STRONG INSURED MUNICIPAL BOND FUND INC, 485BPOS, 1996-04-26

STRONG INSURED MUNICIPAL BOND FUND INC
485BPOS, 1996-04-26

Previous: FIDELITY CALIFORNIA MUNICIPAL TRUST II, 24F-2NT, 1996-04-26

Next: STRONG SHORT TERM MUNICIPAL BOND FUND INC, 485B24E, 1996-04-26

<PAGE> 1
As filed with the Securities and Exchange Commission on or about April 26, 1996

Securities Act Registration No. 33-42775
Investment Company Act Registration No. 811-6410

SECURITIES AND EXCHANGE COMMISSION
Washington D.C.

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 7 [X]
------
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 8 [X]
------
(Check appropriate box or boxes)

STRONG INSURED MUNICIPAL BOND FUND, INC.
(Exact Name of Registrant as Specified in Charter)

100 HERITAGE RESERVE
MENOMONEE FALLS, WISCONSIN 53051
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (414) 359-3400

THOMAS P. LEMKE
STRONG CAPITAL MANAGEMENT, INC.
100 HERITAGE RESERVE
MENOMONEE FALLS, WISCONSIN 53051
(Name and Address of Agent for Service)

Copies to
SCOTT A. MOEHRKE
GODFREY & KAHN, S.C.
780 NORTH WATER STREET
MILWAUKEE, WISCONSIN 53202

Registrant has registered an indefinite amount of securities pursuant
to Rule 24f-2 under the Securities Act of 1933; the Registrant's Rule 24f-2
Notice for the fiscal year ended December 31, 1995 was filed on or about
February 21, 1996.

It is proposed that this filing will become effective (check appropriate box).

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485

[X] on May 1, 1996 pursuant to paragraph (b) of Rule 485

[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485

[ ] on (date) pursuant to paragraph (a)(1) of Rule 485

[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE> 2

STRONG INSURED MUNICIPAL BOND FUND, INC.

CROSS REFERENCE SHEET

(Pursuant to Rule 481 showing the location in the Prospectus and the
Statement of Additional Information of the responses to the Items of Parts A and
B of Form N-1A.)

<TABLE>
<CAPTION>
CAPTION OR SUBHEADING IN PROSPECTUS OR
ITEM NO. ON FORM N-1A STATEMENT OF ADDITIONAL INFORMATION
--------------------- -----------------------------------

PART A - INFORMATION REQUIRED IN PROSPECTUS

<S> <C>
1. Cover Page Cover Page

2. Synopsis Expenses; Highlights

3. Condensed Financial Information Financial Highlights

4. General Description of Registrant Investment Objective and Policies; Implementation of
Policies and Risks; About the Fund - Organization

5. Management of the Fund About the Fund - Management; Financial Highlights

5A. Management's Discussion of Fund Performance *

6. Capital Stock and Other Securities About the Fund - Organization, - Distributions and
Taxes; Shareholders Manual - Shareholder Services

7. Purchase of Securities Being Offered Shareholder Manual - How to Buy Shares,
- Determining Your Share Price, - Shareholder Services

8. Redemption or Repurchase Shareholder Manual - How to Sell Shares,
- Determining Your Share Price, - Shareholder Services

9. Pending Legal Proceedings Inapplicable

PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL
INFORMATION

10. Cover Page Cover page

11. Table of Contents Table of Contents

12. General Information and History **

13. Investment Objectives and Policies Investment Restrictions; Investment Policies and
Techniques

14. Management of the Fund Directors and Officers of the Fund

15. Control Persons and Principal Holders of Securities Principal Shareholders; Directors and Officers of the
Fund; Investment Advisor and Distributor

16. Investment Advisory and Other Services Investment Advisor and Distributor; About the Fund
- Management (in Prospectus); Custodian; Transfer
Agent and Dividend-Disbursing Agent; Independent
Accountants; Legal Counsel
</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
CAPTION OR SUBHEADING IN PROSPECTUS OR
ITEM NO. ON FORM N-1A STATEMENT OF ADDITIONAL INFORMATION
--------------------- -----------------------------------

<S> <C>
17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage

18. Capital Stock and Other Securities Included in Prospectus under the heading About the
Fund - Organization and in the Statement of
Additional Information under the heading Shareholder
Meetings

19. Purchase, Redemption and Pricing of Securities Being Included in Prospectus under the headings:
Offered Shareholder Manual - How to Buy Shares,

- Determining Your Share Price, - How to Sell Shares,
- Shareholder Services; and in the Statement of
Additional Information under the headings:
Additional Shareholder Information; Investment
Advisor and Distributor; and Determination of Net
Asset Value

20. Tax Status Included in Prospectus under the heading About the
Fund - Distributions and Taxes; and in the Statement
of Additional Information under the heading Taxes

21. Underwriters Investment Advisor and Distributor

22. Calculation of Performance Data Performance Information

23. Financial Statements Financial Statements
</TABLE>

* Complete answer to Item is contained in Registrant's Annual Report.
** Complete answer to Item is contained in Registrant's Prospectus.

<PAGE> 4

STRONG INSURED MUNICIPAL BOND FUND

<TABLE>
<S> <C>
STRONG FUNDS
P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863
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. The Fund seeks total return by investing for a
high level of federally tax-exempt current income with a moderate degree of
share-price fluctuation. The Fund invests primarily in long-term, high-quality
municipal obligations that are insured for the timely payment of principal and
interest. The Fund is a separately incorporated diversified, open-end management
investment company. THE FUND IS CLOSED TO NEW INVESTORS AND ADDITIONAL
INVESTMENTS BY EXISTING SHAREHOLDERS. THE FUND'S EXISTING SHAREHOLDERS, HOWEVER,
MAY CONTINUE TO ADD TO THEIR ACCOUNTS THROUGH THE REINVESTMENT OF DIVIDENDS.
(SEE PAGE II-1 FOR ADDITIONAL DETAILS.)

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.

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

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.

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

THE STRONG INSURED MUNICIPAL BOND FUND'S SHARES ARE NOT INSURED OR GUARANTEED
BY ANY GOVERNMENTAL AGENCY OR PRIVATE INSURER. THE FUND WILL, HOWEVER, INVEST AT
LEAST 65% OF ITS TOTAL ASSETS IN MUNICIPAL BONDS THAT ARE INSURED AS TO THE
TIMELY PAYMENT OF PRINCIPAL AND INTEREST. THE ADEQUACY OF THIS INSURANCE WILL BE
DEPENDENT UPON THE FINANCIAL CONDITION OF THE INSURANCE COMPANY ISSUING SUCH
INSURANCE.

Dated May 1, 1996

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

PROSPECTUS PAGE I-1
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
EXPENSES................................................................... I-3
FINANCIAL HIGHLIGHTS....................................................... I-4
INVESTMENT OBJECTIVE AND POLICIES.......................................... I-6
FUNDAMENTALS OF FIXED INCOME INVESTING..................................... I-7
IMPLEMENTATION OF POLICIES AND RISKS....................................... I-9
ABOUT THE FUND............................................................. I-16
SHAREHOLDER MANUAL......................................................... II-1
APPENDIX A................................................................. A-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 in any state or
jurisdiction in which such offering may not lawfully be made.

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

PROSPECTUS PAGE I-2
<PAGE> 6

EXPENSES

The following information is provided in order to help you understand the
various costs and expenses that you, as an investor in the Fund, 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 special shareholder services
offered by the Fund. 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>
Insured .50% .48% NONE .98%
- ------------------------------------------------------------------------------
</TABLE>

From time to time the Fund's investment advisor, Strong Capital Management,
Inc. (the "Advisor"), may voluntarily waive its management fee and/or absorb
certain expenses for the Fund. For additional information concerning fees and
expenses, see "About the Fund - Management."

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>
Insured $10 $31 $54 $120
- -------------------------------------------------
</TABLE>

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

PROSPECTUS PAGE I-3
<PAGE> 7

The Example is based on the Fund's "Total Operating Expenses" before any
waivers and absorptions, as described above. PLEASE REMEMBER THAT THE EXAMPLE
SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND THAT
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. The assumption in the
Example of 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 the Fund's shares.

FINANCIAL HIGHLIGHTS

The following annual Financial Highlights for the Fund 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 Municipal Income Funds that is contained in the Fund's Statement of
Additional

Information. The Financial Highlights for the Fund should be read in conjunction
with the Financial Statements and related notes included in the Fund's Annual
Report. Additional information about the Fund's performance is contained in the
Fund's 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 the Fund, outstanding for the entire period.

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

PROSPECTUS PAGE I-4
<PAGE> 8

<TABLE>
<CAPTION>
STRONG INSURED MUNICIPAL
BOND FUND
------------------------------------------------------------
1995 1994 1993 1992 1991**
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.19 $ 11.46 $ 10.82 $ 10.28 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.50 0.54 0.56 0.62 0.06
Net Realized and Unrealized Gains (Losses)
on Investments 0.77 (1.27) 0.80 0.68 0.28
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.27 (0.73) 1.36 1.30 0.34
LESS DISTRIBUTIONS
From Net Investment Income*** (0.51) (0.54) (0.56) (0.62) (0.06)
In Excess of Net Investment Income (0.28) -- -- -- --
From Net Realized Gains -- -- (0.16) (0.14) --
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.79) (0.54) (0.72) (0.76) (0.06)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.67 $ 10.19 $ 11.46 $ 10.82 $ 10.28
======== ======== ======== ======== ========
Total Return +12.7% -6.5% +12.8% +13.1% +3.4%
Net Assets, End of Period (In Thousands) $ 39,473 $ 51,024 $ 61,213 $ 21,367 $ 1,308
Ratio of Expenses to Average Net Assets 1.0% 1.0% 0.6% 0.2% 0.5%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.0% 1.0% 0.9% 1.1% 1.0%*
Ratio of Net Investment Income to Average
Net Assets 4.6% 5.0% 4.9% 5.8% 5.6%*
Portfolio Turnover Rate 724.9% 411.1% 110.7% 289.6% 24.2%
</TABLE>

*
Calculated on an annualized basis.

**
Inception date is November 25, 1991. Total return and portfolio turnover rate
are not annualized.

***
Tax-exempt for regular federal income tax purposes.

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

PROSPECTUS PAGE I-5
<PAGE> 9

INVESTMENT OBJECTIVE AND POLICIES

The Fund is designed for investors whose income tax levels enable them to
benefit from tax-exempt income. In general, the Fund is not an appropriate
investment for tax-deferred retirement plans, such as Individual Retirement
Accounts. THE FUND EMPLOYS A LONG-TERM INVESTMENT APPROACH; THEREFORE, INVESTORS
SHOULD NOT RELY ON THE FUND FOR THEIR SHORT-TERM FINANCIAL NEEDS.

The Fund has adopted certain fundamental investment restrictions that are set
forth in its Statement of Additional Information ("SAI"). Those restrictions,
the Fund's investment objective, and any other investment policies identified as
"fundamental" cannot be changed without shareholder approval. To further guide
investment activities, the Fund has also instituted a number of non-fundamental
operating policies, which are described in this Prospectus and in the SAI.
Although operating policies may be changed by the Fund's Board of Directors
without shareholder approval, the Fund will promptly notify shareholders of any
material change in operating policies.

As a fundamental policy, the Fund will invest at least 80% of its net assets
in municipal securities under normal market conditions. (See "Implementation of
Policies and Risks - Municipal Obligations.") Generally, municipal obligations
are those whose interest is exempt from federal income tax. The Fund may invest,
without limitation, in municipal obligations whose interest is a tax-preference
item for purposes of the federal alternative minimum tax ("AMT"). For taxpayers
who are subject to the AMT, a substantial portion of the Fund's distributions
may not be exempt from federal income tax. Accordingly, the Fund's net return
may be lower for those taxpayers. (Consult with your tax advisor to determine
whether you are subject to the AMT, and see "About the Fund - Distributions and
Taxes" for more information.) The Fund may also invest up to 20% of its net
assets in taxable securities of comparable quality to its investments in
municipal securities, including U.S. government securities, bank and corporate
obligations and short-term fixed income securities. The Fund will generally
invest in taxable bonds to take advantage of capital gain opportunities. 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.

The Insured Fund seeks total return by investing for a high level of
federally tax-exempt current income with a moderate degree of share-price
fluctuation.

The Fund is designed for long-term investors who want to pursue higher income
than shorter-term municipal obligations generally provide, who are willing to
accept the fluctuation in principal associated with longer-term debt
obligations, and who seek to minimize credit risk. Given the insurance and
credit-quality restrictions described below, the Fund may not yield as high a
level of income as funds that invest in uninsured or lower-quality debt
obligations.

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

PROSPECTUS PAGE I-6

<PAGE> 10
The Insured Fund invests primarily in long-term, high-quality debt
obligations that are insured for the timely payment of principal and interest.
While there are no maturity restrictions for the Fund's debt obligations, it is
anticipated that the Fund will maintain an average portfolio maturity of between
15 and 25 years.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in debt obligations that are insured for the timely payment of
principal and interest by an insurer determined by the Advisor to have high
claims-paying ability (generally, only those carrying the highest credit
rating). INSURANCE, HOWEVER, DOES NOT GUARANTEE EITHER THE PRICE OF AN
INDIVIDUAL DEBT OBLIGATION OR THE SHARE PRICE OF THE FUND ITSELF. (See
"Implementation of Policies and Risks - Insurance.")

The Fund may also invest up to 35% of its total assets in uninsured municipal
obligations, provided they are, at the time of purchase, rated in the highest
rating category by any nationally recognized statistical rating organization or
"NRSRO" (e.g., bonds rated AAA by S&P) or, if unrated, are determined by the
Advisor to be of comparable quality.

FUNDAMENTALS OF

FIXED INCOME INVESTING

The securities in which the Fund may invest include fixed- and variable-rate
obligations, debentures, notes, leases, certificates of deposit, commercial
paper, repurchase agreements, banker's acceptances, other short-term fixed
income securities, structured investments such as mortgage- and asset-backed
securities, loan participations, and convertible debt. The Fund may also borrow
funds and engage in mortgage dollar roll transactions and reverse repurchase
agreements.

Issuers of debt obligations have a contractual obligation to pay interest at
a specified rate ("coupon rate") on specified dates and to repay principal
("face value" or "par value") on a specified maturity date. Certain municipal
obligations (usually intermediate- and long-term obligations) have provisions
that allow the issuer to redeem or "call" an obligation before its maturity.
Issuers are most likely to call such obligations during periods of falling
interest rates. As a result, the Fund may be required to invest the
unanticipated proceeds of the called obligation at lower interest rates, which
may cause the Fund's income to decline.

Although the net asset value of the Fund is expected to fluctuate, the
Advisor actively manages the Fund's portfolio and adjusts its average portfolio
maturity according to the Advisor's interest rate outlook while seeking to avoid
or reduce, to the extent possible, any negative change in the Fund's net asset
value.

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

PROSPECTUS PAGE I-7
<PAGE> 11
PRICE VOLATILITY

The market value of debt obligations, including municipal obligations, is
affected 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. A fund
portfolio consisting primarily of debt obligations will react similarly to
changes in interest rates.

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. Notes, whose original maturities are two years or less, are
considered short-term obligations. The term "bond" generally refers to
securities with maturities longer than two years. Bonds with maturities of three
years or less are considered short-term, bonds with maturities between three and
seven years are considered intermediate-term, and bonds with maturities greater
than seven years are considered long-term.

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 NRSROs. "Appendix A - Ratings of Debt Obligations" presents a
summary of ratings of three well-known rating organizations: S&P, Moody's
Investors Service, Inc., and Fitch Investors Service, Inc. Please refer to the
Appendix in the Fund's SAI for a more detailed description of these ratings.

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

PROSPECTUS PAGE I-8
<PAGE> 12
INVESTMENT-GRADE DEBT OBLIGATIONS. Debt obligations rated in the highest-
through the medium-quality categories are commonly referred to as
"investment-grade" debt obligations and include the following:

- - U.S. government securities;
- - bonds or bank obligations rated in one of the four highest rating categories
(e.g., BBB or higher by 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.

Investment-grade debt obligations are generally believed to have relatively
low degrees of credit risk. However, medium-quality debt obligations, while
considered investment grade, may have some speculative characteristics, since
their issuers' capacity for repayment may be more vulnerable to adverse economic
conditions or changing circumstances than that of higher-rated issuers.

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, the Fund should take consistent with its investment objective.

IMPLEMENTATION OF POLICIES AND RISKS

In addition to the investment policies described above (and subject to
certain restrictions described below), the Fund 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. A more
complete discussion of certain of these securities and investment techniques and
the associated risks is contained in the Fund's SAI.

MUNICIPAL OBLIGATIONS

IN GENERAL. Municipal obligations are debt obligations issued by or on behalf
of states, territories, and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, and instrumentalities.
Municipal obligations generally include debt obligations issued to obtain funds
for various public purposes. Certain types of municipal obligations

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

PROSPECTUS PAGE I-9
<PAGE> 13
are issued in whole or in part to obtain funding for privately operated
facilities or projects. Municipal obligations include general obligation
bonds, revenue bonds, industrial development bonds, notes, and municipal lease
obligations.

BONDS AND NOTES. General obligation bonds are secured by the issuer's pledge
of its full faith, credit, and taxing power for the payment of interest and
principal. Revenue bonds are payable only from the revenues derived from a
project or facility or from the proceeds of a specified revenue source.
Industrial development bonds are generally revenue bonds secured by payments
from and the credit of private users. Municipal notes are issued to meet the
short-term funding requirements of state, regional, and local governments.
Municipal notes include tax anticipation notes, bond anticipation notes, revenue
anticipation notes, tax and revenue anticipation notes, construction loan notes,
short-term discount notes, tax-exempt commercial paper, demand notes, and
similar instruments. Municipal obligations include obligations, the interest on
which is exempt from federal income tax, that may become available in the future
as long as the Board of Directors of the Fund determines that an investment in
any such type of obligation is consistent with the Fund's investment objective.

LEASE OBLIGATIONS. Municipal lease obligations may take the form of a lease,
an installment purchase, or a conditional sales contract. They are issued by
state and local governments and authorities to acquire land, equipment, and
facilities, such as state and municipal vehicles, telecommunications and
computer equipment, and other capital assets. The Fund may purchase these
obligations directly, or it may purchase participation interests in such
obligations. (See "Participation Interests" below.) Municipal leases are
generally subject to greater risks than general obligation or revenue bonds.
State constitutions and statutes set forth requirements that states or
municipalities must meet in order to issue municipal obligations. Municipal
leases may contain a covenant by the state or municipality to budget for,
appropriate, and make payments due under the obligation. Certain municipal
leases may, however, contain "non-appropriation" clauses which provide that the
issuer is not obligated to make payments on the obligation in future years
unless funds have been appropriated for this purpose each year. Accordingly,
such obligations are subject to "non-appropriation" risk. While municipal leases
are secured by the underlying capital asset, it may be difficult to dispose of
any such asset in the event of non-appropriation or other default.

MORTGAGE-BACKED BONDS. The Fund's investments in municipal obligations may
include mortgage-backed municipal obligations, which are a type of municipal
security issued by a state, authority, or municipality to provide financing for
residential housing mortgages to target groups, generally low-income individuals
who are first-time home buyers. The Fund's interest, evidenced by such
obligations, is an undivided interest in a pool of mortgages. Payments made on
the underlying mortgages and passed through to the Fund will represent both
regularly scheduled principal and interest payments. The Fund may also receive
additional principal payments representing prepayments of the underlying
mortgages. While a certain level of prepayments can be expected, regardless of
the interest rate environment, it is anticipated that

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

PROSPECTUS PAGE I-10
<PAGE> 14
prepayment of the underlying mortgages will accelerate in periods of declining
interest rates. In the event that the Fund receives principal prepayments
in a declining interest-rate environment, its reinvestment of such funds may be
in bonds with a lower yield.
[/R]

PARTICIPATION INTERESTS

A participation interest gives the Fund an undivided interest in a municipal
obligation in the proportion that the Fund's participation interest bears to the
principal amount of the obligation. These instruments may have fixed, floating,
or variable rates of interest. The Fund will only purchase participation
interests if accompanied by an opinion of counsel that the interest earned on
the underlying municipal obligations will be tax-exempt. If the Fund purchases
unrated participation interests, the Board of Directors or its delegate must
have determined that the credit risk is equivalent to the rated obligations in
which the Fund may invest. Participation interests may be backed by a letter of
credit or guaranty of the selling institution. When determining whether such a
participation interest meets the Fund's credit quality requirements, the Fund
may look to the credit quality of any financial guarantor providing a letter of
credit or guaranty.

ILLIQUID SECURITIES

The 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 which may be resold to institutional
investors under Rule 144A under the Securities Act of 1933 and Section 4(2)
commercial paper may be determined to be liquid under guidelines adopted by the
Fund's Board of Directors.

STANDBY COMMITMENTS

In order to facilitate portfolio liquidity, the Fund may acquire standby
commitments from brokers, dealers, or banks with respect to securities in its
portfolio. Standby commitments entitle the holder to achieve same-day settlement
and receive an exercise price equal to the amortized cost of the underlying
security plus accrued interest. Standby commitments generally increase the cost
of the acquisition of the underlying security, thereby reducing the yield.
Standby commitments are subject to the issuer's ability to fulfill its
obligation upon demand. Although no definitive creditworthiness criteria are
used, the Advisor reviews the creditworthiness of the brokers, dealers, and
banks from which the Fund obtains standby commitments to evaluate those risks.

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

PROSPECTUS PAGE I-11
<PAGE> 15

INSURANCE

While insurance is intended to reduce financial risk, the cost of such
insurance (from higher purchase prices of portfolio securities or the payment of
insurance premiums) will result in lower yields on the municipal obligations so
insured. Such insurance will be either Issue Insurance or Mutual Fund Insurance.

Issue Insurance is generally purchased by the issuer or underwriter of the
municipal obligation, is non-cancelable, and is effective as long as the
securities are unpaid and the insurer remains in business. Mutual Fund Insurance
may be purchased from insurance companies that guarantee the timely payment of
interest and principal when due on certain of a fund's municipal obligations
that are designated as eligible. Mutual Fund Insurance may terminate upon a
fund's sale of the insured obligations or it may be extended to enhance the
marketability of the insured obligations. Mutual Fund Insurance insurers
generally may not withdraw coverage of insured obligations unless a fund fails
to pay the premiums when due, but they may refuse to insure additional
obligations purchased by a fund after the effective date of a notice to that
effect. The Fund may acquire obligations insured by the seller or other third
party and the insurance would continue for the Fund's benefit. The Fund
anticipates that under normal conditions all or substantially all of its insured
municipal obligations will be subject to Issue Insurance. The Fund, however,
reserves the right to purchase Mutual Fund Insurance if the Advisor determines
it advisable to do so.

The Fund's insured municipal obligations will be insured by insurers
determined to have a high claims-paying ability by or under the authority of the
Fund's Board of Directors. Currently, the following insurers are considered to
have a high claims-paying ability: Municipal Bond Investors Assurance
Corporation, Capital Guaranty Insurance Company, Financial Guaranty Insurance
Company, AMBAC Indemnity Corporation, Financial Security Assurance Inc., Connie
Lee Insurance Company, and Capital Markets Assurance Corporation, all of which
have a claims-paying ability rating of "AAA" by S&P. Additional insurers may be
added without further notification if such insurers' claims-paying ability is
determined to be high by or under the authority of the Fund's Board of
Directors. Municipal obligations subject to Issue Insurance, if rated, will
generally carry the same credit rating as the insurer, and municipal obligations
subject to Mutual Fund Insurance are generally considered to have a credit
quality equivalent to the claims-paying ability rating of the insurer. The Fund
may invest more than 25% of its assets in municipal obligations insured by the
same insurance company.

WHEN-ISSUED SECURITIES

The 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

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

PROSPECTUS PAGE I-12
<PAGE> 16
commitment, these securities may be delivered and paid for at a future date,
generally within 45 days. Purchasing when-issued securities allows the Fund to
lock in a fixed price or yield on a security it intends to purchase. However,
when the Fund purchases a when-issued security, it immediately assumes the risk
of ownership, including the risk of price fluctuation.

The greater the Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of the
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 the
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, the Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.

SECTOR CONCENTRATION

From time to time, the Fund may invest 25% or more of its total assets in
municipal obligations that are related in such a way that an economic,
business, or political development or change affecting one such security
could also affect the other securities. Such related sectors may include
hospitals, retirement centers, pollution control, single-family housing,
multiple-family housing, industrial development, utilities, education, and
general obligation bonds. The Fund also may invest 25% or more of its total
assets in municipal obligations whose issuers are located in the same state.

DERIVATIVE INSTRUMENTS

The 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."

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.

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

PROSPECTUS PAGE I-13
<PAGE> 17

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"; and (viii) 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
instrument in relation to the underlying asset may be magnified. When required
by SEC guidelines, the 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, the 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 the 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, the Fund may be in a worse position
than

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

PROSPECTUS PAGE I-14
<PAGE> 18

if no hedging had occurred. In addition, there may be imperfect correlation
between the 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 the
Fund's investment objective and permitted by the Fund's investment limitations,
operating policies, and applicable regulatory authorities.

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

The Fund may invest without limitation 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 taxable 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 accrued during that year. In order to continue to qualify for
treatment as a "regulated investment company" under the Internal Revenue Code
and avoid a certain excise tax, the 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.

PORTFOLIO TURNOVER

The Fund's historical portfolio turnover rate is listed under "Financial
Highlights." The annual portfolio turnover rate indicates changes in the 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 the 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.

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

PROSPECTUS PAGE I-15
<PAGE> 19

ABOUT THE FUND

MANAGEMENT

The Board of Directors of the Fund is responsible for managing its business
and affairs. The Fund has entered into an investment advisory agreement with
Strong Capital Management, Inc. (the "Advisor"). Under the terms of the
agreement, the Advisor manages the Fund's investments and business affairs
subject to the supervision of the 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 the Fund, is the controlling shareholder of the Advisor.

As compensation for its services, the Fund pays the Advisor a monthly
management fee based on a percentage of its average daily net asset value. The
Fund's annual rate is .50%. 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 the Fund's overall expense ratio and increase the Fund's
overall return to investors.

PORTFOLIO MANAGER. Ms. Mary-Kay H. Bourbulas serves as the Fund's portfolio
manager. Prior to joining the Advisor as a portfolio manager in October 1991,
Ms. Bourbulas was employed by Stein Roe & Farnham, where she co-managed two
tax-exempt funds. Ms. Bourbulas received her bachelor's degree from Northwestern
University in 1989. She co-managed the Fund from October 1991 until February
1996, when she assumed sole management responsibility for the Fund.

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 Fund. 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 Fund.

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

PROSPECTUS PAGE I-16
<PAGE> 20
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
Fund.

ORGANIZATION

SHAREHOLDER RIGHTS. The Fund is 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 Fund 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 Fund will not hold an
annual meeting of shareholders unless required by the 1940 Act.

SHAREHOLDER PRIVILEGES. The shareholders of the Fund may benefit from the
privileges described in the "Shareholder Manual" (see page II-1). However, the
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
reinvested in additional Fund shares. Or, you may elect to have all your
dividends and capital gain distributions from the 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, the 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 the Fund is to pay dividends from net investment income monthly
and to distribute substantially all net realized capital gains annually. The
Fund may make additional distributions if necessary
to avoid imposition of a 4% excise tax on undistributed income and gains. The
Fund declares dividends on each day its net asset value is calculated, except
for bank holidays. Income earned on weekends, holidays (including bank
holidays), and days on

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

PROSPECTUS PAGE I-17
<PAGE> 21

which net asset value is not calculated is declared as a dividend on
the day on which the Fund's net asset value was most recently calculated.

TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. If the Fund satisfies
certain requirements described under "Taxes" in the SAI - which the Fund intends
to continue to do - dividends paid from the interest earned on municipal bonds
will constitute "exempt-interest dividends" and will not be subject to federal
income tax. However, the Fund may invest in municipal bonds the interest on
which is a tax preference item for purposes of the alternative minimum tax
("AMT"). Exempt-interest dividends distributed to corporate shareholders also
may be subject to the AMT regardless of the types of municipal bonds in which
the Fund invests, depending on the corporation's tax status. Distributions by
the Fund may be subject to state and local taxes, depending on the laws of your
home state and locality.

You will be subject to federal income tax at ordinary income rates on any
income dividends you receive that are derived from interest on taxable
securities or from net realized short-term capital gains. Distributions by the
Fund of net capital gain (the excess of net long-term capital gain over net
short-term capital loss), when designated as such, are taxable as long-term
capital gains, regardless of how long you have held your Fund shares.

The Fund's distributions, other than exempt-interest dividends ("taxable
distributions"), are taxable in the year they are paid, whether they are taken
in cash or are reinvested in additional shares, except that certain taxable
distributions declared in the last three months of the year and paid in January
are taxable as if paid on December 31.

If the Fund's taxable distributions exceed its investment company taxable
income and net capital gain in any year, 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
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 the Fund
within thirty days before or after redeeming shares of the 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 all the shares in an account
at any time during a month, dividends credited to the account since the
beginning of the month through the day of redemption will be paid with the
redemption proceeds.

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

PROSPECTUS PAGE I-18
<PAGE> 22

BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish the 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 taxable dividends, capital gain distributions, and
redemption proceeds, payable to you. Withholding at that rate from taxable
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 underreporting 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. The 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 Fund 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

The Fund may advertise a variety of types of performance information
including "yield," "equivalent taxable yield," "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 the
Fund.

Yield is an annualized figure, which means that it is assumed that the Fund
generates the same level of net investment income over a one-year period. The
Fund's yield is a measure of the net investment income per share earned by the
Fund over a specific 30-day period and is shown as a percentage of the net asset
value of the Fund's shares at the end of the period. Equivalent taxable yield
represents the amount a taxable investment would need to generate to equal the
Fund's yield for an investor at stated tax rates.

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 the Fund assuming
the reinvestment of all dividends and distributions. Total return figures are
not annualized and simply represent the aggregate change of the Fund's
investments over a specified period of time.

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

PROSPECTUS PAGE I-19
<PAGE> 23

This page has been left blank intentionally.

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

PROSPECTUS PAGE I-20

<PAGE> 24

SHAREHOLDER MANUAL

<TABLE>
<S> <C>
HOW TO BUY SHARES.................................................... II-1
DETERMINING YOUR SHARE PRICE......................................... II-2
HOW TO SELL SHARES................................................... II-2
SHAREHOLDER SERVICES................................................. II-5
REGULAR INVESTMENT PLANS............................................. II-7
SPECIAL SITUATIONS................................................... II-8
</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. On
April 1, 1996, the Fund closed to new investors and additional investments by
existing shareholders. The Fund's existing shareholders, however, may continue
to add to their accounts through the reinvestment of dividends and cash
distributions on any Fund shares owned. On April 24, 1996, the Advisor
recommended to the Fund's Board of Directors, and the Board of Directors
approved, that the Fund be merged into the Strong Municipal Bond Fund. The
Advisor and the Fund's Board of Directors believes that it is in the best
interests of the Fund's shareholders that the Fund be merged into the Strong
Municipal Bond Fund, a larger fund whose investment objective is identical to
that of the Fund, but whose investment policies allow it to invest in a wider
range of investment-grade municipal securities. The shareholders will be asked
to approve such a merger and will receive proxy solicitation materials that
fully explain the reasons for the proposed merger and its effects.

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

PROSPECTUS PAGE II-1
<PAGE> 25
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 the Fund is normally determined as of 3:00 p.m. Central
Time ("CT") each day the Exchange is open. The Fund reserves 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. The
Fund's NAV is calculated by taking the fair value of the Fund's total assets,
subtracting all its liabilities, and dividing by the total number of shares
outstanding. Expenses are accrued and applied daily when determining the NAV.

The Fund's municipal securities are valued at fair value as determined by a
pricing service that is designated by the Fund's Board of Directors. The
pricing service generally values securities at the average of the most recent
bid and asked prices and also may look to such factors as market transactions
among institutional investors and dealer quotations for similar securities. The
other debt securities are valued at the last sales price on the national
securities exchange or NASDAQ on which such securities are primarily traded;
however, 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. Any taxable 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. Any debt
securities of the Fund having remaining maturities of 60 days or less are
valued by the amortized cost method when the Board of Directors determines that
the fair value of such securities is their amortized cost.

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. For your protection, certain requests may require a signature guarantee.

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

PROSPECTUS PAGE II-2

<PAGE> 26

<TABLE>
<S> <C>
TO SELL SHARES
- ------------------------------------------------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the following information: your account number,
the dollar amount or number of shares you wish to redeem, each owner's name, your street
address, and the signature of each owner as it appears on the account.
- Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If you're using an express
delivery service, send to 100 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 To add the telephone redemption option to your account, call
1-800-368-3863 for a Telephone Redemption Form.
1-800-368-3863 Once the telephone redemption option is in place, you may sell shares ($500 minimum) by phone
24 HOURS A DAY, and arrange to receive the proceeds in one of three ways:
7 DAYS A WEEK 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.
- ------------------------------------------------------------------------------------------------------------------
CHECK WRITING To add check writing to an existing account or to order additional
checks, call 1-800-368-3863.
- Please keep in mind that all check redemptions must be for a minimum of $500 and that you
cannot write a check to close an account.
- ------------------------------------------------------------------------------------------------------------------
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-3
<PAGE> 27
WHAT YOU SHOULD KNOW ABOUT SELLING SHARES

- - 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 the 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 Fund has elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates the 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 Fund's 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 Funds 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.
Redemption checks in excess of the lesser of $250,000 or 1% of the Fund's assets
during any 90-day period may not be honored by the Fund if the Advisor
determines that existing conditions make cash payments undesirable.

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

PROSPECTUS PAGE II-4
<PAGE> 28

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

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

- - 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 Fund and its transfer agent
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. The Fund may incur liability if it does 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, the 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.

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

PROSPECTUS PAGE II-5
<PAGE> 29
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 the Fund's investment policies and
services is contained in the SAI, which you may request by calling or writing
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 Fund, the 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.

CHECK-WRITING PRIVILEGES. You may also redeem shares by check in amounts of
$500 or more. There is no charge for check-writing privileges. Redemption by
check cannot be honored if share certificates are outstanding and would need to
be liquidated to honor the check. In addition, a check may not be honored if the
check results in you redeeming more than the lesser of $250,000 as 1% of the
Fund's assets during any 90-day period and the advisor determines that existing
conditions make cash payments undesirable. Checks

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

PROSPECTUS PAGE II-6
<PAGE> 30

are supplied free of charge, and additional checks will be sent to you upon
your request. The Fund does not return the checks you write, although copies
are available upon request.

You may place stop-payment requests on checks by calling Strong Funds at
1-800-368-3863. A $10 fee will be charged for each stop-payment request. A stop
payment will remain in effect for two weeks following receipt of oral
instruction (six months following written instructions) by Strong Funds.
If there are insufficient cleared shares in your account to cover the amount
of your redemption by check, the check will be returned, marked "insufficient
funds," and a fee of $10 will be charged to the account.

REGULAR INVESTMENT PLANS

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
the 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
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.

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

PROSPECTUS PAGE II-7
<PAGE> 31
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 form, which can be obtained from the Fund. Until a valid corporate
resolution or Certification of Authorized Individuals is received by the Fund,
services such as telephone redemption, wire redemption, and check writing 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
redemption, wire redemption, and check writing 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.

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

- - when you add the telephone redemption or check-writing options 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-8

<PAGE> 32
APPENDIX A

RATINGS OF DEBT OBLIGATIONS:

<TABLE>
<CAPTION>
Moody's Standard & Fitch
Investors Poor's Ratings Investors
Service, Inc. Group Service, Inc. Definition
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM Aaa AAA AAA Highest quality
Aa AA AA High quality
A A A Upper medium grade
Baa BBB BBB Medium grade
Ba BB BB Low grade
B B B Speculative
Caa, Ca, C CCC, CC, C CCC, CC, C Submarginal
D D DDD, DD, D Probably in default
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Moody's S&P Fitch
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM MIG1/VMIG1 Best quality SP-1+ Very strong quality F-1+ Exceptionally strong
quality
---------------------------------------------------------------
MIG2/VMIG2 High quality SP-1 Strong quality F-1 Very strong quality
---------------------------------------------------------------
MIG3/VMIG3 Favorable SP-2 Satisfactory grade F-2 Good credit quality
quality
---------------------------------------------------------------
MIG4/VMIG4 Adequate F-3 Fair credit quality
quality
---------------------------------------------------------------
SG Speculative SP-3 Speculative grade F-S Weak credit quality
grade
- ------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER P-1 Superior A-1+ Extremely strong F-1+ Exceptionally strong
quality quality quality
---------------------------------------------------------------
A-1 Strong quality F-1 Very strong quality
---------------------------------------------------------------
P-2 Strong A-2 Satisfactory quality F-2 Good credit quality
quality
---------------------------------------------------------------
P-3 Acceptable A-3 Adequate quality F-3 Fair credit quality
quality
---------------------------------------------------------------
B Speculative quality F-S Weak credit quality
---------------------------------------------------------------
Not Prime C Doubtful quality D Default
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

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

PROSPECTUS PAGE A-1

<PAGE> 33
NOTES
<PAGE> 34
NOTES
<PAGE> 35
NOTES
<PAGE> 36

STATEMENT OF ADDITIONAL INFORMATION

STRONG INSURED MUNICIPAL BOND FUND, INC.

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 the Fund 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 Fund's Annual
Report, which accompanies this Statement of Additional Information, are
incorporated herein by reference.

This Statement of Additional Information is dated May 1, 1996.

<PAGE> 37

STRONG INSURED MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE

<S> <C>
INVESTMENT RESTRICTIONS...........................................................................................3
INVESTMENT POLICIES AND TECHNIQUES................................................................................5

Borrowing......................................................................................................5
Convertible Securities.........................................................................................5
Derivative Instruments.........................................................................................6
Illiquid Securities...........................................................................................13
Insurance.....................................................................................................13
Lending of Portfolio Securities...............................................................................15
Maturity......................................................................................................16
Mortgage Dollar Rolls and Reverse Repurchase Agreements.......................................................16
Repurchase Agreements.........................................................................................16
Sector Concentration..........................................................................................17
Short Sales Against the Box...................................................................................17
Short-Term Cash Management....................................................................................17
Taxable Securities............................................................................................17
Temporary Defensive Position..................................................................................17
Variable- or Floating-Rate Securities.........................................................................18
When-Issued Securities........................................................................................19
Zero-Coupon, Step-Coupon and Pay-in-Kind Securities...........................................................19

DIRECTORS AND OFFICERS OF THE FUND...............................................................................19
PRINCIPAL SHAREHOLDERS...........................................................................................22
INVESTMENT ADVISOR AND DISTRIBUTOR...............................................................................22
PORTFOLIO TRANSACTIONS AND BROKERAGE.............................................................................24
CUSTODIAN........................................................................................................27
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT.....................................................................27
TAXES............................................................................................................28
DETERMINATION OF NET ASSET VALUE.................................................................................30
ADDITIONAL SHAREHOLDER INFORMATION...............................................................................30
FUND ORGANIZATION................................................................................................31
SHAREHOLDER MEETINGS.............................................................................................31
PERFORMANCE INFORMATION..........................................................................................31
GENERAL INFORMATION..............................................................................................39
PORTFOLIO MANAGEMENT.............................................................................................40
INDEPENDENT ACCOUNTANTS..........................................................................................40
LEGAL COUNSEL....................................................................................................40
FINANCIAL STATEMENTS.............................................................................................40
APPENDIX........................................................................................................A-1
</TABLE>

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

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> 38

INVESTMENT RESTRICTIONS

The investment objective of the Fund is to seek total return by
investing for a high level of federally tax-exempt current income with a
moderate degree of share-price fluctuation. The Fund's investment objectives and
policies are described in detail in the Prospectus under the caption "Investment
Objective and Policies." The following are the Fund's fundamental investment
limitations which cannot be changed without shareholder approval.

The 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.

10. May not, under normal market conditions, invest less than 80% of its
net assets in municipal securities.

3
<PAGE> 39

The following are the Fund's non-fundamental operating policies which
may be changed by the Board of Directors of the Fund without shareholder
approval.

The 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% (10% with respect to the Money Fund) 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.

4
<PAGE> 40

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.

Under normal market conditions, the Fund will invest at least 65% of
the Fund's total assets in bonds.

Except for the fundamental investment limitations listed above and the
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 the 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 the Fund's assets (i.e. due to cash inflows or redemptions) or
in market value of the investment or the Fund's assets will not constitute a
violation of that restriction.

INVESTMENT POLICIES AND TECHNIQUES

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

BORROWING

The 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, the Fund may
not purchase securities when bank borrowings exceed 5% of the Fund's total
assets. Presently, the Fund only intends to borrow from banks for temporary or
emergency purposes.

The Fund has 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 the Fund
within sixty days and is not extended or renewed. The Fund intends to use the
LOC to meet large or unexpected redemptions that would otherwise force the Fund
to liquidate securities under circumstances which are unfavorable to the Fund's
remaining shareholders.

The Fund pays a commitment fee to the banks for the LOC.

CONVERTIBLE SECURITIES

The 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.

5
<PAGE> 41

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
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 the Fund is called for redemption,
the 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.

DERIVATIVE INSTRUMENTS

IN GENERAL. The 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."

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.

HEDGING. The 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
the 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 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. The 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

6
<PAGE> 42

maturity or duration of debt obligations in the 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 the 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
the 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 the
Advisor's 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. The 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, the 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. The 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.

(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

7
<PAGE> 43

are less liquid than exchange-traded derivatives since they often can only be
closed out with the other party to the transaction. The 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 the 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 the 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. The 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 the 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, the Fund's ability to use derivative instruments may
be limited by certain tax considerations. For a discussion of the federal income
tax treatment of the Fund's derivative instruments, see "Taxes - Derivative
Instruments."

The 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 the 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 the 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
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.

The SEC has identified certain trading practices involving derivative
instruments that involve the potential for leveraging the Fund's assets in a
manner that raises issues under the 1940 Act. In order to limit the potential
for the leveraging of the Fund's assets, as defined under the 1940 Act, the SEC
has stated that the Fund may use coverage or the segregation of the Fund's
assets. To the extent required by SEC guidelines, the 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)
cash, liquid high grade debt obligations, or securities positions that
substantially correlate to the market movements of the instrument, with a

8
<PAGE> 44

value sufficient at all times to cover its potential obligations to the extent
that the position is not "covered". For this purpose, a high grade debt
obligation shall include any debt obligation rated A or better by an NRSRO. The
Fund 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 the 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 the 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 the 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. The Fund may use options for any lawful purpose consistent
with the Fund's investment objective such as hedging or managing risk but not
for speculation. 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. The 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 Fund 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.

The 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 the 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 the 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.

The Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, the 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, the 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 the Fund to
realize the profit or limit the loss on an option position prior to its exercise
or expiration.

9
<PAGE> 45

The Fund 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 the Fund and the other party to the transaction ("counter
party") (usually a securities dealer or a bank) with no clearing organization
guarantee. Thus, when the 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.

The Fund's ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The 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 the
Fund will enter into OTC options only with counter parties that are expected to
be capable of entering into closing transactions with the Fund, there is no
assurance that the Fund 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, the Fund might be unable to close out an OTC option position at any time
prior to its expiration. If the 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 Fund 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. The Fund may use spread transactions for any
lawful purpose consistent with the Fund's investment objective such as hedging
or managing risk, but not for speculation. The 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 the
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 the 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 the 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. The Fund may use futures contracts for any lawful
purpose consistent with the Fund's investment objective such as hedging or
managing risk but not for speculation. The Fund may enter into futures
contracts, including interest rate, index, and currency futures. The 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 Fund's 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 Fund 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 Fund will engage in this strategy only when the Advisor believes it
is more advantageous to the Fund than is purchasing the futures contract.

To the extent required by regulatory authorities, the Fund only enters
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 the Fund's exposure to market, currency, or interest rate fluctuations,
the Fund may be able to hedge its exposure more effectively and perhaps at a
lower cost through using futures contracts.

10
<PAGE> 46

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, the Fund realizes a gain;
if it is more, the Fund realizes a loss. Conversely, if the offsetting sale
price is more than the original purchase price, the Fund realizes a gain; if it
is less, the Fund realizes a loss. The transaction costs must also be included
in these calculations. There can be no assurance, however, that the Fund will be
able to enter into an offsetting transaction with respect to a particular
futures contract at a particular time. If the 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 the Fund upon entering into a futures contract.
Instead, at the inception of a futures contract, the 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 the Fund at the termination of the transaction if
all contractual obligations have been satisfied. Under certain circumstances,
such as periods of high volatility, the 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 the Fund's obligations to or from a futures
broker. When the Fund purchases an option on a future, the premium paid plus
transaction costs is all that is at risk. In contrast, when the 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 the 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 Fund intends 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 the 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

11
<PAGE> 47

example, all participants in the futures and options on futures contracts
markets are subject to daily variation margin calls and 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.

SWAP AGREEMENTS. The Fund may enter into interest rate, securities
index, commodity, or security and currency exchange rate swap agreements for any
lawful purpose consistent with the 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. The 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;" 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 the Fund, the
obligations of the parties would be exchanged on a "net basis." Consequently,
the 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"). The 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 the 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, the 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 Fund by the Internal Revenue Code may limit the Fund's ability to
use swap agreements. The swaps market is largely unregulated.

The Fund 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, the 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 Fund's
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 the Fund's investment objective and permitted by the Fund's investment
limitations, operating policies, and applicable regulatory authorities.

12
<PAGE> 48
ILLIQUID SECURITIES

The Fund may invest in illiquid securities (i.e., securities that are
not readily marketable). However, the 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 the Fund's
investments in illiquid securities to 10% of its net assets.

The Board of Directors of the 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 Fund's Board of Directors.

The Board of Directors of the Fund has delegated to Strong Capital
Management, Inc. (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.

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,
the 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, the Fund might obtain a less favorable price than prevailed when it
decided to sell. If through the appreciation of restricted securities or the
depreciation of unrestricted securities, the 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.

The 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.

INSURANCE

IN GENERAL. Under normal market conditions, 65% of the Fund's total
assets must be insured as to the timely payment of principal and interest. Such
insurance will either be (i) purchased by the Fund or by a previous owner of a
municipal security ("Mutual Fund Insurance"); or (ii) obtained from the issuer
or underwriter of the municipal securities ("Issue Insurance"). If a municipal
security is already covered by Issue Insurance when acquired by the Fund, the
coverage will not be duplicated by Mutual Fund Insurance. If a municipal
security is not covered by Issue Insurance, then it may be covered by Mutual
Fund Insurance purchased by the Fund. The Fund anticipates that all or
substantially all of its insured municipal securities will be subject to Issue
Insurance. Although the insurance feature reduces certain financial risks, the
premiums for Mutual Fund Insurance (if purchased by the Fund, which are paid
from the Fund's assets) and the higher market price paid for municipal
securities covered by Issue Insurance reduce the Fund's current yield.

13
<PAGE> 49

Insurance will cover the timely payment of interest and principal on
municipal securities and will be obtained from insurers with a high
claims-paying ability designated by or under the authority of the Fund's Board
of Directors. In order to be considered as an eligible insurer, such insurers
must guarantee the timely payment of all principal and interest on the municipal
securities as they become due. However, such insurance may provide that in the
event of non-payment of interest or principal, when due, with respect to an
insured municipal bond, the insurer is not obligated to make such payment until
a specified time period (which may be 30 days or more after it has been notified
by the Fund that such non-payment has occurred). For these purposes, a payment
of principal is due only at final maturity of the municipal bond and not at the
time any earlier sinking fund payment is due. In addition to the requirement
that the insurer insure the timely payment of principal and interest on
municipal securities as they become due, the insurer's claims-paying ability
must also be determined to be high by or under the authority of the Fund's Board
of Directors. While the insurance will guarantee the timely payment of principal
and interest, it does not guarantee the market value of the municipal securities
or the net asset value of the Fund's shares.

Municipal securities are generally eligible to be insured under Mutual
Fund Insurance if, at the time of purchase by the Fund, they are identified
separately or by category in qualitative guidelines furnished by the mutual fund
insurer and are in compliance with the aggregate limitations on amounts set
forth in such guidelines. Premium variations are based, in part, on the rating
of the municipal securities being insured at the time the Fund purchases the
securities. The insurer may prospectively withdraw particular municipal
securities from the classifications of securities eligible for insurance or
change the aggregate amount limitation of each issue or category of eligible
municipal securities. But, the insurer must continue to insure the full amount
of the municipal securities previously acquired, which the insurer has indicated
are eligible so long as they remain in the Fund's portfolio. The qualitative
guidelines and aggregate amount limitations established by the insurer from time
to time will not necessarily be the same as those the Fund would use to govern
selection of municipal securities for the Fund's investments. Therefore, from
time to time such guidelines and limitations may affect investment decisions in
the event the Fund's portfolio securities are insured by Mutual Fund Insurance.

For Mutual Fund Insurance that terminates upon the sale of the insured
security, the insurance does not have any effect on the resale value of such
security. Therefore, the Fund will generally retain any insured municipal
securities which are in default or, in the judgment of the Advisor, are in
significant risk of default and place a value on the insurance. This value will
be equal to the difference between the market value of the defaulted municipal
securities and the market value of similar municipal securities which are not in
default. As a result, the Advisor may be unable to manage a portion of the
Fund's portfolio to the extent the Fund holds defaulted municipal securities,
which will limit its ability in certain circumstances to purchase other
municipal securities. While a defaulted municipal security is held by the Fund,
the Fund continues to pay the insurance premium thereon but also collects
interest payments from the insurer and retains the right to collect the full
amount of principal from the insurer when the municipal security comes due. The
Fund expects that the market value of a defaulted municipal security covered by
Issue Insurance will generally be greater than the market value of an otherwise
comparable defaulted municipal security covered by Mutual Fund Insurance.

PRINCIPAL INSURERS. Currently, Municipal Bond Investors Assurance
Corporation ("MBIA"), Capital Guaranty Insurance Company ("Capital Guaranty"),
Financial Guaranty Insurance Company ("FGIC"), AMBAC Indemnity Corporation
("AMBAC"), Financial Security Assurance Corp., together with its affiliated
insurance companies -- Financial Security Assurance International Inc. and
Financial Security Assurance of Oklahoma, Inc. (collectively, "FSA"), Connie Lee
Insurance Co. ("Connie Lee"), and Capital Markets Assurance Corporation
("CapMAC") are considered to have a high claims-paying ability and, therefore,
are eligible insurers for the Fund's insured municipal securities. Additional
insurers may be added without further notification if such insurers'
claims-paying ability is determined to be high by or under the authority of the
Fund's Board of Directors. The following information concerning these eligible
insurers is based upon information provided by such insurers or information
filed with certain state insurance regulators. The Fund has not independently
verified such information and makes no representations as to the accuracy and
adequacy of such information or as to the absence of material adverse changes
subsequent to the date of this SAI.

MBIA is a monoline financial guaranty insurance company created from an
unincorporated association (the Municipal Bond Insurance Association), through
which its members wrote municipal bond insurance on a several and joint-basis
through 1986. On January 5, 1990, MBIA acquired all of the outstanding stock of
Bond Investors Group, Inc., the parent of Bond Investors Guaranty Insurance
Company ("BIG"), which has subsequently changed its name to MBIA Insurance Corp.

14
<PAGE> 50

of Illinois. Through a reinsurance agreement, BIG ceded all of its net insured
risks, as well as its related unearned premium and contingency reserves, to
MBIA. MBIA issues municipal bond insurance policies guarantying the timely
payment of principal and interest on new municipal bond issues and leasing
obligations of municipal entities, secondary market insurance of such
instruments and insurance on such instruments held in unit investment trusts and
mutual funds. As of December 31, 1994, MBIA (consolidated) had statutory capital
(i.e., surplus plus contingency reserves) of approximately $1.723 billion
(unaudited) -- prepared in accordance with statutory accounting practices
prescribed or permitted by insurance regulatory authorities. MBIA has a
claims-paying ability rating of "AAA" by S&P and "Aaa" by Moody's. Municipal
securities insured by any insurer with such a claims-paying ability rating will
generally carry the same rating or credit risk as the insurers. Accordingly, S&P
and Moody's rate all bond issues insured by MBIA and BIG "AAA" and "Aaa,"
respectively.

Capital Guaranty is a monoline insurance company whose policies
guaranty the timely payment of principal and interest on new issue and secondary
market issue municipal bond transactions. As of December 31, 1994, Capital
Guaranty had statutory capital of approximately $196 million (audited) --
prepared in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. Capital Guaranty has a
claims-paying ability rating of "AAA" by S&P and "Aaa" by Moody's.

Financial Guaranty Insurance Corporation, a wholly owned subsidiary of
General Electric Capital Corporation, is an insurer of municipal securities,
including new issues, securities held in unit investment trusts and mutual
funds, and those traded on secondary markets. As of December 31, 1994, FGIC had
statutory capital of approximately $1.221 billion (unaudited) -- prepared in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. FGIC has a claims-paying ability rating of
"AAA" by S&P and "Aaa" by Moody's.

AMBAC, a wholly owned subsidiary of AMBAC Inc., is a monoline insurance
company whose policies guaranty the payment of principal and interest on
municipal securities issues. As of December 31, 1994, AMBAC had statutory
capital of approximately $1.218 billion (unaudited) -- prepared in accordance
with statutory accounting practices prescribed or permitted by insurance
regulatory authorities. AMBAC has a claims-paying ability rating of "AAA" by S&P
and "Aaa" by Moody's.

FSA, which is wholly owned by U.S. West Capital Corporation, is a
monoline insurer whose policies guaranty the timely payment of principal and
interest on new issue and secondary market issue municipal securities
transactions, among other financial obligations. As of December 31, 1994, FSA
had statutory capital of approximately $426 million (unaudited) -- prepared in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. FSA has a claims-paying ability rating of
"AAA" by S&P and "Aaa" by Moody's.

Connie Lee, a wholly-owned subsidiary of College Construction Loan
Insurance Association, is an insurer of municipal securities issued by colleges,
universities, and teaching hospitals. As of December 31, 1994, Connie Lee had
statutory capital of approximately $115 million (unaudited) -- prepared in
accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities. Connie Lee has a claims-paying ability of
"AAA" by S&P. Moody's has not issued a claims-paying ability rating for Connie
Lee.

CapMAC, a wholly-owned subsidiary of CapMAC Holdings, Inc., is a
monoline insurance company whose policies guarantee the timely payment of
principal and interest on new issue and secondary market issue municipal
securities transactions, among other financial obligations. As of December 31,
1994, CapMAC had statutory capital of approximately $ 170 million (unaudited) --
prepared in accordance with statutory accounting practices prescribed or
permitted by insurance regulatory authorities. CapMAC has a claims-paying
ability rating of "AAA" by S&P and "Aaa" by Moody's.

LENDING OF PORTFOLIO SECURITIES

The 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 Fund is authorized to lend, the Fund does 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 Fund will retain authority
to terminate any loans at any

15
<PAGE> 51

time. The Fund 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 Fund 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 Fund 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 the Fund's interest.

MATURITY

The Fund's average portfolio maturity represents an average based on
the actual stated maturity dates of the debt securities in the Fund's portfolio,
except that (i) variable-rate securities are deemed to mature at the next
interest-rate adjustment date, (ii) debt securities with put features are deemed
to mature at the next put-exercise date, (iii) the maturity of mortgage-backed
securities is determined on an "expected life" basis as determined by the
Advisor, and (iv) securities being hedged with futures contracts may be deemed
to have a longer maturity, in the case of purchases of futures contracts, and a
shorter maturity, in the case of sales of futures contracts, than they would
otherwise be deemed to have. In addition, a security that is subject to
redemption at the option of the issuer on a particular date (the "call date"),
which is prior to the security's stated maturity, may be deemed to mature on the
call date rather than on its stated maturity date. The call date of a security
will be used to calculate average portfolio maturity when the Advisor reasonably
anticipates, based upon information available to it, that the issuer will
exercise its right to redeem the security. The average portfolio maturity of the
Fund is dollar-weighted based upon the market value of the Fund's securities at
the time of the calculation.

MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

The Fund 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, the
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, the Fund will set aside permissible liquid assets in a segregated account
to secure its obligations to repurchase the security.

The 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 the 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 Fund. (See "Borrowing" above.)

The mortgage dollar rolls and reverse repurchase agreements entered
into by the Fund may be used as arbitrage transactions in which the 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 the 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 Fund that are associated with other
types of leverage.

REPURCHASE AGREEMENTS

The Fund may enter into repurchase agreements with certain banks or
non-bank dealers. In a repurchase agreement, the 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

16
<PAGE> 52

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 the 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 Fund enters into repurchase
agreements to evaluate those risks. The Fund may, under certain circumstances,
deem repurchase agreements collateralized by U.S. government securities to be
investments in U.S. government securities.

SECTOR CONCENTRATION

From time to time, the Fund may invest 25% or more of its assets in
municipal bonds that are related in such a way that an economic, business, or
political development or change affecting one such security could also affect
the other securities (for example, securities whose issuers are located in the
same state). Such related sectors may include hospitals, retirement centers,
pollution control, single family housing, multiple family housing, industrial
development, utilities, education, and general obligation bonds. The Fund also
may invest 25% or more of its assets in municipal bonds whose issuers are
located in the same state. Such states may include California, Pennsylvania,
Texas, New York, Florida, and Illinois.

SHORT SALES AGAINST THE BOX

The 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 the Fund owns or has the right to acquire, for delivery
at a specified date in the future. If the 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.

SHORT-TERM CASH MANAGEMENT

From time to time the Advisor may determine to use a non-affiliated
money market fund to manage some or all of the Fund's short-term cash positions.
The Advisor will do this only when the Advisor reasonably believes that this
action will result in a return to the Fund that is equal to, or better than, the
return that could be achieved by direct investments in money market instruments.
In such cases, to ensure no double charging of fees, the Advisor will credit any
management or other fees of the non-affiliated money market fund against the
Advisor's management fee.

TAXABLE SECURITIES

From time to time when the Advisor deems it appropriate, the Fund may
invest up to 20% of its net assets on a temporary basis in taxable investments
(of comparable quality to their respective tax-free investments), which would
produce interest not exempt from federal income tax, including among others: (i)
obligations issued or guaranteed, as to principal and interest, by the United
States government, its agencies, or instrumentalities; (ii) obligations of
financial institutions, including banks, savings and loan institutions,
insurance companies and mortgage banks, such as certificates of deposit,
bankers' acceptances, and time deposits; (iii) corporate obligations, including
preferred stock and commercial paper, with equivalent credit quality to the
municipal securities in which the Fund may invest; and (iv) repurchase
agreements with respect to any of the foregoing instruments. For example, the
Fund may invest in such taxable investments pending the investment or
reinvestment of such assets in municipal securities, in order to avoid the
necessity of liquidating portfolio securities to satisfy redemptions or pay
expenses, or when such action is deemed to be in the interest of the Fund's
shareholders. In addition, the Fund may invest up to 100% of its total assets in
private activity bonds, the interest on which is a tax-preference item for
taxpayers subject to the federal alternative minimum tax.

TEMPORARY DEFENSIVE POSITION

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, including U.S. government securities,
commercial paper, banker's acceptances, certificates of deposit, and time
deposits.

17
<PAGE> 53

VARIABLE- OR FLOATING-RATE SECURITIES

The Fund may invest in securities which offer a variable- or
floating-rate of interest. Variable-rate securities provide for automatic
establishment of a new interest rate at fixed intervals (e.g., daily, monthly,
semi-annually, etc.). Floating-rate securities generally provide for automatic
adjustment of the interest rate whenever some specified interest rate index
changes. The interest rate on variable- or floating-rate securities is
ordinarily determined by reference to or is a percentage of a bank's prime rate,
the 90-day U.S. Treasury bill rate, the rate of return on commercial paper or
bank certificates of deposit, an index of short-term interest rates, or some
other objective measure.

Variable- or floating-rate securities frequently include a demand
feature entitling the holder to sell the securities to the issuer at par. In
many cases, the demand feature can be exercised at any time on 7 days notice; in
other cases, the demand feature is exercisable at any time on 30 days notice or
on similar notice at intervals of not more than one year. Some securities which
do not have variable or floating interest rates may be accompanied by puts
producing similar results and price characteristics. When considering the
maturity of any instrument which may be sold or put to the issuer or a third
party, the Fund may consider that instrument's maturity to be shorter than its
stated maturity.

Variable-rate demand notes include master demand notes which are
obligations that permit the Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between the Fund, as
lender, and the borrower. The interest rates on these notes fluctuate from time
to time. The issuer of such obligations normally has a corresponding right,
after a given period, to prepay in its discretion the outstanding principal
amount of the obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. The interest rate on a floating-rate
demand obligation is based on a known lending rate, such as a bank's prime rate,
and is adjusted automatically each time such rate is adjusted. The interest rate
on a variable-rate demand obligation is adjusted automatically at specified
intervals. Frequently, such obligations are secured by letters of credit or
other credit support arrangements provided by banks. Because these obligations
are direct lending arrangements between the lender and borrower, it is not
contemplated that such instruments will generally be traded. There generally is
not an established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not secured
by letters of credit or other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to pay principal and interest
on demand. Such obligations frequently are not rated by credit rating agencies
and, if not so rated, the Fund may invest in them only if the Advisor determines
that at the time of investment the obligations are of comparable quality to the
other obligations in which the Fund may invest. The Advisor, on behalf of the
Fund, will consider on an ongoing basis the creditworthiness of the issuers of
the floating- and variable-rate demand obligations in the Fund's portfolio.

The Fund will not invest more than 15% of its net assets in variable-
and floating-rate demand obligations that are not readily marketable (a
variable- or floating-rate demand obligation that may be disposed of on not more
than seven days notice will be deemed readily marketable and will not be subject
to this limitation). (See "Illiquid Securities" and "Investment Restrictions.")
In addition, each variable- or floating-rate obligation must meet the credit
quality requirements applicable to all the Fund's investments at the time of
purchase. When determining whether such an obligation meets the Fund's credit
quality requirements, the Fund may look to the credit quality of the financial
guarantor providing a letter of credit or other credit support arrangement.

In determining the Fund's weighted average portfolio maturity, the Fund
will consider a floating or variable rate security to have a maturity equal to
its stated maturity (or redemption date if it has been called for redemption),
except that it may consider (i) variable rate securities to have a maturity
equal to the period remaining until the next readjustment in the interest rate,
unless subject to a demand feature, (ii) variable rate securities subject to a
demand feature to have a remaining maturity equal to the longer of (a) the next
readjustment in the interest rate or (b) the period remaining until the
principal can be recovered through demand, and (iii) floating rate securities
subject to a demand feature to have a maturity equal to the period remaining
until the principal can be recovered through demand. Variable and floating rate
securities generally are subject to less principal fluctuation than securities
without these attributes since the securities usually trade at par following the
readjustment in the interest rate.

18
<PAGE> 54

WHEN-ISSUED SECURITIES

The 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 one month of the
purchase although is some cases settlement may take longer. During the period
between the purchase and settlement, no payment is made by the 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 Fund intends to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time the 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.

To the extent required by the SEC, the Fund 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, the 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 Fund 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, the
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 FUND

Directors and officers of the Fund, 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 26 registered open-end management
investment companies consisting of 37 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
Fund.

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 Fund as a Director since December 1990 and as Chairman
of the Board since August 1991.

19
<PAGE> 55

MARVIN E. NEVINS (DOB 7/9/18), Director of the Fund.

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
Fund as a Director since December 1990.

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

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 Fund as a Director since July 1994.

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

Mr. Dragisic has been Vice Chairman and a director of the Advisor and
director of Holdings and Distributor since July 1994. Mr. Dragisic previously
served as a director of the Money Fund and Bond Fund from July 1991 until July
1994; the Short- Term Fund and Insured Fund from August 1991 until July 1994;
and the High-Yield Fund from July 1993 until July 1994. 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 Fund as a Director since April 1995; as
Vice Chairman from July 1994 until October 1995; and as President since October
1995.

STANLEY KRITZIK (DOB 1/9/30), Director of the Fund.

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 Fund as a Director since April 1995.

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

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. Mr. Vogt has served the Fund as

a Director since April 1995.

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

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 Fund as a Vice
President since May 1993.

20
<PAGE> 56

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

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 Fund as a Vice President since October 1994.

ANN E. OGLANIAN (DOB 12/7/61), Vice President and Secretary of the Fund.

Ms. Oglanian has been an Associate Counsel of the Advisor since January
1992. Ms. Oglanian acted as Associate Counsel for the Chicago-based investment
management firm, Kemper Financial Services, Inc. from June 1988 until December
1991. Ms. Oglanian has served the Fund as Secretary since May 1994 and as a Vice
President since January 1996.

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

Mr. Shenkenberg has been an Associate Counsel to the Advisor since
December 1992. 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 Fund as a Vice President since April 1996.

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

Mr. Weitzer has been an Associate Counsel to the Advisor since July
1993. Mr. Weitzer has served the Fund as a Vice President since January 1996.

RONALD A. NEVILLE (DOB 5/21/47), C.P.A., Treasurer of the Fund.

Mr. Neville has been the Senior Vice President and Chief Financial
Officer of the Advisor since January 1995. For fourteen years prior to that, Mr.
Neville worked at Twentieth Century Companies, Inc., most notably as Senior Vice
President and Chief Financial Officer (1988 until December 1994). Mr. Neville
received his M.B.A. in 1972 from the University of Missouri - Kansas City and
his B.A. degree in Business Administration and Economics in 1969 from Drury
College. Mr. Neville has served the Fund as Treasurer since April 1995.

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 33962-8172. 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, Mr. Strong has been Chairman
and a director of Strong Holdings, Inc., a Wisconsin corporation and subsidiary
of the Advisor ("Holdings") since October 1993; Chairman and a director of the
Fund's underwriter, Strong Funds Distributors, Inc., a Wisconsin Corporation and
subsidiary of Holdings ("Distributor") since October 1993; Chairman and a
director of Heritage Reserve Development Corporation, a Wisconsin corporation
and subsidiary of Holdings ("Heritage") since January 1994; Chairman and a
director of Strong Service Corporation, a Wisconsin corporation and subsidiary
of Holdings ("SSC") since November 1995; Chairman and a member of the Managing
Board of Fussville Real Estate Holdings L.L.C., a Wisconsin Limited Liability
Company and subsidiary of the Advisor ("Real Estate Holdings") since February
1994; Chairman and a member of the Managing Board of Fussville Development
L.L.C., a Wisconsin Limited Liability Company and subsidiary of the Advisor and
Real Estate Holdings ("Fussville Development") since February 1994; and Chairman
and a member of the Managing Board of Sherwood Development L.L.C., a Wisconsin
Limited Liability Company and subsidiary of the Advisor ("Sherwood") since
December 1995 and April 1995, respectively. In addition to the positions listed
above, Mr. Dragisic has been a director of Distributors since July 1994;
President and a director of Holdings since December 1995 and July 1994,
respectively; President and a director of SSC since November 1995; Vice Chairman
and a

21
<PAGE> 57

director of Heritage since August 1994; Vice Chairman and a member of the
Managing Board of Fussville Development since December 1995 and August 1994,
respectively; Vice Chairman and a member of the Managing Board of Real Estate
Holdings since December 1995 and August 1994, respectively; and Vice Chairman
and a member of the Managing Board of Sherwood since December 1995 and April
1995, respectively. In addition to the positions listed above, Mr. Lemke has
been President of Distributors since December 1995; Vice President of Holdings
since December 1995; Vice President of SSC since November 1995; Vice President
of Heritage since December 1995; Vice President of Fussville Development since
December 1995; Vice President of Real Estate Holdings since December 1995; and
Vice President of Sherwood since December 1995. In addition to the positions
listed above, Mr. Shenkenberg has been Vice President and Secretary of
Distributors since December 1995; Secretary of SSC since November 1995; and
Secretary of Holdings, Heritage, Fussville Development, Real Estate Holdings,
and Sherwood since December 1995. In addition to the positions listed above, Mr.
Neville has been Vice President of Distributors since December 1995; Vice
President of Holdings since December 1995; Vice President of SSC since November
1995; Vice President of Heritage since December 1995; Vice President of
Fussville Development since December 1995; Vice President of Real Estate
Holdings since December 1995; and Vice President of Sherwood since December
1995.

As of March 31, 1996, the officers and directors of the Fund in the
aggregate beneficially owned less than 1% of the Fund's then outstanding shares.

PRINCIPAL SHAREHOLDERS

As of March 31, 1996, no persons owned of record or is known by the
Fund to own of record or beneficially more than 5% of the Fund's outstanding
shares:

INVESTMENT ADVISOR AND DISTRIBUTOR

The Advisor to the Fund 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. Neville is a Senior Vice
President and Chief Financial Officer of the Advisor, Mr. Shenkenberg is Vice
President, Assistant Secretary, and Associate Counsel of the Advisor, and Ms.
Oglanian and Mr. Weitzer are Associate Counsel of the Advisor. A brief
description of the Fund's investment advisory agreement ("Advisory Agreement")
is set forth in the Prospectus under "About the Fund - Management."

The Fund's Advisory Agreement, dated May 1, 1995, was last approved by
shareholders at the annual meeting of shareholders held on April 13, 1995. The
Advisory Agreement is required to be approved annually by 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. The
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. In addition, the Advisory
Agreement will terminate automatically in the event of its assignment.

Under the terms of the 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. 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 its expense.

Except for expenses assumed by the Advisor as set forth above or as
described below with respect to the distribution of the Fund's shares, the 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

<PAGE> 58
registering or qualifying shares for sale; expenses for printing and
distribution costs of Prospectuses and semi-annual financial statements mailed
to existing shareholders; and charges of custodians, transfer agent fees
(including the printing and mailing of reports and notices to shareholders),
fees of registrars, fees for auditing and legal services, fees for clerical
services related to record keeping and shareholder relations, the cost of stock
certificates, and fees for directors who are not "interested persons" of the
Advisor; expenses of indemnification; extraordinary expenses; and costs of
shareholder and director meetings.

As compensation for its services, the Fund pays the Advisor a monthly
management fee at the annual rate of .50% of the average daily net assets. (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 the Fund. The following table sets forth certain information
concerning management fees for the Fund:

<TABLE>
<CAPTION>
Management Fee
Incurred Management Fee Management Fee
by Fund Waiver Paid by Fund
------- ------ ------------

<S> <C> <C> <C>
Insured Fund

1993 $ 246,484 $ 45,481 $ 201,003
1994 251,654 0 251,654
1995 210,246 0 210,246
</TABLE>

The organizational expenses of the Fund which were $85,585.53, were
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 Advisory Agreement requires the Advisor to reimburse the 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 that percentage 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, which is the most restrictive percentage expense limitation
provided by the state laws of the various states in which the Fund's common
stock is qualified for sale; or if the states in which the Fund's common stock
is qualified for sale impose no restrictions, then 2%. The most restrictive
percentage limitation currently applicable to the Fund is 2-1/2% of its average
daily net assets to $30,000,000, 2% on the next $70,000,000 of its average daily
net assets, and 1-1/2% of the average daily net assets in excess of
$100,000,000. 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 the Fund in addition to the reimbursement of expenses in excess of
applicable 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 settled by consent without
admitting or denying the allegations in the Order. The Order alleged 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
alleged 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.

The staff of the U.S. Department of Labor (the "Staff") has contacted
the Advisor regarding alleged cross-trading of securities between 1987 and early
1990 involving various customer accounts subject to the Employee Retirement
Security Act of 1974 ("ERISA") and managed by the Advisor. The Advisor has
informed the Staff of the basis for its position that the trades complied with
ERISA and that, in any event, any alleged noncompliance was not the cause of any
losses to the accounts. The Staff has stated that it disagrees with the
Advisor's positions, although to date it has not filed any action against the
Advisor. At

23
<PAGE> 59
this time, the Advisor is negotiating with the Staff regarding a possible
resolution of the matter, but it cannot presently determine whether the matter
will be settled or litigated or, if it is settled or litigated, how it
ultimately will be resolved. However, management presently believes, based on
current knowledge and the Advisor's insurance coverage, that the ultimate
resolution of this matter should not have a material adverse effect on the
Advisor's financial position.

The Advisor has 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 and the investment
companies managed by the Advisor, including the Fund, as well as certain
employees of the Advisor who have access to information relating to the purchase
or sale of securities by the Advisor 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 Advisor's 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,
including the Fund) 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'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, including the Fund), 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, at the time, is being purchased or sold, or
to the knowledge of the Access Person, is being considered for purchase or sale,
by the Advisor on behalf of any mutual fund or other account managed by it.
Finally, the Code provides for trading "black out" periods which prohibit
trading by Access Persons who are portfolio managers within seven calendar days
of trading in the same securities by any mutual fund or other account managed by
the portfolio manager.

Under a Distribution Agreement dated December 1, 1993 with the Fund (a
"Distribution Agreement"), Strong Funds Distributors, Inc. acts as underwriter
of the Fund's shares ("Distributor"). The Distribution Agreement provides that
the Distributor will use its best efforts to distribute the Fund's shares. Since
the Fund is a "no-load" fund, no sales commissions are charged on the purchase
of Fund shares. The Distribution Agreement further provides that the Distributor
will bear the costs of printing Prospectuses and shareholder reports which are
used for selling purposes, as well as advertising and other costs attributable
to the distribution of the Fund's shares. The Distributor is an indirect
subsidiary of the Advisor and controlled by the Advisor and Richard S. Strong.
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 the
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 is responsible for decisions to buy and sell securities for
the Fund and for the placement of the Fund's portfolio business and the
negotiation of the commissions to be paid on such transactions. It is the policy
of the Advisor 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 or the Fund. 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 by using a broker.
The best price to the Fund means the best net price without regard to the mix
between purchase or sale price and commissions. In selecting broker-dealers and
in negotiating commissions, the Advisor considers 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 the Fund's shares.

24
<PAGE> 60

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, 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, the Advisor
may cause the Fund 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 believes 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 the 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 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 the Fund will be reasonable in relation to the benefits to
the Fund over the long term. The investment management fees paid by the Fund
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
Fund and other advisory clients.

From time to time, the Advisor may purchase new issues of securities
for the 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 Fund 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

25
<PAGE> 61
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 Fund 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 Fund
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 places portfolio transactions for other advisory accounts,
including other mutual funds managed by the Advisor. Research services furnished
by firms through which the Fund effects 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 in connection with the Fund. In the opinion of the
Advisor, it is not possible to separately measure the benefits from research
services to each of the accounts (including the Fund) managed by the Advisor.
Because the volume and nature of the trading 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 Fund will not be disproportionate
to the benefits received by the Fund on a continuing basis.

The Advisor seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund 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 Fund. In making
such allocations between the 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

26
<PAGE> 62

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.

For the 1995 fiscal period ended December 31, the Fund's portfolio
turnover rate was 724.9%. The portfolio turnover rate for this Fund was higher
than anticipated primarily because the Fund employed a trading strategy to
preserve the favorable tax treatment available to it under the Internal Revenue
Code of 1986, as amended.

During 1993, 1994, and 1995 the Fund paid approximately $0, $0, and
$107,592, respectively, in brokerage commissions. The Fund paid higher brokerage
commissions in 1995, primarily because the Fund employed a trading strategy to
preserve the favorable tax treatment available to it under the Internal Revenue
Code of 1986, as amended.

CUSTODIAN

As custodian of the Fund's assets, Firstar Trust Company, P.O. Box 701,
Milwaukee, Wisconsin 53201, has custody of all securities and cash of the Fund,
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 Fund. The custodian is in no way
responsible for any of the investment policies or decisions of the Fund.

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

The Advisor acts as transfer agent and dividend-disbursing agent for
the Fund. The Advisor is compensated based on an annual fee per open account of
$31.50 for the Fund, 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. 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
Agreement. In addition, the Advisor provides certain printing and mailing
services for the Fund, such as printing and mailing of shareholder account
statements, checks, and tax forms.

The following table sets forth certain information concerning amounts
paid by the Fund 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
Insured Fund

27
<PAGE> 63

From time to time, the Fund, 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 Fund to persons who beneficially own interests in the Fund, such as
participants in 401(k) plans. These services may include, among other things,
sub-accounting services, answering inquiries relating to the Fund, transmitting,
on behalf of the Fund, proxy statements, annual reports, updated Prospectuses,
other communications regarding the Fund, and related services as the Fund or
beneficial owners may reasonably request. In such cases, the Fund will not pay
fees at a rate that is greater than the rate the Fund is currently paying the
Advisor for providing these services to Fund shareholders.

TAXES

GENERAL

As indicated under "About the Fund - Distributions and Taxes" in the
Prospectus, the Fund intends to continue to qualify annually for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986, as
amended (the "Code"). This qualification does not involve governmental
supervision of the Fund's management practices or policies.

In order to qualify for treatment as a RIC under the Code, the Fund
must distribute to its shareholders for each taxable year at least 90% of the
sum of its investment company taxable income (consisting generally of taxable
net investment income and net short-term capital gain) plus its net interest
income excludable from gross income under section 103(a) of the Code and must
meet several additional requirements. For the 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 other
income (including gains from options or futures) derived with respect to its
business of investing in securities ("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 options or futures, that were held for less
than three months ("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.

Dividends paid by the Fund will qualify as exempt-interest dividends as
defined in the Prospectus, and thus will be excludable from gross income by its
shareholders, if the Fund satisfies the requirement that, at the close of each
quarter of its taxable year, at least 50% of the value of its total assets
consists of securities the interest on which is excludable from gross income
under section 103(a); the Fund intends to continue to satisfy this requirement.
The aggregate dividends excludable from the Fund's shareholders' gross income
may not exceed the Fund's net tax-exempt income. The shareholders' treatment of
dividends from the Fund under local and state income tax laws may differ from
the treatment thereof under the Code.

If Fund shares are sold at a loss after being held for six months or
less, the loss will be disallowed to the extent of any exempt-interest dividends
received on those shares. Any portion of such a loss that is not disallowed will
be treated as long-term, instead of short-term, capital loss to the extent of
any capital gain distributions received on those shares.

The 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 taxable 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.

INVESTMENTS IN CERTAIN MUNICIPAL SECURITIES

28
<PAGE> 64

Tax-exempt interest attributable to certain private activity bonds
("PABs") (including, in the case of a RIC receiving interest on such bonds, a
proportionate part of the exempt-interest dividends paid by that RIC) is subject
to the alternative minimum tax. Exempt-interest dividends received by a
corporate shareholder also may be indirectly subject to that tax without regard
to whether the Fund's tax-exempt interest was attributable to such bonds.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by PABs or industrial development
bonds ("IDBs") should consult their tax advisors before purchasing shares of the
Fund because, for users of certain of these facilities, the interest on such
bonds is not exempt from federal income tax. For these purposes, the term
"substantial user" is defined generally to include a "non-exempt person" who
regularly uses in trade or business a part of a facility financed from the
proceeds of PABs or IDBs.

The Fund may invest in municipal bonds that are purchased, generally
not on their original issue, with market discount (that is, at a price less than
the principal amount of the bond or, in the case of a bond that was issued with
original issue discount, a price less than the amount of the issue price plus
accrued original issue discount) ("municipal market discount bonds"). Market
discount generally arises when the value of the bond declines after issuance
(typically, because of an increase in prevailing interest rates or a decline in
the issuer's creditworthiness). Gain on the disposition of a municipal market
discount bond purchased by the Fund after April 30, 1993 (other than a bond with
a fixed maturity date within one year from its issuance), generally is treated
as ordinary (taxable) income, rather than capital gain, to the extent of the
bond's accrued market discount at the time of disposition. Market discount on
such a bond generally is accrued ratably, on a daily basis, over the period from
the acquisition date to the date of maturity. In lieu of treating the
disposition gain as above, the Fund may elect to include market discount in its
gross income currently, for each taxable year to which it is attributable.

DERIVATIVE INSTRUMENTS

The use of derivatives strategies, such as purchasing and selling
(writing) options and futures, involves complex rules that will determine for
income tax purposes the character and timing of recognition of the gains and
losses the Fund realizes in connection therewith. Income from transactions in
options and futures derived by the Fund with respect to its business of
investing in securities will qualify as permissible income under the Income
Requirement. However, income from the disposition of options and futures will be
subject to the 30% Limitation if they are held for less than three months.

If the 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 Fund intends
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 Fund's hedging transactions. To the
extent this treatment is not available or is not elected by the Fund, it may be
forced to defer the closing out of certain options or futures contracts beyond
the time when it otherwise would be advantageous to do so, in order for the Fund
to qualify as a RIC.

For federal income tax purposes, the Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on options and
futures 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 the 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 the 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 the holder of those securities, the Fund
must take into account or include in its income (with respect to taxable
securities) 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, the Fund must take into account or
include in its gross income (with

29
<PAGE> 65

respect to taxable securities) securities it receives as "interest" on
pay-in-kind securities. Because the Fund annually must distribute substantially
all of its income, including any tax-exempt original issue discount, to satisfy
the Distribution Requirement, 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. The 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, options, or futures 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 Fund - Distributions and Taxes"
is intended to provide you with an overview of the impact of federal income tax
provisions on the 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 the Fund's current ability to pass-through earnings without
taxation at the Fund level, or otherwise materially changes the Fund's tax
treatment, could adversely affect the value of a shareholder's investment in the
Fund. Because the Fund's taxes are a complex matter, you should consult your tax
adviser for more detailed information concerning the taxation of the Fund and
the federal, state, and local tax consequences to shareholders of an investment
in the 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 the Fund will be
determined as of the close of trading on each day the New York Stock Exchange
(the "NYSE") is open for trading except for bank holidays. The NYSE is open
Monday through Friday except New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday, the
NYSE will not be open for trading on the preceding Friday, and when 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 the yearly accounting period.

ADDITIONAL SHAREHOLDER INFORMATION

TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES AND AUTOMATIC EXCHANGE PLAN

Shares of the Fund and any other funds sponsored by the Advisor may be
exchanged for each other at relative net asset values. Exchanges will be
effected by redemption of shares of the Fund held and purchase of shares of the
fund for which Fund shares are being exchanged (the "New Fund"). For federal
income tax purposes, any such exchange constitutes a sale upon which a capital
gain or loss will be realized, depending upon whether the value of the shares
being exchanged is more or less than the shareholder's adjusted cost basis. If
you are interested in exercising any of these exchange privileges, you should
obtain Prospectuses of other funds sponsored by the Advisor from the Advisor.
Upon a telephone exchange, the transfer agent establishes a new account in the
New Fund with the same registration and dividend and capital gains options as
the redeemed account, unless otherwise specified, and confirms the purchase to
you.

The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Fund 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.

The Telephone Exchange and Redemption Privileges and Automatic Exchange
Plan are available only in states where shares of the New Fund may be sold, and
may be modified or discontinued at any time. Additional information

30
<PAGE> 66
regarding the Telephone Exchange and Redemption Privileges and Automatic
Exchange Plan is contained in the Fund's Prospectus.

31
<PAGE> 67
FUND ORGANIZATION

The Fund is a Wisconsin corporation that is authorized to offer
separate series of shares representing interests in separate portfolios of
securities, each with differing investment 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 the Fund provide that if additional classes of shares are
issued by the Fund, such new classes of shares may not affect the preferences,
limitations or relative rights of the Fund's outstanding shares. In addition,
the Board of Directors of the Fund 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 the Fund 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 Fund have no preemptive,
conversion, or subscription rights. The Fund currently has only one series of
common stock outstanding. If the Fund 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.

The Fund is a Wisconsin corporation organized on the following dates
and currently has the following authorized shares of capital stock:

<TABLE>
<CAPTION>
Incorporation Authorized
Fund Date Shares Par Value ($)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Insured Fund 12/28/90 10,000,000,000 .00001
</TABLE>

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. The 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.

The 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
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

IN GENERAL

As described in the "About the Fund - Performance Information" section
of the Fund's Prospectus, the Fund's historical performance or return may be
shown in the form of "yield" and "tax equivalent yield." In addition, the Fund's
performance may be shown in the form of "average annual total return," "total
return," and "cumulative total return." From time to time, the Advisor may agree
to waive or reduce its management fee and to absorb certain operating expenses
for the Fund. All performance and returns noted herein are historical and do not
represent the future performance of the Fund.

32
<PAGE> 68
YIELD

The Fund's yield is computed in accordance with a standardized method
prescribed by rules of the SEC. Under that method, the current yield quotation
for the Fund is based on a one month or 30-day period. The yield is computed by
dividing the net investment income per share earned during the 30-day or one
month period by the maximum offering price per share on the last day of the
period, according to the following formula:

6
YIELD = 2[( a-b + 1) - 1]
---
cd

Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.

For the 30-day period ended December 31, 1995, the Fund's current yield
was 4.23%. In computing yield, the Fund follows certain standardized accounting
practices specified by SEC rules. These practices are not necessarily consistent
with those that the Fund uses to prepare annual and interim financial statements
in conformity with generally accepted accounting principles.

TAX-EQUIVALENT YIELD

The Fund's tax-equivalent yield is computed by dividing that portion of
the Fund's yield (computed as described above) that is tax-exempt by one minus
the stated federal income tax rate and adding the result to that portion, if
any, of the yield of the Fund that is not tax-exempt. Tax-equivalent yield does
not reflect possible variations due to the federal alternative minimum tax.
Based upon a marginal federal income tax rate of 31.0% and the Fund's yield
computed as described above, the Fund's 30-day tax equivalent yield (period
ended December 31, 1995) was 6.13%. For additional information concerning
tax-exempt yields, see "Tax-Exempt versus Taxable Yield" below.

DISTRIBUTION RATE

The distribution rate is computed, according to a non-standardized
formula, by dividing the total amount of actual distributions per share paid by
the Fund over a twelve month period by the Fund's net asset value on the last
day of the period. The distribution rate differs from the Fund's yield because
the distribution rate includes distributions to shareholders from sources other
than dividends and interest, such as premium income from option writing and
short-term capital gains. Therefore, the Fund's distribution rate may be
substantially different than the Fund's yield. Both the Fund's yield and
distribution rate will fluctuate.

AVERAGE ANNUAL TOTAL RETURN

The Fund's average annual total return quotation is computed in
accordance with a standardized method prescribed by rules of the Commission. The
average annual total return for the Fund for a specific period is found by first
taking a hypothetical $10,000 investment ("initial investment") in the Fund's
shares on the first day of the period and computing the "redeemable value" of
that investment at the end of the period. The redeemable value is then divided
by the initial investment, and this quotient is taken to the Nth root (N
representing the number of years in the period) and 1 is subtracted from the
result, which is then expressed as a percentage. The calculation assumes that
all income and capital gains dividends paid by the Fund have been reinvested at
net asset value on the reinvestment dates during the period. Average annual
total return figures for various periods are set forth in the table below.

33
<PAGE> 69
TOTAL RETURN

Calculation of the 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 the
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 the 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. Total return figures for
various periods are set forth in the table below.

CUMULATIVE TOTAL RETURN

Calculation of the Fund's cumulative total return is not subject to a
standardized formula and represents the simple change in value of our investment
over a stated period and may be quoted as a percentage or as a dollar amount.
Total returns and cumulative total returns may 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.

The Fund's performance figures are based upon historical results and do
not represent future performance. The Fund's shares are sold at net asset value
per share. The 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 the 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.

<TABLE>
<CAPTION>
INSURED FUND

Total Average Annual
Return Total Return
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1995 Increase Increase
---------------------------------------------------------------

(1) Commenced operations on November 25, 1991.

The Fund's total return for the three months ending March 31, 1996, was
- -2.53%.

TAX-EXEMPT VERSUS TAXABLE YIELD. An investor may want to determine
which investment, tax-exempt or taxable, will provide you with a higher
after-tax return. To determine the tax-equivalent yield, simply divide the yield
from the tax-exempt investment by the sum of (1 minus the investor's marginal
tax rate). The tables below are provided for making this calculation for
selected tax-exempt yield and taxable income levels. These yields are presented
for purposes of illustration only and are not representative of any yield that
the Fund may generate. The tables are based upon the 1996 federal tax rates (in
effect as of December 31, 1995).

34
<PAGE> 70
TAXABLE-EQUIVALENT YIELD

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
A TAX-FREE YIELD OF:
- ------------------------------------------------------------------------------------------------------------------------------------
4% 5% 6% 7% 8%
1996 Taxable Income Levels*
- ------------------------------------------------------------------------------------------------------------------------------------
Single Married Filing Marginal IS EQUIVALENT TO A TAXABLE YIELD OF:
Jointly Tax Rate
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
under 24,000 under 40,100 15% 4.71% 5.88% 7.06% 8.24% 9.41%
- ------------------------------------------------------------------------------------------------------------------------------------
24,000-58,150 40,100 - 96,900 28% 5.56% 6.94% 8.33% 9.72% 11.11%
- ------------------------------------------------------------------------------------------------------------------------------------
58,150-121,300 96,900-147,700 31% 5.80% 7.25% 8.70% 10.14% 11.59%
- ------------------------------------------------------------------------------------------------------------------------------------
121,300-263,750 147,700-263,750 36% 6.25% 7.81% 9.38% 10.94% 12.50%
- ------------------------------------------------------------------------------------------------------------------------------------
over 263,750 over 263,750 39.6% 6.62% 8.28% 9.93% 11.59% 13.25%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* A taxpayer with an adjusted gross income in excess of $117,900 may, to the
extent such taxpayer itemizes deductions, be subject to a higher effective
marginal rate.

COMPARISONS - IN GENERAL

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

From time to time, in marketing and other fund literature, the 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 the effect of any sales charges imposed by other funds. The Fund will be
compared to Lipper's appropriate fund category, that is by fund objective and
portfolio holdings. Lipper also issues a monthly yield analysis for fixed income
funds.

(2) MORNINGSTAR, INC.

The Fund's performance also may 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.

(3) INDEPENDENT SOURCES

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

(4) INDICES

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

(a) Lehman Brothers Municipal Bond Index
(b) Lehman Brothers Insured Municipal Bond Index

There are differences and similarities between the investments which
the Fund may purchase and the investments measured by the indices which are
described herein. The market prices and yields of taxable and tax-exempt bonds
will fluctuate. There are important differences among the various investments
included in the indices that should be considered in reviewing this information.

35
<PAGE> 71
(5) MONEY MARKET FUNDS

Investors may also want to compare performance of the Fund to that of
money market funds. Money market fund yields will fluctuate and an investment in
money market fund shares is neither insured nor guaranteed by the U.S.
Government, but share values usually remain stable.

(6) 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.

(7) 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.

36
<PAGE> 72

<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
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 stable share-price, and daily liquidity.
Fund
- ---------------------------------------------------------------------------------------------------------------------------------
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 level of federally tax-exempt current income Fund
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 level of income with a low degree of share-price
Fund 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 level of federally tax-exempt current income.
Fund
- ---------------------------------------------------------------------------------------------------------------------------------
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 Small Cap Fund Capital growth.

- ---------------------------------------------------------------------------------------------------------------------------------
Strong Discovery Fund Capital growth.

- ---------------------------------------------------------------------------------------------------------------------------------
Strong International Stock Fund Capital growth.

- ---------------------------------------------------------------------------------------------------------------------------------
Strong Asia Pacific Fund Capital growth.

- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

* The Fund is currently closed to new investors.

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.

The 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.

37
<PAGE> 73

(8) 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 Fund American Utilities Fund Asia Pacific Fund
High-Yield Bond Fund Value Fund
Equity Income Fund Small Cap Fund
Growth and Income Fund
Schafer Value Fund
</TABLE>

*This fund is currently closed to new investors.

COMPARISONS

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

Investors may want to compare the performance of the Fund to that of
United States Treasury bills, notes, or bonds, which are issued by the U.S.
Government, because such instruments represent alternative income producing
products. 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.

(10) CERTIFICATES OF DEPOSIT

Investors may want to compare the Fund's performance to that of
certificates of deposit offered by banks and other depositary institutions.
Certificates of deposit represent an alternative (taxable) income producing
product. 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. The bonds held by the Bond Fund and High-Yield Fund are
generally of longer term than most certificates of deposit and may reflect
longer term market interest rate fluctuations.

(11) INDIVIDUAL MUNICIPAL BONDS

The Fund may compare and contrast in advertising the relative
advantages of investing in a mutual fund versus an individual municipal bond.
Unlike municipal bond mutual funds, individual municipal bonds offer a stated
rate of interest and, if held to maturity, repayment of principal. Although some
individual municipal bonds might offer a higher return, they may not offer the
reduced risk of a mutual fund which invests in many different securities. The
initial investment requirements and sales charges of many municipal bond mutual
funds are lower than the purchase cost of individual municipal bonds, which are
generally issued in $5,000 denominations and are subject to direct brokerage
costs.

38
<PAGE> 74

ADDITIONAL FUND INFORMATION

(1) DURATION

Duration is a calculation that measures the price sensitivity of the
Fund to changes in interest rates. Theoretically, if the Fund had a duration of
2.0, a 1% increase in interest rates would cause the prices of the bonds in the
Fund to decrease by approximately 2%. Conversely, a 1% decrease in interest
rates would cause the prices of the bonds in the Fund to increase by
approximately 2%. Depending on the direction of market interest rates, the
Fund's duration may be shorter or longer than its average maturity.

(2) PORTFOLIO CHARACTERISTICS

In order to present a more complete picture of the 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.

(3) 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 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:

2
Standard deviation = the square root of Sum of (x - x )
i m
----------------
n-1
where [Sum symbol] = "the sum of",

x = each individual return during the time period,
i
x = the average return over the time period, and
m
n = the number of individual returns during the time period.

Statistics may also be used to discuss the 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.

39
<PAGE> 75
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 Fund may be used in advertisements and sales materials. Such
factors that may impact the Fund 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.

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.

40
<PAGE> 76
PORTFOLIO MANAGEMENT

The 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.

The Advisor believes that actively managing the Fund's portfolio and
adjusting the average portfolio maturity according to the Advisor's interest
rate outlook is the best way to achieve the Fund's objectives. This policy is
based on a fundamental belief that economic and financial conditions create
favorable and unfavorable investment periods (or seasons) and that these
different seasons require different investment approaches. Through its active
management approach, the Advisor seeks to avoid or reduce any negative change in
the Fund's net asset value per share during periods of falling bond prices.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, are the independent certified public 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 that is attached hereto contains the following
financial information for each Fund:

(a) Schedule of Investments in Securities.
(b) Statement of Operations.
(c) Statement of Assets and Liabilities.
(d) Statement of Changes in Net Assets.
(e) Notes to Financial Statements.
(f) Financial Highlights.
(g) Report of Independent Accountants.

41
<PAGE> 77
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> 78
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> 79
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> 80
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> 81
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
AA may vary slightly from time to time because of economic conditions.
AA-
- ------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk factors are
A more variable and greater in periods of economic stress.
A-
- ------------------------------------------------------------------------------

BBB+ Below-average protection factors but still considered sufficient for
BBB prudent investment. Considerable variability in risk during economic
BBB- cycles.

- ------------------------------------------------------------------------------
BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective 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
B met when due. Financial protection factors will fluctuate widely
B- according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in the rating within this category
or into a higher or lower 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> 82
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> 83

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> 84
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> 85

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> 86
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.

<PAGE> 87
STRONG INSURED MUNICIPAL BOND FUND, INC.

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements (all included or incorporated by
reference in Parts A & B)

Schedules of Investments in Securities
Statements of Operations
Statements of Assets and Liabilities
Statements of Changes in Net Assets
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants

(b) Exhibits

(1) Amended and Restated Articles of Incorporation
(2) Bylaws
(3) Inapplicable
(4) Specimen Stock Certificate
(5) Investment Advisory Agreement
(6) Distribution Agreement
(7) Inapplicable
(8) Custody Agreement
(9) Shareholder Servicing Agent Agreement
(10) Inapplicable
(11) Consent of Auditor
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) Computation of Performance Figures
(17) Power of Attorney
(18) Letter of Representation
(27) Financial Data Schedule

Item 25. Persons Controlled by or under Common Control with Registrant

Registrant neither controls any person nor is under common control with
any other person.

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of March 31, 1996
-------------- ------------------------
<S> <C>
Common Stock, $.00001 par value 2,793
</TABLE>

C-1
<PAGE> 88

Item 27. Indemnification

Officers and directors are insured under a joint errors and omissions
insurance policy underwritten by American International Surplus Lines Insurance
Company and First State Insurance Company in the aggregate amount of
$10,000,000, subject to certain deductions. Pursuant to the authority of the
Wisconsin Business Corporation Law, Article VIII of Registrant's Bylaws provides
as follows

ARTICLE VII. INDEMNIFICATION OF OFFICERS AND DIRECTORS

SECTION 7.01. Mandatory Indemnification. The corporation shall
indemnify, to the full extent permitted by the WBCL, as in effect from
time to time, the persons described in Sections 180.0850 through
180.0859 (or any successor provisions) of the WBCL or other provisions
of the law of the State of Wisconsin relating to indemnification of
directors and officers, as in effect from time to time. The
indemnification afforded such persons by this section shall not be
exclusive of other rights to which they may be entitled as a matter of
law.

SECTION 7.02. Permissive Supplementary Benefits. The
Corporation may, but shall not be required to, supplement the right of
indemnification under Section 7.01 of (a) the purchase of insurance on
behalf of any one or more of such persons, whether or not the
Corporation would be obligated to indemnify such person under Section
7.01; (b) individual or group indemnification agreements with any one
or more such persons; and (c) advances for related expenses of such a
person.

SECTION 7.03. Amendment. This Article VII may be amended or
repealed only by a vote of the shareholders and not by a vote of the
Board of Directors.

SECTION 7.04. Investment Company Act. In no event shall the
Corporation indemnify any person hereunder in contravention of any
provision of the Investment Company Act.

Item 28. Business and Other Connections of Investment Advisor

The information contained under "About the Fund - Management" in the
Prospectus and under "Directors and Officers of the Fund" and "Investment
Advisor and Distributor" in the Statement of Additional information is hereby
incorporated by reference pursuant to Rule 411 under the Securities Act of 1933.

Item 29. Principal Underwriters

(a) Strong Funds Distributors, Inc., principal underwriter for
Registrant, also serves as principal underwriter for Strong Advantage Fund,
Inc.; Strong Asia Pacific Fund, Inc.; Strong Asset Allocation Fund, Inc.; Strong
Common Stock Fund, Inc.; Strong Conservative Equity Funds, Inc.; Strong
Corporate Bond Fund, Inc.; Strong Discovery Fund, Inc.; Strong Equity Funds,
Inc.; Strong Government Securities Fund, Inc.; Strong Heritage Reserve Series,
Inc.; Strong High-Yield Municipal Bond Fund, Inc.; Strong Income Funds, Inc.;
Strong Institutional Funds, Inc.; Strong International Bond Fund, Inc.; Strong
International Stock Fund, Inc.; Strong Money Market Fund, Inc.; Strong Municipal
Bond Fund, Inc.; Strong Municipal Funds, Inc.; Strong Opportunity Fund, Inc.;
Strong Schafer Value Fund, Inc.; Strong Short-Term Bond Fund, Inc.; Strong
Short-Term Global Bond Fund, Inc.; Strong Short-Term Municipal Bond Fund, Inc.;
Strong Special Fund II, Inc.; Strong Total Return Fund, Inc.; and Strong
Variable Insurance Funds, Inc.

(b) The information contained under "About the Fund - Management" in
the Prospectus and under "Directors and Officers of the Fund" and "Investment
Advisor and Distributor" in the Statement of Additional Information is hereby
incorporated by reference pursuant to Rule 411 under the Securities Act of 1933.

C-2
<PAGE> 89

Item 30. Location of Accounts and Records

All accounts, books, or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the rules promulgated
thereunder are in the physical possession of Registrant's Treasurer, Ronald A.
Neville, at Registrant's corporate offices, 100 Heritage Reserve, Menomonee
Falls, Wisconsin 53051.

Item 31. Management Services

All management-related service contracts entered into by Registrant are
discussed in Parts A and B of this Registration Statement.

Item 32. Undertakings

The Registrant undertakes to furnish to each person to whom a
prospectus is delivered, upon request and without charge, a copy of the
Registrant's latest annual report to shareholders.

C-3
<PAGE> 90

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that this
Post-Effective Amendment No. 7 meets all the requirements for effectiveness
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1933, as
amended, and that it has duly caused this Post-Effective Amendment No. 7 to the
Registration Statement on Form N-1A to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Menomonee Falls, and
State of Wisconsin on the 25th day of April, 1996.

STRONG INSURED MUNICIPAL BOND FUND, INC.

(Registrant)

BY: \s\John Dragisic
-------------------------------------
John Dragisic, President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----

<S> <C> <C>
President (Principal Executive Officer)
\s\John Dragisic and a Director April 25, 1996
- ---------------------------------------------
John Dragisic

Treasurer (Principal Financial and
\s\Ronald A. Neville Accounting Officer) April 25, 1996
- ---------------------------------------------
Ronald A. Neville

\s\Richard S. Strong Chairman of the Board and a Director April 25, 1996
- ---------------------------------------------
Richard S. Strong

Director April 25, 1996

- ---------------------------------------------
Marvin E. Nevins*

Director April 25, 1996

- ---------------------------------------------
Willie D. Davis*

Director April 25, 1996

- ---------------------------------------------
William F. Vogt*

Director April 25, 1996

- ---------------------------------------------
Stanley Kritzik*
</TABLE>

* Ann E. Oglanian signs this document pursuant to powers of attorney filed with
Post Effective Amendment No. 6 to the Registration Statement of Registrant filed
with the SEC on or about April 20, 1995.

BY: \s\Ann E. Oglanian
-------------------------------
Ann E. Oglanian

<PAGE> 91
EXHIBIT INDEX

EDGAR
Exhibit No. Exhibit Exhibit No.
- ----------- ------- -----------

(1) Amended and Restated Articles of Incorporation EX-99.B1(1)

(2) Bylaws EX-99.B2

(3) Inapplicable

(4) Specimen Stock Certificate EX-99.B4

(5) Investment Advisory Agreement EX-99.B5(1)

(6) Distribution Agreement EX-99.B6

(7) Inapplicable

(8) Custody Agreement EX-99.B8

(9) Shareholder Servicing Agent Agreement EX-99.B9

(10) Inapplicable

(11) Consent of Auditor EX-99.B11

(12) Inapplicable

(13) Inapplicable

(14) Inapplicable

(15) Inapplicable

(16) Computation of Performance Figures EX-99.B16

(17) Power of Attorney (See Signature Page)(1)

(18) Letter of Representation EX-99.B18

(27) Financial Data Schedule EX-27.CLASSA

- --------------------------
(1) Incorporated herein by reference to Post-Effective Amendment No. 6 to
the Registration Statement on Form N-1A of Registrant filed on or about
April 20, 1995.

<PAGE> 1
EXHIBIT 99.B2

BYLAWS

ARTICLE I. OFFICES

SECTION 1.01. Principal and Other Offices. The principal
office of the Corporation shall be located at any place either within or
outside the State of Wisconsin as designated in the Corporation's most current
Annual Report filed with the Wisconsin Secretary of State. The Corporation may
have such other offices, either within or outside the State of Wisconsin, as
the Board of Directors may designate or as the business of the Corporation may
require from time to time.

SECTION 1.02. Registered Office. The registered office of
the Corporation required by the Wisconsin Business Corporation Law (the "WBCL")
to be maintained in the State of Wisconsin may, but need not, be the same as
any of its places of business. The registered office may be changed from time
to time.

SECTION 1.03. Registered Agent. The registered agent of the
Corporation required by the WBCL to maintain a business office in the State of
Wisconsin may, but need not, be an officer or employee of the Corporation as
long as such agent's business office is identical with the registered office.
The registered agent may be changed from time to time.

ARTICLE II. SHAREHOLDERS

SECTION 2.01. Annual Meeting. The annual meeting of the
shareholders, if the annual meeting shall be held, shall be held in April of
each year, or at such other time and date as may be fixed by or under the
authority of the Board of Directors, for the purpose of electing directors and
for the transaction of such other business as may properly come before the
meeting. The Corporation shall not be required to hold an annual meeting in
any year in which none of the following is required to be acted on by
shareholders under the Investment Company Act of 1940, as amended, and the
rules and regulations promulgated thereunder (the "Investment Company Act"):

(i) Election of directors;

(ii) Approval of the Corporation's investment advisory
contract;

(iii) Ratification of the selection of the Corporation's
independent public accountants; or

(iv) Approval of the Corporation's distribution agreement.
<PAGE> 2

SECTION 2.02. Special Meetings. Special meetings of the
shareholders for any purpose or purposes, unless otherwise prescribed by the
WBCL, may be called by the Board of Directors, the Chairman of the Board, Vice
Chairman or President. Notwithstanding any other provision of these By-Laws,
the Corporation shall call a special meeting of shareholders in the event that
the holders of at least 10% of all of the votes entitled to be cast on any
issue proposed to be considered at the proposed special meeting sign, date and
deliver to the Corporation one or more written demands for the meeting
describing one or more purposes for which it is to be held. The Secretary
shall inform such shareholders of the reasonable estimated costs of preparing
and mailing the notice of the 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.

SECTION 2.03. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of Wisconsin, as the
place of meeting for any annual or special meeting of shareholders. If no
designation is made, the place of meeting shall be the principal office of the
Corporation. Any meeting may be adjourned to reconvene at any place designated
by vote of a majority of the shares represented thereat.

SECTION 2.04. Notice of Meeting. Written notice stating the
date, time and place of any meeting of shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days nor more than sixty days before the date of
the meeting (unless a different time is provided by applicable law or
regulation or the Articles of Incorporation), either personally or by mail, by
or at the direction of the Chairman of the Board, Vice Chairman, President or
Secretary, to each shareholder of record entitled to vote at such meeting and
to such other persons as required by the WBCL. If mailed, such notice shall be
deemed to be effective when deposited in the United States mail, addressed to
the shareholder at his or her address as it appears on the stock record books
of the Corporation, with postage thereon prepaid. If an annual or special
meeting of shareholders is adjourned to a different date, time or place, the
Corporation shall not be required to give notice of the new date, time or place
if the new date, time or place is announced at the meeting before adjournment;
provided, however, that if a new record date for an adjourned meeting is or
must be fixed, the Corporation shall give notice of the adjourned meeting to
persons who are shareholders as of the new record date.

SECTION 2.05. Waiver of Notice. A shareholder may waive any
notice required by the WBCL, the Articles of Incorporation or these By-Laws
before or after the date and time stated in the notice. The waiver shall be in
writing and signed by the shareholder entitled to the notice, contain the same
information that would have been required in the notice
<PAGE> 3

under applicable provisions of the WBCL (except that the time and place of
meeting need not be stated) and be delivered to the Corporation for inclusion
in the corporate records. A shareholder's attendance at a meeting, in person
or by proxy, waives objection to all of the following: (a) lack of notice or
defective notice of the meeting, unless the shareholder at the beginning of the
meeting or promptly upon arrival objects to holding the meeting or transacting
business at the meeting; and (b) consideration of a particular matter at the
meeting that is not within the purpose described in the meeting notice, unless
the shareholder objects to considering the matter when it is presented.

SECTION 2.06. Fixing of Record Date. For the purpose of
determining shareholders of any voting group entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any distribution or dividend, or in order to
make a determination of shareholders for any other proper purpose, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders. Such record date shall not be more than 70 days
prior to the date on which the particular action, requiring such determination
of shareholders, is to be taken. If no record date is so fixed for the
determination of shareholders entitled to notice of, or to vote at a meeting of
shareholders, or shareholders entitled to receive a share dividend or
distribution, the record date for determination of such shareholders shall be
at the close of business on:

(a) With respect to an annual shareholders meeting or any
special shareholders meeting called by the Board of Directors or any
person specifically authorized by the Board of Directors or these
By-Laws to call a meeting, the day before the first notice is mailed
to shareholders;

(b) With respect to a special shareholders meeting demanded
by the shareholders, the date the first shareholder signs the demand;

(d) With respect to a distribution to shareholders (other
than one involving a repurchase or reacquisition of shares), the date
the Board of Directors authorizes the distribution.

SECTION 2.07. Voting Lists. After fixing a record date for a
meeting, the Corporation shall prepare a list of the name of all its
shareholders who are entitled to notice of a shareholders meeting. The list
shall be arranged by class or series of shares and show the address of and the
number of shares held by each shareholder. The shareholders list must be

3
<PAGE> 4

available for inspection by any shareholder, beginning two business days after
notice of the meeting is given for which the list was prepared and continuing
to the date of the meeting. The list shall be available at the Corporation's
principal office or at a place identified in the meeting notice in the city
where the meeting is to be held. Subject to the provisions of the WBCL, a
shareholder or his or her agent or attorney may, on written demand, inspect and
copy the list during regular business hours and at his expense, during the
period it is available for inspection. The Corporation shall make the
shareholders list available at the meeting, and any shareholder or his or her
agent or attorney may inspect the list at any time during the meeting or any
adjournment thereof. Refusal or failure to prepare or make available the
shareholders list shall not affect the validity of any action taken at such
meeting.

SECTION 2.08. Shareholder Quorum and Voting Requirements.
Shares entitled to vote as a separate voting group may take action on a matter
at a meeting only if a quorum of those shares exists with respect to that
matter. Unless the Articles of Incorporation or the WBCL provide otherwise, a
majority of the votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter.

If the Articles of Incorporation or the WBCL provide for
voting by two or more voting groups on a matter, action on that matter is taken
only when voted upon by each of those voting groups counted separately as
provided in the WBCL. Action may be taken by one voting group on a matter even
though no action is taken by another voting group entitled to vote on the
matter. A voting group described in the WBCL constitutes a single voting group
for purpose of voting on the matter on which the shares are entitled to vote,
unless otherwise required under applicable laws and regulations, including the
Investment Company Act.

Once a share is represented for any purpose at a meeting,
other than for the purpose of objecting to holding the meeting or transacting
business at the meeting, it is deemed present for purposes of determining
whether a quorum exists, for the remainder of the meeting and for any
adjournment of that meeting to the extent provided in Section 2.13.

If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast within
the voting group favoring the action exceed the votes cast opposing the action,
unless the Articles of Incorporation, the By-Laws, the WBCL or other applicable
laws and regulations, including the Investment Company Act, require a greater
number of affirmative votes. With respect to the election of directors, unless
otherwise provided in the Articles of Incorporation, directors are elected by a
plurality of the votes cast by the shares entitled to vote. For purposes of
this Section 2.08, "plurality" means that the individuals with the largest
number of votes are elected as directors up to the maximum number of directors
to be chosen at the election.

4
<PAGE> 5

SECTION 2.09. Proxies. For all meetings of shareholders, a
shareholder may appoint a proxy to vote or otherwise act for the shareholder by
signing an appointment form, either personally or by a duly authorized
attorney-in-fact. Such proxy shall be effective when filed with the Secretary
of the Corporation or other officer or agent authorized to tabulate votes
before or at the time of the meeting. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.

SECTION 2.10. Voting of Shares. Unless otherwise provided in
the Articles of Incorporation, each outstanding share, regardless of class, is
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.

No shares in the Corporation held by another corporation may
be voted if the Corporation owns, directly or indirectly, a sufficient number
of shares entitled to elect a majority of the directors of such other
corporation; provided, however, that the Corporation shall not be limited in
its power to vote any shares, including its own shares, held by it in a
fiduciary capacity.

Redeemable shares are not entitled to vote after written
notice of redemption that complies with the WBCL is mailed to the holders
thereof and a sum sufficient to redeem the shares has been deposited with a
bank, trust company or other financial institution under an irrevocable
obligation to pay the holders the redemption price on surrender of the shares.

SECTION 2.11. Voting Shares Owned by the Corporation. Shares
of the Corporation belonging to it shall not be voted directly or indirectly at
any meeting and shall not be counted in determining the total number of
outstanding shares at any given time, but shares held by the Corporation in a
fiduciary capacity may be voted and shall be counted in determining the total
number of outstanding shares at any given time.

SECTION 2.12. Acceptance of Instruments Showing Shareholder
Action.

(a) If the name signed on a vote, consent, waiver or proxy
appointment corresponds to the name of a shareholder, the Corporation,
if acting in good faith, may accept the vote, consent, waiver or proxy
appointment and give it effect as the act of the shareholder.

(b) If the name signed on a vote, consent, waiver or proxy
appointment does not correspond to the name of a shareholder, the
Corporation, if acting in good faith,

5
<PAGE> 6

may accept the vote, consent, waiver or proxy appointment and give it effect as
the act of the shareholder if any of the following apply:

(1) the shareholder is an entity, within the meaning
of the WBCL, and the name signed purports to be that of an
officer or agent of the entity;

(2) the name signed purports to be that of a
personal representative, administrator, executor, guardian or
conservator representing the shareholder and, if the
Corporation or its agent request, evidence of fiduciary status
acceptable to the Corporation is presented with respect to the
vote, consent, waiver or proxy appointment;

(3) the name signed purports to be that of a
receiver or trustee in bankruptcy of the shareholder and, if
the Corporation or its agent request, evidence of this status
acceptable to the Corporation is presented with respect to the
vote, consent, waiver or proxy appointment;

(4) the name signed purports to be that of a
pledgee, beneficial owner, or attorney-in-fact of the
shareholder and, if the Corporation or its agent request,
evidence acceptable to the Corporation of the signatory's
authority to sign for the shareholder is presented with
respect to the vote, consent, waiver or proxy appointment; or

(5) two or more persons are the shareholders as
cotenants or fiduciaries and the name signed purports to be
the name of at least one of the coowners and the persons
signing appears to be acting on behalf of all coowners.

(c) The Corporation may reject a vote, consent, waiver or
proxy appointment if the Secretary or other officer or agent of the
Corporation who is authorized to tabulate votes, acting in good faith,
has reasonable basis for doubt about the validity of the signature on
it or about the signatory's authority to sign for the shareholder.

SECTION 2.13. Adjournments. An annual or special meeting of
shareholders may be adjourned at any time, including after action on one or
more matters, by a majority of shares represented, even if less than a quorum.
The meeting may be adjourned for any purpose, including, but not limited to,
allowing additional time to solicit votes on one or more matters, to
disseminate additional information to shareholders or to count votes. Upon
being reconvened, the adjourned meeting shall be deemed to be a continuation of
the initial meeting.

6
<PAGE> 7

(a) Quorum. Once a share is represented for any purpose at
the original meeting, other than for the purpose of objecting to
holding the meeting or transacting business at a meeting, it is
considered present for purposes of determining if a quorum exists, for
the remainder of the meeting and for any adjournment of that meeting
unless a new record date is or must be set for that adjourned meeting.

(b) Record Date. When a determination of shareholders
entitled to notice of or to vote at any meeting of shareholders has
been made as provided in Section 2.06, such determination shall be
applied to any adjournment thereof unless the Board of Directors fixes
a new record date, which it shall do if the meeting is adjourned to a
date more than 120 days after the date fixed for the original meeting.

(c) Notice. Unless a new record date for an adjourned
meeting is or must be fixed pursuant to Section 2.13(b), the
Corporation is not required to give notice of the new date, time or
place if the new date, time or place is announced at the meeting
before adjournment.

SECTION 2.14. Waiver of Notice by Shareholders. A
shareholder may waive any notice required by the WBCL, the Articles of
Incorporation or the By-Laws before or after the date and time stated in the
notice. The waiver shall be in writing and signed by the shareholder entitled
to the notice, contain the same information that would have been required in
the notice under any applicable provisions of the WBCL, except that the time
and place of the meeting need not be stated, and be delivered to the
Corporation for inclusion in the Corporation's records. A shareholder's
attendance at a meeting, in person or by proxy, waives objection to (i) lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting or promptly upon arrival objects to the holding of the
meeting or transacting business at the meeting, and (ii) consideration of a
particular matter at the meeting that is not within the purpose described in
the meeting notice, unless the shareholder objects to considering the matter
when it is presented.

SECTION 2.15. Conduct of Meeting. The Chairman of the Board,
Vice Chairman, President or any person chosen by the Chairman of the Board,
shall call the meeting of the shareholders to order and shall act as chairman
of the meeting, and the Secretary of the Corporation or any other person
appointed by the chairman of the meeting, shall act as secretary of all
meetings of the shareholders.

SECTION 2.16. Unanimous Consent without Meeting. Any action
required or permitted to be taken at a meeting of shareholders may be taken
without a meeting only by

7
<PAGE> 8

unanimous written consent or consents signed by all of the shareholders of the
Corporation and delivered to the Corporation for inclusion in the Corporation's
records.

ARTICLE III. BOARD OF DIRECTORS

SECTION 3.01. General Powers and Number. All corporate
powers shall be exercised by or under the authority of, and the business and
affairs of the Corporation managed under the direction of, the Board of
Directors. The number of directors of the Corporation shall be six.

SECTION 3.02. Tenure and Qualifications. Each director shall
hold office until the next annual meeting of shareholders and until his or her
successor shall have been elected and, if necessary, qualified, or until there
is a decrease in the number of directors which takes effect after the
expiration of his or her term, or until his or her prior death, resignation or
removal. A director may be removed by the shareholders, with or without cause,
only at a meeting called for the purpose of removing the director, and the
meeting notice shall state that the purpose, or one of the purposes, of the
meeting is removal of the director. A director may resign at any time by
delivering written notice which complies with the WBCL to the Board of
Directors, to the Chairman of the Board or to the Corporation. A director's
resignation is effective when the notice is delivered unless the notice
specifies a later effective date. Directors need not be residents of the State
of Wisconsin or shareholders of the Corporation.

SECTION 3.03. Regular Meetings. A regular meeting of the
Board of Directors shall be held without other notice than this Section 3.03
immediately before or after the annual meeting of shareholders and each
adjourned session thereof. The place of such regular meeting shall be the same
as the place of the meeting of shareholders which precedes or follows it, as
the case may be, or such other suitable place as may be announced at such
meeting of shareholders. The Board of Directors shall provide, by resolution,
the date, time and place, either within or without the State of Wisconsin, for
the holding of additional regular meetings of the Board of Directors without
other notice than such resolution. Regular meetings of the Board of Directors
may also be called by the Chairman of the Board, Vice Chairman, President or
Secretary.

SECTION 3.04. Special Meetings. Special meetings of the
Board of Directors may be called by or at the request of the Chairman of the
Board, Vice Chairman, President, Secretary or any two directors. The Chairman
of the Board, Vice Chairman, President or Secretary may fix any place, either
within or without the State of Wisconsin, as the place for holding any special
meeting of the Board of Directors, and if no other place is fixed the place of
the meeting shall be the principal business office of the Corporation in the
State of Wisconsin.

8
<PAGE> 9

SECTION 3.05. Notice; Waiver. Notice of special meetings
shall be given at least twenty-four hours previously thereto and shall state
the date, time and place of the meeting of the Board of Directors or committee.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors or committee need be specified in the
notice of such meeting. Notice may be communicated in person, by telephone,
telegraph, teletype, facsimile or other form of wire or wireless communication,
or by mail or private carrier. Written notice is effective at the earliest of
the following: (1) when received; (2) when mailed postpaid and correctly
addressed; (3) when given to a telegram carrier; or (4) the date it is
deposited with a private carrier. Oral notice is deemed effective when
communicated. Facsimile or teletype notice is deemed effective when sent.

A director may waive any notice required by the WBCL, the
Articles of Incorporation or the By-Laws before or after the date and time
stated in the notice. The waiver shall be in writing, signed by the director
entitled to the notice and retained by the Corporation. Notwithstanding the
foregoing, a director's attendance at or participation in a meeting waives any
required notice to such director of the meeting unless the director at the
beginning of the meeting or promptly upon such director's arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.

SECTION 3.06. Quorum. Except as otherwise provided by the
WBCL, the Articles of Incorporation or the By-Laws, a majority of the number of
directors specified in Section 3.01 shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors. A majority
of the directors present (though less than such quorum) may adjourn any meeting
of the Board of Directors or any committee thereof, as the case may be, from
time to time without further notice.

SECTION 3.07. Manner of Acting. The affirmative vote of a
majority of the directors present at a meeting of the Board of Directors at
which a quorum is present shall be the act of the Board of Directors, unless
the WBCL, the Articles of Incorporation, the By-Laws or other applicable law or
regulation, including the Investment Company Act, require the vote of a greater
number of directors.

SECTION 3.08. Conduct of Meetings. The Chairman of the
Board, and in his absence, the Vice Chairman or any director chosen by the
directors present, shall call meetings of the Board of Directors to order and
shall act as chairman of the meeting. The Secretary of the Corporation shall
act as secretary of all meetings of the Board of Directors unless the presiding
officer appoints another person present to act as secretary of the meeting.
Minutes of any

9
<PAGE> 10

regular or special meeting of the Board of Directors shall be prepared and
distributed to each director.

SECTION 3.09. Vacancies. Except as provided below, any
vacancy occurring in the Board of Directors, including a vacancy resulting from
an increase in the number of directors, may be filled, subject to the
requirements of the Investment Company Act, by any of the following: (a) the
shareholders; (b) the Board of Directors; or (c) if the directors remaining in
office constitute fewer than a quorum of the Board of Directors, the directors,
by the affirmative vote of a majority of all directors remaining in office. If
the vacant office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group may vote to fill
the vacancy if it is filled by the shareholders, and only the remaining
directors elected by that voting group may vote to fill the vacancy if it is
filled by the directors. A vacancy that will occur at a specific later date,
because of a resignation effective at a later date or otherwise, may be filled
before the vacancy occurs, but the new director may not take office until the
vacancy occurs.

SECTION 3.10. Compensation. No director shall receive any
stated salary or fees from the Corporation for his services as such director if
such director is, otherwise than by reason of being such director, an
interested person (as such term is defined by the Investment Company Act) of
the Corporation or its investment adviser. Except as provided in the preceding
sentence, directors shall be entitled to receive such compensation from the
Corporation for their services as may from time to time be voted by the Board
of Directors.

SECTION 3.11. Presumption of Assent. A director who is
present and is announced as present at a meeting of the Board of Directors,
when corporate action is taken, assents to the action taken unless any of the
following occurs: (a) the director objects at the beginning of the meeting or
promptly upon his or her arrival to holding the meeting or transacting business
at the meeting; (b) the director dissents or abstains from an action taken and
minutes of the meeting are prepared that show the director's dissent or
abstention; (c) the director delivers written notice that complies with the
WBCL of his or her dissent or abstention to the presiding officer of the
meeting before its adjournment or to the Corporation immediately after
adjournment of the meeting; or (d) the director dissents or abstains from an
action taken, minutes of the meeting are prepared that fail to show the
director's dissent or abstention from the action taken and the director
delivers to the Corporation a written notice of that failure that complies with
the WBCL promptly after receiving the minutes. Such right of dissent or
abstention shall not apply to a director who votes in favor of the action
taken.

SECTION 3.12. Telephonic Meetings. Except as herein provided
and notwithstanding any place set forth in the notice of the meeting or these
By-Laws, members of

10
<PAGE> 11

the Board of Directors may participate in regular or special meetings by, or
through the use of, any means of communication by which all participants may
simultaneously hear each other, such as by conference telephone. If a meeting
is conducted by such means, then at the commencement of such meeting the
presiding officer shall inform the participating directors that a meeting is
taking place at which official business may be transacted. Any participant in
a meeting by such means shall be deemed present in person at such meeting.
Notwithstanding the foregoing, no action may be taken at any meeting held by
such means (i) on any particular matter which the presiding officer determines,
in his or her sole discretion, to be inappropriate under the circumstances for
action at a meeting held by such means (such determination shall be made and
announced in advance of such meeting), or (ii) if the action must be approved
in person pursuant to the requirements of the Investment Company Act.

SECTION 3.13. Action Without Meeting. Any action required or
permitted by the WBCL to be taken at a meeting of the Board of Directors may be
taken without a meeting if the action is taken by all members of the Board.
The action shall be evidenced by one or more written consents describing the
action taken, signed by each director and retained by the Corporation. Such
action shall be effective when the last director signs the consent, unless the
consent specifies a different effective date. Notwithstanding this Section
3.13, no action may be taken by the Board of Directors pursuant to a written
consent with respect to which the action must be approved in person pursuant to
the requirements of the Investment Company Act.

ARTICLE IV. OFFICERS

SECTION 4.01. Number. The principal officers of the
Corporation shall be a Chairman of the Board, a Vice Chairman of the Board, a
President, the number of Vice Presidents as authorized from time to time by the
Board of Directors, a Secretary, and a Treasurer, each of whom shall be elected
by the Board of Directors. Such other officers and assistant officers as may
be deemed necessary may be elected or appointed by the Board of Directors. The
Board of Directors may also authorize any duly authorized officer to appoint
one or more officers or assistant officers. Any two or more offices may be
held by the same person.

SECTION 4.02. Election and Term of Office. The officers of
the Corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders, if any, or on or
after the anniversary of the last annual meeting if no annual meeting is held.
If the election of officers shall not be held at such first meeting of the
Board of Directors, such election shall be held as soon thereafter as is
practicable. Each officer shall hold office until his or her successor shall
have been duly elected or until his or her prior death, resignation or removal.

11
<PAGE> 12

SECTION 4.03. Removal. The Board of Directors may remove any
officer and, unless restricted by the Board of Directors or these By-Laws, an
officer may remove any officer or assistant officer appointed by that officer.
An officer may be removed at any time, with or without cause and
notwithstanding the contract rights, if any, of the officer removed. The
appointment of an officer does not of itself create contract rights.

SECTION 4.04. Resignation. An officer may resign at any time
by delivering notice to the Corporation that complies with the WBCL. The
resignation shall be effective when the notice is delivered, unless the notice
specifies a later effective date and the Corporation accepts the later
effective date.

SECTION 4.05. Vacancies. A vacancy in any principal office
because of death, resignation, removal, disqualification or otherwise, shall be
filled by the Board of Directors for the unexpired portion of the term. If a
resignation of an officer is effective at a later date as contemplated by
Section 4.04 hereof, the Board of Directors may fill the pending vacancy before
the effective date if the Board provides that the successor may not take office
until the effective date of the registration.

SECTION 4.06. Chairman of the Board. The Chairman of the
Board shall be the chief executive officer of the Corporation. The Chairman of
the Board shall preside at all meetings of the shareholders and directors,
shall have general and active management of the business of the Corporation,
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.

SECTION 4.07. The Vice Chairman. During the absence or
disability of the Chairman of the Board, the Vice Chairman shall exercise all
the functions of the Chairman of the Board. The Vice Chairman shall perform
all duties incident to the office of the Vice Chairman and such other duties as
shall from time to time be assigned by the Board of Directors, the Chairman of
the Board or as prescribed by these By-Laws.

SECTION 4.08. President. The President shall be the chief
operating officer of the Corporation and, subject to the direction of the Board
of Directors, shall in general supervise and control all of the business and
affairs of the Corporation. The President shall, when present, preside at all
meetings of the shareholders in the absence of the Chairman of the Board and
the Vice Chairman. The President shall have authority, subject to such rules
as may be prescribed by the Board of Directors, to appoint such agents and
employees of the Corporation as he or she shall deem necessary, to prescribe
their powers, duties and compensation, and to delegate authority to them. Such
agents and employees shall hold office at the discretion of the President.

12
<PAGE> 13

The President shall have authority to sign, execute and acknowledge, on behalf
of the Corporation, all deeds, mortgages, bonds, stock certificates, contracts,
leases, reports and all other documents or instruments necessary or proper to
be executed in the course of the Corporation's regular business, or which shall
be authorized by resolution of the Board of Directors; and, except as otherwise
provided by law or the Board of Directors, he or she may authorize any Vice
President or other officer or agent of the Corporation to sign, execute and
acknowledge such documents or instruments in his or her place and stead. In
general he or she shall perform all duties incident to the office of President
and such other duties as may be prescribed by the Board of Directors from time
to time.

SECTION 4.09. The Vice Presidents. In the absence of the
President or in the event of the President's death, inability or refusal to
act, or in the event for any reason it shall be impracticable for the President
to act personally, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the Board of
Directors, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. Any Vice President may sign, with the Secretary or Assistant
Secretary, certificates for shares of the Corporation; and shall perform such
other duties and have such authority as from time to time may be delegated or
assigned to him or her by the Chairman of the Board, Vice Chairman or President
or by the Board of Directors. The execution of any instrument of the
Corporation by any Vice President shall be conclusive evidence, as to third
parties, of his or her authority to act for the Corporation.

SECTION 4.10. The Secretary. The Secretary shall: (a) keep
minutes of the meetings of the shareholders and of the Board of Directors (and
of committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (b) see that all notices
are duly given in accordance with the provisions of these By-Laws or as
required by the WBCL; (c) be custodian of the corporate records and of the seal
of the Corporation and see that the seal of the Corporation is affixed to all
documents the execution of which on behalf of the Corporation under its seal is
duly authorized; (d) maintain a record of the shareholders of the Corporation,
in a form that permits preparation of a list of the names and addresses of all
shareholders, by class or series of shares and showing the number and class or
series of shares held by each shareholder; (e) sign with the President, a Vice
President, or any other officer authorized by the Board of Directors,
certificates for shares of the Corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general
charge of the stock transfer books of the Corporation; and (g) in general
perform all duties incident to the office of Secretary and have such other
duties and exercise such authority as from time to time may be

13
<PAGE> 14

delegated or assigned by the Chairman of the Board, Vice Chairman, President or
the Board of Directors.

SECTION 4.11. The Treasurer. The Treasurer shall be the
principal financial and accounting officer of the Corporation and shall have
general charge of the finances and books of account of the Corporation. Except
as otherwise provided by the Board of Directors, he or she shall have general
supervision of the funds and property of the Corporation and of the performance
by the Custodian of its duties with respect thereto. The Treasurer shall
render to the Board of Directors, whenever directed by the Board, an account of
the financial condition of the Corporation and of all his or her transactions
as Treasurer. The Treasurer shall perform all acts incidental to the office of
Treasurer, subject to the control of the Board of Directors.

SECTION 4.12. Assistant Secretaries and Assistant Treasurers.
There shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors may from time to time authorize. The Assistant
Secretaries may sign with the President, a Vice President or any other officer
authorized by the Board of Directors, certificates for shares of the
Corporation the issuance of which shall have been authorized by a resolution of
the Board of Directors. The Assistant Secretaries and Assistant Treasurers, in
general, shall perform such duties and have such authority as shall from time
to time be delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the Chairman of the Board, Vice Chairman, President or the
Board of Directors.

SECTION 4.13. Other Assistants and Acting Officers. The
Board of Directors shall have the power to appoint, or to authorize any duly
appointed officer of the Corporation to appoint, any person to act as assistant
to any officer, or as agent for the Corporation in his or her stead, or to
perform the duties of such officer whenever for any reason it is impracticable
for such officer to act personally, and such assistant or acting officer or
other agent so appointed by the Board of Directors or an authorized officer
shall have the power to perform all the duties of the office to which he or she
is so appointed to be an assistant, or as to which he or she is so appointed to
act, except as such power may be otherwise defined or restricted by the Board
of Directors or the appointing officer.

SECTION 4.14. Surety Bonds. The Board of Directors may
require any officer or agent of the Corporation to execute a bond (including,
without limitation, any bond required by the Investment Company Act of 1940) to
the Corporation in such sum and with such surety or sureties as the Board of
Directors may determine, conditioned upon the faithful performance of his or
her duties to the Corporation, including responsibility for negligence and for
the accounting of any of the Corporation's property, funds or securities that
may come into his or her hands.

14
<PAGE> 15

ARTICLE V. CERTIFICATES FOR SHARES; TRANSFER OF SHARES

SECTION 5.01. Certificates for Shares. Each shareholder
shall be entitled upon request to have a certificate or certificates which
shall represent and certify the number and kind of shares owned by him or her
in the Corporation. Certificates representing shares of the Corporation shall
be in such form, consistent with the WBCL, as shall be determined by the Board
of Directors. Such certificates shall be signed, either manually or in
facsimile, by the President, a Vice President or any other officer authorized
by the Board of Directors and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares represented
thereby are issued, with the number of shares and class of shares and series,
if any, and date of issue, shall be entered on the stock transfer books of the
Corporation. All certificates surrendered to the Corporation for transfer
shall be cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except as provided in Section 5.04.

Shares may also be issued without certificates. Within a
reasonable time after issuance or transfer of shares without certificates, the
Corporation shall send the shareholder a written statement of the information
required on share certificates under the WBCL, including the following:

(a) the name of the Corporation;

(b) the name of the person to whom shares were issued;

(d) either (i) a summary of the designations, relative
rights, preferences and limitations, applicable to each class, and the
variations in rights, preferences and limitations determined for each
series and the authority of the Board of Directors to determine
variations for future series, or (ii) a conspicuous statement that the
Corporation will furnish the information specified in clause (i),
above, on request, in writing and without charge.

15
<PAGE> 16

SECTION 5.02. Signature by Former Officers. The validity of
a share certificate is not affected if a person who signed the certificate
(either manually or in facsimile) no longer holds office when the certificate
is issued.

SECTION 5.03. Transfer of Shares. Prior to due presentment
of a certificate for shares for redemption or registration of transfer, the
Corporation may treat the registered owner of such shares as the person
exclusively entitled to vote, to receive notifications and otherwise to have
and exercise all the rights and power of an owner. Where a certificate for
shares is presented to the Corporation with a request for redemption or to
register for transfer, the Corporation shall not be liable to the owner or any
other person suffering loss as a result of such registration of transfer or
redemption if (a) there were on or with the certificate the necessary
endorsements, and (b) the Corporation had no duty to inquire into adverse
claims or has discharged any such duty. The Corporation may require reasonable
assurance that such endorsements are genuine and effective and compliance with
such other regulations as may be prescribed by or under the authority of the
Board of Directors. All certificates and uncertificated shares surrendered to
the Corporation for redemption shall be cancelled, returned to the status of
authorized and unissued shares and the transaction recorded in the stock
transfer books. Transfer or redemption of shares of the Corporation shall be
made only on the stock transfer books of the Corporation by the holder of
record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto duly authorized
by power of attorney duly executed and filed with the transfer agent or the
Secretary of the Corporation, and on surrender for cancellation of the
certificate for such shares, if any.

SECTION 5.04. Lost, Destroyed or Stolen Certificates. Where
the owner claims that certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if the
owner (a) so requests before the Corporation has notice that such shares have
been acquired by a bona fide purchaser, (b) files with the Corporation a
sufficient indemnity bond if required by the Board of Directors or any
principal officer, and (c) satisfies such other reasonable requirements as may
be prescribed by or under the authority of the Board of Directors.

SECTION 5.05. Stock Regulations. The Board of Directors
shall have the power and authority to make all such further rules and
regulations not inconsistent with law as it may deem expedient concerning the
issue, transfer and registration of shares of the Corporation and to appoint or
designate one or more stock transfer agents and one or more stock registrars.

ARTICLE VI. SEAL

16
<PAGE> 17

SECTION 6.01. The seal of the Corporation shall be circular
in form and shall bear, at a minimum, the name of the Corporation, Wisconsin as
its state of incorporation and the words "Corporate Seal."

ARTICLE VII. INDEMNIFICATION OF OFFICERS AND DIRECTORS

SECTION 7.01. Mandatory Indemnification. The Corporation
shall indemnify, to the full extent permitted by the WBCL, as in effect from
time to time, the persons described in Sections 180.0850 through 180.0859 (or
any successor provisions) of the WBCL or other provisions of the law of the
State of Wisconsin relating to indemnification of directors and officers, as in
effect from time to time. The indemnification afforded such persons by this
section shall not be exclusive of other rights to which they may be entitled as
a matter of law.

SECTION 7.02. Permissive Supplementary Benefits. The
Corporation may, but shall not be required to, supplement the right of
indemnification under Section 7.01 by (a) the purchase of insurance on behalf
of any one or more of such persons, whether or not the Corporation would be
obligated to indemnify such person under Section 7.01; (b) individual or group
indemnification agreements with any one or more of such persons; and (c)
advances for related expenses of such a person.

SECTION 7.03. Amendment. This Article VII may be amended or
repealed only by a vote of the shareholders and not by a vote of the Board of
Directors.

SECTION 7.04. Investment Company Act. In no event shall the
Corporation indemnify any person hereunder in contravention of any provision of
the Investment Company Act.

ARTICLE VIII. AMENDMENTS

SECTION 8.01. By Shareholders. These By-Laws may be amended
or repealed and new By-Laws may be adopted by the shareholders at any annual or
special meeting of the shareholders at which a quorum is in attendance.

SECTION 8.02. By Board of Directors. Except as otherwise
provided by the WBCL, the Articles of Incorporation or a particular By-Law
herein, these By-Laws may also be amended or repealed and new By-Laws may be
adopted by the Board of Directors by affirmative vote of a majority of the
number of directors present at any meeting at which a quorum is in

17
<PAGE> 18

attendance; provided, however, that the shareholders in adopting, amending or
repealing a particular By-Law may provide therein that the Board of Directors
may not amend, repeal or readopt that By-Law.

SECTION 8.03. Implied Amendments. Any action taken or
authorized by the shareholders or by the Board of Directors which would be
inconsistent with the By-Laws then in effect but which is taken or authorized
by affirmative vote of not less than the number of shares or the number of
directors required to amend the By-Laws so that the By-Laws would be consistent
with such action shall be given the same effect as though the By-Laws had been
temporarily amended or suspended so far, but only so far, as is necessary to
permit the specific action so taken or authorized.

ARTICLE IX. DEPOSITARIES, CUSTODIANS, ENDORSEMENTS

SECTION 9.01. Depositories. The funds of the Corporation
shall be deposited with such banks or other depositories as the Board of
Directors of the Corporation may from time to time determine in accordance with
the requirements of the Investment Company Act.

SECTION 9.02. Custodians. All securities and other similar
investments of the Corporation shall be deposited in the safekeeping of such
banks or other companies as the Board of Directors may from time to time
determine in accordance with the requirements of the Investment Company Act.
Every arrangement entered into with any bank or other company for the
safekeeping of the securities and other similar investments of the Corporation
shall contain provisions complying with the requirements of the Investment
Company Act.

SECTION 9.03. Checks, Notes, Drafts, etc. Checks, notes,
drafts, acceptances, bills of exchange and other orders or obligations for the
payment of money shall be signed by such officer or officers or such person or
persons as designated from time to time by the Board of Directors.

SECTION 9.04. Endorsements, Assignments and Transfer of
Securities. All endorsements, assignments, stock powers or other instruments
of transfer of securities standing in the name of the Corporation or its
nominee or directions for the transfer of securities belonging to the
Corporation shall be made by such officer or officers or other person or
persons as may be designated from time to time by the Board of Directors.

ARTICLE X. INDEPENDENT PUBLIC ACCOUNTANTS

18
<PAGE> 19

SECTION 10.01. Independent Public Accountants. The
Corporation shall employ an independent public accountant or a firm of
independent public accountants as its accountants to examine the accounts of
the Corporation and to sign and certify financial statements filed by the
Corporation.

ARTICLE XI. SALES AND REDEMPTION OF SHARES; DIVIDENDS

SECTION 11.01. Sale of Shares. Shares of Common Stock of the
Corporation shall be sold by it for the net asset value per share of such
Common Stock calculated in accordance with the requirements of the Investment
Company Act, and the Corporation's then current prospectus.

SECTION 11.02. Periodic Investment, Dividend Reinvestment and
Other Plans. The Corporation shall offer such periodic investment, dividend
reinvestment, periodic redemption or other plans as are specified in the
Corporation's then current prospectus, provided such plans are offered in
accordance with the requirements of the Investment Company Act. Any such plans
may be discontinued at any time if determined advisable by or under the
authority of the Board of Directors.

SECTION 11.03. Redemption of Shares. Subject to the
suspension of the right of redemption or postponement of the date of payment or
satisfaction upon redemption in accordance with the Investment Company Act,
each shareholder, upon request and after complying with the redemption
procedures established by or under the supervision of the Board of Directors,
shall be entitled to require the Corporation to redeem out of legally available
funds all or any part of the Common Stock standing in the name of such holder
at the net asset value per share calculated in accordance with the requirements
of the Investment Company Act, and the Corporation's then current prospectus.

SECTION 11.04. Dividends and Other Distributions. The
Corporation shall pay such dividends and make other distributions to
shareholders, at such times and in such amounts as are determined by or under
the authority of the Board of Directors, from time to time and in accordance
with the requirements of the WBCL, the Investment Company Act, and other
applicable laws and regulations.

<PAGE> 1
EXHIBIT 99.B4

SPECIMEN STOCK CERTIFICATE

NUMBER STRONG LOGO SHARES

________ _______

CUSIP ___________

STRONG <<FUND>>, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF WISCONSIN

This Certifies that is the owner of

Shares of the Common Stock, Par Value $._____ per share, of Strong <<Fund>>,
Inc. transferable on the books of the Corporation by the holder hereof
in person or by duly authorized attorney upon surrender of this certificate
properly endorsed.

This certificate is not valid until countersigned by the Transfer
Agent.
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.

Dated:

CORPORATE SEAL

/s/ Ann E. Oglanian /s/ John Dragisic

Secretary Vice Chairman

Countersigned:

Strong Capital Management, Inc.
Transfer Agent

Authorized Signature
<PAGE> 2

The following abbreviations, when used in the inscription on the face of
this certificate shall be construed as though they were written out in full
according to applicable laws or regulations:

UNIF GIFT MIN ACT _____Custodian_______
(Cust) (Minor)
Under Uniform Gift to Minors

Act - _________________________________
State

TEN COM - as tenants in common
TEN ENT - as tenants by the
entireties UNIF TRANS MIN ACT ____Custodian _______
JT TEN - as joint tenants with (Cust) (Minor)
right of survivorship
and not as tenants Under Uniform Transfers to Minors
in common Act - _________________________________
State

Additional abbreviations also may be used though not in the above list.
For Value Received, __________________ hereby sell, assign and transfer unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

________________________________________________________________________________
________________________________________________________________________________
Shares of capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
________________________________________________________________________________
Attorney, to transfer the said shares on the books of the within named
Corporation with full power of substitution in the premises.

Date ________________________________ ___________________________________
Signature

___________________________________
Signature

NOTICE: THE SIGNATURE OF THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.

___________________________________
Signature(s) Guarantee

Strong <<Fund>>, Inc. is authorized to issue common stock for multiple series.
Upon request, a Shareholder will be given a summary of the designations,
relative rights, preferences and limitations determined by the Board of
Directors for each series in writing and without charge. The Board of
Directors is authorized to determine variations for different series.

<PAGE> 1

EXHIBIT 99.B6

DISTRIBUTION AGREEMENT

THIS AGREEMENT is made and entered into on this ______day of
___________,____, between STRONG [ ] FUNDS, INC., a Wisconsin
corporation (the "Corporation"), and STRONG FUNDS DISTRIBUTORS, INC., a
Wisconsin corporation (the "Distributor"):

WITNESSETH:

WHEREAS, the Corporation is an open-end management investment company
registered under the Investment Company Act of 1940 (the "Investment Company
Act");

WHEREAS, the Corporation is authorized to issue shares of its $.______
par value common stock (the "Shares") in separate series;

WHEREAS, the Distributor is a registered broker-dealer under state and
federal laws and regulations and is a member of the National Association of
Securities Dealers (the "NASD"); and

WHEREAS, the Corporation desires to retain Distributor as the
distributor of the Shares of each series on whose behalf this Agreement has
been executed.

NOW, THEREFORE, the Corporation and Distributor mutually agree and
promise as follows:

1. Appointment of Distributor

The Company hereby appoints the Distributor as its agent for the
distribution of the Shares of each series of the Corporation listed on Schedule
A attached hereto (each series is hereinafter referred to as a "Fund"), as such
Schedule may be amended from time to time, in jurisdictions wherein the Shares
may legally be offered for sale; provided, however, that the Corporation may
(a) issue or sell Shares directly to holders of such Shares upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the
payment or reinvestment of dividends or distributions, or otherwise; or (b)
issue or sell Shares at net asset value to the shareholders of any other
investment corporation, as defined in the Investment Company Act, for which the
Distributor shall act as exclusive distributor, who wish to exchange all or a
portion of their investment in shares of such other investment company for
Shares of the Corporation.

2. Acceptance; Services of Distributor

The Distributor hereby accepts appointment as agent for the
distribution of the Shares and agrees that it will use its best efforts with
reasonable promptness to sell such part of the authorized Shares remaining
unissued as from time to time shall be effectively registered under the
Securities Act of 1933 (the "Securities Act"), at prices determined as
hereinafter provided and on terms hereinafter set forth, all

<PAGE> 2

subject to applicable federal and state laws and regulations and the Articles
of Incorporation and By-Laws of the Corporation.

3. Manner of Sale; Compliance with Securities Laws and Regulations

a. The Distributor shall sell Shares to or through qualified
dealers or others in such manner, not inconsistent with the provisions hereof
and the Corporation's then effective Registration Statement under the
Securities Act, as the Distributor may determine from time to time, provided
that no dealer or other person shall be appointed or authorized to act as agent
of the Corporation without the prior consent of the Corporation. The
Distributor shall cause subscriptions for Shares to be transmitted in
accordance with any subscription agreement then in force for the purchase of
Shares. Distributor and Corporation shall cooperate in implementing procedures
to ensure that the sales commission, if any, payable on the purchase of Shares
is paid to the Distributor in a timely manner.

b. The Distributor, as agent of and for the account of the
Corporation, may repurchase Shares at such prices and upon such terms and
conditions as shall be specified in the Corporation's current prospectus
relating to each Fund.

c. The Corporation will furnish to the Distributor from time to
time such information with respect to the Corporation, each Fund, and the
Shares as the Distributor may reasonably request for use in connection with the
sale of the Shares. The Distributor agrees that it will not use or distribute
or authorize the use, distribution or dissemination by its dealers or others,
in connection with the sale of such Shares, of any statements, other than those
contained in the Corporation's current prospectus relating to each Fund, except
such supplemental literature or advertising as shall be lawful under federal
and state securities laws and regulations, and that it will furnish the
Corporation with copies of all such material.

d. In selling or reacquiring Shares for the account of the
Corporation, the Distributor will in all respects conform to the requirements
of all state and federal laws and the Rules of Fair Practice of the NASD,
relating to such sale or reacquisition, as the case may be, and will indemnify
and save harmless the Corporation, each Fund, each person who has been, is or
may hereafter be a director or officer of the Corporation or any Fund from any
damage or expense on account of any wrongful act by the Distributor or any
employee, representative or agent of the Distributor. The Distributor will
observe and be bound by all the provisions of the Articles of Incorporation of
the Corporation (and of any fundamental policies adopted by the Corporation
and/or each Fund pursuant to the Investment Company Act, notice of which shall
have been given to the Distributor) which at the time in any way require,
limit, restrict or prohibit or otherwise regulate any action on the part of the
Distributor.

e. The Distributor will require each dealer to conform to the
provisions hereof and the Registration Statement (and related prospectus or
prospectuses) at the time in effect under the Securities Act with respect to
the public offering price of the Shares.

<PAGE> 3

4. Price of Shares

a. Shares offered for sale or sold by the Distributor for the
account of the Corporation shall be so offered or sold at a price per Share
determined in accordance with the then current prospectus relating to the sale
of such Shares except as departure from such prices shall be permitted by the
rules and regulations of the Securities and Exchange Commission (the "SEC").

b. The price the Corporation shall receive for all Shares
purchased from the Corporation shall be the net asset value used in determining
the public offering price applicable to the sale of each Fund's Shares. The
excess, if any, of the sales price over the net asset value of the Shares sold
by the Distributor as agent for the account of the Corporation shall be
retained by the Distributor as a commission for its services hereunder.

5. Registration of Shares and Distributor

a. The Corporation agrees that it will use its best efforts to
keep effectively registered under the Securities Act for sale as herein
contemplated such Shares as the Distributor shall reasonably request and as the
SEC shall permit to be so registered.

b. The Corporation on behalf of each Fund will execute any and all
documents and furnish any and all information which may be reasonably necessary
in connection with the qualification of its Shares for sale (including the
qualification of the Corporation or a Fund as a dealer where necessary or
advisable) in such states as the Distributor may reasonably request (it being
understood that the Corporation shall not be required without its consent to
comply with any requirement which in its opinion is unduly burdensome). The
Distributor, at its own expense, will effect all required qualifications of the
Distributor as a dealer or broker or otherwise under all applicable state or
federal laws in order that the Shares may be sold in as broad a territory as is
reasonably practicable.

c. Notwithstanding any other provision hereof, the Corporation on
behalf of a Fund may terminate, suspend or withdraw the offering of its Shares
whenever, in its sole discretion, the Corporation deems such action to be
desirable.

6. Expenses

The Corporation or respective Fund will pay or cause to be paid the
expenses (including the fees and disbursements of its own counsel) of any
registration of the Shares under the Securities Act, expenses of qualifying or
continuing the qualification of the Shares for sale, and in connection
therewith, of qualifying or continuing the qualification of the Corporation or
respective Fund as a dealer or broker under the laws of such states as may be
designated by the Distributor under the conditions herein specified, and
expenses incident to the issuance of Shares, such as the cost of share
certificates, issue taxes and fees of the transfer agent. The Distributor will
pay all other expenses (other than expenses which one or more dealers may bear
pursuant to any agreement with the Distributor) incident to the sale and
distribution of the Shares issued or sold hereunder, including, without
limiting the generality of the foregoing, all (a) expenses of printing and
distributing or disseminating any other literature, advertising

3
<PAGE> 4

and selling aids in connection with such offering of the Shares for
sale (except that such expenses shall not include expenses incurred by the
Corporation or any Fund in connection with the preparation, printing and
distribution of any report or other communication to holders of Shares in their
capacity as such); and (b) expenses of advertising in connection with such
offering. No transfer taxes, if any, which may be payable in connection with
the issue or delivery of Shares sold as herein contemplated or of the
certificates for such Shares shall be borne by the Corporation or any Fund, and
the Distributor will indemnify and hold harmless the Corporation and each Fund
against liability for all such transfer taxes.

7. Duration and Termination

a. This Agreement shall become effective as of the date hereof
and shall continue in effect until ________, 1996, and from year to year
thereafter, but only so long as such continuance is specifically approved each
year by either (i) the Board of Directors of the Corporation, or (ii) the
affirmative vote of a majority of the relevant Fund's respective outstanding
voting securities. In addition to the foregoing, each renewal of this
Agreement must be approved by the vote of a majority of the Corporation's
directors who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on
such approval. Prior to voting on the renewal of this Agreement, the Board of
Directors of the Corporation shall request and evaluate, and the Distributor
shall furnish, such information as may reasonably be necessary to enable the
Corporation's Board of Directors to evaluate the terms of this Agreement.

b. Notwithstanding whatever may be provided herein to the
contrary, this Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the Board of Directors of the Corporation, or
by vote of a majority of the outstanding voting securities of the relevant
Fund, or by the Distributor, in each case, on not more than sixty (60) days'
written notice to the other party and shall terminate automatically in the
event of its assignment as set forth in paragraph 9 of this Agreement.

8. Notice

Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as
such other party may from time to time designate for the receipt of such
notice.

9. Assignment

This Agreement shall neither be assignable nor subject to pledge or
hypothecation and in the event of assignment, pledge or hypothecation shall
automatically terminate. For purposes of determining whether an "assignment"
has occurred, the definition of "assignment" in Section 2(a)(4) of the
Investment Company Act shall control.

10. Miscellaneous

<PAGE> 5

a. This Agreement shall be construed in accordance with the laws
of the State of Wisconsin, provided that nothing herein shall be construed in a
manner inconsistent with the Investment Company Act, the Securities Act, the
Securities Exchange Act of 1934 or any rule or order of the SEC under such Acts
or any rule of the NASD.

b. The captions of this Agreement are included for convenience
only and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.

c. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the day and year first stated above.

Attest: Strong Funds Distributors, Inc.

__________________________________________ ___________________________________
Thomas M. Zoeller, Treasurer and Secretary Stephen J. Shenkenberg, President

Attest: Strong ________________ Funds, Inc.

__________________________________________ ___________________________________
Ann E. Oglanian, Secretary Lawrence A. Totsky, Vice President

5
<PAGE> 6

SCHEDULE A

The Fund(s) of the Corporation currently subject to this Agreement are as
follows:

Date of Addition
Fund(s) to this Agreement
------- -----------------
Strong [ ] Fund ____________

Attest: Strong Funds Distributors, Inc.

__________________________________________ __________________________________
Thomas M. Zoeller, Treasurer and Secretary Stephen J. Shenkenberg, President

Attest: Strong ______________ Funds, Inc.

__________________________________________ __________________________________
Ann E. Oglanian, Secretary Lawrence A. Totsky, Vice President

<PAGE> 1
EXHIBIT 99.B8

CUSTODIAN AGREEMENT

THIS AGREEMENT is made and entered into on this ___ day of ____, ____,
between STRONG <<FUND>>, INC., a Wisconsin corporation (the "Corporation"), on
behalf of the Funds (as defined below) of the Corporation, and FIRSTAR TRUST
COMPANY, a Wisconsin corporation (the "Custodian").

WITNESSETH:

WHEREAS, the Corporation is registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940 (the "Investment Company Act");

WHEREAS, the Corporation is authorized to create separate series, each
with its own separate investment portfolio, and the beneficial interest in each
such series will be represented by a separate series of shares (each series
indicated on Schedule A is hereinafter individually referred to as a "Fund" and
collectively as the "Funds"); and

WHEREAS, the Corporation desires to retain the Custodian to hold and
administer the securities and cash of each Fund listed in Schedule A hereto,
and any additional Funds the Corporation and the Custodian may agree upon and
include in Schedule A as such Schedule may be amended from time to time,
pursuant to the terms of this Agreement.

NOW, THEREFORE, the Corporation and the Custodian do mutually agree and
promise as follows:

1. Definitions

The word "securities" as used herein includes stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any other
rights or interests therein, or in any property or assets.

The words "officers' certificate" shall mean a request or direction or
certification in writing signed in the name of the Corporation by any two of
the President, a Vice President, the Secretary and the Treasurer of the
Corporation, or any other persons duly authorized to sign by the Board of
Directors.

The word "Board" shall mean the Board of Directors the Corporation.

2. Names, Titles and Signatures of the Corporation's Officers

An officer of the Corporation will certify to the Custodian the names
and signatures of those persons authorized to sign the officers' certificates
described in Section 1, hereof, and the names of the members of the Board of
Directors, together with any changes which may occur from time to time.
<PAGE> 2

3. Receipt and Disbursement of Money

A. The Custodian shall open and maintain a separate account or
accounts in the name of each Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this Agreement. The Custodian shall
hold in such account or accounts, subject to the provisions hereof, all cash
received by it from or for the account of a Fund. The Custodian shall make
payments of cash to, or for the account of, a Fund from such cash only:

(a) for the purchase of securities for the portfolio of a
Fund upon the delivery of such securities to the Custodian, registered
in the name of the Fund or of the nominee of the Custodian referred to
in Section 7 or in proper form for transfer;

(b) for the purchase or redemption of shares of common
stock of a Fund upon delivery thereof to Custodian, or upon proper
instructions from the Fund;

(c) for the payment of interest, dividends, taxes,
investment adviser's fees or operating expenses (including, without
limitation thereto, fees for legal, accounting, auditing and custodian
services and expenses for printing and postage);

(d) for payments in connection with the conversion,
exchange or surrender of securities owned or subscribed to by a Fund
held by or to be delivered to Custodian; or

(e) for other proper corporate purposes certified by
resolution of the Board of Directors of the Corporation, on behalf of a
Fund.

Before making any such payment, the Custodian shall receive
(and may rely upon) an officers' certificate requesting such payment
and stating that it is for a purpose permitted under the terms of
items (a), (b), (c) or (d) of this Subsection A, and also, in respect
of item (e), upon receipt of an officers' certificate specifying the
amount of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made, provided, however, that an officers' certificate need not
precede the disbursement of cash for the purpose of purchasing a money
market instrument, or any other security with same or next-day
settlement, if the President, a Vice President, the Secretary or the
Treasurer of the Corporation, on behalf of a particular Fund, issues
appropriate oral or facsimile instructions to the Custodian and an
appropriate officers' certificate is received by the Custodian within
two business days thereafter.

Regardless of the foregoing, if the Corporation's investment
advisor (the "Advisor") is a member of the Institutional Delivery
("ID") system and desires to affirm trades on behalf of a Fund with
the Depository Trust Company ("DTC") for those transactions affirmed
through the ID system; or (ii) has established an automated interface
to transmit trade authorization detail to the Custodian, then no
officers' certificate is required; provided that the appropriate
ID/DTC letter agreement or automated trade authorization agreement has
been executed by both the Advisor and the Custodian.

2
<PAGE> 3

B. The Custodian is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received by the
Custodian for each Fund's account.

C. The Custodian shall, upon receipt of proper instructions, make
federal funds available to the Funds as of specified times agreed upon from
time to time by the Corporation, on behalf of the Funds, and the Custodian in
the amount of checks received in payment for shares of the Funds which are
deposited into the respective Fund's account.

4. Segregated Accounts

Upon receipt of proper instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of each Fund, into
which account or accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to paragraph 14
hereof, (i) in accordance with the provisions of any agreement among the
Corporation, on behalf of a Fund or Funds, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the National Association of
Securities Dealers, Inc. (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of the
Options Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered contract
market), or of any similar organization or organizations, regarding escrow or
other arrangements in connection with transactions for a Fund, (ii) for the
purpose of segregating cash or securities in connection with options purchased,
sold or written for a Fund or commodity futures contracts or options thereon
purchased or sold for a Fund, (iii) for the purpose of compliance by the
Corporation or a Fund with the procedures required by any release or
interpretations of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies, and (iv)
as mutually agreed upon from time to time between the Corporation, on behalf of
a Fund or Funds, and the Custodian.

5. Transfer, Exchange, Redelivery, etc. of Securities

The Custodian shall have sole power to release or deliver any
securities of the Funds held by it pursuant to this Agreement. The Custodian
agrees to transfer, exchange or deliver securities held by it hereunder only:

(a) for sales of such securities for the account of a Fund upon
receipt by Custodian of payment therefore;

(b) when such securities are called, redeemed or retired or
otherwise become payable;

(d) in exchange for, or upon conversion into, other securities
alone or other securities and cash whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment, or otherwise;

3
<PAGE> 4

(e) upon conversion of such securities pursuant to their terms
into other securities;

(f) upon exercise of subscription, purchase or other similar
rights represented by such securities;

(g) for the purpose of exchanging interim receipts or temporary
securities for definitive securities;

(h) for the purpose of redeeming in kind shares of common stock of
a Fund upon delivery thereof to the Custodian; or

(i) for other proper corporate purposes.

As to any deliveries made by the Custodian pursuant to items (a), (b),
(d), (e), (f), and (g), securities or cash receivable in exchange therefore
shall be deliverable to the Custodian.

Before making any such transfer, exchange or delivery, the Custodian
shall receive (and may rely upon) an officers' certificate requesting such
transfer, exchange or delivery, and stating that it is for a purpose permitted
under the terms of items (a), (b), (c), (d), (e), (f), (g) or (h) of this
Section 5 and also, in respect of item (i), upon receipt of an officers'
certificate specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom delivery of
such securities shall be made, provided, however, that an officers' certificate
need not precede any such transfer, exchange or delivery of a money market
instrument, or any other security with same or next-day settlement, if the
President, a Vice President, the Secretary or the Treasurer of the Corporation,
on behalf of a particular Fund, issues appropriate oral or facsimile
instructions to the Custodian and an appropriate officers' certificate is
received by the Custodian within two business days thereafter.

Regardless of the foregoing, if the Advisor is a member of the ID
system and desires to affirm trades on behalf of a Fund with the DTC for those
transactions affirmed through the ID system; or (ii) has established an
automated interface to transmit trade authorization detail to the Custodian,
then no officers' certificate is required; provided that the appropriate ID/DTC
letter agreement or automated trade authorization agreement has been executed
by both the Advisor and the Custodian.

6. Custodian's Acts Without Instructions

Unless and until the Custodian receives an officers' certificate to
the contrary, the Custodian shall: (a) present for payment all coupons and
other income items held by it for the account of each Fund which call for
payment upon presentation, and hold the cash received by it upon such payment
for the account of the respective Fund; (b) collect interest and cash dividends
received, with notice to each Fund, for the account of the respective Fund; (c)
hold for the account of each Fund hereunder all stock dividends, rights and
similar securities issued with respect to any securities held by it hereunder;
and (d) execute, as agent on behalf of each Fund, all necessary ownership
certificates required by the Internal

4
<PAGE> 5

Revenue Code or the Income Tax Regulations of the United States Treasury
Department or under the laws of any state now or hereafter in effect, inserting
the Fund's name on such certificates as the owner of the securities covered
thereby, to the extent it may lawfully do so.

7. Registration of Securities

Except as otherwise directed by an officers' certificate, the
Custodian shall register all securities, except such as are in bearer form, in
the name of a registered nominee of the Custodian as defined in the Internal
Revenue Code and any Regulations of the Treasury Department issued hereunder or
in any provision of any subsequent federal tax law exempting such transaction
from liability for stock transfer taxes, and shall execute and deliver all such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. The Custodian shall use its best
efforts to the end that the specific securities held by it hereunder shall be
at all times identifiable in its records.

The Corporation shall from time to time furnish to the Custodian
appropriate instruments to enable the Custodian to hold or deliver in proper
form for transfer, or to register in the name of its registered nominee, any
securities which it may hold for the account of the Funds and which may from
time to time be registered in the name of a particular Fund.

8. Voting and Other Action

Neither the Custodian nor any nominee of the Custodian shall vote any
of the securities held hereunder by or for the account of any Fund, except in
accordance with the instructions contained in an officers' certificate. The
Custodian shall deliver, or cause to be executed and delivered, to the
Corporation all notices, proxies and proxy soliciting materials with relation
to such securities, such proxies to be executed by the registered holder of
such securities (if registered otherwise than in the name of a Fund), but
without indicating the manner in which such proxies are to be voted.

9. Transfer Tax and Other Disbursements

The Corporation, on behalf of the Funds, shall pay or reimburse the
Custodian from time to time for any transfer taxes payable upon transfers of
securities made hereunder, and for all other necessary and proper disbursements
and expenses made or incurred by the Custodian in the performance of this
Agreement.

The Custodian shall execute and deliver such certificates in
connection with securities delivered to it or by it under this Agreement as may
be required under the provisions of the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, or under the laws of
any state, to exempt from taxation any exemptable transfers and/or deliveries
of any such securities.

10. Concerning Custodian

The Custodian shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed upon in
writing between the Corporation, on behalf of

5
<PAGE> 6

the Funds, and the Custodian. Until modified in writing, such compensation
shall be as set forth in Schedule B attached hereto.

The Custodian shall not be liable for any action taken in good faith
upon any certificate herein described or certified copy of any resolution of
the Board, and may rely on the genuineness of any such document which it may in
good faith believe to have been validly executed.

The Corporation, on behalf of the Funds, agrees to indemnify and hold
harmless the Custodian and its nominee from all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees) incurred or
assessed against it or by its nominee in connection with the performance of
this Agreement, except such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct. The
Custodian is authorized to charge the applicable account of a Fund for such
items. In the event of any advance of cash by the Custodian which results in
any overdraft of a Fund, which is a money market fund subject to Rule 2a-7
under the Investment Company Act, the Custodian is granted a security interest
in such Fund's assets limited to the extent of the overdraft.

11. Subcustodians

The Custodian is hereby authorized to engage another bank or trust
company as a Subcustodian for all or any part of the Corporation's assets, so
long as any such bank or trust company meets the requirements of the Investment
Company Act, as amended and the rules and regulations thereunder and provided
further that, if the Custodian utilizes the services of a Subcustodian, the
Custodian shall remain fully liable and responsible for any losses caused to
any of the Funds by the Subcustodian as fully as if the Custodian was directly
responsible for any such losses under the terms of the Custodian Agreement.

Notwithstanding anything contained herein, if the Corporation requires
the Custodian to engage specific Subcustodians for the safekeeping and/or
clearing of assets, the Corporation agrees to indemnify and hold harmless the
Custodian from all claims, expenses and liabilities incurred or assessed
against it in connection with the use of such Subcustodian in regard to the
Corporation's assets, except as may arise from its own negligent action,
negligent failure to act or willful misconduct.

12. Reports by Custodian

The Custodian shall furnish the Corporation periodically as agreed upon
with a statement summarizing all transactions and entries for the account of
each Fund. The Custodian shall furnish to the Corporation, at the end of every
month, a list of the securities held by each Fund, showing the aggregate cost
of each issue. The books and records of the Custodian pertaining to its
actions under this Agreement shall be open to inspection and audit at
reasonable times by officers of, and of auditors employed by, the Corporation.

13. Termination or Assignment

This Agreement may be terminated by the Corporation, on behalf of the
Funds, or by the Custodian, on ninety (90) days notice, given in writing and
sent by registered mail to the Custodian at P. O. Box 2054, Milwaukee,
Wisconsin 53201, or to the Corporation at 100 Heritage Reserve, Menomonee Falls,
Wisconsin 53051, as the case may be. Upon any termination of this Agreement,
pending appointment of a successor to the Custodian or a vote of the
shareholders of the Corporation to dissolve or

6
<PAGE> 7

to function without a custodian of its cash, securities and other property,
the Custodian shall not deliver cash, securities or other property of
the Corporation to the Corporation, but may deliver them to a bank or trust
company of its own selection, that meets the requirements of the Investment
Company Act as a Custodian for the Corporation to be held under terms similar
to those of this Agreement, provided, however, that the Custodian shall not be
required to make any such delivery or payment until full payment shall have
been made by the Corporation of all liabilities constituting a charge on or
against the properties then held by the Custodian or on or against the
Custodian, and until full payment shall have been made to the Custodian of all
its fees, compensation, costs and expenses, subject to the provisions of
Section 10 of this Agreement.

This Agreement may not be assigned by the Custodian without the consent
of the Corporation, authorized or approved by a resolution of its Board of
Directors.

14. Deposits of Securities in Securities Depositories

No provision of this Agreement shall be deemed to prevent the use by
the Custodian of a central securities clearing agency or securities depository,
provided, however, that the Custodian and the central securities clearing
agency or securities depository meet all applicable federal and state laws and
regulations, including the requirements of the Investment Company Act, and the
Board of Directors of the Corporation approves by resolution the use of such
central securities clearing agency or securities depository.

15. Records

To the extent that the Custodian in any capacity prepares or maintains
any records required to be maintained and preserved by the Corporation pursuant
to the provisions of the Investment Company Act, the Custodian agrees to make
any such records available to the Corporation upon request and to preserve such
records for the periods prescribed in Rule 31a-2 under the Investment Company
Act.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.

Attest: Firstar Trust Company

____________________________________ ___________________________________
By: By:
Its: Its:

Attest: Strong <<Name>>, Inc.

____________________________________ ___________________________________
By: Ann E. Oglanian By: Lawrence A. Totsky
Its: Secretary Its: Vice President

7
<PAGE> 8

SCHEDULE A

The Fund(s) of the Corporation currently subject to this Agreement are as
follows:

Fund(s) Date of Addition
------- to this Agreement
-----------------
<<SERIES>> <<AGT DATE>>

Attest: Firstar Trust Company

______________________ ______________________________
By: By:
Its: Its:

Attest: Strong <<NAME>>, Inc.

_______________________ ______________________________
By: Ann E. Oglanian By: Lawrence A. Totsky
Its: Secretary Its: Vice President
<PAGE> 9

ADDENDUM TO SCHEDULE B

FIRSTAR TRUST COMPANY
MUTUAL FUND SERVICES

MUTUAL FUND CUSTODIAL AGENT SERVICE
ANNUAL FEE SCHEDULE FOR THE
STRONG MUTUAL FUNDS

EFFECTIVE APRIL 1, 1996 THROUGH MARCH 31, 1997

Annual fee on all Strong Mutual Funds

$500,000.00 BASE FEE ON TOTAL FUND FAMILY

Investment transactions (purchase, sale, exchange, tender,
redemption, maturity, receipt, delivery)

$ 7.00 per Depository Trust Company or Federal Reserve System
trade, automated and non-automated

$25.00 per definitive security (physical)

$ 8.50 per commercial paper trade

$50.00 per Euroclear

$ 6.00 per principal reduction on pass-through certificates

$35.00 per option/futures contract

$10.00 per variation margin transaction

$10.00 per Fed wire deposit or withdrawal

STRONG CAPITAL MANAGEMENT FIRSTAR TRUST COMPANY

By: /s/ Ronald A. Neville By: /s/
Its: Senior VP and CFO Its: First Vice President
Date: April 15, 1996 Date: April 4, 1996

<PAGE> 1
EXHIBIT 99.B9

SHAREHOLDER SERVICING AGENT AGREEMENT

THIS AGREEMENT is made and entered into on this ___ day of _____, 1995,
between STRONG [ ], INC., a Wisconsin corporation (the
"Corporation"), on behalf of the Funds (as defined below) of the Corporation,
and STRONG CAPITAL MANAGEMENT, INC., a Wisconsin corporation ("Strong").

WITNESSETH

WHEREAS, the Corporation is an open-end management investment company
registered under the Investment Company Act of 1940;

WHEREAS, the Corporation is authorized to create separate series, each
with its own separate investment portfolio, and the beneficial interest in each
such series will be represented by a separate series of shares (each series is
hereinafter individually referred to as a "Fund" and collectively, the
"Funds");

WHEREAS, the Corporation is authorized to issue shares of its $._____
par value common stock (the "Shares") of each Fund; and

WHEREAS, the Corporation desires to retain Strong as the shareholder
servicing agent of the Shares of each Fund on whose behalf this Agreement has
been executed.

NOW, THEREFORE, the Corporation and Strong do mutually agree and
promise as follows:

1. Appointment. The Corporation hereby appoints Strong to act as
shareholder servicing agent of the Shares of each Fund listed on Schedule A
hereto, as such Schedule may be amended from time to time. Strong shall, at
its own expense, render the services and assume the obligations herein set
forth subject to being compensated therefor as herein provided.

2. Authority of Strong. Strong is hereby authorized by the
Corporation to receive all cash which may from time to time be delivered to it
by or for the account of the Funds; to issue confirmations and/or certificates
for Shares of the Funds upon receipt of payment; to redeem or repurchase on
behalf of the Funds Shares upon receipt of certificates properly endorsed or
properly executed written requests as described in the current prospectus of
each Fund and to act as dividend disbursing agent for the Funds.

3. Duties of Strong. Strong hereby agrees to:

A. Process new accounts.
<PAGE> 2

B. Process purchases, both initial and subsequent, of
Fund Shares in accordance with conditions set forth
in the prospectus of each Fund as mutually agreed by
the Corporation and Strong.

C. Transfer Fund Shares to an existing account or to a
new account upon receipt of required documentation
in good order.

D. Redeem uncertificated and/or certificated shares upon
receipt of required documentation in good order.

E. Issue and/or cancel certificates as instructed;
replace lost, stolen or destroyed certificates upon
receipt of satisfactory indemnification or bond.

F. Distribute dividends and/or capital gain
distributions. This includes disbursement as cash or
reinvestment and to change the disbursement option at
the request of shareholders.

G. Process exchanges between Funds (process and direct
purchase/redemption and initiate new account or
process to existing account).

H. Make miscellaneous changes to records.

I. Prepare and mail a confirmation to shareholders as
each transaction is recorded in a shareholder
account. Duplicate confirmations to be available on
request within current year.

J. Handle phone calls and correspondence in reply to
shareholder requests except those items set forth in
Referrals to Corporation, below.

K. Prepare Reports for the Funds:

i. Monthly analysis of transactions and accounts
by types.

ii. Quarterly state sales analysis; sales by
size; analysis of systematic withdrawals,
Keogh, IRA and 403(b)(7) plans; print-out of
shareholder balances.

L. Perform daily control and reconciliation of Fund
Shares with Strong's records and the Corporation's
office records.

M. Prepare address labels or confirmations for four
reports to shareholders per year.

2
<PAGE> 3

N. Mail and tabulate proxies for one Annual Meeting of
Shareholders, including preparation of certified
shareholder list and daily report to Corporation
management, if required.

O. Prepare and mail required Federal income taxation
information to shareholders to whom dividends or
distributions are paid, with a copy for the IRS and a
copy for the Corporation if required.

P. Provide readily obtainable data which may from time
to time be requested for audit purposes.

Q. Replace lost or destroyed checks.

R. Continuously maintain all records for active and
closed accounts.

S. Furnish shareholder data information for a current
calendar year in connection with IRA and Keogh Plans
in a format suitable for mailing to shareholders.

4. Referrals to Corporation. Strong hereby agrees to refer to the
Corporation for reply the following:

A. Requests for investment information, including
performance and outlook.

B. Requests for information about specific plans (i.e.,
IRA, Keogh, Systematic Withdrawal).

C. Requests for information about exchanges between
Funds.

D. Requests for historical Fund prices.

E. Requests for information about the value and timing
of dividend payments.

F. Questions regarding correspondence from the
Corporation and newspaper articles.

G. Any requests for information from non-shareholders.

H. Any other types of shareholder requests as the
Corporation may request from Strong in writing.

5. Compensation to Strong. Strong shall be compensated for its
services hereunder in accordance with the Shareholder Servicing Fee Schedule
(the "Fee Schedule") attached hereto as Schedule B and as such Fee Schedule may
from time to time be amended in writing between the two parties. The
Corporation will reimburse Strong for all out-of-pocket expenses, including,
but not

3
<PAGE> 4

necessarily limited to, postage, confirmation forms, etc. Special projects,
not included in the Fee Schedule and requested by proper instructions from the
Corporation with respect to the relevant Funds, shall be completed by Strong and
invoiced to the Corporation and the relevant Funds as mutually agreed upon.

6. Rights and Powers of Strong. Strong's rights and powers with
respect to acting for and on behalf of the Corporation, including rights and
powers of Strong's officers and directors, shall be as follows:

A. No order, direction, approval, contract or obligation
on behalf of the Corporation with or in any way affecting Strong shall
be deemed binding unless made in writing and signed on behalf of the
Corporation by an officer or officers of the Corporation who have been
duly authorized to so act on behalf of the Corporation by its Board of
Directors.

B. Directors, officers, agents and shareholders of the
Corporation are or may at any time or times be interested in Strong as
officers, directors, agents, shareholders, or otherwise.
Correspondingly, directors, officers, agents and shareholders of
Strong are or may at any time or times be interested in the
Corporation as directors, officers, agents, shareholders or otherwise.
Strong shall, if it so elects, also have the right to be a shareholder
of the Corporation.

C. The services of Strong to the Corporation are not to
be deemed exclusive and Strong shall be free to render similar services
to others as long as its services for others do not in any manner or
way hinder, preclude or prevent Strong from performing its duties and
obligations under this Agreement.

D. The Corporation will indemnify Strong and hold it
harmless from and against all costs, losses, and expenses which may be
incurred by it and all claims or liabilities which may be asserted or
assessed against it as a result of any action taken by it without
negligence and in good faith, and for any act, omission, delay or
refusal made by Strong in connection with this agency in reliance upon
or in accordance with any instruction or advice of any duly authorized
officer of the Corporation.

7. Effective Date. This Agreement shall become effective as of
the date hereof.

8. Termination of Agreement. This Agreement shall continue in
force and effect until terminated or amended to such an extent that a new
Agreement is deemed advisable by either party. Notwithstanding anything herein
to the contrary, this Agreement may be terminated at any time, without payment
of any penalty, by the Corporation or Strong upon ninety (90) days' written
notice to the other party.

9. Amendment. This Agreement may be amended by the mutual
written consent of the parties. If, at any time during the existence of this
Agreement, the Corporation deems it necessary or advisable in the best
interests of Corporation that any amendment of this Agreement be made in
order to

4
<PAGE> 5

comply with the recommendations or requirements of the Securities and Exchange
Commission or state regulatory agencies or other governmental authority, or to
obtain any advantage under state or federal laws, the Corporation shall notify
Strong of the form of amendment which it deems necessary or advisable and the
reasons therefor, and if Strong declines to assent to such amendment, the
Corporation may terminate this Agreement forthwith.

10. Notice. Any notice that is required to be given by the
parties to each other under the terms of this Agreement shall be in writing,
addressed and delivered, or mailed postpaid to the other party at the principal
place of business of such party.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be signed as of the day and year first stated above.

Attest: Strong Capital Management, Inc.

______________________________________ ___________________________________
Thomas P. Lemke, Senior Vice President John Dragisic, Vice Chairman

Attest: Strong [ ], Inc.

______________________________________ ___________________________________
Ann E. Oglanian, Secretary Lawrence A. Totsky, Vice President

5
<PAGE> 6

SCHEDULE A

The Fund(s) of the Corporation currently subject to this Agreement are as
follows:

Date of Addition
Fund(s) to this Agreement
------- -----------------

Strong [ ] Fund ___________, 1995

Attest: Strong Capital Management, Inc.

______________________________________ ____________________________________
Thomas P. Lemke, Senior Vice President John Dragisic, Vice Chairman

Attest: Strong [ ], Inc.

______________________________________ ____________________________________
Ann E. Oglanian, Secretary Lawrence A. Totsky, Vice President

6
<PAGE> 7

SCHEDULE B

SHAREHOLDER SERVICING FEE SCHEDULE

Until such time that this schedule is replaced or modified, Strong
[ ], Inc. (the "Corporation"), on behalf of each Fund set
forth on Schedule A to this Agreement, agrees to compensate Strong Capital
Management, Inc. ("Strong") for performing as shareholder servicing agent as
specified below per open Fund account, plus out-of-pocket expenses attributable
to the Corporation and the Fund(s).

Annual Rate per
Fund(s) Open Fund Account
------- -----------------

Strong [ ] Fund $_____

- - an equity fund $21.75

- - an income fund $31.50

- - a money market fund $32.50

Out-of-pocket expenses include, but are not limited to, the following:

1. All materials, paper and other costs associated with necessary
and ordinary shareholder correspondence.

2. Postage and printing of confirmations, statements, tax forms
and any other necessary shareholder correspondence. Printing
is to include the cost of printing account statements and
confirmations by third-party vendors as well as the cost of
printing the actual forms.

3. The cost of mailing (sorting, inserting, etc.) by third-party
vendors.

4. All banking charges of Corporation, including deposit slips and
stamps, checks and share drafts, wire fees not paid by
shareholders, and any other deposit account or checking
account fees.

5. The cost of storage media for Corporation records, including
phone recorder tapes, microfilm and microfiche, forms and
paper.

6. Offsite storage costs for older Corporation records.

7. Charges incurred in the delivery of Corporation materials and
mail.

8. Any costs for outside contractors used in providing necessary
and ordinary services to the Corporation, a Fund or
shareholders, not contemplated to be performed by Strong.

7
<PAGE> 8

9. Any costs associated with enhancing, correcting or developing
the record keeping system currently used by the Corporation,
including the development of new statement or tax form
formats.

For purposes of calculating Strong's compensation pursuant to this
Agreement, all subaccounts which hold shares in a Fund through 401(k) plans,
401(k) alliances, and financial institutions, such as insurance companies,
broker/dealers, and investment advisors shall be treated as direct open
accounts of the Fund upon approval of such arrangement by the Corporation's
Board of Directors. Out-of-pocket expenses will be charged to the applicable
Fund, except for those out-of-pocket expenses attributable to the Corporation
in general, which shall be charged pro rata to each Fund.

In addition, a Fund will pay a fee for closed accounts at an annual
rate of $4.20 per account. All fees will be billed to the Corporation monthly
based upon the number of open and closed accounts existing on the last day of
the month plus any out-of-pocket expenses paid by Strong during the month.
These fees are in addition to any fees the Corporation may pay Strong for
providing investment management services or for underwriting the sale of
Corporation shares.

Attest: Strong Capital Management, Inc.

______________________________________ ____________________________________
Thomas P. Lemke, Senior Vice President John Dragisic, Vice Chairman

Attest: Strong [ ],Inc.

______________________________________ ____________________________________
Ann E. Oglanian, Secretary Lawrence A. Totsky, Vice President

<PAGE> 1
EXHIBIT 99.B11

CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Strong Insured Municipal Bond Fund, Inc.

We consent to the incorporation by reference in Post-Effective Amendment No. 7
to the Registration Statement of Strong Insured Municipal Bond Fund, Inc. on
Form N-1A of our report dated February 6, 1996 on our audit of the financial
statements and financial highlights of Strong Insured Municipal Bond Fund,
Inc., which report is included in the Annual Report to Shareholders for the
year ended December 31, 1995, which is also incorporated by reference in the
Registration Statement. We also consent to the reference to our Firm under the
caption "Independent Accountants" in the Statement of Additional Information.

/s/ COOPERS & LYBRAND L.L.P.

Milwaukee, Wisconsin
April 22, 1996

<PAGE> 1

Strong Insured Municipal Bond Fund, Inc.

EXHIBIT 16

SCHEDULE OF COMPUTATION OF
PERFORMANCE QUOTATIONS

I. CURRENT ANNUALIZED YIELD: 30 days ended December 29, 1995

A. Formula

a-b 6
YIELD = 2[(---------- + 1) - 1]
cd

Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period.
d = the maximum offering price per share on the last day of
the period.

B. Calculation

172,479.68 - 38,284.40 6
YIELD = 2[(---------------------------------- + 1) -1]
3,599,684.552 x 10.67

YIELD = 4.23%

II. TAX-EQUIVALENT YIELD: 30 Days ended December 29, 1995

A. Formula

Tax-Equivalent Yield = YIELD (as defined above)
-------------------------------
100% - Stated Marginal Tax Rate

B. Calculation

4.23%/(1 - .31 tax rate*)

4.23%/.69 = 6.13%

*31% federal tax rate

III. AVERAGE ANNUAL COMPOUNDED RETURN

A. Formula

n _____
P (1 + T) = ERV or T = \n/ERV/P - 1

Where: 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.

B. Calculation
_____
T = \n/ERV/P - 1

1. One-year period 12-31-94 through 12-31-95
_____________
12.71% = \1/11,271/10,000 - 1

2. Since inception 11-25-91 through 12-31-95
_____________
8.37% = \4.10/13,901/10,000 - 1

IV. TOTAL RETURN

A. Formula

EV-IV
-----
IV = TR

Where: EV = Value at the end of the period, including reinvestment of all
dividends and capital gains distributions

IV = Initial value of a hypothetical investment at the net asset value

TR = Total Return

B. Calculation

EV-IV
-----
IV = TR

One-year period ended December 31, 1995

11,271 - 10,000
--------------- = 12.71%
10,000

<PAGE> 1
EXHIBIT 18

[GODFREY & KAHN, S.C. LETTERHEAD]

April 22, 1996

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: Strong Insured Municipal Bond Fund, Inc.

Gentlemen:

We represent Strong Insured Municipal Bond Fund, Inc. (the "Company"),
in connection with its filing of Post-Effective Amendment No. 7 (the
"Post-Effective Amendment") to the Company's Registration Statement
(Registration Nos. 33-42775; 811-6410) on Form N-1A under the Securities Act of
1933 (the "Securities Act") and the Investment Company Act of 1940. The
Post-Effective Amendment is being filed pursuant to Rule 485(b) under the
Securities Act.

We have reviewed the Post-Effective Amendment and, in accordance with
Rule 485(b)(4) under the Securities Act, hereby represent that the
Post-Effective Amendment does not contain disclosures which would render it
ineligible to become effective pursuant to Rule 485(b).

Very truly yours,

GODFREY & KAHN, S.C.

/s/ Scott A. Moehrke

Scott A. Moehrke

<ARTICLE> 6
<CIK> 0000879142
<NAME> STRONG INSURED MUNICIPAL BOND FUND, INC.
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<INVESTMENTS-AT-COST> 38269
<INVESTMENTS-AT-VALUE> 39351
<RECEIVABLES> 1011
<ASSETS-OTHER> 270
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40632
<PAYABLE-FOR-SECURITIES> 934
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 225
<TOTAL-LIABILITIES> 1159
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 41225
<SHARES-COMMON-STOCK> 3699
<SHARES-COMMON-PRIOR> 5009
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1066
<ACCUMULATED-NET-GAINS> (2834)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1082
<NET-ASSETS> 39473
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2351
<OTHER-INCOME> 0
<EXPENSES-NET> (413)
<NET-INVESTMENT-INCOME> 1938
<REALIZED-GAINS-CURRENT> 2301
<APPREC-INCREASE-CURRENT> 945
<NET-CHANGE-FROM-OPS> 5184
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1938
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 1066
<NUMBER-OF-SHARES-SOLD> 1106
<NUMBER-OF-SHARES-REDEEMED> (2624)
<SHARES-REINVESTED> 209
<NET-CHANGE-IN-ASSETS> (11551)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (4069)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 210
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 413
<AVERAGE-NET-ASSETS> 42184
<PER-SHARE-NAV-BEGIN> 10.19
<PER-SHARE-NII> 0.50
<PER-SHARE-GAIN-APPREC> 0.77
<PER-SHARE-DIVIDEND> (0.79)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.67
<EXPENSE-RATIO> 1.0
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>