STRONG AMERICAN UTILITIES FUND INC, 485APOS, 1995-10-11

STRONG AMERICAN UTILITIES FUND INC
485APOS, 1995-10-11

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<PAGE> 1

As filed with the Securities and Exchange Commission
on or about October 11, 1995
Securities Act Registration No. 33-61358
Investment Company Act Registration No. 811-7656
================================================================================
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.___5___ [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. ____7____ [X]
(Check appropriate box or boxes)

STRONG CONSERVATIVE EQUITY FUNDS, INC.
(FORMERLY KNOWN AS STRONG AMERICAN UTILITIES FUND, INC.)
(Exact Name of Registrant as Specified in Charter)

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

Registrant's Telephone Number, including Area Code: (414) 359-3400
THOMAS P. LEMKE
STRONG CAPITAL MANAGEMENT, INC.
100 HERITAGE RESERVE
MENOMONEE FALLS, WISCONSIN 53051
(Name and Address of Agent for Service)

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

Registrant has registered an indefinite amount of securities pursuant
to Rule 24f-2 under the Securities Act of 1933; the Registrant's Rule 24f-2
Notice for the fiscal year ended December 31, 1994 was filed on or about
January 27, 1995.

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

[ ] immediately upon filing pursuant to paragraph (b) of
Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of
Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a)(2) of
Rule 485
[X] on December 29, 1995 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 CONSERVATIVE EQUITY FUNDS, INC.

CROSS REFERENCE SHEET

FOR STRONG AMERICAN UTILITIES FUND

(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 Expenses; Highlights

3. Condensed Financial Information Financial Highlights

4. General Description of Registrant Strong Growth and Income Funds; Investment
Objectives and Policies; Implementation of Policies
and Risks; About the Funds - Organization

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

5A. Management's Discussion of Fund Performance *

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

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

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

9. Pending Legal Proceedings Inapplicable

PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL
INFORMATION

10. Cover Page Cover page

11. Table of Contents Table of Contents

12. General Information and History **

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

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

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

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

<PAGE> 3

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

19. Purchase, Redemption and Pricing of Securities Being Included in Prospectus under the headings:
Offered Shareholder Manual - How to Buy Shares,
- Determining Your Share Price, - How to Sell
Shares, - Shareholder Services; and in the
Statement of Additional Information under the
headings: Additional Shareholder Information;
Investment Advisor, Subadvisor, and Distributor;
and Determination of Net Asset Value

20. Tax Status Included in Prospectus under the heading About the
Funds - Distributions and Taxes; 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 Financial Statements
</TABLE>

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

<PAGE> 4

STRONG CONSERVATIVE EQUITY FUNDS, INC.

CROSS REFERENCE SHEET

FOR STRONG EQUITY INCOME FUND AND
STRONG GROWTH AND INCOME FUND

(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 Expenses

3. Condensed Financial Information Inapplicable

4. General Description of Registrant Strong Conservative Equity Funds; Investment
Objectives and Policies; Fundamentals of Fixed
Income Investing; Implementation of Policies and
Risks; About the Funds - Organization

5. Management of the Fund About the Funds - Management

5A. Management's Discussion of Fund Performance Inapplicable

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

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

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

9. Pending Legal Proceedings Inapplicable

PART B - INFORMATION REQUIRED IN STATEMENT OF ADDITIONAL INFORMATION

10. Cover Page Cover page

11. Table of Contents Table of Contents

12. General Information and History *

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

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

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

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

<PAGE> 5

<TABLE>
<CAPTION>
CAPTION OR SUBHEADING IN PROSPECTUS OR
ITEM NO. ON FORM N-1A STATEMENT OF ADDITIONAL INFORMATION
--------------------- -----------------------------------
<S> <C> <C>
18. Capital Stock and Other Securities Included in Prospectus under the heading About the
Funds - Organization and in the Statement of
Additional Information under the heading
Shareholder Meetings

19. Purchase, Redemption and Pricing of Securities Included in Prospectus under the headings:
Being Offered Shareholder Manual - How to Buy Shares,
- Determining Your Share Price, - How to Sell
Shares, - Shareholder Services; and in the
Statement of Additional Information under the
headings: Additional Shareholder Information;
Investment Advisor, Subadvisor, and Distributor;
and Determination of Net Asset Value

20. Tax Status Included in Prospectus under the heading About the
Funds - Distributions and Taxes; 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 each Fund's Prospectus.

<PAGE> 6

STRONG CONSERVATIVE EQUITY FUNDS

<TABLE>
<S> <C>
STRONG ASSET ALLOCATION FUND STRONG FUNDS
STRONG EQUITY INCOME FUND P.O. Box 2936
STRONG AMERICAN UTILITIES FUND Milwaukee, Wisconsin 53201
STRONG TOTAL RETURN FUND Telephone: (414) 359-1400
STRONG GROWTH AND INCOME FUND Toll-Free: (800) 368-3863
Device for the
Hearing-Impaired:
(800) 999-2780
</TABLE>

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

This Prospectus contains information you should consider before you invest.
Please read it carefully and keep it for future reference. A Statement of
Additional Information for the Funds, dated December , 1995, contains further
information, is incorporated by reference into this Prospectus, and has been
filed with the Securities and Exchange Commission ("SEC"). This Statement, which
may be revised from time to time, is available without charge upon request to
the above-noted address or telephone number.

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

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

Dated December , 1995

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

PROSPECTUS PAGE I-1
<PAGE> 7

STRONG CONSERVATIVE EQUITY FUNDS

Strong Asset Allocation Fund, Inc. and Strong Total Return Fund, Inc. are
separately incorporated, diversified, open-end management investment companies.
The Strong Equity Income, Growth and Income, and American Utilities Funds are
diversified and non-diversified series of Strong Conservative Equity Funds,
Inc., which is an open-end management investment company.

STRONG ASSET ALLOCATION FUND (the "Asset Allocation Fund") seeks high total
return consistent with reasonable risk over the long term. The Fund allocates
its assets globally among a diversified portfolio of equity securities, bonds,
and short-term fixed income securities.

STRONG EQUITY INCOME FUND (the "Equity Income Fund") seeks total return by
investing for both income and capital growth. The Fund invests primarily in
income-producing equity securities.

STRONG AMERICAN UTILITIES FUND (the "American Utilities Fund") seeks total
return by investing for both income and capital growth. The Fund invests
primarily in the equity securities of public utility companies headquartered in
the United States.

STRONG TOTAL RETURN FUND (the "Total Return Fund") seeks high total return by
investing for capital growth and income. Using a conservative approach to equity
management, the Fund emphasizes investments in large companies with steady or
growing dividends.

STRONG GROWTH AND INCOME FUND (the "Growth and Income Fund") seeks high total
return by investing for capital growth and income. The Fund invests primarily in
companies that pay current dividends and offer potential growth of earnings.

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

PROSPECTUS PAGE I-2
<PAGE> 8

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
EXPENSES................................ I-4
FINANCIAL HIGHLIGHTS.................... I-5
HIGHLIGHTS.............................. I-9
INVESTMENT OBJECTIVES AND POLICIES...... I-10
Comparing the Funds............ I-11
Strong Asset Allocation Fund... I-11
Strong Equity Income Fund...... I-13
Strong American Utilities
Fund......................... I-13
Strong Total Return Fund....... I-14
Strong Growth and Income
Fund......................... I-14
IMPLEMENTATION OF POLICIES AND RISKS.... I-15
ABOUT THE FUNDS......................... I-26
SHAREHOLDER MANUAL...................... II-1
APPENDIX A.............................. A-1
APPENDIX B.............................. B-1
</TABLE>

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

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

PROSPECTUS PAGE I-3
<PAGE> 9

EXPENSES

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

SHAREHOLDER TRANSACTION EXPENSES

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

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

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

<TABLE>
<CAPTION>
Total
Management Other 12b-1 Operating
Fund Fees Expenses Fees Expenses
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation .81% .42% NONE 1.23%
Equity Income .80 .74 NONE 1.54
American Utilities .75 .89 NONE 1.64
Total Return .80 .40 NONE 1.20
Growth and Income .80 .56 NONE 1.36
- ----------------------------------------------------------------------------
</TABLE>

From time to time, the Funds' investment advisor, Strong Capital Management,
Inc. (the "Advisor"), may voluntarily waive its management fee and/or absorb
certain expenses for any of the Funds. Except for the Equity Income and Growth
and Income Funds, the expenses specified in the table above are based on actual
expenses incurred for the year ended December 31, 1994. Since the Equity Income
and Growth and Income Funds are new and did not begin operations until December
__, 1995, the expenses specified in the table above for the Funds have been
estimated. For additional information concerning fees and expenses, see "About
the Funds - Management."

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

PROSPECTUS PAGE I-4
<PAGE> 10

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

<TABLE>
<CAPTION>
Period (in years)
-----------------------------------
Fund 1 3 5 10
- ----------------------------------------------------------------
<S> <C> <C> <C> <C>
Asset Allocation $13 $39 $68 $149
Equity Income 16 49 -- --
American Utilities 17 52 89 194
Total Return 12 38 66 145
Growth and Income 14 43 -- --
- ----------------------------------------------------------------
</TABLE>

The Example is based on each Fund's "Total Operating Expenses" described
above. PLEASE REMEMBER THAT THE EXAMPLE SHOULD NOT BE CONSIDERED AS
REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND THAT ACTUAL EXPENSES MAY BE HIGHER
OR LOWER THAN THOSE SHOWN. The assumption in the Example of a 5% annual return
is required by regulations of the SEC applicable to all mutual funds. The
assumed 5% annual return is not a prediction of, and does not represent, the
projected or actual performance of a Fund's shares.

FINANCIAL HIGHLIGHTS

The following annual Financial Highlights for each of the Funds that has
completed a fiscal year has been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants. Their report for the fiscal year ended
December 31, 1994 is included in the Funds' Annual Report that is contained in
the Funds' Statement of Additional Information. The Financial Highlights for the
Funds for the semiannual period ended June 30, 1995 are unaudited. The Financial
Highlights for the Equity Income and Growth and Income Funds are not provided
because they did not commence operations until December , 1995. The Financial
Highlights for the Funds should be read in conjunction with the Financial
Statements and related notes included in the Funds' Annual and Semiannual
Reports. Additional information about each Fund's performance is contained in
the Funds' Annual and Semiannual Reports, which may be obtained without charge
by calling or writing Strong Funds. The following presents information relating
to a share of capital stock of each of the Funds, outstanding for the entire
period.

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

PROSPECTUS PAGE I-5
<PAGE> 11

<TABLE>
<CAPTION>
STRONG ASSET ALLOCATION FUND
----------------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING
OF
PERIOD $ $ 19.06 $ 18.49 $ 19.68 $ 17.50 $ 18.41 $ 17.57 $ 17.60 $ 22.18 $ 20.12 $ 17.62
INCOME
FROM
INVESTMENT
OPERATIONS
Net
Investment
Income 0.70 0.82 0.87 0.94 1.12 1.22 1.39 0.85 0.89 0.84
Net
Realized
and
Unrealized
Gains
(Losses)
on
Invest-
ments (0.99) 1.81 (0.25) 2.41 (0.65) 0.73 0.19 (0.70) 2.54 2.45
------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL FROM
INVESTMENT
OPERATIONS (0.29) 2.63 0.62 3.35 0.47 1.95 1.58 0.15 3.43 3.29
LESS
DISTRI-
BUTIONS
From Net
Investment
Income (0.70) (0.82) (0.87) (0.97) (1.38) (0.97) (1.38) (1.78) (0.95) (0.75)
From Net
Realized
Gains -- (1.24) (0.94) (0.20) -- (0.14) -- (2.95) (0.42) (0.04)
In
Excess
of Net
Realized
Gains (0.16) -- -- -- -- -- -- -- -- --
From
Capital -- -- -- -- -- -- (0.23) -- -- --
------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
TOTAL
DISTRI-
BUTIONS (0.86) (2.06) (1.81) (1.17) (1.38) (1.11) (1.61) (4.73) (1.37) (0.79)
------- -------- -------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET
VALUE,
END OF
PERIOD $ $ 17.91 $ 19.06 $ 18.49 $ 19.68 $ 17.50 $ 18.41 $ 17.57 $ 17.60 $ 22.18 $ 20.12
======= ======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Total
Return % -1.5% +14.5% +3.2% +19.6% +2.8% +11.2% +9.2% -0.3% +17.6% +19.4%
Net
Assets,
End of
Period
(In
Thousands) $ $248,647 $254,439 $208,368 $214,951 $203,562 $240,549 $256,089 $272,899 $339,405 $220,556
Ratio of
Expenses
to
Average
Net
Assets % 1.2% 1.2% 1.2% 1.3% 1.3% 1.3% 1.2% 1.1% 1.1% 1.1%
Ratio of
Net
Investment
Income
to
Average
Net
Assets % 3.8% 4.2% 4.4% 5.1% 6.1% 6.6% 7.5% 4.2% 4.7% 5.4%
Portfolio
Turnover
Rate % 359.7% 348.3% 320.4% 418.4% 319.6% 206.5% 426.2% 336.5% 80.4% 143.6%
</TABLE>

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

PROSPECTUS PAGE I-6
<PAGE> 12

STRONG AMERICAN UTILITIES FUND

<TABLE>
<CAPTION>
1995 1994 1993**
------- ------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ $ 10.19 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.46 0.18
Net Realized and Unrealized
Gains (Losses) on Investments (0.73) 0.27
------- ------- --------
TOTAL FROM INVESTMENT OPERATIONS (0.27) 0.45
LESS DISTRIBUTIONS
From Net Investment Income (0.46) (0.18)
From Net Realized Gains -- (0.05)
In Excess of Net Realized Gains -- (0.03)
------- ------- --------
TOTAL DISTRIBUTIONS (0.46) (0.26)
------- ------- --------
NET ASSET VALUE, END OF PERIOD $ $ 9.46 $ 10.19
======= ======= =======
Total Return % -2.6% +4.5%
Net Assets, End of Period
(In Thousands) $ $37,944 $ 32,457
Ratio of Expenses to Average
Net Assets % 0.5% 0.0%*
Ratio of Expenses to Average Net
Assets Without Waivers and
Absorptions % 1.6% 1.4%*
Ratio of Net Investment Income
to Average Net Assets % 4.8% 5.6%*
Portfolio Turnover Rate % 105.4% 178.6%*
</TABLE>

* Calculated on an annualized basis.
** Inception date is July 1, 1993. Total return is not annualized.

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

PROSPECTUS PAGE I-7
<PAGE> 13

<TABLE>
<CAPTION>
STRONG TOTAL RETURN FUND
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
-------- -------- -------- -------- -------- -------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET
ASSET
VALUE,
BEGINNING
OF
PERIOD $ $ 24.30 $ 20.17 $ 20.24 $ 15.34 $ 17.72 $ 18.96 $ 18.37 $ 21.61 $ 19.56 $ 16.35
INCOME
FROM
INVESTMENT
OPERATIONS
Net
Investment
Income 0.25 0.33 0.18 0.22 0.95 1.55 1.95 0.97 0.66 0.59
Net
Realized
and
Unrealized
Gains
(Losses)
on
Investments (0.59) 4.18 (0.08) 4.90 (2.19) (0.97) 0.85 0.61 3.13 3.40
-------- -------- -------- -------- -------- -------- ---------- ---------- -------- -------- --------
TOTAL
FROM
INVESTMENT
OPERATIONS (0.34) 4.51 0.10 5.12 (1.24) 0.58 2.80 1.58 3.79 3.99
LESS
DISTRIBUTIONS
From
Net
Investment
Income (0.26) (0.33) (0.17) (0.22) (1.14) (1.31) (1.96) (1.65) (0.70) (0.58)
In
Excess
of
Net
Investment
Income (0.08) -- -- -- -- -- -- -- -- --
From
Net
Realized
Gains -- -- -- -- -- (0.51) -- (3.17) (1.04) (0.20)
In
Excess
of Net
Realized
Gains -- (0.05) -- -- -- -- -- -- -- --
From
Capital -- -- -- -- -- -- (0.25) -- -- --
-------- -------- -------- -------- -------- -------- ---------- ---------- -------- -------- --------
TOTAL
DISTRIBUTIONS (0.34) (0.38) (0.17) (0.22) (1.14) (1.82) (2.21) (4.82) (1.74) (0.78)
-------- -------- -------- -------- -------- -------- ---------- ---------- -------- -------- --------
NET
ASSET
VALUE,
END OF
PERIOD $ $ 23.62 $ 24.30 $ 20.17 $ 20.24 $ 15.34 $ 17.72 $ 18.96 $ 18.37 $ 21.61 $ 19.56
======== ======== ======== ======== ======== ======== ========= ========= ======== ======== ========
Total
Return % -1.4% +22.5% +0.6% +33.6% -7.1% +2.6% +15.6% +6.0% +20.0% +25.4%
Net
Assets,
End of
Period
(In
Thousands) $ $606,814 $630,349 $587,873 $691,327 $646,579 $1,065,278 $1,005,192 $802,442 $518,760 $233,956
Ratio
of
Expenses
to
Average
Net
Assets % 1.2% 1.2% 1.3% 1.4% 1.4% 1.2% 1.2% 1.1% 1.1% 1.1%
Ratio
of Net
Investment
Income
to
Average
Net
Assets % 1.1% 1.4% 0.9% 1.3% 5.4% 7.7% 10.1% 5.2% 4.3% 5.0%
Portfolio
Turnover
Rate % 290.4% 271.3% 371.8% 426.4% 312.3% 305.3% 281.1% 224.4% 153.5% 304.6%
</TABLE>

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

PROSPECTUS PAGE I-8
<PAGE> 14

HIGHLIGHTS

INVESTMENT OBJECTIVES AND POLICIES

Each Fund has distinct investment objectives and policies. Each Fund seeks
total return consistent with its investment objective and policies. The
investment objective of each Fund is set forth under "Investment Objectives and
Policies."

IMPLEMENTATION OF POLICIES AND RISKS

Subject to certain limitations, each Fund may invest in foreign securities
and engage in foreign currency and derivative transactions, including options,
futures, and options on futures transactions. Each Fund may invest in repurchase
agreements, when-issued securities, and illiquid securities. The Asset
Allocation Fund may engage in substantial short-term trading, which may result
in high portfolio turnover rates. These investment practices and techniques
involve risks that are different in some respects from those associated with
similar funds that do not use them. The American Utilities Fund is a "non-
diversified" investment company, which means that it may invest a larger
proportion of its assets in the securities of a single issuer than diversified
funds. The Funds may invest in non-investment-grade debt obligations (commonly
called "junk bonds") within specified limits. (See "Implementation of Policies
and Risks.")

MANAGEMENT

The Advisor, Strong Capital Management, Inc., serves as investment advisor to
the Funds. The Advisor provides investment management services for mutual funds
and other investment portfolios representing assets of over $ billion. W.H.
Reaves & Co., Inc. (the "Subadvisor") is the subadvisor for the American
Utilities Fund. (See "About the Funds - Management.")

PURCHASE AND REDEMPTION OF SHARES

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

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

PROSPECTUS PAGE I-9
<PAGE> 15

SHAREHOLDER SERVICES

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

DIVIDENDS AND OTHER DISTRIBUTIONS

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

INVESTMENT OBJECTIVES AND POLICIES

The descriptions that follow are designed to help you choose the Fund that
best fits your investment objective. You may want to pursue more than one
objective by investing in more than one of the Funds or by investing in one of
the other Strong Funds, which are described in separate prospectuses. Each
Fund's investment objective is discussed below in connection with the Fund's
investment policies. Because of the risks inherent in all investments, there can
be no assurance that the Funds will meet their objectives.

The Funds are each required or permitted to invest a substantial portion of
their assets in equity securities. Accordingly, each Fund's net asset value will
fluctuate based upon changes in the value of the securities in its portfolio.
Although they are considered conservative equity funds - meaning, each Fund's
net asset value is likely to be less volatile than that of a Fund invested
principally for growth of capital - each Fund's net asset value is likely to
fluctuate more than that of a fund invested principally for income. The Funds,
therefore, are not appropriate for investors' short-term financial needs.

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

PROSPECTUS PAGE I-10
<PAGE> 16

COMPARING THE FUNDS

The following chart is intended to distinguish the Funds and help you
determine their suitability for your investments.

<TABLE>
<CAPTION>
Maximum
Equity Bond Cash
Fund Range Range Position Diversified Focus
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Asset Allocation 10-60% 20-60% 100%* Yes Allocated Across
Asset Classes
- ---------------------------------------------------------------------------------------------
Equity Income 65-100% 0-35% 100%* Yes Dividend-Paying
Stocks
- ---------------------------------------------------------------------------------------------
American Utilities 65-100% 0-35% 100%* No Utility and
Energy Stocks
- ---------------------------------------------------------------------------------------------
Total Return 60-100% 0-40% 40% Yes Large-Cap and
Dividend-Paying
Stocks
- ---------------------------------------------------------------------------------------------
Growth and Income 65-100% 0-35% 100%* Yes Dividend-Paying
Stocks and Growth
Potential
- ---------------------------------------------------------------------------------------------
</TABLE>

*Temporary defensive position only.

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

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

STRONG ASSET ALLOCATION FUND

The Asset Allocation Fund seeks high total return consistent with reasonable
risk over the long term. The Fund allocates its assets globally among a
diversified portfolio of equity securities, bonds, and short-term fixed income
securities.

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

PROSPECTUS PAGE I-11
<PAGE> 17
Under normal market conditions, the Fund's net assets will be allocated
according to a benchmark of 40% equities, 40% bonds, and 20% short-term fixed
income securities. The Advisor intends to actively manage the Fund's assets,
maintaining a balance over time between investment opportunities and their
associated potential risks. In response to changing market and economic
conditions, the Advisor may reallocate the Fund's net assets among these asset
categories. Those allocations normally will be within the ranges indicated
below. However, in pursuit of total return, the Advisor may under-allocate or
over-allocate the Fund's net assets in a particular category. Furthermore, when
the Advisor determines that market conditions warrant adopting a temporary
defensive position, the Fund may invest without limitation in cash and short-
term fixed income securities.

ASSET-ALLOCATION CATEGORIES

<TABLE>
<CAPTION>
Percentage of Fund
Net Assets
--------------------
Category of Investment Benchmark Range
- -----------------------------------------------------------
<S> <C> <C>
Equities 40% 10-60%
Bonds 40% 20-60%
Short-Term Fixed Income Securities 20% 0-70%
- -----------------------------------------------------------
</TABLE>

Equity securities in which the Fund may invest include common stocks,
preferred stocks, and securities that are convertible into common stocks, such
as warrants and convertible bonds. Bonds purchased by the Fund will be primarily
investment-grade debt obligations, although the Fund may invest up to, but not
including, 35% of its total assets in non-investment-grade debt obligations.
(See "Implementation of Policies and Risks - Debt Obligations.")
The Fund also has the flexibility to take advantage of investment
opportunities around the world by investing in foreign securities. While the
Fund may invest without limitation in foreign securities, the Advisor does not
expect that, under normal market conditions, the Fund will invest more than 40%
of its total assets in foreign securities. Foreign investments involve risks not
normally found when investing in securities of U.S. issuers. (See
"Implementation of Policies and Risks - Foreign Securities and Currencies.")
Within the asset-allocation categories described above, the Advisor will
allocate the Fund's investments among countries, geographic regions, and
currencies in response to changing market and economic trends. In making
geographical allocations of investments, the Advisor will consider such factors
as the historical and prospective relationships among currencies and
governmental policies that influence currency-exchange rates, current and
anticipated interest rates, inflation levels, and business conditions within
various countries, as well as other macroeconomic, social, and political
factors. While there are no prescribed limits on the Fund's geographic
allocations, the Advisor anticipates that the Fund will generally invest in
issuers in industrialized countries

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

PROSPECTUS PAGE I-12
<PAGE> 18

and in major currencies, including the United States, Canada, the countries of
Western Europe, Japan, Australia, and New Zealand. The Fund may also, however,
invest in securities of issuers in developing countries.

STRONG EQUITY INCOME FUND

The Equity Income Fund seeks total return by investing for both income and
capital growth.

The Fund invests primarily in dividend-paying equity securities. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
dividend-paying equity securities, including common stocks, preferred stocks,
and securities that are convertible into common stocks, such as warrants and
convertible bonds. The Fund may invest up to 35% of its total assets in
intermediate- to long-term corporate or U.S. government bonds. Although the
bonds in which it invests will be primarily investment-grade, the Fund may
invest up to 10% of its net assets in non-investment-grade bonds. When the
Advisor determines that market conditions warrant a temporary defensive
position, the Fund may invest without limitation in cash and short-term,
fixed-income securities. The Fund may invest up to 5% of its net assets in the
securities of foreign issuers, either through direct investment or depositary
receipts. See "Implementation of Policies and Risks -- Foreign Currencies" for
the special risks associated with foreign investments.

STRONG AMERICAN UTILITIES FUND

The American Utilities Fund seeks total return by investing for both income
and capital growth.
The Fund normally will invest at least 65% of its total assets in the equity
securities of public utility companies headquartered in the United States.
Equity securities in which the Fund may invest include common stocks, preferred
stocks, and securities that are convertible into common stocks, such as warrants
and convertible bonds. Public utility companies include those engaged in the
manufacture, production, generation, transmission, sale and/or distribution of
water, gas, and electric energy, as well as those engaged in the communications
industry, including providers of telephone, telegraph, satellite, cable
television, microwave, and other communication facilities for the public,
excluding public broadcasting companies. (See "Implementation of Policies and
Risks - Public Utility Companies.")
The balance of the Fund, up to 35% of its total assets, may be invested in
any type of security, including debt obligations and equity securities of
companies in other industries. The Fund intends to use this allowance primarily
to invest in the equity securities of energy companies, which may compose up to
25% of the Fund's total assets. (See "Implementation of Policies and Risks -
Energy Companies.") Although the debt obligations in which it invests will be
primarily investment-grade, the Fund may invest up to 5% of its total assets in

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

PROSPECTUS PAGE I-13
<PAGE> 19

non-investment-grade debt securities. (See "Implementation of Policies and Risks
- - Debt Obligations.")
The Fund may invest up to 15% of its total assets directly in the securities
of foreign issuers and may invest up to 35% of its total assets in foreign
securities in domestic markets through depositary receipts. See "Implementation
of Policies and Risks - Foreign Securities and Currencies" for the special risks
associated with foreign investments.
Under normal market conditions, the Fund expects to be fully invested in the
equity securities of companies in the public utility and energy industries.
However, when the Advisor or W.H. Reaves & Co., Inc. (the "Subadvisor")
determines that market conditions warrant a temporary defensive position, the
Fund may invest without limitation in cash and short-term fixed income
securities.

STRONG TOTAL RETURN FUND

The Total Return Fund seeks high total return by investing for capital growth
and income. Using a conservative approach to equity management, the Fund
emphasizes investments in large companies with steady or growing dividends. (See
"Implementation of Policies and Risks - Debt Obligations.")

The Fund will invest at least 60% of its total assets in equity securities,
including common stocks, preferred stocks, and securities that are convertible
into common stocks, such as warrants and convertible bonds. Under normal market
conditions, the Fund expects to be at least 80% of its total assets invested in
equity securities. At times, however, it may invest up to 40% of its total
assets in intermediate- to long-term corporate or U.S. government bonds.
Although the bonds in which it invests will be primarily investment-grade, the
Fund may invest up to 5% of its total assets in non-investment-grade bonds. When
the Advisor determines that market conditions warrant a temporary defensive
position, the Fund may use the above allowance to invest up to 40% of its total
assets in cash and short-term, fixed-income securities. The Fund may invest up
to 5% of its assets in the securities of foreign issuers, either through direct
investment or depositary receipts. See "Implementation of Policies and Risks -
Foreign Currencies" for the special risks associated with foreign investments.

STRONG GROWTH AND INCOME FUND

The Growth and Income Fund seeks high total return by investing for capital
growth and income.

Under normal market conditions, the Fund will invest at least 65% of its
total assets in equity securities, with a focus on those that pay current
dividends and offer potential growth of earnings. At times, however, the Fund
may invest in equity securities that are not currently paying dividends, but
offer prospects for either capital growth or future income. Equity securities
include common stocks, preferred stocks, and securities that are convertible
into common

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

PROSPECTUS PAGE I-14
<PAGE> 20

stocks, such as warrants and convertible bonds. The Fund may invest up to
35% of its total assets in intermediate- to long-term corporate or U.S.
government bonds. Although the bonds in which it invests will be primarily
investment-grade, the Fund may invest up to 5% of its net assets in
non-investment-grade bonds. When the Advisor determines that market conditions
warrant a temporary defensive position, the Fund may invest without limitation
in cash and short-term, fixed-income securities. The Fund may invest up to 15%
of its net assets directly in the securities of foreign issuers. It may also
invest without limitation in foreign securities in domestic markets through
depositary receipts. However, as a matter of policy, the Advisor intends to
limit total foreign exposure, including both direct investments and depositary
receipts, to no more than 25% of the Fund's net assets. See "Implementation of
Policies and Risks -- Foreign Currencies" for the special risks associated with
foreign investments.

IMPLEMENTATION OF POLICIES AND RISKS

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

DEBT OBLIGATIONS

IN GENERAL. The market value of all debt obligations is affected by changes
in the prevailing interest rates. The market value of such instruments generally
reacts inversely to interest rate changes. If the prevailing interest rates
decline, the market value of debt obligations generally increases. If the
prevailing interest rates increase, the market value of debt obligations
generally decreases. In general, the longer the maturity of a debt obligation,
the greater its sensitivity to changes in interest rates.

TYPES OF OBLIGATIONS. Debt obligations include (i) corporate debt securities,
including bonds, debentures, and notes; (ii) bank obligations, such as
certificates of deposit, banker's acceptances, and time deposits of domestic and
foreign banks and their subsidiaries and branches, and domestic savings and loan
associations (in amounts in excess of the insurance coverage (currently $100,000
per account) provided by the Federal Deposit Insurance Corporation); (iii)
commercial paper (including variable-amount master demand notes); (iv)
repurchase agreements; (v) loan interests; (vi) foreign debt obligations issued
by foreign issuers traded either in foreign markets or in domestic

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

PROSPECTUS PAGE I-15
<PAGE> 21

markets through depositary receipts; (vii) convertible securities - debt
obligations of corporations convertible into or exchangeable for equity
securities or debt obligations that carry with them the right to acquire equity
securities, as evidenced by warrants attached to such securities, or acquired as
part of units of the securities; (viii) preferred stocks - securities that
represent an ownership interest in a corporation and that give the owner a prior
claim over common stock on the company's earnings or assets; (ix) U.S.
government securities; (x) mortgage-backed securities, collateralized mortgage
obligations, and similar securities; and (xi) municipal obligations.

RATINGS. Investment-grade debt obligations include:

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

All ratings are determined at the time of investment. Any subsequent rating
downgrade of a debt obligation will be monitored by the Advisor to consider what
action, if any, a Fund should take consistent with its investment objective.
Securities rated in the fourth highest category (e.g., BBB by S&P), although
considered investment-grade, have speculative characteristics and may be subject
to greater fluctuations in value than higher-rated securities.
Non-investment-grade debt obligations include:

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

HIGH-YIELD (HIGH-RISK) SECURITIES. High-yield (high-risk) securities, also
referred to as "junk bonds," are those securities that are rated lower than
investment-grade and unrated securities of comparable quality. Although these
securities generally offer higher yields than investment-grade securities with
similar maturities, lower-quality securities involve greater risks, including
the possibility of default or bankruptcy. In general, they are regarded to be
predominantly speculative with respect to the issuer's capacity to pay interest

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

PROSPECTUS PAGE I-16
<PAGE> 22

and repay principal. Other potential risks associated with investing in high-
yield securities include:

- - substantial market-price volatility resulting from changes in interest rates,
changes in or uncertainty about economic conditions, and changes in the actual
or perceived ability of the issuer to meet its obligations;
- - greater sensitivity of highly leveraged issuers to adverse economic changes
and individual-issuer developments;
- - subordination to the prior claims of other creditors;
- - additional Congressional attempts to restrict the use or limit the tax and
other advantages of these securities; and
- - adverse publicity and changing investor perceptions about these securities.

As with any other asset in a Fund's portfolio, any reduction in the value of
such securities as a result of the factors listed above would be reflected in
the net asset value of the Fund. In addition, a Fund that invests in
lower-quality securities may incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal and
interest on its holdings. As a result of the associated risks, successful
investments in high-yield (high-risk) securities will be more dependent on the
Advisor's credit analysis than generally would be the case with investments in
investment-grade securities.
It is uncertain how the high-yield market will perform during a prolonged
period of rising interest rates. A prolonged economic downturn or a prolonged
period of rising interest rates could adversely affect the market for these
securities, increase their volatility, and reduce their value and liquidity. In
addition, lower-quality securities tend to be less liquid than higher-quality
debt securities because the market for them is not as broad or active. If market
quotations are not available, these securities will be valued in accordance with
procedures established by a Fund's Board of Directors. Judgment may, therefore,
play a greater role in valuing these securities. The lack of a liquid secondary
market may have an adverse effect on market price and a Fund's ability to sell
particular securities.
See Appendix B for information concerning the credit quality of the Asset
Allocation Fund's investments in debt obligations in 1994.

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

- - the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration, and the Government
National Mortgage Association, including GNMA pass-through

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

PROSPECTUS PAGE I-17
<PAGE> 23

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

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

SHORT-TERM FIXED INCOME SECURITIES. Short-term fixed income securities in
which the Funds may invest include, but are not limited to, debt securities
issued or guaranteed by the U.S. government or its agencies or
instrumentalities, commercial paper, banker's acceptances, certificates of
deposit, and time deposits. The Funds may invest in obligations of domestic and
foreign banks and their subsidiaries and branches.

ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES. Each 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
qualify as a "regulated investment company" under the Internal Revenue Code and
avoid a certain excise tax, a 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.

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

PROSPECTUS PAGE I-18
<PAGE> 24

PUBLIC UTILITY COMPANIES (AMERICAN UTILITIES FUND)

Under normal market conditions, at least 65% of the American Utilities Fund's
total assets will be invested in the equity securities of public utility
companies headquartered in the United States. Accordingly, the Fund's
performance will depend in part on conditions in the public utility industry.
Stocks of public utility companies have traditionally been attractive to
conservative stock market investors because they have generally paid consistent
and above-average dividends. The Fund's investments in public utility securities
may or may not pay consistent and above-average dividends. Moreover, the
securities of public utility companies can still be affected by the risks of the
stock market, as well as factors specific to public utility companies.
Government regulation of public utility companies can limit their ability to
expand their businesses or to pass cost increases onto customers. Additionally,
companies providing power or energy-related services may also be affected by the
following factors: increases in fuel and other operating costs; high costs of
borrowing to finance capital construction during inflationary periods;
operational restrictions, increased costs, and delays associated with compliance
with environmental and nuclear safety regulations; the difficulties involved in
obtaining natural gas for resale or fuel for generating electricity at
reasonable prices; the risks associated with constructing and operating nuclear
power plants; the effects of energy conservation; and the effects of regulatory
changes. Some public utility companies are facing increased competition, which
may reduce their profits. All of these factors are subject to rapid change,
which may affect utility companies independently from the stock market as a
whole. Equity securities issued by public utility companies tend to be more
affected by changes in interest rates than are the equity securities of other
issuers and, therefore, may react to such changes somewhat like debt
instruments. (See "Debt Obligations" above.)

In accordance with its investment objective and fundamental investment
restrictions, the Fund will normally concentrate its investments in the public
utility industry. This means that more than 25% of the value of the Fund's total
assets will normally be invested in the public utility industry. The Fund does
not have set policies to concentrate within any particular segment of the public
utilities industry; however, the Subadvisor generally emphasizes investments in
established electric utility, telephone, natural gas, and energy stocks with
sound financial structures.

Due to the Fund's concentration of investments in the public utility
industry, an investment in the Fund may be subject to greater fluctuations in
value than a Fund that does not concentrate its investments in a similar manner.
For example, as discussed above, certain economic factors or specific events may
exert a disproportionate impact upon the prices of equity securities of
companies within the public utilities industry relative to their impact on the
prices of securities of companies engaged in other industries. Additionally,
changes in the market price of the equity securities of a particular company
that occupies

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

PROSPECTUS PAGE I-19
<PAGE> 25

a dominant position in an industry may tend to influence the market prices of
other companies within the same industry. As a result of the foregoing factors,
the net asset value of the Fund may be more susceptible to change than those of
investment companies that diversify their investments over many different
industries.

ENERGY COMPANIES (AMERICAN UTILITIES FUND)

Under normal market conditions, the American Utilities Fund anticipates it
may invest a substantial portion, but not more than 25% of its total assets, in
the equity securities of energy companies. Energy companies are generally
defined as companies in the conventional areas of oil, gas, electricity, and
coal, as well as those involved in alternative sources of energy, such as
nuclear, geothermal, shale, and solar power. The business activities of energy
companies may include production, generation, refining, transmission,
transportation, marketing, control, or measurement of energy or energy fuels;
providing component parts or services to companies engaged in these energy
activities; energy research or experimentation; and environmental activities
related to the solution of energy problems, such as energy conservation and
pollution control. For purposes of this 25% investment limitation, energy
companies shall exclude companies that are also public utility companies.
To the extent the Fund makes significant investments in energy companies, the
Fund's performance will depend in part on conditions in the energy industry. The
securities of companies in the energy industry are subject to changes in value
and dividend yield that depend to a large extent on the price and supply of
energy fuels. Swift price and supply fluctuations of energy fuels may be caused
by events relating to international politics, energy conservation, the success
of exploration projects, currency exchange rate fluctuations, and tax and other
regulatory policies of various governments.

WHEN-ISSUED SECURITIES

Each Fund may invest without limitation in securities purchased on a when-
issued or delayed delivery basis. Although the payment and interest terms of
these securities are established at the time the purchaser enters into the
commitment, these securities may be delivered and paid for at a future date,
generally within 45 days. Purchasing when-issued securities allows a Fund to
lock in a fixed price or yield on a security it intends to purchase. However,
when a Fund purchases a when-issued security, it immediately assumes the risk of
ownership, including the risk of price fluctuation until the settlement date.
The greater a Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of a Fund.
Purchasing when-issued securities may involve the additional risk that the yield
available in the market when the delivery occurs may be higher or the

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

PROSPECTUS PAGE I-20
<PAGE> 26

market price lower than that obtained at the time of commitment. Although a Fund
may be able to sell these securities prior to the delivery date, it will
purchase when-issued securities for the purpose of actually acquiring the
securities, unless, after entering into the commitment, a sale appears desirable
for investment reasons. When required by SEC guidelines, a Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.

FOREIGN SECURITIES AND CURRENCIES

Each Fund may invest in foreign securities, either directly or through the
use of depositary receipts. (See "Investment Objectives and Policies.")
Depositary receipts are generally issued by banks or trust companies and
evidence ownership of underlying foreign securities. Foreign investments may
include other investment companies which may involve frequent or layered fees
and also are subject to limitations under the Investment Company Act of 1940
(the "1940 Act"). Foreign investments involve special risks, including:

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

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

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

PROSPECTUS PAGE I-21
<PAGE> 27

investments are generally intensified for investments in developing countries.
Risks of investing in such markets include:

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

In addition, brokerage commissions, custodial services, withholding taxes,
and other costs relating to investment in emerging markets generally are more
expensive than in the U.S. and certain more established foreign markets.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values, and other protectionist measures negotiated or imposed by the countries
with which they trade.
The Asset Allocation Fund may also invest a significant portion of its assets
in debt obligations issued or guaranteed by foreign governments or their
agencies, instrumentalities or political subdivisions, or by supranational
issuers (collectively, sovereign debt). Investment in sovereign debt involves
special risks. Certain foreign countries, particularly developing countries,
have experienced, and may continue to experience, high rates of inflation, high
interest rates, exchange rate fluctuations, large amounts of external debt,
balance of payments and trade difficulties, and extreme poverty and
unemployment. The issuer of the debt or the governmental authorities that
control the repayment of the debt may be unable or unwilling to repay principal
or interest when due in accordance with the terms of such debt, and the Fund may
have limited legal recourse in the event of default.
Because most foreign securities are denominated in non-U.S. currencies, the
investment performance of the Asset Allocation Fund, and to a lesser extent the
other Funds, could be significantly affected by changes in foreign currency
exchange rates. The value of a Fund's assets denominated in foreign currencies
will increase or decrease in response to fluctuations in the value of those
foreign currencies relative to the U.S. dollar. Currency exchange rates can be
volatile at times in response to supply and demand in the currency exchange
markets, international balances of payments, governmental intervention,
speculation, and other political and economic conditions.

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

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<PAGE> 28

The Funds may purchase and sell foreign currency on a spot basis and may
engage in forward currency contracts, currency options, and futures transactions
for hedging or any other lawful purpose. (See "Derivative Instruments.")

DERIVATIVE INSTRUMENTS

Derivative instruments may be used by the Funds for any lawful purpose
consistent with each Fund's investment objective, including hedging, risk
management, or enhancing returns, but not for speculation. Derivative
instruments are securities or agreements whose value is derived from the value
of some underlying asset, for example, securities, currencies, reference
indexes, or commodities. Options, futures, and options on futures transactions
are considered derivative transactions. Derivatives generally have investment
characteristics that are based upon either forward contracts (under which one
party is obligated to buy and the other party is obligated to sell an underlying
asset at a specific price on a specified date) or option contracts (under which
the holder of the option has the right but not the obligation to buy or sell an
underlying asset at a specified price on or before a specified date).
Consequently, the change in value of a forward-based derivative generally is
roughly proportional to the change in value of the underlying asset. In
contrast, the buyer of an option-based derivative generally will benefit from
favorable movements in the price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the value of the underlying
asset. The seller of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses due to changes in the value of the
underlying asset. Derivative transactions may include elements of leverage and,
accordingly, the fluctuation of the value of the derivative transaction in
relation to the underlying asset may be magnified. In addition to options,
futures, and options on futures transactions, derivative transactions may
include short sales against the box, in which a Fund sells a security it owns
for delivery at a future date; swaps, in which the two parties agree to exchange
a series of cash flows in the future, such as interest-rate payments;
interest-rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates exceed a specified
rate, or "cap"; and interest-rate floors, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates
fall below a specified level, or "floor." Derivative transactions may also
include forward currency contracts and foreign currency exchange-related
securities.

Derivative instruments may be exchange-traded or traded in over-the-counter
transactions between private parties. Over-the-counter transactions are subject
to the credit risk of the counterparty to the instrument and are less liquid
than exchange-traded derivatives since they often can only be closed out with
the other party to the transaction. When required by SEC guidelines, a Fund will
set aside permissible liquid assets or securities positions that substantially
correlate to the market movements of the derivative transactions in a

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PROSPECTUS PAGE I-23
<PAGE> 29

segregated account to secure its obligations under derivative transactions. In
order to maintain its required cover for a derivative transaction, a Fund may
need to sell portfolio securities at disadvantageous prices or times since it
may not be possible to liquidate a derivative position.
The successful use of derivative transactions by a Fund is dependent upon the
Advisor's ability to correctly anticipate trends in the underlying asset. To the
extent that a Fund is engaging in derivative transactions other than for hedging
purposes, the Fund's successful use of such transactions is more dependent upon
the Advisor's ability to correctly anticipate such trends, since losses in these
transactions may not be offset in gains in the Fund's portfolio or in lower
purchase prices for assets it intends to acquire. The Advisor's prediction of
trends in underlying assets may prove to be inaccurate, which could result in
substantial losses to a Fund. Hedging transactions are also subject to risks. If
the Advisor incorrectly anticipates trends in the underlying asset, a Fund may
be in a worse position than if no hedging had occurred. In addition, there may
be imperfect correlation between a Fund's derivative transactions and the
instruments being hedged.

MORTGAGE- AND ASSET-BACKED SECURITIES

Mortgage-backed securities represent direct or indirect participation 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 or by private issuers, generally
originators and investors in mortgage loans, including savings associations,
mortgage bankers, commercial banks, investment bankers, and special purpose
entities (collectively, "private lenders"). Mortgage-backed securities issued by
private lenders may be supported by pools of mortgage loans or other
mortgage-backed securities that are guaranteed, directly or indirectly, by the
U.S. government or one of its agencies or instrumentalities, or they may be
issued without any governmental guarantee of the underlying mortgage assets but
with some form of non-governmental credit enhancement.
Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein; rather, they include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property, and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal and
interest on asset-backed securities may be supported by non-governmental credit
enhancements similar to those utilized in connection with mortgage-backed
securities.
The yield characteristics of mortgage- and asset-backed securities differ
from those of traditional debt securities. Among the principal differences are
that interest and principal payments are made more frequently on mortgage-and
asset-backed securities, usually monthly, and that principal may be prepaid

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PROSPECTUS PAGE I-24
<PAGE> 30

at any time because the underlying mortgage loans or other assets generally may
be prepaid at any time. As a result, if a Fund purchases these securities at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing the yield to maturity. Conversely, if a Fund
purchases these securities at a discount, a prepayment rate that is faster than
expected will increase yield to maturity, while a prepayment rate that is slower
than expected will reduce yield to maturity. Accelerated prepayments on
securities purchased by a Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is prepaid in full. The market for privately issued mortgage- and
asset-backed securities is smaller and less liquid than the market for
government-sponsored mortgage-backed securities.
The Funds may invest in stripped mortgage- or asset-backed securities, which
receive differing proportions of the interest and principal payments from the
underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases such market
value may be extremely volatile. With respect to certain stripped securities,
such as interest-only ("IO") and principal-only ("PO") classes, a rate of
prepayment that is faster or slower than anticipated may result in a Fund
failing to recover all or a portion of its investment, even though the
securities are rated investment-grade.

SMALL COMPANIES

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

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<PAGE> 31

DIVERSIFICATION

The American Utilities Fund is non-diversified. Because the Fund may invest a
larger portion of its assets in the securities of a single issuer than
diversified funds, an investment in the Fund may be subject to greater
fluctuations in value than an investment in a diversified fund.

ILLIQUID SECURITIES

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

PORTFOLIO TURNOVER

Historical portfolio turnover rates for the Asset Allocation, American
Utilities, and Total Return Funds are listed under "Financial Highlights." The
annual portfolio turnover rate indicates changes in a Fund's investments and may
also be affected by sales of portfolio securities necessary to meet cash
requirements for redemption of shares. The turnover rate may vary from year to
year, as well as within a year. High turnover in any year will result in the
payment by a Fund of above-average transaction costs and could result in the
payment by shareholders of above-average amounts of taxes on realized investment
gains. The Asset Allocation and Total Return Funds each have a wide investment
scope and an active management investment policy. Their portfolio turnover rates
may be as much as 400% or more. Under normal market conditions, it is
anticipated that the rate of portfolio turnover of the Equity Income, Growth and
Income, and American Utilities Funds generally will not exceed 200%. These rates
should not be considered as limiting factors. The Asset Allocation Fund may
engage in substantial short-term trading, which involves significant risk and
may be deemed speculative. Such trading will result in a higher portfolio
turnover rate and correspondingly higher brokerage costs.

ABOUT THE FUNDS

MANAGEMENT

The Board of Directors of each Fund is responsible for managing its business
and affairs. Each of the Funds has entered into an investment advisory

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PROSPECTUS PAGE I-26
<PAGE> 32

agreement (collectively the "Advisory Agreements") with Strong Capital
Management, Inc. (the "Advisor"). Except for the management fee arrangements,
the Advisory Agreements are substantially identical. Under the terms of these
agreements, the Advisor manages each Fund's investments and business affairs
subject to the supervision of each Fund's Board of Directors.

ADVISOR. The Advisor began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans as well as mutual funds several of which are funding vehicles for variable
insurance products. As of November 30, 1995, the Advisor had over $ billion
under management. The Advisor's principal mailing address is P.O. Box 2936,
Milwaukee, Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the Board of
each Fund, is the controlling shareholder of the Advisor.

As compensation for its services, each Fund pays the Advisor a monthly
management fee based on a percentage of each Fund's average daily net asset
value. The annual rates are as follows: Asset Allocation and Total Return Funds,
.85% of the Fund's average daily net assets up to $35,000,000 and .80% of each
Fund's average daily net assets in excess of $35,000,000; Equity Income and
Growth and Income Funds, .80%; and American Utilities Fund, .75%. Such fees are
in excess of fees paid by many other funds. From time to time, the Advisor may
voluntarily waive all or a portion of its management fee and/or absorb certain
Fund expenses without further notification of the commencement or termination of
such waiver or absorption. Any such waiver or absorption will temporarily lower
a Fund's overall expense ratio and increase a Fund's overall return to
investors.

Except for expenses assumed by the Advisor or Strong Funds Distributors,
Inc., each Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions, and similar
expenses; expenses of issue, sale, repurchase, or redemption of shares; expenses
of registering or qualifying shares for sale with the states and the SEC;
expenses of printing and distribution of prospectuses to existing shareholders;
charges of custodians (including fees as custodian for keeping books and similar
services for a Fund), transfer agents (including the printing and mailing of
reports and notices to shareholders), registrars, auditing and legal services,
and clerical services related to record keeping 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.

SUBADVISORY AGREEMENT - AMERICAN UTILITIES FUND. Under a subadvisory
agreement between the Advisor and W.H. Reaves & Co., Inc. (the "Subadvisory
Agreement"), the Subadvisor, pursuant to the oversight and supervision of the
American Utilities Fund's Board of Directors and the Advisor, provides a
continuous investment program for the American Utilities Fund. Under the
Subadvisory Agreement, the Subadvisor is responsible for determining the

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PROSPECTUS PAGE I-27
<PAGE> 33

securities to be purchased and sold by the Fund and for executing those
transactions. However, the Advisor is responsible for managing the short-term
fixed income securities maintained by the Fund in the ordinary course of its
business, which are expected to equal approximately five to seven percent 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 .50% on the first
$200 million of the Fund's average daily net assets plus 40% of the Advisor's
net management fee (after any waivers thereof) on that portion of the Fund's
average daily net assets in excess of $200 million except that the foregoing
percentage will be 50% on those average daily net assets between $1.0 billion
and $1.5 billion. The Subadvisor bears all of its own expenses in providing
subadvisory services to the Fund.

The Subadvisor began conducting business in 1961. Since then, its principal
business has been providing continuous investment supervision to institutional
investors such as corporations, corporate pension funds, employee savings plans,
foundations, and endowments. The Subadvisor is a Delaware corporation. Mr.
William H. Reaves is the controlling shareholder of the Subadvisor. As of
November 30, 1995, the Subadvisor had over $1 billion under management. Its
address is 10 Exchange Place, Jersey City, New Jersey 07302.

The Subadvisor may also act as a broker for the American Utilities Fund. In
order for the Subadvisor to effect any portfolio transactions for the Fund on an
exchange, the commissions, fees, or other remuneration received by the
Subadvisor must be reasonable and fair compared to the commissions, fees, or
other remuneration paid to other brokers in connection with transactions
involving similar securities being purchased or sold on any exchange during a
comparable period of time. This standard would allow the Subadvisor to receive
no more than the remuneration that would be expected to be received by an
unaffiliated broker in a commensurate arm's-length transaction.

PORTFOLIO MANAGERS. The following individuals serve as portfolio managers for
the five Strong Conservative Equity Funds.

STRONG ASSET ALLOCATION FUND

BRADLEY C. TANK. Mr. Tank leads the Fund's investment team and allocates the
Fund's assets among equities, bonds, and short-term fixed income securities. In
addition, Mr. Tank co-manages the Fund's bond component. Before joining the
Advisor in June 1990, he spent eight years at Salomon Brothers, Inc., where he
was a fixed income specialist and, for the last six years, a vice president. Mr.
Tank received his B.A. in 1980 from the University of Wisconsin-Eau Claire and
his M.B.A. in 1982 from the University of Wisconsin-Madison, where he also
completed the Applied Securities Analysis Program. In addition to his Asset
Allocation Fund duties, Mr. Tank manages the Strong Short-Term Bond and
Government Securities Funds and chairs the Advisor's Fixed Income Investment
Committee.

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PROSPECTUS PAGE I-28
<PAGE> 34

Equity Component

ANTHONY L.T. CRAGG. Mr. Cragg co-manages the equity component of the Fund.
Mr. Cragg joined the Advisor in April 1993 to develop the Advisor's
international investment activities. During the prior seven years, he helped
establish Dillon, Read International Asset Management, where he was in charge of
Japanese, Asian, and Australian investments. A graduate of Christ Church, Oxford
University, Mr. Cragg began his investment career as an international investment
manager in 1980 at Gartmore, Ltd., where his tenure included assignments in
London, Hong Kong, and Tokyo. He has co-managed the Fund since December 1994 and
managed the Strong International Stock Fund since he joined the Advisor. He has
also managed the Strong Asia Pacific Fund since its inception in December 1993.
RONALD C. OGNAR. Mr. Ognar co-manages the equity component of the Fund. Mr.
Ognar, a Chartered Financial Analyst with more than 25 years of investment
experience, joined the Advisor in April 1993 after two years as a principal and
portfolio manager with RCM Capital Management. For approximately three years
prior to that, he was a portfolio manager at Kemper Financial Services in
Chicago. Mr. Ognar began his investment career in 1968 at LaSalle National Bank
in Chicago after serving two years in the U.S. Army. He received his bachelor's
degree in accounting from the University of Illinois in 1968. Mr. Ognar has
co-managed the Fund since December 1994. He has managed the Strong Growth Fund
since its inception in December 1993 and managed the Strong Total Return Fund
from April 1993 until October 1994, when Mr. Ian J. Rogers joined him as a
co-manager.
RICHARD S. STRONG. Mr. Strong co-manages the equity component of the Fund.
Mr. Strong founded the Advisor in 1974. He began his investment career at
Employers Insurance of Wausau in 1966, after receiving his master's degree in
finance from the University of Wisconsin-Madison that January. He received his
undergraduate degree in 1963 from Baldwin-Wallace College. Mr. Strong has
co-managed the Fund since December 1994. He has also managed the Strong
Discovery Fund since its inception in December 1987. In addition to his role as
a portfolio manager, he is currently the Chairman of the Board, Director, Chief
Investment Officer, and a member of the Advisor's Executive Committee.
RICHARD T. WEISS. Mr. Weiss co-manages the equity component of the Fund. Mr.
Weiss joined the Advisor in 1991 from Chicago-based Stein Roe & Farnham, where
he began his career as a research analyst in 1975. He was named a portfolio
manager in 1981. Mr. Weiss attended Harvard Graduate School of Business
Administration, where he was awarded his M.B.A. in 1975, and the University of
Southern California, where he received his bachelor's degree in business
administration in 1973. Mr. Weiss has co-managed the Fund since December 1994.
He has also co-managed the Strong Opportunity and Common Stock Funds since 1991.
In addition, Mr. Weiss is a member of the Advisor's Executive Committee.

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PROSPECTUS PAGE I-29
<PAGE> 35

Bond Component

JEFFREY A. KOCH. Mr. Koch co-manages the bond component of the Fund. Mr. Koch
joined the Advisor as a portfolio manager and securities analyst in June 1989.
For a brief period prior to that, he was a market-maker clerk at Fossett
Corporation, a clearing firm. Mr. Koch earned his M.B.A. in Finance at
Washington University in St. Louis, Missouri in 1989. His undergraduate degree,
awarded in 1987, is from the University of Minnesota-Morris. Mr. Koch is also a
Chartered Financial Analyst. In 1991, Mr. Koch joined Bradley C. Tank as
co-portfolio manager of the Strong Advantage and Corporate Bond Funds, as well
as the Strong Short-Term Bond and Government Securities Funds. They managed the
four Funds together until 1993, when Mr. Koch assumed sole management
responsibility for the Strong Advantage and Corporate Bond Funds. Mr. Koch has
co-managed the bond component of the Fund since December 1994.
SHIRISH T. MALEKAR. Mr. Malekar co-manages the bond component of the Fund.
Mr. Malekar joined the Advisor in 1994. He was an international bond portfolio
manager at Pacific Investment Management Company in California for the previous
three years. Prior to that, he was a bond trader at Harris Bank in Chicago for
one year and a bond trader at PaineWebber Incorporated in New York and Tokyo for
more than two years. He has an M.S. in Management from the Massachusetts
Institute of Technology, an M.S. in Petroleum Engineering from the University of
Pittsburgh, and a B.S. in Chemical Engineering from the University of Bombay,
India. Mr. Malekar has co-managed the bond component of the Fund since December
1994. In addition, Mr. Malekar has managed the Strong Short-Term Global Bond and
International Bond Funds since their inception in March 1994.

Short-Term Component

JAY N. MUELLER. Mr. Mueller manages the Fund's short-term component. Mr.
Mueller joined the Advisor in September 1991 as a securities analyst and
portfolio manager. For four years prior to that, he was a securities analyst and
portfolio manager with R. Meeder & Associates of Dublin, Ohio. Mr. Mueller
received his bachelor's degree in economics in 1982 from the University of
Chicago. Mr. Mueller is also a Chartered Financial Analyst. Mr. Mueller has
managed the Fund's short-term component since 1993. He has also managed the
Strong Money Market and U.S. Treasury Money Funds since October 1991.

STRONG GROWTH AND INCOME FUND

[INSERT PORTFOLIO MANAGER BIOGRAPHICAL INFORMATION]

STRONG EQUITY INCOME FUND

[INSERT PORTFOLIO MANAGER BIOGRAPHICAL INFORMATION]

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PROSPECTUS PAGE I-30
<PAGE> 36

STRONG AMERICAN UTILITIES FUND

WILLIAM H. REAVES. Mr. Reaves, the Fund's senior co-manager, has been the
President and Chief Investment Officer, Portfolio Manager, and Utilities Analyst
of the Subadvisor since 1961. He has worked as a utilities analyst since 1946.

WILLIAM A. FERER. Mr. Ferer, a co-manager of the Fund, has been a Vice
President, Portfolio Manager, and Energy Analyst of the Subadvisor since 1987.
He has worked as a securities analyst since 1971.

RONALD J. SORENSON. Mr. Sorenson, a co-manager of the Fund, has been a Vice
President and Portfolio Manager of the Subadvisor since 1991. For three years
prior to that, he was a Partner and Portfolio Manager of PVF Inc. For a two-year
period prior to that, Mr. Sorenson was the Chairman of the Board and Chairman of
the Investment Committee of The American Life Insurance Company of New York. Mr.
Sorenson has acted as President of RWS Energy Services, Chief Financial Officer
of Emerging Market Services A.G., Controller of Triad Holding Corporation S.A.,
and a C.P.A. for Arthur Young & Co.

MARK D. LUFTIG. Mr. Luftig, a co-manager of the Fund, has been a Vice
President and Utilities Analyst of the Subadvisor since January 1995. Prior to
joining the Subadvisor, he was the Executive Vice President and Director of
Equity Research at Kemper Securities, Inc., where he worked since 1992. For
approximately three years prior to that, Mr. Luftig served as the Vice President
of the National Economic Research Association, Inc. From 1975 until 1989, he
worked at Salomon Brothers, Inc. as the Director of Research.

STRONG TOTAL RETURN FUND

RONALD C. OGNAR. Information concerning Mr. Ognar is set forth above under
"Strong Asset Allocation Fund."
IAN J. ROGERS. In October 1994, Mr. Rogers joined Mr. Ognar as co-portfolio
manager of the Fund. Mr. Rogers has worked with Mr. Ognar as an equity analyst
since joining the Advisor in August 1993. Prior to joining the Advisor, Mr.
Rogers worked for seven years as an equity analyst with Kemper Financial
Services in Chicago. For approximately two years prior to that, he was an equity
analyst for Allstate Insurance. Mr. Rogers began his investment career in 1983
as an equity analyst for Comerica Bank in Detroit. He received his M.B.A. from
Central Michigan University in 1983 and his bachelor's degree in Business
Administration from Ferris State College in 1966.

TRANSFER AND DIVIDEND-DISBURSING AGENT

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

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PROSPECTUS PAGE I-31
<PAGE> 37

DISTRIBUTOR

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

ORGANIZATION

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

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

PRINCIPAL SHAREHOLDER. As of November 30, 1995, Charles Schwab & Co., Inc.
("Schwab") owned of record approximately % of the American Utilities Fund.
Schwab's record ownership of greater than 25% of the Fund's shares may result in
it being deemed a controlling entity of the Fund.

DISTRIBUTIONS AND TAXES

PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. You may elect to have all your
dividends and capital gain distributions from a Fund automatically reinvested in
additional shares of that Fund or in shares of another Strong Fund at the net
asset value determined on the payment date. If you request in writing that your
dividends and other distributions be paid in cash, a Fund will credit your bank
account by Electronic Funds Transfer ("EFT") or issue a check to you within five
business days of the payment date. You may change your election at any time by
calling or writing Strong Funds. Strong Funds must receive any such change 7
days (15 days for EFT) prior to a dividend or capital gain distribution payment
date in order for the change to be effective for that payment. The policy of
each Fund is to pay dividends from net investment

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PROSPECTUS PAGE I-32
<PAGE> 38

income quarterly and to distribute substantially all net realized capital gains
and gains from foreign currency transactions annually. Each Fund may make
additional distributions if necessary to avoid imposition of a 4% excise tax on
undistributed income and gains.

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

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

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

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

BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish a Fund with a correct taxpayer identification
number, the Fund is required to withhold federal income tax at a

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PROSPECTUS PAGE I-33
<PAGE> 39

rate of 31% (backup withholding) from all dividends, capital gain distributions,
and redemption proceeds payable to you. Withholding at that rate from dividends
and capital gain distributions payable to you also is required if you otherwise
are subject to backup withholding. To avoid backup withholding, you must provide
a taxpayer identification number and state that you are not subject to backup
withholding due to the underreporting of your income. This certification is
included as part of your application. Please complete it when you open your
account.

TAX STATUS OF THE FUNDS. Each Fund intends to continue to qualify for
treatment as a regulated investment company under Subchapter M of the Internal
Revenue Code and, if so qualified, will not be liable for federal income tax on
earnings and gains distributed to its shareholders in a timely manner.

This section is not intended to be a full discussion of present or proposed
federal income tax law and its effects on the Funds and investors therein. See
the SAI for a further discussion. There may be other federal, state, or local
tax considerations applicable to a particular investor. You are therefore urged
to consult your own tax adviser.

PERFORMANCE INFORMATION

Each Fund may advertise "average annual total return," "total return," and
"cumulative total return." The American Utilities Fund may also advertise
"yield." Each of these figures is based upon historical results and does not
represent the future performance of a Fund.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund assuming
the reinvestment of all dividends and distributions. Total return figures are
not annualized and simply represent the aggregate change of a Fund's investments
over a specified period of time.
Yield is an annualized figure, which means that it is assumed that a Fund
generates the same level of net investment income over a one-year period. The
American Utilities Fund's yield is a measure of the net investment income per
share earned by the Fund over a specific one-month period and is shown as a
percentage of the net asset value of the Fund's shares at the end of the period.

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PROSPECTUS PAGE I-34
<PAGE> 40

SHAREHOLDER MANUAL

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

HOW TO BUY SHARES

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

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

PROSPECTUS PAGE II-1
<PAGE> 41

<TABLE>
<CAPTION>
TO OPEN A NEW ACCOUNT
- ------------------------------------------------------------------------------
<S> <C>
MAIL BY CHECK
- Complete and sign the application. Make your check
or money order payable to "Strong Funds."
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to Strong Funds, 100 Heritage
Reserve, Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- Call 1-800-368-3863 for instructions on
establishing an account with an exchange by mail.
- ------------------------------------------------------------------------------
TELEPHONE BY EXCHANGE
- Call 1-800-368-3863 to establish a new account by
1-800-368-3863 exchanging funds from an existing Strong Funds
24 HOURS A DAY, account.
7 DAYS A WEEK - Sign up for telephone exchange services when you
open your account. To add the telephone exchange
option to your account, call 1-800-368-3863 for a
Telephone Exchange Form.
- Please note that your accounts must be identically
registered and that you must exchange enough into the
new account to meet the minimum initial investment.
- ------------------------------------------------------------------------------
IN PERSON - Stop by our Investor Center in Menomonee Falls,
Wisconsin.
Call 1-800-368-3863 for hours and directions.
- The Investor Center can only accept checks or money
orders.
- ------------------------------------------------------------------------------
WIRE Call 1-800-368-3863 for instructions on opening an
account by
wire.
- ------------------------------------------------------------------------------
AUTOMATICALLY USE STRONG'S "NO-MINIMUM INVESTMENT PROGRAM."
- If you sign up for Strong's Automatic Investment
Plan when you open your account, Strong Funds will
waive the Fund's minimum initial investment (see
chart on page II-4).
- Complete both the Automatic Investment Plan
application at the back of this Prospectus and the
new account application.
- Mail to the address indicated on the application.
- ------------------------------------------------------------------------------
BROKER-DEALER - You may purchase shares in a Fund through a
broker-dealer or other institution that may charge
a transaction fee.
- Strong Funds may only accept requests to purchase
shares into a broker-dealer street name account
from the broker-dealer.
</TABLE>

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

PROSPECTUS PAGE II-2
<PAGE> 42

TO ADD TO AN EXISTING ACCOUNT
- --------------------------------------------------------------------------------
BY CHECK
- - Complete an Additional Investment Form provided at the bottom of your account
statement, or write a note indicating your fund account number and
registration. Make your check or money order payable to "Strong Funds."
- - Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If you're
using an express delivery service, send to Strong Funds, 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- - Call 1-800-368-3863 for instructions on exchanging by mail.
- --------------------------------------------------------------------------------

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

- - Stop by our Investor Center in Menomonee Falls, Wisconsin. Call 1-800-368-3863
for hours and directions.
- - The Investor Center can only accept checks or money orders.
- --------------------------------------------------------------------------------

Call 1-800-368-3863 for instructions on adding to an account by wire.
- --------------------------------------------------------------------------------

USE ONE OF STRONG'S AUTOMATIC INVESTMENT PROGRAMS. Sign up for these services
when you open your account, or call 1-800-368-3863 for instructions on how to
add them to your existing account.
- - AUTOMATIC INVESTMENT PLAN. Make regular, systematic investments (minimum $50)
into your Strong Funds account from your bank checking or NOW account. We've
included an application at the back of this Prospectus.
- - AUTOMATIC EXCHANGE PLAN. Make regular, systematic exchanges (minimum $50) from
one Strong Funds account to another. Call 1-800-368-3863 for an application.
- - PAYROLL DIRECT DEPOSIT. Have a specified amount (minimum $50) regularly
deducted from your paycheck, social security check, military allotment, or
annuity payment invested directly into your Strong Funds account. Call
1-800-368-3863 for an application.
- - AUTOMATIC DIVIDEND REINVESTMENT. Unless you choose otherwise, all your
dividends and capital gain distributions will be automatically reinvested in
additional Fund shares. Or, you may elect to have your dividends and capital
gain distributions automatically reinvested in shares of another Strong Fund.
- --------------------------------------------------------------------------------

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

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

PROSPECTUS PAGE II-3
<PAGE> 43

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES

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

To open a regular account
Total Return and Asset Allocation Funds...........................$250
American Utilities Fund.........................................$1,000

Equity Income and Growth and Income Funds.......................$2,500

To open an IRA, Defined Contribution, or UGMA/UTMA account

Asset Allocation, American Utilities, and Total Return Funds......$250

Equity Income and Growth and Income Funds.......................$1,000

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

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

The Funds offer a No-Minimum Investment Program that waives the minimum
initial investment requirements for investors who participate in the Strong
Automatic Investment Plan (described on page II-10). Unless you participate in
the Strong No-Minimum Investment Program, please ensure your purchases meet the
minimum investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach a Fund's minimum initial investment), each
Fund reserves the right to close your account. Before taking such action, a Fund
will provide you with written notice and at least 60 days in which to reinstate
an investment program or otherwise reach the minimum initial investment
required.

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

PROSPECTUS PAGE II-4
<PAGE> 44

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

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

DETERMINING YOUR SHARE PRICE

Generally, when you make any purchases, sales, or exchanges, the price of
your shares will be the net asset value ("NAV") next determined after Strong
Funds receives your request in proper form. If Strong Funds receives such
request prior to the close of the New York Stock Exchange (the "Exchange") on a
day on which the Exchange is open, your share price will be the NAV determined
that day. The NAV for each Fund is normally determined as of 3:00 p.m. Central
Time ("CT") each day the Exchange is open. The Funds reserve the right to change
the time at which purchases, redemptions, and exchanges are priced if the
Exchange closes at a time other than 3:00 p.m. CT or if an emergency exists.
Each Fund's NAV is calculated by taking the fair value of a Fund's total assets,
subtracting all its liabilities, and dividing by the total number of shares
outstanding. Expenses are accrued daily and applied when determining the net
asset value.
A Fund's portfolio securities are valued based on market quotations or at
fair value as determined by the method selected by each Fund's Board of
Directors. Equity securities traded on a national securities exchange or NASDAQ
are valued at the last sales price on the national securities exchange or NASDAQ
on which such securities are primarily traded. Securities traded on NASDAQ for
which there were no transactions on a given day or securities not listed on an
exchange or NASDAQ are valued at the average of the most recent bid and asked
prices. Other exchange traded securities (generally foreign securities) will be
valued based on market quotations. Debt securities are valued by a pricing
service that utilizes electronic data processing techniques

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

PROSPECTUS PAGE II-5
<PAGE> 45

to determine values for normal institutional-sized trading units of debt
securities without regard to sale or bid prices when such techniques are
believed to more accurately reflect the fair market value for such securities.
Otherwise, sale or bid prices are used. Any securities or other assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors. Debt securities having
remaining maturities of 60 days or less when purchased are valued by the
amortized cost method when the 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.

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 net
asset value per share is determined. Although the Funds value their foreign
assets in U.S. dollars on a daily basis, they do not intend to convert their
holdings of foreign currencies into U.S. dollars on a daily basis. Foreign
currency exchange rates are generally determined prior to the close of trading
on the Exchange. Occasionally, events affecting the value of foreign investments
and such exchange rates occur between the time at which they are determined and
the close of trading on the Exchange. Such events would not normally be
reflected in a calculation of a Fund's net asset value on that day. If events
that materially affect the value of a Fund's foreign investments or the foreign
currency exchange rates occur during such period, the investments will be valued
at their fair value as determined in good faith by or under the direction of the
Board of Directors.

HOW TO SELL SHARES

You can access the money in your account at any time by selling (redeeming)
some or all of your shares back to the Fund. Once your redemption request is
received in proper form, Strong will normally mail you the proceeds the next
business day and, in any event, no later than seven days thereafter.

To redeem shares, you may use any of the methods described in the following
chart. However, if you are selling shares in a retirement account, please call
1-800-368-3863 for instructions. Please note that there is a $10.00 fee for
closing an IRA or other retirement account or for transferring assets to another
custodian. For your protection, certain requests may require a signature
guarantee.

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

PROSPECTUS PAGE II-6
<PAGE> 46

<TABLE>
<CAPTION>
TO SELL SHARES
- ----------------------------------------------------------------------------
<S> <C>
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
following information: your account number, the
dollar amount or number of shares you wish to
redeem, each owner's name, your street address, and
the signature of each owner as it appears on the
account.
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to 100 Heritage Reserve, Menomonee
Falls, Wisconsin 53051.
FOR TRUST ACCOUNTS
- Same as above. Please ensure that all trustees sign
the letter of instruction.
FOR OTHER REGISTRATIONS
- Call 1-800-368-3863 for instructions.
- ----------------------------------------------------------------------------
TELEPHONE
Sign up for telephone redemption services when you
1-800-368-3863 open your account by checking the "Yes" box in the
24 HOURS A DAY, appropriate section of the account application. To
7 DAYS A WEEK add the telephone redemption option to your account,
call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares ($500 minimum) by phone and arrange
to receive the proceeds in one of three ways:
TO RECEIVE A CHECK BY MAIL
- At no charge, we will mail a check to the address
to which your account is registered.
TO DEPOSIT BY EFT
- At no charge, we will transmit the proceeds by
Electronic Funds Transfer (EFT) to a pre-authorized
bank account. Usually, the funds will arrive at
your bank two banking days after we process your
redemption.
TO DEPOSIT BY WIRE
- For a $10 fee, we will transmit the proceeds by
wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next banking day
after we process your redemption.
You may also use Strong Direct(SM), Strong Funds'
automated telephone response system. Call
1-800-368-3863 for details.
- ----------------------------------------------------------------------------
AUTOMATICALLY
You can set up automatic withdrawals from your
account at regular intervals. To establish the
Systematic Withdrawal Plan, request a form by calling
1-800-368-3863.
- ----------------------------------------------------------------------------
BROKER-DEALER
You may also redeem shares through broker-dealers or
others who may charge a commission or other
transaction fee.
</TABLE>

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

PROSPECTUS PAGE II-7
<PAGE> 47

WHAT YOU SHOULD KNOW ABOUT SELLING SHARES

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

REDEMPTIONS IN KIND

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

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

- - The Funds reserve the right to refuse a telephone redemption if they believe
it advisable to do so.
- - Once you place your telephone redemption request, it cannot be canceled or
modified.

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

PROSPECTUS PAGE II-8
<PAGE> 48

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

SHAREHOLDER SERVICES

INFORMATION SERVICES

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

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

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

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

PROSPECTUS PAGE II-9
<PAGE> 49

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

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

TRANSACTION SERVICES

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

REGULAR INVESTMENT PLANS

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

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

PROSPECTUS PAGE II-10
<PAGE> 50

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

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

AUTOMATIC EXCHANGE PLAN. The Automatic Exchange Plan allows you to make
regular, systematic exchanges (minimum $50) from one Strong Funds account into
another Strong Funds account. By setting up the Plan, you authorize the Fund and
its agents to redeem a set dollar amount or number of shares from the first
account and purchase shares of a second Strong Fund. In addition, you authorize
a Fund and its agents to accept telephone instructions to change the dollar
amount and frequency of the exchange. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result in a capital
gain or loss. To establish the Plan, request a form by calling 1-800-368-3863.
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial
investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be

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

PROSPECTUS PAGE II-11
<PAGE> 51

terminated. You may also terminate the Plan at any time by calling or writing to
the Fund. Once participation in the Plan has been terminated for any reason, to
reinstate the Plan you must do so in writing; simply investing additional
funds will not reinstate the Plan.

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

SPECIAL SITUATIONS

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

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

SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and
the Funds against fraudulent transactions by unauthorized persons. In the

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

PROSPECTUS PAGE II-12
<PAGE> 52

following instances, the Funds will require a signature guarantee for all
authorized owners of an account:

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

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

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

PROSPECTUS PAGE II-13
<PAGE> 53

APPENDIX A

RATINGS OF DEBT OBLIGATIONS:

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

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

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

PROSPECTUS PAGE A-1
<PAGE> 54

APPENDIX B

WEIGHTED AVERAGE RATINGS OF DEBT OBLIGATIONS(1)

<TABLE>
<CAPTION>
Average Percentage of Assets Held During Percentage of Assets Held on December
1994(2) 31, 1994
- ---------------------------------------- ----------------------------------------
Asset Allocation Asset Allocation
Fund(3) Fund(3)
-------------------- --------------------
Equivalent Equivalent
S&P Moody's Rated Unrated(4) S&P Moody's Rated Unrated(4)
- --- ------- ----- ---------- --- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
AAA Aaa(5) 26.8 % - AAA Aaa(5) 27.7 % -
AA Aa 3.0 - AA Aa 2.0 -
A A 5.1 - A A 10.0 -
BBB Baa 17.9 - BBB Baa 16.1 -
BB Ba 0.2 - BB Ba - -
B B - - B B - -
CCC Caa - - CCC Caa - -
CC Ca - - CC Ca - -
C C - - C C - -
Totals 53.0 % 0% Totals 55.8 % 0%
</TABLE>

WEIGHTED AVERAGE RATINGS OF CORPORATE COMMERCIAL PAPER

<TABLE>
<CAPTION>
Average Percentage of Assets Held Percentage of Assets Held on December 31,
During 1994(2) 1994
- ------------------------------------------- -------------------------------------------
Asset Asset
S&P Moody's Rated Allocation S&P Moody's Rated Allocation
--- ------- ----- ---------- --- ------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
A1 P1(6) 7.4% A1 P1(6) 2.8%
A2 P2(6) 3.7 A2 P2(6) 3.3
A3 P3 - A3 P3 -
Totals 11.1% Totals 6.1%
</TABLE>

(1) A security rated differently by the rating services is included in the
category representing the higher of the ratings assigned to the security.

(2) Based on a weighted average of the securities held at the end of each
month. Investment-grade debt obligations are those rated in one of the
four highest categories by an NRSRO and investment-grade commercial paper
rated in one of the top three categories by such organizations. See
"Implementation of Policies and Risks - Debt Obligations" in this
Prospectus for a discussion of the risks associated with
non-investment-grade debt obligations and Appendix A and the SAI for a
description of credit ratings. This Appendix does not contain information
on the Total Return and American Utilities Funds since these Funds do not
invest more than 5% of their assets in non-investment-grade debt
obligations.

(3) On December 28, 1994, the Asset Allocation Fund was authorized by the
Fund's Board of Directors to invest up to, but not including,
35% of its total assets in non-investment-grade debt obligations.
Previously, the Fund could not invest in non-investment-grade debt
obligations.

(4) This category represents the comparable quality of unrated securities, as
determined by the Advisor.

(5) Includes all U.S. government obligations.

(6) Includes commercial paper rated in an equivalent category by either D&P or
Fitch.

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

PROSPECTUS PAGE B-1
<PAGE> 55

STATEMENT OF ADDITIONAL INFORMATION

STRONG ASSET ALLOCATION FUND
STRONG EQUITY INCOME FUND
STRONG AMERICAN UTILITIES FUND
STRONG TOTAL RETURN FUND
STRONG GROWTH AND INCOME FUND

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

This Statement of Additional Information is not a Prospectus and should
be read in conjunction with the Prospectus of the Strong Asset Allocation Fund,
Inc. (the "Asset Allocation Fund"); and Strong Total Return Fund, Inc. (the
"Total Return Fund"); and Strong Equity Income Fund (the "Equity Income Fund"),
Strong Growth and Income Fund (the "Growth and Income Fund"), and Strong
American Utilities Fund (the "American Utilities Fund"), all of which are
series of Strong Conservative Equity Funds, Inc. (hereinafter collectively
referred to as the "Funds") dated December __, 1995. Requests for copies of
the Prospectus should be made by calling one of the numbers listed above. The
financial statements appearing in the Funds' Annual Report, which accompanies
this Statement of Additional Information, are incorporated herein by reference.
The Financial Highlights for the Equity Income and Growth and Income Funds are
not provided because they did not commence operations until December __, 1995.

<PAGE> 56

This Statement of Additional Information is dated December __, 1995.

2
<PAGE> 57

STRONG CONSERVATIVE EQUITY FUNDS

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
COMMON INVESTMENT POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Short Sales Against the Box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Debt Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Variable- or Floating-Rate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
High-Yield (High-Risk) Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Mortgage- and Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
When-Issued Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Depositary Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Foreign Investment Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Mortgage Dollar Rolls and Reverse Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 21
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
INVESTMENT POLICIES AND TECHNIQUES -
ASSET ALLOCATION, EQUITY INCOME, GROWTH AND INCOME, AND TOTAL RETURN FUNDS
Small Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
INVESTMENT POLICIES AND TECHNIQUES - ASSET ALLOCATION FUND
Sovereign Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
INVESTMENT POLICIES AND TECHNIQUES - AMERICAN UTILITIES FUND . . . . . . . . . . . . . . . . . . . . . . . 26
Public Utility Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Energy Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
DIRECTORS AND OFFICERS OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ADDITIONAL SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
FUND ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
PORTFOLIO MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
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 December __, 1995, and if given or made,
such information or representations may not be relied upon as having been
authorized by the Funds.

This Statement of Additional Information does not constitute an offer to sell
securities.
<PAGE> 58

INVESTMENT RESTRICTIONS

The investment objective of the Asset Allocation Fund is to seek high
total return consistent with reasonable risk over the long term. The
investment objective of the Equity Income Fund is to seek total return by
investing for both income and capital growth. The investment objective of the
Growth and Income Fund is to seek high total return by investing for capital
growth and income. The investment objective of the American Utilities Fund is
to seek total return by investing for both income and capital growth. The
investment objective of the Total Return Fund is to seek a high total return by
investing for capital growth and income. The Funds' investment objectives and
policies are described in detail in the Prospectus under the caption
"Investment Objectives and Policies." The following are the Funds' fundamental
investment limitations which cannot be changed without shareholder approval.

Each Fund:

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

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

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

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

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

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

7. May not purchase the securities of any issuer if, as a result, more
than 25% of the Fund's total assets would be invested in the
securities of issuers, the principal business activities of which are
in the same industry (however, with respect to the American Utilities
Fund only, under normal market conditions, it will invest more than
25% of its total assets in the securities of issuers in the public
utility 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> 59

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

Each Fund may not:

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

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

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

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

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

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

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

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

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

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

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

<PAGE> 60

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

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

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

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

COMMON INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Funds'
investment objective, policies, and techniques that are described in detail in
the Prospectus under the captions "Investment Objectives and Policies" and
"Implementation of Policies and Risks." Investment policies and techniques
that are unique to the Asset Allocation, Equity Income, Growth and Income,
American Utilities, or Total Return Funds are discussed below.

ILLIQUID SECURITIES

The Funds may invest in illiquid securities (i.e., securities that are
not readily marketable). However, a Fund will not acquire illiquid securities
if, as a result, they would comprise more than 15% of the value of the Fund's
net assets (or such other amounts as may be permitted under the 1940 Act). The
Board of Directors of each Fund, or its delegate, has the ultimate authority to
determine, to the extent permissible under the federal securities laws, which
securities are liquid or illiquid for purposes of this limitation. Certain
securities exempt from registration or issued in transactions exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act"), including securities that may be resold pursuant to Rule 144A under the
Securities Act, may be considered liquid. The Board of Directors of each Fund
has delegated to Strong Capital Management, Inc. (the "Advisor") the day-to-day
determination of the liquidity of a security, although it has retained
oversight and ultimate responsibility for such determinations. Although no
definitive liquidity criteria are used, the Board of Directors has directed the
Advisor to look to such factors as (i) the nature of the market for a security
(including the institutional private resale market), (ii) the terms of certain
securities or other instruments allowing for the disposition to a third party
or the issuer thereof (e.g., certain repurchase obligations and demand
instruments), (iii) the availability of market quotations (e.g., for securities
quoted in the PORTAL system), and (iv) other permissible relevant factors.

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

<PAGE> 61

A 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 a 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.

Notwithstanding the above, the Advisor intends, as a matter of
internal policy, to limit each Fund's investments in illiquid securities to 10%
of its net assets.

SHORT SALES AGAINST THE BOX

The Funds may sell securities short against the box to hedge
unrealized gains on portfolio securities. Selling securities short against the
box involves selling a security that a Fund owns or has the right to acquire,
for delivery at a specified date in the future. If a Fund sells securities
short against the box, it may protect unrealized gains, but will lose the
opportunity to profit on such securities if the price rises.

WARRANTS

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

DEBT OBLIGATIONS

Each Fund may invest a portion of its assets in debt obligations,
including U.S. government securities, commercial paper, banker's acceptances,
certificates of deposit, and time deposits. 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.

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

MATURITY. In general, the longer the maturity of a debt obligation,
the higher its yield and the greater its sensitivity to changes in interest
rates. Conversely, the shorter the maturity, the lower the yield but the
greater the price stability. Commercial paper is generally considered the
shortest form of debt obligation. The term "bond" generally refers to
securities with maturities longer than two years. Bonds with maturities of
three years or less are considered short-term, bonds with maturities between
three and seven years are considered intermediate-term, and bonds with
maturities greater than seven years are considered long-term.

<PAGE> 62

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 or, with
respect to the American Utilities Fund, W.H. Reaves & Co., Inc., the subadvisor
to the American Utilities Fund (the "Subadvisor"), considers both qualitative
and quantitative factors to evaluate the creditworthiness of individual
issuers. The Advisor and Subadvisor also rely, in part, on credit ratings
compiled by a number of NRSROs. See the Appendix for additional information.

TEMPORARY DEFENSIVE POSITION. When the Advisor determines that market
conditions warrant a temporary defensive position, the Funds may invest without
limitation in cash and short-term fixed income securities, including U.S.
government securities, commercial paper, banker's acceptances, certificates of
deposit, and time deposits.

VARIABLE- OR FLOATING-RATE SECURITIES

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

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

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

A Fund will not invest more than 15% of its net assets in variable-
and floating-rate demand obligations that are not readily marketable (a
variable- or floating-rate demand obligation that may be disposed of on not
more than seven days notice will be deemed readily marketable and will not be
subject to this limitation). (See "Common Investment Policies and Techniques -
Illiquid Securities" and "Investment Restrictions.") In addition, each
variable- or floating-rate obligation must meet the credit

<PAGE> 63
quality requirements applicable to all the Funds' investments at the time of
purchase. When determining whether such an obligation meets a Fund's credit
quality requirements, the Fund may look to the credit quality of the financial
guarantor providing a letter of credit or other credit support arrangement.

HIGH-YIELD (HIGH-RISK) SECURITIES

IN GENERAL. The Growth and Income, American Utilities, and Total
Return Funds have the authority to invest up to 5% of their respective net
assets in non-investment grade debt obligations, the Equity Income Fund has the
authority to invest up to 10% of its respective net assets in non-investment
grade debt obligations, and the Asset Allocation Fund has the authority to
invest up to, but not including, 35% of its net assets in such securities.
Non-investment grade debt obligations (hereinafter referred to as
"lower-quality securities") include (i) bonds rated as low as C by Moody's
Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P"),
or Fitch Investors Service, Inc. ("Fitch"), or CCC by Duff & Phelps, Inc.
("D&P"); (ii) commercial paper rated as low as C by S&P, Not Prime by Moody's,
or Fitch 4 by Fitch; and (iii) unrated debt obligations of comparable quality.
Lower-quality securities, while generally offering higher yields than
investment grade securities with similar maturities, involve greater risks,
including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below. Refer to the Appendix of
this Statement of Additional Information for a discussion of securities
ratings.

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

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

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

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

<PAGE> 64

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

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

RECENT AND PROPOSED LEGISLATION. Recent legislation has been adopted,
and from time to time proposals have been discussed, regarding new legislation
designed to limit the use of certain lower-quality and comparable unrated
securities by certain issuers. An example of legislation is a recent law which
requires federally insured savings and loan associations to divest their
investments in these securities over time. It is not currently possible to
determine the impact of the recent legislation or the proposed legislation on
the lower-quality and comparable unrated securities market. However, it is
anticipated that if additional legislation is enacted or proposed, it could
have a material affect on the value of these securities and the existence of a
secondary trading market for the securities.

MORTGAGE- AND ASSET-BACKED SECURITIES

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

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein, but include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property, and receivables from credit card or
other

<PAGE> 65

revolving credit arrangements. Payments or distributions of principal and
interest on asset-backed securities may be supported by non-governmental credit
enhancements similar to those utilized in connection with mortgage-backed
securities.

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

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

DERIVATIVE INSTRUMENTS

GENERAL DESCRIPTION. As discussed in the Prospectus, the Funds may
use a variety of derivative instruments, including options, futures contracts
(sometimes referred to as "futures"), options on futures contracts or forward
currency contracts for any lawful purpose consistent with each Fund's
investment objective, such as to hedge the Fund's portfolio, risk management,
or to attempt to enhance returns, but not for speculation.

The use of these instruments is subject to applicable regulations of
the Securities and Exchange Commission (the "SEC"), the several options and
futures exchanges upon which they may be traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition, the
Funds' ability to use these instruments will be limited by tax considerations.

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

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

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

<PAGE> 66

(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of investments
being hedged. For example, if the value of an instrument used in a short hedge
(such as writing a call option, buying a put option, or selling a futures
contract) increased by less than the decline in value of the hedged investment,
the hedge would not be fully successful. Such a lack of correlation might
occur due to factors unrelated to the value of the investments being hedged,
such as speculative or other pressures on the markets in which these
instruments are traded. The effectiveness of hedges using instruments on
indices will depend on the degree of correlation between price movements in the
index and price movements in the investments being hedged.

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

(4) As described below, a Fund might be required to maintain assets
as "cover," maintain segregated accounts, or make margin payments when it takes
positions in these instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If a Fund were unable to close out
its positions in such instruments, it might be required to continue to maintain
such assets or accounts or make such payments until the position expired or
matured. The requirements might impair a Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be favorable
to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. A Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("counter party") to enter
into a transaction closing out the position. Therefore, there is no assurance
that any hedging position can be closed out at a time and price that is
favorable to a Fund.

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

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

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

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

Transactions using options (other than purchased options) and forward
currency contracts expose the Funds to counterparty risk. To the extent
required by SEC guidelines, a Fund will not enter into any such transactions
unless it owns either (1) an offsetting ("covered") position in securities,
other options, or futures or (2) cash and liquid high grade debt obligations
with a value sufficient at all times to cover its potential obligations to the
extent not covered as provided in (1) above. The Funds will

<PAGE> 67

also set aside cash and/or appropriate liquid assets in a segregated custodial
account if required to do so by the SEC and CFTC regulations. Assets used as
cover or held in a segregated account cannot be sold while the position in the
corresponding option or futures contract is open, unless they are replaced with
similar assets. As a result, the commitment of a large portion of a Fund's
assets to segregated accounts as a cover could impede portfolio management or
the Fund's ability to meet redemption requests or other current obligations.

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

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

The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions. Options used by the Funds may
include European-style options. This means that the option is only exercisable
at its expiration. This is in contrast to American-style options which are
exercisable at any time prior to the expiration date of the option. Options
that expire unexercised have no value.

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

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

<PAGE> 68

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

If a Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call
option written by a Fund could cause material losses because the Fund would be
unable to sell the investment used as a cover for the written option until the
option expires or is exercised.

The Funds may purchase and write put and call options on indices in
much the same manner as the options discussed above, except the index options
may serve as a hedge against overall fluctuations in the securities markets in
general.

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

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

FUTURES CONTRACTS. The Funds may enter into futures contracts,
including interest rate, index and currency futures. Each Fund may also
purchase put and call options, and write covered put and call options, on
futures in which it is allowed to invest. The purchase of futures or call
options thereon can serve as a long hedge, and the sale of futures or the
purchase of put options thereon can serve as a short hedge. Writing covered
call options on futures contracts can serve as a limited short hedge, and
writing covered put options on futures contracts can serve as a limited long
hedge, using a strategy similar to that used for writing covered options in
securities. The Funds' hedging may include purchases of futures as an offset
against the effect of expected increases in currency exchange rates and
securities prices and sales of futures as an offset against the effect of
expected declines in currency exchange rates and securities prices. The Funds'
futures transactions may be entered into for any lawful purpose consistent with
each Fund's investment objective, such as hedging purposes, risk management, or
to enhance returns, but not for speculation. The Funds may also write put
options on futures contracts while at the same time purchasing call options on
the same futures contracts in order to create synthetically a long futures
contract position. Such options would have the same strike prices and
expiration dates. The Funds will engage in this strategy only when the Advisor
believes it is more advantageous to the Funds than is purchasing the futures
contract.

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

An interest rate futures contract provides for the future sale by one
party and purchase by another party of a specified amount of a specific
financial instrument (e.g., debt security) or currency for a specified price at
a designated date, time, and place.

<PAGE> 69

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

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

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

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

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

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

<PAGE> 70

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

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

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

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

A Fund also might seek to hedge against changes in the value of a
particular currency when no hedging instruments on that currency are available
or such hedging instruments are more expensive than certain other hedging
instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using currency-related

<PAGE> 71

derivative instruments on another foreign currency or a basket of currencies,
the values of which the Advisor believes will have a high degree of positive
correlation to the value of the currency being hedged. The risk that movements
in the price of the hedging instrument will not correlate perfectly with
movements in the price of the currency being hedged is magnified when this
strategy is used.

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

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

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

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

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

The precise matching of currency-related derivative instrument amounts
and the value of the portfolio securities involved generally will not be
possible because the value of such securities, measured in the foreign
currency, will change after the currency-related derivative instrument position
has been established. Thus, a Fund might need to purchase or sell foreign

<PAGE> 72

currencies in the spot (cash) market. The projection of short-term currency
market movements is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain.

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

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

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

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

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

SWAP AGREEMENTS. The Funds may enter into interest rate, securities
index and currency exchange rate swap agreements for any lawful purpose
consistent with each Fund's investment objective, such as for the purpose of
attempting to obtain or preserve a particular desired return or spread at a
lower cost to the Fund than if the Fund had invested directly in an instrument
that yielded that desired return or spread. A Fund also may enter into swaps
in order to protect against an increase in the price of, or the currency
exchange rate applicable to, securities that the Fund anticipates purchasing at
a later date. Swap agreements are two-party contracts entered into primarily
by institutional investors for periods ranging from a few weeks to several
years. In a standard "swap" transaction, two parties agree to exchange the
returns (or differentials in rates of return) earned or realized on particular
predetermined investments or instruments. The gross returns to be exchanged or
"swapped" between the

<PAGE> 73

parties are calculated with respect to a "notional amount," i.e., the return on
or increase in value of a particular dollar amount invested at a particular
interest rate, in a particular foreign currency, or in a "basket" of securities
representing a particular index. Swap agreements may include interest rate
caps, under which, in return for a premium, one party agrees to make payments
to the other to the extent that interest rates exceed a specified rate, or
"cap;" interest rate floors, under which, in return for a premium, one party
agrees to make payments to the other to the extent that interest rates fall
below a specified level, or "floor;" and interest rate collars, under which a
party sells a cap and purchases a floor, or vice versa, in an attempt to
protect itself against interest rate movements exceeding given minimum or
maximum levels.

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

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

The Funds will enter into swap agreements only with banks and
recognized securities dealers believed by the Advisor to present minimal credit
risks in accordance with guidelines established by each Fund's Board of
Directors. If there is a default by the other party to such a transaction, a
Fund will have to rely on its contractual remedies (which may be limited by
bankruptcy, insolvency or similar laws) pursuant to the agreements related to
the transaction.

LENDING OF PORTFOLIO SECURITIES

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

WHEN-ISSUED SECURITIES

The Funds may from time to time purchase securities on a "when-issued"
basis. The price of debt securities purchased on a when-issued basis, which
may be expressed in yield terms, is fixed at the time the commitment to
purchase is made, but delivery and payment for the securities take place at a
later date. Normally, the settlement date occurs within one month of the
purchase. During the period between the purchase and settlement, no payment is
made by a Fund to the issuer and no interest on debt securities accrues to the
Fund. Forward commitments involve a risk of loss if the value of the security
to be purchased

<PAGE> 74

declines prior to the settlement date, which risk is in addition to the risk of
decline in value of a Fund's other assets. While when-issued securities may be
sold prior to the settlement date, the Funds intend to purchase such securities
with the purpose of actually acquiring them unless a sale appears desirable for
investment reasons. At the time a Fund makes the commitment to purchase a
security on a when-issued basis, it will record the transaction and reflect the
value of the security in determining its net asset value. The Funds do not
believe that their respective net asset values or income will be adversely
affected by the purchase of securities on a when-issued basis.

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

DEPOSITARY RECEIPTS

As indicated in the Prospectus, each 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 or issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangement. For purposes of the Funds' investment policies, ADRs and EDRs are
deemed to have the same classification as the underlying securities they
represent. Thus, an ADR or EDR representing ownership of common stock will be
treated as common stock.

ADR facilities may be established as either "unsponsored" or
"sponsored." While ADRs issued under these two types of facilities are in some
respects similar, there are distinctions between them relating to the rights
and obligations of ADR holders and the practices of market 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 distribute
shareholder communications received from the issuer of the deposited securities
or to pass through voting rights to ADR holders in respect of the deposited
securities. Sponsored ADR facilities are created in generally the same manner
as unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the 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.

FOREIGN INVESTMENT COMPANIES

Some of the countries in which the Funds invest may not permit direct
investment by outside investors. Investments in such countries may only be
permitted through foreign government-approved or -authorized investment
vehicles, which may include other investment companies. Investing through such
vehicles may involve frequent or layered fees or expenses and may also be
subject to limitation under the 1940 Act. Under the 1940 Act, a Fund may
invest up to 10% of its assets in shares of 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.

<PAGE> 75

REPURCHASE AGREEMENTS

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

BORROWING

Each Fund may borrow money from banks, limited by each Fund's
fundamental investment restriction to 33 1/3% of its total assets and may
engage in mortgage dollar roll transactions and reverse repurchase agreements
which may be considered a form of borrowing. (See "Mortgage Dollar Rolls and
Reverse Repurchase Agreements" below.) In addition, each Fund may borrow up to
an additional 5% of its total assets from banks for temporary or emergency
purposes. A Fund will not purchase securities when bank borrowings exceed 5%
of the Fund's total assets.

MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

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

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

The mortgage dollar rolls and reverse repurchase agreements entered
into by the Funds may be used as arbitrage transactions in which a Fund will
maintain an offsetting position in investment-grade securities or repurchase
agreements that mature on or before the settlement date on the related mortgage
dollar roll or reverse repurchase agreement. Since a Fund will receive interest
on the securities or repurchase agreements in which it invests the transaction
proceeds, such transactions may involve leverage. However, since such
securities or repurchase agreements will be high quality and will mature on or
before the

<PAGE> 76

settlement date of the mortgage dollar roll or reverse repurchase agreement,
the Advisor believes that such arbitrage transactions do not present the risks
to the Funds that are associated with other types of leverage.

FOREIGN SECURITIES

The Asset Allocation Fund may invest without limitation in foreign
securities. In addition, the American Utilities Fund may invest up to 15% of
its total assets directly in securities of foreign issuers and up to 35% of its
total assets in foreign securities in domestic markets through depositary
receipts. The Equity Income and Total Return Funds may each invest up to 5% of
its assets in the securities of foreign issuers, either through direct
investment or depositary receipts. The Growth and Income Fund may invest up to
15% of its net assets directly in the securities of foreign issuers. It may
also invest without limitation in foreign securities in domestic markets
through depositary receipts. However, as a matter of policy, the Advisor
intends to limit total foreign exposure, including both direct investments and
depositary receipts, to no more than 25% of the Fund's net assets. Many of the
foreign securities held by the Funds will not be registered with the SEC, nor
will the issuers thereof be subject to SEC reporting requirements.
Accordingly, there may be less publicly available information concerning
foreign issuers of securities held by the Funds than is available concerning
U.S. companies. Disclosure and regulatory standards in many respects are less
stringent in emerging market countries than in the U.S. and other major
markets. There also may be a lower level of monitoring and regulation of
emerging markets and the activities of investors in such markets, and
enforcement of existing regulations may be extremely limited. Foreign
companies, and in particular, companies in smaller and emerging capital markets
are not generally subject to uniform accounting, auditing and financial
reporting standards or to other regulatory requirements comparable to those
applicable to U.S. companies. A 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 a 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 a 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 a 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 a Fund are uninvested and no return is earned
thereon. The inability of a Fund to make intended security purchases due to
settlement problems could cause the Fund to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to settlement
problems could result either in losses to a Fund due to subsequent declines in
the value of such portfolio security or, if the Fund has entered into a
contract to sell the security, could result in possible liability to the
purchaser.

INVESTMENT POLICIES AND TECHNIQUES -
ASSET ALLOCATION, EQUITY INCOME, GROWTH AND INCOME, AND TOTAL RETURN FUNDS

SMALL COMPANIES

The Fund may, from time to time, invest a substantial portion of its
assets in small companies. While smaller companies generally have the
potential for rapid growth, investments in smaller companies often involve
greater risks than investments in larger, more established companies because
smaller companies may lack the management experience, financial resources,
product diversification, and competitive strengths of larger companies. In
addition, in many instances the securities of smaller companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of smaller companies may be subject to
greater and more abrupt price fluctuations. When making large sales, the Fund
may have to sell portfolio holdings at discounts

<PAGE> 77

from quoted prices or may have to make a series of small sales over an extended
period of time due to the trading volume of smaller company securities.
Investors should be aware that, based on the foregoing factors, an investment
in the Fund may be subject to greater price fluctuations than an investment in
a fund that invests primarily in larger, more established companies. The
Advisor's research efforts may also play a greater role in selecting securities
for the Fund than in a fund that invests in larger, more established companies.

INVESTMENT POLICIES AND TECHNIQUES - ASSET ALLOCATION FUND

SOVEREIGN DEBT

Sovereign debt differs from debt obligations issued by private
entities in that, generally, remedies for defaults must be pursued in the
courts of the defaulting party. Legal recourse is therefore limited.
Political conditions, especially a sovereign entity's willingness to meet the
terms of its debt obligations, are of considerable significance. Also, there
can be no assurance that the holders of commercial bank loans to the same
sovereign entity may not contest payments to the holders of sovereign debt in
the event of default under commercial bank loan agreements.

A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's
policy toward principal international lenders and the political constraints to
which a sovereign debtor may be subject. A country whose exports are
concentrated in a few commodities could be vulnerable to a decline in the
international price of such commodities. Increased protectionism on the part
of a country's trading partners, or political changes in those countries, could
also adversely affect its exports. Such events could diminish a country's
trade account surplus, if any, or the credit standing of a particular local
government or agency. Another factor bearing on the ability of a country to
repay sovereign debt is the level of the country's international reserves.
Fluctuations in the level of these reserves can affect the amount of foreign
exchange readily available for external debt payments and, thus, could have a
bearing on the capacity of the country to make payments on its sovereign debt.

To the extent that a country has a current account deficit (generally
when exports of merchandise and services are less than the country's imports of
merchandise and services plus net transfers (e.g., gifts of currency and goods)
to foreigners), it will need to depend on loans from foreign governments,
multilateral organizations or private commercial banks, aid payments from
foreign governments and inflows of foreign investment. The access of a country
to these forms of external funding may not be certain, and a withdrawal of
external funding could adversely affect the capacity of a government to make
payments on its obligations. In addition, the cost of servicing debt
obligations can be affected by a change in international interest rates since
the majority of these obligations carry interest rates that are adjusted
periodically based upon international rates.

With respect to sovereign debt of emerging market issuers, investors
should be aware that certain emerging market countries are among the largest
debtors to commercial banks and foreign governments. At times certain emerging
market countries have declared moratoria on the payment of principal and
interest on external debt.

Certain emerging market countries have experienced difficulty in
servicing their sovereign debt on a timely basis which led to defaults on
certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds (discussed below), and obtaining new credit to finance interest
payments. Holders of sovereign debt, including the Fund, may be requested to
participate in the rescheduling of such debt and to extend further loans to
sovereign debtors. The interests of holders of sovereign debt could be
adversely affected in the course of restructuring arrangements or by certain
other factors referred to below. Furthermore, some of the participants in the
secondary market for sovereign debt may also be directly involved in
negotiating the terms of these arrangements and may therefore have access to
information not available to other market participants. Obligations arising
from past restructuring agreements may affect the economic performance and
political and social stability of certain issuers of sovereign debt. There is
no bankruptcy proceeding by which sovereign debt on which a sovereign has
defaulted may be collected in whole or in part.

<PAGE> 78

Foreign investment in certain sovereign debt is restricted or
controlled to varying degrees. These restrictions or controls may at times
limit or preclude foreign investment in such sovereign debt and increase the
costs and expenses of the Fund. Certain countries in which the Fund will
invest require governmental approval prior to investments by foreign persons,
limit the amount of investment by foreign persons in a particular issuer, limit
the investment by foreign persons only to a specific class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of the countries, or impose additional taxes on
foreign investors. Certain issuers may require governmental approval for the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if a deterioration occurs in a
country's balance of payments, the country could impose temporary restrictions
on foreign capital remittances. The Fund could be adversely affected by delays
in, or a refusal to grant, any required governmental approval for repatriation
of capital, as well as by the application to the Fund of any restrictions on
investments. Investing in local markets may require the Fund to adopt special
procedures, seek local government approvals or take other actions, each of
which may involve additional costs to the Fund.

The sovereign debt in which the Fund may invest includes Brady Bonds,
which are securities issued under the framework of the Brady Plan, an
initiative announced by former U.S. Treasury Secretary Nicholas F. Brady in
1989 as a mechanism for debtor nations to restructure their outstanding
external commercial bank indebtedness. In restructuring its external debt
under the Brady Plan framework, a debtor nation negotiates with its existing
bank lenders as well as multilateral institutions such as the International
Monetary Fund ("IMF"). The Brady Plan framework, as it has developed,
contemplates the exchange of commercial bank debt for newly issued Brady Bonds.
Brady Bonds may also be issued in respect of new money being advanced by
existing lenders in connection with the debt restructuring. The World Bank and
the IMF support the restructuring by providing funds pursuant to loan
agreements or other arrangements which enable the debtor nation to
collateralize the new Brady Bonds or to repurchase outstanding bank debt at a
discount.

There can be no assurance that the circumstances regarding the
issuance of Brady Bonds by these countries will not change. Investors should
recognize that Brady Bonds have been issued only recently, and accordingly do
not have a long payment history. Agreements implemented under the Brady Plan
to date are designed to achieve debt and debt-service reduction through
specific options negotiated by a debtor nation with its creditors. As a
result, the financial packages offered by each country differ. The types of
options have included the exchange of outstanding commercial bank debt for
bonds issued at 100% of face value of such debt, which carry a below-market
stated rate of interest (generally known as par bonds), bonds issued at a
discount from the face value of such debt (generally known as discount bonds),
bonds bearing an interest rate which increases over time, and bonds issued in
exchange for the advancement of new money by existing lenders. Regardless of
the stated face amount and stated interest rate of the various types of Brady
Bonds, the Fund will purchase Brady Bonds in secondary markets, as described
below, in which the price and yield to the investor reflect market conditions
at the time of purchase.

Certain Brady Bonds have been collateralized as to principal due at
maturity by U.S. Treasury zero coupon bonds with maturities equal to the final
maturity of such Brady Bonds. Collateral purchases are financed by the IMF,
the World Bank, and the debtor nations' reserves. In the event of a default
with respect to collateralized Brady Bonds as a result of which the payment
obligations of the issuer are accelerated, the U.S. Treasury zero coupon
obligations held as collateral for the payment of principal will not be
distributed to investors, nor will such obligations be sold and the proceeds
distributed. The collateral will be held by the collateral agent to the
scheduled maturity of the defaulted Brady Bonds, which will continue to be
outstanding, at which time the face amount of the collateral will equal the
principal payments which would have then been due on the Brady Bonds in the
normal course. In addition, interest payments on certain types of Brady Bonds
may be collateralized by cash or high grade securities in amounts that
typically represent between 12 and 18 months of interest accruals on these
instruments with the balance of the interest accruals being uncollateralized.
Brady Bonds are often viewed as having several valuation components: (1) the
collateralized repayment of principal, if any, at final maturity, (2) the
collateralized interest payments, if any, (3) the uncollateralized interest
payments, and (4) any uncollateralized repayment of principal at maturity
(these uncollateralized amounts constitute the "residual risk"). In light of
the residual risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and private entities
of countries issuing Brady Bonds, investments in Brady Bonds are to be viewed
as speculative. The Fund may purchase Brady Bonds with no or limited
collateralization, and will be relying for payment of interest and (except in
the case of principal collateralized Brady Bonds) principal primarily on the
willingness and ability of the foreign government to make payment in accordance
with the terms of the Brady Bonds. Brady Bonds issued to date

24
<PAGE> 79

are purchased and sold in secondary markets through U.S. securities dealers and
other financial institutions and are generally maintained through European
transnational securities depositories.

25
<PAGE> 80

INVESTMENT POLICIES AND TECHNIQUES -- AMERICAN UTILITIES FUND

PUBLIC UTILITY COMPANIES

Under normal conditions at least 65% of the Fund's total assets will
be invested in the equity securities of public utility companies headquartered
in the United States. Accordingly, the Fund's performance will depend in part
on conditions in the public utility industry. Stocks of public utility
companies have traditionally been popular among more conservative stock market
investors because they have generally paid consistent and above-average
dividends. The Fund's investments in pubic utility securities may or may not
pay consistent and above-average dividends. Moreover, the securities of public
utility companies can still be affected by the risks of the stock market as
well as factors specific to public utility companies. Government regulation of
public utility companies can limit their ability to expand their businesses or
to pass cost increases on to customers. Companies providing power or
energy-related services may also be affected by increases in fuel and other
operating costs; high costs of borrowing to finance capital construction during
inflationary periods; restrictions on operations and increased costs and delays
associated with compliance with environmental and nuclear safety regulations;
the difficulties involved in obtaining natural gas for resale or fuel for
generating electricity at reasonable prices; the risks in connection with the
construction and operation of nuclear power plants; the effects of energy
conservation and the effects of regulatory changes. Some public utility
companies are facing increased competition, which may reduce their profits.
All of these factors are subject to rapid change, which may affect utility
companies independently from the stock market as a whole. Securities issued by
public utility companies are particularly sensitive to movements in interest
rates; therefore, the equity securities of such companies are more affected by
changes in interest rates than are the equity securities of other issuers.

ENERGY COMPANIES

Under normal market conditions, the Fund anticipates it may invest a
substantial portion, but not more than 25%, of its total assets, in the equity
securities of energy companies. Accordingly, the performance of this portion
of the Fund's investments will depend in part on conditions in the energy
industry. The securities of companies in the energy industry are subject to
changes in value and dividend yield which depend to a large extent on the price
and supply of energy fuels. Swift price and supply fluctuations of energy
fuels may be caused by events relating to international politics, energy
conservation, the success of exploration projects, currency exchange rate
fluctuations and tax and other regulatory policies of various governments.

DIRECTORS AND OFFICERS OF THE FUNDS

Directors and officers of the Funds, together with information as to
their principal business occupations during the last five years, and other
information, are shown below. Each director who is deemed an "interested
person," as defined in the 1940 Act, is indicated by an asterisk. Each officer
and director holds the same position with the following registered investment
companies and any series thereof: Strong Advantage Fund, Inc.; Strong Asia
Pacific Fund, Inc.; Strong Common Stock Fund, 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 Insured Municipal
Bond Fund, Inc.; Strong International Bond Fund, Inc.; Strong International
Stock Fund, Inc.; Strong Money Market Fund, Inc.; Strong Municipal Bond Fund,
Inc.; Strong Municipal Funds, Inc.; Strong Opportunity Fund, Inc.; Strong
Short-Term Bond Fund, Inc.; Strong Short-Term Global Bond Fund, Inc.; and
Strong Short-Term Municipal Bond Fund, Inc. (collectively, the "Strong Funds");
and Strong Institutional Funds, Inc.; Strong Special Fund II, Inc.; and Strong
Variable Insurance Funds, Inc.

26
<PAGE> 81

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

Prior to August 1985, Mr. Strong was Chief Executive Officer of the
Advisor, which he founded in 1974. Since August 1985, Mr. Strong has been a
Security Analyst and Portfolio Manager of the Advisor. In October 1991, Mr.
Strong also became the Chairman of the Advisor. Mr. Strong is a director of
the Advisor. Since October 1993, Mr. Strong has been Chairman and a director
of Strong Holdings, Inc., a Wisconsin corporation and subsidiary of the Advisor
("Holdings"), and the Fund's underwriter, Strong Funds Distributors, Inc., a
Wisconsin corporation and subsidiary of Holdings ("Distributor"). Since
January 1994, Mr. Strong has been Chairman and a director of Heritage Reserve
Development Corporation, a Wisconsin Corporation and subsidiary of Holdings;
and since February 1994, Mr. Strong has been a member of the Managing Boards of
Fussville Real Estate Holdings L.L.C., a Wisconsin Limited Liability Company
and subsidiary of the Advisor, and Fussville Development L.L.C., a Wisconsin
Limited Liability Company and subsidiary of the Advisor, and certain of its
subsidiaries. Mr. Strong has served as (i) a director and Chairman of the
Board of the American Utilities Fund since April 1993; (ii) a director of the
Asset Allocation and Total Return Funds since the inception of each Fund in
1981 and as the Chairman of the Board of each Fund since July 1986; and (iii) a
director and Chairman of the Board of the Equity Income and Growth and Income
Funds since October 1995. Mr. Strong has been in the investment management
business since 1967.

Marvin E. Nevins (DOB 7/9/18), Director of the Funds.

Private Investor. From 1945 to 1980, Mr. Nevins was Chairman of
Wisconsin Centrifugal Inc., a foundry. From July 1983 to December 1986, he was
Chairman of General Casting Corp., Waukesha, Wisconsin, a foundry. Mr. Nevins
is a former Chairman of the Wisconsin Association of Manufacturers & Commerce.
He was also a regent of the Milwaukee School of Engineering and a member of the
Board of Trustees of the Medical College of Wisconsin. Mr. Nevins has served
as a director of (i) the American Utilities Fund since April 1993; (ii) the
Asset Allocation and Total Return Funds since 1981; and (iii) the Equity Income
and Growth and Income Funds since October 1995.

Willie D. Davis (DOB 7/24/34), Director of the Funds.

Mr. Davis has been director of Alliance Bank Since 1980, Sara Lee
Corporation (a food/consumer products company) since 1983, KMart Corporation (a
discount consumer products company) since 1985, YMCA Metropolitan - Los Angeles
since 1985, Dow Chemical Company since 1988, MGM Grand, Inc. (an
entertainment/hotel company) since 1990, WICOR, Inc. (a utility company) since
1990, Johnson Controls, Inc. (an industrial company) since 1992, L.A. Gear (a
footwear/sportswear company) since 1992, and Rally's Hamburger, Inc. since
1994. Mr. Davis has been a trustee of the University of Chicago since 1980,
Marquette University since 1988, and Occidental College since 1990. Since
1977, Mr. Davis has been President and Chief Executive Officer of All Pro
Broadcasting, Inc. Mr. Davis was a director of the Fireman's Fund (an
insurance company) from 1975 until 1990. Mr. Davis has served as a director of
(i) the American Utilities, Asset Allocation, and Total Return Funds since July
1994; and (ii) the Equity Income and Growth and Income Funds since October
1995.

*John Dragisic (DOB 11/26/40), Vice Chairman and Director of the Funds.

Mr. Dragisic has been Vice Chairman of the Advisor and director of
Holdings and Distributor since July 1994. Mr. Dragisic previously served as a
director of the American Utilities Fund from April 1993 until July 1994, and as
a director of the Asset Allocation and Total Return Funds from July 1991 until
July 1994. Mr. Dragisic was the President and Chief Executive Officer of
Grunau Company, Inc. (a mechanical contracting and engineering firm),
Milwaukee, Wisconsin from 1987 until July 1994. From 1981 to 1987, he was an
Executive Vice President with Grunau Company, Inc. From 1969 until 1973, Mr.
Dragisic worked for the Inter American Development Bank. Mr. Dragisic received
his Ph.D. in Economics in 1971 from the University of Wisconsin-Madison, and
his B.A. degree in Economics in 1962 from Lake Forest College. Mr. Dragisic
has served as (i) Vice Chairman of the American Utilities, Asset Allocation,
and Total Return Funds since July 1994; (ii) director of the American
Utilities, Asset Allocation, and Total Return Funds since April 1995; and as
(iii) Vice Chairman and director of the Equity Income and Growth and Income
Funds since October 1995.

27
<PAGE> 82

Stanley Kritzik (DOB 1/9/30), Director of the Funds.

Mr. Kritzik has been a Partner of Metropolitan Associates since 1962,
a Director of Aurora Health Care since 1987, and Health Network Ventures, Inc.
since 1992. He has served as a director of the (i) American Utilities, Asset
Allocation, and Total Return Funds since April 1995; and (ii) Equity Income and
Growth and Income Funds since October 1995.

William F. Vogt (DOB 7/19/47), Director of the Funds.

Mr. Vogt has been the President of Vogt Management Consulting, Inc.
since 1990. From 1982 until 1990, he served as Executive Director of
University Physicians of the University of Colorado. Mr. Vogt is the Past
President of the Medical Group Management Association and a Fellow of the
American College of Medical Practice Executives. He has served as a director
of the (i) American Utilities, Asset Allocation, and Total Return Funds since
April 1995; and (ii) Equity Income and Growth and Income Funds since October
1995.

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

Mr. Totsky has been Vice President of the Advisor since December 1992.
Mr. Totsky acted as the Advisor's Manager of Shareholder Accounting and
Compliance from June 1987 to June 1991 when he was named Director of Mutual
Fund Administration. Mr. Totsky has been a Vice President of the (i) American
Utilities Fund since April 1993; (ii) Asset Allocation and Total Return Funds
since May 1993; and (iii) Equity Income and Growth and Income Funds since
October 1995.

Thomas P. Lemke (DOB 7/30/54), Vice President of the Funds.

Mr. Lemke has been Senior Vice President, Secretary, and General
Counsel of the Advisor since September 1994. For two years prior to joining
the Advisor, Mr. Lemke acted as Resident Counsel for Funds Management at J.P.
Morgan & Co., Inc. From February 1989 until April 1992, Mr. Lemke acted as
Associate General Counsel to Sanford C. Bernstein Co., Inc. For two years
prior to that, Mr. Lemke was Of Counsel at the Washington D.C. law firm of Tew
Jorden & Schulte, a successor of Finley, Kumble Wagner. From August 1979 until
December 1986, Mr. Lemke worked at the Securities and Exchange Commission, most
notably as the Chief Counsel to the Division of Investment Management (November
1984 - December 1986), and as Special Counsel to the Office of Insurance
Products, Division of Investment Management (April 1982 - October 1984). Mr.
Lemke has been a Vice President of the (i) American Utilities, Asset
Allocation, and Total Return Funds since October 1994; and (ii) Equity Income
and Growth and Income Funds since October 1995.

Ann E. Oglanian (DOB 12/7/61), Secretary of the Funds.

Ms. Oglanian has been an Associate Counsel of the Advisor since
January 1992. Ms. Oglanian acted as Associate Counsel for the Chicago-based
investment management firm, Kemper Financial Services, Inc. from June 1988
until December 1991. Ms. Oglanian has been the Secretary of the (i) American
Utilities, Asset Allocation, and Total Return Funds since May 1994; and (ii)
Equity Income and Growth and Income Funds since October 1995.

Ronald A. Neville (DOB 5/21/47), C.P.A., Treasurer of the Funds.

Mr. Neville has been the Senior Vice President and Chief Financial
Officer of the Advisor since January 1995. For fourteen years prior to that,
Mr. Neville worked at Twentieth Century Companies, Inc., most notably as Senior
Vice President and Chief Financial Officer (1988 until December 1994). Mr.
Neville received his M.B.A. in 1972 from the University of Missouri - Kansas
City and his B.A. degree in Business Administration and Economics in 1969 from
Drury College. Mr. Neville has been the Treasurer of the (i) American
Utilities, Asset Allocation, and Total Return Funds since April 1995; and (ii)
Equity Income and Growth and Income Funds since October 1995.

28
<PAGE> 83

Except for Messrs. Nevins, Davis, Kritzik and Vogt, the address of all
of the above persons is P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Nevins'
address is 6075 Pelican Bay Boulevard, Naples, Florida 33963. Mr. Davis'
address is 161 North La Brea, Inglewood, California 90301, Mr. Kritzik's
address is 1123 North Astor Street, P.O. Box 92547, Milwaukee, Wisconsin
53202-0547. Mr. Vogt's address is 2830 East Third Avenue, Denver, Colorado
80206.

The mutual fund complex that is managed by the Advisor, which is
composed of 26 open-end management investment companies consisting of 37 mutual
funds, of which the Funds are a part, 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 mutual fund. In addition, each disinterested director
is reimbursed by the mutual funds for travel and other expenses incurred in
connection with attendance at such meetings. Other officers and directors of
the mutual funds receive no compensation or expense reimbursement from the
mutual funds.

As of November 30, 1995, the officers and directors of the Fund in the
aggregate beneficially owned less than 1% of each Fund's then outstanding
shares.

PRINCIPAL SHAREHOLDERS

As of November 30, 1995, the following persons owned of record or are
known by the Funds to own of record more than 5% of a Fund's outstanding
shares:

<TABLE>
<CAPTION>
NAME AND ADDRESS FUND/SHARES PERCENT OF CLASS
---------------- ----------- ----------------
<S> <C> <C> <C>
Charles Schwab & Co., Inc. American Utilities / %
------------------ ------
101 Montgomery Street Asset Allocation / %
San Francisco, California 94104 ---------------- ------
</TABLE>

A shareholder owning more than 25% of a Fund's shares may be
considered a "controlling person" of the Fund. Accordingly, its vote could
have a more significant effect on matters presented to shareholders for
approval than the vote of other Fund shareholders.

INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR

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

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

29
<PAGE> 84

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

As compensation for its services, the American Utilities Fund pays to
the Advisor a monthly management fee at the annual rate of .75% of the average
daily net asset value of the Fund, the Asset Allocation and Total Return Funds
pay to the Advisor a monthly management fee at the annual rate of .85% of the
first $35,000,000 of the Fund's average daily net asset value and at the annual
rate of .80% of the Fund's average daily net asset value in excess of
$35,000,000, and the Equity Income and Growth and Income Funds pay to the
Advisor a monthly management fee at the annual rate of ___% of the average
daily net asset value of the Fund. (See "Shareholder Manual - Determining Your
Share Price" in the Prospectus.) From time to time, the Advisor may
voluntarily waive all or a portion of its management fee for a Fund. The
organizational expenses of the American Utilities Fund, which were $35,100,
were advanced by the Advisor and will be reimbursed by the Fund over a period
of not more than 60 months from the Fund's date of inception.

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

<TABLE>
<CAPTION>
Management Fee
Incurred Management Fee Management Fee
by Fund Waiver Paid by Fund
---------- ------- ------------
<S> <C> <C> <C>
Asset Allocation Fund

1992 $1,698,048 $ 0 $1,698,048
1993 $1,843,753 $ 0 $1,843,753
1994 $2,077,850 $ 0 $2,077,850

American Utilities
Fund

1993(1) $ 71,977 $ 71,977 $ 0
1994 $ 262,428 $208,638 $ 53,790

Total Return Fund

1992 $4,995,179 $ 0 $4,995,179
1993 $4,614,268 $ 0 $4,614,268
1994 $4,973,614 $ 0 $4,973,614
</TABLE>

- ---------------
(1) Commenced operations on July 1, 1993.

Each Advisory Agreement requires the Advisor to reimburse a Fund in
the event that the expenses and charges payable by the Fund in any fiscal year,
including the management fee but excluding taxes, interest, brokerage
commissions, and similar fees and to the extent permitted extraordinary
expenses, exceed a percentage of the average net asset value of the Fund for
such year. Such excess is determined by valuations made as of the close of
each business day of the year, which is the most restrictive percentage
provided by the laws of the various states in which the Fund's common stock is
qualified for sale; or if the states in which the Fund's common stock is
qualified for sale impose no restrictions, the Advisor shall reimburse the Fund
in the event the

30
<PAGE> 85

expenses and charges payable by the Fund in any fiscal year (as described
above) exceed 2%. The most restrictive percentage limitation currently
applicable to a Fund is 2 1/2% of its average daily net assets up to
$30,000,000, 2% on the next $70,000,000 of its average daily net assets and
11/2% of its average daily net assets in excess of $100,000,000. Reimbursement
of expenses in excess of the applicable limitation will be made on a monthly
basis and will be paid to the Fund by reduction of the Advisor's fee, subject
to later adjustment, month by month, for the remainder of the Fund's fiscal
year. The Advisor may from time to time voluntarily absorb expenses for a Fund
in addition to the reimbursement of expenses in excess of applicable
limitations.

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

The staff of the U.S. Department of Labor (the "Staff") has contacted
the Advisor regarding alleged cross-trading of securities between 1987 and
early 1990 involving various customer accounts subject to the Employee
Retirement Security Act of 1974 ("ERISA") and managed by the Advisor. The
Advisor has informed the Staff of the basis for its position that the trades
complied with ERISA and that, in any event, any alleged noncompliance was not
the cause of any losses to the accounts. The Staff has stated that it
disagrees with the Advisor's positions, although to date it has not filed any
action against the Advisor. At this time, the Advisor is negotiating with the
Staff regarding a possible resolution of the matter, but it cannot presently
determine whether the matter will be settled or litigated or, if it is settled
or litigated, how it ultimately will be resolved. However, management
presently believes, based on current knowledge and the Advisor's insurance
coverage, that the ultimate resolution of this matter should not have a
material adverse effect on the Advisor's financial position.

As indicated above, the Subadvisor to the American Utilities Fund is
W.H. Reaves & Co., Inc. (the "Subadvisor"). The American Utilities Fund's
subadvisory agreement, dated June 25, 1993 (the "Subadvisory Agreement"), was
last approved by shareholders at the annual meeting of shareholders held on
April 13, 1995. Under the terms of the Subadvisory Agreement, the Subadvisor
furnishes investment advisory and portfolio management services to the Fund
with respect to its investments. The Subadvisor is responsible for decisions
to buy and sell the Fund's investments and all other transactions related to
investment therein and the negotiation of brokerage commissions, if any, except
that the Advisor is responsible for managing the cash equivalent investments
maintained by the Fund in the ordinary course of its business and which, on
average, are expected to equal approximately five to seven percent of the
Fund's total assets. Purchases and sales of securities on a securities
exchange are effected through brokers who charge a negotiated commission for
their services. However, because the Subadvisor is a member of the New York
Stock Exchange, it is anticipated that the Subadvisor will directly effect
purchases and sales of securities on the Exchange and be paid a commission for
such services commensurate with the commissions charged by unaffiliated brokers
in arm's-length transactions. (See "Portfolio Transactions and Brokerage.")
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 American
Utilities Fund, to pay the Subadvisor a fee, computed and paid monthly, at an
annual rate of 0.50% on the first $200 million of the Fund's average daily net
assets plus 40% of the Advisor's net management fee (after any waivers thereof)
on that portion of the Fund's average daily net assets in excess of $200
million, except that the foregoing percentage will be 50% on average daily net
assets between $1.0 billion and $1.5 billion. In 1994, the Subadvisor received
$172,390 in subadvisory fees from the Advisor pursuant to the Subadvisory
Agreement. The Subadvisory Agreement also requires the Subadvisor to
contribute to the payment by the Advisor of certain start-up costs of the
American Utilities Fund at the rate of 0.25% of the Fund's average daily net
asset value until the earlier of the Fund reaching $100 million in net assets
or one year from the date the Fund commenced operations and at the rate of
0.15% of the Fund's average

31
<PAGE> 86

daily net asset value until the earlier of the Fund reaching $200 million in
net assets or two years from the date the Fund commenced operations.

The Subadvisory Agreement may be terminated at any time, without
payment of any penalty, by vote of the Board of Directors of the American
Utilities 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.

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

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

The Code requires Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor,
including the Funds) to, among other things, preclear their securities
transactions (with limited exceptions, such as transactions in shares of mutual
funds, direct obligations of the U.S. government and certain options on
broad-based securities market indexes) and to execute such transactions through
the Advisor's trading department. The Code, which applies to all Access
Persons (other than Access Persons who are independent directors of the
investment companies managed by the Advisor, including the Funds), includes a
ban on acquiring any securities in an initial public offering, other than a new
offering of a registered open-end investment company, and a prohibition from
profiting on short-term trading in securities. In addition, no Access Person
may purchase or sell any security which, at the time, is being purchased or
sold, or to the knowledge of the Access Person, is being considered for
purchase or sale, by the Advisor on behalf of any mutual fund or other account
managed by it. Finally, the Code provides for trading "black out" periods
which prohibit trading by Access Persons who are portfolio managers within
seven calendar days of trading in the same securities by any mutual fund or
other account managed by the portfolio manager.

In addition, the Subadvisor to the American Utilities Fund has also
adopted a Code of Ethics (the "Reaves Code") which is identical to the Code
discussed above in all but two respects. First, instead of a flat prohibition
against profiting on short-term trading in securities, the Reaves Code gives a
Reaves' compliance official the authority to require forfeiture of such profits
if such person believes that the profits were gained at the expense of an
advisory client. Second, the Reaves Code modifies the seven day trading "black
out" period as contained in the Code to prohibit only like transactions by a
portfolio manager (e.g., a purchase by both the American Utilities Fund and a
portfolio manager of the Fund) within seven calendar days of the establishment
of an initial position or liquidation of a position of the same securities by
the Fund or other account of the Subadvisor managed by that portfolio manager.

32
<PAGE> 87

Under a Distribution Agreement dated December 1, 1993 with the
American Utilities, Asset Allocation, and Total Return Funds, and a
Distribution Agreement dated December __, 1995 for the Equity Income and Growth
and Income Funds (the "Distribution Agreement"), Strong Funds Distributors,
Inc. acts as underwriter of each Fund's shares ("Distributor"). Each
Distribution Agreement provides that the Distributor will use its best efforts
to distribute the Fund's shares. Since the Funds are "no-load" funds, no sales
commissions are charged on the purchase of Fund shares. Each Distribution
Agreement further provides that the Distributor will bear the costs of printing
Prospectuses and shareholder reports which are used for selling purposes, as
well as advertising and other costs attributable to the distribution of a
Fund's shares. The Distributor is an indirect subsidiary of the Advisor and
controlled by the Advisor and Richard S. Strong. Prior to December 1, 1993,
the Advisor acted as underwriter for the American Utilities, Asset Allocation,
and Total Return Funds. On December 1, 1993, the Distributor succeeded to the
broker-dealer registration of the Advisor and, in connection therewith, the
Distribution Agreements for the American Utilities, Asset Allocation, and Total
Return Funds were executed on substantially identical terms as the former
distribution agreement with the Advisor as distributor. Each Distribution
Agreement is subject to the same termination and renewal provisions as are
described above with respect to the Advisory Agreements.

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

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

With respect to the American Utilities Fund only, because the
Subadvisor is a member of the New York Stock Exchange, it expects to act as a
broker for transactions in the Fund's securities. In order for the Subadvisor
to effect any portfolio transactions for the American Utilities Fund on an
exchange, the commissions, fees or other remuneration received by the
Subadvisor must be reasonable and fair compared to the commissions, fees or
other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard would allow the
Subadvisor to receive no more than the remuneration which would be expected to
be received by an unaffiliated broker in a commensurate arm's-length
transaction. During 1993 and 1994, the American Utilities Fund paid
approximately $68,000 and $136,000, respectively, to the Subadvisor in
brokerage commissions. The payments made to the Subadvisor during 1994
represent 99.45% of the Fund's aggregate brokerage commissions paid during the
year.

Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment advisor, under certain circumstances, to cause an account
to pay a broker or dealer a commission for effecting a transaction in excess of
the amount of commission another broker or dealer would have charged for
effecting the transaction in recognition of the value of the brokerage and
research services provided by the broker or dealer. Brokerage and research
services include (a) furnishing advice as to the value of securities, the
advisability of investing, purchasing or selling securities, and the
availability of securities or purchasers or

33
<PAGE> 88

sellers of securities; (b) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy, and
the performance of accounts; and (c) effecting securities transactions and
performing functions incidental thereto (such as clearance, settlement, and
custody).

In carrying out the provisions of the Advisory Agreements, and
Subadvisory Agreement if applicable, the Advisor, and Subadvisor, may cause the
Funds to pay a broker, which provides brokerage and research services to the
Advisor, or Subadvisor, a commission for effecting a securities transaction in
excess of the amount another broker would have charged for effecting the
transaction. The Advisor, and Subadvisor, believe it is important to the
decision-making process to have access to independent research. Each Advisory
Agreement provides that such higher commissions will not be paid by a Fund
unless (a) the Advisor determines in good faith that the amount is reasonable
in relation to the services in terms of the particular transaction or in terms
of the Advisor's overall responsibilities with respect to the accounts as to
which it exercises investment discretion; (b) such payment is made in
compliance with the provisions of Section 28(e), other applicable state and
federal laws, and the Advisory Agreement; and (c) in the opinion of the
Advisor, the total commissions paid by a Fund will be reasonable in relation to
the benefits to the Fund over the long term. The investment management fees
paid by a Fund under its Advisory Agreement are not reduced as a result of the
Advisor's receipt of research services. The American Utilities Fund paid
approximately $3,000 in brokerage commissions in 1993 and $0 in 1994 (exclusive
of the amounts paid to the Subadvisor, as noted above). The Asset Allocation
Fund paid approximately $520,000, $630,000 and $626,000 in brokerage
commissions during 1992, 1993 and 1994, respectively. The Total Return Fund
paid approximately $4,467,000, $4,309,000 and $4,403,000 in brokerage
commissions during 1992, 1993 and 1994, respectively.

Generally, research services provided by brokers 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 such 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 between administrative benefits and research
and brokerage services, a conflict of interest may exist by reason of the
Advisor's allocation of the costs of such benefits and services between those
that primarily benefit the Advisor and those that primarily benefit the Funds
and other advisory clients.

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

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

During its last fiscal year, the Advisor had an arrangement with
various brokers whereby, in consideration of the providing of research
services, the Advisor allocated brokerage to those firms, provided that their
brokerage and research services

34
<PAGE> 89

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.

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

The Advisor, and Subadvisor, place portfolio transactions for other
advisory accounts, including other mutual funds managed by the Advisor.
Research services furnished by firms through which the Funds effect their
securities transactions may be used by the Advisor, and Subadvisor, in
servicing all of their accounts; not all of such services may be used by the
Advisor, and Subadvisor, in connection with the Funds. In the opinion of the
Advisor, it is not possible to separately measure the benefits from research
services to each of the accounts (including the Funds) managed by the Advisor.
Because the volume and nature of the trading activities of the accounts are not
uniform, the amount of commissions in excess of those charged by another broker
paid by each account for brokerage and research services will vary. However,
in the opinion of the Advisor, such costs to the Funds will not be
disproportionate to the benefits received by the Funds on a continuing basis.

The Advisor seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by a 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 Funds.
In making such allocations between a Fund and other advisory accounts, the main
factors considered by the Advisor are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and the opinions of the persons responsible for recommending
the investment.

The Advisor and Subadvisor place portfolio transactions for other
advisory accounts, including other mutual funds managed by them. Research
services furnished by firms through which the Fund effects its securities
transactions may be used by the Advisor and Subadvisor in servicing all of
their accounts; not all of such services may be used by the Advisor or the
Subadvisor in connection with the Fund. The Advisor and the Subadvisor believe
it is not possible to measure separately the benefits from research services to
each of the accounts (including the Fund) managed by them. 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, the Advisor
and the Subadvisor believe such costs to the Fund will not be disproportionate
to the benefits received by the Fund on a continuing basis.

The Advisor and the Subadvisor seek 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 and the Subadvisor 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 opinions of the persons
responsible for recommending the investment.

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<PAGE> 90

CUSTODIAN

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

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

The Advisor acts as transfer agent and dividend-disbursing agent for
the Funds. The Advisor is compensated based on an annual fee per open account
of $21.75 plus certain out-of-pocket expenses and a $4.20 charge per account
per annum on all closed accounts, payable monthly. The Advisor also acts as
investment advisor for the Funds. The fees received and the services provided
as transfer agent and dividend-disbursing agent are in addition to those
received and provided by the Advisor under the Advisory Agreements. In
addition, the Advisor provides certain printing and mailing services for the
Funds, such as printing and mailing of shareholder account statements, checks,
and tax forms.

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

<TABLE>
<CAPTION>
Transfer Agency and Dividend Disbursement
Services Charges Incurred

Per Printing and Amounts Net Amount
Account Out-of-Pocket Mailing Waived By Paid By
Fund Charges Expenses Services Advisor Fund
-------- ------- -------- -------- ------- -----
<S> <C> <C> <C> <C> <C>
Asset Allocation Fund
1992 $ 515,216 $101,948 $ 11,600 $ 0 $ 628,764
1993 524,693 64,072 12,746 0 601,511
1994 594,683 158,509 14,340 0 767,532
American Utilities Fund
1993(1) $ 0 $ 0 $ 0 $ 0 $ 0
1994 56,756 451 798 0 58,005
Total Return Fund
1992 $ 1,944,126 $ 385,737 $ 44,675 $ 0 $ 2,374,538
1993 1,596,596 360,677 37,559 0 1,994,832
1994 1,617,511 341,401 36,448 0 1,995,360
- ----------------------------------------------------------------------
</TABLE>
(1) The American Utilities Fund commenced operations on July 1, 1993.

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

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<PAGE> 91

TAXES

GENERAL

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

In order to qualify for treatment as a RIC under the Code, each Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign
currency transactions) ("Distribution Requirements") 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, 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) the Fund must derive less than 30% of its gross
income each taxable year from the sale or other disposition of securities, or
any of the following that was held for less than three months -- options or
futures (other than those on foreign currencies), or foreign currencies (or
options, futures, or forward contracts thereon) that are not directly related
to the Fund's principal business of investing in securities (or options and
futures with respect to securities), or forward contracts ("30% Limitation");
(3) at the close of each quarter of the Fund's taxable year, at least 50% of
the value of its total assets must be represented by cash and cash items, U.S.
government securities, securities of other RICs, and other securities, with
these other securities limited, in respect of any one issuer, to an amount that
does not exceed 5% of the value of the Fund's total assets and that does not
represent more than 10% of the issuer's outstanding voting securities; and (4)
at the close of each quarter of the Fund's taxable year, not more than 25% of
the value of its total assets may be invested in securities (other than U.S.
government securities or the securities of other RICs) of any one issuer.

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

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

FOREIGN TRANSACTIONS

Interest and dividends received by a Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S. possessions
that would reduce the yield on its securities. Tax conventions between certain
countries and the United States may reduce or eliminate these foreign taxes,
however, and many foreign countries do not impose taxes on capital gains in
respect of investments by foreign investors.

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

Each 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

37
<PAGE> 92

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

The "Tax Simplification and Technical Corrections Bill of 1993,"
passed in May 1994 by the House of Representatives, would substantially modify
the taxation of U.S. shareholders of foreign corporations, including
eliminating the provisions described above dealing with PFICs and replacing
them (and other provisions) with a regulatory scheme involving entities called
"passive foreign corporations." Three similar bills were passed by Congress in
1991 and 1992 and were vetoed. It is unclear at this time whether, and in what
form, the proposed modifications may be enacted into law.

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

DERIVATIVE INSTRUMENTS

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

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

For federal income tax purposes, each Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on options,
futures, and forward currency contracts that are subject to section 1256 of the
Code ("Section 1256 Contracts") and are held by the Fund as of the end of the
year, as well as gains and losses on Section 1256 Contracts actually realized
during the year. Except for Section 1256 Contracts that are part of a "mixed
straddle" and with respect to which a Fund makes a certain election, any gain
or loss recognized with respect to Section 1256 Contracts is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the Section 1256 Contract. Unrealized
gains on Section 1256 Contracts that have been held by a Fund for less than
three months as of the end of its taxable

38
<PAGE> 93

year, and that are recognized for federal income tax purposes as described
above, will not be considered gains on investments held for less than three
months for purposes of the 30% Limitation.

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

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

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

DETERMINATION OF NET ASSET VALUE

As set forth in the Prospectus under the caption "Shareholder Manual -
Determining Your Share Price," the net asset value of each Fund will be
determined as of the close of trading on each day the New York Stock Exchange
(the "NYSE") is open for trading. The NYSE is open for trading Monday through
Friday except New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Additionally, if any of the aforementioned holidays falls on a Saturday, the
NYSE will not be open for trading on the preceding Friday, and when such
holiday falls on a Sunday, the NYSE will not be open for trading on the
succeeding Monday, unless unusual business conditions exist, such as the ending
of a monthly or the yearly accounting period.

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

ADDITIONAL SHAREHOLDER INFORMATION

39
<PAGE> 94

TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES AND AUTOMATIC EXCHANGE PLAN

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

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

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

RETIREMENT PLANS

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

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

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

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

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

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

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

FUND ORGANIZATION

40
<PAGE> 95

The Asset Allocation and Total Return Funds are Wisconsin corporations that are
authorized to offer separate series of shares representing interests in
separate portfolios of securities, each with differing investment objectives.
The American Utilities, Equity Income, and Growth and Income Funds are series
of common stock of Strong Conservative Equity Funds, Inc., a Wisconsin
corporation (a "Corporation") that is authorized to offer separate series of
shares representing interests in separate portfolios of securities, each with
differing objectives.

41
<PAGE> 96

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

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

<TABLE>
<CAPTION>
Incorporation Date Series Authorized Par
Corporation Date Created Shares Value ($)
----------- ------------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Strong Asset Allocation Fund, Inc. 09/03/81 300,000,000 .01
Strong Conservative Equity Funds, Inc. 12/28/90 10,000,000,000 .00001
- Strong American Utilities Fund 12/28/90 _____________ .00001
- Strong Equity Income Fund 10/__/95 _____________ .00001
- Strong Growth and Income Fund 10/__/95 _____________ .00001
Strong Total Return Fund 9/03/81 300,000,000 .01
</TABLE>

42
<PAGE> 97

SHAREHOLDER MEETINGS

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

Each Corporation's Bylaws allow for a director to be removed by its
shareholders with or without cause, only at a meeting called for the purpose
of removing the director. Upon the written request of the holders of shares
entitled to not less than ten percent (10%) of all the votes entitled to be
cast at such meeting, the Secretary of the Corporation shall promptly call a
special meeting of shareholders for the purpose of voting upon the question of
removal of any director. The Secretary of the Corporation shall inform such
shareholders of the reasonable estimated costs of preparing and mailing the
notice of the meeting, and upon payment to the Corporation of such costs, the
Corporation shall give not less than ten nor more than sixty days notice of the
special meeting.

PERFORMANCE INFORMATION

As described in the "About the Funds - Performance Information"
section of the Funds' Prospectus, each Fund's historical performance or return
may be shown in the form of "average annual total return," "total return," and
"cumulative total return." In addition, the American Utilities Fund's
performance may be shown in the form of "yield" and "distribution rate." From
time to time, the Advisor may agree to waive or reduce its management fee and
to absorb certain operating expenses for a Fund. Without these waivers and
absorption of expenses, the performance results for the Funds noted herein
would have been lower. All performance and returns noted herein are historical
and do not represent the future performance of the Funds.

AVERAGE ANNUAL TOTAL RETURN

The Funds' 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 a Fund for a specific period is found by first
taking a hypothetical $10,000

43
<PAGE> 98

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

44
<PAGE> 99

TOTAL RETURN

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

CUMULATIVE TOTAL RETURN

Cumulative total return represents the simple change in value of an
investment over a stated period and may be quoted as a percentage or as a
dollar amount. Total returns and cumulative total returns 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.

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

The figures below show performance information for the period ended
December 31, 1994. No adjustment has been made for taxes, if any, payable on
dividends. Securities prices fluctuated during these periods.

45
<PAGE> 100

ASSET ALLOCATION FUND

Average
Annual
Total Total
Initial Return Return
$10,000 Ending Value ------ ------
Investment June 30, 1995 Percentage Percentage
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $______ ______% _____%
Ten Years 10,000 ______ ______ _____
Five Years 10,000 ______ ______ _____
One Year 10,000 ______ ______ _____
</TABLE>

_____________________________
(1) December 30, 1981

46
<PAGE> 101

AMERICAN UTILITIES FUND

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial
$10,000 Ending Value Percentage Percentage
Investment June 30, 1995 Increase Increase
---------- ------------- -------- --------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $______ _____ % _____ %
One Year 10,000
------ ----- -----
</TABLE>

- ----------------------
(1) July 1, 1993

TOTAL RETURN FUND

<TABLE>
<CAPTION>
Average
Annual
Total Total
Return Return
------ ------
Initial Ending Value Percentage Percentage
Investment June 30, 1995 Increase Increase
---------- ------------- -------- --------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $______ ______ % _____ %
Ten Years 10,000 ______ ______ _____
Five Years 10,000 ______ ______ _____
One Year 10,000
------ ------ -----
</TABLE>

- ---------------------------
(1) December 30, 1981

The American Utilities, Asset Allocation, and Total Return Funds'
total return for the five months ending November 30, 1995 were ____%, ____%,
and ____%, respectively.

47
<PAGE> 102

YIELD

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

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

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

For the 30-day period ended December 30, 1994, the American Utilities
Fund's yield was 3.93%. In computing its yield, the Fund follows certain
standardized accounting practices specified by rules of the SEC. These
practices are not necessarily consistent with those that the Fund uses to
prepare annual and interim financial statements in conformity with generally
accepted accounting principles.

DISTRIBUTION RATE

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

COMPARISONS

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

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

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

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

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<PAGE> 103

From time to time, in marketing and other fund literature, a Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, may be
cited. Lipper performance figures are based on changes in net asset value,
with all income and capital gains dividends reinvested. Such calculations do
not include the effect of any sales charges imposed by other funds. A Fund
will be compared to Lipper's appropriate fund category, that is, by fund
objective and portfolio holdings. A Fund's performance may also be compared to
the average performance of its Lipper category.

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

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

49
<PAGE> 104

(7) INDICES
The Funds may compare their performance to a wide variety of indices
including the following:

<TABLE>
<S> <C>
(a) The Consumer Price Index
(b) Dow Jones Average of 30 Industrials
(c) Dow Jones Utility Average
(d) Standard & Poor's 500 Stock Index
(e) Standard & Poor's Utility Index
(f) NASDAQ Over-the-Counter Composite Index
(g) Russell 1000 Stock Index
(h) Russell 1000 Growth Index
(i) Russell 2000 Small Stock Index
(j) Russell 2500 Stock Index
(k) Russell 3000 Stock Index
(l) Russell Midcap Index
(m) Russell Midcap Growth Index
(n) Salomon Brothers 3-Month Treasury Bill Index
(o) Salomon Brothers Broad Investment-Grade Bond Index
(p) Lehman Brothers Aggregate Bond Index
(q) Lehman Brothers Intermediate Government/Corporate Bond Index
(r) A blend index consisting of: Standard & Poor's 500
Stock Index (40% weighted), Salomon Brothers Broad
Investment-Grade Bond Index (40% weighted), and
Salomon Brothers 3-Month Treasury Bill Index (20%
weighted)

</TABLE>

There are differences and similarities between the investments that a
Fund may purchase and the investments measured by the indices which are noted
herein.

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

(9) STRONG FAMILY OF FUNDS
The Strong Family of Funds offers a comprehensive range of
conservative to aggressive investment options. All of the members of the Strong
Family and their investment objectives are listed below. The Funds are listed
in ascending order of risk and return, as determined by the Funds' Advisor.

50
<PAGE> 105

<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
<S> <C>
Strong U.S. Treasury Money Fund Current income, a stable share price, and daily liquidity.
Strong Money Market Fund Current income, a stable share price, and daily liquidity.
Strong Heritage Money Fund Current income, a stable share price, and daily liquidity.
Strong Municipal Money Market Fund Federally tax-exempt current income, a stable share-price, and daily liquidity.
Strong Advantage Fund Current income with a very low degree of share-price fluctuation.
Strong Municipal Advantage Fund

Strong Short-Term Bond Fund Total return by investing for a high level of current income with a low
degree of share-price fluctuation.
Strong Short-Term Municipal Bond Fund Total return by investing for a high level of federally tax-exempt
current income with a low degree of share-price fluctuation.
Strong Short-Term Global Bond Fund Total return by investing for a high level of income with a low degree
of share-price fluctuation.
Strong Government Securities Fund Total return by investing for a high level of current income with a
moderate degree of share-price fluctuation.
Strong Insured Municipal Bond Fund Total return by investing for a high level of federally tax-exempt
current income with a moderate degree of share-price fluctuation.
Strong Municipal Bond Fund Total return by investing for a high level of federally tax-exempt
current income with a moderate degree of share-price fluctuation.
Strong Corporate Bond Fund Total return by investing for a high level of current income with a
moderate degree of share-price fluctuation.
Strong International Bond Fund High total return by investing for both income and capital appreciation.
Strong High-Yield Bond Fund
Strong High-Yield Municipal Bond Fund Total return by investing for a high level of federally tax-exempt current income.
Strong Asset Allocation Fund High total return consistent with reasonable risk over the long term.
Strong Equity Income Fund
Strong American Utilities Fund Total return by investing for both income and capital growth.

Strong Total Return Fund High total return by investing for capital growth and income.
Strong Growth and Income Fund
Strong Disciplined Value Fund
Strong Opportunity Fund Capital growth.
Strong Growth Fund Capital growth.
Strong Common Stock Fund* Capital growth.

Strong Small Cap Fund
Strong Discovery Fund Capital growth.
Strong International Stock Fund Capital growth.
Strong Asia Pacific Fund Capital growth.

</TABLE>

* The Strong Common Stock Fund is currently closed to new investors.

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

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<PAGE> 106

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

Financial goals vary from person to person. You may choose one or
more of the Strong Funds to help you reach your financial goals. To help you
better understand the Strong Conservative Equity Funds and determine which Fund
or combination of Funds best meets your personal investment objectives, they
are described in the same Prospectus. Though they appear in the same
Prospectus, each of the Conservative Equity Funds is a separately incorporated
investment company. Because the Funds share a Prospectus, there may be the
possibility of cross liability between the Funds.

ADDITIONAL FUND INFORMATION

(1) PORTFOLIO CHARACTERISTICS

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

(2) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

Occasionally statistics may be used to specify Fund volatility or
risk. The general premise is that greater volatility connotes greater risk
undertaken in achieving performance. Measures of volatility or risk are
generally used to compare a 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",
xi = each individual return during the time period,
xm = the average return over the time period, and
n = the number of individual returns during the time period.

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

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

52
<PAGE> 107

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. Through its
commitment to excellence, the Advisor intends to benefit investors and to
encourage them to think of Strong Funds as their mutual fund family.

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

INVESTMENT ENVIRONMENT

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

EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING

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

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

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.

53
<PAGE> 108

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

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

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

STRONG RETIREMENT PLAN SERVICES

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

Markets:

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

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

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

3. Women-owned businesses.

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

Turnkey approach:

The retirement plans offered by the Advisor are designed to be
streamlined and simple to administer. To this end, the Advisor has invested
heavily in the equipment, systems, and people necessary to adopt or convert a
plan, and to keep it running smoothly. The Advisor provides all aspects of the
plan, including plan design, administration, recordkeeping, and investment
management. To streamline plan design, the Advisor provides customizable
IRS-approved prototype documents. The Advisor's services also include annual
government reporting and testing as well as daily valuation of each
participant's account. This structure is intended to eliminate the confusion
and complication often associated with dealing with multiple vendors. It is
also designed to save plan sponsors time and expense.

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

54
<PAGE> 109

Education:

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

Service:

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

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

STRONG FINANCIAL ADVISORS GROUP

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

PORTFOLIO MANAGEMENT

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

ASSET ALLOCATION FUND

The Advisor believes that active management is the best way to achieve
the Asset Allocation Fund's objective. This policy is based on the fundamental
belief that economic and financial conditions create favorable and unfavorable
investment periods (or seasons) and that these different seasons require
different investment approaches. During favorable investment periods, the Fund
seeks to generate real (inflation plus) growth, and its portfolio may be more
heavily weighted in equities. During uncertain periods, income and capital
preservation may be emphasized, and the Fund's portfolio may be more heavily
weighted in bonds or short-term securities. Through their understanding and
willingness to change with investment cycles or periods, the co-managers of the
Fund seek to achieve the Fund's objectives throughout the seasons of
investment.

The Fund's co-managers intend to employ an investment strategy which
will permit it to participate in a rising market in equities with less risk and
volatility and more income than a fund which concentrates its investments in
stocks. On the other hand, since the Fund's portfolio will generally have
significant holdings in equities, it will be subject to greater volatility and
produce less income than a fund which concentrates its investments solely in
bonds or money market instruments.

In allocating the Fund's assets among equities, bonds, and short-term
securities, the team's lead portfolio manager will employ top-down fundamental
analysis in evaluating the attractiveness of the three asset components on the
basis of economic trends such as inflation, growth of corporate profits and
Federal Reserve Board policies in conjunction with measures of market valuation
such as price-earnings ratios, dividend yields and real interest rates. The
relative weights of the Fund's three asset

55
<PAGE> 110

components are adjusted gradually, perhaps as often as several times a year,
rather than making dramatic reallocations in anticipation of a major shift in
the attractiveness of one asset category over another. Therefore, the Fund
should be viewed as a long-term investment suitable for investors with an
investment horizon of five years or more. In light of the nature of the Fund
and its long-term investment horizon, it may be most appropriate for persons
attempting to achieve long-term goals such as accumulating funds for
retirement, college tuition or a better life for one's family.

EQUITY INCOME FUND

[Insert Portfolio Management Style]

GROWTH AND INCOME FUND

[Insert Portfolio Management Style]

AMERICAN UTILITIES FUND

In selecting securities for the American Utilities Fund, the
Subadvisor looks for certain investment attributes including strong financial
quality, seasoned management, a favorable regulatory environment, and
attractive stock valuations. The Subadvisor also seeks positive changes that
are not yet fully recognized by the marketplace. The Subadvisor continually
monitors the utilities industry for what it believes are attractive stocks or
sectors. When market conditions warrant, the Subadvisor may advocate
opportunistic purchases or focus on a particular sector of the utilities
industry. The Subadvisor believes that individual stock selection is the key
to successfully managing a sector fund. The team approach utilized by the
Subadvisor allows the analysis of companies and situations from many points of
view.

TOTAL RETURN FUND

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

The style of the portfolio managers for the Total Return Fund, Mr.
Ronald C. Ognar and Mr. Ian J. Rogers, leans more toward growth, although they
keep an eye on valuations. The Advisor invests chiefly in the stocks of large,
dividend-paying companies. However, the Fund's charter also enables it to
invest in small and mid-sized companies and to hold up to 40% of its assets in
bonds or cash reserves. In selecting its equity investments, the Advisor looks
for growth of both sales and earnings. The Advisor believes that, in general,
good growth companies exhibit accelerating sales and earnings, high return on
equity, and, typically, low debt. They offer products or services that should
show strong future growth, and their market share is expanding. In short, they
offer some unique, sustainable competitive advantage, such as low cost
production or innovative products and services. The key, however, is the
management. Members of the portfolio management team meet face-to-face with
the management of many companies, which helps them get to know and trust a
company and the people in charge of it.

Currently, the Advisor is focusing on some companies that are
undergoing positive change. Oftentimes, a new product, a new technology, or a
change in management can positively affect a company's earnings growth
prospects. Themes also play a part in the investment strategy. Some examples
would be the aging population, telecommunications, and the rapid development of
foreign economies where U.S. companies have strong revenue growth. The Advisor
seeks to manage risk by adhering to price disciplines, diversifying holdings
across sectors, and, when appropriate, building cash reserves.

As was true with respect to its management of the Asset Allocation
Fund, the Advisor believes that active management is the best way to achieve
the Total Return Fund's objectives. This policy is based on a fundamental
belief that economic and financial conditions create favorable and unfavorable
investment periods (or seasons) and that these different seasons require

56
<PAGE> 111

different investment approaches. Through its understanding and willingness to
change with these investment cycles, the Advisor seeks to achieve the Fund's
objectives throughout the seasons of investment.

<PAGE> 112

INDEPENDENT ACCOUNTANTS

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

LEGAL COUNSEL

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

FINANCIAL STATEMENTS

The Annual Report for the American Utilities, Asset Allocation, and
Total Return Funds that is attached hereto contains the following audited
financial information for the Funds:

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

The Semi-Annual Report for the American Utilities, Asset Allocation,
and Total Return Funds that is attached hereto contains the following unaudited
financial information for the six months ended June 30, 1995 for the Funds:

In the opinion of management of the Funds, the unaudited financial
statements reflect all adjustments which are necessary to a fair statement of
the results for the six months ended June 30, 1995. All such adjustments are
of a normal recurring nature.

<PAGE> 113

APPENDIX

BOND RATINGS

Standard & Poor's Debt Ratings

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

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

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

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

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

2. Nature of and provisions of the obligation.

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

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

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

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

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

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

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

A-1
<PAGE> 114

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-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.

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

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

MOODY'S LONG-TERM DEBT RATINGS

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

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

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

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

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

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

A-2
<PAGE> 115

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

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

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

FITCH INVESTORS SERVICE, INC. BOND RATINGS

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

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

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

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

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

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

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

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

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

A-3
<PAGE> 116

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

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

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk. Moreover, the character of the risk
factor varies from industry to industry and between corporate, health care and
municipal obligations.

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

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

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

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

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

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

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

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

A-4
<PAGE> 117

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

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

<TABLE>
<CAPTION>
Rating Scale Definition
- ----------------------------------------------------------------------------------------------------------------
<S> <C>
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.
- ----------------------------------------------------------------------------------------------------------------
</TABLE>

A-5
<PAGE> 118

DD Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
DP Preferred stock with dividend arrearages.
- -----------------------------------------------------------------------------
SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

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

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

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

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

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

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

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

D Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.

STANDARD & POOR'S NOTE RATINGS

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

The following criteria will be used in making the assessment:

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

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

The 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.

A-6
<PAGE> 119

SP-2 Satisfactory capacity to pay interest and principal, 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 COMMERCIAL PAPER RATINGS

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

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

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

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

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

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

MOODY'S NOTE RATINGS

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

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

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

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

A-7
<PAGE> 120

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

FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS

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

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

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

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

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

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

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

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

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

A-8
<PAGE> 121

DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

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

Emphasis is placed on liquidity which 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.

<TABLE>
<CAPTION>
RATING SCALE: DEFINITION:
------------ ----------
<S> <C>
Duff 1+ Highest certainty of timely payment. Short-term liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations.

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

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

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

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

Satisfactory Grade
------------------

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

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

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

Default
-------

DUFF 5 Issuer failed to meet scheduled principal and/or interest payments.
</TABLE>

A-9
<PAGE> 122

STRONG CONSERVATIVE EQUITY FUNDS, INC.

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

(1) Strong American Utilities Fund (all included or
incorporated by reference in Parts A & B).

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

(2) Strong Equity Income Fund and Strong Growth and
Income Fund.

Report of Independent Accountants
Statement of Assets and Liabilities

(b) Exhibits
(1) Amended and Restated Articles of Incorporation
(1.1) Amendment to Articles of Incorporation
(2) Bylaws
(2.1) Amendment to Bylaws
(3) Inapplicable
(4) Specimen Stock Certificate (American Utilities)
(4.1) Specimen Stock Certificate (Equity Income and Growth
and Income)
(5.1) Investment Advisory Agreement
(5.1.1) Schedule of Additional Funds (Equity Income and
Growth and Income)
(5.2) Subadvisory Agreement
(6) Distribution Agreement (American Utilities)
(6.1) Distribution Agreement (Equity Income and Growth and
Income)
(7) Inapplicable
(8.1) Custody Agreement (American Utilities)
(8.1.1) Custody Agreement (Equity Income and Growth and
Income)
(8.2) Global Custody Agreement (American Utilities)
(8.2.1) Global Custody Agreement (Equity Income and Growth
and Income)
(9) Shareholder Servicing Agent Agreement (American
Utilities)
(9.1) Shareholder Servicing Agent Agreement (Equity Income
and Growth and Income)
(10) Opinion of Counsel
(11) Consent of Auditor
(12) Inapplicable
(13) Subscription Agreement (Equity Income and Growth and
Income)
(14.1) Amended Prototype Defined Contribution Retirement
Plan with Standardized Adoption Agreements
(14.2) Amended Individual Retirement Custodial Account
(14.3) Amended Section 403(b)(7) Retirement Plan
(15) Inapplicable
(16) Computation of Performance Figures
(17) Power of Attorney
(27) Financial Data Schedule (American Utilities)

C-1
<PAGE> 123

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

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

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of September 30, 1995
-------------- ------------------------
<S> <C>
Common Stock, $.00001 par value

Strong American Utilities Fund 6,559
Strong Equity Income Fund None
Strong Growth and Income Fund None
</TABLE>

Item 27. Indemnification

Officers and directors are insured under a joint errors and omissions
insurance policy underwritten by American International Surplus Lines Insurance
Company and First State Insurance Company in the aggregate amount of
$10,000,000, subject to certain deductions. Pursuant to the authority of the
Wisconsin Business Corporation Law, Article VII of Registrant's 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 "About the Funds - Management" in the
Prospectus and under "Directors and Officers of the Funds" 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.

C-2
<PAGE> 124

Item 29. Principal Underwriters

(a) Strong Funds Distributors, Inc., principal underwriter for
Registrant, also serves as principal underwriter for Strong Advantage Fund,
Inc.; Strong Asia Pacific Fund, Inc.; Strong Asset Allocation Fund, Inc.;
Strong Common Stock Fund, Inc.; Strong 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 Insured Municipal Bond Fund, Inc.; Strong International Bond Fund, Inc.;
Strong International Stock Fund, Inc.; Strong Money Market Fund, Inc.; Strong
Municipal Bond Fund, Inc.; Strong Municipal Funds, Inc.; Strong Opportunity
Fund, Inc.; Strong Short-Term Bond Fund, Inc.; Strong Short-Term Global Bond
Fund, Inc.; Strong Short-Term Municipal Bond Fund, Inc.; Strong Special Fund
II, Inc.; Strong Total Return Fund, Inc.; and Strong Variable Insurance Funds,
Inc.

(b) The information contained under "About the Funds - Management" in
the Prospectus and under "Directors and Officers of the Funds" 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 Treasurer, Ronald A.
Neville, at Registrant's corporate offices, 100 Heritage Reserve, Menomonee
Falls, Wisconsin 53051.

Item 31. Management Services

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

Item 32. Undertakings

(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 the effective date of this Registration Statement with respect to
Strong Equity Income Fund and Strong Growth and Income Fund.

(c) The Registrant undertakes to furnish to each person to whom a
prospectus is delivered, upon request and without charge, a copy of Strong
American Utilities Fund's latest annual report to shareholders.

C-3
<PAGE> 125

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it has
duly caused this Post-Effective Amendment No. 5 to the Registration Statement
on Form N-1A to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Village of Menomonee Falls, and State of Wisconsin on the
10th day of October, 1995.

STRONG CONSERVATIVE EQUITY FUNDS, INC.
(Registrant)

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

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
Vice Chairman of the Board (Principal
/s/ John Dragisic Executive Officer) and a Director October 10, 1995
- ------------------------
John Dragisic

Treasurer (Principal Financial and
/s/ Ronald A. Neville Accounting Officer) October 10, 1995
- ------------------------
Ronald A. Neville

/s/ Richard S. Strong Chairman of the Board and a Director October 10, 1995
- ------------------------
Richard S. Strong

- ------------------------ Director October 10, 1995
Marvin E. Nevins*

- ------------------------ Director October 10, 1995
Willie D. Davis*

- ------------------------ Director October 10, 1995
William F. Vogt*

- ------------------------ Director October 10, 1995
Stanley Kritzik*
</TABLE>

* Thomas P. Lemke signs this document pursuant to powers of attorney
filed with Post-Effective Amendment No. 4 to the Registration
Statement of Registrant filed with the SEC on or about April 24, 1995.

By: /s/ Thomas P. Lemke
-------------------
Thomas P. Lemke

<PAGE> 126

EXHIBIT INDEX

<TABLE>
<CAPTION>
EDGAR
Exhibit No. Exhibit Exhibit No.
----------- ------- -----------
<S> <C> <C>
(1) Amended and Restated Articles of Incorporation EX-99.B1(7)

(1.1) Amendment to Articles of Incorporation*

(2) Bylaws(1)

(2.1) Amendment to Bylaws EX-99.B2.1(7)

(3) Inapplicable

(4) Specimen Stock Certificate (American Utilities)(2)

(4.1) Specimen Stock Certificate (Equity Income and Growth and Income)*

(5.1) Investment Advisory Agreement EX-99.B5.1(7)

(5.1.1) Schedule of Additional Funds (Equity Income and Growth and Income)*

(5.2) Subadvisory Agreement(3)

(6) Distribution Agreement (American Utilities)(2)

(6.1) Distribution Agreement (Equity Income and Growth and Income)*

(7) Inapplicable

(8.1) Custody Agreement (American Utilities)(3)

(8.1.1) Custody Agreement (Equity Income and Growth and Income)*

(8.2) Global Custody Agreement (American Utilities)(4)

(8.2.1) Global Custody Agreement (Equity Income and Growth and Income)*

(9) Shareholder Servicing Agent Agreement (American Utilities)(2)

(9.1) Shareholder Servicing Agent Agreement (Equity Income and Growth and
Income)*

(10) Opinion of Counsel*

(11) Consent of Auditor*

(12) Inapplicable

(13) Subscription Agreement (Equity Income and Growth and Income)*

(14.1) Amended Prototype Defined Contribution Retirement Plan with Standardized
Adoption Agreements(5)
</TABLE>

<PAGE> 127

<TABLE>
<S> <C> <C>
(14.2) Amended Individual Retirement Custodial Account(5)

(14.3) Amended Section 403(b)(7) Retirement Plan(5)

(15) Inapplicable

(16) Computation of Performance Figures EX-99.B16(6)

(17) Power of Attorney(7)

(27) Financial Data Schedule (American Utilities)*
</TABLE>
- ----------------------
(1) Incorporated herein by reference to the Registration Statement on Form
N-1A of Registrant filed on or about April 20, 1993.

(2) Incorporated herein by reference to Exhibit 5(a) to Pre-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of Registrant
filed on or about June 14, 1993.

(3) Incorporated herein by reference to Pre-Effective Amendment No. 2 to the
Registration Statement on Form N-1A of Registrant filed on or about June
28, 1993. The Subadvisory Agreement is incorporated by reference to
Exhibit 5(b) to Pre-Effective Amendment No. 2. The Custody Agreement is
incorporated by reference to Exhibit 8(a) to Pre-Effective Amendment
No. 2.

(4) Incorporated by reference to Exhibit 8(b) to Post-Effective Amendment No.
1 to the Registration Statement on Form N-1A of Registrant filed on or
about January 27, 1994.

(5) Incorporated by reference to Post-Effective Amendment No. 2 to the
Registration Statement on Form N-1A of Registrant filed on or about April
28, 1994.

(6) Incorporated herein by reference to Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A of Registrant filed on or about
February 24, 1995.

(7) Incorporated herein by reference to Post-Effective Amendment No. 4 to the
Registration Statement on Form N-1A of Registrant filed on or about April
24, 1995.

* To be included by amendment prior to the effective date of this
Post-Effective Amendment to the Registration Statement on Form N-1A.