STRONG DISCOVERY FUND II INC, 485APOS, 1995-02-24

STRONG DISCOVERY FUND II INC
485APOS, 1995-02-24

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<PAGE> 1

As filed with the Securities and Exchange Commission on or about
February 24, 1995

Securities Act Registration No. 33-45321
Investment Company Act Registration No. 811-6553

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. 6 [X]

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

STRONG DISCOVERY FUND II, 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, 1994 was filed on or about
January 27, 1995.

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

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[X] on May 1, 1995 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 DISCOVERY FUND II, 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
--------------------- -----------------------------------
<S> <C>
PART A - INFORMATION REQUIRED IN PROSPECTUS

1. Cover Page Cover Page

2. Synopsis Not Applicable

3. Condensed Financial Information Financial Highlights

4. General Description of Registrant The Fund; Investment Objective and Policies;
Implementation of Policies and Certain Risks;
Special Considerations; Additional Information

5. Management of the Fund Management, Additional Information

5A. Management's Discussion of Fund Performance *

6. Capital Stock and Other Securities Additional Information

7. Purchase of Securities Being Offered Additional Information

8. Redemption or Repurchase Additional Information

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 Shareholder; Directors and Officers of
the Fund; Investment Advisor and Distributor

16. Investment Advisory and Other Services Investment Advisor and Distributor; Management
(in Prospectus); Custodian; Transfer Agent and
Dividend-Disbursing Agent; Independent Accountants

17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage
</TABLE>
<PAGE> 3

19. Purchase, Redemption and Pricing of Securities Included in Prospectus under the headings:
Being Offered Additional Information; and in the Statement of
Additional Information under the headings: Shareholder
Services; Investment Advisor and Distributor; and
Determination of Net Asset Value

20. Tax Status Included in Prospectus under the heading Additional
Information; and Special Considerations; 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

Dated May 1, 1995

STRONG DISCOVERY FUND II, INC.

Strong Discovery Fund II (the "Fund") is a diversified open-end management
investment company, commonly called a mutual fund. This Fund is designed to
provide an investment vehicle for variable annuity and variable life insurance
contracts of certain insurance companies. The Fund seeks capital growth. The
Fund's Advisor seeks to identify emerging investment trends and attractive
growth opportunities. While the Fund normally emphasizes equity investments, it
also has the flexibility to invest in bonds and short-term fixed income
securities.

Shares of the Fund are only offered and sold to the separate accounts of
insurance companies for the purpose of funding variable annuity and variable
life insurance contracts. The Fund may not be available in certain states due
to insurance regulations. This Prospectus should be read together with the
prospectus of the separate account of the specific insurance product which
preceded or accompanies this Prospectus.

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.

This Prospectus contains information that you should consider before investing.
Please read it carefully and keep it for future reference. A Statement of
Additional Information for the Fund dated May 1, 1995, which contains further
information and is incorporated by reference into this Prospectus, has been
filed with the Securities and Exchange Commission ("SEC"). This Statement,
which may be revised from time to time, is available upon request and without
charge by writing to the Fund at P.O. Box 2936, Milwaukee, Wisconsin 53201.

<PAGE> 5

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE

<S> <C>
THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
INVESTMENT OBJECTIVE AND POLICIES . . . . . . . . . . . . . . . . . . . . . 0
IMPLEMENTATION OF POLICIES AND RISKS . . . . . . . . . . . . . . . . . . . 0
SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 0
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 0
</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 Fund.
This Prospectus does not constitute an offer to sell securities to any person
in any state or jurisdiction in which such offering may not lawfully be made.

<PAGE> 6
THE FUND

The Fund is a diversified, open-end management investment company. The Fund
offers and sells its shares only to separate accounts of insurance companies
for the purpose of funding variable annuity and variable life insurance
contracts. The Fund does not impose any sales or redemption charges. Strong
Capital Management, Inc. (the "Advisor") (formerly known as Strong/Corneliuson
Capital Management, Inc.) is the investment advisor for the Fund.

FINANCIAL HIGHLIGHTS
(for each share of the Fund outstanding throughout each period)

The following 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, 1994 is included in the Fund's Annual Report
that is contained in the Fund's Statement of Additional Information. The
Financial Highlights should be read in conjunction with the Financial
Statements and related notes included in the Fund's Annual Report. Additional
information about the performance of the Fund is contained in the Fund's Annual
Report, which may be obtained without charge by calling or writing Strong
Funds.

STRONG DISCOVERY FUND II

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994 1993 1992(1)
------ ------ ------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.15 $10.00

INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.05 0.04
Net Realized and Unrealized
Gains on Investments 2.09 0.78
--------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 2.14 0.82

LESS DISTRIBUTIONS
Dividends From Net Investment
Income (0.05) (0.04)
Distributions From Net Realized
Gains (0.70)(2) (0.63)(2)
---------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (0.75) (0.67)
- -------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.54 $10.15
===============================================================================
Total Return +22.0% +8.9%*
- ------------
Net Assets, End of Period (In Thousands) $71,938 $26,739
Ratio of Expenses to Average Net Assets 1.3% 1.7%**
Ratio of Net Investment Income to Average
Net Assets 0.5% 0.5%**
Portfolio Turnover Rate 976.5% 1,767.9%**
- -------------------------------------------------------------------------------
</TABLE>

(1) Date of Inception was May 8, 1992.

(2) Ordinary income distribution for tax purposes.

* Total Return is not annualized.
** Calculated on an annualized basis.

Please note that the total return shown in the financial highlights does not
reflect expenses that apply to the separate account or the related insurance
policies. Inclusion of these charges would reduce the total return for the
periods shown.

3
<PAGE> 7

INVESTMENT OBJECTIVE AND POLICIES

STRONG DISCOVERY FUND II seeks capital growth. The Fund invests in a
diversified portfolio of securities that the Advisor believes represent
attractive growth opportunities.

The Fund normally emphasizes equity securities, although it has the flexibility
to invest in any type of security that the Advisor believes has the potential
for capital appreciation. The Fund may invest up to 100% of its assets in
equity securities, including common stocks, preferred stocks, securities that
are convertible into common or preferred stocks, such as warrants and
convertible bonds. The Fund may also invest up to 100% of its assets in
intermediate- to long-term corporate or U.S. government debt securities.
Although the debt securities in which it invests will be primarily
investment-grade, the Fund may invest up to 5% of its total assets in
non-investment-grade debt securities. (See "Implementation of Policies and
Risks -- Debt Securities.") The Fund may invest up to 15% of its total assets
directly in the securities of foreign issuers and may also invest in foreign
securities in domestic markets through depositary receipts without regard to
this limitation. However, the Advisor currently intends to invest not more
than 25% of the Fund's total assets in foreign securities, including both
direct investments and investments made through depositary receipts. Please
see "Implementation of Policies and Risks--Foreign Securities and Currency" for
the special risks associated with foreign investments. 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.

Except as limited below, the Fund may invest in a diversified portfolio of
securities without regard to objective investment criteria, such as company
size, exchange listing, earnings history, or other factors. When selecting
securities, the Advisor will, except as otherwise limited below, be limited
only by its best judgment as to what will help achieve the Fund's investment
objective.

The Advisor seeks to uncover emerging investment trends and attractive growth
opportunities. In its search for potential investments, the Advisor attempts to
identify companies that are poised for accelerated earnings growth due to
innovative products or services, new management, or favorable economic or
market cycles. These companies may be small, unseasoned firms in the early
stages of development, or they may be mature organizations. (See
"Implementation of Policies and Risks -- Small Companies.") Whatever their
size, history, or industry, the Advisor believes their potential earnings
growth is not yet reflected in their market value and that, over time, the
market prices of these securities will move higher.

IMPLEMENTATION OF POLICIES AND RISKS

In addition to the Fund's investment policies described above (and subject to
certain restrictions described herein), the Fund may invest in some or all of
the following securities and employ some or all of the following investment
techniques, some of which may present special risks as described below.
Presently the Fund does not intend to engage in cross-trading. A more
complete discussion of these securities and investment techniques and their
associated risks is contained in the Fund's SAI.

The Fund has adopted certain fundamental investment restrictions that are set
forth in the Fund's Statement of Additional Information ("SAI"). Those
restrictions, the Fund's investment objective and any other investment policies
identified as "fundamental" in this

4
<PAGE> 8

prospectus or the SAI 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 throughout this
prospectus and in the SAI. Although these additional 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.

FOREIGN SECURITIES AND CURRENCIES

The Fund may invest in foreign securities. (See "Investment Objective and
Policies.") Foreign investments involve special risks including (i)
expropriation, confiscatory taxation and withholding taxes on dividends and
interest; (ii) less extensive regulation of foreign brokers, securities markets
and issuers; (iii) less publicly available information and different accounting
standards; (iv) costs incurred in conversions between currencies, possible
delays in settlement in foreign securities markets, limitations on the use or
transfer of assets (including suspension of the ability to transfer currency
from a given country), and difficulty of enforcing obligations in other
countries; and (v) diplomatic developments, and political or social
instability. Foreign economies may differ favorably or unfavorably from the
U.S. economy in various respects, including growth of gross domestic product,
rates of inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments positions. Many foreign securities
are less liquid and their prices more volatile than comparable U.S. securities.
Although the Fund generally invests only in securities that are regularly
traded on recognized exchanges or in over-the-counter markets, from time to
time foreign securities may be difficult to liquidate rapidly without adverse
price effects. Certain costs attributable to foreign investing, such as custody
charges and brokerage costs, are higher than those attributable to domestic
investing.

The investment performance of the Fund could be significantly affected by
changes in foreign currency exchange rates, because most foreign securities are
denominated in non-U.S. currencies. The value of a Fund's assets denominated in
foreign currencies will increase or decrease in response to fluctuations in the
value of those foreign currencies relative to the U.S. dollar. Currency
exchange rates can be volatile at times in response to supply and demand in the
currency exchange markets, international balances of payments, governmental
intervention, speculation, and other political and economic conditions. The
Funds may purchase and sell foreign currency on a spot basis and may engage in
forward currency contract, currency options, and futures transactions for
hedging or any other lawful purpose. (See "Derivative Instruments.")

DERIVATIVE INSTRUMENTS

Derivative transactions may be used by the Fund for any lawful purpose,
including hedging, risk management, or enhancing returns, but not for
speculation. Derivative instruments are securities or agreements whose value is
derived from the value of some underlying asset, including securities,
currencies, reference indexes, or commodities. Options, futures, and options on
futures transactions are considered derivative transactions. Derivative
instruments or agreements generally have characteristics similar to forward
contracts (under which one party is obligated to buy and the other party is
obligated to sell an underlying asset at a specific price on a specific date)
or option contracts (under which the holder of the option has the right but not
the obligation to buy or sell an underlying asset at a specified date).
Accordingly, the change in value of a forward-based derivative is generally
related to the change in value of the underlying asset. Option- based
derivative instruments generally will increase in value from favorable
fluctuations in the value of the underlying asset and decrease in value from
unfavorable fluctuations in the value of the underlying asset. Derivative
transactions may include elements of leverage and, accordingly, the fluctuation
of the value of the derivative

5
<PAGE> 9

transaction in relation to the underlying asset may be magnified. The purchaser
of an option-based derivative will generally pay a premium in connection with
entering into such position and the seller of an option-based derivative will
generally receive a premium in connection with such position. In addition to
options, futures, and options on futures transactions, derivative transactions
may include short sales against the box, in which the Fund sells a security it
owns for delivery at a future date; swaps, in which the two parties agree to
exchange a series of cash flows in the future, such as interest rate payments;
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" and 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". Derivative transactions may
also include forward currency contracts and foreign currency exchange-related
securities.

Derivative transactions may be exchange traded or over-the-counter transactions
between private parties. Over-the-counter transactions are subject to 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. When required by the SEC, the Fund will set
aside permissible liquid assets in a segregated account to secure its
obligations under derivative transactions. In order to maintain its required
cover for a derivative transaction, 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 derivative transactions by the Fund is dependent upon the
Advisor's ability to correctly anticipate trends in the underlying asset. To
the extent that the Fund is engaging in derivative transactions other than for
hedging purposes, 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 the Fund. Hedging transactions are also
subject to risks. If the Advisor incorrectly anticipates trends in the
underlying asset, the Fund may be in a worse position than if no hedging had
occurred. In addition, there may be imperfect correlation between the Fund's
derivative transactions and the instruments being hedged.

In connection with its futures and options on futures transactions, the Fund is
subject to certain restrictions on such transactions under the Commodity
Exchange Act and, accordingly, will use futures and options on futures
transactions solely for bona fide hedging transactions (within the meaning of
the Commodity Exchange Act). However, 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, the Fund follows certain other restrictions concerning its
options, futures, and options on futures transactions and, accordingly, (i) the
aggregate value of securities that underlie call options on securities written
by the Fund or obligations that underlie 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.

6
<PAGE> 10

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

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

DEBT SECURITIES
Debt securities in which the Fund will invest will primarily be investment
grade debt securities, although the Fund may invest up to 5% of its assets in
non-investment grade debt securities. Investment grade debt securities include
(i) bonds rated in one of the four highest rating categories of any nationally
recognized statistical rating organization or "NRSRO" (e.g., BBB or higher by
Standard & Poor's Ratings Group or "S&P"); (ii) U.S. government securities (as
defined below); (iii) commercial paper rated in one of the three highest
ratings categories of any NRSRO (e.g., A-3 or higher by S&P); (iv) bank
obligations (certificates of deposit, banker's acceptances, and time deposits)
with a long-term rating in one of the four highest categories by any NRSRO
(e.g., BBB or higher by S&P) or in one of the three highest categories by any
NRSRO (e.g., A-3 or higher by S&P), with respect to obligations maturing in one
year or less; (v) repurchase agreements involving these securities; or (vi)
unrated debt securities which are deemed by the Advisor to be of comparable
quality. All ratings are determined at the time of investment. Securities rated
in the fourth highest category, although considered investment grade, have
speculative characteristics and may be subject to greater fluctuations in value
than higher-rated securities. Non-investment grade debt securities include (i)
securities rated as low as C by S&P or their equivalents; (ii) commercial paper
rated as low as A-3 by S&P or their equivalents; and (iii) unrated debt
securities judged to be of comparable quality by the Advisor. See the SAI for
additional information regarding debt securities.

U.S. government securities include securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities and are obligations supported
by the full faith and credit of the U.S., such as U.S. Treasury obligations and
the obligations of certain agencies, including the Government National Mortgage
Association, and securities that are backed only by (i) the right of the issuer
to borrow from the U.S.

7
<PAGE> 11

Treasury, such as the Federal Home Loan Bank; (ii) the discretionary authority
of the U.S. government to purchase such securities, such as the Federal
National Mortgage Association; or (iii) the credit of the agency or
instrumentality itself, such as the Student Loan Marketing Association. While
the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it always will do so. The U.S. government, its agencies, and
instrumentalities do not guarantee the market value of their securities and
consequently, the value of such securities may fluctuate.

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
investments. The turnover rate may vary from year to year, as well as within a
year. It may also be affected by sales of 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 transaction costs. The
Fund may engage in substantial short-term trading and its annual portfolio
turnover rate may be in excess of 400%. Short-term trading involves substantial
risks and may be considered speculative.

SPECIAL CONSIDERATIONS

The Fund is designed as an investment vehicle for variable annuity and variable
life insurance contracts of certain insurance companies. Section 817(h) of the
Internal Revenue Code (the "Code") imposes certain diversification standards on
the underlying assets of variable contracts held in the Fund. The Code provides
that a variable contract shall not be treated as an annuity contract for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the Treasury Department, adequately
diversified. Disqualification of the variable contract as an annuity contract
would result in imposition of federal income tax on contract owners with
respect to earnings allocable to the variable contract prior to the receipt of
payments under the variable contract. Section 817(h)(2) of the Code is a safe
harbor provision which provides that contracts such as the variable contracts
meet the diversification requirements if, as of the close of each quarter, the
underlying assets meet the diversification standards for a regulated investment
company and no more than 55% of the total assets consists of cash, cash items,
U.S. government securities, and securities of other regulated investment
companies.

The Treasury Department has issued Regulations (Treas. Reg. Section 1.817-5)
that establish diversification requirements for the investment portfolios
underlying variable contracts. The Regulations amplify the diversification
requirements for variable contracts set forth in Section 817(h) of the Code and
provide an alternative to the safe harbor provision described above. Under the
Regulations, an investment portfolio will be deemed adequately diversified if
(i) no more than 55% of the value of the total assets of the portfolio is
represented by any one investment; (ii) no more than 70% of such value is
represented by any two investments; (iii) no more than 80% of such value is
represented by any three investments; and (iv) no more than 90% of such value
is represented by any four investments. For purposes of these Regulations all
securities of the same issuer are treated as a single investment, but each U.S.
government agency or instrumentality shall be treated as a separate issuer.

The Fund will be managed in such a manner as to comply with these
diversification requirements. It is possible that in order to comply with the
diversification requirements, less desirable investment decisions may be made
which would affect the investment performance of the Fund.

8
<PAGE> 12

The Fund may sell its shares to the separate accounts of various insurance
companies for the purpose of funding variable annuity and variable life
insurance contracts. The Fund currently does not foresee any disadvantages to
variable annuity and variable life contract owners arising out of the fact that
the Fund offers its shares to separate accounts of various insurance companies
to serve as the investment medium for their variable products. The Board of
Directors of the Fund, however, will monitor events in order to identify any
material irreconcilable conflicts which may possibly arise, and to determine
what action, if any, should be taken in response to such conflicts. If such a
conflict were to occur, one or more insurance companies' separate accounts
might be required to withdraw its investments in the Fund, and shares of
another fund may be substituted. This might force the Fund to sell securities
at disadvantageous prices. In addition, the Board of Directors of the Fund may
refuse to sell shares of the Fund to any separate account or may suspend or
terminate the offering of shares of the Fund if such action is required by law
or regulatory authority or is in the best interest of the shareholders of 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 (an
"Advisory Agreement") with the Advisor. Under the terms of the Advisory
Agreement, the Advisor manages the Fund's investments and business affairs,
subject to the supervision of the Board of Directors.

The Advisor began conducting business in 1974. Since then, its principal
business has been providing continuous investment supervision for mutual funds,
individuals, and institutional accounts, such as pension funds and
profit-sharing plans. As of March 31, 1995, the Advisor had approximately $11
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 advisory
fee. The annual fee is 1.00% of the average daily net asset value of the Fund.
Under the terms of the Advisory Agreement, the Advisor provides office space
and all necessary office facilities, equipment, and personnel for servicing the
investments of the Fund. From time to time, the Advisor may voluntarily waive
all or a portion of its management fee and/or absorb certain expenses for the
Fund without further notification of the commencement or termination of any
such waiver or absorption. Any such waiver or absorption will have the effect
of lowering the overall expense ratio of the Fund and increasing the Fund's
yield to investors at the time such amounts were waived and/or absorbed.

PORTFOLIO MANAGER. Mr. Richard S. Strong founded the Advisor in 1974. He began
his investment career at Employers Insurance of Wausau in 1966, after receiving
his master's degree in finance from the University of Wisconsin-Madison that
January. He received his undergraduate degree in 1963 from Baldwin-Wallace
College. Mr. Strong has managed the Discovery Fund II since its inception in
May 1992. In addition to his role as a portfolio manager, he is currently the
Chairman of the Board, Director, Chief Investment Officer, and Member of the
Advisor's Executive Committee.

ADDITIONAL INFORMATION

9
<PAGE> 13

HOW TO INVEST. Investments in the Fund may only be made by separate accounts
established and maintained by insurance companies for purposes of funding
variable annuity and variable life insurance contracts. For instructions on how
to direct a separate account to purchase shares, please refer to the prospectus
of the insurance company's separate account. The Fund does not impose any sales
charge or 12b-1 fee. Certain sales charges may apply to the variable annuity or
variable life insurance contract, which should be described in the prospectus
of the insurance company's separate account. The Fund may decline to accept a
purchase order upon receipt when, in the judgment of the Advisor, it would not
be in the best interest of the existing shareholders to accept the order.
Shares of the Fund will be sold at the net asset value next determined after
receipt by the Fund of a purchase order in proper form. Certificates for shares
in the Fund will only be issued upon written request by the separate account.

CALCULATION OF NET ASSET VALUE. The net asset value per share for the Fund is
determined as of the close of trading on the New York Stock Exchange (the
"Exchange"), currently 3:00 p.m. Central Time, on days the Exchange is open for
business. The net asset value will not be determined for the Fund on days
during which the Fund receives no orders to purchase shares and no shares are
tendered for redemption. Net asset value is calculated by taking the fair value
of the Fund's total assets, subtracting all liabilities, and dividing by the
total number of outstanding shares. Expenses are accrued and applied daily when
determining the net asset value. The Fund's securities are valued based on
market quotations or at fair value as determined by the method selected by the
Board of Directors. Equity securities traded on a national securities exchange
or NASDAQ are valued at the last sales price on the national securities
exchange or NASDAQ on which such securities are primarily traded. Securities
traded on NASDAQ for which there were no transactions on a given day or
securities not listed on an exchange or NASDAQ are valued at the average of the
most recent bid and asked prices. Other exchange-traded securities (generally
foreign securities), will be valued based on market quotations. Debt securities
are valued on the basis of valuations furnished by a pricing service that
utilizes electronic data processing techniques to determine valuations for
normal institutional-sized trading units of debt securities without regard to
sale or bid prices when such valuations are believed to more accurately reflect
the fair market value for such securities. Otherwise, sale or bid prices are
used. Any securities or other assets for which market quotations are not
readily available are valued at fair value as determined in good faith by the
Board of Directors. Debt securities of the Fund having remaining maturities of
60 days or less when purchased are valued by the amortized cost method when the
fair value of such securities is their amortized cost. This involves valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
rates on the market value of the instrument.

HOW TO REDEEM SHARES. Shares of the Fund may be redeemed on any business day.
The price received upon redemption will be the net asset value next determined
after the redemption request in proper form is received by the Fund. (See
"Calculation of Net Asset Value.") Contract owners should refer to the
withdrawal or surrender instructions in the prospectus of the separate account
for instructions on how to redeem shares. Once the redemption request is
received in proper form, the Fund will ordinarily forward payment to the
separate account no later than seven days after receipt.

The right of redemption may be suspended during any period when: (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

10
<PAGE> 14

emergency, as determined by the SEC, exists which makes disposal of portfolio
securities or valuation of net assets of the Fund not reasonably practicable.

DISTRIBUTIONS AND TAXES. The Fund intends to continue to qualify for treatment
as a "regulated investment company" under the Code and intends to take all
other action required to ensure that no federal income taxes will be payable by
the Fund. If the Fund does not so qualify, however, it would be treated for tax
purposes as an ordinary corporation and would receive no tax deduction for
payments made to shareholders of the Fund. For a discussion of the tax status
of variable contracts, refer to the prospectus of the insurance company's
separate account.

The Fund will pay dividend distributions of net investment income quarterly,
and capital gains annually, after using any available capital loss carryovers.
All dividends and capital gains distributions will be automatically reinvested
in additional shares.

This section is not intended to be a full discussion of present or proposed
federal income tax law and its effect on investors. Investors are urged to
consult their own tax advisor.

ORGANIZATION. 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 Funds has one vote, and all shares participate equally
in dividends and other capital gains distributions by the respective Fund and
in the residual assets of the respective Fund in the event of liquidation.
Certificates will be issued for shares held only upon written request of the
separate account. You will, however, have full shareholder rights whether or
not you request certificates. Generally, the Funds will not hold an annual
meeting of shareholders unless required by the 1940 Act. Shareholders have
certain rights, including the right to call a meeting upon a vote of 10% of a
Fund's outstanding shares for the purpose of voting to remove one or more
directors or to transact any other business. The 1940 Act requires each Fund to
assist the shareholders in calling such a meeting.

The insurance company separate accounts, as the record shareholders in the
Fund, have the right to vote on matters submitted for a shareholder vote. Under
current interpretations of the 1940 Act, these insurance companies must solicit
voting instructions from contract owners and vote Fund shares in accordance
with the instructions received or, for Fund shares for which no voting
instructions were received, in the same proportion as those Fund shares for
which instructions were received. Contract owners should refer to the
prospectus of the insurance company's separate account for a complete
description of their voting rights.

TRANSFER AND DIVIDEND-DISBURSING AGENT. The Advisor, P.O. Box 2936, Milwaukee,
Wisconsin 53201, acts as dividend-disbursing agent and transfer agent for the
Fund. The Advisor is compensated for its services based on an annual fee 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 Agreement. Strong Funds Distributors, Inc., an
indirect subsidiary of the Advisor, acts as distributor of the shares of the
Fund. Certain administrative services normally performed by the Fund or the
Advisor may be performed by the insurance companies offering the Fund's shares,
and the Fund may pay them for such services.

PERFORMANCE INFORMATION. Each Fund may advertise "average annual total return,"
"total return," and "cumulative total return." Each of these figures is based
upon historical results and is not necessarily representative of the future
performance of a

11
<PAGE> 15

Fund. Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund assuming
the reinvestment of all dividends and distributions. Total return figures are
not annualized and simply represent the aggregate change of a Fund's
investments over a specified period of time.

The Fund's shares are sold at the net asset value per share of the Fund.
Returns and net asset value will fluctuate. Shares of the Fund are redeemable
by the separate accounts of insurance companies at the then current net asset
value per share for the Fund, which may be more or less than the original cost.
TOTAL RETURNS CONTAINED IN ADVERTISEMENTS INCLUDE THE EFFECT OF DEDUCTING THE
FUND'S EXPENSES, BUT MAY NOT INCLUDE CHARGES AND EXPENSES ATTRIBUTABLE TO ANY
PARTICULAR INSURANCE PRODUCT. SINCE SHARES MAY ONLY BE PURCHASED BY THE
SEPARATE ACCOUNTS OF CERTAIN INSURANCE COMPANIES, CONTRACT OWNERS SHOULD
CAREFULLY REVIEW THE PROSPECTUS OF THE SEPARATE ACCOUNT FOR INFORMATION ON FEES
AND EXPENSES. Excluding such fees and expenses from the Fund's total return
quotations has the effect of increasing the performance quoted. Additional
information concerning the Fund's performance appears in the Statement of
Additional Information for the Fund.

12
<PAGE> 16

CUSTODIAN
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201

AUDITORS
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202

LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202

INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
(414) 359-1400

DISTRIBUTOR
Strong Funds Distributors, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201

13
<PAGE> 17

STATEMENT OF ADDITIONAL INFORMATION

STRONG DISCOVERY FUND II, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: 1-414-359-1400
Toll-Free: 1-800-368-3863

Strong Discovery Fund II (the "Fund") is a separately incorporated,
diversified open-end management investment company designed to provide an
investment vehicle for variable annuity and variable life insurance contracts
of certain insurance companies. Shares in the Fund are only offered and sold
to the separate accounts of such insurance companies. The Fund is described
herein and in the Prospectus for the Fund dated May 1, 1995.

This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Prospectus for the Fund dated May 1,
1995 and the prospectus for the separate account of the specific insurance
product. Requests for copies of the Fund's Prospectus may be made by writing
to the Fund, P.O. Box 2936, Milwaukee, Wisconsin 53201, Attention: Corporate
Secretary; or 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, 1995.

<PAGE> 18

STRONG DISCOVERY FUND II, INC.

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
----
<S> <C>
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
INVESTMENT POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Short Sales Against the Box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Fixed-Income Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
High Yield, High Risk Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Zero-Coupon, Step-Coupon and Pay-in-Kind Securities . . . . . . . . . . . . . . . . . . . . . . 0
Mortgage- and Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
When-Issued Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
European and American Depository Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Foreign Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Mortgage Dollar Rolls and Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . 0
DIRECTORS AND OFFICERS OF THE FUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
INVESTMENT ADVISOR AND DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
SHAREHOLDER SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
FUND ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
PORTFOLIO MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
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, 1995 and, if given or made, such
information or representations may not be relied upon as having been authorized
by the Fund.

This Statement of Additional Information does not constitute an offer to sell
securities.

2
<PAGE> 19

INVESTMENT RESTRICTIONS

The investment objective of the Fund is to seek capital growth. The
Fund's investment objective 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 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
Investment Company Act of 1940.

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)
purchase 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.

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.

3
<PAGE> 20
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 SEC 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 credit as are necessary for the clearance of transactions;
and provided that margin deposits in connection with futures
contracts, options on futures contracts, or other derivative
instruments shall not constitute purchasing securities on margin.

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

4. Purchase securities of other investment companies except in compliance
with the Investment Company Act of 1940 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 of 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.

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 the New York Stock

4
<PAGE> 21

Exchange or the American 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.

If a percentage restriction relating to a fundamental or
non-fundamental limitation is adhered to at the time of investment, a later
increase in percentage resulting from a change in market value of the
investment or the total assets will not constitute a violation of that
restriction. 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 a Fund's Board of Directors.

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Fund's
investment objective, policies, and techniques that are described in detail in
the Prospectus under the captions "INVESTMENT OBJECTIVE AND POLICIES" and
"IMPLEMENTATION OF POLICIES AND RISKS".

DERIVATIVE INSTRUMENTS

GENERAL DESCRIPTION. As discussed in the Prospectus, the Advisor may
use a variety of derivative instruments, including options, futures contracts
(sometimes referred to as "futures"), options on futures contracts, and forward
currency contracts for any lawful purpose, such as to hedge the Fund's
portfolio, risk management, or to attempt to enhance returns.

The use of these instruments is subject to applicable regulations of
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 these
instruments will be limited by tax considerations.

In addition to the products, strategies and risks described below and
in the Prospectus, the Advisor expects to discover additional derivative
instruments and other hedging techniques. These new opportunities may become
available as the Advisor develops new techniques or as regulatory authorities
broaden the range of permitted transactions. The Advisor may utilize these
opportunities to the extent that they are consistent with the Fund's investment
objective and permitted by the Fund's investment limitations and applicable
regulatory authorities.

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

(1) Successful use of most of these instruments depends upon the
Advisor's ability to predict movements of the overall securities and currency
markets, which requires different skills than predicting changes in the prices
of individual securities. While the Advisor is experienced in the use of these
instruments, there can be no assurance that any particular strategy adopted
will succeed.

(2) 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 an instrument 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 investment,
the hedge would not be fully successful. 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 on the degree of correlation between price movements in the
index and price movements in the investments being hedged.

5
<PAGE> 22

(3) Hedging strategies, if successful, can reduce 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 opportunity for gain by offsetting the positive effect of favorable
price movements in the hedged investments. For example, if a Fund entered into
a short hedge because the Advisor projected a decline in the price of a
security in the Fund's portfolio, and the price of that security increased
instead, the gain from that increase might be wholly or partially offset by a
decline in the price of the instrument. Moreover, if the price of the
instrument declined by more than the increase in the price of the security, the
Fund could suffer a loss.

(4) As described below, the Fund might be required to maintain assets
as "cover," maintain segregated accounts, or make margin payments when it takes
positions in these instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If the Fund were 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 or matured. 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 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 other party to the transaction ("counter party") to enter
into a transaction closing out the position. Therefore, there is no assurance
that any hedging position can be closed out at a time and price that is
favorable to the Fund.

For a discussion of the federal income tax treatment of the Fund's
derivative instruments, see "TAXES -- Derivative Instruments" below.

GENERAL LIMITATIONS ON CERTAIN DERIVATIVE TRANSACTIONS. 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. Pursuant to Rule 4.5 of the
regulations under the Commodity Exchange Act (the "CEA"), the notice of
eligibility includes representations that the Fund will use futures contracts,
options on futures contracts, and options on foreign currencies trading on a
commodities exchange only for bona fide hedging purposes within the meaning of
CFTC regulations, provided that a Fund may hold other positions in futures
contracts, options on futures contracts, and options on foreign currencies
trading on a commodities exchange 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 options positions
are "in the money," do not exceed 5% of the Fund's net assets. Adoption of
these guidelines does not limit the percentage of the Fund's assets at risk to
5%. The Fund may purchase a put or call option, including any straddles or
spreads, only if the value of its premium, when aggregated with the premiums on
all other options purchased by the Fund, does not exceed 5% of the Fund's total
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.

The foregoing limitations are not fundamental policies of the Fund and
may be changed by the Fund's Board of Directors without shareholder approval as
regulatory agencies permit.

Transactions using options (other than purchased options) and forward
currency contracts, expose the Fund to counter-party risk. To the extent
required by SEC guidelines, the Fund will not enter into any such transactions
unless it owns either (1) an offsetting ("covered") position in securities,
currencies, or other options, futures, or forward currency contracts or (2)
cash and liquid high grade debt securities with a value sufficient at all times
to cover its potential obligations to the extent not covered as provided in (1)
above. 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 position in the corresponding option, futures contract, or
forward currency contract is open, unless they are replaced with similar
assets. As a result, the commitment of a large portion of the Fund's assets to
cover or segregated accounts could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.

6
<PAGE> 23

OPTIONS. The Fund may purchase and write put and call options on
securities, on indices of debt and equity securities and on foreign currencies.
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 OTC debt and foreign currency
options used by the Fund may include European-style options. This means that
the option is only exercisable at its expiration. This is in contrast to
American-style options which are exercisable at any time prior to the
expiration date of the option. Options that expire unexercised have no value.

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
action. 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 actions permit the Fund to realize the
profit or limit the loss on an option position prior to its exercise or
expiration.

The Fund may purchase or write both exchange-traded and OTC options.
Exchange-traded options in the United States 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 action. OTC
options are contracts between the Fund and the other party to the action
("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 Funds will in fact be able to close out an OTC
option at a favorable price prior to expiration. In the event of insolvency of
the counter party, a Fund might be unable to close out an OTC option position
at any time prior to its expiration.

If 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 inability to enter into a closing purchase transaction for a covered call
option written by the Fund could cause material losses because the Fund would
be unable to sell the investment used as cover for the written option until the
option expires or is exercised.

The Fund may purchase and write put and call options on indices of
debt and equity securities in much the same manner as the more traditional
options discussed above, except the index options may serve as a hedge against
overall fluctuations

7
<PAGE> 24

in the debt or equity securities market (or market sectors) rather than
anticipated increases or decreases in the value of a particular security.

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 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 enter into interest rate, securities
index, and foreign currency futures contracts (hereinafter referred to as
"futures" or "futures contracts"). 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's futures transactions may be entered into for any
lawful purpose such as hedging purposes, risk management, or to enhance
returns. 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 equity market movements, interest rate
fluctuations, and movements in the values of foreign currencies in which the
Fund's portfolio securities are denominated, the Fund may be able to hedge its
exposure more effectively and perhaps at a lower cost through using futures
contracts.

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 (debt security) 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. A foreign currency contract is a bilateral agreement
pursuant to which one party agrees to make and the other party agrees to accept
delivery of a specified type of currency at a specified future time and at a
specified price. 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.

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<PAGE> 25

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
securities, in an amount generally equal to 10% or less of the contract value.
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 a Fund
purchases or sells a futures contract or writes a call or put option thereon,
it is subject to daily variation margin calls that could be substantial in the
event of adverse price movements. If 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 actions 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 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 market are less onerous than margin requirements in
the securities markets, there might be increased participation by speculators
in the future markets. This participation also might cause temporary price
distortions. In addition, activities of large traders in both the futures and
securities markets involving arbitrage, "program trading" and other investment
strategies might result in temporary price distortions.

FOREIGN CURRENCY-RELATED DERIVATIVE STRATEGIES-SPECIAL CONSIDERATIONS.
The Fund may also use options and futures on foreign currencies, as described
above, and forward currency contracts, as described below, to hedge against
movements in the values of the foreign currencies in which the Fund's
securities are denominated. The Fund may utilize foreign currency-related
derivative instruments for any lawful purposes such as for bona fide hedging or
to seek to enhance returns through exposure to a particular foreign currency.
Such currency hedges can protect against price movements in a security the Fund
owns or intends to acquire that are attributable to changes in the value of the
currency in which it is denominated. Such hedges do not, however, protect
against price movements in the securities that are attributable to other
causes.

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<PAGE> 26

The Fund might seek to hedge against changes in the value of a
particular currency when no hedging instruments on that currency are available
or such hedging instruments are more expensive than certain other hedging
instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using hedging instruments on another
foreign currency or a basket of currencies, the values of which the Advisor
believes will have a high degree of positive correlation to the value of the
currency being hedged. The risk that movements in the price of the hedging
instrument will not correlate perfectly with movements in the price of the
currency being hedged is magnified when this strategy is used.

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

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

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

Permissible foreign currency options will include options traded
primarily in the over-the-counter ("OTC") market. Although options on foreign
currencies are traded primarily in the OTC market, the Fund will normally
purchase OTC options on foreign currency only when the Advisor believes a
liquid secondary market will exist for a particular option at any specific
time.

FORWARD CURRENCY CONTRACTS. A forward currency contract involves an
obligation to purchase or sell a specific currency at a specified future date,
which may be any fixed number of days from the contract date agreed upon by the
parties, at a price set at the time the contract is entered into.

The Fund may enter into forward currency contracts to purchase or sell
foreign currencies for a fixed amount of U.S. dollars or another foreign
currency for any lawful purpose. Such transactions may serve as long hedges --
for example, the Fund may purchase a forward currency contract to lock in the
U.S. dollar price of a security denominated in a foreign currency that the Fund
intends to acquire. Forward currency contracts may also serve as short hedges
- -- for example, the Fund may sell a forward currency contract to lock in the
U.S. dollar equivalent of the proceeds from the anticipated sale of a security
denominated in a foreign currency.

As noted above, the Fund may seek to hedge against changes in the
value of a particular currency by using forward contracts on another foreign
currency or a basket of currencies, the value of which the Advisor believes
will have a positive correlation to the values of the currency being hedged.
In addition, the Fund may use forward currency contracts to shift exposure to
foreign currency fluctuations from one country to another. For example, if the
Fund owns securities denominated in a foreign currency and the Advisor believes
that currency will decline relative to another currency, it might enter into a
forward contract to sell an appropriate amount of the first foreign currency,
with payment to be made in the second foreign currency. Transactions that use
two foreign currencies are sometimes referred to as "cross hedges." Use of
different foreign currency magnifies the risk that movements in the price of
the instrument will not correlate or will correlate unfavorably with the
foreign currency being hedged.

The cost to the Fund of engaging in forward currency contracts varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered

10
<PAGE> 27

into on a principal basis, no fees or commissions are involved. When the Fund
enters into a forward currency contract, it relies on the counter party to make
or take delivery of the underlying currency at the maturity of the contract.
Failure by the counter party to do so would result in the loss of any expected
benefit of the transaction.

As is the case with futures contracts, purchasers and sellers of
forward currency contracts can enter into offsetting closing transactions,
similar to closing transactions on futures, by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing actions generally can be made for forward currency
contracts only by negotiating directly with the counter party. Thus, there can
be no assurance that the Fund will in fact be able to close out a forward
currency contract at a favorable price prior to maturity. In addition, in the
event of insolvency of the counter party, the Fund might be unable to close out
a forward currency contract at any time prior to maturity. In either event,
the Fund would continue to be subject to market risk with respect to the
position, and would continue to be required to maintain a position in
securities denominated in the foreign currency or to maintain cash or
securities in a segregated account.

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

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.

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. [However, the Fund does not presently intend to engage in such
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 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.

WARRANTS

The Fund may acquire warrants. Warrants are securities giving the
holder the right, but not the obligation, to buy the stock of an issuer at a
given price (generally higher than the value of the stock at the time of
issuance) during a specified period or perpetually. Warrants may be acquired
separately or in connection with the acquisition of securities. The Fund will
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 the New York Stock
Exchange or the American Stock Exchange. Warrants acquired by the Fund in
units or attached to securities are not subject to these restrictions.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date.

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<PAGE> 28

FIXED-INCOME SECURITIES

The Fund may invest a portion of its assets in fixed-income
securities. Issuers of fixed-income securities have a contractual obligation
to pay interest at a specified rate on specified dates and to repay principal
on a specified maturity date. Certain fixed-income securities (usually
intermediate- and long-term bonds) have provisions that allow the issuer to
redeem or "call" a bond before its maturity. Issuers are most likely to call
such securities during periods of falling interest rates.

PRICE VOLATILITY. The market value of debt 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 security. 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 securities 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 Securities"
presents the ratings of three well-known such organizations: Moody's Investors
Services, Inc., Standard & Poor's Ratings Group, and Fitch Investors Service,
Inc.

HIGH YIELD, HIGH RISK SECURITIES

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

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

All interest-bearing securities typically experience appreciation when
interest rates decline and depreciation when interest rates rise. The market
values of lower-quality and comparable unrated securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Lower-quality and comparable unrated securities also tend to be
more sensitive to economic conditions than are higher-rated securities. As a
result, they generally involve more credit risks than securities in the
higher-rated categories. During an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower-quality and comparable

12
<PAGE> 29

unrated securities may experience financial stress and may not have sufficient
revenues to meet their payment obligations. The issuer's ability to service
its debt obligations may also be adversely affected by specific corporate
developments, the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due
to default by an issuer of these securities is significantly greater than
issuers of higher-rated securities because such securities are generally
unsecured and are often subordinated to other creditors. Further, if the
issuer of a lower-quality or comparable unrated security defaulted, a Fund
might incur additional expenses to seek recovery. Periods of economic
uncertainty and changes would also generally result in increased volatility in
the market prices of these securities and thus in the Fund's net asset value.

As previously stated, the value of a lower-quality or comparable
unrated security will decrease in a rising interest rate market, and
accordingly so will the Fund's net asset value. If the Fund experiences
unexpected net redemptions in such a market, it may be forced to liquidate a
portion of its portfolio securities without regard to their investment merits.
Due to the limited liquidity of lower-quality and comparable unrated securities
(discussed below), the Fund may be forced to liquidate these securities at a
substantial discount. Any such liquidation would reduce the Fund's asset base
over which expenses could be allocated and could result in a reduced rate of
return for the Fund.

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

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

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

NEW AND PROPOSED LEGISLATION. Recent legislation has been adopted,
and from time to time, proposals have been discussed, regarding new legislation
designed to limit the use of certain lower-quality and comparable unrated
securities by certain issuers. An example of legislation is a recent law which
requires federally insured savings and loan associations to divest their
investments in these securities over time. It is not currently possible to
determine the impact of the recent legislation or

13
<PAGE> 30

the proposed legislation on the lower-quality and comparable unrated securities
market. However, it is anticipated that if additional legislation is enacted
or proposed, it could have a material affect on the value of these securities
and the existence of a secondary trading market for the securities.

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
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
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
certain pay-in-kind securities to report as interest each year the portion of
the original discount (or deemed discount) on such securities accruing that
year. In order to qualify as a "regulated investment company" under the Code,
the Fund may be required to distribute a portion of such discount 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.

MORTGAGE- AND ASSET-BACKED SECURITIES

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

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein, but include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property, and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal
and interest on asset-backed securities may be supported by non-governmental
credit enhancements similar to those utilized in connection with
mortgage-backed securities.

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

The Fund may invest in stripped mortgage- or asset-backed securities,
which receive differing proportions of the interest and principal payments from
the underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases such
market value may be extremely volatile. With respect to certain stripped
securities, such as interest only ("IO") and principal only ("PO") classes, a
rate of prepayment that is faster or slower than anticipated may result in the
Fund failing to recover all or a portion of its investment, even though the
securities are rated investment grade.

14
<PAGE> 31

WHEN-ISSUED SECURITIES

The Fund may from time to time purchase securities on a "when-issued"
basis. The price of debt securities purchased on a when-issued basis, which
may be expressed in yield terms, 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. During the period between the purchase and settlement, no payment is
made by the Fund to the issuer and no interest on debt securities 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. The Fund does not believe that its net asset value or income
will be adversely affected by its purchases of securities on a when-issued
basis.

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).

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
Investment Company Act). The Board of Directors, 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"), including securities that may be resold pursuant to Rule 144A under the
Securities Act, may be considered liquid. The Board of Directors 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. Although no definitive liquidity
criteria are used, the Board of Directors has directed the Advisor to look to
such factors as (i) the nature of the market for a security (including the
institutional private resale market), (ii) the terms of certain securities or
other instruments allowing for the disposition to a third party or the issuer
thereof (e.g., certain repurchase obligations and demand instruments), (iii)
the availability of market quotations (e.g., for securities quoted in PORTAL
system), and (iv) other permissible 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. Restricted securities will be priced at
fair value as determined in good faith by the Board of Directors. 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 assets, including restricted
securities which are not readily marketable, 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 of 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.

EUROPEAN AND AMERICAN DEPOSITORY RECEIPTS

15
<PAGE> 32

The Fund may invest in foreign securities by purchasing American
Depository Receipts ("ADRs"). The Fund also may purchase securities of foreign
issuers in foreign markets and purchase European Depository Receipts ("EDRs")
or other securities convertible into securities or issuers based in foreign
countries. These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. Generally, ADRs,
in registered form, are denominated in U.S. dollars and are designed for use in
the U.S. securities markets, while EDRs, in bearer form, may be denominated in
other currencies and are designed for use in European securities markets. ADRs
are receipts typically issued by a U.S. Bank or trust company evidencing
ownership of the underlying securities. EDRs are European receipts evidencing
a similar arrangement. For purposes of the Fund's investment policies, ADRs
and EDRs are deemed to have the same classification as the underlying
securities they represent. Thus, an ADR or EDR representing ownership of
common stock will be treated as common stock.

ADR facilities may be established as either "unsponsored" or
"sponsored." While ADRs issued under these two types of facilities are in some
respects similar, there are distinctions between them relating to the rights
and obligations of ADR holders and the practices of market participant. A
depository may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depository requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depository usually
charges fees upon the deposit and withdrawal of the deposited securities, the
conversion of dividends into U.S. dollars, the disposition of non-cash
distribution, and the performance of other services. The depository of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited securities
or to pass through voting rights to ADR holders in respect of the deposited
securities. Sponsored ADR facilities are created in generally the same manner
as unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depository. The deposit agreement
sets out the rights and responsibilities of the issuer, the depository and the
ADR holders. With sponsored facilities, the issuer of the deposited securities
generally will bear some of the costs relating to the facility (such as
dividend payment fees of the depository), although ADR holders continue to bear
certain other costs (such as deposit and withdrawal fees). Under the terms of
most sponsored arrangements, depositories agree to distribute notices of
shareholder meetings and voting instructions, and to provide shareholder
communications and other information to the ADR holders at the request of the
issuer of the deposited securities.

FOREIGN INVESTMENT COMPANIES

Some of the countries in which the Fund invests may not permit direct
investment by outside investors. Investments in such countries may only be
permitted through foreign government-approved or -authorized investment
vehicles, which may include other investment companies. Investing through such
vehicles may involve frequent or layered fees or expenses and may also be
subject to limitation under the Investment Company Act. Under the Investment
Company Act, a Fund may invest up to 10% of its assets in shares of investment
companies and up to 5% of its assets in any one investment company as long as
the investment does not represent more than 3% of the voting stock of the
acquired investment company.

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 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.

BORROWINGS

The Fund may borrow money from banks, limited by the Fund's
fundamental investment restriction to 33 1/3% of its total assets, and may
engage in mortgage dollar roll transactions and reverse repurchase agreements
which may be considered a form of borrowing. (See "Mortgage Dollar Rolls and
Reverse Repurchase Agreements" below.) In addition, the Fund may borrow

16
<PAGE> 33

up to an additional 5% of its total assets from banks for temporary or
emergency purposes. The Fund will not purchase securities when bank borrowings
exceed 5% of the Fund's total assets.

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. 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 that 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.

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 securities or repurchase
agreements that mature on or before the settlement date on the related mortgage
dollar roll or reverse repurchase agreement. 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.

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<PAGE> 34

DIRECTORS AND OFFICERS OF THE FUND

Directors and officers of the Fund, together with information as to
their principal business occupations during the past five years, and other
information are shown below. Each director who is deemed an "interested
person," as defined in the Investment Company Act, is indicated by an asterisk.
Each officer and director holds the same positions with the following
registered investment companies: Strong Money Market Fund, Inc., Strong U.S.
Treasury Money Market Fund, Inc., Strong Municipal Money Market Fund, Inc.,
Strong Municipal Bond Fund, Inc., Strong Short-Intermediate Municipal Bond
Fund, Inc., Strong Insured Municipal Bond Fund, Inc., Strong Advantage Fund,
Inc., Strong Short-Term Bond Fund, Inc., Strong Corporate Bond Fund, Inc.,
Strong Government Securities Fund, Inc., Strong Asset Allocation Fund, Inc.,
Strong Total Return Fund, Inc., Strong Discovery Fund, Inc., Strong Opportunity
Fund, Inc., Strong Common Stock Fund, Inc., Strong International Stock Fund,
Inc., Strong American Utilities Fund, Inc., Strong High-Yield Municipal Bond
Fund, Inc., Strong Special Fund II, Inc., Strong Asia Pacific Fund, Inc.,
Strong Growth Fund, Inc., Strong International Bond Fund, Inc., and Strong
Short-Term Global Bond Fund, Inc. (collectively, the "Strong Funds").

*Richard S. Strong, 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. Since October 1993, Mr. Strong has been Chairman and a director
of Strong Holdings, Inc., a Wisconsin corporation and subsidiary of the Advisor
("Holdings"), and the Fund's underwriter, Strong Funds Distributors, Inc., a
Wisconsin corporation and subsidiary of Holdings ("Distributor"). Since
January 1994, Mr. Strong has been Chairman and a director of Heritage Reserve
Development Corporation, a Wisconsin corporation and subsidiary of Holdings
("Heritage"); and since February 1994, Mr. Strong has been a member of the
Managing Boards of Fussville Real Estate Holdings L.L.C. ("Real Estate
Holdings"), a Wisconsin Limited Liability Company and subsidiary of the
Advisor, and Fussville Development L.L.C. ("Development") a Wisconsin Limited
Liability Company and subsidiary of the Advisor, and certain of its
subsidiaries. Mr. Strong has served as a director of the Fund since
incorporation in December 1990 and Chairman of the Board of the Fund since
January 1992. Mr. Strong has been in the investment management business since
1967.

Marvin E. Nevins, 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
as a director of the Fund since incorporation in December 1990.

Willie D. Davis, 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 as a director of
the Fund since July 1994.

18
<PAGE> 35

*John Dragisic, Vice Chairman and Director of the Fund.

Mr. Dragisic has been Vice Chairman and a director of the Advisor and
a director of Holdings and Distributor since 1994. Mr. Dragisic previously
served as a director of the Fund from 1992 and 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 as Vice Chairman of the Fund
since July 1994 and director of the Fund since April 1995.

Stanley Kritzik, Director of the Fund.

Mr. Kritzik has been a Partner of Metropolitan Associates since _____
and a Director of Aurora Health Care and Health Network Ventures, Inc. since
____. He has served as a Director of the Fund since April 1995.

William F. Vogt, Director of Fund.

Mr. Vogt has been the President of Vogt Management Consulting, Inc.
(need description of Co.), Denver, Colorado since 1990. From 1982 until 1990,
he served as an executive director of University Physicians (need description),
Denver, Colorado. Mr. Vogt was also a Fellow of the Medical Group Management
Association, American College of Medical Practice Executives. He has served as
a director of the Fund since April 1995.

Lawrence A. Totsky, C.P.A., Vice President of the Fund.

Mr. Totsky has been Senior Vice President of the Advisor since
December 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 been the Vice President
of the Fund since May 1993.

Ann E. Oglanian, 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 been the Secretary of the Fund since May
1994.

Thomas P. Lemke, 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 been a Vice President of the Fund since October 1994.

Ronald A. Neville, Treasurer of the Fund.

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 33963. 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 3003 Third Street Avenue, Denver, Colorado
80206.

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<PAGE> 36

As of January 31, 1995, the officers and directors of the Fund in the
aggregate beneficially owned less than 1% of the Fund's then outstanding
shares. Directors and officers of the Fund who are officers, directors,
employees, or shareholders of the Advisor do not receive any remuneration from
the Fund for serving as directors or officers.

PRINCIPAL SHAREHOLDER

Except for the organizational shares of the Fund, the Fund's shares
are held of record by an insurance company separate account. As of January 31,
1995, the following 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:

<TABLE>
<CAPTION>
Name and Address Shares Percent of Class
---------------- ------ ----------------
<S> <C> <C>
Nationwide Life Insurance Company 11,750,486 98.90%
P.O. Box 182029
Columbus, Ohio 43218
</TABLE>

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 Vice Chairman 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, Ms.
Oglanian is an Associate Counsel of the Advisor and Mr. Zoeller is the
Treasurer of the Advisor. A brief description of the Fund's investment
advisory agreement ("Advisory Agreement") is set forth in the Prospectus under
"MANAGEMENT, FEES, AND EXPENSES."

The Fund's Advisory Agreement, dated April 16, 1992, 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 Investment Company Act of 1940 (the "Investment
Company Act")). In either case, each annual renewal must also 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 securities at its expense.

Except for expenses assumed by the Advisor as set forth above or by
the Distributor 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 registering or qualifying shares for sale; expenses for printing
and distribution costs of prospectuses and quarterly 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 recordkeeping and shareholder relations, the cost of stock
certificates and fees for directors who are not "interested persons" of the
Advisor.

As compensation for its services, the Fund pays to the Advisor a
monthly advisory fee at the annual rate of 1.00% of the Fund's average daily
net asset value. (See "CALCULATION OF NET ASSET VALUE" in the Prospectus.)
From time to time, the Advisor may voluntarily waive all or a portion of its
management fee for the Fund. The organizational expenses of the Fund were
advanced by the Advisor and will be reimbursed by the Fund over a period of not
more than 60 months. In 1992, 1993 and 1994, the Fund paid the Advisor $70,755,
$438,815, and $_________, respectively, in advisory fees.

20
<PAGE> 37

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 advisory fee but excluding taxes, interest, brokerage
commissions, and similar fees, exceed that percentage of the average net asset
value of the Fund for such year. Such excess is determined by valuations made
as of the close of each business day of the year, which is the most restrictive
percentage provided by the state laws of the various states in which the Fund's
shares are qualified for sale; or if the states in which the Fund's shares are
qualified for sale impose no restrictions, the Advisor shall reimburse the Fund
in the event the expenses and charges payable by the Fund in any fiscal year
(as described above) exceed 2%. The most restrictive percentage limitation
currently applicable to the Fund is 2.5% of its average daily net assets up to
$30,000,000, 2% on the next $70,000,000 of its average daily net assets and
1.5% of its 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 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 SCM, Mr. Strong, and another
employee of SCM 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 SCM 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 SCM
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 SCM's policy on personal trading and by failing to disclose
trading by Harbour, an entity in which principals of SCM 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 SCM agreed to various
undertakings, including adoption of certain procedures and a limitation for six
months on accepting certain types of new advisory clients.

Under a Distribution Agreement dated December 1, 1993 with the Fund
(the "Distribution Agreement"), Strong Funds Distributors, Inc. (the
"Distributor"), a subsidiary of the Advisor, acts as underwriter of the Fund's
shares. The Distribution Agreement provides that the Distributor will use its
best efforts to distribute the Fund's shares. Shares are only offered and sold
to the separate accounts of certain insurance companies. Since the Fund is a
"no-load" fund, no sales commissions are charged on the purchase of Fund
shares. Certain sales charges may apply to the variable annuity or life
insurance contract, which should be described in the prospectus of the
insurance company's separate account. The Distribution Agreement further
provides that the Distributor will bear the additional costs of printing
prospectuses and shareholder reports which are used for selling purposes, as
well as advertising and 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. Prior to December 1, 1993,
the Advisor acted as underwriter for the Fund. On December 1, 1993, the
Distributor succeeded to the broker-dealer registration of the Advisor and, in
connection therewith, a Distribution Agreement was executed on substantially
identical terms as the former distribution agreement with the Advisor as
distributor. The Distribution Agreement is subject to the same termination and
renewal provisions as are described above with respect to the Advisory
Agreement.

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 investment 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 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 commission, if
any. In selecting broker-dealers and in negotiating commissions, the Advisor
considers the firm's reliability, the quality of its execution services on a
continuing basis, and its financial condition. Brokerage will not be allocated
based on the sale of any shares of the Strong Funds.

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 who supplies brokerage and research services a
commission for

21
<PAGE> 38

effecting a transaction in excess of the amount of commission another broker or
dealer would have charged for effecting the transaction. Brokerage and
research services include (a) furnishing advice as to the value of securities,
the advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities; (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts; and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement, and custody).

In carrying out the provisions of the Advisory Agreement, 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 is of the opinion that the continued receipt of
supplemental investment research services from broker-dealers is essential to
its provision of high quality portfolio management services to the Fund. The
Advisory Agreement provides 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 advisory fee
paid by the Fund under the Advisory Agreement is not reduced as a result of the
Advisor's receipt of research services. During 1992, 1993 and 1994 the Fund
paid $259,152, $985,647, and $__________, respectively, in brokerage
commissions.

Generally, research services provided consist of portfolio pricing and
capital changes services and reports, research reports dealing with
macroeconomic trends and monetary and fiscal policy, research reports on
individual companies and industries, and information dealing with market trends
and technical analysis. 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. The Advisor's receipt of these administrative benefits arises from
its ability, in certain cases, to direct brokerage to certain firms in
connection with its management of client portfolios. In making good faith
allocations 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 its clients,
such as the Fund.

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 its 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 measure separately 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.

In view of the Fund's investment objective and portfolio management
policies, the Fund's annual portfolio turnover rate is expected to be in excess
of 400%. The annual portfolio turnover rate indicates changes in the Fund's
investments; for instance, a rate of 100% would result if all the Fund's
investments (excluding securities whose maturities at acquisition were one year
or less) at the beginning of an annual period had been replaced by the end of
the period. The turnover rate may vary from year to year, as well as within a
year, and may be affected by sales of investments necessary to meet cash
requirements for redemptions of the Fund's shares. For the 1992, 1993 and 1994
fiscal periods ended December 31, 1994, the Fund's portfolio turnover rates
were 1,767.9%, 976.5%, and _____% respectively. These portfolio turnover rates
for this Fund were

22
<PAGE> 39

higher than anticipated substantially because the Fund employed a trading
strategy to preserve the favorable tax treatment available to it under the
Internal Revenue Code of 1986 (the "Code"), as amended.

The Fund has entered into agreements with the Advisor and each of
Salomon and PaineWebber (collectively, the "Brokers"), in which the Brokers
have agreed to pay directly to vendors certain investment management and other
related expenses incurred and otherwise payable by the Fund ("Expense
Agreements"). In accordance with the Expense Agreements, the Advisor directs
the delivery to the Brokers of invoices determined by the Fund to be
appropriate for payment by the Brokers. The Brokers pay the invoices with the
proceeds of certain commissions received from the Fund. The Expense Agreements
provide that a percentage of commissions received from the Fund for completed
agency transactions in certain securities for the Fund, designated by the
Advisor as directed commissions subject to the Expense Agreements, shall be
used by the Brokers to pay the invoices. In all cases, such credits have been
immaterial in amount. The Advisor believes that this practice has not resulted
in any increase in the level of commissions paid by the Fund. Investment
management and other related expenses include those payable by the Fund, as
described under "INVESTMENT ADVISOR AND DISTRIBUTOR" in this Statement of
Additional Information.

As of December 31, 1994, the Fund has acquired securities of its
regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or
their parents in the following amounts:

<TABLE>
<CAPTION>
<S> <C>
Regular Broker or Dealer or Parent Issuer Value of Securities Owned as of December 31, 1994*
</TABLE>

* To the nearest thousandth.

CUSTODIAN

As custodian of the Fund's assets, Firstar Trust Company 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 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 performs these services for a fee of $2,500 per
insurance company separate account for the Fund, and reimbursement of
out-of-pocket expenses such as postage and printing expenses in connection with
communications sent to shareholders and contract owners. 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. Certain administrative services that would be performed by the
Advisor as transfer agent and dividend-disbursing agent may be performed by the
insurance companies that purchase shares in the Fund and the Fund may pay such
companies for this service. In addition, the insurance companies may impose a
separate account or service charge for its contract holders. See the
prospectus for the separate account of the insurance company for additional
information.

TAXES

GENERAL

As indicated under "INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS, AND
TAX STATUS" in the Prospectus, each Fund intends to qualify annually as a
regulated investment company ("RIC") under the Internal Revenue Code of 1986,
as amended ("Code"). This qualification does not involve government
supervision of the Funds' management practices or policies.

In order to qualify for treatment as a RIC under the Code, the Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income and net short-term

23
<PAGE> 40

capital gain, and net gains from certain foreign currency transactions)
("Distribution Requirement") and must meet several additional requirements.
Among these requirements are the following: (1) the Fund must derive at least
90% of its gross income each taxable year from dividends, interest, payments
with respect to securities loans, and gains from the sale or other disposition
of securities or foreign currencies, or other income (including gains from
options, futures, or forward currency contracts) derived with respect to its
business of investing in securities or those currencies ("Income Requirement");
(2) the Fund must derive less than 30% of its gross income each taxable year
from the sale or other disposition of securities, or any of the following, that
were held for less than three months - options or futures (other than those on
foreign currencies), or foreign currencies (or options, futures, or forward
currency contracts thereon) that are not directly related to the Fund's
principal business or investing in securities (or options and futures with
respect to securities) ("30% Limitation"); (3) at the close of each quarter of
the Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs, and other securities, with these other securities limited, in
respect of any one issuer, to an amount that does not exceed 5% of the value of
the Fund's total assets and that does not represent more than 10% of the
issuer's outstanding voting securities; and (4) at the close of each quarter of
the Fund's taxable year, not more than 25% of the value of its total assets may
be invested in securities (other than U.S. government securities or the
securities of other RICs) of any one issuer.

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

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

FOREIGN TRANSACTIONS

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

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

The Fund may invest in the stock of "passive foreign investment
companies" ("PFICs"). A PFIC is a foreign corporation that, in general, meets
either of the following tests: (1) at least 75% of its gross income is passive
or (2) an average of at least 50% of its assets produce, or are held for the
production of, passive income. Under certain circumstances, a Fund will be
subject to federal income tax on a portion (collectively, "PFIC income"), plus
interest thereon, even if the Fund distributes the PFIC income as a taxable
dividend to its shareholders. The balance of the PFIC income will be included
in the Fund's investment

24
<PAGE> 41

company taxable income and, accordingly, will not be taxable to it to the
extent that income is distributed to its shareholders. If a Fund invests in a
PFIC and elects to treat the PFIC as a "qualified electing fund," then in lieu
of the foregoing tax and interest obligation, the Fund will be required to
include in income each year its pro rata share of the qualified electing fund's
annual ordinary earnings and net capital gain (the excess of net long-term
capital gain over net short-term capital loss) -- which would have to be
distributed to its shareholders to satisfy the Distribution Requirement and to
avoid imposition of the Excise Tax -- even if those earnings and gain were not
received by the Fund. In most instances it will be very difficult, if not
impossible, to make this election because of certain requirements thereof.

Three bills passed by Congress in 1991 and 1992 and vetoed by
President Bush would have substantially modified the taxation of U.S.
shareholders of foreign corporations, including eliminating the provisions
described above dealing with PFICs and replacing them (and other provisions)
with a regulatory scheme involving entities called "passive foreign
corporations." The "Tax Simplification and Technical Corrections Bill of
1993," approved in November 1993 by the House Ways and Means Committee,
contains the same modifications. It is unclear at this time whether, and in
what form, the proposed modifications may be enacted into law.

Pursuant to proposed regulations, open-end RICs such as the Funds
would be entitled to elect to "mark-to-market" their stock in certain PFICs.
"Marking-to-market," in this context, means recognizing as gain for each
taxable year the excess, as of the end of that year, of the fair market value
of such PFIC's stock over the adjusted basis in that stock (including
mark-to-market gain for each prior year for which an election was in effect).

DERIVATIVE INSTRUMENTS

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

If 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 Funds
intend that, when they engage in hedging strategies, the hedging transactions
will qualify for this treatment, but at the present time it is not clear
whether this treatment will be available for all of the Funds' hedging
transactions. To the extent this treatment is not available or is not elected
by a Fund, it may be forced to defer the closing out of certain options 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 a Fund for less than three months as of
the end of its taxable year, and that are recognized for federal income tax
purposes as described above, will not be considered gains on investments held
for less than three months for purposes of the 30% Limitation.

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

25
<PAGE> 42

The Funds may acquire zero-coupon, step-coupon, or other securities
issued with original issue discount. As the holder of those securities, the
Fund must include in its income the original issue discount that accrues on the
securities during the taxable year, even if the Fund receives no corresponding
payment on the securities during the year. Similarly, the Fund must include in
its gross income securities it receives as "interest" on pay-in-kind
securities. Because the Fund annually must distribute substantially all of its
investment company taxable income, including any original issue discount and
other non-cash income, to satisfy the Distribution Requirement and to avoid
imposition of the Excise Tax, it may be required in a particular year to
distribute as a dividend an amount that is greater than the total amount of
cash it actually receives. Those distributions may be made from the proceeds
on sales of portfolio securities, if necessary. 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, or options, or futures contracts,
held for less than three months that it might wish to sell in the ordinary
course of its portfolio management.

DETERMINATION OF NET ASSET VALUE

A more complete discussion of the Fund's determination of net asset
value is contained in the Prospectus. Generally, the net asset value of the
Fund will be determined as of the close of trading on each day the New York
Stock Exchange is open for trading. The Fund will not determine net asset
value on days the New York Stock Exchange is closed and at other times
described in the Prospectus. The New York Stock Exchange is closed on New
Year's Day, Presidents' 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 New York Stock Exchange will
not be open for trading on the preceding Friday and when any such holiday falls
on a Sunday, the New York Stock Exchange 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.

SHAREHOLDER SERVICES

As set forth under "CAPITAL STOCK" in the Prospectus, certificates for
shares of the Fund will only be issued upon written request of the separate
account. For information concerning the purchase and redemption of shares by
contract holders, refer to the prospectus of the insurance company's separate
account.

FUND ORGANIZATION

The Fund is a Wisconsin corporation organized on December 28, 1990
under the name Strong D Fund, Inc. The Fund is authorized to issue
10,000,000,000 shares of common stock and series and classes of series of
shares of common stock, with a par value of $.00001 per share. Each share has
one vote, and all shares participate equally in dividends and other capital
gains distributions by the Fund and in the residual assets of the Fund in the
event of liquidation. 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. All holders of shares of the Fund would
vote on each matter presented to shareholders for action except with respect to
any matter which affects only one or more series or classes, in which case only
the shares of the affected series or class shall be entitled to vote. The
Wisconsin Business Corporation Law permits registered investment companies,
such as the Fund, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the Investment
Company Act. The Fund has adopted the appropriate provisions in its By-Laws
and may, at its 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
Investment Company Act.

The Fund's By-Laws also contain procedures for the removal of
directors by its shareholders. At any meeting of shareholders, duly called and
at which a quorum is present, the shareholders may, by the affirmative vote of
the holders of a majority of the votes entitled to be cast thereon, remove any
director or directors from office and may elect a successor or successors to
fill any resulting vacancies for the unexpired terms of removed directors.

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 Fund shall promptly call a special meeting of shareholders
for the purpose of voting upon the question of removal of any director.
Whenever ten or more shareholders of record who have been such for at least six
months

26
<PAGE> 43

preceding the date of application, and who hold in the aggregate either shares
having a net asset value of at least $25,000 or at least one percent (1%) of
the total outstanding shares, whichever is less, shall apply to the Fund's
Secretary in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to a request for a meeting as
described above and accompanied by a form of communication and request which
they wish to transmit, the Secretary shall within five business days after such
application either: (1) afford to such applicants access to a list of the names
and addresses of all shareholders as recorded on the books of the Fund; or (2)
inform such applicants as to the approximate number of shareholders of record
and the approximate cost of mailing to them the proposed communication and form
of request.

If the Secretary elects to follow the course specified in clause (2)
of the last sentence of the preceding paragraph, the Secretary, upon the
written request of such applicants, accompanied by a tender of the material to
be mailed and of the reasonable expenses of mailing, shall, with reasonable
promptness, mail such material to all shareholders of record at their addresses
as recorded on the books unless within five business days after such tender the
Secretary shall mail to such applicants and file with the Commission, together
with a copy of the material to be mailed, a written statement signed by at
least a majority of the Board of Directors to the effect that in their opinion
either such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion.

After opportunity for hearing upon the objections specified in the
written statement so filed, the Commission may, and if demanded by the Board of
Directors or by such applicants shall, enter an order either sustaining one or
more of such objections or refusing to sustain any of them. If the Commission
shall enter an order refusing to sustain any of such objections, or if, after
the entry of an order sustaining one or more of such objections, the Commission
shall find, after notice and opportunity for hearing, that all objections so
sustained have been met, and shall enter an order so declaring, the Secretary
shall mail copies of such material to all shareholders with reasonable
promptness after the entry of such order and the renewal of such tender.

PERFORMANCE INFORMATION

As described under "PERFORMANCE" in the Prospectus, the Fund's
historical performance or return may be shown in the form of "average annual
total return," "total return," and "cumulative total return." From time to
time, the Advisor may voluntarily waive all or a portion of its management fee
and/or absorb certain expenses for the Fund. Total returns contained in
advertisements include the effect of deducting the Fund's expenses, but may not
include charges and expenses attributable to any particular insurance product.
Since shares may only be purchased by the separate accounts of certain
insurance companies, contract owners should carefully review the prospectus of
the separate account for information on fees and expenses. Excluding such fees
and expenses from the Fund's total return quotations has the effect of
increasing the performance quoted.

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.

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

27
<PAGE> 44
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 an 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
are not necessarily representative of 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 an insurance company 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, 1994. The periods indicated were ones of fluctuating
securities prices.

<TABLE>
<CAPTION>
Discovery Fund II

Total Average Annual
Return Total Return
--------------------------------------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1994 Increase Increases
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund* $10,000 $ % %
One Year 10,000
- ------------------------------
</TABLE>

* The Fund's inception date is May 8, 1992.

COMPARISONS

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

Investors may also wish 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.

(2) CERTIFICATES OF DEPOSIT

Investors may wish to compare the Fund's performance to that of
certificates of deposit offered by banks and other depository institutions.
Certificates of deposit represent an alternative 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 depository institutions are subject to change at any time specified by
the issuing institution.

(3) MONEY MARKET FUNDS

Investors may also want to compare performance of 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.

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

28
<PAGE> 45

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.

(5) MORNINGSTAR, INC.

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

(6) VARDS REPORT

The Fund's performance may also be compared to the performance of
other variable annuity products in general or to the performance of particular
types of variable annuity products, with similar investment goals, as tracked
by the VARDS Report (Variable Annuity Research and Data Service Report)
produced by Financial Planning Resources, Inc. The VARDS Report is a monthly
performance analysis of the variable annuity industry.

(7) INDEPENDENT SOURCES

Evaluations of Fund 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,
Morningstar, Inc., Financial World, Business Week, U.S. News and World Report,
The Wall Street Journal, Barron's, and a variety of investment newsletters.

(8) INDICES

In addition, the Fund may compare its performance to a number of
indices including the Standard & Poor's 500 and the Consumer Price Index, as
well as other measures of inflation.

GENERAL INFORMATION

SERVICE ORIENTATION

The Advisor is an independent, Midwestern-based investment advisor,
unaffiliated with any bank, securities brokerage, or insurance company. 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. Through its commitment to excellence, the Advisor
intends to benefit investors and to encourage them to think of Strong Funds as
their mutual fund family.

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.

PORTFOLIO MANAGEMENT

29
<PAGE> 46

Financial goals vary from person to person. Many experienced
investors know the potential benefits of staying with an investment over time,
and the Fund may use its performance results to demonstrate this.

While the Fund has the ability to take advantage of favorable trends
in stock prices, it also retains the flexibility to invest up to 100% of its
assets in debt securities. The need for this flexibility is based on a
fundamental belief by the Advisor that economic and financial conditions create
favorable and unfavorable investment periods (or seasons) and that these
different seasons require different investment approaches. Through its
understanding and willingness to change with these investment cycles, the
Advisor seeks to achieve the Fund's objectives throughout the seasons of
investment. In its advertising, the Advisor may refer to the Funds as "Mutual
Funds for All Seasons."

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, have been selected as the independent accountants for the
Fund, providing audit services and assistance and consultation with respect to
the preparation of filings with the Securities and Exchange Commission.

FINANCIAL STATEMENTS

The Annual Report that is attached hereto contains the following
financial information for the Fund:

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

30
<PAGE> 47

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
for 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 risk 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.

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

A-1
<PAGE> 48

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-' debt 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 of
maintenance of other terms of the contract over any long period of time may be
small.

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.

A-2
<PAGE> 49
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.

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.

A-3
<PAGE> 50

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. Moreover, the character of the risk
factor varies from industry to industry and between corporate, health care and
municipal obligations.

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 which, 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.

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

A-4
<PAGE> 51

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.
AA Risk is modest, but may vary slightly from time to
AA- time because of economic conditions.

A+ Protection factors are average but adequate.
A However, risk factors are more variable and greater
A- in periods of economic stress.

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

BB+ Below investment grade but deemed likely to meet
BB obligations when due. Present or prospective
BB- financial protection factors fluctuate according to
industry conditions or company fortunes. Overall
quality may move up or down frequently within this
category.

B+ Below investment grade and possessing risk that
B obligations will not be met when due. Financial
B- protection factors will fluctuate widely 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.

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.

A-5
<PAGE> 52

Ratings 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.

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 grace period.

MOODY'S COMMERCIAL PAPER RATINGS

The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act of 1933, as amended.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act of 1933, nor
does it represent that any specific note is a valid obligation of a rated
issuer or issued in conformity with any applicable law. Moody's employs the
following three designations, all judged to be investment grade, to indicate
the relative repayment capacity of rated issuers:

Issuers rated PRIME-1 (for related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
(i) leading market positions in well established industries, (ii) high rates of
return on funds employed, (iii) conservative capitalization structures 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 related supporting institutions) have a
strong capacity for repayment of short-term promissory 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, will 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 related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.

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

A-6
<PAGE> 53

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 utilized 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 we define 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
------------ ----------

Duff 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.

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

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

Good Grade
----------

A-7
<PAGE> 54

Duff 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
------------------

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

Non-investment Grade
--------------------

Duff 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
-------

Duff 5 Issuer failed to meet scheduled principal and/or
interest payments.

A-8
<PAGE> 55

STRONG DISCOVERY FUND II, INC.

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

Inapplicable

(b) Exhibits

(1) Articles of Incorporation, as amended
(2) By-Laws
(3) Inapplicable
(4) Specimen Stock Certificate
(5) Investment Advisory Agreement
(6) Distribution Agreement
(7) Inapplicable
(8) Custody Agreement
(8.1) Global Custody Agreement
(9.1) Shareholder Servicing Agent Agreement
(9.2) Amended and Restated Fund Participation Agreement -
Nationwide Life Insurance Company
(9.3) Fund Participation Agreement - National Home Life
(9.4) Fund Participation Agreement - Charles Schwab
(10) Inapplicable
(11) Inapplicable
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(15) Inapplicable
(16) Computation of Performance Figures
(17) Power of Attorney

C - 1
<PAGE> 56

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
Number of Record Holders
Title of Class as of January 31, 1995
------------------------------- ------------------------

Common Stock, $.00001 par value 7

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 VII of Registrant's By-Laws
provides as follows:

ARTICLE VII. INDEMNIFICATION OF OFFICERS AND DIRECTORS

7.01. Mandatory Indemnification. The corporation shall
indemnify, to the full extent permitted by the Wisconsin
Business Corporation Law, as in effect from time to time, the persons
described in Sections 180.0850 through 180.0859 (or any successor
provisions) of the Wisconsin Business Corporation Law 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.

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.

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.

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 of 1940.

Item 28. Business and Other Connections of Investment Advisor

The information contained under "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 American Utilities Fund, Inc.; Strong Asia Pacific Fund, Inc.;
Strong Asset Allocation Fund, Inc.; Strong Common Stock Fund, Inc.; Strong
Discovery Fund, Inc.; Strong Government Securities Fund, Inc.; Strong Growth
Fund, Inc.; Strong High-Yield Municipal Bond Fund, Inc.; Strong Income Fund,
Inc.; Strong Insured Municipal Bond Fund, Inc.; Strong International Bond Fund,
Inc.; Strong International Stock Fund, Inc.; Strong Money Market Fund, Inc.;
Strong Municipal Bond Fund, Inc.; Strong Municipal Money Market Fund, Inc.;
Strong Opportunity 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 U.S.
Treasury Money Fund, Inc.

C - 2
<PAGE> 57

(b) The information contained under "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 incorporate
d by reference pursuant to Rule 411 under the Securities
Act of 1933.

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, Thomas M.
Zoeller, 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> 58

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 6 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 23rd day of February,
1995.

STRONG DISCOVERY FUND II, INC.
(Registrant)

BY: /s/ John Dragisic
--------------------------------
John Dragisic, Vice Chairman

Each person whose signature appears below constitutes and appoints
John Dragisic, Thomas P. Lemke, Lawrence A. Totsky, and Ann E. Oglanian, and
each of them, his true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all post-effective amendments to this
Registration Statement on Form N-1A and to file the same, with all exhibits
thereto, and any other documents in connection therewith, with the Securities
and Exchange Commission and any other regulatory body on or before May 30,
1996, granting unto said attorney-in-fact and agent, full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes, as he might or could do in person,
hereby ratifying and confirming all that said attorney-in-fact and agent, or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 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>
Vice Chairman of the Board (Principal
/s/ John Dragisic Executive Officer) February 23, 1995
-------------------------------
John Dragisic

Treasurer (Principal Financial and
/s/ Thomas M. Zoeller Accounting Officer) February 23, 1995
-------------------------------
Thomas M. Zoeller

/s/ Richard S. Strong Chairman of the Board and a Director February 23, 1995
-------------------------------
Richard S. Strong

/s/ Marvin E. Nevins Director February 23, 1995
-------------------------------
Marvin E. Nevins

/s/ Willie D. Davis Director February 23, 1995
-------------------------------
Willie D. Davis
</TABLE>

<PAGE> 59

EXHIBIT INDEX

<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Exhibit Page No.
----------- ------- --------
<S> <C> <C>
(1) Articles of Incorporation, as amended(1)

(2) By-Laws(1)

(3) Inapplicable

(4) Specimen Stock Certificate(1)

(5) Investment Advisory Agreement(1)

(6) Distribution Agreement(1)

(7) Inapplicable

(8) Custody Agreement(1)

(8.1) Global Custody Agreement(2)

(9.1) Shareholder Servicing Agent Agreement(1)

(9.2) Amended and Restated Fund Description Agreement - Nationwide Life Insurance
Company(2)

(9.3) Fund Participation Agreement - National Home Life(2)

(9.4) Fund Participation Agreement - Charles Schwab(2)

(10) Inapplicable

(11) Inapplicable

(12) Inapplicable

(13) Inapplicable

(14) Inapplicable

(15) Inapplicable

(16) Computation of Performance Figures

(17) Power of Attorney (See Signature Page)
</TABLE>
- --------------------
(1) Incorporated herein by reference to Pre-Effective Amendment No. 1 to
the Registration Statement on Form N-1A of Registrant filed on or
about April 21, 1992.

(2) Incorporated herein by reference to Post-Effective Amendment No. 5 to
the Registration Statement on Form N-1A of Registrant filed on or
about April 21, 1994.

<PAGE> 1

EXHIBIT 16

Strong Discovery Fund II, Inc.

SCHEDULE OF COMPUTATION OF
PERFORMANCE QUOTATIONS

I. AVERAGE ANNUAL TOTAL RETURN

A. Formula _____
P (1 + T)n = 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 12-31-93 through 12-31-94
____________
-5.39% = \1/9,461/10,000 - 1

2. Since inception 05-08-92 through 12-31-94
_____________
9.02% = \2.648/12,569/10,000 - 1

<PAGE> 2

III. 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, 1994

9,461-10,000
------------
10,000 = -5.39%