STRONG VARIABLE INS FDS INC, 485BPOS, 1997-09-26

STRONG VARIABLE INS FDS INC
485BPOS, 1997-09-26

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<PAGE> 1

As filed with the Securities and Exchange Commission on or about September 26,
1997

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

SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]

Pre-Effective Amendment No. [ ]
----
Post-Effective Amendment No. 16 [X]
----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

Amendment No. 17 [X]
----

(Check appropriate box or boxes)

STRONG VARIABLE INSURANCE FUNDS, 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)

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, 1996 was filed on or about February 19,
1997.

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

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on September 30, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

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

<PAGE> 2

STRONG VARIABLE INSURANCE FUNDS, INC.
CROSS REFERENCE SHEET

This Post-Effective Amendment to the Registration Statement of Strong
Variable Insurance Funds, Inc., which is currently comprised of six Funds,
relates only to Strong Schafer Value Fund II, which is being added to Strong
Variable Insurance Funds, Inc. through this Amendment. This Post-Effective
Amendment does not relate to, amend, supersede, or otherwise affect any of the
separate Prospectuses and Statements of Additional Information contained in
Post-Effective Amendment No. 14.

FOR STRONG SCHAFER VALUE FUND II

(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.)

1. Cover Page Cover Page

2. Synopsis Inapplicable

3. Condensed Financial Information Inapplicable

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

5. Management of the Fund Management, Additional
Information

5A. Management's Discussion of Inapplicable
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

</TABLE>

<PAGE> 3

<TABLE>
<CAPTION>
Caption or Subheading in Prospectus or
Item No. on Form N-1A Statement of Additional Information
--------------------- -----------------------------------
<S> <C>
15. Control Persons and Principal Holders of Principal Shareholders;
Securities Directors and Officers of the
Fund; Investment Advisor,
Subadvisor, and Distributor

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

17. Brokerage Allocation and Other Practices Portfolio Transactions and
Brokerage

18. Capital Stock and Other Securities Included in Prospectus under
the heading Additional
Information

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

22. Calculation of Performance Data Performance Information

23. Financial Statements Inapplicable

</TABLE>

* Complete answer to Item is contained in the Fund's Prospectus.

<PAGE> 4

STRONG SCHAFER VALUE FUND II

Strong Schafer Value Fund II (the "Fund") is a diversified series of the
Strong Variable Insurance Funds, Inc. (the "Corporation"), an open-end
management investment company, commonly called a mutual fund. The Fund seeks
long-term capital appreciation principally through investments in common stocks
and other equity securities. Current income is a secondary objective.

Shares of the Fund are only offered and sold to the separate accounts of
certain insurance companies for the purpose of funding variable annuity and
variable life insurance contracts. This Prospectus should be read together with
the prospectus of the separate account of the specific insurance product which
preceded or accompanies this Prospectus.

This Prospectus contains information that you should consider before you
invest. Please read it carefully and keep it for future reference. A Statement
of Additional Information for the Fund, dated September 30, 1997, which contains
further information, is incorporated by reference into this Prospectus, and has
been filed with the Securities and Exchange Commission ("SEC"). This Statement,
which may be revised from time to time, is available upon request and without
charge by writing to the Fund at P.O. Box 2936, Milwaukee, Wisconsin 53201 or by
calling 1-800-368-1683.

============================================================================
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.
- ----------------------------------------------------------------------------

September 30, 1997

PROSPECTUS PAGE 1
<PAGE> 5

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
THE FUND................................. 2
INVESTMENT OBJECTIVE AND POLICIES........ 3
SPECIAL CONSIDERATIONS................... 5
MANAGEMENT............................... 6
ADDITIONAL INFORMATION................... 9
</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.

THE FUND

The Fund is a diversified series of the Corporation, which is an 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") is
the investment advisor for the Fund. Schafer Capital Management, Inc. (the
"Subadvisor") is the investment subadvisor for the Fund.

PROSPECTUS PAGE 2
<PAGE> 6

INVESTMENT OBJECTIVE AND POLICIES

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" 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 Corporation's Board of Directors without shareholder approval, the Fund will
promptly notify shareholders of any material change in operating policies.

The Fund's primary investment objective is long-term capital appreciation,
and portfolio securities are selected primarily with a view to achievement of
this objective. The Fund's primary objective is also a fundamental policy of the
Fund and may not be changed without shareholder approval. Current income is a
secondary objective in the selection of investments. Such secondary objective is
not a fundamental policy of the Fund and may be changed by a vote of a majority
of the Board of Directors without a vote of the shareholders.

The policy of the Fund is to invest in securities which are believed by
the Subadvisor to offer the possibility of increase in value, for the most part
common stocks of established companies having a strong financial position and a
low stock market valuation at the time of purchase (as measured by
price/earnings ratios as compared with average price/earnings ratios of major
market indices, e.g., Standard & Poor's 500 Index) in relation to investment
value (as measured by prospective earnings and dividend growth rates as compared
with market averages of such rates). Investments are then monitored by the
Fund's Subadvisor for price movement and earnings developments. Once a security
is purchased, it will generally be held in the portfolio until it no longer
meets the Fund's financial or valuation criteria as determined by the Fund's
Subadvisor.

The Fund expects to purchase and sell securities at such times as it deems to
be in the best interest of its shareholders. Although there may be some
short-term portfolio turnover, securities are generally purchased which the
Subadvisor believes will appreciate in value over the long term. The Fund
anticipates that its annual portfolio turnover rate should not significantly
exceed 50%. The Fund, however, has not placed any limit on its rate of portfolio
turnover and securities may be sold without regard to the time they have been
held when, in the opinion of the Subadvisor, investment considerations warrant
such action.

The Fund does not concentrate its investments in any particular industry or
group of industries, but diversifies its holdings among as many different
companies and industries as seems appropriate in the light of conditions
prevailing at any given time.

PROSPECTUS PAGE 3
<PAGE> 7

Other than as considered appropriate for cash reserves, the Fund will
generally maintain a fully invested position in common stocks of publicly-held
companies, primarily in stocks of companies listed on a national securities
exchange and other equity securities (common stocks or securities convertible
into common stocks). Investments may also be made in debt securities which are
convertible into equity securities and preferred stocks which are convertible
into common stock and in warrants or other rights to purchase common stock,
which in each case are considered equity securities by the Subadvisor. The
Subadvisor rarely engages in market timing by shifting the portfolio or a
significant portion thereof in or out of the market in anticipation of market
fluctuations. Although the Fund's portfolio will normally be fully invested in
equity securities as described above, a portion of its assets may be held from
time to time in cash or cash equivalents (e.g., short-term money market
securities such as U.S. Treasury bills, prime-rated commercial paper,
certificates of deposit, variable rate demand notes, repurchase agreements, or
affiliated money market funds) when the Subadvisor is unable to identify
attractive equity investments. Variable rate demand notes are non-negotiable
instruments. The instruments the Fund invests in are rated at least A1 by
Standard & Poor's. However, the Fund may be susceptible to credit risk with
respect to these notes to the extent the issuer defaults on its payment
obligation. With regard to repurchase agreements (which are agreements under
which the seller of a security agrees at the time of sale to repurchase it at an
agreed time and price), in the event of a bankruptcy or other default of the
seller, the Fund could experience both delays in liquidating the underlying
securities and losses, including: (a) possible decline in the value of the
underlying security during the period while the Fund seeks to enforce its rights
thereto; (b) possible subnormal levels of income or proceeds and lack of access
to income and proceeds during this period; and (c) expenses of enforcing its
rights. The Fund may invest in shares of one or more money market funds managed
by the Advisor (collectively, the "Strong Money Funds"). The Strong Money Funds
seek current income, a stable share price of $1.00, and daily liquidity. All
money market instruments can change in value when interest rates or an issuer's
creditworthiness change dramatically. The Strong Money Funds cannot guarantee
that they will always be able to maintain a stable net asset value of $1.00 per
share.

The above-described investment policies of the Fund will be applied in a
manner considered prudent by the Subadvisor to achieve the Fund's investment
objective of long-term capital appreciation. The Fund does not consider such
policies to be fundamental and such policies may be changed by the Board of
Directors without shareholder approval.

The Fund expects to invest primarily in the securities of U.S. issuers,
although it may also invest up to 20% of its net assets in securities of foreign
issuers, or depository receipts for such securities, which are traded in a U.S.
market or are available through a U.S. broker or dealer, regardless of whether
such securities or depository receipts are traded in U.S. dollars, and which
meet the criteria for investment selection set forth above. Since 20% of the

PROSPECTUS PAGE 4
<PAGE> 8

Fund's net assets may consist of securities issued by foreign issuers, the Fund
may be subject to additional investment risks for these securities that are
different in some respects from those experienced by a fund which invests only
in securities of U.S. domestic issuers. Such risks include future political and
economic developments, the imposition of foreign withholding taxes on dividend
and interest income payable on the securities, the possible establishment of
exchange controls, the possible seizure or nationalization of foreign
investments, or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such securities.
With respect to the securities of foreign issuers which are denominated in
foreign currencies, such risks also include the currency risk. Generally, the
Fund will not purchase securities which it believes, at the time of purchase,
will be subject to exchange controls; however, there can be no assurance that
such laws may not become applicable to certain of the Fund's investments. In
addition, there may be less publicly available information about a foreign
issuer than about a domestic issuer, and foreign issuers may not be subject to
the same accounting, auditing, financial recordkeeping and shareholder reporting
standards and requirements as domestic issuers.

There are market risks inherent in any investment, and there is no assurance
that the primary investment objective of the Fund will be realized or that any
income will be earned. Moreover, the application of investment policies is
basically dependent upon the judgment of the Subadvisor. A prospective purchaser
of shares of the Fund should realize that there are risks in any policy
dependent upon such judgment and that no representation is made that the
objectives of the Fund will be accomplished or that there may not be substantial
losses in any particular investment. At any time, the value of the Fund's shares
may be more or less than the cost of such shares to the investor.

SPECIAL CONSIDERATIONS

The Fund is designed as an investment vehicle for variable annuity and
variable life insurance contracts funded by separate accounts of certain
insurance companies. Section 817(h) of the Internal Revenue Code of 1986, as
amended (the "Code") and the regulations thereunder impose certain
diversification standards on the investments underlying variable annuity and
variable life insurance contracts in order for such contracts to be treated for
tax purposes as annuities or life insurance. Section 817(h) of the Code provides
that a variable annuity and variable life insurance contract based on a separate
account shall not be treated as an annuity or life insurance contract for any
period (and any subsequent period) for which the account's investments are not
adequately diversified. These diversification requirements are in addition to
the diversification requirements applicable to the Fund under Subchapter M of
the Code and the Investment Company Act of 1940 (the "1940 Act") and may affect
the composition of the Fund's investments.

PROSPECTUS PAGE 5
<PAGE> 9

Since the shares of the Fund are currently sold to segregated asset accounts
underlying such variable annuity and variable life insurance contracts, the Fund
intends to comply with the diversification requirements as set forth in the
regulations. The Secretary of the Treasury may in the future issue additional
regulations or revenue rulings that may prescribe the circumstances in which a
contract owner's control of the investments of a separate account may cause the
contract owner, rather than the insurance company, to be treated as the owner of
assets of the separate account. Failure to comply with Section 817(h) of the
Code or any regulation thereunder, or with any future regulations or revenue
rulings on contract owner control, would cause earnings regarding a contract
owner's interest in an insurance company's separate account to be includible in
the contract owner's gross income in the year earned. Such standards may apply
only prospectively, although retroactive application is possible. In the event
that any such regulations or revenue rulings are adopted, the Fund may not be
able to continue to operate as currently described in this prospectus, or
maintain its investment program.
The Fund will be managed in such a manner as to comply with the requirements
of Subchapter L of the Code. It is possible that in order to comply with such
requirements, less desirable investment decisions may be made which would affect
the investment performance of the Fund.
The Fund may sell its shares to the separate accounts of various insurance
companies, which are not affiliated with each other, for the purpose of funding
variable annuity and variable life insurance contracts. The Fund currently does
not foresee any disadvantages to contract owners arising out of the fact that it
offers its shares to separate accounts of various insurance companies, which are
not affiliated with each other, to serve as an investment medium for their
variable products. However, it is theoretically possible that the interests of
owners of various contracts participating in the Fund through the separate
accounts might at some time be in conflict. The Board of Directors of the
Corporation, 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 may refuse to sell Fund shares to
any separate account or may suspend or terminate the offering of Fund shares 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 Corporation is responsible for managing the
Fund's business and affairs. The Fund has entered into an investment advisory
agreement (an "Advisory Agreement") with Strong Capital Management, Inc.

PROSPECTUS PAGE 6
<PAGE> 10

(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.

ADVISOR. The Advisor began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans, as well as mutual funds, several of which are funding vehicles for
variable insurance products. As of August 31, 1997, the Advisor had over $27
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 Corporation, is the controlling shareholder of the Advisor.

As compensation for its services, the Fund pays the Advisor a monthly
management 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. The Advisor has voluntarily agreed to cap
the Fund's total operating expenses at 1.20%. The Advisor has no current
intention to, but may in the future, discontinue or modify any waiver of fees or
absorption of expenses at its discretion without further notification. The
Fund's cap on total operating expenses will have the effect of lowering the
overall expense ratio of the Fund and increasing the Fund's return to investors.

Except for expenses assumed by the Advisor, Subadvisor, or Strong Funds
Distributors, Inc., 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 with the states
and the SEC; expenses of printing and distribution of prospectuses to existing
shareholders; charges of custodians (including fees as custodian for keeping
books and similar services for the Fund), transfer agents (including the
printing and mailing of reports and notices to shareholders), registrars,
auditing and legal services, and clerical services related to recordkeeping and
shareholder relations; printing of stock certificates; fees for directors who
are not "interested persons" of the Advisor; expenses of indemnification;
extraordinary expenses; and costs of shareholder and director meetings.
The Advisor and Subadvisor permit portfolio managers and other persons who
may have access to information about the purchase or sale of securities in the
Fund's portfolio ("access persons") to purchase and sell securities for their
own accounts, subject to the Advisor's or Subadvisor's policy governing personal
investing. These policies require access persons to conduct their personal
investment activities in a manner that the Advisor or Subadvisor believes is not
detrimental to the Fund or to the Advisor's or Subadvisor's other advisory
clients. Among other things, these policies require access persons to obtain
preclearance before executing personal trades and prohibits access persons from
keeping profits derived from the purchase or sale of the same security within 60
calendar days. See the SAI for more information.

PROSPECTUS PAGE 7
<PAGE> 11

SUBADVISOR. Under a subadvisory agreement between the Advisor and Schafer
Capital Management, Inc. (the "Subadvisory Agreement"), the Subadvisor, pursuant
to the oversight and supervision of the Fund's Board of Directors and the
Advisor, provides a continuous investment program for the Fund. Under the
Subadvisory Agreement, the Subadvisor is responsible both for determining the
securities to be purchased and sold by the Fund and for executing those
transactions. However, the Advisor is responsible for managing the
cash-equivalent investments maintained by the Fund in the ordinary course of its
business, which on average are expected to be no more than 5% of the Fund's
total assets. As compensation for its services, the Advisor (not the Fund) pays
the Subadvisor a monthly fee at an annual rate of .60% of the Fund's average
daily net asset value. The Subadvisor bears all of its own expenses in providing
subadvisory services to the Fund.

The Subadvisor began conducting business in 1984. Its principal business has
been providing investment supervision to institutional investors and high net
worth clients. The Subadvisor is a Delaware Corporation. Mr. David K. Schafer,
the Subadvisors' President, is the sole and controlling shareholder of the
Subadvisor. As of August 31, 1997, the Subadvisor had approximately $1.4 billion
under management. Its address is 101 Carnegie Center, Princeton, New Jersey
08540.

PORTFOLIO MANAGER. David K. Schafer, the Subadvisor's controlling person
(within the meaning of the Investment Company Act) and sole shareholder, has
been in the investment management business for more than twenty-five years. Mr.
Schafer is the President of the Subadvisor. Mr. Schafer is also a minority
shareholder of Schafer Cullen Capital Management, Inc. Mr. Schafer was a
securities analyst, first for Arnold Bernhard & Co., Inc., publisher of The
Value Line Investment Survey, from June 1966 to June 1968; for J & W Seligman &
Co. from June 1968 to December 1970; and for Fariston Management Corp., from
January 1971 to November 1972. In 1972, he joined the treasury department of
INCO Ltd. to supervise the investment managers of that company's pension assets,
and in 1974 he began managing a portion of those assets himself. In 1981, Mr.
Schafer left INCO Ltd. to found Schafer Capital Management.

PRIOR PERFORMANCE OF SIMILAR FUND MANAGED BY THE SUBADVISOR. The Strong
Schafer Value Fund II, which commenced operations on September 30, 1997, has
been modeled after the Strong Schafer Value Fund, an existing retail fund
managed by the Subadvisor. The Strong Schafer Value Fund began operations on
October 22, 1985 and, as of August 29, 1997, had $1.1 billion in assets. The
investment objective, policies, and strategies of the Strong Schafer Value Fund
are identical to those of the Strong Schafer Value Fund II. The Strong Schafer
Value Fund II's expense ratio is expected to be substantially similar to that of
the Strong Schafer Value Fund. The average annual and cumulative total returns
for the Strong Schafer Value Fund as of June 30, 1997

PROSPECTUS PAGE 8
<PAGE> 12

are presented in the table below. These performance returns have been audited
through September 30, 1996, and are unaudited thereafter.

<TABLE>
<CAPTION>
STRONG SCHAFER
PERFORMANCE RETURNS(1) VALUE FUND
---------------------- --------------
<S> <C>
Average Annual Returns
1 Year............................................ 31.96%
3 Year............................................ 23.98%
5 Year............................................ 20.63%
10 Year........................................... 15.51%
10/22/85 - 6/30/97................................ 16.55%
Cumulative Return..................................... 499.08%
</TABLE>

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

Historical performance does not indicate future performance. THE STRONG
SCHAFER VALUE FUND IS A SEPARATE FUND AND ITS HISTORICAL PERFORMANCE IS NOT
INDICATIVE OF THE PRESENT OR FUTURE PERFORMANCE OF THE STRONG SCHAFER VALUE FUND
II. THE PERFORMANCE OF THE STRONG SCHAFER VALUE FUND II MAY BE GREATER OR LESS
THAN THE PERFORMANCE OF THE STRONG SCHAFER VALUE FUND DUE TO, AMONG OTHER
THINGS, DIFFERENCES IN EXPENSES AND CASH FLOWS. Share prices and investment
returns will fluctuate.

ADDITIONAL INFORMATION

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 in the Fund, 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 placed by an
insurance company invested in the Fund. Certificates for shares in the Fund will
not be issued.

CALCULATION OF NET ASSET VALUE. The net asset value ("NAV") 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 NAV 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. The Fund's NAV is calculated by taking

PROSPECTUS PAGE 9
<PAGE> 13

the fair value of the Fund's total assets, subtracting all its liabilities, and
dividing by the total number of shares outstanding. Expenses are accrued daily
and applied when determining the NAV.
The Fund's portfolio 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.
Securities quoted in foreign currency are valued daily in U.S. dollars at the
foreign currency exchange rates that are prevailing at the time the daily NAV
per share is determined. Although the Fund values its foreign assets in U.S.
dollars on a daily basis, the Fund does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. Foreign currency exchange
rates are generally determined prior to the close of trading on the Exchange.
Occasionally, events affecting the value of foreign investments and such
exchange rates occur between the time at which they are determined and the close
of trading on the Exchange. Such events would not normally be reflected in a
calculation of the Fund's NAV on that day. If events that materially affect the
value of the Fund's foreign investments or the foreign currency exchange rates
occur during such period, the investments will be valued at their fair value as
determined in good faith by or under the direction of the Board of Directors.

HOW TO 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 in which: (i)
trading on the Exchange is restricted, as determined by the SEC, or the Exchange
is closed for other than weekends and holidays; (ii) the SEC has permitted such
suspension by order; or (iii) an emergency, as determined by the SEC, exists
which makes disposal of portfolio securities or valuation of net assets of the
Fund not reasonably practicable.

DISTRIBUTIONS AND TAXES. The policy of the Fund is to pay dividends to the
insurance company's separate accounts from net investment income quarterly and
to distribute substantially all net realized capital gains, after using any
available capital loss carryovers, annually. All dividends and capital gain

PROSPECTUS PAGE 10
<PAGE> 14

distributions paid to the insurance company's separate accounts will be
automatically reinvested in additional Fund shares.
The Fund intends to continue to qualify for treatment as a Regulated
Investment Company or "RIC" under Subchapter M of the Code and, if so qualified,
will not be liable for federal income tax on earnings and gains distributed to
its shareholders in a timely manner. 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 distributions made to its shareholders. For more
information regarding tax implications for owners of variable annuity or
variable life insurance contracts investing in the Fund, please refer to the
prospectus of your insurance company's separate account. (See "Special
Considerations" for a discussion of special tax considerations relating to the
Fund's compliance with Subchapter L of the Code, as an investment vehicle for
variable annuity and variable life insurance contracts of certain insurance
companies.)
This section is not intended to be a full discussion of present or proposed
federal income tax law and its effect on the Fund and investors. (See the SAI
for a further discussion.) Investors are urged to consult their own tax adviser.

ORGANIZATION. The Fund is a series of common stock of the Corporation, which
is a Wisconsin corporation. The Corporation is authorized to issue an indefinite
number of shares of common stock and series and classes of series of shares of
common stock. All holders of shares of the Corporation 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.
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. Generally, the Corporation will not hold an annual meeting of
shareholders unless required by the 1940 Act.
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 AGENT, DIVIDEND-DISBURSING AGENT, AND DISTRIBUTOR. The Advisor, P.O.
Box 2936, Milwaukee, Wisconsin 53201, acts as transfer agent and
dividend-disbursing agent for the Fund. Strong Funds Distributors, Inc., P.O.
Box 2936, Milwaukee, Wisconsin 53201, an indirect subsidiary of the Advisor,
acts as distributor of the shares of the Fund.

PROSPECTUS PAGE 11
<PAGE> 15

PERFORMANCE INFORMATION. The Fund may advertise a variety of types of
performance information, including "average annual total return," "total
return," and "cumulative total return." Each of these figures is based upon
historical results and does not represent the future performance of the 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 the Fund assuming
the reinvestment of all dividends and distributions. Total return figures are
not annualized and simply represent the aggregate change of the Fund's
investments over a specified period of time.
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. The Fund will not use information
concerning its investment performance in advertisements or sales materials
unless appropriate information concerning the relevant separate account is also
included. Additional information concerning the Fund's performance appears in
the SAI.

PROSPECTUS PAGE 12
<PAGE> 16
STATEMENT OF ADDITIONAL INFORMATION

STRONG SCHAFER VALUE FUND II
P.O. Box 2936
Milwaukee, Wisconsin 53201
Toll-Free: (800) 368-1683

Strong Schafer Value Fund II (the "Fund") is a diversified series of the
Strong Variable Insurance Funds, Inc. (the "Corporation"), an 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 September 30, 1997.

This Statement of Additional Information is not a prospectus and should be
read in conjunction with the Prospectus for the Fund dated September 30, 1997
and the prospectus for the separate account of the specific insurance product.
Requests for copies of the Fund's Prospectus may be made by calling the number
listed above.

This Statement of Additional Information is dated September 30, 1997.

<PAGE> 17

STRONG SCHAFER VALUE FUND II

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
INVESTMENT RESTRICTIONS 3
INVESTMENT POLICIES AND TECHNIQUES 4
Borrowing 5
Convertible Securities 5
Debt Obligations 5
Depositary Receipts 6
Foreign Investment Companies 7
Foreign Securities 7
Illiquid Securities 7
Lending of Portfolio Securities 8
Mortgage- and Asset-Backed Securities 9
Mortgage Dollar Rolls and Reverse Repurchase Agreements 10
Repurchase Agreements 10
Short Sales 11
Small and Medium Companies 11
Warrants 11
When-Issued Securities 11
Zero-Coupon, Step-Coupon and Pay-in-Kind Securities 12
DIRECTORS AND OFFICERS OF THE FUND 12
PRINCIPAL SHAREHOLDERS 14
INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR 14
PORTFOLIO TRANSACTIONS AND BROKERAGE 17
CUSTODIAN 20
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 20
ADMINISTRATIVE SERVICES 20
TAXES 20
DETERMINATION OF NET ASSET VALUE 22
ADDITIONAL SHAREHOLDER INFORMATION 22
FUND ORGANIZATION 23
PERFORMANCE INFORMATION 23
GENERAL INFORMATION 26
PORTFOLIO MANAGEMENT 27
INDEPENDENT ACCOUNTANTS 28
LEGAL COUNSEL 28
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 September 30, 1997 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.

<PAGE> 18

INVESTMENT RESTRICTIONS

The investment objective of the Fund is to seek long-term capital growth.
Current income is a secondary objective. 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
(the "1940 Act") which may involve a borrowing, provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of the value of the
Fund's total assets (including the amount borrowed), less the Fund's
liabilities (other than borrowings), except that the Fund may borrow up to
an additional 5% of its total assets (not including the amount borrowed)
from a bank for temporary or emergency purposes (but not for leverage or
the purchase of investments). The Fund may also borrow money from the
other Strong Funds or other persons to the extent permitted by applicable
law.

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

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

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

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

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

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

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

<PAGE> 19

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

The Fund may not:

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

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

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

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

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

6. 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.

7. 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.

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

Except for the fundamental investment limitations listed above and the
Fund's investment objective, the other investment policies described in the
Prospectus and this Statement of Additional Information are not fundamental and
may be changed with approval of the Fund 's Board of Directors. Unless noted
otherwise, if a percentage restriction is adhered to at the time of investment,
a later increase or decrease in percentage resulting from a change in the
Fund's assets (i.e., due to cash inflows or redemptions) or in market value of
the investment or the Fund's assets will not constitute a violation of that
restriction.

INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Fund's
investment 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."

<PAGE> 20

BORROWING

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

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

CONVERTIBLE SECURITIES

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

The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value,
if converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with
investment value declining as interest rates increase and increasing as
interest rates decline. The credit standing of the issuer and other factors
also may have an effect on the convertible security's investment value. The
conversion value of a convertible security is determined by the market price of
the underlying common stock. If the conversion value is low relative to the
investment value, the price of the convertible security is governed principally
by its investment value. Generally, the conversion value decreases as the
convertible security approaches maturity. To the extent the market price of
the underlying common stock approaches or exceeds the conversion price, the
price of the convertible security will be increasingly influenced by its
conversion value. A convertible security generally will sell at a premium over
its conversion value by the extent to which investors place value on the right
to acquire the underlying common stock while holding a fixed income security.

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

DEBT OBLIGATIONS

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

<PAGE> 21

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

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

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

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

DEPOSITARY RECEIPTS

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

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

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

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

<PAGE> 22

FOREIGN INVESTMENT COMPANIES

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

FOREIGN SECURITIES

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

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

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

ILLIQUID SECURITIES

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

The Board of Directors of the Fund, or its delegate, has the ultimate
authority to determine, to the extent permissible under the federal securities
laws, which securities are illiquid for purposes of this limitation. Certain
securities exempt from registration or issued in transactions exempt from
registration under the Securities Act of 1933, as amended (the "Securities

<PAGE> 23

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

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

Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act. Where registration is
required, 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 in
accordance with pricing procedures adopted by the Board of Directors of the
Fund. If through the appreciation of restricted securities or the depreciation
of unrestricted securities, the Fund should be in a position where more than
15% of the value of its net assets are invested in illiquid securities,
including restricted securities which are not readily marketable (except for
144A Securities and 4(2) commercial paper deemed to be liquid by the Advisor),
the Fund will take such steps as is deemed advisable, if any, to protect
liquidity.

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

LENDING OF PORTFOLIO SECURITIES

The Fund is authorized to lend up to 33 1/3% of the total value of its
portfolio securities to broker-dealers or institutional investors that the
Advisor deems qualified, but only when the borrower maintains with the Fund's
custodian bank collateral either in cash or money market instruments in an
amount at least equal to the market value of the securities loaned, plus
accrued interest and dividends, determined on a daily basis and adjusted
accordingly. Although the Fund is authorized to lend, the Fund does not
presently intend to engage in lending. In determining whether to lend
securities to a particular broker-dealer or institutional investor, the Advisor
will consider, and during the period of the loan will monitor, all relevant
facts and circumstances, including the creditworthiness of the borrower. The
Fund will retain authority to terminate any loans at any 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.

<PAGE> 24

MORTGAGE- AND ASSET-BACKED SECURITIES

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

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

The rate of principal payment on mortgage- and asset-backed securities
generally depends on the rate of principal payments received on the underlying
assets which in turn may be affected by a variety of economic and other
factors. As a result, the yield on any mortgage- and asset-backed security is
difficult to predict with precision and actual yield to maturity may be more or
less than the anticipated yield to maturity. The yield characteristics of
mortgage- and asset-backed securities differ from those of traditional debt
securities. Among the principal differences are that interest and principal
payments are made more frequently on mortgage-and asset-backed securities,
usually monthly, and that principal may be prepaid at any time because the
underlying mortgage loans or other assets generally may be prepaid at any time.
As a result, if 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
a Fund are likely to be greater during a period of declining interest rates
and, as a result, are likely to be reinvested at lower interest rates than
during a period of rising interest rates. Accelerated prepayments on
securities purchased by 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.

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

The 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

<PAGE> 25

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

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

MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

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

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

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

REPURCHASE AGREEMENTS

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

<PAGE> 26

SHORT SALES

The Fund may sell securities short to hedge unrealized gains on portfolio
securities or if it covers such short sale with liquid assets as required by
the current rules and positions of the Securities and Exchange Commission or
its staff. 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.

SMALL AND MEDIUM COMPANIES

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

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 do not carry with them the
right to dividends or voting rights with respect to the securities that they
entitle their holder to purchase, and they do not represent any rights in the
assets of the issuer. As a result, warrants may be considered to have more
speculative characteristics than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date.

WHEN-ISSUED SECURITIES

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

To the extent required by the SEC, the Fund will maintain cash and
marketable securities equal in value to commitments for when-issued securities.
Such segregated securities either will mature or, if necessary, be sold on or
before the settlement date. When the time comes to pay for when-issued
securities, the Fund will meet its obligations from then-available cash flow,
sale of the securities held in the separate account, described above, sale of
other securities or, although it would not

<PAGE> 27

normally expect to do so, from the sale of the when-issued securities
themselves (which may have a market value greater or less than the Fund's
payment obligation).

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

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

DIRECTORS AND OFFICERS OF THE FUND

Directors and officers of the Fund, together with information as to their
principal business occupations during the last five years, and other
information are shown below. Each director who is deemed an "interested
person," as defined in the 1940 Act, is indicated by an asterisk (*). Each
officer and director holds the same position with the 25 registered open-end
management investment companies consisting of 41 mutual funds (the "Strong
Funds"). The Strong Funds, in the aggregate, pays each Director who is not a
director, officer, or employee of the Advisor, or any affiliated company (a
"disinterested director") an annual fee of $50,000, plus $100 per Board meeting
for each Strong Fund. In addition, each disinterested director is reimbursed
by the Strong Funds for travel and other expenses incurred in connection with
attendance at such meetings. Other officers and directors of the Strong Funds
receive no compensation or expense reimbursement from the Strong Funds.

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

Prior to August 1985, Mr. Strong was Chief Executive Officer of the
Advisor, which he founded in 1974. Since August 1985, Mr. Strong has been a
Security Analyst and Portfolio Manager of the Advisor. In October 1991, Mr.
Strong also became the Chairman of the Advisor. Mr. Strong is a Director of
the Advisor. Mr. Strong has been in the investment management business since
1967. Mr. Strong has served the Fund as a Director and Chairman of the Board
since September 1997.

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

Private Investor. From 1945 to 1980, Mr. Nevins was Chairman of Wisconsin
Centrifugal Inc.; a foundry. From July 1983 to December 1986, he was Chairman
of General Casting Corp., Waukesha, Wisconsin, a foundry. Mr. Nevins is a
former Chairman of the Wisconsin Association of Manufacturers & Commerce. He
was also a regent of the Milwaukee School of Engineering and a member of the
Board of Trustees of the Medical College of Wisconsin. Mr. Nevins has served
the Fund as a Director since September 1997.

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

Mr. Davis has been Director of Alliance Bank since 1980, Sara Lee
Corporation (a food/consumer products company) since 1983, KMart Corporation (a
discount consumer products company) since 1985, YMCA Metropolitan - Los Angeles
since 1985, Dow Chemical Company since 1988, MGM Grand, Inc. (an
entertainment/hotel company) since 1990, WICOR, Inc. (a utility company) since
1990, Johnson Controls, Inc. (an industrial company) since 1992, L.A. Gear (a
footwear/sportswear company) since 1992, and Rally's Hamburger, Inc. since
1994. Mr. Davis has been a trustee of the University of Chicago since 1980,
Marquette University since 1988, and Occidental College since 1990. Since
1977, Mr.

<PAGE> 28

Davis has been President and Chief Executive Officer of All Pro Broadcasting,
Inc. Mr. Davis was a Director of the Fireman's Fund (an insurance company)
from 1975 until 1990. Mr. Davis has served the Fund as a Director since
September 1997.

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

Mr. Kritzik has been a Partner of Metropolitan Associates since 1962, a
Director of Aurora Health Care since 1987, and Health Network Ventures, Inc.
since 1992. Mr. Kritzik has served the Fund as a Director since September
1997.

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

Mr. Vogt has been the President of Vogt Management Consulting, Inc. since
1990. From 1982 until 1990, he served as Executive Director of University
Physicians of the University of Colorado. Mr. Vogt is the Past President of
the Medical Group Management Association and a Fellow of the American College
of Medical Practice Executives. Mr. Vogt has served the Fund as a Director
since September 1997.

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

Mr. Totsky has been Senior Vice President of the Advisor since 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 served the Fund as a Vice President since
September 1997.

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

Mr. Lemke has been Senior Vice President, Secretary, and General Counsel
of the Advisor since September 1994. For two years prior to joining the
Advisor, Mr. Lemke acted as Resident Counsel for Funds Management at J.P.
Morgan & Co., Inc. From February 1989 until April 1992, Mr. Lemke acted as
Associate General Counsel to Sanford C. Bernstein Co., Inc. For two years
prior to that, Mr. Lemke was Of Counsel at the Washington, D.C. law firm of Tew
Jorden & Schulte, a successor of Finley, Kumble & Wagner. From August 1979
until December 1986, Mr. Lemke worked at the Securities and Exchange
Commission, most notably as the Chief Counsel to the Division of Investment
Management (November 1984 - December 1986), and as Special Counsel to the
Office of Insurance Products, Division of Investment Management (April 1982 -
October 1984). Mr. Lemke has served the Fund as a Vice President since
September 1997.

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

Mr. Shenkenberg has been Deputy General Counsel to the Advisor since
November 1996. From December 1992 until November 1996, Mr. Shenkenberg acted
as Associate Counsel to the Advisor. From June 1987 until December 1992, Mr.
Shenkenberg was an attorney for Godfrey & Kahn, S.C., a Milwaukee law firm.
Mr. Shenkenberg has served the Fund as a Vice President and Secretary since
September 1997.

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

Mr. Weitzer has been an Associate Counsel of the Advisor since July 1993.
Mr. Weitzer has served the Fund as a Vice President since September 1997.

JOHN A. FLANAGAN (DOB 6/5/46), Treasurer of the Fund.

Mr. Flanagan has been Senior Vice President of the Advisor since April
1997. For three years prior to joining the Advisor, Mr. Flanagan was a Partner
with Coopers & Lybrand L.L.P. (an international professional services firm).
From November 1992 to April 1994, Mr. Flanagan was an independent consultant.
From October 1970 to November 1992, Mr. Flanagan was with Ernst & Young (an
international professional services firm), most notably as Partner in charge of
the Investment Company Practice of that firm's Boston office from 1982 to 1992.
Mr. Flanagan has served the Fund as the Treasurer since September 1997.

13
<PAGE> 29

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

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

RICHARD S. STRONG:

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

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

THOMAS P. LEMKE:

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

STEPHEN J. SHENKENBERG:

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

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

As of September 29, 1997, the officers and directors of the Fund did not
own any of the Fund's shares.

PRINCIPAL SHAREHOLDERS

As of September 29, 1997, no one owned of record and beneficially any
shares of the Fund.

INVESTMENT ADVISOR, SUBADVISOR, 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. Totsky is a Senior Vice President of the Advisor, Mr. Lemke is a
Senior Vice President, Secretary and General Counsel of the Advisor, Mr.
Flanagan is a Senior Vice President of the Advisor, Mr. Shenkenberg is Vice
President, Assistant Secretary, and Deputy General Counsel of the Advisor, and
Mr. Weitzer is an Associate Counsel of the Advisor. A brief description of the
Fund's investment advisory agreement ("Advisory Agreement") is set forth in the
Prospectus under "About the Fund - Management."

The Advisory Agreement for the Fund is dated September 29, 1997, and will
remain in effect for a period of two years. The Advisory Agreement was
approved by the Fund's initial shareholder on its first day of operations.
The Advisory

<PAGE> 30

Agreement is required to be approved annually by either the Board of Directors
of the Fund or by vote of a majority of the Fund's outstanding voting
securities (as defined in the 1940 Act). In either case, each annual renewal
must be approved by the vote of a majority of the Fund's directors who are not
parties to the Advisory Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such approval. 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, and will terminate
automatically in the event of its assignment.

Under the terms of the Advisory Agreement, the Advisor manages the Fund's
investments subject to the supervision of the Fund's Board of Directors. The
Advisor is responsible for investment decisions and supplies investment
research and portfolio management. At its expense, the Advisor provides office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund. The Advisor places all orders for the
purchase and sale of the Fund's portfolio securities at the Fund's expense.

As compensation for its services, the Fund pays to the Advisor a monthly
management fee at the annual rate of 1.00% of the average daily net asset value
of the Fund. (See "Shareholder Manual - Determining Your Share Price" in the
Prospectus.) From time to time, the Advisor may voluntarily waive all or a
portion of its management fee for the Fund.

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

On July 12, 1994, the Securities and Exchange Commission (the "SEC") filed
an administrative action (the "Order") against the Advisor, Mr. Strong, and
another employee of the Advisor in connection with conduct that occurred
between 1987 and early 1990. In re Strong/Corneliuson Capital Management, Inc.,
et al. Admin. Proc. File No. 3-8411. The proceeding was settled by consent
without admitting or denying the allegations in the Order. The Order found that
the Advisor and Mr. Strong aided and abetted violations of Section 17(a) of the
1940 Act by effecting trades between mutual funds, and between mutual funds and
Harbour Investments Ltd. ("Harbour"), without complying with the exemptive
provisions of SEC Rule 17a-7 or otherwise obtaining an exemption. It further
found that the Advisor violated, and Mr. Strong aided and abetted violations
of, the disclosure provisions of the 1940 Act and the Investment Advisers Act
of 1940 by misrepresenting the Advisor's policy on personal trading and by
failing to disclose trading by Harbour, an entity in which principals of the
Advisor owned between 18 and 25 percent of the voting stock. As part of the
settlement, the respondents agreed to a censure and a cease and desist order
and the Advisor agreed to various undertakings, including adoption of certain
procedures and a limitation for six months on accepting certain types of new
advisory clients.

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

The Advisor has retained Schafer Capital Management, Inc. (the
"Subadvisor") to manage as Subadvisor the Fund's investments. The Fund's
subadvisory agreement, dated September 29, 1997 (the "Subadvisory Agreement"),
was last approved by the Fund's initial shareholder on its first day of
operations. Under the terms of the Subadvisory Agreement, the Subadvisor
furnishes investment advisory and portfolio management services to the Fund
with respect to its investments. The Subadvisor is responsible for decisions
to buy and sell the Fund's investments and all other transactions related to
investment therein and the negotiation of brokerage commissions, if any, except
that the Advisor is responsible for managing the cash equivalent investments
maintained by the Fund in the ordinary course of its business and which, on
average, are expected to

<PAGE> 31

equal approximately five percent of the Fund's total assets. Purchases and
sales of securities on a securities exchange are effected through brokers who
charge a negotiated commission for their services. During the term of the
Subadvisory Agreement, the Subadvisor will bear all expenses incurred by it in
connection with its services under such agreement. The Subadvisory Agreement
requires the Advisor, not the Fund, to pay the Subadvisor a fee, computed and
paid monthly, at an annual rate of (i) .60% of the Fund's average daily net
asset value.

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

The Advisor has two relationships with the Subadvisor that are not related
to the subadvisory arrangement for the Fund. On September 7, 1997, the
Subadviser and the Advisor entered into a Limited Liability Company Agreement
(the "LLC Agreement") forming Strong Schafer Capital Management, L.L.C. (the
"LLC"). The LLC contemplates that the Subadvisor, subject to obtaining
necessary regulatory approvals, including, without limitation, approval of the
shareholders of Strong Schafer Value Fund (the "Schafer Fund"), will cause the
LLC to become the investment adviser to the Schafer Fund. The LLC agreement
further provides that each of the Subadvisor and the Advisor shall be members
of the LLC, with the Subadvisor as the managing member, and grants to Strong an
option, pursuant to which Strong may purchase the Subadvisor's interest in the
LLC, which is first exercisable on January 10, 2001, or earlier in the event of
certain other circumstances. Under the LLC Agreement, the Advisor, together
with its subsidiary, Strong Funds Distributors, Inc., is to act as distributor
of the Schafer Fund and to pay for and provide marketing assistance. The
Advisor has provided transfer agency and fund accounting services to the
Schafer Fund since January 1996. Second, since March 31, 1997, Matthew D.
Strong, the son of Richard S. Strong, CEO and controlling shareholder of the
Advisor, has been employed by Schafer Cullen Capital Management, Inc., an
affiliate of the Subadvisor, as a research analyst. Matthew D. Strong has a
beneficial interest in certain trusts which hold shares of the Advisor. In
addition to the Fund, the Subadvisor also serves as an investment subadviser to
certain other accounts for which the Advisor acts as either investment adviser
or subadviser.

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

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

The Code requires Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor or
Subadvisor, including the Fund) to, among other things, preclear their
securities transactions (with limited exceptions, such as transactions in
shares of mutual funds, direct obligations of the U.S. government, and certain
options on broad-based securities market indexes) and to execute such
transactions through the Advisor or Subadvisor's trading department. The Code,
which applies to all Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor or
Subadvisor, including the Fund), includes a ban on acquiring any securities in
an initial public offering, other than a new offering of a registered open-end
investment company, and a prohibition from profiting on short-term trading in
securities. In addition, no Access Person may purchase or sell any security
which is contemporaneously being purchased or sold, or to the knowledge of the
Access Person, is being considered
16

<PAGE> 32
for purchase or sale, by the Advisor or Subadvisor on behalf of any mutual fund
or other account managed by it. Finally, the Code provides for trading "black
out" periods of seven calendar days during which time Access Persons who are
portfolio managers may not trade in securities which may have been purchased or
sold by any mutual fund or other account managed by the portfolio manager.

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

Under a Distribution Agreement with the Fund dated September 29, 1997,
Strong Funds Distributors, Inc. ("Distributor"), an indirect 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. Since the Fund is a "no-load" fund, no sales commissions are
charged on the purchase of Fund shares. The Distribution Agreement further
provides that the Distributor will bear the additional costs of printing
Prospectuses and shareholder reports which are used for selling purposes, as
well as advertising and any other costs attributable to the distribution of the
Fund's shares. The Distributor is an indirect subsidiary of the Advisor and
controlled by the Advisor and Richard S. Strong. The Distribution Agreement is
subject to the same termination and renewal provisions as are described above
with respect to the Advisory Agreement.

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

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Advisor and the Subadvisor are 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. References in this section to the Advisor also refer to the
Subadvisor unless indicated otherwise. 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 commissions, if any. In selecting broker-dealers
and in negotiating commissions, the Advisor considers a variety of factors,
including best price and execution, the full range of brokerage services
provided by the broker, as well as its capital strength and stability, and the
quality of the research and research services provided by the broker.
Brokerage will not be allocated based on the sale of any shares of the Strong
Funds.

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

<PAGE> 33

subject to certain exceptions, and each participating account will participate
at the average share price for the bunched order on the same business day.

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

In carrying out the provisions of the Advisory Agreements, the Advisor may
cause the Fund to pay a broker, which provides brokerage and research services
to the Advisor, a commission for effecting a securities transaction in excess
of the amount another broker would have charged for effecting the transaction.
The Advisor believes it is important to its investment decision-making process
to have access to independent research. The Advisory 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 management fee paid by the Fund
under the Advisory Agreement is not reduced as a result of the Advisor's
receipt of research services.

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

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

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

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

<PAGE> 34

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

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

The Advisor places portfolio transactions for other advisory accounts,
including other mutual funds managed by the Advisor. Research services
furnished by firms through which the Fund effects 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.

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

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

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

<PAGE> 35

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

CUSTODIAN

As custodian of the Fund's assets, Firstar Trust Company, P.O. Box 761,
Milwaukee, Wisconsin 53201, has custody of all securities and cash of the Fund,
delivers and receives payment for securities sold, receives and pays for
securities purchased, collects income from investments, and performs other
duties, all as directed by 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 at no cost.

ADMINISTRATIVE SERVICES

From time to time the Fund and/or the Advisor may enter into arrangements
under which certain administrative services may be performed by the insurance
companies that purchase shares in the Fund. These administrative services may
include, among other things, responding to ministerial inquiries concerning the
Fund's investment objective, investment program, policies and performance,
transmitting, on behalf of the Fund, proxy statements, annual reports, updated
prospectuses, and other communications regarding the Fund, and providing only
related services as the Fund or its shareholders may reasonably request.
Depending on the arrangements, the Fund and/or Advisor may compensate such
insurance companies or their agents directly or indirectly for the
administrative services. To the extent the Fund compensates the insurance
company for these services, the Fund will pay the insurance company an annual
fee that will vary depending upon the number of contract holders that utilize
the Fund as the funding medium for their contracts. The insurance company may
impose other account or service charges. See the prospectus for the separate
account of the insurance company for additional information regarding such
charges.

TAXES

GENERAL

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

In order to qualify for treatment as a RIC under the Code, the Fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign
currency transactions) ("Distribution Requirement") and must meet several
additional requirements. 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 contracts) derived
with respect to its business of investing in securities or those currencies
("Income Requirement"); (2) 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 (3) 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

<PAGE> 36

RICs) of any one issuer. From time to time the Advisor may find it necessary
to make certain types of investments for the purpose of ensuring that the Fund
continues to qualify for treatment as a RIC under the Code.

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

In addition, the Fund must satisfy the diversification requirements of
Section 817(h) of the Code. In general, for the Fund to meet these investment
diversification requirements, Treasury regulations require that no more than
55% of the total value of the assets of the Fund may be represented by any one
investment, no more than 70% by two investments, no more than 80% by three
investments and no more than 90% by four investments. Generally, for purposes
of the regulations, all securities of the same issuer are treated as a single
investment. With respect to the United States Government securities (including
any security that is issued, guaranteed or insured by the United States or an
instrumentality of the United States), each governmental agency or
instrumentality is treated as a separate issuer. Compliance with the
regulations is tested on the last day of each calendar year quarter. There is
a 30-day period after the end of each calendar year quarter in which to cure
any non-compliance with these requirements.

FOREIGN TRANSACTIONS

Interest and dividends received by the 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.

The Fund maintains its accounts and calculates its income in U.S. dollars.
In general, gain or loss (1) from the disposition of foreign currencies and
forward currency contracts, (2) from the disposition of
foreign-currency-denominated debt securities that are attributable to
fluctuations in exchange rates between the date the securities are acquired and
their disposition date, and (3) attributable to fluctuations in exchange rates
between the time the Fund accrues interest or other receivables or expenses or
other liabilities denominated in a foreign currency and the time the Fund
actually collects those receivables or pays those liabilities, will be treated
as ordinary income or loss. A foreign-currency-denominated debt security
acquired by the 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, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock or of any gain on disposition of the stock (collectively, "PFIC income"),
plus interest thereon, even if the Fund distributes the PFIC income to its
shareholders. The balance of the PFIC income will be included in the Fund's
investment company taxable income and, accordingly, will not be taxable to it
to the extent that income is distributed to its shareholders. If the Fund
invests in a PFIC and elects to treat the PFIC as a "qualified electing fund,"
then in lieu of the foregoing tax and interest obligation, the Fund will be
required to include in income each year its pro rata share of the qualified
electing fund's annual ordinary earnings and net capital gain (the excess of
net long-term capital gain over net short-term capital loss) -- which probably
would have to be distributed to its shareholders to satisfy the Distribution
Requirement -- 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.

<PAGE> 37

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

The Fund may acquire zero-coupon, step-coupon, or other securities issued
with original issue discount. As a 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 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, 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.

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

DETERMINATION OF NET ASSET VALUE

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 (the "NYSE") is open for trading. The NYSE is open for trading Monday
through Friday except New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday, the
NYSE will not be open for trading on the preceding Friday, and when any such
holiday falls on a Sunday, the NYSE will not be open for trading on the
succeeding Monday, unless unusual business conditions exist, such as the ending
of a monthly or the yearly accounting period.

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

ADDITIONAL SHAREHOLDER INFORMATION

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

<PAGE> 38

dollar amount or number of shares to be redeemed and the date of the
transaction (please call 1-800-368-3863). This will provide the Fund with
sufficient time to raise the cash in an orderly manner to pay the redemption
and thereby minimize the effect of the redemption on the interests of the
Fund's remaining shareholders. Redemption checks in excess of the lesser of
$250,000 or 1% of the Fund's assets during any 90-day period may not be honored
by the Fund if the Advisor determines that existing conditions make cash
payments undesirable.

FUND ORGANIZATION

The Fund is a series of Strong Variable Insurance Funds, Inc., a Wisconsin
corporation (the "Corporation"). The Corporation (formerly known as Strong
Discovery Fund II, Inc., formerly known as Strong D Fund, Inc.) was organized
on December 28, 1990 and is authorized to issue an indefinite shares of common
stock and series and classes of series of shares of common stock, with a par
value of $.00001 per share. The Corporation is authorized to issue an
indefinite shares of common stock of the Fund. Each share of the Corporation
has one vote, and all shares of a series participate equally in dividends and
other capital gains distributions and in the residual assets of that Fund in
the event of liquidation. Fractional shares have the same rights
proportionately as do full shares. Shares of the Corporation have no
preemptive, conversion, or subscription rights. The Corporation currently has
seven series of common stock outstanding. The assets belonging to each series
of shares is held separately by the custodian, and in effect each series is a
separate fund. All holders of shares of the Corporation 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. Because of current
federal securities law requirements the Corporation expects that its
shareholders will offer to owners of variable annuity and variable life
insurance contracts the opportunity to instruct them as to how shares allocable
to their contracts will be voted with respect to certain matters, such as
approval of changes to the investment advisory agreement.

PERFORMANCE INFORMATION

As described under "Additional Information - Performance Information" 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, contracts 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 SEC. 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 one 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.

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

<PAGE> 39

paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Total return may also be shown as the increased
dollar value of the hypothetical investment over the period.

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

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 depositary 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 depositary institutions are subject to change at any time specified by
the issuing institution.

(3) MONEY MARKET FUNDS
Investors may also want to compare performance of 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
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 and do not represent future results.

<PAGE> 40

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

(8) INDICES
The Fund may compare its performance to a wide variety of indices. There
are differences and similarities between the investments that the Fund may
purchase for its portfolio and the investments measured by the indices.

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

(10) STRONG VARIABLE INSURANCE FUNDS
The Strong Variable Insurance Funds offer a range of investment options.
All of the members of the Strong Variable Insurance Funds and their investment
objectives are listed below. The Funds are listed in ascending order of risk
and return, as determined by the Funds' Advisor.

<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
<S> <C>
Strong Advantage Fund II Current income with a very low degree of
share-price fluctuation.
- --------------------------------------------------------------------------------
Strong Government Securities Fund II Total return by investing for a high level
of current income with a moderate degreee
of share-price fluctuation.
- --------------------------------------------------------------------------------
Strong Asset Allocation Fund II High total return consistent with
reasonable risk over the long term.
- --------------------------------------------------------------------------------
Strong Schafer Value Fund II Long-term Capital growth. Current income
is a secondary objective.
- --------------------------------------------------------------------------------
Strong Opportunity Fund II Capital growth.
- --------------------------------------------------------------------------------
Strong Growth Fund II Capital growth.
- --------------------------------------------------------------------------------
Strong Discovery Fund II Capital growth.
- --------------------------------------------------------------------------------
Strong International Stock Fund II Capital growth.
- --------------------------------------------------------------------------------
</TABLE>

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

<PAGE> 41

relationship between risk and reward as it relates to an individual investor's
portfolio. Financial goals vary from person to person. You may choose one or
more of the Strong Variable Insurance Funds to help you reach your financial
goals.

The Advisor also serves as advisor to the Strong Family of Funds, which is
a retail fund complex composed of 25 open-end management investment companies.

ADDITIONAL FUND INFORMATION

(1) PORTFOLIO CHARACTERISTICS

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

(2) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

Occasionally statistics may be used to specify Fund volatility or risk.
The general premise is that greater volatility connotes greater risk undertaken
in achieving performance. Measures of volatility or risk are generally used to
compare the Fund's net asset value or performance relative to a market index.
One measure of volatility is beta. Beta is the volatility of a fund relative
to the total market as represented by the Standard & Poor's 500 Stock Index. A
beta of more than 1.00 indicates volatility greater than the market, and a beta
of less than 1.00 indicates volatility less than the market. Another measure
of volatility or risk is standard deviation. Standard deviation is a
statistical tool that measures the degree to which a fund's performance has
varied from its average performance during a particular time period.

Standard deviation is calculated using the following formula:

2
Standard deviation = the square root of E(x - x )
i m
---------
n-1

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

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

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

GENERAL INFORMATION

BUSINESS PHILOSOPHY

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

<PAGE> 42

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

INVESTMENT ENVIRONMENT

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

EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING

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

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

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

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

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

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

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

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

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

PORTFOLIO MANAGEMENT

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

The Subadvisor's investment philosophy includes the following basic
beliefs:

<PAGE> 43

1. Stocks with lower P/E ratios and higher growth rates than the
Standard & Poor's 500 Index are attractive investment candidates for
value-oriented investors.

2. Market timing is rarely successful. Instead, the Subadvisor
maintains a long-term perspective, normally remaining fully invested
regardless of market conditions.

3. Allocating relatively equal weighting to portfolio holdings
ensures a disciplined, rational approach to the investment process.

4. Since the Subadvisor invests in a limited number of stocks,
its selection of holdings typically requires a judicious buy and
sell discipline.

The Subadvisor employs a value-oriented management style that focuses on
mid-to large-capitalization stocks. The investment process generally includes
roughly equally weighting each issue and holding a relatively limited number of
stocks in the portfolio. The Subadvisor generally utilizes a "buy and hold"
strategy, but remains aware of the status of each individual holding. As a
result of this long-term approach, the Fund typically has a low annual turnover
rate (50% or less). As the Subadvisor identifies attractive new investments,
current Fund holdings are evaluated to determine sell candidates.

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 SEC.

LEGAL COUNSEL

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

<PAGE> 44

APPENDIX

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

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

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

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

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

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

2. Nature of and provisions of the obligation.

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

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

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

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

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

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

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

A-1

<PAGE> 45

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

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

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

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

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

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

MOODY'S LONG-TERM DEBT RATINGS

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

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

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

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

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

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

A-2

<PAGE> 46

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

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

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

FITCH INVESTORS SERVICE, INC. BOND RATINGS

Fitch investment grade bond and preferred stock 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 or preferred issue 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 and preferred stock carrying 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 and preferred stock considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally
strong ability to pay interest and/or dividends and repay principal,
which is unlikely to be affected by reasonably foreseeable events.

AA Bonds and preferred stock considered to be investment grade
and of very high credit quality. The obligor's ability to pay
interest and/or dividends and repay principal is very strong,
although not quite as strong as bonds rated 'AAA'. Because bonds
and preferred stock 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 and preferred stock considered to be investment grade
and of high credit quality. The obligor's ability to pay interest
and/or dividends and repay principal is considered to be strong,
but may be more vulnerable to adverse changes in economic
conditions and circumstances than debt or preferred securities with
higher ratings.

BBB Bonds and preferred stock considered to be investment grade
and of satisfactory credit quality. The obligor's ability to pay
interest or dividends 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 securities
and, therefore, impair timely payment. The likelihood that the
ratings of these bonds or preferred will fall below investment grade
is higher than for securities with higher ratings.

A-3

<PAGE> 47

Fitch speculative grade bond or preferred stock 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 or dividends in accordance with the
terms of obligation for issues not in default. For defaulted bonds or
preferred stock, the rating ('DDD' to 'D') is an assessment of the ultimate
recovery value through reorganization or liquidation.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer or possible recovery value in
bankruptcy, 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.

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

BB Bonds or preferred stock are considered speculative. The
obligor's ability to pay interest or dividends 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 or preferred stock are considered highly speculative.
While bonds in this class are currently meeting debt service
requirements or paying dividends, 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 or preferred stock have certain identifiable
characteristics that, if not remedied, may lead to default. The
ability to meet obligations requires an advantageous business and
economic environment.

CC Bonds or preferred stock 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 or suspension of preferred stock dividends is imminent.

DDD, DD,
and D Bonds are in default on interest and/or principal payments
or preferred stock dividends are suspended. Such securities 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 securities, 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. From time
to time, Duff & Phelps Credit Rating Co. places issuers or security classes on
Rating Watch. The Rating Watch Status results from a need to notify investors
and the issuer that there are conditions present leading us to re-evaluate the
current rating(s). A listing on Rating Watch, however, does not mean a rating
change is inevitable. The Rating Watch Status can either be resolved quickly
or over a longer period of time, depending on the reasons surrounding the
placement on Rating Watch. The "up" designation means a rating may be
upgraded; the "down" designation means a rating may be downgraded, and the
uncertain designation means a rating may be raised or lowered.

A-4

<PAGE> 48

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. Structured finance issues, including real estate,
asset-backed and mortgage-backed financings, use this same rating scale with
minor modification in the definitions. Thus, an investor can compare the
credit quality of investment alternatives across industries and structural
types. A "Cash Flow Rating" (as noted for specific ratings) addresses the
likelihood that aggregate principal and interest will equal or exceed the rated
amount under appropriate stress conditions.

<TABLE>
<S> <C>
RATING SCALE DEFINITION

AAA Highest credit quality. The risk factors are negligible, being only slightly more
than for risk-free U.S. Treasury debt.

AA+ High credit quality. Protection factors are strong. Risk is modest, but may
AA vary slightly from time to time because of economic conditions.
AA-

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

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

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

B+ Below investment grade and possessing risk that obligations will not be met
B when due. Financial protection factors will fluctuate widely according to
B- 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.
</TABLE>

A-5

<PAGE> 49

IBCA LONG-TERM DEBT RATINGS

AAA - Obligations for which there is the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial,
such that adverse changes in business, economic or financial conditions are
unlikely to increase investment risk substantially.

AA - Obligations for which there is a very low expectation of investment
risk. Capacity for timely repayment of principal and interest is substantial.
Adverse changes in business, economic or financial conditions may increase
investment risk, albeit not very significantly.

A - Obligations for which there is a low expectation of investment risk.
Capacity for timely repayment of principal and interest is strong, although
adverse changes in business, economic or financial conditions may lead to
increased investment risk.

BBB - Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal and interest is
adequate, although adverse changes in business, economic or financial
conditions are more likely to lead to increased investment risk than for
obligations in other categories.

BB - Obligations for which there is a possibility of investment risk
developing. Capacity for timely repayment of principal and interest exists,
but is susceptible over time to adverse changes in business, economic or
financial conditions.

B - Obligations for which investment risk exists. Timely repayment of
principal and interest is not sufficiently protected against adverse changes in
business, economic or financial conditions.

CCC - Obligations for which there is a current perceived possibility of
default. Timely repayment of principal and interest is dependent on favorable
business, economic or financial conditions.

CC - Obligations which are highly speculative or which have a high risk of
default.

C - Obligations which are currently in default.

Notes: "+" or "-" may be appended to a rating below AAA to denote relative
status within major rating categories. Ratings of BB and below are assigned
where it is considered that speculative characteristics are present.

THOMSON BANKWATCH LONG-TERM DEBT RATINGS

Long-Term Debt Ratings assigned by Thomson BankWatch also weigh heavily
government ownership and support. The quality of both the company's management
and franchise are of even greater importance in the Long-Term Debt Rating
decisions. Long-Term Debt Ratings look out over a cycle and are not adjusted
frequently for what we believe are short-term performance aberrations.

Long-Term Debt Ratings can be restricted to local currency debt - ratings
will be identified by the designation LC. In addition, Long-Term Debt Ratings
may include a plus (+) or minus (-) to indicate where within the category the
issue is placed. BankWatch Long-Term Debt Ratings are based on the following
scale:

Investment Grade

AAA (LC-AAA) - Indicates that the ability to repay principal and interest
on a timely basis is extremely high.

AA (LC-AA) - Indicates a very strong ability to repay principal and
interest on a timely basis, with limited incremental risk compared to issues
rated in the highest category.

A (LC-A) - Indicates the ability to repay principal and interest is
strong. Issues rated A could be more vulnerable to adverse developments (both
internal and external) than obligations with higher ratings.

A-6

<PAGE> 50

BBB (LC-BBB) - The lowest investment-grade category; indicates an
acceptable capacity to repay principal and interest. BBB issues are more
vulnerable to adverse developments (both internal and external) than
obligations with higher ratings.

Non-Investment Grade - may be speculative in the likelihood of timely repayment
of principal and interest

BB (LC-BB) - While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for lower-rated issues.
However, there are significant uncertainties that could affect the ability to
adequately service debt obligations.

B (LC-B) - Issues rated B show higher degree of uncertainty and therefore
greater likelihood of default than higher-rated issues. Adverse developments
could negatively affect the payment of interest and principal on a timely
basis.

CCC (LC-CCC) - Issues rated CCC clearly have a high likelihood of default,
with little capacity to address further adverse changes in financial
circumstances.

CC (LC-CC) - CC is applied to issues that are subordinate to other
obligations rated CCC and are afforded less protection in the event of
bankruptcy or reorganization.

D (LC-D) - Default.

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

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

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

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

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

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

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

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

STANDARD & POOR'S NOTE RATINGS

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

A-7

<PAGE> 51

The following criteria will be used in making the assessment:

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

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

Note rating symbols and definitions are as follows:

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

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

SP-3 Speculative capacity to pay principal and interest.

MOODY'S SHORT-TERM RATINGS

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

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

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

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

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

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

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.

A-8

<PAGE> 52

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

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

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

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

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

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

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

DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

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

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

The distinguishing feature of Duff & Phelps' short-term ratings is the
refinement of the traditional '1' category. The majority of short-term debt
issuers carry the highest rating, yet quality differences exist within that
tier. As a consequence, Duff & Phelps has incorporated gradations of '1+' (one
plus) and '1-' (one minus) to assist investors in recognizing those
differences.

From time to time, Duff & Phelps places issuers or security classes on
Rating Watch. The Rating Watch status results from a need to notify investors
and the issuer that there are conditions present leading us to re-evaluate the
current rating(s). A listing on Rating Watch, however, does not mean a rating
change is inevitable.

The Rating Watch status can either be resolved quickly or over a longer
period of time, depending on the reasons surrounding the placement on Rating
Watch. The "up" designation means a rating may be upgraded; the "down"
designation means a rating may be downgraded, and the "uncertain" designation
means a rating may be raised or lowered.

Rating Scale: Definition

High Grade

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

A-9

<PAGE> 53

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

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

Good Grade

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

Satisfactory Grade

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

Non-Investment Grade

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

Default

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

THOMSON BANKWATCH (TBW) SHORT-TERM RATINGS

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

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

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

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

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

IBCA SHORT-TERM RATINGS

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

A1 Obligations supported by the highest capacity for timely repayment.
Where issues possess a particularly strong credit feature, a rating of
A1+ is assigned.

A2 Obligations supported by a good capacity for timely repayment.

A-10

<PAGE> 54

A3 Obligations supported by a satisfactory capacity for timely repayment.

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

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

A-11

<PAGE> 55

STRONG VARIABLE INSURANCE FUNDS, INC.

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

(1) Strong Discovery Fund II, Strong Advantage Fund II, Strong
Asset Allocation Fund II, Strong International Stock Fund
II, and Strong Government Securities Fund II (Audited)

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

Incorporated by reference to the Annual Reports to
Shareholders of the Strong Variable Insurance Funds dated
December 31, 1996, pursuant to Rule 411 under the Securities
Act of 1933. (File Nos. 33-45321 and 811-6553)

(2) Strong Growth Fund II (Unaudited)

Schedule of Investments in Securities
Statement of Operations
Statement of Assets and Liabilities
Statement of Changes in Net Assets
Notes to Financial Statements
Financial Highlights

Included in Parts A & B.

(3) Strong Schafer Value Fund II

Inapplicable

(b) Exhibits

(1) Articles of Incorporation dated July 31, 1996 (6)
(1.1) Amendment to Articles of Incorporation dated August 7, 1997
(2) Bylaws dated October 20, 1995 (3)
(3) Inapplicable
(4) Inapplicable
(5) Investment Advisory Agreement (1)
(5.1) Subadvisory Agreement (Strong Schafer Value Fund II)
(6) Distribution Agreement (3)
(7) Inapplicable
(8) Custody Agreement with Firstar (Strong Advantage Fund II,
Strong Asset Allocation Fund II, Strong Discovery Fund II,
Strong Government Securities Fund II, Strong Growth Fund
II, and Strong Schafer Value Fund II) (5)

C-1

<PAGE> 56

(8.1) Custody Agreement with Brown Brothers Harriman & Co.
(Strong International Stock Fund II) (5)
(8.1.1) Amendment to Custody Agreement with Brown Brothers
Harriman & Co. (Strong International Stock Fund II) (4)
(8.1.2) Amendment to Custody Agreement with Brown Brothers
Harriman & Co. dated August 20, 1996 (Strong
International Stock Fund II) (6)
(8.2) Global Custody Agreement with Brown Brothers Harriman &
Co. (Strong Advantage Fund II, Strong Asset Allocation
Fund II, Strong Discovery Fund II, Strong Growth Fund II,
and Strong Schafer Value Fund II) (5)
(9) Shareholder Servicing Agent Agreement (3)
(10) Opinion of Counsel (Strong Schafer Value Fund II)
(11) Inapplicable
(12) Inapplicable
(13) Stock Subscription Agreement (Strong Schafer Value
Fund II)
(14) Inapplicable
(15) Inapplicable
(16) Computation of Performance Figures (6)
(17) Financial Data Schedule (6)
(18) Inapplicable
(19) Power of Attorney dated April 24, 1997 (6)
(20) Letter of Representation (Strong Schafer Value Fund II)
(21.1) Code of Ethics for Access Persons dated October 18,
1996 (6)
(21.2) Code of Ethics for Non-Access Persons dated October 18,
1996 (6)

______________________________________
(1) Incorporated herein by reference to Post-Effective Amendment No. 7 to
the Registration Statement on Form N-1A of Registrant filed on or
about April 20, 1995.

(2) Incorporated herein by reference to Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A of Registrant filed on or
about May 9, 1995.

(3) Incorporated herein by reference to Post-Effective Amendment No. 9 to
the Registration Statement on Form N-1A of Registrant filed on or
about July 7, 1995.

(4) Incorporated herein by reference to Post-Effective Amendment No. 11 to
the Registration Statement on Form N-1A of Registrant filed on or about
April 23, 1996.

(5) Incorporated herein by reference to Post-Effective Amendment No. 13 to
the Registration Statement on Form N-1A of Registrant filed on or about
July 30, 1996.

(6) Incorporated herein by reference to Post-Effective Amendment No. 14 to
the Registration Statement on Form N-1A of Registrant filed on or about
April 25, 1997.

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.

C-2

<PAGE> 57

Item 26. Number of Holders of Securities

Number of Record Holders
Title of Class as of August 31, 1997
-------------- -------------------
<S> <C>
Common Stock, $.00001 par value:

Strong Advantage Fund II 3
Strong Asset Allocation Fund II 2
Strong Discovery Fund II 12
Strong Government Securities Fund II 1
Strong Growth Fund II 4
Strong International Stock Fund II 9
Strong Schafer Value Fund II 0
</TABLE>

Item 27. Indemnification

Officers and directors are insured under a joint errors and omissions
insurance policy underwritten by American International Group and Great
American Insurance Company in the aggregate amount of $80,000,000, subject to
certain deductions. Pursuant to the authority of the Wisconsin Business
Corporation Law ("WBCL"), Article VII of Registrant's Bylaws provides as
follows:

ARTICLE VII. INDEMNIFICATION OF OFFICERS AND DIRECTORS

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

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

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

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

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, Subadvisor,
and Distributor" in the Statement of Additional Information is hereby
incorporated by reference pursuant to Rule 411 under the Securities Act of 1933.

Item 29. Principal Underwriters

(a) Strong Funds Distributors, Inc., principal underwriter for
Registrant, also serves as principal underwriter for Strong Advantage Fund,
Inc.; Strong Asia Pacific Fund, Inc.; Strong Asset Allocation Fund, Inc.;

C-3

<PAGE> 58

Strong Common Stock Fund, Inc.; Strong Conservative Equity Funds, Inc.; Strong
Corporate Bond Fund, Inc.; Strong Discovery Fund, Inc.; Strong Equity Funds,
Inc.; Strong Government Securities Fund, Inc.; Strong Heritage Reserve Series,
Inc.; Strong High-Yield Municipal Bond Fund, Inc.; Strong Income Funds, Inc.;
Strong Institutional Funds, Inc.; Strong International Bond Fund, Inc.; Strong
International Stock Fund, Inc.; Strong Money Market Fund, Inc.; Strong
Municipal Bond Fund, Inc.; Strong Municipal Funds, Inc.; Strong Opportunity
Fund, Inc.; Strong Schafer Value Fund, Inc.; Strong Short-Term Bond Fund, Inc.;
Strong Short-Term Global Bond Fund, Inc.; Strong Short-Term Municipal Bond
Fund, Inc.; Strong Special Fund II, Inc.; and Strong Total Return Fund, Inc.

(b) The information contained under "Management" in the Prospectus and
under "Directors and Officers of the Fund" and "Investment Advisor, Subadvisor,
and Distributor" in the Statement of Additional Information is hereby
incorporated 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 Vice President,
Thomas P. Lemke, 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

(a) Inapplicable.

(b) The Registrant undertakes to file a post-effective amendment,
using financial statements which need not be certified, within four to six
months from commencement of operations with respect to Strong Schafer Value
Fund II.

(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered, upon request and without charge, a copy of Strong
Discovery Fund II's, Strong Advantage Fund II's, Strong Asset Allocation Fund
II's, Strong Government Securities Fund II's, Strong Growth Fund II's and
Strong International Stock Fund II's latest annual report to shareholders.

C-4

<PAGE> 59

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 16 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 16 to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the Village of Menomonee Falls, and State of Wisconsin on the
25th day of September, 1997.

STRONG VARIABLE INSURANCE FUNDS, INC.
(Registrant)

By: /s/ Thomas P. Lemke
----------------------------------
Thomas P. Lemke, Vice President

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 16 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated.

Name Title Date
---- ----- ----
<S> <C> <C>
Vice President (Acting Principal
/s/ Thomas P. Lemke Executive Officer) September 25, 1997
- ---------------------
Thomas P. Lemke

/s/ Richard S. Strong Chairman of the Board and a Director September 25, 1997
- ---------------------
Richard S. Strong

Treasurer (Principal Financial and
/s/ John A. Flanagan Accounting Officer) September 25, 1997
- ---------------------
John A. Flanagan

Director September 25, 1997
- ---------------------
Marvin E. Nevins*

Director September 25, 1997
- ---------------------
Willie D. Davis*

Director September 25, 1997
- ---------------------
William F. Vogt*

Director September 25, 1997
- ---------------------
Stanley Kritzik*

</TABLE>

* John S. Weitzer signs this document pursuant to powers of attorney filed
with Post-Effective Amendment No. 14 to the Registration Statement on
Form N-1A.

By: /s/ John S. Weitzer
-------------------
John S. Weitzer

<PAGE> 60

EXHIBIT INDEX

<TABLE>
<CAPTION>
EDGAR
Exhibit No. Exhibit Exhibit No.
- ----------- ------- -----------
<S> <C> <C>
(1.1) Amendment to Articles of Incorporation EX-99.B1.1

(5.1) Subadvisory Agreement EX-99.B5.1

(10) Opinion of Counsel EX-99.B10

(13) Stock Subscription Agreement EX-99.B13

(20) Letter of Representation EX-99.B20

</TABLE>

<PAGE> 1

Exhibit 99.B1.1

AMENDMENT OF ARTICLES OF INCORPORATION

STRONG VARIABLE INSURANCE FUNDS, INC.

The undersigned officer of Strong Variable Insurance Funds, Inc. (the
"Corporation"), hereby certifies that in accordance with Section 180.1002 of
the Wisconsin Statutes, the following Amendment was duly adopted to redesignate
Strong A Fund II as Strong Schafer Value Fund II:

"Paragraph A of Article IV is hereby amended by deleting Paragraph A
thereof and inserting the following as a new paragraph:

'A. The Corporation shall have the authority to issue an indefinite number
of shares of Common Stock with a par value of $.00001 per share. Subject to the
following paragraph the authorized shares are classified as follows:

Class Authorized Number of Shares
----- ---------------------------
<S> <C>
Strong Advantage Fund II Indefinite
Strong Asset Allocation Fund II Indefinite
Strong Discovery Fund II Indefinite
Strong International Stock Fund II Indefinite
Strong Growth Fund II Indefinite
Strong Government Securities Fund II Indefinite
Strong Schafer Value Fund II Indefinite'"

</TABLE>

This Amendment to the Articles of Incorporation of the Corporation was
adopted by the Board of Directors on July 25, 1997, in accordance with Sections
180.1002 and 180.0602(2) of the Wisconsin Statutes. Shareholder approval was
not required.

Executed in duplicate this 13th day of August, 1997.

STRONG VARIABLE INSURANCE FUNDS, INC.

By: /s/Stephen J. Shenkenberg
----------------------------------
Stephen J. Shenkenberg,
Vice President and Secretary

This instrument was drafted by:

John S. Weitzer
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051

<PAGE> 1
Exhibit 99.B5.1

SUBADVISORY AGREEMENT

THIS AGREEMENT is made and entered into on this 29th day of September,
1997 between STRONG CAPITAL MANAGEMENT, INC. (the "Adviser"), a Wisconsin
corporation registered under the Investment Advisers Act of 1940, as amended
(the "Advisers Act"), and SCHAFER CAPITAL MANAGEMENT, INC. (the "Subadviser"),
a Delaware corporation registered under the Advisers Act.

WITNESSETH:

WHEREAS, Strong Schafer Value Fund II (the "Fund"), a series of the Strong
Variable Insurance Funds, Inc., a Wisconsin corporation, is in the process of
registering with the U.S. Securities and Exchange Commission (the "Commission")
as a series fund of an open-end management investment company under the
Investment Company Act of 1940, as amended (the "Investment Company Act");

WHEREAS, the Advisory Agreement permits the Adviser to delegate certain of
its duties under the Advisory Agreement to other investment advisers, subject
to the requirements of the Investment Company Act; and

WHEREAS, the Adviser desires to retain the Subadviser as subadviser for
the Fund to act as investment adviser for and to manage the Fund's Investments
(as defined below) and the Subadviser desires to render such services.

NOW, THEREFORE, the Adviser and Subadviser do mutually agree and promise
as follows:

1. Appointment as Subadviser. The Adviser hereby retains the Subadviser
to act as investment adviser for and to manage certain assets of the Fund
subject to the supervision of the Adviser and the Board of Directors of the
Fund and subject to the terms of this Agreement; and the Subadviser hereby
accepts such employment. In such capacity, the Subadviser shall be responsible
for the Fund's investments.

2. Duties of Subadviser.

(a) Investments. The Subadviser is hereby authorized and directed
and hereby agrees, subject to the stated investment policies and restrictions
of the Fund as set forth in the Fund's current prospectus and statement of
additional information as currently in effect and as supplemented or amended
from time to time (collectively referred to hereinafter as the "Prospectus")
and subject to the directions of the Adviser and the Fund's Board of
Directors, to purchase, hold and sell investments for the account

<PAGE> 2

of the Fund (hereinafter "Investments") and to monitor on a continuous
basis the performance of such Investments.

(b) Allocation of Brokerage. The Subadviser is authorized, subject
to the supervision of the Adviser and the Board of Directors of the Fund,
to place orders for the purchase and sale of the Fund's Investments with
or through such persons, brokers or dealers, and to negotiate commissions
to be paid on such transactions in accordance with the Fund's policy with
respect to brokerage as set forth in the Prospectus. The Subadviser may,
on behalf of the Fund, pay brokerage commissions to a broker which
provides brokerage and research services to the Subadviser in excess of
the amount another broker would have charged for effecting the
transaction, provided (i) the Subadviser determines in good faith that
the amount is reasonable in relation to the value of the brokerage and
research services provided by the executing broker in terms of the
particular transaction or in terms of the Subadviser's overall
responsibilities with respect to the Fund and the accounts as to which
the Subadviser exercises investment discretion, (ii) such payment is made
in compliance with Section 28(e) of the Securities Exchange Act of 1934,
as amended, and any other applicable laws and regulations, and (iii) in
the opinion of the Subadviser, the total commissions paid by the Fund
will be reasonable in relation to the benefits to the Fund over the long
term. It is recognized that the services provided by such brokers may be
useful to the Subadviser in connection with the Subadviser's services to
other clients. On occasions when the Subadviser deems the purchase or
sale of a security to be in the best interests of the Fund as well as
other clients of the Subadviser, the Subadviser, to the extent permitted
by applicable laws and regulations, may, but shall be under no obligation
to, aggregate the securities to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions and efficient
execution. In such event, allocation of securities so sold or purchased,
as well as the expenses incurred in the transaction, will be made by the
Subadviser in the manner the Subadviser considers to be the most
equitable and consistent with its fiduciary obligations to the Fund and
to such other clients.

(c) Securities Transactions. The Subadviser and any affiliated
person of the Subadviser will not purchase securities or other
instruments from or sell securities or other instruments to the Fund;
provided, however, the Subadviser may purchase securities or other
instruments from or sell securities or other instruments to the Fund if
such transaction is permissible under applicable laws and regulations,
including, without limitation, the Investment Company Act and the
Advisers Act and the rules and regulations promulgated thereunder.

The Subadviser agrees to observe and comply with Rule 17j-1 under
the Investment Company Act and the Fund's Code of Ethics, as the same may
be amended

<PAGE> 3

from time to time (or, in the case of the Fund's Code of Ethics, to
adopt or have adopted a Code of Ethics that complies in all material
respects with the requirements of the Fund's Code of Ethics). The
Subadviser will make available to the Adviser or the Fund at any time
upon request, including facsimile without delay, during any business day
any reports required to be made by the Subadviser pursuant to Rule 17j-1
under the Investment Company Act.

(d) Books and Records. The Subadviser will maintain all books and
records required to be maintained pursuant to the Investment Company Act
and the rules and regulations promulgated thereunder with respect to
transactions made by it on behalf of the Fund including, without
limitation, the books and records required by Subsections (b)(1), (5),
(6), (7), (9), (10) and (11) and Subsection (f) of Rule 31a-1 under the
Investment Company Act and shall timely furnish to the Adviser all
information relating to the Subadviser's services hereunder needed by the
Adviser to keep such other books and records of the Fund required by Rule
31a-1 under the Investment Company Act. The Subadviser will also
preserve all such books and records for the periods prescribed in Rule
31a-2 under the Investment Company Act, and agrees that such books and
records shall remain the sole property of the Fund and shall be
immediately surrendered to the Fund upon request. The Subadviser further
agrees that all books and records maintained hereunder shall be made
available to the Fund or the Adviser at any time upon request, including
facsimile without delay, during any business day.

(e) Information Concerning Investments and Subadviser. From time to
time as the Adviser or the Fund may request, the Subadviser will furnish
the requesting party reports on portfolio transactions and reports on
Investments held in the portfolio, all in such detail as the Adviser or
the Fund may request. The Subadviser will also provide the Fund and the
Adviser on a regular basis with economic and investment analyses and
reports or other investment services normally available to institutional
or other clients of the Subadviser.

The Subadviser will make available its officers and employees to
meet with the Fund's Board of Directors at the Fund's principal place of
business on due notice to review the Investments of the Fund (through
quarterly telephone presentations and, if necessary, an in-person
presentation once per year). The Subadviser further agrees to inform the
Fund and the Adviser on a current basis of changes in investment
strategy, tactics or key personnel.

The Subadviser will also provide such information or perform such
additional acts as are customarily performed by a subadviser and may be
required for the Fund or the Adviser to comply with their respective
obligations under applicable laws,

3
<PAGE> 4

including, without limitation, the Internal Revenue Code of 1986, as
amended (the "Code"), the Investment Company Act, the Advisers Act, the
Securities Act of 1933, as amended (the "Securities Act") and any state
securities laws, and any rule or regulation thereunder.

(f) Custody Arrangements. The Subadviser acknowledges receipt of
the Custody Agreement for the Fund, dated September 29, 1997, and the
Global Custody Agreement for the Fund, dated September 15, 1997, and
agrees to comply at all times with all requirements relating to such
arrangements. The Subadviser shall provide the Adviser, and the Adviser
shall provide the Fund's custodian, on each business day with information
relating to all transactions concerning the Fund's assets.

(g) Adviser Representatives. The Subadviser shall include at least
two (2) representatives of the Adviser, as specified by the Adviser, in
the list of individuals authorized to give directions (without
restrictions of any kind) to brokers and dealers utilized by the
Subadviser to execute portfolio transactions for the Fund and custodians
or depositories that hold securities or other assets of the Fund at any
time. Subadviser shall have no liability or responsibility for the
actions of such representatives of the Adviser. For so long as this
Agreement is in effect, the Adviser will not issue any instructions under
this provision without prior notice to the Subadviser.

(h) Compliance with Applicable Laws and Governing Documents. The
Subadviser agrees that in all matters relating to its performance under
this Agreement, the Subadviser and its directors, officers, partners,
employees and interested persons, will act in accordance with all
applicable laws, including, without limitation, the Investment Company
Act, the Advisers Act, the Code, and state securities laws, and any
rules and regulations promulgated thereunder. The Subadviser further
agrees to act in accordance with the Fund's Articles of Incorporation,
By-Laws, currently effective registration statement under the Investment
Company Act, including any amendments or supplements thereto, and Notice
of Eligibility under Rule 4.5 of the CEA, if applicable, (collectively,
"Governing Instruments and Regulatory Filings") and any instructions or
directions of the Fund, its Board of Directors or the Adviser.

The Subadviser acknowledges receipt of the Fund's Governing
Instruments and Regulatory Filings. The Adviser hereby agrees to provide
to the Subadviser any amendments, supplements or other changes to the
Governing Instruments and Regulatory Filings as soon as practicable after
such materials become available and, upon receipt by the Subadviser, the
Subadviser will act in accordance with such amended, supplemented or
otherwise changed Governing Instruments and Regulatory Filings.

<PAGE> 5

(i) Fund's Name; Adviser's Name. The Subadviser agrees that it
shall have no rights of any kind relating to name "Strong" as it is used
in connection with investment products, services or otherwise, and that
it shall make no use of such names without the express written consent of
the Fund or the Adviser, as the case may be.

(j) Voting of Proxies. The Subadviser shall direct the custodian as
to how to vote such proxies as may be necessary or advisable in
connection with any matters submitted to a vote of shareholders of
securities held by the Fund.

3. Independent Contractor. In the performance of its duties hereunder,
the Subadviser is and shall be an independent contractor and unless otherwise
expressly provided herein or otherwise authorized in writing, shall have no
authority to act for or represent the Fund or the Adviser in any way or
otherwise be deemed an agent of the Fund or the Adviser.

4. Compensation. The Adviser shall pay to the Subadviser a fee for its
services hereunder (the "Subadvisory Fee") computed as follows, based on the
net asset value of the Fund:

(a) Fee Rate. The Subadvisory Fee shall be the sum of the annual
rate of 0.60% of the Fund's average daily net asset value. In connection
with subsection (a) hereof, Subadviser acknowledges and agrees that the
Adviser may waive all or any portion of its management fee at such times
and for such periods of time as it determines in its sole and absolute
discretion.

(b) Most Favored Client Compensation Disclosure. In the event the
Subadviser charges any of its similarly situated advisory clients on a
more favorable compensation basis, the Subadviser shall immediately
notify and fully disclose to the Adviser the nature and exact terms of
such arrangement.

(c) Method of Computation; Payment. The Subadvisory Fee shall be
accrued for each calendar day the Subadviser renders subadvisory services
hereunder and the sum of the daily fee accruals shall be paid monthly to
the Subadviser as soon as practicable following the last day of each
month, by wire transfer if so requested by the Subadviser, but no later
than eight (8) calendar days thereafter. The daily fee accruals will be
computed by multiplying the fraction of one (1) over the number of
calendar days in the year by the annual rate as described in Subsection
(a) of this Section 4 and multiplying the product by the net asset value
of the Fund as determined in accordance with the Prospectus as of the
close of business on the previous business day on which the Fund was open
for business.

<PAGE> 6

5. Commissions. The Adviser understands that the Subadviser may, in the
future, act as executing and clearing broker in connection with the
transactions effected by the Fund and that the Subadviser will be paid
commissions by the Fund in connection therewith in accordance with all
applicable laws, including, but not limited to Rule 17e-1 promulgated under the
Investment Company Act.

6. Expenses. The Subadviser shall bear all expenses incurred by it in
connection with its services under this Agreement and will, from time to time,
at its sole expense employ or associate itself with such persons as it believes
to be particularly fitted to assist it in the execution of its duties
hereunder.

7. Representations and Warranties of Subadviser. The Subadviser
represents and warrants to the Adviser and the Fund as follows:

(a) The Subadviser is registered as an investment adviser under the
Advisers Act;

(b) The Subadviser is a corporation duly organized and validly
existing under the laws of the State of Delaware with the power to own
and possess its assets and carry on its business as it is now being
conducted;

(c) The execution, delivery and performance by the Subadviser of
this Agreement are within the Subadviser's powers and have been duly
authorized by all necessary action on the part of its shareholders, and
no action by or in respect of, or filing with, any governmental body,
agency or official is required on the part of the Subadviser for the
execution, delivery and performance by the Subadviser of this Agreement,
and the execution, delivery and performance by the Subadviser of this
Agreement do not contravene or constitute a default under (i) any
provision of applicable law, rule or regulation, (ii) the Subadviser's
governing instruments, or (iii) any agreement, judgment, injunction,
order, decree or other instrument binding upon the Subadviser;

(d) This Agreement is a valid and binding agreement of the
Subadviser;

(e) The Subadviser and any affiliated person of the Subadviser have
not:

6
<PAGE> 7

(i) within 10 years from the date hereof been convicted of
any felony or misdemeanor involving the purchase or sale of any
securities or arising out of the conduct as an underwriter, broker,
dealer, investment adviser, municipal securities dealer, government
securities broker, government securities dealer, transfer agent, or
entity or person required to be registered under the CEA, or as an
affiliated person, salesman, or employee of any investment company,
bank, insurance company, or entity or person required to be
registered under the CEA; or

(ii) by reason of any misconduct, been permanently or
temporarily enjoined by an order, judgment or decree of any court
of competent jurisdiction or other governmental authority from
acting as an underwriter, broker, dealer, investment adviser,
municipal securities dealer, government securities broker,
government securities dealer, transfer agent, or entity or person
required to be registered under the CEA, or an affiliated person,
salesman, or employee of any investment company, bank, insurance
company, or entity or person required to be registered under the
CEA or from engaging in or continuing any conduct or practice in
connection with any such activity or in connection with the
purchase or sale of any security; or

(iii) been a party to litigation or other adversarial
proceedings involving any former or current client that is material
to the Subadviser's business;

(f) The Form ADV of the Subadviser attached hereto as Exhibit A is a
true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects and does not omit to state any material fact necessary in order
to make the statements made, in light of the circumstances under which
they were made, not misleading;

(g) The Subadviser's unaudited financial statements for the fiscal
years ended December 31, 1996, 1995, and 1994 attached hereto as Exhibit
B are true and complete copies of the Subadviser's financial statements;

(h) The Subadviser's performance figures for certain client accounts
attached hereto as Exhibit C are accurate and complete in all material
respects and do not omit to state any material fact necessary in order to
make the statements made, in light of the circumstances under which they
were made, not misleading; and

7
<PAGE> 8

(i) The Subadviser's Code of Ethics attached hereto as Exhibit D has
been duly adopted by the Subadviser, meets the requirements of Rule 17j-1
under the Investment Company Act and such code has been complied with and
no violation has occurred.

8. Representations and Warranties of Adviser. The Adviser represents
and warrants to the Subadviser as follows:

(a) The Adviser is registered as an investment adviser under the
Advisers Act;

(b) The Adviser has filed a notice of exemption pursuant to Rule
4.14 under the CEA with the CFTC and the NFA;

(c) The Adviser is a corporation duly organized and validly existing
under the laws of the State of Wisconsin with the power to own and
possess its assets and carry on its business as it is now being
conducted;

(d) The execution, delivery and performance by the Adviser of this
Agreement are within and Adviser's powers and have been duly authorized
by all necessary action on the part of its shareholders, and no action by
or in respect of, or filing with, any governmental body, agency or
official is required on the part of the Adviser for the execution,
delivery and performance by the Adviser of this Agreement, and the
execution, delivery and performance by the Adviser of this Agreement do
not contravene or constitute a default under (i) any provision of
applicable law, rule or regulation, (ii) the Adviser's governing
instruments, or (iii) any agreement, judgment, injunction, order, decree
or other instrument binding upon the Adviser;

(e) This Agreement is a valid and binding agreement of the Adviser;

(f) The Adviser and any affiliated person of the Adviser have not:

<PAGE> 9

(iii) been a party to litigation or other adversarial
proceedings involving any former or current client that is material
to the Adviser's business;

(g) The Form ADV of the Adviser attached hereto as Exhibit E is a
true and complete copy of the form filed with the Commission and the
information contained therein is accurate and complete in all material
respects and does not omit to state any material fact necessary in order
to make the statements made, in light of the circumstances under which
they were made, not misleading;

(h) The Adviser acknowledges that it received a copy of the
Subadviser's Form ADV at least 48 hours prior to the execution of this
Agreement.

9. Survival of Representations and Warranties; Duty to Update Information.
All representations and warranties made by the Subadviser and the Adviser
pursuant to Sections 9 and 10 hereof shall survive for the duration of this
Agreement and the parties hereto shall immediately notify, but in no event
later than five (5) business days, each other in writing upon becoming aware
that any of the foregoing representations and warranties are no longer true.
In addition, the Subadviser will deliver to the Adviser and the Fund copies of
any amendments, supplements or updates to any of the information provided to
the Adviser and attached as exhibits hereto within fifteen (15) days after
becoming available. Within forty-five (45) days after the end of each calendar
year during the term hereof, the Subadviser shall certify to the Adviser that
it has complied with the requirements of Rule 17j-1 under the Investment
Company Act with regard to its duties hereunder during the prior year and that
there has been no violation of the Subadviser's Code of Ethics with respect to
the Fund or in respect of any matter or circumstance that is material to the
performance of the Subadviser's duties hereunder or, if such violation has
occurred, that appropriate action was taken in response to such violation.

9
<PAGE> 10

10. Liability and Indemnification.

(a) Liability. In the absence of willful misfeasance, bad faith or
gross negligence on the part of the Subadviser or a breach of its duties
hereunder, the Subadviser shall not be subject to any liability to the
Adviser or the Fund or any of the Fund's shareholders, and, in the
absence of willful misfeasance, bad faith or gross negligence on the part
of the Adviser or a breach of its duties hereunder, the Adviser shall not
be subject to any liability to the Subadviser, for any act or omission in
the case of, or connected with, rendering services hereunder or for any
losses that may be sustained in the purchase, holding or sale of
Investments; provided, however, that nothing herein shall relieve the
Adviser and the Subadviser from any of their obligations under applicable
law, including, without limitation, the federal and state securities laws
and the CEA.

(b) Indemnification. The Subadviser shall indemnify the Adviser and
the Fund, and their respective officers and directors, for any liability
and expenses, including attorneys' fees, which may be sustained as a
result of the Subadviser's willful misfeasance, bad faith, negligence,
breach of its duties hereunder or violation of applicable law, including,
without limitation, the federal and state securities laws or the CEA.
The Adviser shall indemnify the Subadviser and its officers and
directors, for any liability and expenses, including attorneys' fees,
which may be sustained as a result of the Adviser's willful misfeasance,
bad faith, negligence, breach of its duties hereunder or violation of
applicable law, including, without limitation, the federal and state
securities laws or the CEA.

11. Duration and Termination.

(a) Duration. This Agreement shall be submitted for approval by
shareholders of the Fund at the first meeting of shareholders of the Fund
following the effective date of its Registration Statement on Form N-1A
covering the initial offering of shares of the Fund. This Agreement
shall continue in effect for a period of two years from the date hereof,
subject thereafter to being continued in force and effect from year to
year if specifically approved each year by either (i) the Board of
Directors of the Fund, or (ii) by the affirmative vote of a majority of
the Fund's outstanding voting securities. In addition to the foregoing,
each renewal of this Agreement must be approved by the vote of a majority
of the Fund's directors who are not parties to this Agreement or
interested persons of any such party, cast in person at a meeting called
for the purpose of voting on such approval. Prior to voting on the
renewal of this Agreement, the Board of Directors of the Fund may request
and evaluate, and the Subadviser shall furnish, such information as may
reasonably be necessary to enable the Fund's Board of Directors to
evaluate the terms of this Agreement.

10
<PAGE> 11

(b) Termination. Notwithstanding whatever may be provided herein to
the contrary, this Agreement may be terminated at any time, without
payment of any penalty:

(i) By vote of a majority of the Board of Directors of the
Fund, or by vote of a majority of the outstanding voting securities
of the Fund, or by the Adviser, in each case, upon sixty (60) days'
written notice to the Subadviser;

(ii) By the Adviser upon breach by the Subadviser of any
representation or warranty contained in Section 9 hereof, which
shall not have been cured during the notice period, upon twenty
(20) days written notice;

(iii) By the Adviser immediately upon written notice to the
Subadviser if the Subadviser becomes unable to discharge its duties
and obligations under this Agreement; or

(iv) By the Subadviser upon 180 days written notice to the
Adviser and the Fund.

This Agreement shall not be assigned (as such term is defined in the
Investment Company) without the prior written consent of the parties
hereto. This Agreement shall terminate automatically in the event of its
assignment without such consent or upon the termination of the Advisory
Agreement.

12. Duties of the Adviser. The Adviser shall continue to have
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Subadviser's performance of
its duties under this Agreement. Nothing contained in this Agreement shall
obligate the Adviser to provide any funding or other support for the purpose of
directly or indirectly promoting investments in the Fund.

13. Amendment. This Agreement may be amended by mutual consent of the
parties, provided that the terms of each such amendment shall be approved by
the Board of Directors of the Fund or by a vote of a majority of the
outstanding voting securities of the Fund. If such amendment is proposed in
order to comply with the recommendations or requirements of the Commission or
state regulatory bodies or other governmental authority, or to expressly obtain
any advantage under federal or state or non-U.S. laws, the Adviser shall notify
the Subadviser of the form of amendment which it deems necessary or advisable
and the reasons therefor, and if the Subadviser declines to assent to such
amendment, the Adviser may terminate this Agreement forthwith.

11
<PAGE> 12

14. Confidentiality. Subject to the duties of the Adviser, the Fund and
the Subadviser to comply with applicable law, including any demand of any
regulatory or taxing authority having jurisdiction, the parties hereto shall
treat as confidential all information pertaining to the Fund and the actions of
the Subadviser, the Adviser and the Fund in respect thereof.

15. Notice. Any notice that is required to be given by the parties to
each other under the terms of this Agreement shall be in writing, delivered, or
mailed postpaid to the other party, or transmitted by facsimile with
acknowledgment of receipt, to the parties at the following addresses or
facsimile numbers, which may from time to time be changed by the parties by
notice to the other party:

(a) If to the Adviser:

Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Attention: General Counsel
Facsimile: (414) 359-3948

(b) If to the Subadviser:

Schafer Capital Management, Inc.
101 Carnegie Center
Princeton, New Jersey 08540

Attention: Brendan Spillane
Facsimile: 609-520-8227

Strong Schafer Value Fund II
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Attention: General Counsel
Facsimile: (414) 359-3948

16. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin and
the Subadviser

12
<PAGE> 13

consents to the exclusive jurisdiction of courts, both federal and state, and
venue in Wisconsin, with respect to any dispute arising under or in connection
with this Agreement.

17. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall together constitute one and the same
instrument.

18. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.

19. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision or applicable law, the remainder of the
Agreement shall not be affected adversely and shall remain in full force and
effect.

20. Certain Definitions.

(a) "business day." As used herein, business day means any
customary business day in the United States on which the New York Stock
Exchange is open.

(b) Miscellaneous. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived
from a term or provision of the Investment Company Act shall be resolved
by reference to such term or provision of the Investment company Act and
to interpretations thereof, if any, by the U.S. courts or, in the absence
of any controlling decisions of any such court, by rules, regulation or
order of the Commission validly issued pursuant to the Investment Company
Act. Specifically, as used herein, "investment company," "affiliated
person," "interested person," "assignment," "broker," "dealer" and
"affirmative vote of the majority of the Fund's outstanding voting
securities" shall all have such meaning as such terms have in the
Investment Company Act. The term "investment adviser" shall have such
meaning as such term has in the Advisers Act and the Investment Company
Act, and in the event of a conflict between such Acts, the most expansive
definition shall control. In addition, where the effect of a requirement
of the Investment Company Act reflected in any provision of this
Agreement is relaxed by a rule, regulation or order of the Commission,
whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.

13
<PAGE> 14

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

STRONG CAPITAL MANAGEMENT, INC.

By: /s/
----------------------------------

Attest: /s/
----------------------------------

SCHAFER CAPITAL MANAGEMENT, INC.

By: /s/
----------------------------------

Attest: /s/
----------------------------------

<PAGE> 1

EX-99.B10

GODFREY & KAHN, S.C.
ATTORNEYS AT LAW
780 North Water Street
Milwaukee, Wisconsin 53202

September 25, 1997

Strong Variable Insurance Funds, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051

Re: Strong Schafer Value Fund II
----------------------------

Gentlemen:

We have acted as your counsel in connection with the preparation of a
Registration Statement on Form N-1A (Registration Nos. 33-45321; 811-6553) (the
"Registration Statement") relating to the sale by you of an indefinite number
of shares (the "Shares") of common stock, $.00001 par value of Strong Schafer
Value Fund II (the "Fund"), a series of Strong Variable Insurance Funds, Inc.
(the "Company") in the manner set forth in the Registration Statement (and the
Prospectus of the Fund included therein).

We have examined: (a) the Registration Statement (and the Prospectus of the
Fund included therein), (b) the Company's Articles of Incorporation and
By-Laws, each as amended to date, (c) certain resolutions of the Company's
Board of Directors, and (d) such other proceedings, documents and records as we
have deemed necessary to enable us to render this opinion.

Based upon the foregoing, we are of the opinion that the Shares, when sold
as contemplated in the Registration Statement, will be duly authorized and
validly issued, fully paid and nonassessable except to the extent provided in
Section 180.0622(2)(b) of the Wisconsin Statutes, or any successor provision,
which provides that shareholders of a corporation organized under Chapter 180
of the Wisconsin Statutes may be assessed up to the par value of their shares
to satisfy the obligations of such corporation to its employees for services
rendered, but not exceeding six months service in the case of any individual
employee; certain Wisconsin courts have interpreted "par value" to mean the
full amount paid by the purchaser of shares upon the issuance thereof.

We consent to the use of this opinion as an exhibit to the Registration
Statement. In giving this consent, however, we do not admit that we are
"experts" within the meaning of

<PAGE> 2

Strong Variable Insurance Funds, Inc.
September 25, 1997
Page 2

Section 11 of the Securities Act of 1933, as amended, or within the category of
persons whose consent is required by Section 7 of said Act.

Very truly yours,

GODFREY & KAHN, S.C.

/s/ Godfrey & Kahn, S.C.

<PAGE> 1
EXHIBIT 99.B13

STRONG <<FUND>>, INC. -

STOCK SUBSCRIPTION AGREEMENT

To the Board of Directors of Strong <<FUND>>, Inc.:

The undersigned purchaser (the "Purchaser") hereby subscribes to
__________ shares (the "Shares") of common stock, _______ par value (the
"Common Stock"), of Strong <<FUND>>, Inc. - in consideration for which the
Purchaser agrees to transfer to you upon demand cash in the amount of
___________________________________.

It is understood that a certificate representing the Shares shall be
issued to the undersigned upon request at any time after receipt by you of
payment therefore, and said Shares shall be deemed fully paid and
nonassessable, except to the extent provided in Section 180.0622(2)(b) of the
Wisconsin Statutes, as interpreted by courts of competent jurisdiction, or any
successor provision to said Section 180.0622(2)(b).

The Purchaser agrees that the Shares are being purchased for
investment with no present intention of reselling or redeeming said Shares.

Dated and effective this _____ day of __________________, 199__.

Strong Capital Management, Inc.

By: _________________________
Officer

ACCEPTANCE

The foregoing subscription is hereby accepted. Dated and effective as
of this _____ day of ________________, 199__.

STRONG <<FUND>>, INC.

By: _________________________
Officer

Attest: _____________________
Officer

<PAGE> 1

EX-99.B20

GODFREY & KAHN, S.C.
ATTORNEYS AT LAW
780 North Water Street
Milwaukee, Wisconsin 53202
Phone: (414) 273-3500 Fax: (414) 273-5198

September 25, 1997

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

Re: Strong Variable Insurance Funds, Inc.
-------------------------------------

Gentlemen:

We represent Strong Variable Insurance Funds, Inc. (the "Company"), in
connection with its filing of Post-Effective Amendment No. 16 (the
"Post-Effective Amendment") to the Company's Registration Statement
(Registration Nos. 33-45321; 811-6553) on Form N-1A under the Securities Act of
1933 (the "Securities Act") and the Investment Company Act of 1940. The
Post-Effective Amendment is being filed pursuant to Rule 485(b) under the
Securities Act.

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

Very truly yours,

GODFREY & KAHN, S.C.

/s/Pamela M. Krill
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Pamela M. Krill