt Obligations.")
The Fund may invest up to 25% of its net assets in foreign securities,
including both direct investments and investments made through depositary

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<PAGE> 16

receipts. (See "Implementation of Policies and Risks - Foreign Securities and
Currencies" for the special risks associated with foreign investments.)

STRONG DISCOVERY FUND

The Discovery Fund seeks capital growth. The Fund invests in securities that
the Advisor believes represent attractive growth opportunities.
The Fund normally emphasizes equity securities, although it has the
flexibility to invest in any type of security that the Advisor believes has the
potential for capital appreciation. The Fund may invest up to 100% of its total
assets in equity securities, including common stocks, preferred stocks, and
securities that are convertible into common or preferred stocks, such as
warrants and convertible bonds. The Fund may also invest up to 100% of its total
assets in debt obligations, including intermediate- to long-term corporate or
U.S. government debt securities. When the Advisor determines that market
conditions warrant a temporary defensive position, the Fund may invest without
limitation in cash and short-term fixed income securities. Although the debt
obligations in which it invests will be primarily investment grade, the Fund may
invest up to 5% of its net assets in non-investment-grade debt obligations. (See
"Implementation of Policies and Risks - Debt Obligations.")
The Fund may invest up to 25% of its net assets in foreign securities,
including both direct investments and investments made through depositary
receipts. See "Implementation of Policies and Risks - Foreign Securities and
Currencies" for the special risks associated with foreign investments.
The Advisor seeks to uncover emerging investment trends and attractive growth
opportunities. In its search for potential investments, the Advisor attempts to
identify companies that are poised for accelerated earnings growth due to
innovative products or services, new management, or favorable economic or market
cycles. These companies may be small, unseasoned firms in the early stages of
development, or they may be mature organizations. (See "Implementation of
Policies and Risks - Small Companies.") Whatever their size, history, or
industry, the Advisor believes their potential earnings growth is not yet
reflected in their market value and that, over time, the market prices of these
securities will move higher.

IMPLEMENTATION OF POLICIES AND RISKS

In addition to the investment policies described above (and subject to
certain restrictions described below), the Funds may invest in some or all of
the following securities and may employ some or all of the following investment
techniques, some of which may present special risks as described below. Each
Fund may engage in reverse repurchase agreements and mortgage dollar roll
transactions. A more complete discussion of certain of these securities and
investment techniques and the associated risks is presented in the Funds' SAI.

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<PAGE> 17

FOREIGN SECURITIES AND CURRENCIES

The Opportunity, Growth, Common Stock, Small Cap, and Discovery Funds may
invest in foreign securities either directly or indirectly through the use of
depositary receipts. (See "Investment Objectives and Policies.") The Value Fund
may only invest in foreign securities through depositary receipts. Depositary
receipts are generally issued by banks or trust companies and evidence ownership
of underlying foreign securities.
Foreign investments involve special risks, including:

- - expropriation, confiscatory taxation, and withholding taxes on dividends and
interest;
- - less extensive regulation of foreign brokers, securities markets, and issuers;
- - less publicly available information and different accounting standards;
- - costs incurred in conversions between currencies, possible delays in
settlement in foreign securities markets, limitations on the use or transfer
of assets (including suspension of the ability to transfer currency from a
given country), and difficulty of enforcing obligations in other countries;
and
- - diplomatic developments and political or social instability.

Foreign economies may differ favorably or unfavorably from the U.S. economy
in various respects, including growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments positions. Many foreign securities may
be less liquid and their prices more volatile than comparable U.S. securities.
Although the Funds generally invest only in securities that are regularly traded
on recognized exchanges or in over-the-counter markets, from time to time
foreign securities may be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign investing, such as custody
charges and brokerage costs, may be higher than those attributable to domestic
investing.
The Funds may invest in securities of issuers in developing or emerging
markets and economies. Risks of investing in developing or emerging markets
include:

- - less social, political, and economic stability;
- - smaller securities markets and lower trading volume, which may result in a
lack of liquidity and greater price volatility;
- - certain national policies that may restrict a Fund's investment opportunities,
including restrictions on investments in issuers or industries deemed
sensitive to national interests, or expropriation or confiscation of assets or
property, which could result in a Fund's loss of its entire investment in that
market; and
- - less developed legal structures governing private or foreign investment or
allowing for judicial redress for injury to private property.

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<PAGE> 18

In addition, brokerage commissions, custodial services, withholding taxes,
and other costs relating to investment in emerging markets generally are more
expensive than in the U.S. and certain more established foreign markets.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values, and other protectionist measures negotiated or imposed by the countries
with which they trade.
Because most foreign securities are denominated in non-U.S. currencies, the
investment performance of the Funds could be affected by changes in foreign
currency exchange rates to some extent. The value of a Fund's assets denominated
in foreign currencies will increase or decrease in response to fluctuations in
the value of those foreign currencies relative to the U.S. dollar. Currency
exchange rates can be volatile at times in response to supply and demand in the
currency exchange markets, international balances of payments, governmental
intervention, speculation, and other political and economic conditions.
The Funds may purchase and sell foreign currency on a spot basis and may
engage in forward currency contracts, currency options, and futures transactions
for hedging or any other lawful purpose. (See "Derivative Instruments.")

FOREIGN INVESTMENT COMPANIES

The Funds may invest, to a limited extent, in foreign investment companies.
Some of the countries in which the Funds invest may not permit direct investment
by outside investors. Investments in such countries may only be permitted
through foreign government-approved or -authorized investment vehicles, which
may include other investment companies. In addition, it may be less expensive
and more expedient for a Fund to invest in a foreign investment company in a
country which permits direct foreign investment. Investing through such vehicles
may involve frequent or layered fees or expenses and may also be subject to
limitation under the Investment Company Act of 1940 (the "1940 Act"). The Funds
do not intend to invest in such investment companies unless, in the judgment of
the Advisor, the potential benefits of such investments justify the payment of
any associated fees or expenses.

DERIVATIVE INSTRUMENTS

A Fund may use derivative instruments for any lawful purpose consistent with
the Fund's investment objective such as hedging or managing risk, but not for
speculation. Derivative instruments are commonly defined to include securities
or contracts whose values depend on (or "derive" from) the value of one or more
other assets, such as securities, currencies, or commodities. These "other
assets" are commonly referred to as "underlying assets."

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<PAGE> 19

A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to options or forward contracts. Options and forward
contracts are considered to be the basic "building blocks" of derivatives. For
example, forward-based derivatives include forward contracts, swap contracts, as
well as exchange-traded futures. Option-based derivatives include privately
negotiated, over-the-counter (OTC) options (including caps, floors, collars, and
options on forward and swap contracts) and exchange-traded options on futures.
Diverse types of derivatives may be created by combining options or forward
contracts in different ways, and by applying these structures to a wide range of
underlying assets.
An option is a contract in which the "holder" (the buyer) pays a certain
amount (the "premium") to the "writer" (the seller) to obtain the right, but not
the obligation, to buy from the writer (in a "call") or sell to the writer (in a
"put") a specific asset at an agreed upon price at or before a certain time. The
holder pays the premium at inception and has no further financial obligation.
The holder of an option-based derivative generally will benefit from favorable
movements in the price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the value of the underlying
asset. The writer of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses due to changes in the value of the
underlying asset.
A forward is a sales contract between a buyer (holding the "long" position)
and a seller (holding the "short" position) for an asset with delivery deferred
until a future date. The buyer agrees to pay a fixed price at the agreed future
date and the seller agrees to deliver the asset. The seller hopes that the
market price on the delivery date is less than the agreed upon price, while the
buyer hopes for the contrary. The change in value of a forward-based derivative
generally is roughly proportional to the change in value of the underlying
asset.
Derivative instruments may include (i) options; (ii) futures; (iii) options
on futures; (iv) short sales against the box, in which a Fund sells a security
it owns for delivery at a future date; (v) swaps, in which two parties agree to
exchange a series of cash flows in the future, such as interest-rate payments;
(vi) interest-rate caps, under which, in return for a premium, one party agrees
to make payments to the other to the extent that interest rates exceed a
specified rate, or "cap"; (vii) interest-rate floors, under which, in return for
a premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; (viii) forward currency
contracts and foreign currency exchange-related securities; and (ix) structured
instruments which combine the foregoing in different ways.
Derivatives may be exchange traded or traded in OTC transactions between
private parties. OTC transactions are subject to additional risks, such as the
credit risk of the counterparty to the instrument and are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction. Derivative instruments may include elements of
leverage and, accordingly, the fluctuation of the value of the derivative

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PROSPECTUS PAGE I-19
<PAGE> 20

instrument in relation to the underlying asset may be magnified. When required
by SEC guidelines, a Fund will set aside permissible liquid assets or securities
positions that substantially correlate to the market movements of the derivative
in a segregated account to secure its obligations under the derivative. In order
to maintain its required cover for a derivative, a Fund may need to sell
portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a derivative position.
The successful use of derivatives by a Fund is dependent upon a variety of
factors, particularly the Advisor's ability to correctly anticipate trends in
the underlying asset. In a hedging transaction, if the Advisor incorrectly
anticipates trends in the underlying asset, a Fund may be in a worse position
than if no hedging had occurred. In addition, there may be imperfect correlation
between a Fund's derivative transactions and the instruments being hedged. To
the extent that the Fund is engaging in derivative transactions for risk
management, the Fund's successful use of such transactions is more dependent
upon the Advisor's ability to correctly anticipate such trends, since losses in
these transactions may not be offset in gains in the Fund's portfolio or in
lower purchase prices for assets it intends to acquire. The Advisor's prediction
of trends in underlying assets may prove to be inaccurate, which could result in
substantial losses to a Fund.
In addition to the derivative instruments and strategies described above, the
Advisor expects to discover additional derivative instruments and other hedging
or risk management techniques. The Advisor may utilize these new derivative
instruments and techniques to the extent that they are consistent with a Fund's
investment objective and permitted by the Fund's investment limitations,
operating policies, and applicable regulatory authorities.

ILLIQUID SECURITIES

Each Fund may invest up to 15% of its net assets in illiquid securities.
Illiquid securities are those securities that are not readily marketable,
including restricted securities and repurchase obligations maturing in more than
seven days. Certain restricted securities that may be resold to institutional
investors pursuant to Rule 144A under the Securities Act of 1933 and Section
4(2) commercial paper may be determined liquid under guidelines adopted by each
Fund's Board of Directors.

SMALL COMPANIES

The Funds may, from time to time, invest a substantial portion of their
assets in small companies. While smaller companies generally have potential for
rapid growth, investments in smaller companies often involve greater risks than
investments in larger, more established companies because smaller companies may
lack the management experience, financial resources, product diversification,
and competitive strengths of larger companies. In addition, in

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<PAGE> 21

many instances the securities of smaller companies are traded only over-the-
counter or on a regional securities exchange, and the frequency and volume of
their trading is substantially less than is typical of larger companies.
Therefore, the securities of smaller companies may be subject to greater and
more abrupt price fluctuations. When making large sales, a Fund may have to sell
portfolio holdings at discounts from quoted prices or may have to make a series
of small sales over an extended period of time due to the trading volume of
smaller company securities. Investors should be aware that, based on the
foregoing factors, an investment in the Funds may be subject to greater price
fluctuations than an investment in a fund that invests primarily in larger, more
established companies. The Advisor's research efforts may also play a greater
role in selecting securities for the Funds than in a fund that invests in
larger, more established companies.

DEBT OBLIGATIONS

IN GENERAL. Debt obligations in which the Funds may invest will be primarily
investment-grade debt obligations, although each Fund may invest up to 5% of its
net assets in non-investment-grade debt obligations. The market value of all
debt obligations is affected by changes in the prevailing interest rates. The
market value of such instruments generally reacts inversely to interest rate
changes. If the prevailing interest rates decline, the market value of debt
obligations generally increases. If the prevailing interest rates increase, the
market value of debt obligations generally decreases. In general, the longer the
maturity of a debt obligation, the greater its sensitivity to changes in
interest rates.
Investment-grade debt obligations include:

- - U.S. government securities (as defined below);
- - bonds or bank obligations rated in one of the four highest rating categories
(e.g., BBB or higher by Standard & Poor's Ratings Group or "S&P");
- - short-term notes rated in one of the two highest rating categories (e.g., SP-2
or higher by S&P);
- - short-term bank obligations rated in one of the three highest rating
categories (e.g., A-3 or higher by S&P), with respect to obligations maturing
in one year or less;
- - commercial paper rated in one of the three highest rating categories (e.g.,
A-3 or higher by S&P);
- - unrated debt obligations determined by the Advisor to be of comparable
quality; and
- - repurchase agreements involving investment-grade debt obligations.

All ratings are determined at the time of investment. Any subsequent rating
downgrade of a debt obligation will be monitored by the Advisor to consider what
action, if any, a Fund should take consistent with its investment objective.

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PROSPECTUS PAGE I-21
<PAGE> 22

Securities rated in the fourth-highest category (e.g., BBB by S&P), although
considered investment grade, have speculative characteristics and may be subject
to greater fluctuations in value than higher-rated securities.
Non-investment-grade debt obligations include:

- - securities rated as low as C by S&P or their equivalents;
- - commercial paper rated as low as C by S&P or its equivalents; and
- - unrated debt securities judged to be of comparable quality by the Advisor.

GOVERNMENT SECURITIES

U.S. government securities are issued or guaranteed by the U.S. government or
its agencies or instrumentalities. Securities issued by the government include
U.S. Treasury obligations, such as Treasury bills, notes, and bonds. Securities
issued by government agencies or instrumentalities include, for example,
obligations of the following:

- - the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration, and the Government
National Mortgage Association, including GNMA pass-through certificates, whose
securities are supported by the full faith and credit of the United States;
- - the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of the
agency to borrow from the U.S. Treasury;
- - the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and
- - the Student Loan Marketing Association, the Interamerican Development Bank,
and International Bank for Reconstruction and Development, whose securities
are supported only by the credit of such agencies.

Although the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities;
consequently, the value of such securities will fluctuate.

WHEN-ISSUED SECURITIES

Each Fund may invest without limitation in securities purchased on a when-
issued or delayed delivery basis. Although the payment and interest terms of
these securities are established at the time the purchaser enters into the
commitment, these securities may be delivered and paid for at a future date,
generally within 45 days. Purchasing when-issued securities allows a Fund to

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PROSPECTUS PAGE I-22
<PAGE> 23

lock in a fixed price or yield on a security it intends to purchase. However,
when a Fund purchases a when-issued security, it immediately assumes the risk of
ownership, including the risk of price fluctuation.
The greater a Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of a Fund.
Purchasing when-issued securities may involve the additional risk that the yield
available in the market when the delivery occurs may be higher or the market
price lower than that obtained at the time of commitment. Although a Fund may be
able to sell these securities prior to the delivery date, it will purchase
when-issued securities for the purpose of actually acquiring the securities,
unless after entering into the commitment a sale appears desirable for
investment reasons. When required by SEC guidelines, a Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.

PORTFOLIO TURNOVER

Each Fund's (except for the Value and Small Cap Funds) historical portfolio
turnover rate is listed under "Financial Highlights." The annual portfolio
turnover rate indicates changes in a Fund's portfolio. The turnover rate may
vary from year to year, as well as within a year. It may also be affected by
sales of portfolio securities necessary to meet cash requirements for
redemptions of shares. High portfolio turnover in any year will result in the
payment by a Fund of above-average amounts of transaction costs and could result
in the payment by shareholders of above-average amounts of taxes on realized
investment gains. The Value Fund will not generally trade in securities for
short-term profits, but, when the Advisor determines that circumstances warrant,
securities may be purchased and sold without regard to the length of time held.
Under normal market conditions, it is anticipated that the rate of portfolio
turnover of the Value Fund generally will not exceed 150%. Under normal market
conditions, the rate of portfolio turnover of the Small Cap Fund generally will
not exceed 300%. However, during periods in which the Advisor deems it advisable
to engage in substantial short-term trading, the rate of portfolio turnover may
exceed 300%.

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<PAGE> 24

ABOUT THE FUNDS

MANAGEMENT

The Board of Directors of each Fund is responsible for managing its business
and affairs. Each of the Funds has entered into an investment advisory agreement
(collectively the "Advisory Agreements") with Strong Capital Management, Inc.
(the "Advisor"). The Advisory Agreements are substantially identical. Under the
terms of these agreements, the Advisor manages each Fund's investments and
business affairs subject to the supervision of each Fund's Board of Directors.

ADVISOR. The Advisor began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans, as well as mutual funds, several of which are funding vehicles for
variable insurance products. As of April 15, 1996, the Advisor had over $19
billion under management. The Advisor's principal mailing address is P.O. Box
2936, Milwaukee, Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the
Board of each Fund, is the controlling shareholder of the Advisor.
As compensation for its services, each Fund pays the Advisor a monthly
management fee. The annual fee for each Fund is 1.0% of a Fund's average daily
net asset value. Such fees are in excess of fees paid by many other funds. From
time to time, the Advisor may voluntarily waive all or a portion of its
management fee and/or absorb certain Fund expenses without further notification
of the commencement or termination of such waiver or absorption. Any such waiver
or absorption will temporarily lower a Fund's overall expense ratio and increase
a Fund's overall return to investors.
Except for expenses assumed by the Advisor, Subadvisor, or Strong Funds
Distributors, Inc., each Fund is responsible for all its other expenses,
including, without limitation, interest charges, taxes, brokerage commissions,
and similar expenses; expenses of issue, sale, repurchase, or redemption of
shares; expenses of registering or qualifying shares for sale with the states
and the SEC; expenses of printing and distribution of prospectuses to existing
shareholders; charges of custodians (including fees as custodian for keeping
books and similar services for a Fund), transfer agents (including the printing
and mailing of reports and notices to shareholders), registrars, auditing and
legal services, and clerical services related to recordkeeping and shareholder
relations; printing of stock certificates; fees for directors who are not
"interested persons" of the Advisor; expenses of indemnification; extraordinary
expenses; and costs of shareholder and director meetings.

SUBADVISOR -- VALUE FUND. Under a subadvisory agreement between the Advisor
and Sloate, Weisman, Murray and Company, Inc. (the "Subadvisory Agreement"), the
Subadvisor, pursuant to the oversight and supervision of the

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<PAGE> 25

Fund's Board of Directors and the Advisor, provides a continuous investment
program for the Fund. Under the Subadvisory Agreement, the Subadvisor is
responsible both for determining the securities to be purchased and sold by the
Fund and for executing those transactions. However, the Advisor is responsible
for managing the cash-equivalent investments maintained by the Fund in the
ordinary course of its business, which are expected to be no more than 10%-15%
of the Fund's total assets. As compensation for its services, the Advisor (not
the Fund) pays the Subadvisor a monthly fee based on the following annual rates.
For the first eighteen (18) months, the Advisor will pay the Subadvisor 60% of
the management fees collected by the Advisor from the Fund on the first $150
million of net assets in the Fund, 50% of the management fees collected by the
Advisor from the Fund on net assets from $150 to $300 million in the Fund, and
40% of the management fees collected by the Advisor from the Fund on net assets
in excess of $300 million in the Fund. After the first eighteen (18) months, the
Advisor will pay the Subadvisor 60% of the management fees collected by the
Advisor from the Fund on the lower of $150 million or the level of net assets in
the Fund at the end of eighteen (18) months (this amount being "base" net
assets), 50% of the management fees collected by the Advisor from the Fund on
net assets from base net assets to $300 million in the Fund, and 40% of the
management fees collected by the Advisor from the Fund on net assets in excess
of $300 million in the Fund. The Subadvisor bears all of its own expenses in
providing subadvisory services to the Fund.
The Subadvisor began conducting business in 1974. Its principal business has
been providing investment supervision to institutional investors and high net
worth clients. The Subadvisor is a Delaware corporation. Ms. Laura J. Sloate,
the Subadvisor's Chairman and Chief Investment Officer, is the controlling
shareholder of the Subadvisor. As of March 31, 1996, the Subadvisor had
approximately $1 billion under management. Its address is 540 Madison Avenue,
New York, New York 10022.

HISTORICAL PERFORMANCE DATA OF THE SUBADVISOR

The following table sets forth the composite performance data of the
Subadvisor relating to the historical performance of actual, fee-paying,
discretionary equity accounts and the designated equity portion (including
designated cash reserves) of balanced accounts with assets over $5 million (the
"Equity Accounts") managed by the Subadvisor, since the dates indicated, that
have investment objectives, policies, strategies, and risks substantially
similar to those of the Value Fund. The data is provided to illustrate the past
performance of the Subadvisor in managing substantially-similar accounts as
measured against the Standard & Poor's 500 Stock Index ("S&P 500") and the
Russell 1000 Value Index ("Russell 1000 Value") and does not represent the
performance of the Value Fund. PERFORMANCE IS HISTORICAL AND DOES NOT REPRESENT
THE FUTURE PERFORMANCE OF THE VALUE FUND OR OF THE SUBADVISOR.

----------------------

PROSPECTUS PAGE I-25
<PAGE> 26

The Subadvisor's composite performance data shown below was calculated in
accordance with the recommended standards of the Association for Investment
Management and Research (commonly referred to as AIMR)* retroactively applied
for all time periods. All returns presented were calculated on a total return
basis and include all dividends and interest, accrued income, and realized and
unrealized gains and losses. All returns reflect the deduction of investment
management fees, brokerage commissions, and execution costs paid by the Equity
Accounts, without provision for federal or state income taxes. Custodial fees,
if any, were not included in the calculation. Securities transactions are
accounted for on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns. The composite's returns are
calculated on a time-weighted basis.

The Equity Accounts that are included in the Subadvisor's composite are not
subject to the same type of expenses to which the Value Fund is subject nor to
the diversification requirements, specific tax restrictions, and investment
limitations imposed on the Value Fund by the 1940 Act or Subchapter M of the
Internal Revenue Code. Consequently, the performance results for the
Subadvisor's composite could have been adversely affected if the Equity Accounts
included in the composite had been regulated under the federal security and tax
laws.

The investment results of the Subadvisor's composite presented below are
unaudited and are not intended to predict or suggest the future returns of the
Value Fund. Investors should be aware that the use of a methodology different
than that used below to calculate performance could result in different
performance data.

- ---------------

* AIMR is a non-profit membership and education organization with more than
60,000 members worldwide that, among other things, has formulated a set of
performance presentation standards for investment advisers. These AIMR
performance presentation standards are intended to (i) promote full and fair
presentations by investment advisers of their performance results, and (ii)
ensure uniformity in reporting so that performance results of investment
advisers are directly comparable.

----------------------

PROSPECTUS PAGE I-26
<PAGE> 27

----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Subadvisor's Russell
Value Equity 1000 S&P
Time Period Composite Value(1) 500(2)
<S> <C> <C> <C>
Average Annual Returns
1 Year 18.46% 17.95% 20.33%
3 Year 15.56% 14.36% 17.42%
5 Year 18.10% 16.08% 15.23%
4/1/88 - 9/30/96(3) 20.45% 14.77% 15.65%
Cumulative Returns
4/1/88 - 9/30/96(3) 386.40% 222.62% 244.23%
</TABLE>

- ----------------------------------------------------------------------------

(1)The Russell 1000 Value Index is an unmanaged index that contains securities
that value managers typically select from the Russell 1000 Index, which
generally represents the U.S. stock market. The index does not reflect
investment management fees, brokerage commissions, and other expenses
associated with investing in equity securities.

(2)The S&P 500 Stock Index is an unmanaged index generally representative of the
U.S. stock market. The index does not reflect investment management fees,
brokerage commissions, and other expenses associated with investing in equity
securities.

(3)The Value Equity Composite began on April 1, 1988.

PORTFOLIO MANAGERS. The following individuals serve as portfolio managers for
the six Strong Growth Funds.

STRONG OPPORTUNITY FUND
STRONG COMMON STOCK FUND

RICHARD T. WEISS. Mr. Weiss joined the Advisor in 1991 from Chicago-based
Stein Roe & Farnham, where he began his career as a research analyst in 1975. He
was named a portfolio manager in 1981. Mr. Weiss attended Harvard Graduate
School of Business Administration, where he was awarded his M.B.A. in 1975, and
the University of Southern California, where he received his bachelor's degree
in Business Administration in 1973. Mr. Weiss has managed the Strong Opportunity
and Common Stock Funds since 1991. In addition, Mr. Weiss is a member of the
Advisor's Executive Committee.

From November 1981 through March 1991, Mr. Richard T. Weiss managed and
co-managed the Stein Roe Special Fund. Mr. Weiss assumed portfolio management
responsibility from the Stein Roe Special Fund's previous manager. Although Mr.
Weiss co-managed the Stein Roe Special Fund from 1986 until March 1991, Mr.
Weiss was primarily responsible for the day-to-day management of the Fund from
November 1981 through March 1991. During the time that Mr. Weiss managed the
Stein Roe Special Fund, it had an investment objective, policies, and strategies
that were substantially similar to the Strong Common Stock Fund. The cumulative
total return for the Stein Roe Special Fund from December 1, 1981 through
February 28, 1991 was 380.24% as compared to 163.68% for the Russell 2000 Index
and 322.20% for the S&P

----------------------

PROSPECTUS PAGE I-27
<PAGE> 28

500 Index over the same period. The average annual total returns for the Stein
Roe Special Fund for the one-year, three-year, and five-year periods ended
February 28, 1991, and for the entire period that Mr. Weiss managed the Stein
Roe Special Fund compared with the performance of the Russell 2000 and S&P 500
Indices were:

----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Stein Roe Russell
Special 2000 S&P 500
Year Fund(1) Index(2) Index(3)
<S> <C> <C> <C>
1 Year 12.07% 3.72% 14.67%
3 Year 18.14% 7.63% 15.12%
5 Year 14.18% 4.66% 13.97%
12/1/81 - 2/28/91 18.49% 11.05% 16.85%
</TABLE>

- ----------------------------------------------------------------------------

(1)Average annual total returns reflect changes in share prices and reinvestment
of dividends and distributions and are net of fund expenses.

(2)The Russell 2000 Index is an unmanaged index of common stocks generally
representative of the small capitalization U.S. stock market. The index does
not reflect investment management fees, brokerage commissions and other
expenses associated with investing in equity securities.

(3)The S&P 500 Stock Index is an unmanaged index generally representative of the
U.S. stock market. The index does not reflect investment management fees,
brokerage commissions and other expenses associated with investing in equity
securities.

Historical performance does not indicate future performance. THE STEIN ROE
SPECIAL FUND IS A SEPARATE FUND AND ITS HISTORICAL PERFORMANCE IS NOT INDICATIVE
OF THE POTENTIAL PERFORMANCE OF THE STRONG COMMON STOCK FUND. Share prices and
investment returns will fluctuate.

MARINA T. CARLSON. Before she joined the Advisor as an equity research
analyst in 1991, Ms. Carlson worked in a similar capacity at Stein Roe &
Farnham, where she began her investment career in 1986. She has worked with
portfolio manager Richard T. Weiss since 1989, and, in 1993, she was named a
co-manager of the Strong Opportunity and Common Stock Funds. A Chartered
Financial Analyst, Ms. Carlson received her M.B.A. from DePaul University in
1989 and her bachelor's degree in Finance from Drake University in 1986.

----------------------

PROSPECTUS PAGE I-28
<PAGE> 29

STRONG GROWTH FUND

RONALD C. OGNAR. Mr. Ognar, a Chartered Financial Analyst with more than 25
years of investment experience, joined the Advisor in April 1993 after two years
as a principal and portfolio manager with RCM Capital Management. For
approximately three years prior to that, he was a portfolio manager at Kemper
Financial Services in Chicago. Mr. Ognar began his investment career in 1968 at
LaSalle National Bank in Chicago after serving two years in the U.S. Army. He
received his bachelor's degree in Accounting from the University of Illinois in
1968.

From February 1989 through July 1991, Mr. Ronald C. Ognar managed the Kemper
Growth Fund. Mr. Ognar assumed portfolio management responsibility from the
Kemper Growth Fund's previous manager. As portfolio manager, Mr. Ognar was
primarily responsible for the day-to-day management of the Kemper Growth Fund
and no other person played a significant part in that management. During the
time that Mr. Ognar managed the Kemper Growth Fund, it had an investment
objective, policies, and strategies that were substantially similar to the
Strong Growth Fund. The cumulative total return for the Kemper Growth Fund from
March 1, 1989 through June 30, 1991 was 62.93% as compared to 39.32% for the S&P
500 Index over the same period. The average annual total returns for the Kemper
Growth Fund for the one-year period ended June 30, 1991, and for the entire
period that Mr. Ognar managed the Kemper Growth Fund compared with the
performance of the S&P 500 Index were:

----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Kemper
Growth S&P
Year Fund(1) 500 Index(2)
<S> <C> <C>
1 Year 15.13% 7.39%
3/1/89 -
6/30/91(3) 23.27% 15.27%
</TABLE>

- ----------------------------------------------------------------------------

(1)Average annual total returns reflect changes in share prices and reinvestment
of dividends and distributions and are net of fund expenses.

(3)From July 1991 until he joined Strong Capital Management in April of 1993,
Mr. Ognar served RCM Capital Management as a principal and as a portfolio
manager of certain growth separate accounts. Mr. Ognar has been managing the
Strong Growth Fund since its inception on December 31, 1993.

Historical performance does not indicate future performance. THE KEMPER
GROWTH FUND IS A SEPARATE FUND AND ITS HISTORICAL PERFORMANCE IS NOT INDICATIVE
OF THE POTENTIAL PERFORMANCE OF THE STRONG GROWTH FUND. Share prices and
investment returns will fluctuate.

----------------------

PROSPECTUS PAGE I-29
<PAGE> 30

STRONG VALUE FUND

LAURA J. SLOATE. Ms. Sloate, blind since the age of six, is a leading figure
in the field of money management. After graduating from Barnard College and
Columbia University, she began working as a Securities Analyst at Scheinman
Hochstein & Trotta, Neuberger Berman & Company and Drexel Burnham & Company. In
1974, Ms. Sloate was one of the founders of Sloate, Weisman, Murray & Company,
the Fund's Subadvisor. As a principal of one of the first woman-owned money
management firms, Ms. Sloate has been responsible for the successful expansion
of assets under her management to their current level of approximately $1
billion. In addition to her role as portfolio manager, she is the Subadvisor's
Chairman and Chief Investment Officer.

JEFFREY B. COHEN. Mr. Cohen joined Sloate, Weisman, Murray & Company in 1987
where he presently serves as a senior portfolio manager. Prior to joining
Sloate, Weisman, he spent three years as Credit Officer, Analyst at J.P. Morgan.
Mr. Cohen graduated from the Wharton School at the University of Pennsylvania
with a B.S.E. in Finance and an M.B.A. from New York University. Mr. Cohen is a
principal of the Subadvisor.

STRONG SMALL CAP FUND

MARY LISANTI. Ms. Lisanti serves as the portfolio manager of the Strong Small
Cap Fund. Prior to joining the Advisor, Ms. Lisanti acted as a managing director
at Bankers Trust in New York, where she headed the small/mid-cap equity team,
and served as a portfolio manager of the BT Investment Small Cap Fund since its
inception in October 1993. As portfolio manager, Ms. Lisanti was primarily
responsible for the day-to-day management of the BT Investment Small Cap Fund
and no other person played a significant part in that management. During the
time that Ms. Lisanti managed the BT Investment Small Cap Fund, it had an
investment objective, policies, and strategies that were substantially similar
to the Strong Small Cap Fund. The cumulative total return for the BT Investment
Small Cap Fund from its inception (10/21/93) through July 31, 1996 was 100.17%
as compared to 29.15% for the Russell 2000 Index and 47.88% for the S&P 500
Index over the same period. The average annual returns of the BT Investment
Small Cap Fund for the one-year period ended July 31, 1996, and for the entire
period that Ms. Lisanti managed the Fund compared with the performance of the
Russell 2000 and S&P 500 Indices were:

<TABLE>
<CAPTION>
BT Investment Russell
Small Cap 2000 S&P
Year Fund(1,2) Index(3) 500 Index(4)
<S> <C> <C> <C>
1 Year 11.57% 6.91% 16.57%
10/21/93 - 7/31/96 28.39% 9.64% 15.13%
- ----------------------------------------------------------------------------
</TABLE>

----------------------

PROSPECTUS PAGE I-30
<PAGE> 31

(1)Average annual total returns reflect changes in share prices and reinvestment
of dividends and distributions and are net of fund expenses.

(2)The expense ratio of the BT Investment Small Cap Fund was capped at 1.25% for
the period from October 21, 1993 (inception) to September 30, 1994
(reflecting annualized reimbursement of expenses of .86%), for the period
from October 1, 1994 to September 30, 1995 (reflecting reimbursement of
expenses of .34%), and for the period from October 1, 1995 to September 30,
1996 (reflecting reimbursement of expenses of .22%).

(3)The Russell 2000 Index is an unmanaged index of common stocks generally
representative of the small capitalization U.S. stock market. The index does
not reflect investment management fees, brokerage commissions and other
expenses associated with investing in equity securities.

(4)The S&P 500 Stock Index is an unmanaged index generally representative of the
U.S. stock market. The index does not reflect investment management fees,
brokerage commissions, and other expenses associated with investing in equity
securities.

Historical performance does not indicate future performance. THE BT
INVESTMENT SMALL CAP FUND IS A SEPARATE FUND AND ITS HISTORICAL PERFORMANCE IS
NOT INDICATIVE OF THE POTENTIAL PERFORMANCE OF THE STRONG SMALL CAP FUND. Share
prices and investment returns will fluctuate.

Prior to joining Bankers Trust in February 1993, Ms. Lisanti was a vice
president and portfolio manager with Lieber & Company/The Evergreen Funds. A
native of Queens, New York, she graduated with honors from Princeton University
in 1978. Ms. Lisanti is a Chartered Financial Analyst and a member of the New
York Society of Security Analysts and the Financial Analyst Federation.

STRONG DISCOVERY FUND

RICHARD S. STRONG. Mr. Strong founded the Advisor in 1974. He began his
investment career at Employers Insurance of Wausau in 1966, after receiving his
master's degree in Finance from the University of Wisconsin-Madison that
January. He received his undergraduate degree in 1963 from Baldwin-Wallace
College. Mr. Strong has managed or co-managed the Strong Discovery Fund since
its inception in December 1987. In addition to his role as a portfolio manager,
he is the Chairman of the Board, Director, Chief Investment Officer, and a
member of the Advisor's Executive Committee.

CHARLES A. PAQUELET. On August 31, 1996, Mr. Paquelet joined Mr. Strong as a
portfolio co-manager of the Strong Discovery Fund. Mr. Paquelet joined the
Advisor as a securities analyst in 1988 from the B.F. Goodrich Company, where he
began his career as a financial analyst earlier in 1987. Since 1990, he has been
a portfolio manager of separate accounts for individual and institutional
investors. Mr. Paquelet was awarded his M.B.A. in 1989 from Indiana University.
He received his bachelor's degree in finance in 1987 from Case Western Reserve
University. Mr. Paquelet is a Chartered Financial Analyst.

----------------------

PROSPECTUS PAGE I-31
<PAGE> 32

Mr. Paquelet served as the portfolio manager of the Strong Small Cap Fund from
the Fund's inception on December 31, 1995 through August 31, 1996.

TRANSFER AND DIVIDEND-DISBURSING AGENT

The Advisor, P.O. Box 2936, Milwaukee, Wisconsin 53201, also acts as
dividend-disbursing agent and transfer agent for the Funds. The Advisor is
compensated for its services based on an annual fee per account plus certain
out-of-pocket expenses. The fees received and the services provided as transfer
agent and dividend-disbursing agent are in addition to those received and
provided under the Advisory Agreements between the Advisor and the Funds.

DISTRIBUTOR

Strong Funds Distributors, Inc., P.O. Box 2936, Milwaukee, Wisconsin 53201,
an indirect subsidiary of the Advisor, acts as distributor of the shares of the
Funds.

ORGANIZATION

SHAREHOLDER RIGHTS. The Opportunity, Common Stock, and Discovery Funds are
Wisconsin corporations that are authorized to issue shares of common stock and
series and classes of series of shares of common stock. The Growth, Value, and
Small Cap Funds are series of Strong Equity Funds, Inc., a Wisconsin corporation
that is authorized to issue shares of common stock and series and classes of
series of shares of common stock. Each share of the Funds has one vote, and all
shares participate equally in dividends and other capital gains distributions by
the respective Fund and in the residual assets of the respective Fund in the
event of liquidation. Certificates will be issued for shares held in your
account only upon your written request. You will, however, have full shareholder
rights whether or not you request certificates. Generally, the Funds will not
hold an annual meeting of shareholders unless required by the 1940 Act.

SHAREHOLDER PRIVILEGES. The shareholders of each Fund may benefit from the
privileges described in the "Shareholder Manual" (see Page II-1). However, each
Fund reserves the right, at any time and without prior notice, to suspend,
limit, modify, or terminate any of these privileges or their use in any manner
by any person or class.

DISTRIBUTIONS AND TAXES

PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. Unless you choose otherwise,
all your dividends and capital gains distributions will be automatically

----------------------

PROSPECTUS PAGE I-32
<PAGE> 33

reinvested in additional Fund shares. Or, you may elect to have all your
dividends and capital gain distributions from a Fund automatically invested in
additional shares of another Strong Fund. Shares are purchased at the net asset
value determined on the payment date. If you request in writing that your
dividends and other distributions be paid in cash, a Fund will credit your bank
account by Electronic Funds Transfer ("EFT") or issue a check to you within five
business days of the payment date. You may change your election at any time by
calling or writing Strong Funds. Strong Funds must receive any such change 7
days (15 days for EFT) prior to a dividend or capital gain distribution payment
date in order for the change to be effective for that payment. The policy of
each Fund is to pay dividends from net investment income quarterly and to
distribute substantially all net realized capital gains and gains from foreign
currency transactions annually. Each Fund may make additional distributions if
necessary to avoid imposition of a 4% excise tax on undistributed income and
gains.

TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. You will be subject to
federal income tax at ordinary income tax rates on any dividends you receive
that are derived from investment company taxable income (consisting generally of
net investment income, net short-term capital gain, and net gains from certain
foreign currency transactions, if any). Distributions of net capital gain (the
excess of net long-term capital gain over net short-term capital loss), when
designated as such by a Fund, are taxable to you as long-term capital gains,
regardless of how long you have held your Fund shares. The Funds' distributions
are taxable in the year they are paid, whether they are taken in cash or
reinvested in additional shares, except that certain distributions declared in
the last three months of the year and paid in January are taxable as if paid on
December 31.
If a Fund's distributions exceed its investment company taxable income and
net capital gain in any year, as a result of currency-related losses or
otherwise, all or a portion of those distributions may be treated as a return of
capital to shareholders for tax purposes.

YEAR-END TAX REPORTING. After the end of each calendar year, you will receive
a statement (Form 1099) of the federal income tax status of all dividends and
other distributions paid (or deemed paid) during the year.

SHARES SOLD OR EXCHANGED. Your redemption of Fund shares may result in a
taxable gain or loss to you, depending upon whether the redemption proceeds
payable to you are more or less than your adjusted cost basis for the redeemed
shares. Similar tax consequences generally will result from an exchange of Fund
shares for shares of another Strong Fund. If you purchase shares of a Fund
within thirty days before or after redeeming shares of the same Fund at a loss,
a portion or all of that loss will not be deductible and will increase the cost
basis of the newly purchased shares. If you redeem shares out of a retirement
account, you will be subject to withholding for federal

----------------------

PROSPECTUS PAGE I-33
<PAGE> 34

income tax purposes unless you transfer the distribution directly to an
"eligible retirement plan."

BUYING A DISTRIBUTION. A distribution paid shortly after you have purchased
shares in a Fund will reduce the net asset value of the shares by the amount of
the distribution, which nevertheless will be taxable to you even though it
represents a return of a portion of your investment.

BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish a Fund with a correct taxpayer identification
number, the Fund is required to withhold federal income tax at a rate of 31%
(backup withholding) from all dividends, capital gain distributions, and
redemption proceeds payable to you. Withholding at that rate from dividends and
capital gain distributions payable to you also is required if you otherwise are
subject to backup withholding. To avoid backup withholding, you must provide a
taxpayer identification number and state that you are not subject to backup
withholding due to the under-reporting of your income. This certification is
included as part of your application. Please complete it when you open your
account.

TAX STATUS OF THE FUNDS. Each Fund intends to continue to qualify for
treatment as a regulated investment company under Subchapter M of the Internal
Revenue Code and, if so qualified, will not be liable for federal income tax on
earnings and gains distributed to its shareholders in a timely manner.
This section is not intended to be a full discussion of present or proposed
federal income tax law and its effects on the Funds and investors therein. See
the SAI for a further discussion. There may be other federal, state, or local
tax considerations applicable to a particular investor. You are therefore urged
to consult your own tax adviser.

PERFORMANCE INFORMATION

Each Fund may advertise a variety of types of performance information
including "average annual total return," "total return," and "cumulative total
return." Each of these figures is based upon historical results and does not
represent the future performance of a Fund. Average annual total return and
total return figures measure both the net investment income generated by, and
the effect of any realized and unrealized appreciation or depreciation of, the
underlying investments in a Fund assuming the reinvestment of all dividends and
other distributions. Total return figures are not annualized and simply
represent the aggregate change of a Fund's investments over a specified period
of time.

----------------------

PROSPECTUS PAGE I-34
<PAGE> 35

SHAREHOLDER MANUAL

<TABLE>
<S> <C>
HOW TO BUY SHARES...................... II-1
DETERMINING YOUR SHARE PRICE........... II-5
HOW TO SELL SHARES..................... II-6
SHAREHOLDER SERVICES................... II-9
REGULAR INVESTMENT PLANS............... II-10
SPECIAL SITUATIONS..................... II-12
</TABLE>

HOW TO BUY SHARES

All the Strong Funds are 100% no-load, meaning you may purchase, redeem, or
exchange shares directly at net asset value without paying a sales charge.
Because the Funds' net asset values change daily, your purchase price will be
the next net asset value determined after Strong receives and accepts your
purchase order.
Whether you are opening a new account or adding to an existing one, Strong
provides you with several methods to buy Fund shares.

----------------------

PROSPECTUS PAGE II-1
<PAGE> 36

-----------------------------------------------------------------------------

<TABLE>
<S> <C>
TO OPEN A NEW ACCOUNT
- ------------------------------------------------------------------------------
MAIL BY CHECK
- Complete and sign the application. Make your check
or money order payable to "Strong Funds."
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to Strong Funds, 900 Heritage
Reserve, Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- Call 1-800-368-3863 for instructions on
establishing an account with an exchange by mail.
- ------------------------------------------------------------------------------
TELEPHONE BY EXCHANGE
- Call 1-800-368-3863 to establish a new account by
1-800-368-3863 exchanging funds from an existing Strong Funds
24 HOURS A DAY, account.
7 DAYS A WEEK - Sign up for telephone exchange services when you
open your account. To add the telephone exchange
option to your account, call 1-800-368-3863 for a
Telephone Exchange Form.
- Please note that your accounts must be identically
registered and that you must exchange enough into the
new account to meet the minimum initial investment.
- ------------------------------------------------------------------------------
IN PERSON - Stop by our Investor Center in Menomonee Falls,
Wisconsin.
Call 1-800-368-3863 for hours and directions.
- The Investor Center can only accept checks or money
orders.
- ------------------------------------------------------------------------------
WIRE Call 1-800-368-3863 for instructions on opening an
account
by wire.
- ------------------------------------------------------------------------------
AUTOMATICALLY USE STRONG'S "NO-MINIMUM INVESTMENT PROGRAM."
- If you sign up for Strong's Automatic Investment
Plan when you open your account, Strong Funds will
waive the Fund's minimum initial investment (see
chart on page II-4).
- Complete the Automatic Investment Plan section on
the account application.
- Mail to the address indicated on the application.
- ------------------------------------------------------------------------------
BROKER-DEALER - You may purchase shares in a Fund through a
broker-dealer
or other institution that may charge a transaction
fee.
- Strong Funds may only accept requests to purchase
shares into a broker-dealer street name account
from the broker-dealer.
</TABLE>

----------------------

PROSPECTUS PAGE II-2
<PAGE> 37

- ------------------------------------------------------------------------------
TO ADD TO AN EXISTING ACCOUNT
- --------------------------------------------------------------------------------
BY CHECK
- - Complete an Additional Investment Form provided at the bottom of your account
statement, or write a note indicating your fund account number and
registration. Make your check or money order payable to "Strong Funds."

- - Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If you're
using an express delivery service, send to Strong Funds, 900 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.

BY EXCHANGE
- - Call 1-800-368-3863 for instructions on exchanging by mail.
- --------------------------------------------------------------------------------

BY EXCHANGE
- - Add to an account by exchanging funds from another Strong Funds account.
- - Sign up for telephone exchange services when you open your account. To add the
telephone exchange option to your account, call 1-800-368-3863 for a Telephone
Exchange Form.
- - Please note that the accounts must be identically registered and that the
minimum exchange is $50 or the balance of your account, whichever is less.
BY TELEPHONE PURCHASE
- - Sign up for telephone purchase when you open your account to make additional
investments from $50 to $25,000 into your Strong Funds account by telephone.
To add this option to your account, call 1-800-368-3863 for a Telephone
Purchase Form.
Or use Strong DirectSM, Strong Funds' automated telephone response system. Call
1-800-368-3863 for details.
- --------------------------------------------------------------------------------

- - Stop by our Investor Center in Menomonee Falls, Wisconsin. Call 1-800-368-3863
for hours and directions.
- - The Investor Center can only accept checks or money orders.
- --------------------------------------------------------------------------------
Call 1-800-368-3863 for instructions on adding to an account by wire.
- --------------------------------------------------------------------------------
USE ONE OF STRONG'S AUTOMATIC INVESTMENT PROGRAMS. Sign up for these services
when you open your account, or call 1-800-368-3863 for instructions on how to
add them to your existing account.
- - AUTOMATIC INVESTMENT PLAN. Make regular, systematic investments (minimum $50)
into your Strong Funds account from your bank checking or NOW account.
Complete the Automatic Investment Plan section on the account application.
- - AUTOMATIC EXCHANGE PLAN. Make regular, systematic exchanges (minimum $50) from
one Strong Funds account to another. Call 1-800-368-3863 for an application.
- - PAYROLL DIRECT DEPOSIT. Have a specified amount (minimum $50) regularly
deducted from your paycheck, social security check, military allotment, or
annuity payment invested directly into your Strong Funds account. Call
1-800-368-3863 for an application.
- - AUTOMATIC DIVIDEND REINVESTMENT. Unless you choose otherwise, all your
dividends and capital gain distributions will be automatically reinvested in
additional Fund shares. Or, you may elect to have your dividends and capital
gain distributions automatically invested in shares of another Strong Fund.
- --------------------------------------------------------------------------------

- - You may purchase additional shares in a Fund through a broker-dealer or other
institution that may charge a transaction fee.
- - Strong Funds may only accept requests to purchase additional shares into a
broker-dealer street name account from the broker-dealer.

----------------------

PROSPECTUS PAGE II-3
<PAGE> 38

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES

- - Please make all checks or money orders payable to "Strong Funds."
- - We cannot accept third-party checks or checks drawn on banks outside the U.S.
- - You will be charged a $20 service fee for each check, wire, or Electronic
Funds Transfer ("EFT") purchase that is returned unpaid, and you will be
responsible for any resulting losses suffered by a Fund.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
- - A Fund may decline to accept your purchase order upon receipt when, in the
judgment of the Advisor, it would not be in the best interests of the existing
shareholders.
- - The exchange privilege is available in all 50 states because all the Strong
Funds intend to continue to qualify their shares for sale in all 50 states.
- - Minimum Investment Requirements:
----------------------------------------------------------------------------

To open a regular account
Opportunity, Growth, Common Stock, and Discovery Funds............$1,000
Value and Small Cap Funds.........................................$2,500

To open an IRA or Defined Contribution account........................$250

To open an UGMA/UTMA account..........................................$250

To open a 401(k) or 403(b) retirement account...................No Minimum

To add to an existing account..........................................$50

The Funds offer a No-Minimum Investment Plan that waives the minimum initial
investment requirements for investors who participate in the Strong Automatic
Investment Plan (described on page II-11). Unless you participate in the Strong
No-Minimum Investment Program, please ensure your purchases meet the minimum
investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach a Fund's minimum initial investment), each
Fund reserves the right to close your account. Before taking such action, a Fund
will provide you with written notice and at least 60 days in which to reinstate
an investment program or otherwise reach the minimum initial investment
required.

COMMON STOCK FUND IS CLOSED TO NEW INVESTORS

----------------------

PROSPECTUS PAGE II-4
<PAGE> 39

cash distributions on any Common Stock Fund shares owned, through the purchase
of additional Common Stock Fund shares, and through exchanges from other Strong
Fund accounts, which includes accounts where the shareholder is the owner, a
joint owner, or a custodian for a minor child. Employee benefit plans (that are
not 401(k) retirement plans) that became shareholders on or before the March 19,
1993 closing date may continue to purchase Fund shares in the course of their
normal operations. Additionally, directors of the Fund and employees and
directors of the Fund's Advisor and Distributor may continue to open new Fund
accounts. Shareholders of other Strong Funds are not able to exchange into the
Fund. The Fund may resume sales to new investors at some future date, but it has
no present intention to do so.

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES
THROUGH A BROKER-DEALER

- - If you purchase shares through a program of services offered or administered
by a broker-dealer, financial institution, or other service provider, you
should read the program's materials, including information relating to fees,
in connection with a Fund's Prospectus. Certain features of a Fund may not be
available or may be modified in connection with the program of services
provided.
- - Certain broker-dealers, financial institutions, or other service providers
that have entered into an agreement with the Distributor may enter purchase
orders on behalf of their customers by phone, with payment to follow within
several days as specified in the agreement. The Funds may effect such purchase
orders at the net asset value next determined after receipt of the telephone
purchase order. It is the responsibility of the broker-dealer, financial
institution, or other service provider to place the order with the Funds on a
timely basis. If payment is not received within the time specified in the
agreement, the broker-dealer, financial institution, or other service provider
could be held liable for any resulting fees or losses.

DETERMINING YOUR SHARE PRICE

Generally, when you make any purchases, sales, or exchanges, the price of
your shares will be the net asset value ("NAV") next determined after Strong
Funds receives your request in proper form. If Strong Funds receives such
request prior to the close of the New York Stock Exchange (the "Exchange") on a
day on which the Exchange is open, your share price will be the NAV determined
that day. The NAV for each Fund is normally determined as of 3:00 p.m. Central
Time ("CT") each day the Exchange is open. The Funds reserve the right to change
the time at which purchases, redemptions, and exchanges are priced if the
Exchange closes at a time other than 3:00 p.m. CT or if an emergency exists.
Each Fund's NAV is calculated by taking the fair value of a Fund's total assets,
subtracting all its liabilities, and dividing by the

----------------------

PROSPECTUS PAGE II-5
<PAGE> 40

total number of shares outstanding. Expenses are accrued daily and applied when
determining the NAV.
A Fund's portfolio securities are valued based on market quotations or at
fair value as determined by the method selected by each Fund's Board of
Directors. Equity securities traded on a national securities exchange or NASDAQ
are valued at the last sales price on the national securities exchange or NASDAQ
on which such securities are primarily traded. Securities traded on NASDAQ for
which there were no transactions on a given day or securities not listed on an
exchange or NASDAQ are valued at the average of the most recent bid and asked
prices. Other exchange-traded securities (generally foreign securities) will be
valued based on market quotations.
Securities quoted in foreign currency are valued daily in U.S. dollars at the
foreign currency exchange rates that are prevailing at the time the daily NAV
per share is determined. Although the Funds value their foreign assets in U.S.
dollars on a daily basis, they do not intend to convert their holdings of
foreign currencies into U.S. dollars on a daily basis. Foreign currency exchange
rates are generally determined prior to the close of trading on the Exchange.
Occasionally, events affecting the value of foreign investments and such
exchange rates occur between the time at which they are determined and the close
of trading on the Exchange. Such events would not normally be reflected in a
calculation of a Fund's NAV on that day. If events that materially affect the
value of a Fund's foreign investments or the foreign currency exchange rates
occur during such period, the investments will be valued at their fair value as
determined in good faith by or under the direction of the Board of Directors.

HOW TO SELL SHARES

You can access the money in your account at any time by selling (redeeming)
some or all of your shares back to the Fund. Once your redemption request is
received in proper form, Strong will normally mail you the proceeds the next
business day and, in any event, no later than seven days thereafter.
To redeem shares, you may use any of the methods described in the following
chart. However, if you are selling shares in a retirement account, please call
1-800-368-3863 for instructions. Please note that there is a $10.00 fee for
closing an IRA or other retirement account or for transferring assets to another
custodian. For your protection, certain requests may require a signature
guarantee.

----------------------

PROSPECTUS PAGE II-6
<PAGE> 41

-----------------------------------------------------------------------------

<TABLE>
<S> <C>
TO SELL SHARES
- -----------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
For your protection following information: your account number, the
certain redemption dollar amount or number of shares you wish to
requests may require redeem, each owner's name, your street address, and
a signature guarantee. the signature of each owner as it appears on the
See "Special Situations - account.
Signature Guarantees." - Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to 900 Heritage Reserve, Menomonee
Falls, Wisconsin 53051.
FOR TRUST ACCOUNTS
- Same as above. Please ensure that all trustees sign
the letter of instruction.
FOR OTHER REGISTRATIONS
- Call 1-800-368-3863 for instructions.
- -----------------------------------------------------------------------------
TELEPHONE Sign up for telephone redemption services when you
open
1-800-368-3863 your account by checking the "Yes" box in the
24 HOURS A DAY, appropriate section of the account application. To
7 DAYS A WEEK add the telephone redemption option to your account,
call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares by phone and arrange to receive the
proceeds in one of three ways:
TO RECEIVE A CHECK BY MAIL
- At no charge, we will mail a check to the address
to which your account is registered.
TO DEPOSIT BY EFT
- At no charge, we will transmit the proceeds by
Electronic Funds Transfer (EFT) to a pre-authorized
bank account. Usually, the funds will arrive at
your bank two banking days after we process your
redemption.
TO DEPOSIT BY WIRE
- For a $10 fee, we will transmit the proceeds by
wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next banking day
after we process your redemption.
You may also use Strong DirectSM, Strong Funds'
automated telephone response system. Call
1-800-368-3863 for details.
- -----------------------------------------------------------------------------
AUTOMATICALLY You can set up automatic withdrawals from your
account at
regular intervals. To establish the Systematic
Withdrawal Plan, request a form by calling
1-800-368-3863.
- -----------------------------------------------------------------------------
BROKER-DEALER You may also redeem shares through broker-dealers or
others
who may charge a commission or other transaction fee.
</TABLE>

----------------------

PROSPECTUS PAGE II-7
<PAGE> 42

WHAT YOU SHOULD KNOW ABOUT SELLING SHARES

- - If you have recently purchased shares, please be aware that your redemption
request may not be honored until the purchase check has cleared your bank,
which generally occurs within ten calendar days.
- - You will be charged a $10 service fee for a stop-payment and replacement of a
redemption or dividend check.
- - The right of redemption may be suspended during any period in which (i)
trading on the Exchange is restricted, as determined by the SEC, or the
Exchange is closed for other than weekends and holidays; (ii) the SEC has
permitted such suspension by order; or (iii) an emergency as determined by the
SEC exists, making disposal of portfolio securities or valuation of net assets
of a Fund not reasonably practicable.
- - If you are selling shares you hold in certificate form, you must submit the
certificates with your redemption request. Each registered owner must endorse
the certificates and all signatures must be guaranteed.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.

REDEMPTIONS IN KIND

The Funds have elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates each Fund to redeem shares in cash, with respect to any one
shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the
assets of the Fund. If the Advisor determines that existing conditions make cash
payments undesirable, redemption payments may be made in whole or in part in
securities or other financial assets, valued for this purpose as they are valued
in computing the NAV for the Fund's shares (a "redemption-in-kind").
Shareholders receiving securities or other financial assets in a redemption-in-
kind may realize a gain or loss for tax purposes, and will incur any costs of
sale, as well as the associated inconveniences. If you expect to make a
redemption in excess of the lesser of $250,000 or 1% of the Funds assets during
any 90-day period and would like to avoid any possibility of being paid with
securities in-kind, you may do so by providing Strong with an unconditional
instruction to redeem at least 15 calendar days prior to the date on which the
redemption transaction is to occur, specifying the dollar amount or number of
shares to be redeemed and the date of the transaction (please call
1-800-368-3863). This will provide the Fund with sufficient time to raise the
cash in an orderly manner to pay the redemption and thereby minimize the effect
of the redemption on the interests of the Fund's remaining shareholders.

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

- - The Funds reserve the right to refuse a telephone redemption if they believe
it advisable to do so.

----------------------

PROSPECTUS PAGE II-8
<PAGE> 43

- - Once you place your telephone redemption request, it cannot be canceled or
modified.
- - Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund reasonably
believes that such instructions are genuine. The Funds and their transfer
agent employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. The Funds may incur liability if they do not follow
these procedures.
- - Because of increased telephone volume, you may experience difficulty in
implementing a telephone redemption during periods of dramatic economic or
market changes.

SHAREHOLDER SERVICES

INFORMATION SERVICES

24-HOUR ASSISTANCE. Strong Funds has registered representatives available to
help you 24 hours a day, 7 days a week. Call 1-414-359-1400 or toll-free
1-800-368-3863. You may also write to Strong Funds at the address on the cover
of this Prospectus, or e-mail us at [email protected].

STRONG DIRECTSM AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day,
the Strong DirectSM automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity, and
perform purchases, exchanges or redemptions among your existing Strong accounts.
Your account information is protected by a personal code that you establish. For
more information on this service, call 1-800-368-3863.

STATEMENTS AND REPORTS. At a minimum, each Fund will confirm all transactions
for your account on a quarterly basis. We recommend that you file each quarterly
statement - and, especially, each calendar year-end statement - with your other
important financial papers, since you may need to refer to them at a later date
for tax purposes. Should you need additional copies of previous statements, you
may order confirmation statements for the current and preceding year at no
charge. Statements for earlier years are available for $10 each. Call
1-800-368-3863 to order past statements.
Each year, you will also receive a statement confirming the tax status of any
distributions paid to you, as well as a semiannual report and an annual report
containing audited financial statements.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household. Call
1-800-368-3863 if you wish to receive additional copies, free of charge.
More complete information regarding each Fund's investment policies and
services is contained in its SAI, which you may request by calling or writing

----------------------

PROSPECTUS PAGE II-9
<PAGE> 44

Strong Funds at the phone number and address on the cover of this Prospectus.

CHANGING YOUR ACCOUNT INFORMATION. So that you continue receiving your Strong
correspondence, including any dividend checks and statements, please notify us
in writing as soon as possible if your address changes. You may use the
Additional Investment Form at the bottom of your confirmation statement, or
simply write us a letter of instruction that contains the following information:
1. a written request to change the address,
2. the account number(s) for which the address is to be changed,
3. the new address, and
4. the signatures of all owners of the accounts.
Please send your request to the address on the cover of this Prospectus.
Changes to your accounts' registration - such as adding or removing a joint
owner, changing an owner's name, or changing the type of your account - must
also be submitted in writing. Please call 1-800-368-3863 for instructions. For
your protection, some requests may require a signature guarantee.

TRANSACTION SERVICES

EXCHANGE PRIVILEGE. You may exchange shares between identically registered
Strong Funds accounts, either in writing or by telephone. By establishing the
telephone exchange services, you authorize the Fund and its agents to act upon
your instruction by telephone to exchange shares from any account you specify.
For tax purposes, an exchange is considered a sale and a purchase of Fund
shares. Please obtain and read the appropriate prospectus before investing in
any of the Strong Funds. Since an excessive number of exchanges may be
detrimental to the Funds, each Fund reserves the right to discontinue the
exchange privilege of any shareholder who makes more than five exchanges in a
year or three exchanges in a calendar quarter.

REGULAR INVESTMENT PLANS

Strong Funds' Automatic Investment Plan, Payroll Direct Deposit Plan, and
Automatic Exchange Plan, all discussed below, are methods of implementing DOLLAR
COST AVERAGING. Dollar cost averaging is an investment strategy that involves
investing a fixed amount of money at regular time intervals. By always investing
the same set amount, you will be purchasing more shares when the price is low
and fewer shares when the price is high. Ultimately, by using this principle in
conjunction with fluctuations in share price, your average cost per share may be
less than your average transaction price. A program of regular investment cannot
ensure a profit or protect against a loss during declining markets. Since such a
program involves continuous investment regardless of

-----------------------

PROSPECTUS PAGE II-10
<PAGE> 45

fluctuating share values, you should consider your ability to continue the
program through periods of both low and high share-price levels.

AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan allows you to make
regular, systematic investments in a Fund from your bank checking or NOW
account. You may choose to make investments on any day of the month in amounts
of $50 or more. You can set up the Automatic Investment Plan with any financial
institution that is a member of the Automated Clearing House. Because each Fund
has the right to close an investor's account for failure to reach the minimum
initial investment, please consider your ability to continue this Plan until you
reach the minimum initial investment. Such closing may occur in periods of
declining share prices. To establish the Plan, complete the Automatic Investment
Plan section on the account application, or call 1-800-368-3863 for an
application.

PAYROLL DIRECT DEPOSIT PLAN. Once you meet a Fund's minimum initial
investment requirement, you may purchase additional Fund shares through the
Payroll Direct Deposit Plan. Through this Plan, periodic investments (minimum
$50) are made automatically from your payroll check into your existing Fund
account. By enrolling in the Plan, you authorize your employer or its agents to
deposit a specified amount from your payroll check into the Fund's bank account.
In most cases, your Fund account will be credited the day after the amount is
received by the Fund's bank. In order to participate in the Plan, your employer
must have direct deposit capabilities through the Automated Clearing House
available to its employees. The Plan may be used for other direct deposits, such
as social security checks, military allotments, and annuity payments.
To establish a Direct Deposit for your account, call 1-800-368-3863 to obtain
an Authorization for Payroll Direct Deposit to a Strong Funds Account form. Once
the Plan is established, you may alter the amount of the deposit, alter the
frequency of the deposit, or terminate your participation in the program by
notifying your employer.

AUTOMATIC EXCHANGE PLAN. The Automatic Exchange Plan allows you to make
regular, systematic exchanges (minimum $50) from one Strong Funds account into
another Strong Funds account. By setting up the Plan, you authorize the Fund and
its agents to redeem a set dollar amount or number of shares from the first
account and purchase shares of a second Strong Fund. In addition, you authorize
a Fund and its agents to accept telephone instructions to change the dollar
amount and frequency of the exchange. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result in a capital
gain or loss. To establish the Plan, request a form by calling 1-800-368-3863.
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial

-----------------------

PROSPECTUS PAGE II-11
<PAGE> 46

investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be terminated. You may also terminate the Plan at any time by calling
or writing to the Fund. Once participation in the Plan has been terminated for
any reason, to reinstate the Plan you must do so in writing; simply investing
additional funds will not reinstate the Plan.

SYSTEMATIC WITHDRAWAL PLAN. You can set up automatic withdrawals from your
account at regular intervals. To begin distributions, you must have an initial
balance of $5,000 in your account and withdraw at least $50 per payment. To
establish the Systematic Withdrawal Plan, request a form by calling
1-800-368-3863. Depending upon the size of the account and the withdrawals
requested (and fluctuations in net asset value of the shares redeemed),
redemptions for the purpose of satisfying such withdrawals may reduce or even
exhaust the account. If the amount remaining in the account is not sufficient to
meet a Plan payment, the remaining amount will be redeemed and the Plan will be
terminated.

SPECIAL SITUATIONS

POWER OF ATTORNEY. If you are investing as attorney-in-fact for another
person, please complete the account application in the name of such person and
sign the back of the application in the following form: "[applicant's name] by
[your name], attorney-in-fact." To avoid having to file an affidavit prior to
each transaction, please complete the Power of Attorney form available from
Strong Funds at 1-800-368-3863. However, if you would like to use your own power
of attorney form, please call the same number for instructions.

CORPORATIONS AND TRUSTS. If you are investing for a corporation, please
include with your account application a certified copy of your corporate
resolution indicating which officers are authorized to act on behalf of the
corporation. As an alternative, you may complete a Certification of Authorized
Individuals, which can be obtained from the Funds. Until a valid corporate
resolution or Certification of Authorized Individuals form is received by the
Fund, services such as telephone and wire redemption will not be established.
If you are investing as a trustee, please include the date of the trust. All
trustees must sign the application. If they do not, services such as telephone
and wire redemption will not be established. All trustees must sign redemption
requests unless proper documentation to the contrary is provided to the Fund.
Failure to provide these documents or signatures as required when you invest may
result in delays in processing redemption requests.

-----------------------

PROSPECTUS PAGE II-12
<PAGE> 47

SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and
the Funds against fraudulent transactions by unauthorized persons. In the
following instances, the Funds will require a signature guarantee for all
authorized owners of an account:

- - when you add the telephone redemption option to your existing account;
- - if you transfer the ownership of your account to another individual or
organization;
- - when you submit a written redemption request for more than $25,000;
- - when you request to redeem or redeposit shares that have been issued in
certificate form;
- - if you open an account and later decide that you want certificates;
- - when you request that redemption proceeds be sent to a different name or
address than is registered on your account;
- - if you add/change your name or add/remove an owner on your account; and
- - if you add/change the beneficiary on your transfer-on-death account.

A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks, savings
associations, credit unions, brokerage firms, and others. PLEASE NOTE THAT A
NOTARY PUBLIC STAMP OR SEAL IS NOT ACCEPTABLE.

-----------------------

PROSPECTUS PAGE II-13
<PAGE> 48

NOTES
<PAGE> 49
STATEMENT OF ADDITIONAL INFORMATION

STRONG VALUE FUND
STRONG OPPORTUNITY FUND
STRONG GROWTH FUND
STRONG COMMON STOCK FUND
STRONG SMALL CAP FUND
STRONG DISCOVERY FUND
P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863

This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus of Strong Opportunity Fund, Inc. (the
"Opportunity Fund"); Strong Common Stock Fund, Inc. (the "Common Stock Fund");
Strong Discovery Fund, Inc. (the "Discovery Fund"); and Strong Growth Fund (the
"Growth Fund"), Strong Small Cap Fund ("the Small Cap Fund"), and Strong Value
Fund (the "Value Fund"), all of which are series of Strong Equity Funds, Inc.
(individually, a "Fund", and collectively the "Funds") dated May 1, 1996.
Requests for copies of the Prospectus should be made by calling one of the
numbers listed above. The financial statements appearing in the Opportunity,
Growth, Common Stock, and Discovery Funds' Annual Report, which accompanies this
Statement of Additional Information, are incorporated herein by reference. The
unaudited Financial Statements for the Small Cap and Value Funds for the period
from December 29, 1995 through June 30, 1996, accompany this Statement of
Additional Information.

This Statement of Additional Information is dated May 1, 1996,
as supplemented on December 31, 1996.
<PAGE> 50
STRONG GROWTH FUNDS

TABLE OF CONTENTS PAGE

INVESTMENT RESTRICTIONS.................................................... 3
INVESTMENT POLICIES AND TECHNIQUES......................................... 5
Borrowing................................................................ 5
Convertible Securities................................................... 5
Debt Obligations......................................................... 6
Depositary Receipts...................................................... 6
Derivative Instruments................................................... 7
Foreign Investment Companies............................................. 16
Foreign Securities....................................................... 16
High-Yield (High-Risk) Securities........................................ 17
Illiquid Securities...................................................... 18
Lending of Portfolio Securities.......................................... 19
Mortgage-and Asset-Backed Securities.................................... 20
Mortgage Dollar Rolls and Reverse Repurchase Agreements.................. 21
Repurchase Agreements.................................................... 21
Short Sales Against the Box.............................................. 21
Small and Medium Companies............................................... 22
Temporary Defensive Position............................................. 22
Warrants................................................................. 22
When-Issued Securities................................................... 22
Zero-Coupon, Step-Coupon and Pay-in-Kind Securities...................... 23
DIRECTORS AND OFFICERS OF THE FUNDS........................................ 23
PRINCIPAL SHAREHOLDERS..................................................... 27
INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR............................ 27
PORTFOLIO TRANSACTIONS AND BROKERAGE....................................... 31
CUSTODIAN.................................................................. 34
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT............................... 34
TAXES...................................................................... 35
DETERMINATION OF NET ASSET VALUE........................................... 37
ADDITIONAL SHAREHOLDER INFORMATION......................................... 38
FUND ORGANIZATION.......................................................... 39
SHAREHOLDER MEETINGS....................................................... 39
PERFORMANCE INFORMATION.................................................... 40
GENERAL INFORMATION........................................................ 47
PORTFOLIO MANAGEMENT....................................................... 49
INDEPENDENT ACCOUNTANTS.................................................... 52
LEGAL COUNSEL.............................................................. 52
FINANCIAL STATEMENTS....................................................... 52
APPENDIX.................................................................. A-1

--------------------------------------

No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated May 1, 1996 and, if given or made, such
information or representations may not be relied upon as having been authorized
by the Funds.

This Statement of Additional Information does not constitute an offer to
sell securities.
<PAGE> 51
INVESTMENT RESTRICTIONS

The investment objective of each of the Funds is to seek capital growth.
The Funds' investment objectives and policies are described in detail in the
Prospectus under the caption "Investment Objectives and Policies." The following
are the Funds' fundamental investment limitations which cannot be changed
without shareholder approval.

Each Fund :

1. May not with respect to 75% of its total assets, purchase the securities
of any issuer (except securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities) if, as a result, (i) more
than 5% of the Fund's total assets would be invested in the securities of
that issuer, or (ii) the Fund would hold more than 10% of the outstanding
voting securities of that issuer.

2. May (i) borrow money from banks and (ii) make other investments or
engage in other transactions permissible under the Investment Company
Act of 1940 (the "1940 Act") which may involve a borrowing, provided
that the combination of (i) and (ii) shall not exceed 33 1/3% of the
value of the Fund's total assets (including the amount borrowed), less
the Fund's liabilities (other than borrowings), except that the Fund
may borrow up to an additional 5% of its total assets (not including
the amount borrowed) from a bank for temporary or emergency purposes
(but not for leverage or the purchase of investments). The Fund may
also borrow money from the other Strong Funds or other persons to the
extent permitted by applicable law.

3. May not issue senior securities, except as permitted under the 1940 Act.

4. May not act as an underwriter of another issuer's securities, except to
the extent that the Fund may be deemed to be an underwriter within the
meaning of the Securities Act of 1933 in connection with the purchase and
sale of portfolio securities.

5. May not purchase or sell physical commodities unless acquired as a result
of ownership of securities or other instruments (but this shall not
prevent the Fund from purchasing or selling options, futures contracts, or
other derivative instruments, or from investing in securities or other
instruments backed by physical commodities).

6. May not make loans if, as a result, more than 33 1/3% of the Fund's total
assets would be lent to other persons, except through (i) purchases of
debt securities or other debt instruments, or (ii) engaging in repurchase
agreements.

7. May not purchase the securities of any issuer if, as a result, more than
25% of the Fund's total assets would be invested in the securities of
issuers, the principal business activities of which are in the same
industry.

8. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not prohibit
the Fund from purchasing or selling securities or other instruments backed
by real estate or of issuers engaged in real estate activities).

9. May, notwithstanding any other fundamental investment policy or
restriction, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and restrictions as the Fund.

3
<PAGE> 52
The following are the Funds' non-fundamental operating policies which may
be changed by the Board of Directors of each Fund without shareholder approval.

Each Fund may not:

1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, or
unless it covers such short sale as required by the current rules and
positions of the Securities and Exchange Commission or its staff, and
provided that transactions in options, futures contracts, options on
futures contracts, or other derivative instruments are not deemed to
constitute selling securities short.

2. Purchase securities on margin, except that the Fund may obtain such
short-term credits as are necessary for the clearance of transactions; and
provided that margin deposits in connection with futures contracts,
options on futures contracts, or other derivative instruments shall not
constitute purchasing securities on margin.

3. Invest in illiquid securities if, as a result of such investment, more
than 15% of its net assets would be invested in illiquid securities, or
such other amounts as may be permitted under the 1940 Act.

4. Purchase securities of other investment companies except in compliance
with the 1940 Act and applicable state law.

5. Invest all of its assets in the securities of a single open-end investment
management company with substantially the same fundamental investment
objective, restrictions and policies as the Fund.

6. Purchase the securities of any issuer (other than securities issued or
guaranteed by domestic or foreign governments or political subdivisions
thereof) if, as a result, more than 5% of its total assets would be
invested in the securities of issuers that, including predecessor or
unconditional guarantors, have a record of less than three years of
continuous operation. This policy does not apply to securities of pooled
investment vehicles or mortgage or asset-backed securities.

7. Invest in direct interests in oil, gas, or other mineral exploration
programs or leases; however, the Fund may invest in the securities of
issuers that engage in these activities.

8. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act
and, in accordance with Rule 4.5, will use futures or options on
futures transactions solely for bona fide hedging transactions (within
the meaning of the Commodity Exchange Act), provided, however, that
the Fund may, in addition to bona fide hedging transactions, use
futures and options on futures transactions if the aggregate initial
margin and premiums required to establish such positions, less the
amount by which any such options positions are in the money (within the
meaning of the Commodity Exchange Act), do not exceed 5% of the Fund's
net assets.

In addition, (i) the aggregate value of securities underlying call options
on securities written by the Fund or obligations underlying put options on
securities written by the Fund determined as of the date the options are
written will not exceed 50% of the Fund's net assets; (ii) the aggregate
premiums paid on all options purchased by the Fund and which are being
held will not exceed 20% of the Fund's net assets; (iii) the Fund will not
purchase put or call options, other than hedging positions, if, as a
result thereof, more than 5% of its total assets would be so invested; and
(iv) the aggregate margin deposits required on all futures and options on
futures transactions being held will not exceed 5% of the Fund's total
assets.

9. Pledge, mortgage or hypothecate any assets owned by the Fund except as may
be necessary in connection with permissible borrowings or investments and
then such pledging, mortgaging, or hypothecating may not exceed 33 1/3% of
the Fund's total assets at the time of the borrowing or investment.

10. Purchase or retain the securities of any issuer if any officer or director
of the Fund or its investment advisor beneficially owns more than 1/2 of
1% of the securities of such issuer and such officers and directors
together own beneficially more than 5% of the securities of such issuer.

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11. Purchase warrants, valued at the lower of cost or market value, in excess
of 5% of the Fund's net assets. Included in that amount, but not to exceed
2% of the Fund's net assets, may be warrants that are not listed on any
stock exchange. Warrants acquired by the Fund in units or attached to
securities are not subject to these restrictions.

12. Borrow money except (i) from banks or (ii) through reverse repurchase
agreements or mortgage dollar rolls, and will not purchase securities when
bank borrowings exceed 5% of its total assets.

13. Make any loans other than loans of portfolio securities, except through
(i) purchases of debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.

Except for the fundamental investment limitations listed above and each
Fund's investment objective, the other investment policies described in the
Prospectus and this Statement of Additional Information are not fundamental and
may be changed with approval of a Fund's Board of Directors.

Unless noted otherwise, if a percentage restriction is adhered to at the
time of investment, a later increase or decrease in percentage resulting from a
change in a Fund's assets (i.e., due to cash inflows or redemptions) or in
market value of the investment or a Fund's assets will not constitute a
violation of that restriction.

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Funds'
investment objectives, policies, and techniques that are described in detail in
the Prospectus under the captions "Investment Objectives and Policies" and
"Implementation of Policies and Risks."

BORROWING

A Fund may borrow money from banks and make other investments or engage in
other transactions permissible under the 1940 Act which may be considered a
borrowing (such as mortgage dollar rolls and reverse repurchase agreements) as
discussed under "Investment Restrictions." However, a Fund may not purchase
securities when bank borrowings exceed 5% of a Fund's total assets. Presently,
the Funds only intend to borrow from banks for temporary or emergency purposes.

The Funds have established a line-of-credit (LOC) with certain banks by
which they may borrow funds for temporary or emergency purposes. A borrowing is
presumed to be for temporary or emergency purposes if it is repaid by a Fund
within sixty days and is not extended or renewed. The Funds intend to use the
LOC to meet large or unexpected redemptions that would otherwise force a Fund to
liquidate securities under circumstances which are unfavorable to a Fund's
remaining shareholders. The Funds pay a commitment fee to the banks for the LOC.

CONVERTIBLE SECURITIES

A Fund may invest in convertible securities, which are bonds, debentures,
notes, preferred stocks, or other securities that may be converted into or
exchanged for a specified amount of common stock of the same or a different
issuer within a particular period of time at a specified price or formula. A
convertible security entitles the holder to receive interest normally paid or
accrued on debt or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted, or exchanged. Convertible securities
have unique investment characteristics in that they generally (i) have higher
yields than common stocks, but lower yields than comparable non-convertible
securities, (ii) are less subject to fluctuation in value than the underlying
stock since they have fixed income characteristics, and (iii) provide the
potential for capital appreciation if the market price of the underlying common
stock increases. Most convertible securities currently are issued by U.S.
companies, although a substantial Eurodollar convertible securities market has
developed, and the markets for convertible securities denominated in local
currencies are increasing.

The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The investment value of a

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<PAGE> 54
convertible security is influenced by changes in interest rates, with investment
value declining as interest rates increase and increasing as interest rates
decline. The credit standing of the issuer and other factors also may have an
effect on the convertible security's investment value. The conversion value of a
convertible security is determined by the market price of the underlying common
stock. If the conversion value is low relative to the investment value, the
price of the convertible security is governed principally by its investment
value. Generally, the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common
stock approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. A convertible
security generally will sell at a premium over its conversion value by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.

A convertible security may be subject to redemption at the option of the
issuer at a price established in the convertible security's governing
instrument. If a convertible security held by a Fund is called for redemption, a
Fund will be required to permit the issuer to redeem the security, convert it
into the underlying common stock, or sell it to a third party.

DEBT OBLIGATIONS

Each Fund may invest a portion of its assets in debt obligations. Issuers
of debt obligations have a contractual obligation to pay interest at a specified
rate on specified dates and to repay principal on a specified maturity date.
Certain debt obligations (usually intermediate- and long-term bonds) have
provisions that allow the issuer to redeem or "call" a bond before its maturity.
Issuers are most likely to call such securities during periods of falling
interest rates and a Fund may have to replace such securities with lower
yielding securities, which could result in a lower return for the Fund.

PRICE VOLATILITY. The market value of debt obligations is affected
primarily by changes in prevailing interest rates. The market value of a debt
obligation generally reacts inversely to interest-rate changes, meaning, when
prevailing interest rates decline, an obligation's price usually rises, and when
prevailing interest rates rise, an obligation's price usually declines.

MATURITY. In general, the longer the maturity of a debt obligation, the
higher its yield and the greater its sensitivity to changes in interest rates.
Conversely, the shorter the maturity, the lower the yield but the greater the
price stability. Commercial paper is generally considered the shortest form of
debt obligation.

CREDIT QUALITY. The values of debt obligations may also be affected by
changes in the credit rating or financial condition of their issuers. Generally,
the lower the quality rating of a security, the higher the degree of risk as to
the payment of interest and return of principal. To compensate investors for
taking on such increased risk, those issuers deemed to be less creditworthy
generally must offer their investors higher interest rates than do issuers with
better credit ratings.

In conducting its credit research and analysis, the Advisor considers both
qualitative and quantitative factors to evaluate the creditworthiness of
individual issuers. The Advisor also relies, in part, on credit ratings compiled
by a number of Nationally Recognized Statistical Rating Organizations
("NRSROs"). Refer to the Appendix for a discussion of securities ratings.

DEPOSITARY RECEIPTS

The Funds may invest in foreign securities by purchasing depositary
receipts, including American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs") or other securities convertible into securities of
foreign issuers. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. Generally, ADRs, in
registered form, are denominated in U.S. dollars and are designed for use in the
U.S. securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in the European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement. For purposes of a Fund's investment policies, ADRs and EDRs are
deemed to have the same classification as the underlying securities they
represent, except that ADRs and EDRs shall be treated as indirect foreign
investments. Thus, an ADR or EDR representing ownership of common stock will be
treated as common stock. ADR and EDR depositary receipts do not eliminate all of
the risks associated with directly investing in the securities of foreign
issuers.

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ADR facilities may be established as either "unsponsored" or "sponsored."
While ADRs issued under these two types of facilities are in some respects
similar, there are distinctions between them relating to the rights and
obligations of ADR holders and the practices of market participants.

A depositary may establish an unsponsored facility without participation
by (or even necessarily the acquiescence of) the issuer of the deposited
securities, although typically the depositary requests a letter of non-objection
from such issuer prior to the establishment of the facility. Holders of
unsponsored ADRs generally bear all the costs of such facilities. The depositary
usually charges fees upon the deposit and withdrawal of the deposited
securities, the conversion of dividends into U.S. dollars, the disposition of
non-cash distributions, and the performance of other services. The depositary of
an unsponsored facility frequently is under no obligation to pass through voting
rights to ADR holders in respect of the deposited securities. In addition, an
unsponsored facility is generally not obligated to distribute communications
received from the issuer of the deposited securities or to disclose material
information about such issuer in the U.S. and thus there may not be a
correlation between such information and the market value of the depositary
receipts.

Sponsored ADR facilities are created in generally the same manner as
unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depositary. The deposit agreement sets
out the rights and responsibilities of the issuer, the depositary, and the ADR
holders. With sponsored facilities, the issuer of the deposited securities
generally will bear some of the costs relating to the facility (such as dividend
payment fees of the depositary), although ADR holders continue to bear certain
other costs (such as deposit and withdrawal fees). Under the terms of most
sponsored arrangements, depositories agree to distribute notices of shareholder
meetings and voting instructions, and to provide shareholder communications and
other information to the ADR holders at the request of the issuer of the
deposited securities.

DERIVATIVE INSTRUMENTS

IN GENERAL. A Fund may use derivative instruments for any lawful purpose
consistent with the Fund's investment objective such as hedging or managing
risk. Derivative instruments are commonly defined to include securities or
contracts whose values depend on (or "derive" from) the value of one or more
other assets, such as securities, currencies, or commodities. These "other
assets" are commonly referred to as "underlying assets."

An option is a contract in which the "holder" (the buyer) pays a certain
amount (the "premium") to the "writer" (the seller) to obtain the right, but not
the obligation, to buy from the writer (in a "call") or sell to the writer (in a
"put") a specific asset at an agreed upon price at or before a certain time. The
holder pays the premium at inception and has no further financial obligation.
The holder of an option-based derivative generally will benefit from favorable
movements in the price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the value of the underlying
asset. The writer of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses due to changes in the value of the
underlying asset.

A forward is a sales contract between a buyer (holding the "long"
position) and a seller (holding the "short" position) for an asset with delivery
deferred until a future date. The buyer agrees to pay a fixed price at the
agreed future date and the seller agrees to deliver the asset. The seller hopes
that the market price on the delivery date is less than the agreed upon price,
while the buyer hopes for the contrary. The change in value of a forward-based
derivative generally is roughly proportional to the change in value of the
underlying asset.

HEDGING. A Fund may use derivative instruments to protect against possible
adverse changes in the market value of securities held in, or are anticipated to
be held in, the Fund's portfolio. Derivatives may also be used by a Fund to
"lock-in" the Fund's realized but unrecognized gains in the value of its
portfolio securities. Hedging strategies, if successful, can reduce the risk of
loss by wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being

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<PAGE> 56
hedged. However, hedging strategies can also reduce the opportunity for gain by
offsetting the positive effect of favorable price movements in the hedged
investments.

MANAGING RISK. A Fund may also use derivative instruments to manage the
risks of the Fund's portfolio. Risk management strategies include, but are not
limited to, facilitating the sale of portfolio securities, managing the
effective maturity or duration of debt obligations in a Fund's portfolio,
establishing a position in the derivatives markets as a substitute for buying or
selling certain securities, or creating or altering exposure to certain asset
classes, such as equity, debt, and foreign securities. The use of derivative
instruments may provide a less expensive, more expedient or more specifically
focused way for a Fund to invest than "traditional" securities (i.e., stocks or
bonds) would.

EXCHANGE OR OTC DERIVATIVES. Derivative instruments may be exchange-traded
or traded in OTC transactions between private parties. Exchange-traded
derivatives are standardized options and futures contracts traded in an auction
on the floor of a regulated exchange. Exchange contracts are generally very
liquid. The exchange clearinghouse is the counterparty of every contract. Thus,
each holder of an exchange contract bears the credit risk of the clearinghouse
(and has the benefit of its financial strength) rather than that of a particular
counterparty. Over-the-counter transactions are subject to additional risks,
such as the credit risk of the counterparty to the instrument and are less
liquid than exchange-traded derivatives since they often can only be closed out
with the other party to the transaction

RISKS AND SPECIAL CONSIDERATIONS. The use of derivative instruments
involves risks and special considerations as described below. Risks pertaining
to particular derivative instruments are described in the sections that follow.

(1) MARKET RISK. The primary risk of derivatives is the same as the risk
of the underlying assets, namely that the value of the underlying asset may go
up or down. Adverse movements in the value of an underlying asset can expose a
Fund to losses. Derivative instruments may include elements of leverage and,
accordingly, the fluctuation of the value of the derivative instrument in
relation to the underlying asset may be magnified. The successful use of
derivative instruments depends upon a variety of factors, particularly Strong
Capital Management, Inc.'s (the "Advisor") ability to predict movements of the
securities, currencies, and commodity markets, which requires different skills
than predicting changes in the prices of individual securities. There can be no
assurance that any particular strategy adopted will succeed. The Advisor's
decision to engage in a derivative instrument will reflect the Advisor's
judgment that the derivative transaction will provide value to the Fund and its
shareholders and is consistent with the Fund's objectives, investment
limitations, and operating policies. In making such a judgment, the Advisor will
analyze the benefits and risks of the derivative transaction and weigh them in
the context of the Fund's entire portfolio and investment objective.

(2) CREDIT RISK. A Fund will be subject to the risk that a loss may be
sustained by the Fund as a result of the failure of a counterparty to comply
with the terms of a derivative instrument. The counterparty risk for
exchange-traded derivative instruments is generally less than for
privately-negotiated or OTC derivative instruments, since generally a clearing
agency, which is the issuer or counterparty to each exchange-traded instrument,
provides a guarantee of performance. For privately-negotiated instruments, there
is no similar clearing agency guarantee. In all transactions, a Fund will bear
the risk that the counterparty will default, and this could result in a loss of
the expected benefit of the derivative transaction and possibly other losses to
the Fund. A Fund will enter into transactions in derivative instruments only
with counterparties that the Advisor reasonably believes are capable of
performing under the contract.

(3) CORRELATION RISK. When a derivative transaction is used to completely
hedge another position, changes in the market value of the combined position
(the derivative instrument plus the position being hedged) result from an
imperfect correlation between the price movements of the two instruments. With a
perfect hedge, the value of the combined position remains unchanged for any
change in the price of the underlying asset. With an imperfect hedge, the values
of the derivative instrument and its hedge are not perfectly correlated.
Correlation risk is the risk that there might be imperfect correlation, or even
no correlation, between price movements of an instrument and price movements of
investments being hedged. For example, if the value of a derivative instruments
used in a short hedge (such as writing a call option, buying a put option, or
selling a futures contract) increased by less than the decline in value of the
hedged investments, the hedge would not be perfectly correlated. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as speculative or other pressures on the markets in which
these instruments are traded. The effectiveness of hedges using instruments on
indices will depend, in part, on the degree of correlation between price
movements in the index and price movements in the investments being hedged.

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(4) LIQUIDITY RISK. Derivatives are also subject to liquidity risk.
Liquidity risk is the risk that a derivative instrument cannot be sold, closed
out, or replaced quickly at or very close to its fundamental value. Generally,
exchange contracts are very liquid because the exchange clearinghouse is the
counterparty of every contract. OTC transactions are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction. A Fund might be required by applicable
regulatory requirement to maintain assets as "cover," maintain segregated
accounts, and/or make margin payments when it takes positions in derivative
instruments involving obligations to third parties (i.e., instruments other than
purchased options). If a Fund was unable to close out its positions in such
instruments, it might be required to continue to maintain such assets or
accounts or make such payments until the position expired, matured, or was
closed out. The requirements might impair a Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be favorable to
do so, or require that the Fund sell a portfolio security at a disadvantageous
time. A Fund's ability to sell or close out a position in an instrument prior to
expiration or maturity depends on the existence of a liquid secondary market or,
in the absence of such a market, the ability and willingness of the counterparty
to enter into a transaction closing out the position. Therefore, there is no
assurance that any derivatives position can be sold or closed out at a time and
price that is favorable to a Fund.

(5) LEGAL RISK. Legal risk is the risk of loss caused by the legal
unenforcibility of a party's obligations under the derivative. While a party
seeking price certainty agrees to surrender the potential upside in exchange for
downside protection, the party taking the risk is looking for a positive payoff.
Despite this voluntary assumption of risk, a counterparty that has lost money in
a derivative transaction may try to avoid payment by exploiting various legal
uncertainties about certain derivative products.

(6) SYSTEMIC OR "INTERCONNECTION" RISK. Interconnection risk is the risk
that a disruption in the financial markets will cause difficulties for all
market participants. In other words, a disruption in one market will spill over
into other markets, perhaps creating a chain reaction. Much of the OTC
derivatives market takes place among the OTC dealers themselves, thus creating a
large interconnected web of financial obligations. This interconnectedness
raises the possibility that a default by one large dealer could create losses at
other dealers and destabilize the entire market for OTC derivative instruments.

GENERAL LIMITATIONS. The use of derivative instruments is subject to
applicable regulations of the Securities and Exchange Commission (the "SEC"),
the several options and futures exchanges upon which they may be traded, the
Commodity Futures Trading Commission ("CFTC"), and various state regulatory
authorities. In addition, a Fund's ability to use derivative instruments may be
limited by certain tax considerations. For a discussion of the federal income
tax treatment of a Fund's derivative instruments, see "Taxes Derivative
Instruments."

Each Fund has filed a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the CFTC and the National
Futures Association, which regulate trading in the futures markets. In
accordance with Rule 4.5 of the regulations under the Commodity Exchange Act
(the "CEA"), the notice of eligibility for a Fund includes representations that
the Fund will use futures contracts and related options solely for bona fide
hedging purposes within the meaning of CFTC regulations, provided that the Fund
may hold other positions in futures contracts and related options that do not
qualify as a bona fide hedging position if the aggregate initial margin deposits
and premiums required to establish these positions, less the amount by which any
such futures contracts and related options positions are "in the money," do not
exceed 5% of the Fund's net assets. Adherence to these guidelines does not limit
a Fund's risk to 5% of the Fund's assets.

In addition, certain state regulations presently require that (i) the
aggregate value of securities underlying call options on securities written by a
Fund or obligations underlying put options on securities written by a Fund
determined as of the date the options are written will not exceed 50% of the
Fund's net assets; (ii) the aggregate premiums paid on all options purchased by
a Fund and which are being held will not exceed 20% of the Fund's net assets;
(iii) a Fund will not purchase put or call options, other than hedging
positions, if, as a result thereof, more than 5% of its net assets would be so
invested; and (iv) the aggregate margin deposits required on all futures and
options on futures transactions being held will not exceed 5% of a Fund's net
assets.

The SEC has identified certain trading practices involving derivative
instruments that involve the potential for leveraging a Fund's assets in a
manner that raises issues under the 1940 Act. In order to limit the potential
for the leveraging of

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a Fund's assets, as defined under the 1940 Act, the SEC has stated that a Fund
may use coverage or the segregation of a Fund's assets. To the extent required
by SEC guidelines, a Fund will not enter into any such transactions unless it
owns either: (i) an offsetting ("covered") position in securities, options,
futures, or derivative instruments; or (ii) liquid securities with a value
sufficient at all times to cover its potential obligations to the extent that
the position is not "covered". The Funds will also set aside cash and/or
appropriate liquid assets in a segregated custodial account if required to do so
by the SEC and CFTC regulations. Assets used as cover or held in a segregated
account cannot be sold while the derivative position is open, unless they are
replaced with similar assets. As a result, the commitment of a large portion of
a Fund's assets to segregated accounts could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.

In some cases a Fund may be required to maintain or limit exposure to a
specified percentage of its assets to a particular asset class. In such cases,
when a Fund uses a derivative instrument to increase or decrease exposure to an
asset class and is required by applicable SEC guidelines to set aside liquid
assets in a segregated account to secure its obligations under the derivative
instruments, the Advisor may, where reasonable in light of the circumstances,
measure compliance with the applicable percentage by reference to the nature of
the economic exposure created through the use of the derivative instrument and
not by reference to the nature of the exposure arising from the liquid assets
set aside in the segregated account (unless another interpretation is specified
by applicable regulatory requirements).

OPTIONS. A Fund may use options for any lawful purpose consistent with the
Fund's investment objective such as hedging or managing risk. An option is a
contract in which the "holder" (the buyer) pays a certain amount (the "premium")
to the "writer" (the seller) to obtain the right, but not the obligation, to buy
from the writer (in a "call") or sell to the writer (in a "put") a specific
asset at an agreed upon price (the "strike price" or "exercise price") at or
before a certain time (the "expiration date"). The holder pays the premium at
inception and has no further financial obligation. The holder of an option will
benefit from favorable movements in the price of the underlying asset but is not
exposed to corresponding losses due to adverse movements in the value of the
underlying asset. The writer of an option will receive fees or premiums but is
exposed to losses due to changes in the value of the underlying asset. A Fund
may buy or write (sell) put and call options on assets, such as securities,
currencies, commodities, and indices of debt and equity securities ("underlying
assets") and enter into closing transactions with respect to such options to
terminate an existing position. Options used by the Funds may include European,
American, and Bermuda style options. If an option is exercisable only at
maturity, it is a "European" option; if it is also exercisable prior to
maturity, it is an "American" option. If it is exercisable only at certain
times, it is a "Bermuda" option.

Each Fund may purchase (buy) and write (sell) put and call options
underlying assets and enter into closing transactions with respect to such
options to terminate an existing position. The purchase of call options serves
as a long hedge, and the purchase of put options serves as a short hedge.
Writing put or call options can enable a Fund to enhance income by reason of the
premiums paid by the purchaser of such options. Writing call options serves as a
limited short hedge because declines in the value of the hedged investment would
be offset to the extent of the premium received for writing the option. However,
if the security appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the Fund
will be obligated to sell the security at less than its market value or will be
obligated to purchase the security at a price greater than that at which the
security must be sold under the option. All or a portion of any assets used as
cover for OTC options written by a Fund would be considered illiquid to the
extent described under "Investment Policies and Techniques -- Illiquid
Securities." Writing put options serves as a limited long hedge because
increases in the value of the hedged investment would be offset to the extent of
the premium received for writing the option. However, if the security
depreciates to a price lower than the exercise price of the put option, it can
be expected that the put option will be exercised and the Fund will be obligated
to purchase the security at more than its market value.

The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions.

A Fund may effectively terminate its right or obligation under an option
by entering into a closing transaction. For example, a Fund may terminate its
obligation under a call or put option that it had written by purchasing an
identical call or put option; this is known as a closing purchase transaction.
Conversely, a Fund may terminate a position in a put or call option it had
purchased by writing an identical put or call option; this is known as a closing
sale transaction. Closing transactions permit a Fund to realize the profit or
limit the loss on an option position prior to its exercise or expiration.

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The Funds may purchase or write both exchange-traded and OTC options.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed that, in effect, guarantees
completion of every exchange-traded option transaction. In contrast, OTC options
are contracts between a Fund and the other party to the transaction ("counter
party") (usually a securities dealer or a bank) with no clearing organization
guarantee. Thus, when a Fund purchases or writes an OTC option, it relies on the
counter party to make or take delivery of the underlying investment upon
exercise of the option. Failure by the counter party to do so would result in
the loss of any premium paid by the Fund as well as the loss of any expected
benefit of the transaction.

A Fund's ability to establish and close out positions in exchange-listed
options depends on the existence of a liquid market. Each Fund intends to
purchase or write only those exchange-traded options for which there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist at any particular time. Closing transactions can be made for
OTC options only by negotiating directly with the counter party, or by a
transaction in the secondary market if any such market exists. Although each
Fund will enter into OTC options only with counter parties that are expected to
be capable of entering into closing transactions with the Funds, there is no
assurance that the Funds will in fact be able to close out an OTC option at a
favorable price prior to expiration. In the event of insolvency of the counter
party, a Fund might be unable to close out an OTC option position at any time
prior to its expiration. If a Fund were unable to effect a closing transaction
for an option it had purchased, it would have to exercise the option to realize
any profit.

The Funds may engage in options transactions on indices in much the same
manner as the options on securities discussed above, except the index options
may serve as a hedge against overall fluctuations in the securities market in
general.

The writing and purchasing of options is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Imperfect correlation between
the options and securities markets may detract from the effectiveness of
attempted hedging.

SPREAD TRANSACTIONS. A Fund may use spread transactions for any lawful
purpose consistent with the Fund's investment objective such as hedging or
managing risk. A Fund may purchase covered spread options from securities
dealers. Such covered spread options are not presently exchange-listed or
exchange-traded. The purchase of a spread option gives a Fund the right to put,
or sell, a security that it owns at a fixed dollar spread or fixed yield spread
in relationship to another security that the Fund does not own, but which is
used as a benchmark. The risk to a Fund in purchasing covered spread options is
the cost of the premium paid for the spread option and any transaction costs. In
addition, there is no assurance that closing transactions will be available. The
purchase of spread options will be used to protect a Fund against adverse
changes in prevailing credit quality spreads, i.e., the yield spread between
high quality and lower quality securities. Such protection is only provided
during the life of the spread option.

FUTURES CONTRACTS. A Fund may use futures contracts for any lawful purpose
consistent with the Fund's investment objective such as hedging or managing
risk. A Fund may enter into futures contracts, including interest rate, index,
and currency futures. Each Fund may also purchase put and call options, and
write covered put and call options, on futures in which it is allowed to invest.
The purchase of futures or call options thereon can serve as a long hedge, and
the sale of futures or the purchase of put options thereon can serve as a short
hedge. Writing covered call options on futures contracts can serve as a limited
short hedge, and writing covered put options on futures contracts can serve as a
limited long hedge, using a strategy similar to that used for writing covered
options in securities. The Funds' hedging may include purchases of futures as an
offset against the effect of expected increases in currency exchange rates and
securities prices and sales of futures as an offset against the effect of
expected declines in currency exchange rates and securities prices. The Funds
may also write put options on futures contracts while at the same time
purchasing call options on the same futures contracts in order to create
synthetically a long futures contract position. Such options would have the same
strike prices and expiration dates. The Funds will engage in this strategy only
when the Advisor believes it is more advantageous to the Funds than is
purchasing the futures contract.

To the extent required by regulatory authorities, the Funds only enter
into futures contracts that are traded on national futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading are regulated under the CEA by the CFTC. Although
techniques other than sales and purchases of futures contracts could be used to
reduce a Fund's exposure to market, currency, or interest rate fluctuations, a
Fund may be able to hedge its exposure more effectively and perhaps at a lower
cost through using futures contracts.

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An interest rate futures contract provides for the future sale by one
party and purchase by another party of a specified amount of a specific
financial instrument (e.g., debt security) or currency for a specified price at
a designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index futures
contract was originally written. Transaction costs are incurred when a futures
contract is bought or sold and margin deposits must be maintained. A futures
contract may be satisfied by delivery or purchase, as the case may be, of the
instrument, the currency or by payment of the change in the cash value of the
index. More commonly, futures contracts are closed out prior to delivery by
entering into an offsetting transaction in a matching futures contract. Although
the value of an index might be a function of the value of certain specified
securities, no physical delivery of those securities is made. If the offsetting
purchase price is less than the original sale price, a Fund realizes a gain; if
it is more, a Fund realizes a loss. Conversely, if the offsetting sale price is
more than the original purchase price, a Fund realizes a gain; if it is less, a
Fund realizes a loss. The transaction costs must also be included in these
calculations. There can be no assurance, however, that a Fund will be able to
enter into an offsetting transaction with respect to a particular futures
contract at a particular time. If a Fund is not able to enter into an offsetting
transaction, the Fund will continue to be required to maintain the margin
deposits on the futures contract.

No price is paid by a Fund upon entering into a futures contract. Instead,
at the inception of a futures contract, a Fund is required to deposit in a
segregated account with its custodian, in the name of the futures broker through
whom the transaction was effected, "initial margin" consisting of cash, U.S.
government securities or other liquid, high grade debt obligations, in an amount
generally equal to 10% or less of the contract value. High grade securities
include securities rated "A" or better by an NRSRO. Margin must also be
deposited when writing a call or put option on a futures contract, in accordance
with applicable exchange rules. Unlike margin in securities transactions,
initial margin on futures contracts does not represent a borrowing, but rather
is in the nature of a performance bond or good-faith deposit that is returned to
a Fund at the termination of the transaction if all contractual obligations have
been satisfied. Under certain circumstances, such as periods of high volatility,
a Fund may be required by an exchange to increase the level of its initial
margin payment, and initial margin requirements might be increased generally in
the future by regulatory action.

Subsequent "variation margin" payments are made to and from the futures
broker daily as the value of the futures position varies, a process known as
"marking to market." Variation margin does not involve borrowing, but rather
represents a daily settlement of a Fund's obligations to or from a futures
broker. When a Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when a Fund purchases or
sells a futures contract or writes a call or put option thereon, it is subject
to daily variation margin calls that could be substantial in the event of
adverse price movements. If a Fund has insufficient cash to meet daily variation
margin requirements, it might need to sell securities at a time when such sales
are disadvantageous. Purchasers and sellers of futures positions and options on
futures can enter into offsetting closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument held or written.
Positions in futures and options on futures may be closed only on an exchange or
board of trade that provides a secondary market. The Funds intend to enter into
futures transactions only on exchanges or boards of trade where there appears to
be a liquid secondary market. However, there can be no assurance that such a
market will exist for a particular contract at a particular time.

Under certain circumstances, futures exchanges may establish daily limits
on the amount that the price of a future or option on a futures contract can
vary from the previous day's settlement price; once that limit is reached, no
trades may be made that day at a price beyond the limit. Daily price limits do
not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

If a Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required
to make daily variation margin payments and might be required to maintain the
position being hedged by the future or option or to maintain cash or securities
in a segregated account.

Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or options on futures contracts
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and options on
futures contracts markets are subject to daily variation margin calls and

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might be compelled to liquidate futures or options on futures contracts
positions whose prices are moving unfavorably to avoid being subject to further
calls. These liquidations could increase price volatility of the instruments and
distort the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements in
the futures markets are less onerous than margin requirements in the securities
markets, there might be increased participation by speculators in the future
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities markets
involving arbitrage, "program trading" and other investment strategies might
result in temporary price distortions.

FOREIGN CURRENCIES. The Funds may purchase and sell foreign currency on a
spot basis, and may use currency-related derivatives instruments such as options
on foreign currencies, futures on foreign currencies, options on futures on
foreign currencies and forward currency contracts (i.e., an obligation to
purchase or sell a specific currency at a specified future date, which may be
any fixed number of days from the contract date agreed upon by the parties, at a
price set at the time the contract is entered into). The Funds may use these
instruments for hedging or any other lawful purpose consistent with its
investment objective, including transaction hedging, anticipatory hedging, cross
hedging, proxy hedging, and position hedging. The Funds' use of currency-related
derivative instruments will be directly related to a Fund's current or
anticipated portfolio securities, and the Funds may engage in transactions in
currency-related derivative instruments as a means to protect against some or
all of the effects of adverse changes in foreign currency exchange rates on its
portfolio investments. In general, if the currency in which a portfolio
investment is denominated appreciates against the U.S. dollar, the dollar value
of the security will increase. Conversely, a decline in the exchange rate of the
currency would adversely affect the value of the portfolio investment expressed
in U.S. dollars.

For example, a Fund might use currency-related derivative instruments to
"lock in" a U.S. dollar price for a portfolio investment, thereby enabling the
Fund to protect itself against a possible loss resulting from an adverse change
in the relationship between the U.S. dollar and the subject foreign currency
during the period between the date the security is purchased or sold and the
date on which payment is made or received. A Fund also might use
currency-related derivative instruments when the Advisor believes that one
currency may experience a substantial movement against another currency,
including the U.S. dollar, and it may use currency-related derivative
instruments to sell or buy the amount of the former foreign currency,
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. Alternatively, where appropriate, a Fund
may use currency-related derivative instruments to hedge all or part of its
foreign currency exposure through the use of a basket of currencies or a proxy
currency where such currency or currencies act as an effective proxy for other
currencies. The use of this basket hedging technique may be more efficient and
economical than using separate currency-related derivative instruments for each
currency exposure held by the Fund. Furthermore, currency-related derivative
instruments may be used for short hedges - for example, a Fund may sell a
forward currency contract to lock in the U.S. dollar equivalent of the proceeds
from the anticipated sale of a security denominated in a foreign currency.

In addition, a Fund may use a currency-related derivative instrument to
shift exposure to foreign currency fluctuations from one foreign country to
another foreign country where the Advisor believes that the foreign currency
exposure purchased will appreciate relative to the U.S. dollar and thus better
protect the Fund against the expected decline in the foreign currency exposure
sold. For example, if a Fund owns securities denominated in a foreign currency
and the Advisor believes that currency will decline, it might enter into a
forward contract to sell an appropriate amount of the first foreign currency,
with payment to be made in a second foreign currency that the Advisor believes
would better protect the Fund against the decline in the first security than
would a U.S. dollar exposure. Hedging transactions that use two foreign
currencies are sometimes referred to as "cross hedges." The effective use of
currency-related derivative instruments by a Fund in a cross hedge is dependent
upon a correlation between price movements of the two currency instruments and
the underlying security involved, and the use of two currencies magnifies the
risk that movements in the price of one instrument may not correlate or may
correlate unfavorably with the foreign currency being hedged. Such a lack of
correlation might occur due to factors unrelated to the value of the currency
instruments used or investments being hedged, such as speculative or other
pressures on the markets in which these instruments are traded.

A Fund also might seek to hedge against changes in the value of a
particular currency when no hedging instruments on that currency are available
or such hedging instruments are more expensive than certain other hedging
instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using currency-related derivative
instruments on another foreign currency or a basket of currencies, the values of
which the Advisor believes will have a high degree of positive correlation to
the value of the currency being hedged. The risk that movements in the price of
the

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hedging instrument will not correlate perfectly with movements in the price of
the currency being hedged is magnified when this strategy is used.

The use of currency-related derivative instruments by a Fund involves a
number of risks. The value of currency-related derivative instruments depends on
the value of the underlying currency relative to the U.S. dollar. Because
foreign currency transactions occurring in the interbank market might involve
substantially larger amounts than those involved in the use of such derivative
instruments, a Fund could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots (generally consisting of transactions of greater than $1 million).

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information generally is representative of very large transactions in the
interbank market and thus might not reflect odd-lot transactions where rates
might be less favorable. The interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options or futures markets are
closed while the markets for the underlying currencies remain open, significant
price and rate movements might take place in the underlying markets that cannot
be reflected in the markets for the derivative instruments until they re-open.

Settlement of transactions in currency-related derivative instruments
might be required to take place within the country issuing the underlying
currency. Thus, a Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and
might be required to pay any fees, taxes and charges associated with such
delivery assessed in the issuing country.

When a Fund engages in a transaction in a currency-related derivative
instrument, it relies on the counterparty to make or take delivery of the
underlying currency at the maturity of the contract or otherwise complete the
contract. In other words, the Fund will be subject to the risk that a loss may
be sustained by the Fund as a result of the failure of the counterparty to
comply with the terms of the transaction. The counterparty risk for
exchange-traded instruments is generally less than for privately-negotiated or
OTC currency instruments, since generally a clearing agency, which is the issuer
or counterparty to each instrument, provides a guarantee of performance. For
privately-negotiated instruments, there is no similar clearing agency guarantee.
In all transactions, the Fund will bear the risk that the counterparty will
default, and this could result in a loss of the expected benefit of the
transaction and possibly other losses to the Fund. The Funds will enter into
transactions in currency-related derivative instruments only with counterparties
that the Advisor reasonably believes are capable of performing under the
contract.

Purchasers and sellers of currency-related derivative instruments may
enter into offsetting closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can be
no assurance that a Fund will in fact be able to close out a forward currency
contract (or any other currency-related derivative instrument) at a time and
price favorable to a Fund. In addition, in the event of insolvency of the
counterparty, a Fund might be unable to close out a forward currency contract at
any time prior to maturity. In the case of an exchange-traded instrument, a Fund
will be able to close the position out only on an exchange which provides a
market for the instruments. The ability to establish and close out positions on
an exchange is subject to the maintenance of a liquid market, and there can be
no assurance that a liquid market will exist for any instrument at any specific
time. In the case of a privately-negotiated instrument, a Fund will be able to
realize the value of the instrument only by entering into a closing transaction
with the issuer or finding a third party buyer for the instrument. While a Fund
will enter into privately-negotiated transactions only with entities who are
expected to be capable of entering into a closing transaction, there can be no
assurance that a Fund will in fact be able to enter into such closing
transactions.

The precise matching of currency-related derivative instrument amounts and
the value of the portfolio securities involved generally will not be possible
because the value of such securities, measured in the foreign currency, will
change after the currency-related derivative instrument position has been
established. Thus, a Fund might need to purchase or sell foreign currencies in
the spot (cash) market. The projection of short-term currency market movements
is extremely difficult, and the successful execution of a short-term hedging
strategy is highly uncertain.

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Permissible foreign currency options will include options traded primarily
in the OTC market. Although options on foreign currencies are traded primarily
in the OTC market, the Funds will normally purchase or sell OTC options on
foreign currency only when the Advisor reasonably believes a liquid secondary
market will exist for a particular option at any specific time.

There will be a cost to a Fund of engaging in transactions in
currency-related derivative instruments that will vary with factors such as the
contract or currency involved, the length of the contract period and the market
conditions then prevailing. A Fund using these instruments may have to pay a fee
or commission or, in cases where the instruments are entered into on a principal
basis, foreign exchange dealers or other counterparties will realize a profit
based on the difference ("spread") between the prices at which they are buying
and selling various currencies. Thus, for example, a dealer may offer to sell a
foreign currency to a Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.

When required by the SEC guidelines, the Funds will set aside permissible
liquid assets in segregated accounts or otherwise cover their respective
potential obligations under currency-related derivatives instruments. To the
extent a Fund's assets are so set aside, they cannot be sold while the
corresponding currency position is open, unless they are replaced with similar
assets. As a result, if a large portion of a Fund's assets are so set aside,
this could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.

The Advisor's decision to engage in a transaction in a particular
currency-related derivative instrument will reflect the Advisor's judgment that
the transaction will provide value to the Fund and its shareholders and is
consistent with the Fund's objectives and policies. In making such a judgment,
the Advisor will analyze the benefits and risks of the transaction and weigh
them in the context of the Fund's entire portfolio and objectives. The
effectiveness of any transaction in a currency-related derivative instrument is
dependent on a variety of factors, including the Advisor's skill in analyzing
and predicting currency values and upon a correlation between price movements of
the currency instrument and the underlying security. There might be imperfect
correlation, or even no correlation, between price movements of an instrument
and price movements of investments being hedged. Such a lack of correlation
might occur due to factors unrelated to the value of the investments being
hedged, such as speculative or other pressures on the markets in which these
instruments are traded. In addition, a Fund's use of currency-related derivative
instruments is always subject to the risk that the currency in question could be
devalued by the foreign government. In such a case, any long currency positions
would decline in value and could adversely affect any hedging position
maintained by the Fund.

The Funds' dealing in currency-related derivative instruments will
generally be limited to the transactions described above. However, the Funds
reserve the right to use currency-related derivatives instruments for different
purposes and under different circumstances. Of course, the Funds are not
required to use currency-related derivatives instruments and will not do so
unless deemed appropriate by the Advisor. It also should be realized that use of
these instruments does not eliminate, or protect against, price movements in the
Funds' securities that are attributable to other (i.e., non-currency related)
causes. Moreover, while the use of currency-related derivatives instruments may
reduce the risk of loss due to a decline in the value of a hedged currency, at
the same time the use of these instruments tends to limit any potential gain
which may result from an increase in the value of that currency.

SWAP AGREEMENTS. The Funds may enter into interest rate, securities index,
commodity, or security and currency exchange rate swap agreements for any lawful
purpose consistent with each Fund's investment objective, such as for the
purpose of attempting to obtain or preserve a particular desired return or
spread at a lower cost to the Fund than if the Fund had invested directly in an
instrument that yielded that desired return or spread. A Fund also may enter
into swaps in order to protect against an increase in the price of, or the
currency exchange rate applicable to, securities that the Fund anticipates
purchasing at a later date. Swap agreements are two-party contracts entered into
primarily by institutional investors for periods ranging from a few weeks to
several years. In a standard "swap" transaction, two parties agree to exchange
the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments. The gross returns to be
exchanged or "swapped" between the parties are calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index. Swap
agreements may include interest rate caps, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates
exceed a specified rate, or "cap;"

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interest rate floors, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates fall below a
specified level, or "floor;" and interest rate collars, under which a party
sells a cap and purchases a floor, or vice versa, in an attempt to protect
itself against interest rate movements exceeding given minimum or maximum
levels.

The "notional amount" of the swap agreement is the agreed upon basis for
calculating the obligations that the parties to a swap agreement have agreed to
exchange. Under most swap agreements entered into by a Fund, the obligations of
the parties would be exchanged on a "net basis." Consequently, a Fund's
obligation (or rights) under a swap agreement will generally be equal only to
the net amount to be paid or received under the agreement based on the relative
values of the positions held by each party to the agreement (the "net amount").
A Fund's obligation under a swap agreement will be accrued daily (offset against
amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap
counterparty will be covered by the maintenance of a segregated account
consisting of cash, or liquid high grade debt obligations.

Whether a Fund's use of swap agreements will be successful in furthering
its investment objective will depend, in part, on the Advisor's ability to
predict correctly whether certain types of investments are likely to produce
greater returns than other investments. Swap agreements may be considered to be
illiquid. Moreover, a Fund bears the risk of loss of the amount expected to be
received under a swap agreement in the event of the default or bankruptcy of a
swap agreement counterparty. Certain restrictions imposed on the Funds by the
Internal Revenue Code may limit the Funds' ability to use swap agreements. The
swaps market is largely unregulated.

The Funds will enter swap agreements only with counterparties that the
Advisor reasonably believes are capable of performing under the swap agreements.
If there is a default by the other party to such a transaction, a Fund will have
to rely on its contractual remedies (which may be limited by bankruptcy,
insolvency or similar laws) pursuant to the agreements related to the
transaction.

ADDITIONAL DERIVATIVE INSTRUMENTS AND STRATEGIES. In addition to the
derivative instruments and strategies described above and in the Funds'
Prospectus, the Advisor expects to discover additional derivative instruments
and other hedging or risk management techniques. The Advisor may utilize these
new derivative instruments and techniques to the extent that they are consistent
with a Fund's investment objective and permitted by the Fund's investment
limitations, operating policies, and applicable regulatory authorities.

FOREIGN INVESTMENT COMPANIES

The Funds may invest, to a limited extent, in foreign investment
companies. Some of the countries in which the Funds invest may not permit direct
investment by outside investors. Investments in such countries may only be
permitted through foreign government-approved or -authorized investment
vehicles, which may include other investment companies. In addition, it may be
less expensive and more expedient for a Fund to invest in a foreign investment
company in a country which permits direct foreign investment. Investing through
such vehicles may involve frequent or layered fees or expenses and may also be
subject to limitation under the 1940 Act. Under the 1940 Act, a Fund may invest
up to 10% of its assets in shares of other investment companies and up to 5% of
its assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.
Each Fund does not intend to invest in such investment companies unless, in the
judgment of the Advisor, the potential benefits of such investments justify the
payment of any associated fees and expenses.

FOREIGN SECURITIES

Investing in foreign securities involves a series of risks not present in
investing in U.S. securities. Many of the foreign securities held by the Fund
will not be registered with the Securities and Exchange Commission (the "SEC"),
nor will the foreign issuers be subject to SEC reporting requirements.
Accordingly, there may be less publicly available information concerning foreign
issuers of securities held by the Funds than is available concerning U.S.
companies. Disclosure and regulatory standards in many respects are less
stringent in emerging market countries than in the U.S. and other major markets.
There also may be a lower level of monitoring and regulation of emerging markets
and the activities of investors in such markets, and enforcement of existing
regulations may be extremely limited. Foreign companies, and in particular,
companies in smaller and emerging capital markets are not generally subject to
uniform accounting, auditing and financial reporting

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standards, or to other regulatory requirements comparable to those applicable to
U.S. companies. The Fund's net investment income and capital gains from its
foreign investment activities may be subject to non-U.S. withholding taxes.

The costs attributable to foreign investing that the Funds must bear
frequently are higher than those attributable to domestic investing; this is
particularly true with respect to emerging capital markets. For example, the
cost of maintaining custody of foreign securities exceeds custodian costs for
domestic securities, and transaction and settlement costs of foreign investing
also frequently are higher than those attributable to domestic investing. Costs
associated with the exchange of currencies also make foreign investing more
expensive than domestic investing. Investment income on certain foreign
securities in which the Funds may invest may be subject to foreign withholding
or other government taxes that could reduce the return of these securities. Tax
treaties between the United States and foreign countries, however, may reduce or
eliminate the amount of foreign tax to which the Funds would be subject.

Foreign markets also have different clearance and settlement procedures,
and in certain markets there have been times when settlements have failed to
keep pace with the volume of securities transactions, making it difficult to
conduct such transactions. Delays in settlement could result in temporary
periods when assets of a Fund are uninvested and no return is earned thereon.
The inability of a Fund to make intended security purchases due to settlement
problems could cause the Fund to miss investment opportunities. Inability to
dispose of a portfolio security due to settlement problems could result either
in losses to a Fund due to subsequent declines in the value of such portfolio
security or, if the Fund has entered into a contract to sell the security, could
result in possible liability to the purchaser.

HIGH-YIELD (HIGH-RISK) SECURITIES

IN GENERAL. The Funds may invest up to 5% of its net assets in
non-investment grade debt obligations. Non-investment grade debt obligations
(hereinafter referred to as "lower-quality securities") include (i) bonds rated
as low as C by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), or Fitch Investors Service, Inc. ("Fitch"), or CCC by
Duff & Phelps, Inc. ("D&P"); (ii) commercial paper rated as low as C by S&P, Not
Prime by Moody's, or Fitch 4 by Fitch; and (iii) unrated debt obligations of
comparable quality. Lower-quality securities, while generally offering higher
yields than investment grade securities with similar maturities, involve greater
risks, including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below. Refer to the Appendix for a
discussion of securities ratings.

EFFECT OF INTEREST RATES AND ECONOMIC CHANGES. The lower-quality and
comparable unrated security market is relatively new and its growth has
paralleled a long economic expansion. As a result, it is not clear how this
market may withstand a prolonged recession or economic downturn. Such conditions
could severely disrupt the market for and adversely affect the value of such
securities.

All interest-bearing securities typically experience appreciation when
interest rates decline and depreciation when interest rates rise. The market
values of lower-quality and comparable unrated securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Lower-quality and comparable unrated securities also tend to be
more sensitive to economic conditions than are higher-rated securities. As a
result, they generally involve more credit risks than securities in the
higher-rated categories. During an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower-quality and comparable
unrated securities may experience financial stress and may not have sufficient
revenues to meet their payment obligations. The issuer's ability to service its
debt obligations may also be adversely affected by specific corporate
developments, the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due to
default by an issuer of these securities is significantly greater than issuers
of higher-rated securities because such securities are generally unsecured and
are often subordinated to other creditors. Further, if the issuer of a
lower-quality or comparable unrated security defaulted, a Fund might incur
additional expenses to seek recovery. Periods of economic uncertainty and
changes would also generally result in increased volatility in the market prices
of these securities and thus in a Fund's net asset value.

As previously stated, the value of a lower-quality or comparable unrated
security will decrease in a rising interest rate market and accordingly so will
a Fund's net asset value. If a Fund experiences unexpected net redemptions in
such a market, it

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may be forced to liquidate a portion of its portfolio securities without regard
to their investment merits. Due to the limited liquidity of lower-quality and
comparable unrated securities (discussed below), a Fund may be forced to
liquidate these securities at a substantial discount. Any such liquidation would
force the Fund to sell the more liquid portion of its portfolio.

PAYMENT EXPECTATIONS. Lower-quality and comparable unrated securities
typically contain redemption, call or prepayment provisions which permit the
issuer of such securities containing such provisions to, at its discretion,
redeem the securities. During periods of falling interest rates, issuers of
these securities are likely to redeem or prepay the securities and refinance
them with debt securities with a lower interest rate. To the extent an issuer is
able to refinance the securities, or otherwise redeem them, a Fund may have to
replace the securities with a lower yielding security, which would result in a
lower return for the Fund.

CREDIT RATINGS. Credit ratings issued by credit rating agencies are
designed to evaluate the safety of principal and interest payments of rated
securities. They do not, however, evaluate the market value risk of
lower-quality securities and, therefore, may not fully reflect the true risks of
an investment. In addition, credit rating agencies may or may not make timely
changes in a rating to reflect changes in the economy or in the condition of the
issuer that affect the market value of the security. Consequently, credit
ratings are used only as a preliminary indicator of investment quality.
Investments in lower-quality and comparable unrated obligations will be more
dependent on the Advisor's credit analysis than would be the case with
investments in investment-grade debt obligations. The Advisor employs its own
credit research and analysis, which includes a study of existing debt, capital
structure, ability to service debt and to pay dividends, the issuer's
sensitivity to economic conditions, its operating history and the current trend
of earnings. The Advisor continually monitors the investments in each Fund's
portfolio and carefully evaluates whether to dispose of or to retain
lower-quality and comparable unrated securities whose credit ratings or credit
quality may have changed.

LIQUIDITY AND VALUATION. A Fund may have difficulty disposing of certain
lower-quality and comparable unrated securities because there may be a thin
trading market for such securities. Because not all dealers maintain markets in
all lower-quality and comparable unrated securities, there is no established
retail secondary market for many of these securities. The Funds anticipate that
such securities could be sold only to a limited number of dealers or
institutional investors. To the extent a secondary trading market does exist, it
is generally not as liquid as the secondary market for higher-rated securities.
The lack of a liquid secondary market may have an adverse impact on the market
price of the security. As a result, a Fund's asset value and ability to dispose
of particular securities, when necessary to meet the Fund's liquidity needs or
in response to a specific economic event, may be impacted. The lack of a liquid
secondary market for certain securities may also make it more difficult for a
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio. Market quotations are generally available on many lower-quality and
comparable unrated issues only from a limited number of dealers and may not
necessarily represent firm bids of such dealers or prices for actual sales.
During periods of thin trading, the spread between bid and asked prices is
likely to increase significantly. In addition, adverse publicity and investor
perceptions, whether or not based on fundamental analysis, may decrease the
values and liquidity of lower-quality and comparable unrated securities,
especially in a thinly traded market.

LEGISLATION. Legislation may be adopted, and from time to time designed to
limit the use of certain lower-quality and comparable unrated securities by
certain issuers. It is anticipated that if additional legislation is enacted or
proposed, it could have a material affect on the value of these securities and
the existence of a secondary trading market for the securities.

ILLIQUID SECURITIES

The Funds may invest in illiquid securities (i.e., securities that are not
readily marketable). However, a Fund will not acquire illiquid securities if, as
a result, they would comprise more than 15% of the value of the Fund's net
assets (or such other amounts as may be permitted under the 1940 Act). However,
as a matter of internal policy, the Advisor intends to limit each Fund's
investments in illiquid securities to 10% of its net assets.

The Board of Directors of each Fund, or its delegate, has the ultimate
authority to determine, to the extent permissible under the federal securities
laws, which securities are illiquid for purposes of this limitation. Certain
securities exempt from registration or issued in transactions exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), such as securities that may be resold to institutional investors under
Rule 144A under the Securities Act and Section 4(2) commercial paper, may be
considered liquid under guidelines adopted by the Funds' Board of Directors.

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<PAGE> 67

The Board of Directors of each Fund has delegated to the Advisor the
day-to-day determination of the liquidity of a security, although it has
retained oversight and ultimate responsibility for such determinations. The
Board of Directors has directed the Advisor to look to such factors as (i) the
frequency of trades or quotes for a security, (ii) the number of dealers willing
to purchase or sell the security and number of potential buyers, (iii) the
willingness of dealers to undertake to make a market in the security, (iv) the
nature of the security and nature of the marketplace trades, such as the time
needed to dispose of the security, the method of soliciting offers, and the
mechanics of transfer, (v) the likelihood that the security's marketability will
be maintained throughout the anticipated holding period, and (vi) any other
relevant factors. The Advisor may determine 4(2) commercial paper to be liquid
if (i) the 4(2) commercial paper is not traded flat or in default as to
principal and interest, (ii) the 4(2) commercial paper is rated in one of the
two highest rating categories by at least two nationally rated statistical
rating organizations ("NRSRO"), or if only one NRSRO rates the security, by that
NRSRO, or is determined by the Advisor to be of equivalent quality, and (iii)
the Advisor considers the trading market for the specific security taking into
account all relevant factors. With respect to a Fund's foreign holdings, a
foreign security may be considered liquid by the Advisor (despite its restricted
nature under the Securities Act) if the security can be freely traded in a
foreign securities market and all the facts and circumstances support a finding
of liquidity.

Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act. Where registration is required,
a Fund may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, a Fund might obtain a less favorable price than prevailed when it
decided to sell. Restricted securities will be priced at fair value as
determined in good faith by the Board of Directors of the Funds. If through the
appreciation of restricted securities or the depreciation of unrestricted
securities, a Fund should be in a position where more than 15% of the value of
its net assets are invested in illiquid securities, including restricted
securities which are not readily marketable (except for 144A Securities and 4(2)
commercial paper deemed to be liquid by the Advisor), the Fund will take such
steps as is deemed advisable, if any, to protect liquidity.

Each Fund may sell over-the-counter ("OTC") options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC options
written by the Fund. The assets used as cover for OTC options written by the
Fund will be considered illiquid unless the OTC options are sold to qualified
dealers who agree that the Fund may repurchase any OTC option it writes at a
maximum price to be calculated by a formula set forth in the option agreement.
The cover for an OTC option written subject to this procedure would be
considered illiquid only to the extent that the maximum repurchase price under
the formula exceeds the intrinsic value of the option.

LENDING OF PORTFOLIO SECURITIES

Each Fund is authorized to lend up to 33 1/3% of the total value of its
portfolio securities to broker-dealers or institutional investors that the
Advisor deems qualified, but only when the borrower maintains with the Fund's
custodian bank collateral either in cash or money market instruments in an
amount at least equal to the market value of the securities loaned, plus accrued
interest and dividends, determined on a daily basis and adjusted accordingly.
Although the Funds are authorized to lend, the Funds do not presently intend to
engage in lending. In determining whether to lend securities to a particular
broker-dealer or institutional investor, the Advisor will consider, and during
the period of the loan will monitor, all relevant facts and circumstances,
including the creditworthiness of the borrower. The Funds will retain authority
to terminate any loans at any time. The Funds may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion of
the interest earned on the cash or money market instruments held as collateral
to the borrower or placing broker. The Funds will receive reasonable interest on
the loan or a flat fee from the borrower and amounts equivalent to any
dividends, interest or other distributions on the securities loaned. The Funds
will retain record ownership of loaned securities to exercise beneficial rights,
such as voting and subscription rights and rights to dividends, interest or
other distributions, when retaining such rights is considered to be in a Fund's
interest.

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MORTGAGE- AND ASSET-BACKED SECURITIES

Mortgage-backed securities represent direct or indirect participations in,
or are secured by and payable from, mortgage loans secured by real property, and
include single- and multi-class pass-through securities and collateralized
mortgage obligations. Such securities may be issued or guaranteed by U.S.
government agencies or instrumentalities, such as the Government National
Mortgage Association and the Federal National Mortgage Association, or by
private issuers, generally originators and investors in mortgage loans,
including savings associations, mortgage bankers, commercial banks, investment
bankers, and special purpose entities (collectively, "private lenders").
Mortgage-backed securities issued by private lenders may be supported by pools
of mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. Asset-backed debt obligations represent direct or
indirect participation in, or secured by and payable from, assets such as motor
vehicle installment sales contracts, other installment loan contracts, home
equity loans, leases of various types of property, and receivables from credit
card or other revolving credit arrangements. The credit quality of most
asset-backed securities depends primarily on the credit quality of the assets
underlying such securities, how well the entity issuing the security is
insulated from the credit risk of the originator or any other affiliated
entities, and the amount and quality of any credit enhancement of the
securities. Payments or distributions of principal and interest on asset-backed
debt obligations may be supported by non-governmental credit enhancements
including letters of credit, reserve funds, overcollateralization, and
guarantees by third parties. The market for privately issued asset-backed debt
obligations is smaller and less liquid than the market for government sponsored
mortgage-backed securities.

The rate of principal payment on mortgage- and asset-backed securities
generally depends on the rate of principal payments received on the underlying
assets which in turn may be affected by a variety of economic and other factors.
As a result, the yield on any mortgage- and asset-backed security is difficult
to predict with precision and actual yield to maturity may be more or less than
the anticipated yield to maturity. The yield characteristics of mortgage- and
asset-backed securities differ from those of traditional debt securities. Among
the principal differences are that interest and principal payments are made more
frequently on mortgage-and asset-backed securities, usually monthly, and that
principal may be prepaid at any time because the underlying mortgage loans or
other assets generally may be prepaid at any time. As a result, if a Fund
purchases these securities at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing the yield to maturity.
Conversely, if a Fund purchases these securities at a discount, a prepayment
rate that is faster than expected will increase yield to maturity, while a
prepayment rate that is slower than expected will reduce yield to maturity.
Amounts available for reinvestment by a Fund are likely to be greater during a
period of declining interest rates and, as a result, are likely to be reinvested
at lower interest rates than during a period of rising interest rates.
Accelerated prepayments on securities purchased by a Fund at a premium also
impose a risk of loss of principal because the premium may not have been fully
amortized at the time the principal is prepaid in full. The market for privately
issued mortgage- and asset-backed securities is smaller and less liquid than the
market for government-sponsored mortgage-backed securities.

While many mortgage- and asset-backed securities are issued with only one
class of security, many are issued in more than one class, each with different
payment terms. Multiple class mortgage- and asset-backed securities are issued
for two main reasons. First, multiple classes may be used as a method of
providing credit support. This is accomplished typically through creation of one
or more classes whose right to payments on the security is made subordinate to
the right to such payments of the remaining class or classes. Second, multiple
classes may permit the issuance of securities with payment terms, interest
rates, or other characteristics differing both from those of each other and from
those of the underlying assets. Examples include so-called "strips" (mortgage -
and asset-backed securities entitling the holder to disproportionate interests
with respect to the allocation of interest and principal of the assets backing
the security), and securities with class or classes having characteristics which
mimic the characteristics of non-mortgage- or asset-backed securities, such as
floating interest rates (i.e., interest rates which adjust as a specified
benchmark changes) or scheduled amortization of principal.

The Funds may invest in stripped mortgage- or asset-backed securities,
which receive differing proportions of the interest and principal payments from
the underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some

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cases such market value may be extremely volatile. With respect to certain
stripped securities, such as interest only and principal only classes, a rate of
prepayment that is faster or slower than anticipated may result in a Fund
failing to recover all or a portion of its investment, even though the
securities are rated investment grade.

Mortgage- and asset-backed securities backed by assets, other than as
described above, or in which the payment streams on the underlying assets are
allocated in a manner different than those described above may be issued in the
future. A Fund may invest in such securities if such investment is otherwise
consistent with its investment objectives and policies and with the investment
restrictions of a Fund.

MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

The Funds may engage in reverse repurchase agreements to facilitate
portfolio liquidity, a practice common in the mutual fund industry, or for
arbitrage transactions discussed below. In a reverse repurchase agreement, a
Fund would sell a security and enter into an agreement to repurchase the
security at a specified future date and price. The Fund generally retains the
right to interest and principal payments on the security. Since the Fund
receives cash upon entering into a reverse repurchase agreement, it may be
considered a borrowing. (See "Borrowing".) When required by guidelines of the
SEC, a Fund will set aside permissible liquid assets in a segregated account to
secure its obligations to repurchase the security.

Each Fund may also enter into mortgage dollar rolls, in which the Fund
would sell mortgage-backed securities for delivery in the current month and
simultaneously contract to purchase substantially similar securities on a
specified future date. While a Fund would forego principal and interest paid on
the mortgage-backed securities during the roll period, the Fund would be
compensated by the difference between the current sales price and the lower
price for the future purchase as well as by any interest earned on the proceeds
of the initial sale. The Fund also could be compensated through the receipt of
fee income equivalent to a lower forward price. At the time the Fund would enter
into a mortgage dollar roll, it would set aside permissible liquid assets in a
segregated account to secure its obligation for the forward commitment to buy
mortgage-backed securities. Mortgage dollar roll transactions may be considered
a borrowing by the Funds. (See "Borrowing".)

The mortgage dollar rolls and reverse repurchase agreements entered into
by the Funds may be used as arbitrage transactions in which a Fund will maintain
an offsetting position in investment grade debt obligations or repurchase
agreements that mature on or before the settlement date on the related mortgage
dollar roll or reverse repurchase agreements. Since a Fund will receive interest
on the securities or repurchase agreements in which it invests the transaction
proceeds, such transactions may involve leverage. However, since such securities
or repurchase agreements will be high quality and will mature on or before the
settlement date of the mortgage dollar roll or reverse repurchase agreement, the
Advisor believes that such arbitrage transactions do not present the risks to
the Funds that are associated with other types of leverage.

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with certain banks or
non-bank dealers. In a repurchase agreement, a Fund buys a security at one
price, and at the time of sale, the seller agrees to repurchase the obligation
at a mutually agreed upon time and price (usually within seven days). The
repurchase agreement, thereby, determines the yield during the purchaser's
holding period, while the seller's obligation to repurchase is secured by the
value of the underlying security. The Advisor will monitor, on an ongoing basis,
the value of the underlying securities to ensure that the value always equals or
exceeds the repurchase price plus accrued interest. Repurchase agreements could
involve certain risks in the event of a default or insolvency of the other party
to the agreement, including possible delays or restrictions upon a Fund's
ability to dispose of the underlying securities. Although no definitive
creditworthiness criteria are used, the Advisor reviews the creditworthiness of
the banks and non-bank dealers with which the Funds enter into repurchase
agreements to evaluate those risks. A Fund may, under certain circumstances,
deem repurchase agreements collateralized by U.S. government securities to be
investments in U.S. government securities.

SHORT SALES AGAINST THE BOX

Each Fund may sell securities short against the box to hedge unrealized
gains on portfolio securities. Selling securities short against the box involves
selling a security that a Fund owns or has the right to acquire, for delivery at
a specified

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<PAGE> 70
date in the future. If a Fund sells securities short against the box, it may
protect unrealized gains, but will lose the opportunity to profit on such
securities if the price rises.

SMALL AND MEDIUM COMPANIES

The Funds may invest a substantial portion of their assets in small and
medium companies. While small and medium companies generally have the potential
for rapid growth, investments in small and medium companies often involve
greater risks than investments in larger, more established companies because
small and medium companies may lack the management experience, financial
resources, product diversification, and competitive strengths of larger
companies. In addition, in many instances the securities of small and medium
companies are traded only over-the-counter or on a regional securities exchange,
and the frequency and volume of their trading is substantially less than is
typical of larger companies. Therefore, the securities of small and medium
companies may be subject to greater and more abrupt price fluctuations. When
making large sales, the Fund may have to sell portfolio holdings at discounts
from quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of small and medium company securities.
Investors should be aware that, based on the foregoing factors, an investment in
the Fund may be subject to greater price fluctuations than an investment in a
fund that invests primarily in larger, more established companies. The Advisor's
research efforts may also play a greater role in selecting securities for the
Fund than in a fund that invests in larger, more established companies.

TEMPORARY DEFENSIVE POSITION

When the Advisor determines that market conditions warrant a temporary
defensive position, the Opportunity and Value Funds may invest up to 30% of
their net assets, the Common Stock Fund may invest up to 20% of its net assets,
and the Growth, Discovery, and Small Cap Funds may invest without limitation in
cash and short-term fixed income securities, including U.S. government
securities, commercial paper, banker's acceptances, certificates of deposit, and
time deposits.

WARRANTS

Each Fund may acquire warrants. Warrants are securities giving the holder
the right, but not the obligation, to buy the stock of an issuer at a given
price (generally higher than the value of the stock at the time of issuance)
during a specified period or perpetually. Warrants may be acquired separately or
in connection with the acquisition of securities. A Fund will not purchase
warrants, valued at the lower of cost or market value, in excess of 5% of the
Fund's net assets. Included in that amount, but not to exceed 2% of the Fund's
net assets, may be warrants that are not listed on any stock exchange. Warrants
acquired by a Fund in units or attached to securities are not subject to these
restrictions. Warrants do not carry with them the right to dividends or voting
rights with respect to the securities that they entitle their holder to
purchase, and they do not represent any rights in the assets of the issuer. As a
result, warrants may be considered to have more speculative characteristics than
certain other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities, and a warrant
ceases to have value if it is not exercised prior to its expiration date.

WHEN-ISSUED SECURITIES

Each Fund may from time to time purchase securities on a "when-issued"
basis. The price of debt obligations purchased on a when-issued basis, which may
be expressed in yield terms, generally is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date. Normally, the settlement date occurs within 45 days of the purchase
although in some cases settlement may take longer. During the period between the
purchase and settlement, no payment is made by a Fund to the issuer and no
interest on the debt obligations accrues to the Fund. Forward commitments
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in value of the Fund's other assets. While when-issued securities may be sold
prior to the settlement date, the Funds intend to purchase such securities with
the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time a Fund makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The Funds do not
believe that their net asset values will be adversely affected by purchases of
securities on a when-issued basis.

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To the extent required by the SEC, the Funds will maintain cash and
marketable securities equal in value to commitments for when-issued securities.
Such segregated securities either will mature or, if necessary, be sold on or
before the settlement date. When the time comes to pay for when-issued
securities, a Fund will meet its obligations from then-available cash flow, sale
of the securities held in the separate account, described above, sale of other
securities or, although it would not normally expect to do so, from the sale of
the when-issued securities themselves (which may have a market value greater or
less than the Fund's payment obligation).

ZERO-COUPON, STEP-COUPON AND PAY-IN-KIND SECURITIES

The Funds may invest in zero-coupon, step-coupon, and pay-in-kind
securities. These securities are debt securities that do not make regular cash
interest payments. Zero-coupon and step-coupon securities are sold at a deep
discount to their face value. Pay-in-kind securities pay interest through the
issuance of additional securities. Because such securities do not pay current
cash income, the price of these securities can be volatile when interest rates
fluctuate. While these securities do not pay current cash income, federal income
tax law requires the holders of zero-coupon, step-coupon, and pay-in-kind
securities to include in income each year the portion of the original issue
discount (or deemed discount) and other non-cash income on such securities
accruing that year. In order to continue to qualify as a "regulated investment
company" under the Internal Revenue Code and avoid a certain excise tax, each
Fund may be required to distribute a portion of such discount and income and may
be required to dispose of other portfolio securities, which may occur in periods
of adverse market prices, in order to generate cash to meet these distribution
requirements.

DIRECTORS AND OFFICERS OF THE FUNDS

Directors and officers of the Funds, together with information as to
their principal business occupations during the last five years, and other
information are shown below. Each director who is deemed an "interested person,"
as defined in the 1940 Act, is indicated by an asterisk (*). Each officer and
director holds the same position with the 25 registered open-end management
investment companies consisting of 36 mutual funds, which are managed by the
Advisor (the "Strong Funds"). The Strong Funds, in the aggregate, pays each
Director who is not a director, officer, or employee of the Advisor, or any
affiliated company (a "disinterested director") an annual fee of $50,000, plus
$100 per Board meeting for each Strong Fund. In addition, each disinterested
director is reimbursed by the Strong Funds for travel and other expenses
incurred in connection with attendance at such meetings. Other officers and
directors of the Strong Funds receive no compensation or expense reimbursement
from the Strong Funds.

*RICHARD S. STRONG (DOB 5/12/42), Chairman of the Board and Director of the
Funds.

Prior to August 1985, Mr. Strong was Chief Executive Officer of the
Advisor, which he founded in 1974. Since August 1985, Mr. Strong has been a
Security Analyst and Portfolio Manager of the Advisor. In October 1991, Mr.
Strong also became the Chairman of the Advisor. Mr. Strong is a director of the
Advisor. Mr. Strong has been in the investment management business since 1967.
Mr. Strong has served the Funds as follows:

DIRECTOR - Opportunity Fund (since December 1985); Growth Fund (since
October 1993); Common Stock Fund (since December 1989); Discovery Fund
(since December 1987); Small Cap Fund (since November 1995); and Value
Fund (since November 1995).

CHAIRMAN - Opportunity Fund (since December 1985); Growth Fund (since
October 1993); Common Stock Fund (since December 1989); Discovery Fund
(since December 1987); Small Cap Fund (since November 1995); and Value
Fund (since November 1995).

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<PAGE> 72
MARVIN E. NEVINS (DOB 7/9/18), Director of the Funds.

Private Investor. From 1945 to 1980, Mr. Nevins was Chairman of
Wisconsin Centrifugal Inc., a foundry. From July 1983 to December 1986, he was
Chairman of General Casting Corp., Waukesha, Wisconsin, a foundry. Mr. Nevins is
a former Chairman of the Wisconsin Association of Manufacturers & Commerce. He
was also a regent of the Milwaukee School of Engineering and a member of the
Board of Trustees of the Medical College of Wisconsin. Mr. Nevins has served the
Funds as follows:

WILLIE D. DAVIS (DOB 7/24/34), Director of the Funds.

Mr. Davis has been director of Alliance Bank since 1980, Sara Lee
Corporation (a food/consumer products company) since 1983, KMart Corporation (a
discount consumer products company) since 1985, YMCA Metropolitan - Los Angeles
since 1985, Dow Chemical Company since 1988, MGM Grand, Inc. (an
entertainment/hotel company) since 1990, WICOR, Inc. (a utility company) since
1990, Johnson Controls, Inc. (an industrial company) since 1992, L.A. Gear (a
footwear/sportswear company) since 1992, and Rally's Hamburger, Inc. since 1994.
Mr. Davis has been a trustee of the University of Chicago since 1980, Marquette
University since 1988, and Occidental College since 1990. Since 1977, Mr. Davis
has been President and Chief Executive Officer of All Pro Broadcasting, Inc. Mr.
Davis was a director of the Fireman's Fund (an insurance company) from 1975
until 1990. Mr. Davis has served the Funds as follows:

DIRECTOR - Opportunity Fund (since July 1994); Growth Fund (since July
1994); Common Stock Fund (since July 1994); Discovery Fund (since July
1994); Small Cap Fund (since November 1995); and Value Fund (since
November 1995).

*JOHN DRAGISIC (DOB 11/26/40), President and Director of the Funds.

Mr. Dragisic has been President of the Advisor since October 1995 and a
director of the Advisor since July 1994. Mr. Dragisic previously served as a
director of Opportunity, Growth, Common Stock, and Discovery Funds between 1991
and 1994, and as Vice Chairman of the Funds from July 1994 until October 1995.
Mr. Dragisic was the President and Chief Executive Officer of Grunau Company,
Inc. (a mechanical contracting and engineering firm), Milwaukee, Wisconsin from
1987 until July 1994. From 1981 to 1987, he was an Executive Vice President with
Grunau Company, Inc. From 1969 until 1973, Mr. Dragisic worked for the
InterAmerican Development Bank. Mr. Dragisic received his Ph.D. in Economics in
1971 from the University of Wisconsin - Madison and his B.A. degree in Economics
in 1962 from Lake Forest College. Mr. Dragisic has served the Funds as follows:

DIRECTOR - Opportunity Fund(since April 1995); Growth Fund (since April
1995); Common Stock Fund (since April 1995); Discovery Fund (since
April 1995); Small Cap Fund (since November 1995); and Value Fund
(since November 1995).

VICE CHAIRMAN - Opportunity Fund (July 1994 through October 1995);
Growth Fund (July 1994 through October 1995); Common Stock Fund (July
1994 through October 1995); Discovery Fund (July 1994 through October
1995).

PRESIDENT - Opportunity Fund (since November 1995); Growth Fund (since
November 1995); Common Stock Fund (since November 1995); Discovery Fund
(since November 1995); Small Cap Fund (since November 1995); and Value
Fund (since November 1995).

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<PAGE> 73
STANLEY KRITZIK (DOB 1/9/30), Director of the Funds.

Mr. Kritzik has been a Partner of Metropolitan Associates since 1962, a
Director of Aurora Health Care since 1987, and Health Network Ventures, Inc.
since 1992. Mr. Kritzik has served the Funds as follows:

DIRECTOR - Opportunity Fund (since April 1995); Growth Fund (since
April 1995); Common Stock Fund (since April 1995); Discovery Fund
(since April 1995); Small Cap Fund (since November 1995); and Value
Fund (since November 1995).

WILLIAM F. VOGT (DOB 7/19/47), Director of the Funds.

Mr. Vogt has been the President of Vogt Management Consulting, Inc.
since 1990. From 1982 until 1990, he served as Executive Director of University
Physicians of the University of Colorado. Mr. Vogt is the Past President of the
Medical Group Management Association and a Fellow of the American College of
Medical Practice Executives. He has served the Funds as follows:

DIRECTOR - Opportunity Fund (since April 1995); Growth Fund (since
April 1995); Common Stock Fund (since April 1995); Discovery Fund
(since April 1995); Small Cap Fund (since November 1995); and Value
Fund (since November 1995).

LAWRENCE A. TOTSKY (DOB 5/6/59), C.P.A., Vice President of the Funds.

Mr. Totsky has been Senior Vice President of the Advisor since
September 1994. Mr. Totsky served as Vice President of the Advisor from December
1992 to September 1994. Mr. Totsky acted as the Advisor's Manager of Shareholder
Accounting and Compliance from June 1987 to June 1991 when he was named Director
of Mutual Fund Administration. Mr. Totsky has served the Funds as follows:

VICE PRESIDENT - Opportunity Fund (since May 1993); Common Stock Fund
(since May 1993); Growth Fund (since October 1993); Discovery Fund
(since April 1993); Small Cap Fund (since November 1995); and Value
Fund (since November 1995).

THOMAS P. LEMKE (DOB 7/30/54), Vice President of the Funds.

Mr. Lemke has been Senior Vice President, Secretary, and General
Counsel of the Advisor since September 1994. For two years prior to joining the
Advisor, Mr. Lemke acted as Resident Counsel for Funds Management at J.P. Morgan
& Co., Inc. From February 1989 until April 1992, Mr. Lemke acted as Associate
General Counsel to Sanford C. Bernstein Co., Inc. For two years prior to that,
Mr. Lemke was Of Counsel at the Washington, D.C. law firm of Tew Jorden &
Schulte, a successor of Finley, Kumble & Wagner. From August 1979 until December
1986, Mr. Lemke worked at the Securities and Exchange Commission, most notably
as the Chief Counsel to the Division of Investment Management (November 1984 -
December 1986), and as Special Counsel to the Office of Insurance Products,
Division of Investment Management (April 1982 - October 1984). Mr. Lemke has
served the Funds as follows:

VICE PRESIDENT - Opportunity Fund (since October 1994); Growth Fund
(since October 1994); Common Stock Fund (since October 1994); Discovery
Fund (since October 1994); Small Cap Fund (since November 1995); and
Value Fund (since November 1995).

STEPHEN J. SHENKENBERG (DOB 6/14/58), Vice President and Secretary of the Funds.

Mr. Shenkenberg has been Deputy General Counsel to the Advisor since
November 1996. From 1992 until November 1996, Mr. Shenkenberg acted as Associate
Counsel to the Advisor. From June 1987 until December 1992, Mr. Shenkenberg was
an attorney for Godfrey & Kahn, S.C., a Milwaukee law firm. Mr. Shenkenberg has
served the Funds as follows:

<PAGE> 74
VICE PRESIDENT - Opportunity Fund (since April 1996); Growth Fund
(since April 1996); Common Stock Fund (since April 1996); Discovery
Fund (since April 1996); Small Cap Fund (since April 1996); and Value
Fund (since April 1996).

SECRETARY - Opportunity Fund (since October 1996); Growth Fund (since
October 1996); Common Stock Fund (since October 1996); Discovery Fund
(since October 1996); Small Cap Fund (since October 1996); and Value
Fund (since October 1996).

JOHN S. WEITZER (DOB 10/31/67), Vice President of the Funds.

Mr. Weitzer has been an Associate Counsel to the Advisor since July
1993. Mr. Weitzer has served the Funds as follows:

VICE PRESIDENT - Opportunity Fund (since January 1996); Growth Fund
(since January 1996); Common Stock Fund (since January 1996); Discovery
Fund (since January 1996); Small Cap Fund (since January 1996), and
Value Fund (since 1996).

Except for Messrs. Nevins, Davis, Kritzik and Vogt, the address of all
of the above persons is P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Nevins'
address is 6075 Pelican Bay Boulevard, Naples, Florida 34108. Mr. Davis' address
is 161 North La Brea, Inglewood, California 90301, Mr. Kritzik's address is 1123
North Astor Street, P.O. Box 92547, Milwaukee, Wisconsin 53202-0547. Mr. Vogt's
address is 2830 East Third Avenue, Denver, Colorado 80206.

In addition to the positions listed above, the following individuals
also hold the following positions with Strong Holdings, Inc. ("Holdings"), a
Wisconsin corporation and subsidiary of the Advisor; Strong Funds Distributors,
Inc., the Fund's underwriter ("Distributors"), Heritage Reserve Development
Corporation ("Heritage"), and Strong Service Corporation ("SSC"), each of which
is a Wisconsin corporation and subsidiary of Holdings; Fussville Real Estate
Holdings L.L.C. ("Real Estate Holdings") and Sherwood Development L.L.C.
("Sherwood"), each of which is a Wisconsin Limited Liability Company and
subsidiary of the Advisor and Heritage; and Fussville Development L.L.C.
("Fussville Development"), a Wisconsin Limited Liability Company and subsidiary
of the Advisor and Real Estate Holdings:

RICHARD S. STRONG:

CHAIRMAN AND A DIRECTOR - Holdings and Distributors (since October
1993); Heritage (since January 1994); and SSC (since November 1995).

CHAIRMAN AND A MEMBER OF THE MANAGING BOARD - Real Estate Holdings and
Fussville Development (since December 1995 and February 1994,
respectively); and Sherwood (since October 1994).

JOHN DRAGISIC:

PRESIDENT AND A DIRECTOR - Holdings (since December 1995 and July 1994,
respectively); Distributors (since September 1996 and July 1994,
respectively); Heritage (since May 1994 and August 1994, respectively);
and SSC (since November 1995).

VICE CHAIRMAN AND A MEMBER OF THE MANAGING BOARD - Real Estate and
Fussville Development (since December 1995 and August 1994,
respectively); and Sherwood (since October 1994).

THOMAS P. LEMKE:

VICE PRESIDENT - Holdings, Heritage, Real Estate Holdings, and
Fussville Development (since December 1995); Distributors (since
October 1996); Sherwood (since October 1994); and SSC (since November
1995).

26
<PAGE> 75

STEPHEN J. SHENKENBERG:

VICE PRESIDENT AND SECRETARY - Distributors (since December 1995).

SECRETARY - Holdings, Heritage, Fussville Development, Real Estate
Holdings, and Sherwood (since December 1995); and SSC (since November
1995).

As of November 29, 1996, the officers and directors of the Funds in the
aggregate beneficially owned less than 1% of each Fund's then outstanding
shares.

PRINCIPAL SHAREHOLDERS

As of November 29, 1996 the following persons owned of record or are
known by the Funds to own of record or beneficially, more than 5% of the listed
Fund's outstanding shares:

<TABLE>
<CAPTION>
NAME AND ADDRESS FUND/SHARES PERCENT OF CLASS
- ---------------- ----------- ----------------

DISCOVERY FUND
- --------------
<S> <C> <C>
Lincoln National Life Insurance 1,680,983.093 5.22%
P.O. Box 1110
Fort Wayne, IN 46801
</TABLE>

INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR

The Advisor to the Funds is Strong Capital Management, Inc. Mr. Richard
S. Strong controls the Advisor. Mr. Strong is the Chairman and a director of the
Advisor, Mr. Dragisic is the President and a director of the Advisor, Mr. Totsky
is a Senior Vice President of the Advisor, Mr. Lemke is a Senior Vice President,
Secretary, and General Counsel of the Advisor, Mr. Shenkenberg is Vice
President, Assistant Secretary, and Deputy General Counsel of the Advisor, and
Mr. Weitzer is Associate Counsel of the Advisor. A brief description of each
Fund's investment advisory agreement ("Advisory Agreement") is set forth in the
Prospectus under "About the Funds - Management."

The Advisory Agreements for the Opportunity, Growth, Common Stock, and
Discovery Funds, dated May 1, 1995, were last approved by shareholders at the
annual meeting of shareholders held on April 13, 1995. The Small Cap and Value
Funds' Advisory Agreements dated December 28, 1995 was last approved by each
Fund's sole shareholder on December 28, 1995, and will remain in effect as to
each Fund for a period of two years. The Advisory Agreement is required to be
approved annually by either the Board of Directors of the Fund or by vote of a
majority of the Fund's outstanding voting securities (as defined in the 1940
Act). In either case, each annual renewal must be approved by the vote of a
majority of the Fund's directors who are not parties to the Advisory Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Each Advisory Agreement is terminable,
without penalty, on 60 days' written notice by the Board of Directors of the
Fund, by vote of a majority of the Fund's outstanding voting securities, or by
the Advisor, and will terminate automatically in the event of its assignment.

27
<PAGE> 76
Under the terms of each Advisory Agreement, the Advisor manages the
Fund's investments subject to the supervision of the Fund's Board of Directors.
The Advisor is responsible for investment decisions and supplies investment
research and portfolio management. In addition, the Advisory Agreement between
the Advisor and the Value Fund authorizes the Advisor to delegate its duties
under that agreement to another Advisor. As discussed below, the Advisor has
retained Sloate, Weisman, Murray & Company, Inc. as Subadvisor with respect to
the Value Fund's investments. At its expense, the Advisor provides office space
and all necessary office facilities, equipment and personnel for servicing the
investments of the Fund. The Advisor places all orders for the purchase and sale
of the Fund's portfolio securities at the Fund's expense.

As compensation for its services, each Fund pays to the Advisor a
monthly management fee at the annual rate of 1.00% of the average daily net
asset value of the Fund. (See "Shareholder Manual - Determining Your Share
Price" in the Prospectus.) From time to time, the Advisor may voluntarily waive
all or a portion of its management fee for a Fund. The organizational expenses
of the Growth Fund was approximately $31,418, was advanced by the Advisor, and
will be reimbursed by the Fund over a period of not more than 60 months from the
Fund's date of inception.

The following table sets forth certain information concerning
management fees for each Fund that has completed a fiscal year:

<TABLE>
<CAPTION>
Management Fee
Incurred Management Fee Management Fee
by Fund Waiver Paid by Fund
------- ------ ------------
<S> <C> <C> <C>
Opportunity Fund
1993 $ 3,265,375 $0 $ 3,265,375
1994 6,335,605 0 6,335,605
1995 10,843,733 0 10,843,733
Growth Fund(1)
1994 $ 484,396 $0 $ 484,396
1995 3,861,111 0 3,861,111

Common Stock Fund
1993 $ 5,801,331 $0 $ 5,801,331
1994 7,989,263 0 7,979,263
1995 9,152,976 0 9,152,976

Discovery Fund
1993 $ 2,236,540 $0 $ 2,236,540
1994 3,647,967 0 3,647,967
1995 4,713,024 0 4,713,024
</TABLE>

(1) Commenced operations on December 31, 1993.

Each Advisory Agreement requires the Advisor to reimburse a Fund in the
event that the expenses and charges payable by the Fund in any fiscal year,
including the management fee but excluding taxes, interest, brokerage
commissions, and similar fees and to the extent permitted extraordinary
expenses, exceed two percent (2%) of the average net asset value of the Fund for
such year, as determined by valuations made as of the close of each business day
of the year. Reimbursement of expenses in excess of the applicable limitation
will be made on a monthly basis and will be paid to the Fund by reduction of the
Advisor's fee, subject to later adjustment, month by month, for the remainder of
the Fund's fiscal year. The Advisor may from time to time voluntarily absorb
expenses for a Fund in addition to the reimbursement of expenses in excess of
application limitations.

On July 12, 1994, the Securities and Exchange Commission (the "SEC")
filed an administrative action (Order) against the Advisor, Mr. Strong, and
another employee of the Advisor in connection with conduct that occurred between
1987 and early 1990. In re Strong/Corneliuson Capital Management, Inc., et al.
Admin. Proc. File No. 3-8411. The proceeding was

28
<PAGE> 77
settled by consent without admitting or denying the allegations in the Order.
The Order found that the Advisor and Mr. Strong aided and abetted violations of
Section 17(a) of the 1940 Act by effecting trades between mutual funds, and
between mutual funds and Harbour Investments Ltd. ("Harbour"), without complying
with the exemptive provisions of SEC Rule 17a-7 or otherwise obtaining an
exemption. It further found that the Advisor violated, and Mr. Strong aided and
abetted violations of, the disclosure provisions of the 1940 Act and the
Investment Advisers Act of 1940 by misrepresenting the Advisor's policy on
personal trading and by failing to disclose trading by Harbour, an entity in
which principals of the Advisor owned between 18 and 25 percent of the voting
stock. As part of the settlement, the respondents agreed to a censure and a
cease and desist order and the Advisor agreed to various undertakings, including
adoption of certain procedures and a limitation for six months on accepting
certain types of new advisory clients.

On June 6, 1996, the Department of Labor (the "DOL") filed an action
against the Advisor for equitable relief alleging violations of the Employee
Retirement Income Security Act of 1974 ("ERISA") in connection with cross trades
that occurred between 1987 and late 1989 involving certain pension accounts
managed by the Advisor. Contemporaneous with this filing, the Advisor, without
admitting or denying the DOL's allegations, agreed to the entry of a consent
judgment resolving all matters relating to the allegations. Reich v. Strong
Capital Management, Inc., (U.S.D.C. E.D. WI) (the "Consent Judgment"). Under the
terms of the Consent Judgment, the Advisor agreed to reimburse the affected
accounts a total of $5.9 million. The settlement did not have any material
impact on the Advisor's financial position or operations.

As indicated above, the Subadvisor to the Value Fund is Sloate,
Weisman, Murray & Company, Inc. (the "Subadvisor") The Value Fund's subadvisory
agreement, dated December 28, 1995 (the "Subadvisory Agreement"), was last
approved by the Fund's sole shareholder on December 28, 1995. Under the terms of
the Subadvisory Agreement, the Subadvisor furnishes investment advisory and
portfolio management services to the Fund with respect to its investments. The
Subadvisor is responsible for decisions to buy and sell the Fund's investments
and all other transactions related to investment therein and the negotiation of
brokerage commissions, if any, except that the Advisor is responsible for
managing the cash equivalent investments maintained by the Fund in the ordinary
course of its business and which, on average, are expected to equal
approximately five to seven percent of the Fund's total assets. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. During the term of the
Subadvisory Agreement, the Subadvisor will bear all expenses incurred by it in
connection with its services under such agreement.

The Subadvisory Agreement requires the Advisor, not the Value Fund, to
pay the Subadvisor a monthly fee based on the following annual rates. For the
first eighteen (18) months, the Advisor will pay the Subadvisor 60% of
management fees collected by the Advisor from the Fund on the first $150 million
of net assets in the Fund, 50% of management fees collected by the Advisor from
the Fund on net assets from $150 to $300 million in the Fund, and 40% of
management fees collected by the Advisor from the Fund on assets in excess of
$300 million in the Fund. After the first eighteen (18) months, the Advisor will
pay the Subadvisor 60% of management fees collected by the Advisor from the Fund
on the lower of $150 million or the level of net assets in the Fund at the end
of eighteen months (this amount being "base" net assets), 50% of management fees
collected by the Advisor from the Fund on net assets from base net assets to
$300 million in the Fund, and 40% of management fees collected by the Advisor
from the Fund on assets in excess of $300 million in the Fund.

The Subadvisory Agreement may be terminated at any time, without
payment of any penalty, by vote of the Board of Directors of the Value Fund or
by a vote of a majority of the outstanding voting securities of the Fund on 60
days' written notice to the Subadvisor. The Subadvisory Agreement may also be
terminated by the Advisor for breach upon 20 days' notice, immediately in the
event that the Subadvisor becomes unable to discharge its duties and
obligations, and upon 60 days' notice for any reason. The Subadvisory Agreement
may be terminated by the Subadvisor upon 180 days' notice for any reason. The
Subadvisory Agreement will terminate automatically in the event of its
unauthorized assignment.

The Advisor has two relationships with the Subadvisor that are not
related to the subadvisory arrangement for the Fund. First, for more than 10
years, the Advisor has obtained third party investment research from the
Subadvisor through soft dollar brokerage arrangements with various
broker-dealers. The Advisor expects to continue this relationship in the future.
Second, since early 1995, Matthew D. Strong, the son of Richard S. Strong, CEO
and controlling shareholder of the Advisor, has been employed by the Subadvisor
as a research analyst. Matthew D. Strong has a beneficial interest in certain
trusts which hold shares of the Advisor.

29
<PAGE> 78
Except for expenses assumed by the Advisor, and the Subadvisor if
applicable, as set forth above, or by the Distributor, as described below with
respect to the distribution of a Fund's shares, each Fund is responsible for all
its other expenses, including, without limitation, interest charges, taxes,
brokerage commissions and similar expenses; organizational expenses; expenses of
issue, sale, repurchase or redemption of shares; expenses of registering or
qualifying shares for sale with the states and the SEC; expenses for printing
and distributing Prospectuses and quarterly financial statements to existing
shareholders; charges of custodians, transfer agents (including the printing and
mailing of reports and notices to shareholders), registrars, auditing and legal
services, clerical services related to recordkeeping and shareholder relations,
and printing of stock certificates; and fees for directors who are not
"interested persons" of the Advisor.

The Funds, the Advisor and Subadvisor have each adopted a Code of
Ethics (the "Code") which governs the personal trading activities of all "Access
Persons" of the Advisor. Access Persons include every director and officer of
the Advisor or Subadvisor and the investment companies managed by the Advisor or
Subadvisor, including the Funds, as well as certain employees of the Advisor or
Subadvisor who have access to information relating to the purchase or sale of
securities by the Advisor or Subadvisor on behalf of accounts managed by it. The
Code is based upon the principal that such Access Persons have a fiduciary duty
to place the interests of the Funds and the Advisor or Subadvisor's other
clients ahead of their own.

The Code requires Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor or
Subadvisor, including the Funds) to, among other things, preclear their
securities transactions (with limited exceptions, such as transactions in shares
of mutual funds, direct obligations of the U.S. government, and certain options
on broad-based securities market indexes) and to execute such transactions
through the Advisor or Subadvisor's trading department. The Code, which applies
to all Access Persons (other than Access Persons who are independent directors
of the investment companies managed by the Advisor or Subadvisor, including the
Funds), includes a ban on acquiring any securities in an initial public
offering, other than a new offering of a registered open-end investment company,
and a prohibition from profiting on short-term trading in securities. In
addition, no Access Person may purchase or sell any security which, is
contemporaneously being purchased or sold, or to the knowledge of the Access
Person, is being considered for purchase or sale, by the Advisor or Subadvisor
on behalf of any mutual fund or other account managed by it. Finally, the Code
provides for trading "black out" periods of seven calendar days during which
time Access Persons who are portfolio managers may not trade in securities which
have been purchased or sold by any mutual fund or other account managed by the
portfolio manager.

The Advisor provides investment advisory services for multiple clients
and may give advice and take action, with respect to any client, that may differ
from the advice given, or the timing or nature of action taken, with respect to
any one account. However, the Advisor will allocate over a period of time, to
the extent practical, investment opportunities to each account on a fair and
equitable basis relative to other similarly-situated client accounts. The
Advisor, its principals and associates (to the extent not prohibited by the
Code), and other clients of the Advisor may have, acquire, increase, decrease,
or dispose of securities or interests therein at or about the same time that the
Advisor is purchasing or selling securities or interests therein for an account
that are or may be deemed to be inconsistent with the actions taken by such
persons.

From time to time the Advisor votes the shares owned by the Funds
according to its Statement of General Proxy Voting Policy ("Proxy Voting
Policy"). The general principal of the Proxy Voting Policy is to vote any
beneficial interest in an equity security prudently and solely in the best
long-term economic interest of the Fund and its beneficiaries considering all
relevant factors and without undue influence from individuals or groups who may
have an economic interest in the outcome of a proxy vote. Shareholders may
obtain a copy of the Proxy Voting Policy upon request from the Advisor.

Under a Distribution Agreement dated December 1, 1993 with the
Opportunity, Common Stock, and Discovery Funds, a Distribution Agreement dated
December 20, 1993 with the Growth Fund, and a Distribution Agreement dated
December 28, 1995 for the Small Cap and Value Funds (collectively, the
"Distribution Agreements"), Strong Funds Distributors, Inc. ("Distributor"), a
subsidiary of the Advisor, acts as underwriter of each Fund's shares. Each
Distribution Agreement provides that the Distributor will use its best efforts
to distribute the Fund's shares. Since the Funds are "no-load" funds, no sales
commissions are charged on the purchase of Fund shares. Each Distribution
Agreement further provides that the Distributor will bear the additional costs
of printing Prospectuses and shareholder reports which are used for selling
purposes, as well as advertising and any other costs attributable to the
distribution of a Fund's shares. The Distributor is an indirect subsidiary of
the Advisor and controlled by the Advisor and Richard S. Strong. Prior to
December 1, 1993, the Advisor acted as underwriter for the Opportunity, Common
Stock, and Discovery Funds. On December 1, 1993, the

<PAGE> 79
Distributor succeeded to the broker-dealer registration of the Advisor and, in
connection therewith, Distribution Agreements for the Opportunity, Common Stock,
and Discovery Funds were executed on substantially identical terms as the former
distribution agreement with the Advisor as distributor. The Distribution
Agreement is subject to the same termination and renewal provisions as are
described above with respect to the Advisory Agreements.

From time to time, the Distributor may hold in-house sales incentive
programs for its associated persons under which these persons may receive
non-cash compensation awards in connection with the sale and distribution of a
Fund's shares. These awards may include items such as, but not limited to,
gifts, merchandise, gift certificates, and payment of travel expenses, meals and
lodging. As required by the National Association of Securities Dealers, Inc. or
NASD's proposed rule amendments in this area, any in-house sales incentive
program will be multi-product oriented, i.e., any incentive will be based on an
associated person's gross production of all securities within a product type and
will not be based on the sales of shares of any specifically designated mutual
fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Advisor and the Subadvisor, with respect to the Value Fund only,
are responsible for decisions to buy and sell securities for the Funds and for
the placement of the Funds' investment business and the negotiation of the
commissions to be paid on such transactions. It is the policy of the Advisor,
and the Subadvisor, to seek the best execution at the best security price
available with respect to each transaction, in light of the overall quality of
brokerage and research services provided to the Advisor, and the Subadvisor, or
the Funds. In over-the-counter transactions, orders are placed directly with a
principal market maker unless it is believed that a better price and execution
can be obtained using a broker. The best price to the Funds means the best net
price without regard to the mix between purchase or sale price and commissions,
if any. In selecting broker-dealers and in negotiating commissions, the Advisor,
and the Subadvisor, consider a variety of factors, including best price and
execution, the full range of brokerage services provided by the broker, as well
as its capital strength and stability, and the quality of the research and
research services provided by the broker. Brokerage will not be allocated based
on the sale of any shares of the Strong Funds.

The Advisor has adopted procedures that provide generally for the
Advisor to seek to bunch orders for the purchase or sale of the same security
for the Fund, other mutual funds managed by the Advisor, and other advisory
clients (collectively, the "client accounts"). The Advisor will bunch orders
when it deems it to be appropriate and in the best interest of the client
accounts. When a bunched order is filled in its entirety, each participating
client account will participate at the average share price for the bunched order
on the same business day, and transaction costs shall be shared pro rata based
on each client's participation in the bunched order. When a bunched order is
only partially filled, the securities purchased will be allocated on a pro rata
basis to each client account participating in the bunched order based upon the
initial amount requested for the account, subject to certain exceptions, and
each participating account will participate at the average share price for the
bunched order on the same business day.

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment advisor, under certain circumstances, to cause an account
to pay a broker or dealer a commission for effecting a transaction in excess of
the amount of commission another broker or dealer would have charged for
effecting the transaction in recognition of the value of the brokerage and
research services provided by the broker or dealer. Brokerage and research
services include (a) furnishing advice as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody).

In carrying out the provisions of the Advisory Agreements, and
Subadvisory Agreement, if applicable, the Advisor, and the Subadvisor, may cause
the Funds to pay a broker, which provides brokerage and research services to the
Advisor, a commission for effecting a securities transaction in excess of the
amount another broker would have charged for effecting the transaction. The
Advisor, and the Subadvisor, believe it is important to its investment
decision-making process to have access to independent research. The Advisory
Agreements provide that such higher commissions will not be paid by a Fund
unless (a) the Advisor determines in good faith that the amount is reasonable in
relation to the services in terms of the particular transaction or in terms of
the Advisor's overall responsibilities with respect to the accounts as to which
it exercises investment

31
<PAGE> 80
discretion; (b) such payment is made in compliance with the provisions of
Section 28(e), other applicable state and federal laws, and the Advisory
Agreement; and (c) in the opinion of the Advisor, the total commissions paid by
a Fund will be reasonable in relation to the benefits to the Fund over the long
term. The investment management fees paid by the Funds under the Advisory
Agreements are not reduced as a result of the Advisor's receipt of research
services.

Generally, research services provided by brokers may include
information on the economy, industries, groups of securities, individual
companies, statistical information, accounting and tax law interpretations,
political developments, legal developments affecting portfolio securities,
technical market action, pricing and appraisal services, credit analysis, risk
measurement analysis, performance analysis, and analysis of corporate
responsibility issues. Such research services are received primarily in the form
of written reports, telephone contacts, and personal meetings with security
analysts. In addition, such research services may be provided in the form of
access to various computer-generated data, computer hardware and software, and
meetings arranged with corporate and industry spokespersons, economists,
academicians, and government representatives. In some cases, research services
are generated by third parties but are provided to the Advisor by or through
brokers. Such brokers may pay for all or a portion of computer hardware and
software costs relating to the pricing of securities.

Where the Advisor itself receives both administrative benefits and
research and brokerage services from the services provided by brokers, it makes
a good faith allocation between the administrative benefits and the research and
brokerage services, and will pay for any administrative benefits with cash. In
making good faith allocations of costs between administrative benefits and
research and brokerage services, a conflict of interest may exist by reason of
the Advisor's allocation of the costs of such benefits and services between
those that primarily benefit the Advisor and those that primarily benefit the
Funds and other advisory clients.

From time to time, the Advisor may purchase new issues of securities
for a Fund in a fixed price offering. In these situations, the seller may be a
member of the selling group that will, in addition to selling the securities to
the Funds and other advisory clients, provide the Advisor with research. The
National Association of Securities Dealers has adopted rules expressly
permitting these types of arrangements under certain circumstances. Generally,
the seller will provide research "credits" in these situations at a rate that is
higher than that which is available for typical secondary market transactions.
These arrangements may not fall within the safe harbor of Section 28(e).

Each year, the Advisor considers the amount and nature of research and
research services provided by brokers, as well as the extent to which such
services are relied upon, and attempts to allocate a portion of the brokerage
business of the Funds and other advisory clients on the basis of that
consideration. In addition, brokers may suggest a level of business they would
like to receive in order to continue to provide such services. The actual
brokerage business received by a broker may be more or less than the suggested
allocations, depending upon the Advisor's evaluation of all applicable
considerations.

The Advisor has informal arrangements with various brokers whereby, in
consideration for providing research services and subject to Section 28(e), the
Advisor allocates brokerage to those firms, provided that their brokerage and
research services were satisfactory to the Advisor and their execution
capabilities were compatible with the Advisor's policy of seeking best execution
at the best security price available, as discussed above. In no case will the
Advisor make binding commitments as to the level of brokerage commissions it
will allocate to a broker, nor will it commit to pay cash if any informal
targets are not met. The Advisor anticipates it will continue to enter into such
brokerage arrangements.

The Advisor may direct the purchase of securities on behalf of the
Funds and other advisory clients in secondary market transactions, in public
offerings directly from an underwriter, or in privately negotiated transactions
with an issuer. When the Advisor believes the circumstances so warrant,
securities purchased in public offerings may be resold shortly after acquisition
in the immediate aftermarket for the security in order to take advantage of
price appreciation from the public offering price or for other reasons.
Short-term trading of securities acquired in public offerings, or otherwise, may
result in higher portfolio turnover and associated brokerage expenses.

The Advisor, and Subadvisor, place portfolio transactions for other
advisory accounts, including other mutual funds managed by the Advisor. Research
services furnished by firms through which the Funds effect their securities
transactions may be used by the Advisor in servicing all of its accounts; not
all of such services may be used by the Advisor, and Subadvisor, in connection
with the Funds. In the opinion of the Advisor, it is not possible to measure
separately the benefits from research services to each of the accounts
(including the Funds) managed by the Advisor. Because the volume and nature of
the trading

32
<PAGE> 81
activities of the accounts are not uniform, the amount of commissions in excess
of those charged by another broker paid by each account for brokerage and
research services will vary. However, in the opinion of the Advisor, such costs
to the Funds will not be disproportionate to the benefits received by the Funds
on a continuing basis.

The Advisor seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Funds and
another advisory account. In some cases, this procedure could have an adverse
effect on the price or the amount of securities available to the Funds. In
making such allocations between a Fund and other advisory accounts, the main
factors considered by the Advisor are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and the opinions of the persons responsible for recommending the
investment.

Where consistent with a client's investment objectives, investment
restrictions, and risk tolerance, the Advisor may purchase securities sold in
underwritten public offerings for client accounts, commonly referred to as
"deal" securities. The Advisor has adopted deal allocation procedures (the
"procedures"), summarized below, that reflect the Advisor's overriding policy
that deal securities must be allocated among participating client accounts in a
fair and equitable manner and that deal securities may not be allocated in a
manner that unfairly discriminates in favor of certain clients or types of
clients.

The procedures provide that, in determining which client accounts a
portfolio manager team will seek to have purchase deal securities, the team will
consider all relevant factors including, but not limited to, the nature, size,
and expected allocation to the Advisor of deal securities; the size of the
account(s); the accounts' investment objectives and restrictions; the risk
tolerance of the client; the client's tolerance for possibly higher portfolio
turnover; the amount of commissions generated by the account during the past
year; and the number of other deals the client has participated in during the
past year.

Where more than one of the Advisor's portfolio manager team seeks to
have client accounts participate in a deal and the amount of deal securities
allocated to the Advisor by the underwriting syndicate is less than the
aggregate amount ordered by the Advisor (a "reduced allocation"), the deal
securities will be allocated among the portfolio manager teams based on all
relevant factors. The primary factor shall be assets under management, although
other factors that may be considered in the allocation decision include, but are
not limited to, the nature, size, and expected allocation of the deal; the
amount of brokerage commissions or other amounts generated by the respective
participating portfolio manager teams; and which portfolio manager team is
primarily responsible for the Advisor receiving securities in the deal. Based on
the relevant factors, the Advisor has established general allocation percentages
for its portfolio manager teams, and these percentages are reviewed on a regular
basis to determine whether asset growth or other factors make it appropriate to
use different general allocation percentages for reduced allocations.

When a portfolio manager team receives a reduced allocation of deal
securities, the portfolio manager team will allocate the reduced allocation
among client accounts in accordance with the allocation percentages set forth in
the team's initial allocation instructions for the deal securities, except where
this would result in a de minimis allocation to any client account. On a regular
basis, the Advisor reviews the allocation of deal securities to ensure that they
have been allocated in a fair and equitable manner that does not unfairly
discriminate in favor of certain clients or types of clients.

As of December 31, 1995, the Discovery Fund had acquired securities of
its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or
their parents in the following amounts:

<TABLE>
<CAPTION>
Regular Broker or Dealer or Parent Issuer Value of Securities Owned as of December 31, 1995
- ----------------------------------------- -------------------------------------------------

<S> <C>
Chase Manhattan 28,870,000
</TABLE>

<PAGE> 82
The following table sets forth certain information concerning brokerage
commissions paid by each Fund that has completed a fiscal year.

<TABLE>
<CAPTION>
Opportunity Fund Brokerage Commissions
---------------- ---------------------
<S> <C>
1993 $ 1,347,000
1994 2,114,000
1995 3,873,000

Growth Fund
-----------
1994 $ 549,000
1995 2,125,360

Common Stock Fund
-----------------
1993 $ 2,120,000
1994 2,905,000
1995 3,060,000

Discovery Fund
--------------
1993 $ 3,901,000
1994 5,548,000
1995 6,380,000
</TABLE>

CUSTODIAN

Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201, serves
as custodian of the assets of the Opportunity, Growth, Common Stock, and
Discovery Funds. As a result, Firstar Trust Company has custody of all
securities and cash of the Funds, delivers and receives payment for securities
sold, receives and pays for securities purchased, collects income from
investments, and performs other duties, all as directed by the officers of the
Funds. The custodian is in no way responsible for any of the investment policies
or decisions of the Funds.

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

The Advisor acts as transfer agent and dividend-disbursing agent for
the Funds. The Advisor is compensated based on an annual fee per open account of
$21.75 for the Funds, plus out-of-pocket expenses, such as postage and printing
expenses in connection with shareholder communications. The Advisor also
receives an annual fee per closed account of $4.20 from each Fund. 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 under the
Advisory Agreements. In addition, the Advisor provides certain printing and
mailing services for the Funds, such as printing and mailing of shareholder
account statements, checks, and tax forms.

The following table sets forth certain information concerning amounts
paid by each Fund that has completed a fiscal year for transfer agency and
dividend disbursing and printing and mailing services:

<TABLE>
<CAPTION>
Transfer Agency and Dividend Disbursement
Services Charges Incurred
-----------------------------------------------------------------------------
Per Printing and Amounts Net Amount
Account Out-of-Pocket Mailing Waived By Paid By
Fund Charges Expenses Services Advisor Fund
---- ------- -------- -------- ------- ----
Opportunity Fund
<S> <C> <C> <C> <C> <C>
1993 $ 818,157 $ 177,231 $ 20,947 $ 0 $ 1,016,335
1994 1,512,509 305,446 34,044 0 1,851,999
1995 2,291,454 216,920 40,488 0 2,548,862
</TABLE>

<PAGE> 83
<TABLE>
<CAPTION>
Transfer Agency and Dividend Disbursement
Services Charges Incurred
-----------------------------------------------------------------------------
Per Printing and Amounts Net Amount
Account Out-of-Pocket Mailing Waived By Paid By
Fund Charges Expenses Services Advisor Fund
---- ------- -------- -------- ------- ----
Growth Fund
<S> <C> <C> <C> <C> <C>
1994 $ 142,921 $ 34,501 $ 3,818 $ 0 $ 181,240
1995 1,029,731 99,888 17,794 0 1,147,413
Common Stock Fund
1993 $ 1,304,233 $ 392,470 $ 43,107 $ 0 $ 1,739,810
1994 1,449,445 398,828 41,781 0 1,890,054
1995 1,424,965 186,368 33,018 0 1,644,351
Discovery Fund
1993 $ 591,796 $ 139,185 $ 16,937 $ 0 $ 747,918
1994 1,021,993 215,173 24,127 0 1,261,293
1995 1,172,370 126,755 23,139 0 1,322,264
</TABLE>
- ----------------------------------------------------------------------

From time to time, the Funds, directly or indirectly through
arrangements with the Advisor, and/or 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, such as
participants in 401(k) plans. These services may include, among other things,
sub-accounting services, transfer agent type activities, answering inquiries
relating to the Funds, transmitting, on behalf of the Funds, proxy statements,
annual reports, updated Prospectuses, other communications regarding the Funds,
and related services as the Funds or beneficial owners may reasonably request.
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.

TAXES

GENERAL

As indicated under "About the Funds - Distributions and Taxes" in the
Prospectus, each Fund intends to continue to qualify annually for treatment as a
regulated investment company ("RIC") under the Code. This qualification does not
involve government supervision of the Funds' management practices or policies.

In order to qualify for treatment as a RIC under the Code, each Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign currency
transactions) ("Distribution Requirement") and must meet several additional
requirements. For each Fund, these requirements include the following: (1) the
Fund must derive at least 90% of its gross income each taxable year from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of securities or foreign currencies or other
income (including gains from options, futures, or forward contracts) derived
with respect to its business of investing in securities of those currencies
("Income Requirement"); (2) the Fund must derive less than 30% of its gross
income each taxable year from the sale or other disposition of securities, or
any of the following that were held for less than three months -- options or
futures (other than those on foreign currencies), or foreign currencies (or
options, futures, or forward contracts thereon) that are not directly related to
the Fund's principal business of investing in securities (or options and futures
with respect to securities) ("30% Limitation"); (3) at the close of each quarter
of the Fund's taxable year, at least 50% of the value of its total assets must
be represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (4) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer. From time to time the Advisor may
find it necessary to make certain types of investments for the purpose of
ensuring that the Fund continues to qualify for treatment as a RIC under the
Code.

If Fund shares are sold at a loss after being held for six months or
less, the loss will be treated as long-term, instead of short-term, capital loss
to the extent of any capital gain distributions received on those shares.

35
<PAGE> 84
Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

FOREIGN TRANSACTIONS

Dividends and interest received by a Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors. If more than 50% of the value of a
Fund's total assets at the close of its taxable year consists of securities of
foreign corporations, it will be eligible to, and may, file an election with the
Internal Revenue Service that would enable its shareholders, in effect, to
receive the benefit of the foreign tax credit with respect to any foreign and
U.S. possessions income taxes paid by it. Pursuant to the election, a Fund would
treat those taxes as dividends paid to its shareholders and each shareholder
would be required to (1) include in gross income, and treat as paid by him, his
proportionate share of those taxes, (2) treat his share of those taxes and of
any dividend paid by the Fund that represents income from foreign or U.S.
possessions sources as his own income from those sources, and (3) either deduct
the taxes deemed paid by him in computing his taxable income or, alternatively,
use the foregoing information in calculating the foreign tax credit against his
federal income tax. Each Fund will report to its shareholders shortly after each
taxable year their respective shares of its income from sources within, and
taxes paid to, foreign countries and U.S. possessions if it makes this election.

Each Fund maintains its accounts and calculates its income in U.S.
dollars. In general, gain or loss (1) from the disposition of foreign currencies
and forward currency contracts, (2) from the disposition of
foreign-currency-denominated debt securities that are attributable to
fluctuations in exchange rates between the date the securities are acquired and
their disposition date, and (3) attributable to fluctuations in exchange rates
between the time a Fund accrues interest or other receivables or expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects those receivables or pays those liabilities, will be treated
as ordinary income or loss. A foreign-currency-denominated debt security
acquired by a Fund may bear interest at a high normal rate that takes into
account expected decreases in the value of the principal amount of the security
due to anticipated currency devaluations; in that case, the Fund would be
required to include the interest in income as it accrues but generally would
realize a currency loss with respect to the principal only when the principal
was received (through disposition or upon maturity).

The Funds may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a portion of any "excess distribution" received
on the stock or of any gain on disposition of the stock (collectively, "PFIC
income"), plus interest thereon, even if the Fund distributes the PFIC income as
a taxable dividend to its shareholders. The balance of the PFIC income will be
included in the Fund's investment company taxable income and, accordingly, will
not be taxable to it to the extent that income is distributed to its
shareholders. If a Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) -- which probably would have to be distributed to its shareholders
to satisfy the Distribution Requirement and avoid imposition of the Excise Tax
- -- even if those earnings and gain were not received by the Fund. In most
instances it will be very difficult, if not impossible, to make this election
because of certain requirements thereof.

DERIVATIVE INSTRUMENTS

The use of derivatives strategies, such as purchasing and selling
(writing) options and futures and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the character
and timing of recognition of the gains and losses the Funds realize in
connection therewith. Gains from the disposition of foreign currencies (except
certain gains therefrom that may be excluded by future regulations), and income
from transactions in options, futures, and forward currency contracts derived by
a Fund with respect to its business of investing in securities or foreign
currencies, will qualify as permissible income under the Income Requirement.
However, income from the disposition of options and futures (other than those on
foreign currencies) will be subject to the 30% Limitation if they are held for
less than three months. Income from the disposition of foreign currencies, and
options, futures, and forward contracts on foreign currencies, that are not
directly related to a Fund's principal business of investing in securities (or
options and futures with respect to securities) also will be subject to the 30%
Limitation if they are held for less than three months.

36
<PAGE> 85
Income from the disposition of foreign currencies, and options, futures, and
forward contracts on foreign currencies, that are not directly related to a
Fund's principal business of investing in securities (or options and futures
with respect to securities) also will be subject to the 30% Limitation if they
are held for less than three months.

If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
30% Limitation. Thus, only the net gain (if any) from the designated hedge will
be included in gross income for purposes of that limitation. The Funds intend
that, when they engage in hedging strategies, the hedging transactions will
qualify for this treatment, but at the present time it is not clear whether this
treatment will be available for all of the Funds' hedging transactions. To the
extent this treatment is not available or is not elected by a Fund, it may be
forced to defer the closing out of certain options, futures, or forward currency
contracts beyond the time when it otherwise would be advantageous to do so, in
order for the Fund to continue to qualify as a RIC.

For federal income tax purposes, each Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on options,
futures, or forward currency contracts that are subject to section 1256 of the
Code ("Section 1256 Contracts") and are held by the Fund as of the end of the
year, as well as gains and losses on Section 1256 Contracts actually realized
during the year. Except for Section 1256 Contracts that are part of a "mixed
straddle" and with respect to which a Fund makes a certain election, any gain or
loss recognized with respect to Section 1256 Contracts is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss, without
regard to the holding period of the Section 1256 Contract. Unrealized gains on
Section 1256 Contracts that have been held by a Fund for less than three months
as of the end of its taxable year, and that are recognized for federal income
tax purposes as described above, will not be considered gains on investments
held for less than three months for purposes of the 30% Limitation.

ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES

Certain Funds may acquire zero-coupon, step-coupon, or other securities
issued with original issue discount. As a holder of those securities, a Fund
must include in its income the original issue discount that accrues on the
securities during the taxable year, even if the Fund receives no corresponding
payment on the securities during the year. Similarly, a Fund must include in its
income securities it receives as "interest" on pay-in-kind securities. Because a
Fund annually must distribute substantially all of its investment company
taxable income, including any original issue discount and other non-cash income,
to satisfy the Distribution Requirement and avoid imposition of the Excise Tax,
it may be required in a particular year to distribute as a dividend an amount
that is greater than the total amount of cash it actually receives. Those
distributions may be made from the proceeds on sales of portfolio securities, if
necessary. A Fund may realize capital gains or losses from those sales, which
would increase or decrease its investment company taxable income or net capital
gain, or both. In addition, any such gains may be realized on the disposition of
securities held for less than three months. Because of the 30% Limitation, any
such gains would reduce the Fund's ability to sell other securities, or certain
options, futures or forward contracts, held for less that three months that it
might wish to sell in the ordinary course of its portfolio management.

The foregoing federal tax discussion as well as the tax discussion
contained within the Prospectus under "About the Funds - Distributions and
Taxes" is intended to provide you with an overview of the impact of federal
income tax provisions on each Fund or its shareholders. These tax provisions are
subject to change by legislative or administrative action at the federal, state
or local level, and any changes may be applied retroactively. Any such action
that limits or restricts each Fund's current ability to pass-through earnings
without taxation at the Fund level, or otherwise materially changes a Fund's tax
treatment, could adversely affect the value of a shareholder's investment in a
Fund. Because each Fund's taxes are a complex matter, you should consult your
tax adviser for more detailed information concerning the taxation of a Fund and
the federal, state, and local tax consequences to shareholders of an investment
in a Fund.

DETERMINATION OF NET ASSET VALUE

As set forth in the Prospectus under the caption "Shareholder Manual -
Determining Your Share Price," the net asset value of each Fund will be
determined as of the close of trading on each day the New York Stock Exchange
(the "NYSE") is open for trading. The NYSE is open for trading Monday through
Friday except, New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Additionally,
if any of the

37
<PAGE> 86
aforementioned holidays falls on a Saturday, the NYSE will not be open for
trading on the preceding Friday, and when any such holiday falls on a Sunday,
the NYSE will not be open for trading on the succeeding Monday, unless unusual
business conditions exist, such as the ending of a monthly or yearly accounting
period.

Debt securities are valued by a pricing service that utilizes
electronic data processing techniques to determine values for normal
institutional-sized trading units of debt securities without regard to sale or
bid prices when such values are believed to more accurately reflect the fair
market value for such securities. Otherwise, sale or bid prices are used. Any
securities or other assets for which market quotations are not readily available
are valued at fair value as determined in good faith by the Board of Directors
of each Fund. Debt securities having remaining maturities of 60 days or less are
valued by the amortized cost method when the respective Fund's Board of
Directors determines that the fair value of such securities is their amortized
cost. Under this method of valuation, a security is initially valued at its
acquisition cost, and thereafter, amortization of any discount or premium is
assumed each day, regardless of the impact of the fluctuating rates on the
market value of the instrument.

ADDITIONAL SHAREHOLDER INFORMATION

TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES AND AUTOMATIC EXCHANGE PLAN

The Funds employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Funds may not be liable for losses
due to unauthorized or fraudulent instructions. Such procedures include but are
not limited to requiring a form of personal identification prior to acting on
instructions received by telephone, providing written confirmations of such
transactions to the address of record, and tape recording telephone
instructions.

RETIREMENT PLANS

Individual Retirement Account (IRA): Everyone under age 70 1/2 with earned
income may contribute to a tax-deferred IRA. The Strong Funds offer a prototype
plan for you to establish your own IRA. You are allowed to contribute up to the
lesser of $2,000 or 100% of your earned income each year to your IRA. Under
certain circumstances, your contribution will be deductible.

Direct Rollover IRA: To avoid the mandatory 20% federal withholding tax on
distributions, you must transfer the qualified retirement or Code section 403(b)
plan distribution directly into an IRA. This tax cannot be avoided if you
receive a distribution and then roll it over into an IRA. The amount of your
Direct Rollover IRA contribution will not be included in your taxable income for
the year.

Simplified Employee Pension Plan (SEP-IRA): A SEP-IRA allows an employer to make
deductible contributions to separate IRA accounts established for each eligible
employee.

Salary Reduction Simplified Employee Pension Plan (SAR SEP-IRA): A SAR SEP-IRA
is a type of SEP-IRA in which an employer may allow employees to defer part of
their salaries and contribute to an IRA account. These deferrals help lower the
employees' taxable income.

Defined Contribution Plan: A defined contribution plan allows self-employed
individuals, partners, or a corporation to provide retirement benefits for
themselves and their employees. There are three plan types: a profit-sharing
plan, a money purchase pension plan, and a paired plan (a combination of a
profit-sharing plan and a money purchase plan).

401(k) Plan: A 401(k) plan is a type of profit-sharing plan that allows
employees to have part of their salary contributed to a retirement plan which
will earn tax-deferred income. A 401(k) plan is funded by employee
contributions, employer contributions, or a combination of both.

38
<PAGE> 87
403(b)(7) Plan: A tax-sheltered custodial account designed to qualify under
section 403(b)(7) of the Code is available for use by employees of certain
educational, non-profit, hospital, and charitable organizations.

39
<PAGE> 88
FUND ORGANIZATION

Each Corporation was organized on the following dates and currently has
the following authorized shares of capital stock:

<TABLE>
<CAPTION>
Incorporation Date Series Authorized Par
Corporation Date Created Shares Value ($)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strong Opportunity Fund, Inc. 07/05/83 Indefinite .01
Strong Equity Funds, Inc. (1) 12/28/90 Indefinite .00001
- Strong Growth Fund 12/28/90 Indefinite .00001
- Strong Value Fund 11/1/95 Indefinite .00001
- Strong Small Cap Fund 11/1/95 Indefinite .00001
- Strong Mid Cap Fund* 10/28/96 Indefinite .00001
Strong Common Stock Fund, Inc. 11/11/88 Indefinite .001
Strong Discovery Fund, Inc. 09/24/87 Indefinite .001
</TABLE>

*Described in a different prospectus and Statement of Additional Information.
(1) Prior to November 1, 1995, the Fund's name was Strong Growth Fund, Inc.

The Opportunity, Common Stock, and Discovery Funds are Wisconsin
corporations (each a "Corporation") that are authorized to offer separate series
of shares representing interests in separate portfolios of securities, each with
differing investment objectives. The Growth, Small Cap, and Value Funds are
series of common stock of Strong Equity Funds, Inc., a Wisconsin corporation (a
"Corporation") that is authorized to offer separate series of shares
representing interests in separate portfolios of securities, each with differing
objectives. The shares in any one portfolio may, in turn, be offered in separate
classes, each with differing preferences, limitations or relative rights.
However, the Articles of Incorporation for each of the Corporations provides
that if additional classes of shares are issued by a Corporation, such new
classes of shares may not affect the preferences, limitations or relative rights
of the Corporation's outstanding shares. In addition, the Board of Directors of
each Corporation is authorized to allocate assets, liabilities, income and
expenses to each series and class. Classes within a series may have different
expense arrangements than other classes of the same series and, accordingly, the
net asset value of shares within a series may differ. Finally, all holders of
shares of a Corporation may vote on each matter presented to shareholders for
action except with respect to any matter which affects only one or more series
or class, in which case only the shares of the affected series or class are
entitled to vote. Fractional shares have the same rights proportionately as do
full shares. Shares of the Corporation have no preemptive, conversion, or
subscription rights. If a Corporation issues additional series, the assets
belonging to each series of shares will be held separately by the custodian, and
in effect each series will be a separate fund.

SHAREHOLDER MEETINGS

The Wisconsin Business Corporation Law permits registered investment
companies, such as the Corporations, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the 1940 Act. Each Corporation has adopted the appropriate provisions in
their Bylaws and may, at their discretion, not hold an annual meeting in any
year in which the election of directors is not required to be acted on by
shareholders under the 1940 Act.

Each Corporation's Bylaws allow for a director to be removed by its
shareholders with or without cause, only at a meeting called for the purpose of
removing the director. Upon the written request of the holders of shares
entitled to not less than ten percent (10%) of all the votes entitled to be cast
at such meeting, the Secretary of the Corporation shall promptly call a special
meeting of shareholders for the purpose of voting upon the question of removal
of any director. The Secretary of the Corporation shall inform such shareholders
of the reasonable estimated costs of preparing and mailing the notice of the

40
<PAGE> 89
meeting, and upon payment to the Corporation of such costs, the Corporation
shall give not less than ten nor more than sixty days notice of the special
meeting.

PERFORMANCE INFORMATION

As described under "About the Funds - Performance Information" in the
Prospectus, each Fund's historical performance or return may be shown in the
form of "average annual total return," "total return," and "cumulative total
return." From time to time, the Advisor may voluntarily waive all or a portion
of its management fee and/or absorb certain expenses for a Fund. Without these
waivers and absorption of expenses, the performance results for the Funds noted
herein would have been lower. All performance and returns noted herein are
historical and do not represent the future performance of a Fund.

AVERAGE ANNUAL TOTAL RETURN

The average annual total return of a Fund is computed by finding the
average annual compounded rates of return over these periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:

P (1 + T)(n) = ERV

P = a hypothetical initial payment of $10,000. T = average annual
total return.
(n) = number of years.
ERV = ending redeemable value of a hypothetical $10,000 payment
made at the beginning of the stated periods at the end of the stated
periods.

TOTAL RETURN

Calculation of a Fund's total return is not subject to a standardized
formula. Total return performance for a specific period is calculated by first
taking an investment (assumed below to be $10,000) ("initial investment") in a
Fund's shares on the first day of the period and computing the "ending value" of
that investment at the end of the period. The total return percentage is then
determined by subtracting the initial investment from the ending value and
dividing the remainder by the initial investment and expressing the result as a
percentage. The calculation assumes that all income and capital gains dividends
paid by a Fund have been reinvested at net asset value on the reinvestment dates
during the period. Total return may also be shown as the increased dollar value
of the hypothetical investment over the period.

CUMULATIVE TOTAL RETURN

Cumulative total return represents the simple change in value of an
investment over a stated period and may be quoted as a percentage or as a dollar
amount. Total returns and cumulative total returns my be broken down into their
components of income and capital (including capital gains and changes in share
price) in order to illustrate the relationship between these factors and their
contributions to total return.

Each of the Fund's performance figures are based upon historical
results and do not represent future performance. Each Fund's shares are sold at
net asset value per share. Each Fund's returns and net asset value will
fluctuate and shares are redeemable at the then current net asset value of the
Fund, which may be more or less than original cost. Factors affecting a Fund's
performance include general market conditions, operating expenses, and
investment management. Any additional fees charged by a dealer or other
financial services firm would reduce the returns described in this section.

The table below shows performance information for various periods ended
December 31, 1995. No adjustment has been made for taxes, if any, payable on
dividends. Securities prices fluctuated during these periods.

41
<PAGE> 90
<TABLE>
<CAPTION>
OPPORTUNITY FUND
- ----------------
Total Average Annual
Return Total Return
Initial Ending Value ---------- ------------
$10,000 June 30, Percentage Percentage
Investment 1996 Increase Increase
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $57,958 479.58% 18.22%
Ten Years 10,000 32,288 222.88 12.44
Five Years 10,000 23,364 133.64 18.50
One Year 10,000 11,970 19.70 19.70
</TABLE>

-----------------------
(1) Commenced operations on December 31, 1985.

<TABLE>
<CAPTION>
GROWTH FUND
- -----------
Total Average Annual
Return Total Return
Initial Ending Value ------ ------------
$10,000 June 30, Percentage Percentage
Investment 1996 Increase Increase
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $19,433 94.33% 30.44%
One Year 10,000 13,891 38.91 38.91
</TABLE>

--------------------
(1) Commenced operations on December 31, 1993.

<TABLE>
<CAPTION>
COMMON STOCK FUND
- -----------------
Total Average Annual
Return Total Return
Initial Ending Value ------ ------------
$10,000 June 30 , Percentage Percentage
Investment 1996 Increase Increase
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $34,142 241.42% 20.79%
Five Year 10,000 26,494 164.94 21.51
One Year 10,000 12,206 22.06 22.06
</TABLE>

------------------------
(1) Commenced operations on December 29, 1989.

<TABLE>
<CAPTION>
DISCOVERY FUND
- --------------
Total Average Annual
Return Total Return
Initial Ending Value ------ ------------
$10,000 June 30 , Percentage Percentage
Investment 1996 Increase Increase
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $39,082 290.82% 17.39%
Five Years 10,000 21,054 110.54 16.06
One Year 10,000 11,336 13.36 13.36
</TABLE>

------------------------
(1) Commenced operations on December 31, 1987.

42
<PAGE> 91
VALUE FUND
- ----------

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial Ending Value
$10,000 June 30, Percentage Percentage
Investment 1996 Increase Increase
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $11,073 10.73% N/A
</TABLE>

------------------------
(1) Commenced operations on December 31, 1995.

SMALL CAP FUND
- --------------

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial Ending Value
$10,000 June 30, Percentage Percentage
Investment 1996 Increase Increase
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $12,469 24.69% N/A
</TABLE>

------------------------
(1) Commenced operations on December 31, 1995.

The Opportunity, Growth, Common Stock, Discovery, Small Cap and Value
Funds' total returns for the three months ending June 30, 1996, were 2.33%,
10.28%, .86%, 1.09%, 6.31% and 1.87%, respectively.

COMPARISONS

(1) U.S. TREASURY BILLS, NOTES, OR BONDS

Investors may want to compare the performance of a Fund to that of U.S.
Treasury bills, notes or bonds, which are issued by the U.S. government.
Treasury obligations are issued in selected denominations. Rates of Treasury
obligations are fixed at the time of issuance and payment of principal and
interest is backed by the full faith and credit of the United States Treasury.
The market value of such instruments will generally fluctuate inversely with
interest rates prior to maturity and will equal par value at maturity.
Generally, the values of obligations with shorter maturities will fluctuate less
than those with longer maturities.

(2) CERTIFICATES OF DEPOSIT

Investors may want to compare a Fund's performance to that of
certificates of deposit offered by banks and other depositary institutions.
Certificates of deposit may offer fixed or variable interest rates and principal
is guaranteed and may be insured. Withdrawal of the deposits prior to maturity
normally will be subject to a penalty. Rates offered by banks and other
depositary institutions are subject to change at any time specified by the
issuing institution.

(3) MONEY MARKET FUNDS

Investors may also want to compare performance of a Fund to that of
money market funds. Money market fund yields will fluctuate and shares are not
insured, but share values usually remain stable.

(4) LIPPER ANALYTICAL SERVICES, INC. ("LIPPER") AND OTHER INDEPENDENT
RANKING ORGANIZATIONS

From time to time, in marketing and other fund literature, a Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds, with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, may be
cited. Lipper performance figures are based on changes in net asset value, with
all income and capital gain dividends reinvested. Such calculations do not
include

43
<PAGE> 92

the effect of any sales charges imposed by other funds. A Fund will be
compared to Lipper's appropriate fund category, that is, by fund objective and
portfolio holdings. A Fund's performance may also be compared to the average
performance of its Lipper category.

(5) MORNINGSTAR, INC.

A Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. which rates funds on the basis of historical
risk and total return. Morningstar's ratings range from five stars (highest) to
one star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a fund as a weighted average for 3, 5, and 10 year
periods. Ratings are not absolute and do not represent future results.

(6) INDEPENDENT SOURCES

Evaluations of Fund performance made by independent sources may also be
used in advertisements concerning a Fund, including reprints of, or selections
from, editorials or articles about a Fund, especially those with similar
objectives. Sources for Fund performance information and articles about a Fund
may include publications such as Money, Forbes, Kiplinger's, Smart Money,
Morningstar, Inc., Financial World, Business Week, U.S. News and World Report,
The Wall Street Journal, Barron's, and a variety of investment newsletters.

(7) INDICES

A Fund may compare its performance to a wide variety of indices
including the following:

(a) Consumer Price Index
(b) Dow Jones Average of 30 Industrials
(c) NASDAQ Over-the-Counter Composite Index
(d) Standard & Poor's 500 Stock Index
(e) Standard & Poor's 400 Mid-Cap Stock Index
(f) Standard & Poor's 600 Small-Cap Index
(g) Standard & Poor's Barra Value Index
(h) Wilshire 4500 Index
(i) Wilshire 5000 Index
(j) Wilshire Small Cap Index
(k) Wilshire Small Cap Growth Index
(l) Wilshire Small Cap Value Index
(m) Wilshire Midcap 750 Index
(n) Wilshire Midcap Growth Index
(o) Wilshire Midcap Value Index
(p) Wilshire Large Cap Growth Index
(q) Russell 1000 Index
(r) Russell 1000 Growth Index
(s) Russell 1000 Value Index
(t) Russell 2000 Index
(u) Russell 2000 Small Stock Index
(v) Russell 2000 Growth Index
(w) Russell 2000 Value Index
(x) Russell 2500 Index
(y) Russell 3000 Stock Index
(z) Russell MidCap Index
(aa) Russell MidCap Growth Index
(bb) Russell MidCap Value Index
(cc) Value Line Index
(dd) Morgan Stanley Capital International EAFE(R) Index (Net
Dividend, Gross Dividend, and Price-Only). In addition, a Fund
may compare its performance to certain other indices that
measure stock market performance in geographic areas in which
the Fund may invest. The market prices and yields of the
stocks in these indexes will fluctuate. A Fund may also
compare its portfolio weighting to the EAFE Index

44
<PAGE> 93

weighting, which represents the relative capitalization of the
major overseas markets on a dollar-adjusted basis
(ee) Morgan Stanley Capital International World Index

There are differences and similarities between the investments that a
Fund may purchase for its portfolio and the investments measured by these
indices.

(8) HISTORICAL ASSET CLASS RETURNS

From time to time, marketing materials may portray the historical
returns of various asset classes. Such presentations will typically compare the
average annual rates of return of inflation, U.S. Treasury bills, bonds, common
stocks, and small stocks. There are important differences between each of these
investments that should be considered in viewing any such comparison. The market
value of stocks will fluctuate with market conditions, and small-stock prices
generally will fluctuate more than large-stock prices. Stocks are generally more
volatile than bonds. In return for this volatility, stocks have generally
performed better than bonds or cash over time. Bond prices generally will
fluctuate inversely with interest rates and other market conditions, and the
prices of bonds with longer maturities generally will fluctuate more than those
of shorter-maturity bonds. Interest rates for bonds may be fixed at the time of
issuance, and payment of principal and interest may be guaranteed by the issuer
and, in the case of U.S. Treasury obligations, backed by the full faith and
credit of the U.S. Treasury.

45
<PAGE> 94

(9) STRONG FAMILY OF FUNDS

The Strong Family of Funds offers a comprehensive range of conservative
to aggressive investment options. Members of the Strong Family and their
investment objectives are listed below.

FUND NAME INVESTMENT OBJECTIVE
- --------- --------------------

Strong Money Market Fund Current income, a stable share price, and
daily liquidity.

Strong Heritage Money Fund Current income, a stable share price, and
daily liquidity.

Strong Municipal Money Market Federally tax-exempt current income, a
Fund stable share-price, and daily liquidity.

Strong Municipal Advantage Fund Federally tax-exempt current income with
a very low degree of share-price
fluctuation.

Strong Advantage Fund Current income with a very low degree of
share-price fluctuation.

Strong Short-Term Municipal Bond Total return by investing for a high
Fund level of federally tax-exempt current
income with a low degree of share-price
fluctuation.

Strong Short-Term Bond Fund Total return by investing for a high
level of current income with a low
degree of share-price fluctuation.

Strong Short-Term Global Bond Total return by investing for a high
Fund level of income with a low degree of
share-price fluctuation.

Strong Government Securities Fund Total return by investing for a high
level of current income with a moderate
degree of share-price fluctuation.

Strong Municipal Bond Fund Total return by investing for a high
level of federally tax-exempt current
income with a moderate degree of
share-price fluctuation.

Strong Corporate Bond Fund Total return by investing for a high
level of current income with a moderate
degree of share-price fluctuation.

Strong High-Yield Municipal Bond Total return by investing for a high
Fund level of federally tax-exempt current
income.

Strong High-Yield Bond Fund Total return by investing for a high
level of current income and capital
growth.

Strong International Bond Fund High total return by investing for both
income and capital appreciation.

Strong Asset Allocation Fund High total return consistent with
reasonable risk over the long term.

Strong Equity Income Fund Total return by investing for both income
and capital growth.

Strong American Utilities Fund Total return by investing for both income
and capital growth.

Strong Total Return Fund High total return by investing for
capital growth and income.

Strong Growth and Income Fund High total return by investing for
capital growth and income.

Strong Schafer Value Fund Long-term capital appreciation
principally through investment in
common stocks and other equity
securities. Current income is a
secondary objective.

Strong Value Fund Capital growth.

Strong Opportunity Fund Capital growth.

Strong Growth Fund Capital growth.

Strong Common Stock Fund* Capital growth.

Strong Mid Cap Fund Capital growth

Strong Small Cap Fund Capital growth.

Strong Discovery Fund Capital growth.

Strong International Stock Fund Capital growth.

Strong Asia Pacific Fund Capital growth.

* The Fund is closed to new investors, except the Fund may continue to offer its
shares through certain 401(k) plans and similar company-sponsored retirement
plans.

The Advisor also serves as Advisor or Subadvisor to several management
investment companies, some of which fund variable annuity separate accounts of
certain insurance companies.

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<PAGE> 95

Each Fund may from time to time be compared to the other funds in the
Strong Family of Funds based on a risk/reward spectrum. In general, the amount
of risk associated with any investment product is commensurate with that
product's potential level of reward. The Strong Funds risk/reward continuum or
any Fund's position on the continuum may be described or diagrammed in marketing
materials. The Strong Funds risk/reward continuum positions the risk and reward
potential of each Strong Fund relative to the other Strong Funds, but is not
intended to position any Strong Fund relative to other mutual funds or
investment products. Marketing materials may also discuss the relationship
between risk and reward as it relates to an individual investor's portfolio.

Financial goals vary from person to person. You may choose one or more
of the Strong Funds to help you reach your financial goals. To help you better
understand the Strong Growth Funds and determine which Fund or combination of
Funds best meets your personal investment objectives, they are described in the
same Prospectus.

(10) TYING TIME FRAMES TO YOUR GOALS

There are many issues to consider as you make your investment
decisions, including analyzing your risk tolerance, investing experience, and
asset allocations. You should start to organize your investments by learning to
link your many financial goals to specific time frames. Then you can begin to
identify the appropriate types of investments to help meet your goals. As a
general rule of thumb, the longer your time horizon, the more price fluctuation
you will be able to tolerate in pursuit of higher returns. For that reason, many
people with longer-term goals select stocks or long-term bonds, and many people
with nearer-term goals match those up with for instance, short-term bonds. The
Advisor developed the following suggested holding periods to help our investors
set realistic expectations for both the risk and reward potential of our funds.
(See table below.) Of course, time is just one element to consider when making
your investment decision.

STRONG FUNDS SUGGESTED MINIMUM HOLDING PERIODS

<TABLE>
<CAPTION>
UNDER 1 YEAR 1 TO 2 YEARS 4 TO 7 YEARS 5 OR MORE YEARS
<S> <C> <C> <C>
Money Market Fund Advantage Fund Government Securities Fund Total Return Fund
Heritage Money Fund Municipal Advantage Fund Municipal Bond Fund Opportunity Fund
Municipal Money Market Fund Corporate Bond Fund Growth Fund
2 TO 4 YEARS International Bond Fund Common Stock Fund*
Short-Term Bond Fund High-Yield Municipal Bond Fund Discovery Fund
Short-Term Municipal Bond Fund Asset Allocation Fund International Stock Fund
Short-Term Global Bond American Utilities Fund Asia Pacific Fund
High-Yield Bond Fund Value Fund
Equity Income Fund Small Cap Fund
Mid Cap Fund
Growth and Income Fund
Schafer Value Fund
</TABLE>

* This Fund is closed to new investors, except the Fund may continue to offer
its shares through certain 401(k) plans and similar company-sponsored retirement
plans.

ADDITIONAL FUND INFORMATION

(1) PORTFOLIO CHARACTERISTICS

In order to present a more complete picture of a Fund's portfolio,
marketing materials may include various actual or estimated portfolio
characteristics, including but not limited to median market capitalizations,
earnings per share, alphas, betas, price/earnings ratios, returns on equity,
dividend yields, capitalization ranges, growth rates, price/book ratios, top
holdings, sector breakdowns, asset allocations, quality breakdowns, and
breakdowns by geographic region.

(2) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

Occasionally statistics may be used to specify Fund volatility or risk.
The general premise is that greater volatility connotes greater risk undertaken
in achieving performance. Measures of volatility or risk are generally used to
compare the Fund's net asset value or performance relative to a market index.
One measure of volatility is beta. Beta is the volatility of

47
<PAGE> 96

a fund relative to the total market as represented by the Standard & Poor's 500
Stock Index. A beta of more than 1.00 indicates volatility greater than the
market, and a beta of less than 1.00 indicates volatility less than the market.
Another measure of volatility or risk is standard deviation. Standard deviation
is a statistical tool that measures the degree to which a fund's performance has
varied from its average performance during a particular time period.

Standard deviation is calculated using the following formula:

<TABLE>
<S> <C> <C>
Standard deviation = the square root of the sum of (x log i - x log m)squared
-------------------------------------
n-1
</TABLE>

where the sum of = "the sum of",

x log i = each individual return during the time period,

x log m = the average return over the time period, and

n = the number of individual returns during the time period.

Statistics may also be used to discuss a Fund's relative performance.
One such measure is alpha. Alpha measures the actual return of a fund compared
to the expected return of a fund given its risk (as measured by beta). The
expected return is based on how the market as a whole performed, and how the
particular fund has historically performed against the market. Specifically,
alpha is the actual return less the expected return. The expected return is
computed by multiplying the advance or decline in a market representation by the
fund's beta. A positive alpha quantifies the value that the fund manager has
added, and a negative alpha quantifies the value that the fund manager has lost.

Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.

GENERAL INFORMATION

BUSINESS PHILOSOPHY

The Advisor is an independent, Midwestern-based investment advisor,
owned by professionals active in its management. Recognizing that investors are
the focus of its business, the Advisor strives for excellence both in investment
management and in the service provided to investors. This commitment affects
many aspects of the business, including professional staffing, product
development, investment management, and service delivery.

The increasing complexity of the capital markets requires specialized
skills and processes for each asset class and style. Therefore, the Advisor
believes that active management should produce greater returns than a passively
managed index. The Advisor has brought together a group of top-flight investment
professionals with diverse product expertise, and each concentrates on their
investment specialty. The Advisor believes that people are the firm's most
important asset. For this reason, continuity of professionals is critical to the
firm's long-term success.

INVESTMENT ENVIRONMENT

Discussions of economic, social, and political conditions and their
impact on the Funds may be used in advertisements and sales materials. Such
factors that may impact the Funds include, but are not limited to, changes in
interest rates, political developments, the competitive environment, consumer
behavior, industry trends, technological advances, macroeconomic trends, and the
supply and demand of various financial instruments. In addition, marketing
materials may cite the portfolio management's views or interpretations of such
factors.

EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING

These common sense rules are followed by many successful investors.
They make sense for beginners, too. If you have a question on these principles,
or would like to discuss them with us, please contact us at 1-800-368-3863.

1. Have a plan - even a simple plan can help you take control of your financial
future. Review your plan once a year, or if your circumstances change.

48
<PAGE> 97

2. Start investing as soon as possible. Make time a valuable ally. Let it put
the power of compounding to work for you, while helping to reduce your
potential investment risk.

3. Diversify your portfolio. By investing in different asset classes - stocks,
bonds, and cash - you help protect against poor performance in one type of
investment while including investments most likely to help you achieve your
important goals.

4. Invest regularly. Investing is a process, not a one-time event. By investing
regularly over the long term, you reduce the impact of short-term market
gyrations, and you attend to your long-term plan before you're tempted to
spend those assets on short-term needs.

5. Maintain a long-term perspective. For most individuals, the best discipline
is staying invested as market conditions change. Reactive, emotional
investment decisions are all too often a source of regret - and principal
loss.

6. Consider stocks to help achieve major long-term goals. Over time, stocks
have provided the more powerful returns needed to help the value of your
investments stay well ahead of inflation.

7. Keep a comfortable amount of cash in your portfolio. To meet current needs,
including emergencies, use a money market fund or a bank account - not your
long-term investment assets.

8. Know what you're buying. Make sure you understand the potential risks and
rewards associated with each of your investments. Ask questions... request
information...make up your own mind. And choose a fund company that helps
you make informed investment decisions.

STRONG RETIREMENT PLAN SERVICES

Strong Retirement Plan Services offers a full menu of high quality,
affordable retirement plan options, including traditional money purchase pension
and profit sharing plans, 401(k) plans, simplified employee pension plans,
salary reduction plans, Keoghs, and 403(b) plans. Retirement plan specialists
are available to help companies determine which type of retirement plan may be
appropriate for their particular situation.

Markets:

The retirement plan services provided by the Advisor focus on four
distinct markets, based on the belief that a retirement plan should fit the
customer's needs, not the other way around.

1. Small company plans. Small company plans are designed for companies with
1-50 plan participants. The objective is to incorporate the features and
benefits typically reserved for large companies, such as sophisticated
recordkeeping systems, outstanding service, and investment expertise, into a
small company plan without administrative hassles or undue expense. Small
company plan sponsors receive a comprehensive plan administration manual as
well as toll-free telephone support.

2. Large company plans. Large company plans are designed for companies with
between 51 and 1,000 plan participants. Each large company plan is assigned
a team of professionals consisting of an account manager, who is typically
an attorney, CPA, or holds a graduate degree in business, a conversion
specialist (if applicable), an accounting manager, a legal/technical
manager, and an education/communications educator.

3. Women-owned businesses.

4. Non-profit and educational organizations (the 403(b) market).

Turnkey approach:

The retirement plans offered by the Advisor are designed to be
streamlined and simple to administer. To this end, the Advisor has invested
heavily in the equipment, systems, and people necessary to adopt or convert a
plan, and to keep it running smoothly. The Advisor provides all aspects of the
plan, including plan design, administration, recordkeeping, and investment

49
<PAGE> 98

management. To streamline plan design, the Advisor provides customizable
IRS-approved prototype documents. The Advisor's services also include annual
government reporting and testing as well as daily valuation of each
participant's account. This structure is intended to eliminate the confusion and
complication often associated with dealing with multiple vendors. It is also
designed to save plan sponsors time and expense.

The Advisor strives to provide one-stop retirement savings programs
that combine the advantages of proven investment management, flexible plan
design, and a wide range of investment options. The open architecture design of
the plans allow for the use of the family of mutual funds managed by the Advisor
as well as a stable asset value option. Large company plans may supplement these
options with their company stock (if publicly traded) or funds from other
well-known mutual fund families.

Education:

Participant education and communication is key to the success of any
retirement program, and therefore is one of the most important services that the
Advisor provides. The Advisor's goal is twofold: to make sure that plan
participants fully understand their options and to educate them about the
lifelong investment process. To this end, the Advisor provides attractive,
readable print materials that are supplemented with audio and video tapes, and
retirement education programs.

Service:

The Advisor's goal is to provide a world class level of service. One
aspect of that service is an experienced, knowledgeable team that provides
ongoing support for plan sponsors, both at adoption or conversion and throughout
the life of a plan. The Advisor is committed to delivering accurate and timely
information, evidenced by straightforward, complete, and understandable reports,
participant account statements, and plan summaries.

The Advisor has designed both "high-tech" and "high-touch" systems,
providing an automated telephone system as well as personal contact.
Participants can access daily account information, conduct transactions, or have
questions answered in the way that is most comfortable for them.

STRONG FINANCIAL ADVISORS GROUP

The Strong Financial Advisors Group is dedicated to helping financial
advisors better serve their clients. Financial advisors receive regular updates
on the mutual funds managed by the Advisor, access to portfolio managers through
special conference calls, consolidated mailings of duplicate confirmation
statements, access to the Advisor's network of regional representatives, and
other specialized services. For more information on the Strong Financial
Advisors Group, call 1-800-368-1683.

PORTFOLIO MANAGEMENT

Each portfolio manager works with a team of analysts, traders, and
administrative personnel. From time to time, marketing materials may discuss
various members of the team, including their education, investment experience,
and other credentials.

OPPORTUNITY AND COMMON STOCK FUNDS

The Advisor uses a research-intensive, "bottom up" securities selection
discipline to identify well-run, profitable companies whose prospects for growth
and other financial characteristics, when compared to the price of their
securities, indicate fundamental value and the potential for significant capital
appreciation. The Advisor's goal is to find well-managed companies that have
sustainable growth prospects but that are selling at prices below their private
market values. While not limited to smaller-capitalization stocks, this
investment approach often leads to smaller, newer companies that have not yet
captured the attention of investment professionals.

50
<PAGE> 99

It should be noted, however, that investments in securities of under
researched companies with smaller market capitalizations, while generally
offering a greater opportunity for appreciation, also involve a greater risk of
depreciation than securities of companies with larger market capitalization. In
addition, since companies with smaller market capitalizations are not as broadly
traded as those of companies with larger market capitalizations. these
securities are often subject to wider and more abrupt fluctuations in market
price.

The Advisor's investment philosophy is that (i) underfollowed stocks
with low institutional ownership and low analyst coverage tend to be
undervalued; (ii) unpopular or "quiet" sectors of the market tend to be
undervalued; (iii) stock prices are more volatile than underlying intrinsic
business values; and (iv) smaller capitalization stocks historically have had
higher growth rates and have outperformed larger cap stocks, but may also entail
significantly greater price variability than those of larger companies.

The Advisor's investment process includes (i) independent, fundamental
analysis; (ii) screening for stocks covered by fewer than 10 analysts; (iii)
identifying unpopular or "quiet" sectors of the market; (iv) identifying
companies with consistent earnings per share growth greater than 10% and
price/earnings ratios below the S&P 500; (v) visiting companies and meeting
management; (vi) establishing intrinsic business value and buy/sell targets, and
(vii) diversifying the portfolio.

The Advisor considers selling a stock when it reaches 80 to 100% of
private market value, it becomes widely followed, or there is a change in
company fundamentals.

GROWTH FUND

Conventional wisdom often divides fund managers into two schools
- -growth and value. Growth-style managers look for companies that exhibit
faster-than-average gains in earnings and profits. Value-style managers
generally concentrate more on the price side of the equation, looking for
companies that are undervalued and selling at a discount to what they believe is
their intrinsic value.

The style of the portfolio manager for the Fund, Mr. Ronald C. Ognar,
leans more toward growth, although he keeps an eye on valuations. The Fund's
core investments tend to be growth stocks at reasonable prices. These core
holdings are supplemented by stocks that have strong growth prospects. The
Advisor looks for growth of both sales and earnings. The Advisor believes that,
in general, good growth companies exhibit accelerating sales and earnings, high
return on equity, and, typically, low debt. They offer products or services that
should show strong future growth, and their market share is expanding. Other
characteristics that the Advisor looks for in companies include low cost
production, innovative products, and strong fundamentals versus an index. In
short, they offer some unique, sustainable competitive advantage. These
advantages can be found in companies of all market capitalizations. However, the
Advisor believes that the key is the management. Mr. Ognar meets face-to-face
with the management of many companies, which helps him get to know and trust a
company and the people in charge of it.

Currently, the Advisor is focusing on some companies that are
undergoing positive change. Oftentimes, a new product, a new technology, or a
change in management can positively affect a company's earnings growth
prospects. Themes also play a part in the investment strategy. Some examples
would be the aging population, telecommunications, and the rapid development of
foreign economies where U.S. companies have strong revenue growth.

The Advisor believes that investors need to have both large and small
companies because core holdings with growing dividends are usually found in
larger companies, but faster growth should continue in medium and small
companies. Therefore, the Advisor utilizes a broad range of equity market
capitalizations.

The Advisor seeks to manage risk by adhering to price disciplines,
diversifying holdings across sectors, and, when appropriate, building cash
reserves.

VALUE FUND

The Subadvisor uses a research intensive, "bottom up" securities
selection discipline to identify companies whose share price does not fully
reflect the value of the company's assets, earnings power, or cash generating
ability. While the

51
<PAGE> 100

approach focuses on medium-to-large capitalization companies, investments may be
made in companies with small market capitalizations as well.

The Subadivsor's investment approach is to search for a catalyst event
- - whether company specific or affecting an industry or sector - that will bring
out the value in companies currently not recognized by the market. These events
include:

* corporate restructuring or reorganization - including acquisition
or divestiture of assets

* significant management change

* cyclical turnaround of a depressed business or industry

* secular trend (e.g. demographic, regulatory, environmental change,
etc.)

The Subadvisor's fundamental research process focuses on identifying
value, as measured by qualitative factors, such as management and business
position, and quantitative valuation measures. Key quantitative indicators
include cash flow and earnings multiples at the low end of historical levels or
a discount to asset value, growth rate or industry peer group levels.

The Subadvisor considers selling a stock when it reaches price
objectives or if there is a change in fundamentals or management that will
negatively affect the company. A drop of 15% in price from cost under normal
market conditions will prompt an immediate sale review, resulting in the sale of
the security or purchase of additional shares.

SMALL CAP FUND

The Advisor believes that small companies offer excellent opportunities
for capital growth. Although they may have higher risks, smaller-capitalization
stocks have historically outperformed larger-capitalization stocks. The
investment process includes:

* Macro analysis to identify attractive sectors or industries;

* Bottom-up investment analysis on the companies in the identified
sectors or industries to select individual stocks;

* Individual stock selection based on a variety of factors,
including:

- Revenue and earning growth prospects

- Management track record commitment

- Valuation relative to the market and the company's peer group;
and

* Regular review of investments for changes in valuation levels and
earnings/growth prospects.

The goal of the Advisor is to find well-managed, growing companies that
trade at attractive valuations in the marketplace.

DISCOVERY FUND

While the Fund has the ability to take advantage of favorable trends in
stock prices, it also retains the flexibility to invest up to 100% of its assets
in conservative, short-term, money market securities. The need for this
flexibility is based on a fundamental belief by the Advisor that economic and
financial conditions create favorable and unfavorable investment periods (or
seasons) and that these different seasons require different investment
approaches. Through its understanding and willingness to change with these
investment cycles, the Advisor seeks to achieve the Fund's objectives throughout
the seasons of investment. The Fund is managed to capitalize on change, which
can include technological, regulatory, political, social, economic, market,
management and demographic change.

The Advisor's investment philosophy is that (i) maximum capital growth
should be aggressively pursued in a favorable market environment; (ii) capital
preservation is critical under unfavorable market conditions; and (iii) broad
use of asset classes and investment vehicles provides flexibility in achieving
capital growth and risk control. The Advisor also believes that (i) the purpose
of investment capital is to finance corporate growth, (ii) companies that are
growing rapidly often provide excellent opportunities for capital appreciation,
(iii) assessing the management behind a company is as important as "crunching
the numbers", and (iv) American and foreign economies are increasingly
intertwined, creating growth opportunities for both American and foreign
companies.

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<PAGE> 101

The Advisor's investment process includes (i) independent, fundamental
analysis; (ii) top-down economic and secular research to determine the current
position of the economic cycle, identify unique secular trends and themes, and
allocate asset classes; (iii) bottom-up security analysis and selection process
with particular emphasis on the following: free cash flow, revenue and earnings
growth, balance sheet strength, share repurchase programs, competitive position,
discounted cash flow value, private market value, relative price earnings ratio,
and assessment of management, including on-site visits; (iv) reducing equity
exposure in bear markets; and (v) aggressively pursuing unique investment
opportunities.

The Advisor considers selling a stock when there is a change in market
conditions, a change in company fundamentals, or when the stock is excessively
overvalued. The Advisor attempts to reduce risk by diversifying broadly across
industries and by generally limiting position sizes to 5% or less.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, are the independent accountants for the Funds, providing audit
services and assistance and consultation with respect to the preparation of
filings with the SEC.

LEGAL COUNSEL

Godfrey & Kahn, S.C., 780 North Water Street, Milwaukee, Wisconsin
53202, acts as outside legal counsel for the Funds.

FINANCIAL STATEMENTS

The Annual Report for the Opportunity, Growth, Common Stock, and
Discovery Funds that is attached hereto contains the following audited financial
information for the Funds:

(a) Schedules of Investments in Securities.
(b) Statements of Operations.
(c) Statements of Assets and Liabilities.
(d) Statements of Changes in Net Assets.
(e) Notes to Financial Statements.
(f) Financial Highlights.

(g) Reports of Independent Accountants.

The unaudited financial statements for the Small Cap and Value Funds
for the period December 29, 1995 through June 30, 1996 that are attached hereto
contain the following financial information for the Funds:

53
<PAGE> 102

APPENDIX

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

The ratings are based on current information furnished by the issuer or
obtained by S&P from other sources it considers reliable. S&P does not perform
an audit in connection with any rating and may, on occasion, rely on unaudited
financial information. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information, or based on other
circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of default capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the
obligation.

2. Nature of and provisions of the obligation.

3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.

INVESTMENT GRADE

AAA Debt rated `AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

AA Debt rated `AA' has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.

A Debt rated `A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB Debt rated `BBB' is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.

SPECULATIVE GRADE

Debt rated `BB', `B', `CCC', `CC' and `C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. `BB' indicates the least degree of speculation and
`C' the highest. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions.

BB Debt rated `BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The `BB'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied `BBB-' rating.

A-1
<PAGE> 103

B Debt rated `B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The `B' rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
`BB' or `BB-' rating.

CCC Debt rated `CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial, or economic conditions, it is not likely
to have the capacity to pay interest and repay principal. The `CCC' rating
category is also used for debt subordinated to senior debt that is assigned an
actual or implied `B' or `B-' rating.

CC Debt rated `CC' typically is applied to debt subordinated to senior
debt that is assigned an actual or implied `CCC' rating.

C Debt rated `C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied `CCC-' rating. The `C' rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.

CI The rating `CI' is reserved for income bonds on which no interest is
being paid.

D Debt rated `D' is in payment default. The `D' rating category is used
when interest payments or principal payments are not made on the date due, even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grade period. The `D' rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

MOODY'S LONG-TERM DEBT RATINGS

Aaa - Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
maintenance of other terms of the contract over any long period of time may be
small.

A-2
<PAGE> 104

Caa - Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

FITCH INVESTORS SERVICE, INC. BOND RATINGS

Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.

Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.

Fitch ratings are not recommendations to buy, sell, or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.

Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.

AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated `AAA'. Because bonds rated in the `AAA' and
`AA' categories are not significantly vulnerable to
foreseeable future developments, short-term debt of the
issuers is generally rated `F-1+'.

A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and
repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more
likely to have adverse impact on these bonds and, therefore,
impair timely payment. The likelihood that the ratings of
these bonds will fall below investment grade is higher than
for bonds with higher ratings.

A-3
<PAGE> 105

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
(`BB' to `C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating (`DDD' to `D') is an
assessment of the ultimate recovery value through reorganization or liquidation.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk.

BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified, which could assist the obligor
in satisfying its debt service requirements.

B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and
interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity
throughout the life of the issue.

CCC Bonds have certain identifiable characteristics that, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.

CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.

C Bonds are in imminent default in payment of interest or
principal.

DDD, DD,
and D Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on
the basis of their ultimate recovery value in liquidation or
reorganization of the obligor. `DDD' represents the highest
potential for recovery of these bonds, and `D' represents the
lowest potential for recovery.

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and expertise.
The projected viability of the obligor at the trough of the cycle is a critical
determination.

Each rating also takes into account the legal form of the security,
(e.g., first mortgage bonds, subordinated debt, preferred stock, etc.). The
extent of rating dispersion among the various classes of securities is
determined by several factors including relative weightings of the different
security classes in the capital structure, the overall credit strength of the
issuer, and the nature of covenant protection. Review of indenture restrictions
is important to the analysis of a company's operating and financial constraints.

A-4
<PAGE> 106

The Credit Rating Committee formally reviews all ratings once per quarter (more
frequently, if necessary). Ratings of `BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities.

RATING SCALE DEFINITION
- --------------------------------------------------------------------------------
AAA Highest credit quality. The risk factors are
negligible, being only slightly more than for
risk-free U.S. Treasury debt.
- --------------------------------------------------------------------------------
AA+ High credit quality. Protection factors are strong.
Risk is modest, but may vary slightly from time to
AA time because of economic conditions.
AA-
- --------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However,
risk factors are more variable and greater in periods
A of economic stress.
A-
- --------------------------------------------------------------------------------
BBB+ Below-average protection factors but still considered
sufficient for prudent investment. Considerable
BBB variability in risk during economic cycles.
BBB-
- --------------------------------------------------------------------------------
BB+ Below investment grade but deemed likely to meet
obligations when due. Present or prospective
BB financial protection factors fluctuate according to
BB- industry conditions or company fortunes. Overall
quality may move up or down frequently within this
category.
- --------------------------------------------------------------------------------
B+ Below investment grade and possessing risk that
obligations will not be met when due. Financial
B protection factors will fluctuate
widely according to economic cycles, industry
B- conditions and/or company fortunes. Potential
exists for frequent changes in the rating within
this category or into a higher or rating grade.
- --------------------------------------------------------------------------------
CCC Well below investment grade securities. Considerable
uncertainty exists as to timely payment of principal,
interest or preferred dividends. Protection factors
are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with
unfavorable company developments.
- --------------------------------------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
DP Preferred stock with dividend arrearages.
- --------------------------------------------------------------------------------

A-5
<PAGE> 107

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment of
the likelihood of timely payment of debt considered short-term in the relevant
market.

Ratings are graded into several categories, ranging from `A-1' for the
highest quality obligations to `D' for the lowest. These categories are as
follows:

A-1 This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated `A-1'.

A-3 Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

B Issues rated `B' are regarded as having only speculative capacity for
timely payment.

C This rating is assigned to short-term debt obligations with doubtful
capacity for payment.

STANDARD & POOR'S NOTE RATINGS

An S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating.

The following criteria will be used in making the assessment:

* Amortization schedule - the larger the final maturity relative to
other maturities, the more likely the issue is to be treated as a
note.

* Source of payment - the more the issue depends on the market for
its refinancing, the more likely it is to be considered a note.

Note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues determined
to possess very strong characteristics are given a plus (+) designation.

SP-2 Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3 Speculative capacity to pay principal and interest.

A-6
<PAGE> 108

MOODY'S SHORT-TERM RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers
to repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year, unless explicitly noted.

Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment ability of rated issuers:

Issuers rated PRIME-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
will often be evidenced by many of the following characteristics: (i) leading
market positions in well-established industries, (ii) high rates of return on
funds employed, (iii) conservative capitalization structure with moderate
reliance on debt and ample asset protection, (iv) broad margins in earnings
coverage of fixed financial charges and high internal cash generation, and (v)
well established access to a range of financial markets and assured sources of
alternate liquidity.

Issuers rated PRIME-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

Issuers rated PRIME-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.

MOODY'S NOTE RATINGS

MIG 1/VMIG 1 This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.

MIG 2/VMIG 2 This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

MIG 3/VMIG 3 This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

MIG 4/VMIG 4 This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.

SG This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.

A-7
<PAGE> 109

FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.

F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated `F-1+'.

F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment but the
margin of safety is not as great as for issues assigned `F-1+'
and `F-1' ratings.

F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate; however, near-term adverse changes
could cause these securities to be rated below investment
grade.

F-S Weak Credit Quality. Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.

D Default. Issues assigned this rating are in actual or imminent
payment default.

LOC The symbol LOC indicates that the rating is based on a letter
of credit issued by a commercial bank.

DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

Duff & Phelps' short-term ratings are consistent with the rating
criteria used by money market participants. The ratings apply to all obligations
with maturities of under one year, including commercial paper, the uninsured
portion of certificates of deposit, unsecured bank loans, master notes, bankers
acceptances, irrevocable letters of credit, and current maturities of long-term
debt. Asset-backed commercial paper is also rated according to this scale.

Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.

Rating Scale: Definition
------------- ----------
High Grade
----------

D-1+ Highest certainty of timely payment. Short-Term
liquidity, including internal operating factors
and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

D-1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good
fundamental protection factors. Risk factors are
minor.

A-8
<PAGE> 110

D-1- High certainty of timely payment. Liquidity factors
are strong and supported by good fundamental
protection factors. Risk factors are very small.

Good Grade
----------
D-2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing
requirements, access to capital markets is good. Risk
factors are small.

Satisfactory Grade
------------------
D-3 Satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors
are larger and subject to more variation.
Nevertheless, timely payment is expected.

Non-Investment Grade
--------------------
D-4 Speculative investment characteristics. Liquidity is
not sufficient to insure against disruption in debt
service. Operating factors and market access may be
subject to a high degree of variation.

Default
-------
D-5 Issuer failed to meet scheduled principal and/or
interest payments.

THOMSON BANKWATCH (TBW) SHORT-TERM RATINGS

The TBW Short-Term Ratings apply, unless otherwise noted, to specific
debt instruments of the rated entities with a maturity of one year or less. TBW
Short-Term Ratings are intended to assess the likelihood of an untimely or
incomplete payments of principal or interest.

TBW-1 The highest category; indicates a very high likelihood that
principal and interest will be paid on a timely basis.

TBW-2 The second highest category; while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1".

TBW-3 The lowest investment-grade category; indicates that while the
obligation is more susceptible to adverse developments (both internal and
external) than those with higher ratings, the capacity to service principal and
interest in a timely fashion is considered adequate.

TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.

A-9
<PAGE> 111

IBCA SHORT-TERM RATINGS

IBCA Short-Term Ratings assess the borrowing characteristics of banks
and corporations, and the capacity for timely repayment of debt obligations. The
Short-Term Ratings relate to debt which has a maturity of less than one year.

A1+ Obligations supported by the highest capacity for timely
repayment and possess a particularly strong credit feature.

A1 Obligations supported by the highest capacity for timely
repayment.

A2 Obligations supported by a good capacity for timely repayment.

A3 Obligations supported by a satisfactory capacity for timely
repayment.

B Obligations for which there is an uncertainty as to the
capacity to ensure timely repayment.

C Obligations for which there is a high risk of default or which
are currently in default.

A-10