STRONG EQUITY FUNDS INC, 485APOS, 1996-10-17

STRONG EQUITY FUNDS INC
485APOS, 1996-10-17

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<PAGE> 1
As filed with the Securities and Exchange Commission on or about October 17,1996

Securities Act Registration No. 33-70764
Investment Company Act Registration No. 811-8100
================================================================================
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. 8 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]

Amendment No. 9 [X]

(Check appropriate box or boxes)

STRONG EQUITY FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

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

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

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

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

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

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

[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ ] 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 31, 1996 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 EQUITY FUNDS, INC.

CROSS REFERENCE SHEET

For Strong Growth 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 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; 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
</TABLE>
<PAGE> 3

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

17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage

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, 3-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 EQUITY FUNDS, INC.

CROSS REFERENCE SHEET

FOR STRONG VALUE FUND AND
STRONG SMALL CAP 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 Growth 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 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

</TABLE>
<PAGE> 5

17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage

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 Financial Statements
</TABLE>

* Complete answer to Item is contained in the Fund's Prospectus.
<PAGE> 6

STRONG EQUITY FUNDS, INC.

CROSS REFERENCE SHEET

For Strong Mid Cap 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 Investment Objective and Policies; Implementation
of Policies and Risks; About the Fund -
Organization

5. Management of the Fund About the Fund - Management

5A. Management's Discussion of Fund Performance Inapplicable

6. Capital Stock and Other Securities About the Fund - 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 Fund

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

</TABLE>
<PAGE> 7

<TABLE>
<CAPTION>
CAPTION OR SUBHEADING IN PROSPECTUS OR
ITEM NO. ON FORM N-1A STATEMENT OF ADDITIONAL INFORMATION
--------------------- -----------------------------------
<S> <C>
16. Investment Advisory and Other Services Investment Advisor, Subadvisor, and Distributor;
About the Fund - Management (in Prospectus);
Custodian; Transfer Agent and Dividend-Disbursing
Agent; Independent Accountants; Legal Counsel

17. Brokerage Allocation and Other Practices Portfolio Transactions and Brokerage

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

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

21. Underwriters Investment Advisor, Subadvisor, and Distributor

22. Calculation of Performance Data Performance Information

23. Financial Statements Inapplicable
</TABLE>

* Complete answer to Item is contained in the Fund's Prospectus.
<PAGE> 8

Please file this Prospectus Supplement with your records.

STRONG VALUE FUND
STRONG OPPORTUNITY FUND
STRONG GROWTH FUND
STRONG COMMON STOCK FUND
STRONG SMALL CAP FUND
STRONG DISCOVERY FUND

Supplement to the Prospectus dated May 1, 1996

STRONG VALUE FUND

The following table sets forth the composite performance data of Sloate,
Weisman, Murray & Company, Inc., the subadvisor (the "Subadvisor") of the Strong
Value Fund (the "Value Fund") relating to the historical performance of equity
accounts and the designated equity portion (including designated cash reserves)
of balanced accounts with assets over $5 million (the "Equity Accounts") managed
by the Subadvisor, since the dates indicated, that have investment objectives,
policies, strategies, and risks substantially similar to those of the Value
Fund. The data is provided to illustrate the past performance of the Subadvisor
in managing substantially similar accounts as measured against the Standard &
Poor's 500 Stock Index ("S&P 500") and the Russell 100 Value Index ("Russell
1000 Value"), and does not represent the performance of the Value Fund.
Performance is historical and does not represent the future performance of the
Value Fund or of the Subadvisor.
The Subadvisor's composite performance data shown below was calculated in
accordance with the recommended standards of the Association for Investment
Management and Research (commonly referred to as AIMR)* retroactively applied
for all time periods. All returns presented were calculated on a total return
basis and include all dividends and interest, accrued income and realized and
unrealized gains and losses. All returns reflect the deduction of investment
management fees, brokerage commissions and execution costs paid by the Equity
Accounts, without provision for federal or state income

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

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

---------------------
<PAGE> 9

taxes. Custodial fees, if any, were not included in the calculation. The
composite includes all actual, fee-paying, discretionary Equity Accounts managed
by the Subadvisor that have investment objectives, policies, strategies and
risks substantially similar to those of the Value Fund. Securities transactions
are accounted for on the trade date and accrual accounting is utilized. Cash and
equivalents are included in performance returns. The composite's returns are
calculated on a time-weighted basis.
The Equity Accounts that are included in the Subadvisor's composite are not
subject to the same type of expenses to which the Value Fund is subject nor to
the diversification requirements, specific tax restrictions, and investment
limitations imposed on the Value Fund by the Investment Company Act of 1940 or
Subchapter M of the Internal Revenue Code. Consequently, the performance results
for the Subadvisor's composite could have been adversely affected if the Equity
Accounts included in the composite had been regulated under the federal security
and tax laws.
The investment results of the Subadvisor's composite presented below are
unaudited and are not intended to predict or suggest the future returns of the
Value Fund. Investors should be aware that the use of a methodology different
than that used below to calculate performance could result in different
performance data.
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Subadvisor's Value Russell
Time Period Equity Composite 1000 Value(1) S&P 500(2)
<S> <C> <C> <C>
Average Annual Returns
1 Year .% .% .%
3 Year .% .% .%
5 Year .% .% .%
4/1/88 - 9/30/96 .% .% .%
Cumulative Returns
4/1/88 - 9/30/96 .% .% .%
</TABLE>

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

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

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

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

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

2
<PAGE> 10

STRONG GROWTH FUND

From March 1, 1989 through June 30, 1991, Mr. Ronald C. Ognar, the current
portfolio manager of the Strong Growth Fund, managed the Kemper Growth Fund. Mr.
Ognar assumed portfolio management responsibility from the Kemper Growth Fund's
previous manager. As portfolio manager, Mr. Ognar was primarily responsible for
the day-to-day management of the Kemper Growth Fund. During the time that Mr.
Ognar managed the Kemper Growth Fund, it had an investment objective, policies,
and strategies that were substantially similar to the Strong Growth Fund. The
cumulative total return for the Kemper Growth Fund from March 1, 1989 through
June 30, 1991 was 62.93% as compared to 39.32% for the S&P 500 Index over the
same period. The average annual total returns for the Kemper Growth Fund for the
one-year period ended June 30, 1991, and for the entire period that Mr. Ognar
managed the Kemper Growth Fund compared with the performance of the S&P 500
Index were:
----------------------------------------------------------------------------

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

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

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

(3) From July 1991 until he began managing the Strong Growth Fund in April of
1993, Mr. Ognar served RCM Capital Management as a portfolio manager of
certain separate accounts.

Historical performance does not indicate future performance. The Kemper
Growth Fund is a separate fund and its historical performance is not indicative
of the potential performance of the Strong Growth Fund. Share prices and
investment returns will fluctuate.

STRONG COMMON STOCK FUND

From November 1981 through March 1991, Mr. Richard T. Weiss, a current
co-portfolio manager of the Strong Common Stock Fund, managed and co-managed the
Stein Roe Special Fund. Mr. Weiss assumed portfolio management responsibility
from the Stein Roe Special Fund's previous manager. Although Mr. Weiss
co-managed the Stein Roe Special Fund from 1986 until March 1991, Mr. Weiss was
primarily responsible for the day-to-day

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

3
<PAGE> 11

management of the Fund from November 1981 through March 1991. During
the time that Mr. Weiss managed the Stein Roe Special Fund, it had an investment
objective, policies and strategies that were substantially similar to the Strong
Common Stock Fund. The cumulative total return for the Stein Roe Special Fund
from December 1, 1981 through February 28, 1991 was 380.24% as compared to
163.68% for the Russell 2000 Stock Market Index ("Russell 2000 Index") and
322.20% for the S&P 500 Index over the same period. The average annual total
returns for the Stein Roe Special Fund the one-year, three-year, five-year
periods ended February 28, 1991, and for the entire period that Mr. Weiss
managed the Stein Roe Special Fund compared with the performance of the Russell
2000 and S&P 500 Indices were:
----------------------------------------------------------------------------

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

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

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

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

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

Historical performance does not indicate future performance. The Stein Roe
Special Fund is a separate fund and its historical performance is not indicative
of the potential performance of the Strong Common Stock Fund. Share prices and
investment returns will fluctuate.

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

STRONG SMALL CAP FUND

On August 31, 1996, Ms. Mary Lisanti began serving as the portfolio manager of
the Strong Small Cap Fund. Prior to joining Strong Capital Management, Inc., the
Fund's investment advisor (the "Advisor"), Ms. Lisanti acted as a managing
director at Bankers Trust in New York, where she headed the small/mid-cap equity
team, and served as a portfolio manager of the BT Investment Small Cap Fund
since its inception in March 1993. As portfolio

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

4
<PAGE> 12

manager, Ms. Lisanti was primarily responsible for the day-to-day management of
BT Investment Small Cap Fund. During the time that Ms. Lisanti managed the BT
Investment Small Cap Fund, it had an investment objective, policies and
strategies that were substantially similar to the Strong Small Cap Fund. The
cumulative total return for the BT Investment Small Cap Fund from its inception
(10/21/93) through July 31, 1996 was 100.17% as compared to 29.15% for the
Russell 2000 Index and 47.88% for the S&P 500 Index over the same period. The
average annual returns of the BT Investment Small Cap Fund for the one-year
period ended July 31, 1996, and for the entire period that Ms. Lisanti managed
the Fund compared with the performance of the Russell 2000 and S&P 500 Indices
were:
----------------------------------------------------------------------------

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

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

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

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

(4) The S&P 500 Stock Index is an unmanaged index generally representative of
the U.S. stock market. The index does not reflect investment management
fees, brokerage commissions and other expenses associated with investing in
equity securities.
Historical performance does not indicate future performance. The BT
Investment Small Cap Fund is a separate fund and its historical performance is
not indicative of the potential performance of the Strong Small Cap Fund. Share
prices and investment returns will fluctuate.
Prior to joining Bankers Trust in February 1993, Ms. Lisanti was a vice
president and portfolio manager with Lieber & Company/The Evergreen Funds. A
native of Queens, New York, she graduated with honors from Princeton University
in 1978. Ms. Lisanti is a Chartered Financial Analyst and a member of the New
York Society of Security Analysts and the Financial Analyst Federation.

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

5
<PAGE> 13

STRONG DISCOVERY FUND

On August 31, 1996, Mr. Charles A. Paquelet joined Mr. Richard S. Strong as a
co-portfolio manager of the Strong Discovery Fund. Mr. Strong has managed the
Fund since its inception in 1988.
Mr. Paquelet joined the Advisor as a securities analyst in 1988 from the B.F.
Goodrich Company, where he began his career as a financial analyst earlier in
1987. Since 1990, he has been a portfolio manager of separate accounts for
individual and institutional investors. Mr. Paquelet was awarded his M.B.A. in
1989 from Indiana University. He received his bachelor's degree in finance in
1987 from Case Western Reserve University. Mr. Paquelet is a Chartered Financial
Analyst. Mr. Paquelet served as the portfolio manager of the Strong Small Cap
Fund from the Fund's inception in December 1995 through August 31, 1996.

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

6
<PAGE> 14

FINANCIAL HIGHLIGHTS
(For each share of the Funds' outstanding throughout the period.)
-----------------------------------------------------------------------

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

* Calculated on an annualized basis
(a) For the six months ended June 30, 1996 (Unaudited). Inception date is
December 29, 1995. Total return and portfolio turnover rate are not
annualized.
(b) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
(c) For the six months ended June 30, 1996 (Unaudited). Total return and
portfolio turnover rate are not annualized.

Prospectus Supplement Dated December 31, 1996.

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

7
<PAGE> 15

PART A

PROSPECTUS

STRONG VALUE FUND
STRONG OPPORTUNITY FUND
STRONG GROWTH FUND
STRONG COMMON STOCK FUND
STRONG SMALL CAP FUND
STRONG DISCOVERY FUND

Incorporated by Reference to the Registrant's Post-Effective Amendment
No. 6 to the Registration Statement on Form N-1A (File No. 33-70764), which was
filed with the Securities and Exchange Commission on or about April 25, 1996
(Edgar Reference No. 0000950124-96-001773).
<PAGE> 16

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH
SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
STATE.

STRONG MID CAP FUND

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

The Strong Family of Funds ("Strong Funds") is a family of more than
twenty-five diversified and non-diversified mutual funds. All of the Strong
Funds are no-load funds, meaning that you may purchase, redeem, or exchange
shares without paying a sales charge. Strong Funds include growth funds,
conservative equity funds, income funds, municipal income funds, international
funds, and cash management funds. The Strong Mid Cap Fund is described in this
Prospectus. The Fund seeks capital growth. The Fund invests primarily in equity
securities of companies with medium market capitalizations. The Fund is a
diversified series of Strong Equity Funds, Inc.
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 Fund, dated December 31, 1996, contains further
information, is incorporated by reference into this Prospectus, and has been
filed with the Securities and Exchange Commission ("SEC"). This Statement, which
may be revised from time to time, is available without charge upon request to
the above-noted address or telephone number.

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

THE FUND MAY ENGAGE IN SUBSTANTIAL SHORT-TERM TRADING, WHICH MAY INCREASE
THE FUND'S EXPENSES. THE FUND MAY INVEST A SIGNIFICANT PORTION OF ITS ASSETS
IN RESTRICTED SECURITIES. THESE INVESTMENT POLICIES INVOLVE SUBSTANTIAL RISK
AND MAY BE CONSIDERED SPECULATIVE.
----------------------------------------------------------------------------

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.
----------------------------------------------------------------------------

December 31, 1996

PROSPECTUS PAGE I-1
<PAGE> 17

TABLE OF CONTENTS

EXPENSES................................. I-3
INVESTMENT OBJECTIVE AND POLICIES........ I-4
IMPLEMENTATION OF POLICIES AND RISKS..... I-6
ABOUT THE FUND........................... I-12
SHAREHOLDER MANUAL....................... II-1

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

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PROSPECTUS PAGE I-2
<PAGE> 18

EXPENSES

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

SHAREHOLDER TRANSACTION EXPENSES

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

There are certain charges associated with retirement accounts and with
certain other special shareholder services offered by the Fund. Additionally,
purchases and redemptions may also be made through broker-dealers or financial
intermediaries 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
Fees Expenses Fees Expenses
<S> <C> <C> <C> <C>
Mid Cap Fund 1.00% ___% NONE ____%
</TABLE>

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

From time to time, the Fund's investment advisor, Strong Capital Management,
Inc. (the "Advisor"), may voluntarily waive its management fee and/or absorb
certain expenses for the Fund. Since the Fund is new and did not begin
operations until December 31, 1996, the Other Expenses have been estimated. For
additional information concerning fees and expenses, see "About the Fund -
Management."

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<PAGE> 19

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)
-----------
1 3
<S> <C> <C>
Mid Cap Fund -- --
</TABLE>

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

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

INVESTMENT OBJECTIVE AND POLICIES

The Fund is required to invest a substantial portion of its assets in equity
securities. Accordingly, the Fund's net asset value will fluctuate based upon
changes in the value of the securities in its portfolio, and the Fund's net
asset value is likely to fluctuate more than that of a fund invested principally
in fixed income securities. The Fund, therefore, is not appropriate for
investors' short-term financial needs.
The Fund has adopted certain fundamental investment restrictions that are set
forth in its Statement of Additional Information ("SAI"). Those restrictions,
the Fund's investment objective, and any other investment policies identified as
"fundamental" cannot be changed without shareholder approval. To further guide
investment activities, the Fund has also instituted a number of non-fundamental
operating policies, which are described in this Prospectus and in the SAI.
Although operating policies may be changed by the Fund's Board of Directors
without shareholder approval, the Fund will promptly notify shareholders of any
material change in operating policies.
Except as limited below, the Fund may invest in a diversified portfolio of
securities without regard to objective investment criteria, such as company
size, exchange listing, earnings history, or other factors. When selecting
securities, the Advisor will, except as otherwise limited below, be limited only
by its best judgment as to what will help achieve the Fund's investment
objective.

STRONG MID CAP FUND

The Fund seeks capital growth. The Fund invests primarily in equity
securities of companies that have medium market capitalizations.

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PROSPECTUS PAGE I-4
<PAGE> 20

The Fund will invest at least 80% of its net assets in equity securities,
including common stocks, preferred stocks, and securities that are convertible
into common or preferred stocks, such as warrants and convertible bonds. At
least 65% of the Fund's total assets will normally be invested in equity
securities of medium market capitalization companies, which for the purposes of
this Fund, are those companies with a market capitalization of between $800
million and $5 billion at the time of the Fund's investment. In general,
medium-capitalization companies often involve greater risks than investments in
established companies. (See "Implementation of Policies and Risks - Small and
Medium Companies.") The Fund may invest up to 20% of its net assets in debt
obligations, including intermediate- to long-term corporate or U.S. government
debt securities. When the Advisor determines that market conditions warrant a
temporary defensive position, the Fund may use that allowance to invest in cash
and short-term fixed income securities. Although the debt obligations in which
it invests will be primarily investment-grade, the Fund may invest up to 5% of
its net assets in non-investment-grade debt obligations. (See "Implementation of
Policies and Risks - Debt Obligations.")
The Fund may invest up to 25% of its net assets in foreign securities,
including both direct investments and investment made through depositary
receipts. (See "Implementation of Policies and Risks - Foreign Securities and
Currencies" for the special risks associated with foreign investments.)

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PROSPECTUS PAGE I-5
<PAGE> 21

IMPLEMENTATION OF POLICIES AND RISKS

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

FOREIGN SECURITIES AND CURRENCIES

The Fund may invest in foreign securities either directly or indirectly
through the use of depositary receipts. (See "Investment Objective and
Policies.") Depositary receipts are generally issued by banks or trust companies
and evidence ownership of underlying foreign securities.
Foreign investments involve special risks, including:

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

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

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PROSPECTUS PAGE I-6
<PAGE> 22

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

FOREIGN INVESTMENT COMPANIES

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

DERIVATIVE INSTRUMENTS

The Fund may use derivative instruments for any lawful purpose consistent
with the Fund's investment objective such as hedging or managing risk.
Derivative instruments are commonly defined to include securities or contracts
whose values depend on (or "derive" from) the value of one or more other assets,
such as securities, currencies, or commodities. These "other assets" are
commonly referred to as "underlying assets."
A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to options or forward contracts. Options and forward
contracts are considered to be the basic "building blocks" of derivatives. For
example, forward-based derivatives include forward contracts, swap contracts, as
well as exchange-traded futures. Option-based derivatives include privately
negotiated, over-the-counter (OTC) options (including caps, floors, collars, and
options on forward and swap contracts) and exchange-traded options on futures.
Diverse types of derivatives may be created by combining options or

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PROSPECTUS PAGE I-7
<PAGE> 23

forward contracts in different ways, and by applying these structures to a wide
range of underlying assets.
An option is a contract in which the "holder" (the buyer) pays a certain
amount (the "premium") to the "writer" (the seller) to obtain the right, but not
the obligation, to buy from the writer (in a "call") or sell to the writer (in a
"put") a specific asset at an agreed upon price at or before a certain time. The
holder pays the premium at inception and has no further financial obligation.
The holder of an option-based derivative generally will benefit from favorable
movements in the price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the value of the underlying
asset. The writer of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses due to changes in the value of the
underlying asset.
A forward is a sales contract between a buyer (holding the "long" position)
and a seller (holding the "short" position) for an asset with delivery deferred
until a future date. The buyer agrees to pay a fixed price at the agreed future
date and the seller agrees to deliver the asset. The seller hopes that the
market price on the delivery date is less than the agreed upon price, while the
buyer hopes for the contrary. The change in value of a forward-based derivative
generally is roughly proportional to the change in value of the underlying
asset.
Derivative instruments may include (i) options; (ii) futures; (iii) options
on futures; (iv) short sales against the box, in which the Fund sells a security
it owns for delivery at a future date; (v) swaps, in which two parties agree to
exchange a series of cash flows in the future, such as interest-rate payments;
(vi) interest-rate caps, under which, in return for a premium, one party agrees
to make payments to the other to the extent that interest rates exceed a
specified rate, or "cap"; (vii) interest-rate floors, under which, in return for
a premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; (viii) forward currency
contracts and foreign currency exchange-related securities; and (ix) structured
instruments which combine the foregoing in different ways.
Derivatives may be exchange traded or traded in OTC transactions between
private parties. OTC transactions are subject to additional risks, such as the
credit risk of the counterparty to the instrument and are less liquid than
exchange-traded derivatives since they often can only be closed out with the
other party to the transaction. Derivative instruments may include elements of
leverage and, accordingly, the fluctuation of the value of the derivative
instrument in relation to the underlying asset may be magnified. When required
by SEC guidelines, the Fund will set aside permissible liquid assets in a
segregated account to secure its obligations under the derivative.
The successful use of derivatives by the Fund is dependent upon a variety of
factors, particularly the Advisor's ability to correctly anticipate trends in
the underlying asset. In a hedging transaction, if the Advisor incorrectly
anticipates trends in the underlying asset, the Fund may be in a worse position
than if no hedging had occurred. In addition, there may be imperfect correlation

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PROSPECTUS PAGE I-8
<PAGE> 24

between the Fund's derivative transactions and the instruments being hedged. To
the extent that the Fund is engaging in derivative transactions for risk
management, the Fund's successful use of such transactions is more dependent
upon the Advisor's ability to correctly anticipate such trends, since losses in
these transactions may not be offset in gains in the Fund's portfolio or in
lower purchase prices for assets it intends to acquire. The Advisor's prediction
of trends in underlying assets may prove to be inaccurate, which could result in
substantial losses to the Fund.
In addition to the derivative instruments and strategies described above, the
Advisor expects to discover additional derivative instruments and other hedging
or risk management techniques. The Advisor may utilize these new derivative
instruments and techniques to the extent that they are consistent with the
Fund's investment objective and permitted by the Fund's investment limitations,
operating policies, and applicable regulatory authorities.

ILLIQUID SECURITIES

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

SMALL AND MEDIUM COMPANIES

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

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PROSPECTUS PAGE I-9
<PAGE> 25

securities for the Fund than in a fund that invests in larger, more established
companies.

DEBT OBLIGATIONS

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

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

All ratings are determined at the time of investment. Any subsequent rating
downgrade of a debt obligation will be monitored by the Advisor to consider what
action, if any, the 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 equivalents; and
- - unrated debt securities judged to be of comparable quality by the Advisor.

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<PAGE> 26

GOVERNMENT SECURITIES

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

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

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

WHEN-ISSUED SECURITIES

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

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PROSPECTUS PAGE I-11
<PAGE> 27

purchase when-issued securities for the purpose of actually acquiring the
securities, unless after entering into the commitment a sale appears desirable
for investment reasons. When required by SEC guidelines, the Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.

PORTFOLIO TURNOVER

The annual portfolio turnover rate indicates changes in the Fund's portfolio.
The turnover rate may vary from year to year, as well as within a year. It may
also be affected by sales of portfolio securities necessary to meet cash
requirements for redemptions of shares. High portfolio turnover in any year will
result in the payment by the Fund of above-average amounts of transaction costs
and could result in the payment by shareholders of above-average amounts of
taxes on realized investment gains. Under normal market conditions, the rate of
portfolio turnover of the Fund generally will not exceed 300%. However, during
periods in which the Advisor deems it advisable to engage in substantial
short-term trading, the rate of portfolio turnover may exceed 300%.

ABOUT THE FUND

MANAGEMENT

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

ADVISOR. The Advisor began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans as well as mutual funds, several of which are funding vehicles for
variable insurance products. As of November 30, 1996, 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 the Fund, is the controlling shareholder of the Advisor.
As compensation for its services, the Fund pays the Advisor a monthly
management fee. The annual fee is 1.0% of the Fund's average daily net asset
value. This fee is 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

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<PAGE> 28

absorption will temporarily lower the Fund's overall expense ratio and increase
the Fund's overall return to investors.
Except for expenses assumed by the Advisor, Subadvisor, or Strong Funds
Distributors, Inc., the Fund is responsible for all its other expenses,
including, without limitation, interest charges, taxes, brokerage commissions,
and similar expenses; expenses of issue, sale, repurchase, or redemption of
shares; expenses of registering or qualifying shares for sale with the states
and the SEC; expenses of printing and distribution of prospectuses to existing
shareholders; charges of custodians (including fees as custodian for keeping
books and similar services for the Fund), transfer agents (including the
printing and mailing of reports and notices to shareholders), registrars,
auditing and legal services, and clerical services related to recordkeeping and
shareholder relations; printing of stock certificates; fees for directors who
are not "interested persons" of the Advisor; expenses of indemnification;
extraordinary expenses; and costs of shareholder and director meetings.

PORTFOLIO MANAGER. Ms. Mary Lisanti serves as the Fund's portfolio manager.
Prior to joining the Advisor, Ms. Lisanti acted as a managing director at
Bankers Trust in New York, where she headed the small/mid-cap equity team, and
served as the portfolio manager of the BT Investment Capital Appreciation and BT
Investment Small Cap Funds since their inception in March 1993 and October 1993,
respectively. As portfolio manager, Ms. Lisanti had full discretionary authority
over the selection of investments for these funds. During the time that Ms.
Lisanti managed the BT Investment Capital Appreciation Fund, it had an
investment objective, policies, and strategies that were substantially similar
to those of the Strong Mid Cap Fund. The cumulative total return for the BT
Investment Capital Appreciation Fund from its inception (3/9/93) through July
31, 1996 was 64.26% as compared to 43.14% for the Standard & Poor's ("S&P") 400
MidCap Index and 53.94% for the S&P 500 Stock Index over the same period. The
average annual returns of the BT Investment Capital Appreciation Fund for the
one-year, three-year and since inception periods compared with the performance
of the S&P 400 MidCap and S&P 500 Indices were:
- ----------------------------------------------------------------------------

<TABLE>
<CAPTION>
BT Investment Capital S&P
Appreciation S&P 400 Mid 500
Fund(1,2) Cap Index(3) Index(4)
<S> <C> <C> <C>
1 Year 2.96% 7.76% 16.57%
3 Years 15.42% 11.57% 15.63%
Inception (3/9/93)
through July 31,
1996 15.73% 11.13% 13.54%
- -----------------------------------------------------------
</TABLE>

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

(2)The expense ratio of the BT Capital Appreciation Fund was capped at 1.25% for
the period from March 9, 1993 (inception) to December 31, 1993 (reflecting

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PROSPECTUS PAGE I-13
<PAGE> 29

annualized reimbursement of expenses of .74%), for the period from January 1,
1994 to December 31, 1994 (reflecting reimbursement of expenses of .54%), and
for the period from January 1, 1995 to September 30, 1995 (reflecting
annualized reimbursement of expenses of .32%), and for the period from
November 1, 1995 to September 30, 1996 (reflecting reimbursement of expenses
of ___%).

(3)The S&P 400 MidCap Index is an unmanaged index generally representative of
the U.S. market for mid-cap domestic stocks. The Index does not reflect
brokerage commissions and other expenses associated with investing in equity
securities.

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

Historical performance does not indicate future performance. The BT Investment
Capital Appreciation Fund is a separate fund and its historical performance is
not indicative of the potential performance of the Strong Mid Cap Fund. Share
prices and investment returns will fluctuate.

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

TRANSFER AND DIVIDEND-DISBURSING AGENT

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

DISTRIBUTOR

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

ORGANIZATION

SHAREHOLDER RIGHTS. The Fund is a series of Strong Equity Funds, Inc., a
Wisconsin corporation that is authorized to issue an indefinite number of

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<PAGE> 30

shares of common stock and series and classes of series of shares of common
stock. Each share of the Fund has one vote, and all shares participate equally
in dividends and other capital gains distributions and in the residual assets of
the Fund in the event of liquidation. Certificates will be issued for shares
held in your account only upon your written request. You will, however, have
full shareholder rights whether or not you request certificates. Generally, the
Fund will not hold an annual meeting of shareholders unless required by the 1940
Act.

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

DISTRIBUTIONS AND TAXES

PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. Unless you choose otherwise,
all your dividends and capital gain distributions will be automatically
reinvested in additional Fund shares. Or, you may elect to have all your
dividends and capital gain distributions from the Fund automatically invested in
additional shares of another Strong Fund. Shares are purchased at the net asset
value determined on the payment date. If you request in writing that your
dividends and other distributions be paid in cash, the Fund will credit your
bank account by Electronic Funds Transfer ("EFT") or issue a check to you within
five business days of the payment date. You may change your election at any time
by calling or writing Strong Funds. Strong Funds must receive any such change 7
days (15 days for EFT) prior to a dividend or capital gain distribution payment
date in order for the change to be effective for that payment. The policy of the
Fund is to pay dividends from net investment income quarterly and to distribute
substantially all net realized capital gains and gains from foreign currency
transactions annually. The 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 the Fund, are taxable to you as long-term capital gains,
regardless of how long you have held your Fund shares. The Fund's distributions
are taxable in the year they are paid, whether they are taken in cash or
reinvested in additional shares, except that certain distributions

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<PAGE> 31

declared in the last three months of the year and paid in January are taxable as
if paid on December 31.
If the Fund's distributions exceed its investment company taxable income and
net capital gain in any year, as a result of currency-related losses or
otherwise, all or a portion of those distributions may be treated as a return of
capital to shareholders for tax purposes.

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

SHARES SOLD OR EXCHANGED. Your redemption of Fund shares may result in a
taxable gain or loss to you, depending upon whether the redemption proceeds
payable to you are more or less than your adjusted cost basis for the redeemed
shares. Similar tax consequences generally will result from an exchange of Fund
shares for shares of another Strong Fund. If you purchase shares of the Fund
within thirty days before or after redeeming shares of the Fund at a loss, a
portion or all of that loss will not be deductible and will increase the cost
basis of the newly purchased shares. If you redeem shares out of a non-IRA
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 the 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 the Fund with a correct taxpayer identification
number, the Fund is required to withhold federal income tax at a rate of 31%
(backup withholding) from all 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 FUND. The Fund intends to continue to qualify for treatment
as a regulated investment company under Subchapter M of the Internal Revenue
Code and, if so qualified, will not be liable for federal income tax on earnings
and gains distributed to its shareholders in a timely manner.

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

PROSPECTUS PAGE I-16
<PAGE> 32

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

PERFORMANCE INFORMATION

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

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

PROSPECTUS PAGE I-17
<PAGE> 33

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 Fund's 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 the Fund's shares.

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

PROSPECTUS PAGE II-1
<PAGE> 34

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

TO OPEN A NEW ACCOUNT
- ------------------------------------------------------------------------------
MAIL BY CHECK
- Complete and sign the application. Make your check
or money order payable to "Strong Funds."
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to Strong Funds, 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 the Automatic Investment Plan Section on
the account application.
- Mail to the address indicated on the application.
- ------------------------------------------------------------------------------
BROKER-DEALER - You may purchase shares in the 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.

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

PROSPECTUS PAGE II-2
<PAGE> 35

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

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
- - Sign up for telephone purchase when you open your account to make additional
investments from $50 to $25,000 into your Strong Funds account by telephone.
To add this option to your account, call 1-800-368-3863 for a Telephone
Purchase Form.
Or use Strong DirectSM, Strong Funds' automated telephone response system. Call
1-800-368-7550.
- --------------------------------------------------------------------------------

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

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

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

- - You may purchase additional shares in the 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> 36

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 the Fund.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
- - The Fund reserves the right to decline to accept your purchase order upon
receipt for any reason.
- - The exchange privileges are available in all 50 states because all the Strong
Funds intend to continue to qualify their shares for sale in all 50 states.
- - Minimum Investment Requirements:
----------------------------------------------------------------------------

To open a regular account...........................................$2,500

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

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

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

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

The Fund offers a No-Minimum Investment Plan that waives the minimum initial
investment requirements for investors who participate in the Strong Automatic
Investment Plan (described on page II-11). Unless you participate in the Strong
No-Minimum Investment Program, please ensure your purchases meet the minimum
investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach the Fund's minimum initial investment), the
Fund reserves the right to close your account. Before taking such action, the
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.

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 the Fund's Prospectus. Certain features of the Fund may not
be available or may be modified in connection with the program of services
provided.

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

PROSPECTUS PAGE II-4
<PAGE> 37

- - 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 Fund 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 Fund 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 Fund reserves the right to change
the time at which purchases, redemptions, and exchanges are priced if the
Exchange closes at a time other than 3:00 p.m. CT or if an emergency exists. The
Fund's NAV is calculated by taking the fair value of the Fund's total assets,
subtracting all its liabilities, and dividing by the total number of shares
outstanding. Expenses are accrued daily and applied when determining the NAV.
The Fund's portfolio securities are valued based on market quotations or at
fair value as determined by the method selected by the Fund's Board of
Directors. Equity securities traded on a national securities exchange or NASDAQ
are valued at the last sales price on the national securities exchange or NASDAQ
on which such securities are primarily traded. Securities traded on NASDAQ for
which there were no transactions on a given day or securities not listed on an
exchange or NASDAQ are valued at the average of the most recent bid and asked
prices. Other exchange traded securities (generally foreign securities) will be
valued based on market quotations.
Securities quoted in foreign currency are valued daily in U.S. dollars at the
foreign currency exchange rates that are prevailing at the time the daily NAV
per share is determined. Although the Fund values its foreign assets in U.S.
dollars on a daily basis, the Fund does not intend to convert its holdings of
foreign currencies into U.S. dollars on a daily basis. Foreign currency exchange
rates are generally determined prior to the close of trading on the Exchange.
Occasionally, events affecting the value of foreign investments and such
exchange rates occur between the time at which they are determined and the close
of trading on the Exchange. Such events would not normally be

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

PROSPECTUS PAGE II-5
<PAGE> 38

reflected in a calculation of the Fund's NAV on that day. If events that
materially affect the value of the Fund's foreign investments or the foreign
currency exchange rates occur during such period, the investments will be valued
at their fair value as determined in good faith by or under the direction of the
Board of Directors.

HOW TO 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> 39

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

<TABLE>
<S> <C>
TO SELL SHARES
- -----------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
following information: your account number, the
dollar amount or number of shares you wish to
redeem, each owner's name, your street address, and
the signature of each owner as it appears on the
account.
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to 100 Heritage Reserve, Menomonee
Falls, Wisconsin 53051.
FOR TRUST ACCOUNTS
- Same as above. Please ensure that all trustees sign
the letter of instruction.
FOR OTHER REGISTRATIONS
- Call 1-800-368-3863 for instructions.
- -----------------------------------------------------------------------------
TELEPHONE Sign up for telephone redemption services when you
open
1-800-368-3863 your account by checking the "Yes" box in the
24 HOURS A DAY, appropriate section of the account application. To
7 DAYS A WEEK add the telephone redemption option to your account,
call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares ($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 DirectSM, Strong Funds'
automated telephone response system. Call
1-800-368-7550.
- -----------------------------------------------------------------------------
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
financial intermediaries who may charge a commission
or other transaction fee.
</TABLE>

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

PROSPECTUS PAGE II-7
<PAGE> 40

WHAT YOU SHOULD KNOW ABOUT SELLING SHARES

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

REDEMPTIONS IN KIND

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

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

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

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

PROSPECTUS PAGE II-8
<PAGE> 41

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

SHAREHOLDER SERVICES

INFORMATION SERVICES

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

STRONG DIRECTSM AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day,
the Strong DirectSM automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity
(1-800-368-5500), and perform purchases, exchanges or redemptions among your
existing Strong accounts (1-800-368-7550). Your account information is protected
by a personal code that you establish.

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

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

PROSPECTUS PAGE II-9
<PAGE> 42

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

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

TRANSACTION SERVICES

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

REGULAR INVESTMENT PLANS

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

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

PROSPECTUS PAGE II-10
<PAGE> 43

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

AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan allows you to make
regular, systematic investments in the 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 the Fund
has the right to close an investor's account for failure to reach the minimum
initial investment, please consider your ability to continue this Plan until you
reach the minimum initial investment. Such closing may occur in periods of
declining share prices. To establish the Plan, complete the Automatic Investment
Plan section on the account application, or call 1-800-368-3863 for an
application.

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

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

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

PROSPECTUS PAGE II-11
<PAGE> 44

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

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

SPECIAL SITUATIONS

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

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

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

PROSPECTUS PAGE II-12
<PAGE> 45

FINANCIAL INTERMEDIARIES. Broker-dealers, financial institutions, and other
financial intermediaries that have entered into agreements with the Distributor
may enter purchase or redemption orders on behalf of their customers. If you
purchase or redeem shares of the Fund through a financial intermediary, certain
features of the Fund relating to such transactions may not be available or may
be modified in accordance with the terms of the intermediaries' agreement with
the Distributor. In addition, certain operational policies of the Fund,
including those related to settlement and dividend accrual, may vary from those
applicable to direct shareholders of the Fund and may vary among intermediaries.
We urge you to consult your financial intermediary for more information
regarding these matters. In addition, the Fund may pay, directly or indirectly
through arrangements with the Advisor, amounts to financial intermediaries that
provide transfer agent and other administrative services relating to the Fund to
their customers provided, however, that the Fund will not pay more for these
services through intermediary relationships than it would if the intermediaries'
customers were direct shareholders in the Fund.

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

- - when you add the telephone redemption 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 financial intermediaries.
PLEASE NOTE THAT A NOTARY PUBLIC STAMP OR SEAL IS NOT ACCEPTABLE.

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

PROSPECTUS PAGE II-13
<PAGE> 46

STATEMENT OF ADDITIONAL INFORMATION

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

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

This Statement of Additional Information is dated May 1, 1996,
as supplemented on December 31, 1996.

<PAGE> 47

STRONG GROWTH FUNDS

TABLE OF CONTENTS PAGE

INVESTMENT RESTRICTION.................................... 3
INVESTMENT POLICIES AND TECHNIQUES........................ 5
Borrowing................................................ 5
Convertible Securities................................... 5
Debt Obligations......................................... 6
Depositary Receipts...................................... 6
Derivative Instruments................................... 7
Foreign Investment Companies............................. 16
Foreign Securities....................................... 16
High-Yield (High-Risk) Securities........................ 17
Illiquid Securities...................................... 18
Lending of Portfolio Securities.......................... 19
Mortgage- and Asset-Backed Securities.................... 20
Mortgage Dollar Rolls and Reverse Repurchase Agreements.. 21
Repurchase Agreements.................................... 21
Short Sales Against the Box.............................. 21
Short-Term Cash Management............................... 22
Small Companies.......................................... 22
Temporary Defensive Position............................. 22
Warrants................................................. 22
When-Issued Securities................................... 22
Zero-Coupon, Step-Coupon and Pay-in-Kind Securities...... 23
DIRECTORS AND OFFICERS OF THE FUNDS....................... 23
PRINCIPAL SHAREHOLDERS.................................... 26
INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR........... 27
PORTFOLIO TRANSACTIONS AND BROKERAGE...................... 31
CUSTODIAN................................................. 34
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT.............. 34
TAXES..................................................... 35
DETERMINATION OF NET ASSET VALUE.......................... 37
ADDITIONAL SHAREHOLDER INFORMATION........................ 38
FUND ORGANIZATION......................................... 39
SHAREHOLDER MEETINGS...................................... 40
PERFORMANCE INFORMATION................................... 40
GENERAL INFORMATION....................................... 47
PORTFOLIO MANAGEMENT...................................... 49
INDEPENDENT ACCOUNTANTS................................... 52
LEGAL COUNSEL............................................. 52
FINANCIAL STATEMENTS...................................... 52
APPENDIX.................................................. A-1

______________________________________

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

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

<PAGE> 48

INVESTMENT RESTRICTIONS

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

Each Fund:

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

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

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

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

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

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

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

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

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

<PAGE> 49

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

Each Fund may not:

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

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

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

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

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

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

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

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

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

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

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

<PAGE> 50

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

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

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

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

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

INVESTMENT POLICIES AND TECHNIQUES

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

BORROWING

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

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

CONVERTIBLE SECURITIES

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

<PAGE> 51

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

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

DEBT OBLIGATIONS

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

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

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

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

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

DEPOSITARY RECEIPTS

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

<PAGE> 52

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

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

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

DERIVATIVE INSTRUMENTS

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

A derivative instrument generally consists of, is based upon, or exhibits
characteristics similar to options or forward contracts. Options and forward
contracts are considered to be the basic "building blocks" of derivatives. For
example, forward-based derivatives include forward contracts, swap contracts,
as well as exchange-traded futures. Option-based derivatives include privately
negotiated, over-the-counter (OTC) options (including caps, floors, collars,
and options on forward and swap contracts) and exchange-traded options on
futures. Diverse types of derivatives may be created by combining options or
forward contracts in different ways, and by applying these structures to a wide
range of underlying assets.

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

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

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

<PAGE> 53

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

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

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

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

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

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

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

<PAGE> 54

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

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

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

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

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

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

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

<PAGE> 55

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

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

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

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

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

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

<PAGE> 56

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

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

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

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

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

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

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

<PAGE> 57

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

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

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

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

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

<PAGE> 58

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

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

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

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

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

<PAGE> 59
hedging instrument will not correlate perfectly with movements in the price of
the currency being hedged is magnified when this strategy is used.

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

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

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

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

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

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

<PAGE> 60
Permissible foreign currency options will include options traded primarily
in the OTC market. Although options on foreign currencies are traded primarily
in the OTC market, the Funds will normally purchase or sell OTC options on
foreign currency only when the Advisor reasonably believes a liquid secondary
market will exist for a particular option at any specific time.

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

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

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

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

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

<PAGE> 61

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

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

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

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

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

FOREIGN INVESTMENT COMPANIES

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

FOREIGN SECURITIES

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

<PAGE> 62

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

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

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

HIGH-YIELD (HIGH-RISK) SECURITIES

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

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

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

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

<PAGE> 63

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 force the Fund to sell the more liquid portion of its
portfolio.

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

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

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

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

ILLIQUID SECURITIES

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

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

<PAGE> 64
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. The Board of Directors has directed the Advisor to
look to such factors as (i) the frequency of trades or quotes for a security,
(ii) the number of dealers willing to purchase or sell the security and number
of potential buyers, (iii) the willingness of dealers to undertake to make a
market in the security, (iv) the nature of the security and nature of the
marketplace trades, such as the time needed to dispose of the security, the
method of soliciting offers, and the mechanics of transfer, (v) the likelihood
that the security's marketability will be maintained throughout the anticipated
holding period, and (vi) any other relevant factors. The Advisor may determine
4(2) commercial paper to be liquid if (i) the 4(2) commercial paper is not
traded flat or in default as to principal and interest, (ii) the 4(2)
commercial paper is rated in one of the two highest rating categories by at
least two nationally rated statistical rating organizations ("NRSRO"), or if
only one NRSRO rates the security, by that NRSRO, or is determined by the
Advisor to be of equivalent quality, and (iii) the Advisor considers the
trading market for the specific security taking into account all relevant
factors. With respect to a Fund's foreign holdings, a foreign security may be
considered liquid by the Advisor (despite its restricted nature under the
Securities Act) if the security can be freely traded in a foreign securities
market and all the facts and circumstances support a finding of liquidity.

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

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

LENDING OF PORTFOLIO SECURITIES

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

<PAGE> 65

MORTGAGE- AND ASSET-BACKED SECURITIES

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

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

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

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

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

<PAGE> 66

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

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

MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

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

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

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

REPURCHASE AGREEMENTS

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

SHORT SALES AGAINST THE BOX

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

<PAGE> 67

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.

SHORT-TERM CASH MANAGEMENT

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

SMALL COMPANIES

The Funds may invest a substantial portion of their 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 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.

TEMPORARY DEFENSIVE POSITION

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

WARRANTS

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

WHEN-ISSUED SECURITIES

Each Fund may from time to time purchase securities on a "when-issued"
basis. The price of debt obligations purchased on a when-issued basis, which
may be expressed in yield terms, generally is fixed at the time the commitment
to purchase is made, but delivery and payment for the securities take place at
a later date. Normally, the settlement date occurs within 45 days of the
purchase although is some cases settlement may take longer. During the period
between the purchase and settlement, no payment is made by a Fund to the issuer
and no interest on the debt obligations accrues to the Fund. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date, which risk is

<PAGE> 68

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

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

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

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

DIRECTORS AND OFFICERS OF THE FUNDS

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

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

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

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

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

<PAGE> 69

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

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

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

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

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

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

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

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

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

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

<PAGE> 70

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

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

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

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

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

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

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

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

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

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

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

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

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

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

<PAGE> 71

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

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

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

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

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

As of October 7, 1996, the officers and directors of the Funds in the
aggregate beneficially owned less than 1% of each Fund's then outstanding
shares.

PRINCIPAL SHAREHOLDERS

As of September 30, 1996 the following persons owned of record or are
known by the Funds to own of record or beneficially, more than 5% of the listed
Fund's outstanding shares:

<PAGE> 72

NAME AND ADDRESS FUND/SHARES PERCENT OF CLASS
---------------- ------------ ----------------
<S> <C> <C>
OPPORTUNITY FUND
----------------

Charles Schwab & Co., Inc. 11,373,065.105 24.45%
For Exclusive Benefit of Customers
101 Montgomery Street
San Francisco, CA 94104

GROWTH FUND
-----------

Charles Schwab & Co., Inc. 14,847,160.594 22.45%

National Financial Service Corp. 3,404,120.811 5.15%
FBO Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908

COMMON FUND
-----------

Charles Schwab & Co., Inc. 5,496,126.327 9.94%

DISCOVERY FUND
---------------

Charles Schwab & Co., Inc. 4,659,246.521 14.46%

Lincoln National Life Insurance 1,680,983.093 5.22%
P.O. Box 1110
Fort Wayne, IN 46801

VALUE FUND
----------

Charles Schwab & Co., Inc. 858,923.479 20.30%

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

Charles Schwab & Co., Inc. 1,625,954.382 17.35%
</TABLE>

INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR

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

The Advisory Agreements for the Opportunity, Growth, Common Stock, and
Discovery Funds, dated May 1, 1995, were last approved by shareholders at the
annual meeting of shareholders held on April 13, 1995. The Small Cap and Value
Funds' Advisory Agreements dated December 28, 1995 was last approved by each
Fund's sole shareholder on December 28, 1995, and will remain in effect as to
each Fund for a period of two years. The Advisory Agreement is required to be
approved

<PAGE> 73
annually by either the Board of Directors of the Fund or by vote of a majority
of the Fund's outstanding voting securities (as defined in the 1940 Act). In
either case, each annual renewal must be approved by the vote of a majority of
the Fund's directors who are not parties to the Advisory Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Each Advisory Agreement is terminable,
without penalty, on 60 days' written notice by the Board of Directors of the
Fund, by vote of a majority of the Fund's outstanding voting securities, or by
the Advisor, and will terminate automatically in the event of its assignment.

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

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

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

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

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

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

(1) Commenced operations on December 31, 1993.

Each Advisory Agreement requires the Advisor to reimburse a Fund in the
event that the expenses and charges payable by the Fund in any fiscal year,
including the management fee but excluding taxes, interest, brokerage
commissions, and similar fees and to the extent permitted extraordinary
expenses, exceed that percentage of the average net asset value of the Fund for
such year, as determined by valuations made as of the close of each business
day of the year, which is the most restrictive percentage expense limitation
provided by the laws of the various states in which the Fund's common stock is

<PAGE> 74
qualified for sale; or if the states in which the Fund's common stock is
qualified for sale impose no restrictions, then 2%. The most restrictive
percentage limitation currently applicable to a Fund is 2.5% of its average
daily net assets up to $30,000,000, 2% on the next $70,000,000 of its average
daily net assets and 1.5% of its average daily net assets in excess of
$100,000,000. Reimbursement of expenses in excess of the applicable limitation
will be made on a monthly basis and will be paid to the Fund by reduction of
the Advisor's fee, subject to later adjustment, month by month, for the
remainder of the Fund's fiscal year. The Advisor may from time to time
voluntarily absorb expenses for a Fund in addition to the reimbursement of
expenses in excess of application limitations.

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

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

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

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

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

<PAGE> 75

for any reason. The Subadvisory Agreement may be terminated by the Subadvisor
upon 180 days' notice for any reason. The Subadvisory Agreement will terminate
automatically in the event of its unauthorized assignment.

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

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 and Subadvisor have each adopted a Code of Ethics (the "Code")
which governs the personal trading activities of all "Access Persons" of the
Advisor. Access Persons include every director and officer of the Advisor or
Subadvisor and the investment companies managed by the Advisor or Subadvisor,
including the Funds, as well as certain employees of the Advisor or Subadvisor
who have access to information relating to the purchase or sale of securities
by the Advisor or Subadvisor on behalf of accounts managed by it. The Code is
based upon the principal that such Access Persons have a fiduciary duty to
place the interests of the Advisor or Subadvisor'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 or
Subadvisor, including the Funds) to, among other things, preclear their
securities transactions (with limited exceptions, such as transactions in
shares of mutual funds, direct obligations of the U.S. government, and certain
options on broad-based securities market indexes) and to execute such
transactions through the Advisor or Subadvisor's trading department. The Code,
which applies to all Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor or
Subadvisor, including the Funds), includes a ban on acquiring any securities in
an initial public offering, other than a new offering of a registered open-end
investment company, and a prohibition from profiting on short-term trading in
securities. In addition, no Access Person may purchase or sell any security
which, 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 or
Subadvisor 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.

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

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

<PAGE> 76

Advisor acted as underwriter for the Opportunity, Common Stock, and Discovery
Funds. On December 1, 1993, the Distributor succeeded to the broker-dealer
registration of the Advisor and, in connection therewith, Distribution
Agreements for the Opportunity, Common Stock, and Discovery Funds were executed
on substantially identical terms as the former distribution agreement with the
Advisor as distributor. The Distribution Agreement is subject to the same
termination and renewal provisions as are described above with respect to the
Advisory Agreements.

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

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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

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

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

<PAGE> 77
discretion; (b) such payment is made in compliance with the provisions of
Section 28(e), other applicable state and federal laws, and the Advisory
Agreement; and (c) in the opinion of the Advisor, the total commissions paid by
a Fund will be reasonable in relation to the benefits to the Fund over the long
term. The investment management fees paid by the Funds under the Advisory
Agreements are not reduced as a result of the Advisor's receipt of research
services.

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

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

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

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

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

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

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

<PAGE> 78
activities of the accounts are not uniform, the amount of commissions in excess
of those charged by another broker paid by each account for brokerage and
research services will vary. However, in the opinion of the Advisor, such
costs to the Funds will not be disproportionate to the benefits received by the
Funds on a continuing basis.

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

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

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

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

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

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

<TABLE>
<CAPTION>
Regular Broker or Dealer or Parent Issuer Value of Securities Owned as of December 31, 1995
- ----------------------------------------- -------------------------------------------------
<S> <C>
Chase Manhattan 28,870,000
</TABLE>

<PAGE> 79

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

<TABLE>
<CAPTION>
Opportunity Fund Brokerage Commissions
- ---------------- ---------------------
<S> <C>
1993 $1,347,000
1994 2,114,000
1995 3,873,000
Growth Fund
1994 $ 549,000
1995 2,125,360
Common Stock Fund
1993 $2,120,000
1994 2,905,000
1995 3,060,000
Discovery Fund
1993 $3,901,000
1994 5,548,000
1995 6,380,000
</TABLE>
CUSTODIAN

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

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

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

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

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>
Opportunity Fund
1993 $ 818,157 $177,231 $ 20,947 $ 0 $1,016,335
1994 1,512,509 305,446 34,044 0 1,851,999
1995 2,291,454 216,920 40,488 0 2,548,862

</TABLE>
34

<PAGE> 80
<TABLE>
<S> <C> <C> <C> <C> <C>
Growth Fund
1994 $ 142,921 $ 34,501 $ 3,818 $ 0 $ 181,240
1995 1,029,731 99,888 17,794 0 1,147,413
Common Stock Fund
1993 $1,304,233 $ 392,470 $ 43,107 $ 0 $1,739,810
1994 1,449,445 398,828 41,781 0 1,890,054
1995 1,424,965 186,368 33,018 0 1,644,351
Discovery Fund
1993 $ 591,796 $139,185 $16,937 $ 0 $ 747,918
1994 1,021,993 215,173 24,127 0 1,261,293
1995 1,172,370 126,755 23,139 0 1,322,264
</TABLE>

______________________________________________________________________

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

TAXES

GENERAL

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

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

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

<PAGE> 81

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

FOREIGN TRANSACTIONS

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

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

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

DERIVATIVE INSTRUMENTS

The use of derivatives strategies, such as purchasing and selling
(writing) options and futures and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the
character and timing of recognition of the gains and losses the Funds realize
in connection therewith. Gains from the disposition of foreign currencies
(except certain gains therefrom that may be excluded by future regulations),
and income from transactions in options, futures, and forward currency
contracts derived by a Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under the
Income Requirement. However, income from the disposition of options and
futures (other than those on foreign currencies) will be subject to the 30%
Limitation if they are held for less than three months.

<PAGE> 82

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

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

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

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

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

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

DETERMINATION OF NET ASSET VALUE

<PAGE> 83

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

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

ADDITIONAL SHAREHOLDER INFORMATION

TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES AND AUTOMATIC EXCHANGE PLAN

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

The 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.

<PAGE> 84

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

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

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

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

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

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

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

(1) Prior to November 1, 1995, the Fund's name was Strong Growth Fund, Inc.

<PAGE> 85

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

AVERAGE ANNUAL TOTAL RETURN

The average annual total return of a Fund is computed by finding the
average annual compounded rates of return over these periods that would equate
the initial amount invested to the ending redeemable value, according to the
following formula:
n
P (1 + T) = ERV

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

TOTAL RETURN

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

CUMULATIVE TOTAL RETURN

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

<PAGE> 86
Each of the Fund's performance figures are based upon historical results
and do not represent future performance. Each Fund's shares are sold at net
asset value per share. Each Fund's returns and net asset value will fluctuate
and shares are redeemable at the then current net asset value of the Fund,
which may be more or less than original cost. Factors affecting a Fund's
performance include general market conditions, operating expenses, and
investment management. Any additional fees charged by a dealer or other
financial services firm would reduce the returns described in this section.

The table below shows performance information for various periods ended
June 30, 1996. No adjustment has been made for taxes, if any, payable on
dividends. Securities prices fluctuated during these periods.

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

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

GROWTH FUND
- -----------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 June 30, Percentage Percentage
Investment 1996 Increase Increase
---------- ------- -------- --------
<S> <C> <C> <C> <C>

Life of Fund(1) $10,000 $19,433 94.33% 30.44%
One Year 10,000 13,891 38.91 38.91
</TABLE>

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

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

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

<PAGE> 87

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

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

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

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

SMALL CAP FUND
- --------------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 June 30, Percentage Percentage
Investment 1996 Increase Increase
---------- ------- --------- --------
<S> <C> <C> <C> <C>

Life of Fund(1) $10,000 $12,469 24.69% N/A
</TABLE>

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

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

COMPARISONS

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

<PAGE> 88

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

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

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

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

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

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

<PAGE> 89

(s) Russell 1000 Value Index
(t) Russell 2000 Index
(u) Russell 2000 Small Stock Index
(v) Russell 2000 Growth Index
(w) Russell 2000 Value Index
(x) Russell 2500 Index
(y) Russell 3000 Stock Index
(z) Russell MidCap Index
(aa) Russell Midcap Growth Index
(bb) Russell MidCap Value Index
(cc) Value Line Index
(dd) Morgan Stanley Capital International EAFE(R) Index (Net
Dividend, Gross Dividend, and Price-Only). In addition, a Fund may
compare its performance to certain other indices that measure stock
market performance in geographic areas in which the Fund may invest.
The market prices and yields of the stocks in these indexes will
fluctuate. A Fund may also compare its portfolio weighting to the
EAFE Index weighting, which represents the relative capitalization
of the major overseas markets on a dollar-adjusted basis
(ee) Morgan Stanley Capital International World Index

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

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

(9) STRONG FAMILY OF FUNDS
The Strong Family of Funds offers a comprehensive range of conservative to
aggressive investment options. Members of the Strong Family and their
investment objectives are listed below.

<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
<S> <C>
Strong Money Market Fund Current income, a stable share price, and daily liquidity.
Strong Heritage Money Fund Current income, a stable share price, and daily liquidity.
Strong Municipal Money Market Federally tax-exempt current income, a stable share-price, and daily
Fund liquidity.
Federally tax-exempt current income with a very low degree of
Strong Municipal Advantage Fund share-price fluctuation.
Strong Advantage Fund Current income with a very low degree of share-price fluctuation.
Strong Short-Term Municipal Total return by investing for a high level of federally tax-exempt
Bond Fund current income with a low degree of share-price fluctuation.
Total return by investing for a high level of current income with a low
Strong Short-Term Bond Fund degree of share-price fluctuation.
Strong Short-Term Global Bond Total return by investing for a high level of income with a low degree
Fund of share-price fluctuation.
Strong Government Securities Total return by investing for a high level of current income with a
Fund moderate degree of share-price fluctuation.
</TABLE>

<S> <C>
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
Strong High-Yield Municipal moderate degree of share-price fluctuation.
Bond Fund Total return by investing for a high level of federally tax-exempt
current income.
Strong High-Yield Bond Fund Total return by investing for a high level of current income and
Strong International Bond Fund capital growth.
Strong Asset Allocation Fund High total return by investing for both income and capital appreciation.
Strong Equity Income Fund High total return consistent with reasonable risk over the long term.
Strong American Utilities Fund Total return by investing for both income and capital growth.
Strong Total Return Fund Total return by investing for both income and capital growth.
Strong Growth and Income Fund High total return by investing for capital growth and income.
High total return by investing for capital growth and income.
Strong Schafer Value Fund Long-term capital appreciation principally through investment in common
stocks and other equity securities. Current income is a secondary
objective.
Strong Value Fund Capital growth.
Strong Opportunity Fund Capital growth.
Strong Growth Fund Capital growth.
Strong Common Stock Fund* Capital growth.
Strong Mid Cap Fund Capital growth.
Strong Small Cap Fund Capital growth.
Strong Discovery Fund Capital growth.
Strong International Stock Fund Capital growth.
Strong Asia Pacific Fund Capital growth.
</TABLE>

*The Fund is currently closed to new investors.

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

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

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

(10) TYING TIME FRAMES TO YOUR GOALS

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

<PAGE> 91

STRONG FUNDS SUGGESTED MINIMUM HOLDING PERIODS

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

</TABLE>

*This fund is currently closed to new investors.

ADDITIONAL FUND INFORMATION

(1) PORTFOLIO CHARACTERISTICS

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

(2) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

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

Standard deviation is calculated using the following formula:

<TABLE>
<S><C> 2
Standard deviation = the square root of E(x - x )
i m
---------
n-1

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

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.

<PAGE> 92

GENERAL INFORMATION

BUSINESS PHILOSOPHY

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

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

INVESTMENT ENVIRONMENT

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

EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING

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

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

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

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

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

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

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

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

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

<PAGE> 93

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.

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.

48
<PAGE> 94

Service:

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

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

STRONG FINANCIAL ADVISORS GROUP

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

PORTFOLIO MANAGEMENT

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

OPPORTUNITY AND COMMON STOCK FUNDS

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

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

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

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

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

<PAGE> 95

GROWTH FUND

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

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

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

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

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

VALUE FUND

The Subadvisor uses a research intensive, "bottom up" securities selection
discipline to identify companies whose share price does not fully reflect the
value of the company's assets, earnings power, or cash generating ability.
While the approach focuses on medium-to-large capitalization companies,
investments may be made in companies with small market capitalizations as well.

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

- corporate restructuring or reorganization - including acquisition or
divestiture of assets
- significant management change
- cyclical turnaround of a depressed business or industry
- secular trend (e.g. demographic, regulatory, environmental change,
etc.)

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

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

<PAGE> 96

SMALL CAP FUND

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

- Macro analysis to identify attractive sectors or industries;
- Bottom-up investment analysis on the companies in the identified sectors
or industries to select individual stocks;
- Individual stock selection based on a variety of factors, including:
- Revenue and earning growth prospects
- Management track record commitment
- Valuation relative to the market and the company's peer group; and
- Regular review of investments for changes in valuation levels and
earnings/growth prospects.

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

DISCOVERY FUND

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

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

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

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

<PAGE> 97

INDEPENDENT ACCOUNTANTS

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

LEGAL COUNSEL

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

FINANCIAL STATEMENTS

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

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

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

<PAGE> 98

APPENDIX

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

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

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

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

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

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

2. Nature of and provisions of the obligation.

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

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

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

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

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

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

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

A-1

<PAGE> 99

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

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

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

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

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

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

MOODY'S LONG-TERM DEBT RATINGS

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

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

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

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

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

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

A-2

<PAGE> 100

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

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

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

FITCH INVESTORS SERVICE, INC. BOND RATINGS

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

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

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

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

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

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

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

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

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

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

A-3

<PAGE> 101

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

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

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

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

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

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

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

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

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

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

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

A-4

<PAGE> 102

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.

DD Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arrearages.
</TABLE>

A-5

<PAGE> 103

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

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

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

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

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

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

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

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

STANDARD & POOR'S NOTE RATINGS

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

The following criteria will be used in making the assessment:

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

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

Note rating symbols and definitions are as follows:

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

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

SP-3 Speculative capacity to pay principal and interest.

A-6

<PAGE> 104

MOODY'S SHORT-TERM RATINGS

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

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

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

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

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

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

MOODY'S NOTE RATINGS

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

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

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

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

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

A-7

<PAGE> 105

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.

d DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

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

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

Rating Scale: Definition
- ------------- ----------

High Grade

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

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

A-8

<PAGE> 106

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

Good Grade

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

Satisfactory Grade

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

Non-Investment Grade

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

Default

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

THOMSON BANKWATCH (TBW) SHORT-TERM RATINGS

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

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

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

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

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

A-9
<PAGE> 107

IBCA SHORT-TERM RATINGS

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

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

A1 Obligations supported by the highest capacity for timely repayment.

A2 Obligations supported by a good capacity for timely repayment.

A3 Obligations supported by a satisfactory capacity for timely repayment.

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

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

A-10
<PAGE> 108

STATEMENT OF ADDITIONAL INFORMATION

STRONG MID CAP FUND
P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863

This Statement of Additional Information is not a Prospectus and should be
read in conjunction with the Prospectus of Strong Mid Cap Fund (the "Fund"),
which is a series of Strong Equity Funds, Inc., dated December 31, 1996.
Requests for copies of the Prospectus should be made by calling one of the
numbers listed above.

This Statement of Additional Information is dated December 31, 1996.

<PAGE> 109

STRONG MID CAP FUND

<TABLE>
<S> <C>
TABLE OF CONTENTS PAGE

INVESTMENT RESTRICTIONS.......................................3
INVESTMENT POLICIES AND TECHNIQUES............................5
Borrowing...................................................5
Convertible Securities......................................5
Debt Obligations............................................6
Depositary Receipts.........................................6
Derivative Instruments......................................7
Foreign Investment Companies...............................17
Foreign Securities.........................................17
High-Yield (High-Risk) Securities..........................17
Illiquid Securities........................................19
Lending of Portfolio Securities............................20
Mortgage- and Asset-Backed Securities......................20
Mortgage Dollar Rolls and Reverse Repurchase Agreements....21
Repurchase Agreements......................................22
Short Sales Against the Box................................22
Short-Term Cash Management.................................22
Small and Medium Companies.................................22
Temporary Defensive Position...............................23
Warrants...................................................23
When-Issued Securities.....................................23
Zero-Coupon, Step-Coupon and Pay-in-Kind Securities........23
DIRECTORS AND OFFICERS OF THE FUND...........................24
PRINCIPAL SHAREHOLDERS.......................................26
INVESTMENT ADVISOR AND DISTRIBUTOR...........................26
PORTFOLIO TRANSACTIONS AND BROKERAGE.........................28
CUSTODIAN....................................................31
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT.................31
TAXES........................................................31
DETERMINATION OF NET ASSET VALUE.............................34
ADDITIONAL SHAREHOLDER INFORMATION...........................34
FUND ORGANIZATION............................................35
SHAREHOLDER MEETINGS.........................................35
PERFORMANCE INFORMATION......................................36
GENERAL INFORMATION..........................................41
PORTFOLIO MANAGEMENT.........................................43
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 31, 1996 and, if given or made,
such information or representations may not be relied upon as having been
authorized by the Fund.

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

<PAGE> 110

INVESTMENT RESTRICTIONS

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

The Fund :

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

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<PAGE> 111

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

The Fund may not:

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

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

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.

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.

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<PAGE> 112

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

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

INVESTMENT POLICIES AND TECHNIQUES

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

BORROWING

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

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

CONVERTIBLE SECURITIES

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

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<PAGE> 113

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

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

DEBT OBLIGATIONS

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

DEPOSITARY RECEIPTS

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

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<PAGE> 114

EDRs shall be treated as indirect foreign investments. Thus, an ADR or EDR
representing ownership of common stock will be treated as common stock. ADR
and EDR depositary receipts do not eliminate all of the risks associated with
directly investing in the securities of foreign issuers.

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

DERIVATIVE INSTRUMENTS

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

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<PAGE> 115

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

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

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

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

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<PAGE> 116

selling a futures contract) increased by less than the decline in value of the
hedged investments, the hedge would not be perfectly correlated. Such a lack
of correlation might occur due to factors unrelated to the value of the
investments being hedged, such as speculative or other pressures on the markets
in which these instruments are traded. The effectiveness of hedges using
instruments on indices will depend, in part, on the degree of correlation
between price movements in the index and price movements in the investments
being hedged.

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

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

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

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<PAGE> 117

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

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

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

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

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

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<PAGE> 118

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

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

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

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

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

FUTURES CONTRACTS. The Fund may use futures contracts for any lawful
purpose consistent with the Fund's investment objective such as hedging or
managing risk. The Fund may enter into futures contracts, including interest
rate, index, and currency futures. The Fund may also purchase put and call
options, and write covered put and call options, on futures in which it is
allowed to invest. The purchase of futures or call options thereon can serve
as a long hedge, and the sale of futures or the purchase of put options thereon
can serve as a short hedge. Writing covered call options on futures contracts
can serve as a limited short hedge, and writing covered put options on futures
contracts can serve as a limited long hedge, using a strategy similar to that
used for writing covered options in securities. The Fund's hedging may include
purchases of futures as an offset against the effect of expected increases in
currency exchange rates and securities prices and sales of futures as an offset

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against the effect of expected declines in currency exchange rates and
securities prices. The Fund may also write put options on futures contracts
while at the same time purchasing call options on the same futures contracts in
order to create synthetically a long futures contract position. Such options
would have the same strike prices and expiration dates. The Fund will engage
in this strategy only when the Advisor believes it is more advantageous to the
Fund than is purchasing the futures contract.

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

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

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

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

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

Certain characteristics of the futures market might increase the risk that
movements in the prices of futures contracts or options on futures contracts
might not correlate perfectly with movements in the prices of the investments
being hedged. For example, all participants in the futures and options on
futures contracts markets are subject to daily variation margin calls and might
be compelled to liquidate futures or options on futures contracts positions
whose prices are moving unfavorably to avoid being subject to further calls.
These liquidations could increase price volatility of the instruments and
distort the normal price relationship between the futures or options and the
investments being hedged. Also, because initial margin deposit requirements in
the futures markets are less onerous than margin requirements in the securities
markets, there might be increased participation by speculators in the future
markets. This participation also might cause temporary price distortions. In
addition, activities of large traders in both the futures and securities
markets involving arbitrage, "program trading" and other investment strategies
might result in temporary price distortions.

FOREIGN CURRENCIES. The Fund 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 Fund
may use these instruments for hedging or any other lawful purpose consistent
with its investment objective, including transaction hedging, anticipatory
hedging, cross hedging, proxy hedging, and position hedging. The Fund's use of
currency-related derivative instruments will be directly related to the Fund's
current or anticipated portfolio securities, and the Fund may engage in
transactions in currency-related derivative instruments as a means to protect
against some or all of the effects of adverse changes in foreign currency
exchange rates on its portfolio investments. In general, if the currency in
which a portfolio investment is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase. Conversely, a decline
in the exchange rate of the currency would adversely affect the value of the
portfolio investment expressed in U.S. dollars.

For example, the 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. The 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, the
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, the Fund may sell a forward currency contract to lock in the U.S.
dollar equivalent of the proceeds from the anticipated sale of a security
denominated in a foreign currency.

In addition, the 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 the Fund owns securities denominated in a foreign
currency and the Advisor believes

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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 the 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.

The Fund also might seek to hedge against changes in the value of a
particular currency when no hedging instruments on that currency are available
or such hedging instruments are more expensive than certain other hedging
instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using currency-related derivative
instruments on another foreign currency or a basket of currencies, the values
of which the Advisor believes will have a high degree of positive correlation
to the value of the currency being hedged. The risk that movements in the
price of the 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 the 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, the Fund could be disadvantaged by having to deal in the odd lot
market (generally consisting of transactions of less than $1 million) for the
underlying foreign currencies at prices that are less favorable than for round
lots (generally consisting of transactions of greater than $1 million).

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

When the 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 Fund
will enter into transactions in currency-related derivative instruments only
with counterparties that the Advisor reasonably believes are capable of
performing under the contract.

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to close out a forward currency contract (or any other currency-related
derivative instrument) at a time and price favorable to the Fund. In addition,
in the event of insolvency of the counterparty, the 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, the 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, the 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 the 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
the 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, the Fund might need to purchase or sell foreign currencies
in the spot (cash) market. The projection of short-term currency market
movements is extremely difficult, and the successful execution of a short-term
hedging strategy is highly uncertain.

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 Fund 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 the 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. The 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 the 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 Fund will set aside permissible
liquid assets in segregated accounts or otherwise cover their respective
potential obligations under currency-related derivatives instruments. To the
extent the 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 the 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, the 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.

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The Fund's dealing in currency-related derivative instruments will
generally be limited to the transactions described above. However, the Fund
reserves the right to use currency-related derivatives instruments for
different purposes and under different circumstances. Of course, the Fund is
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 Fund's 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 Fund may enter into interest rate, securities index,
commodity, or security and currency exchange rate swap agreements for any
lawful purpose consistent with the Fund's investment objective, such as for the
purpose of attempting to obtain or preserve a particular desired return or
spread at a lower cost to the Fund than if the Fund had invested directly in an
instrument that yielded that desired return or spread. The Fund also may enter
into swaps in order to protect against an increase in the price of, or the
currency exchange rate applicable to, securities that the Fund anticipates
purchasing at a later date. Swap agreements are two-party contracts entered
into primarily by institutional investors for periods ranging from a few weeks
to several years. In a standard "swap" transaction, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized
on particular predetermined investments or instruments. The gross returns to
be exchanged or "swapped" between the parties are calculated with respect to a
"notional amount," i.e., the return on or increase in value of a particular
dollar amount invested at a particular interest rate, in a particular foreign
currency, or in a "basket" of securities representing a particular index. Swap
agreements may include interest rate caps, under which, in return for a
premium, one party agrees to make payments to the other to the extent that
interest rates exceed a specified rate, or "cap;" interest rate floors, under
which, in return for a premium, one party agrees to make payments to the other
to the extent that interest rates fall below a specified level, or "floor;" and
interest rate collars, under which a party sells a cap and purchases a floor,
or vice versa, in an attempt to protect itself against interest rate movements
exceeding given minimum or maximum levels.

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

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

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

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

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FOREIGN INVESTMENT COMPANIES

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

FOREIGN SECURITIES

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

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

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

HIGH-YIELD (HIGH-RISK) SECURITIES

IN GENERAL. The Fund may invest up to 5% of its net assets in
non-investment grade debt obligations. Non-investment grade debt obligations
(hereinafter referred to as "lower-quality securities") include (i) bonds rated
as low as C by Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's
Ratings Group ("S&P"), or Fitch Investors Service, Inc. ("Fitch"), or CCC by
Duff & Phelps, Inc. ("D&P"); (ii) commercial paper rated as low as C by S&P,
Not Prime by Moody's, or Fitch 4 by Fitch; and (iii) unrated debt obligations
of comparable quality. Lower-quality securities, while generally offering
higher yields than investment grade securities with similar maturities, involve
greater risks, including the possibility of default

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or bankruptcy. They are regarded as predominantly speculative with respect to
the issuer's capacity to pay interest and repay principal. The special risk
considerations in connection with investments in these securities are discussed
below. Refer to the Appendix for a discussion of securities ratings.

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, the Fund
might incur additional expenses to seek recovery. Periods of economic
uncertainty and changes would also generally result in increased volatility in
the market prices of these securities and thus in the Fund's net asset value.

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

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

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

LIQUIDITY AND VALUATION. The Fund may have difficulty disposing of certain
lower-quality and comparable unrated securities because there may be a thin
trading market for such securities. Because not all dealers maintain markets
in all lower-quality and comparable unrated securities, there is no established
retail secondary market for many of these securities. The Fund anticipate that
such securities could be sold only to a limited number of dealers or
institutional investors. To the extent a

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secondary trading market does exist, it is generally not as liquid as the
secondary market for higher-rated securities. The lack of a liquid secondary
market may have an adverse impact on the market price of the security. As a
result, the Fund's asset value and ability to dispose of particular securities,
when necessary to meet the Fund's liquidity needs or in response to a specific
economic event, may be impacted. The lack of a liquid secondary market for
certain securities may also make it more difficult for the Fund to obtain
accurate market quotations for purposes of valuing the Fund's portfolio.
Market quotations are generally available on many lower-quality and comparable
unrated issues only from a limited number of dealers and may not necessarily
represent firm bids of such dealers or prices for actual sales. During periods
of thin trading, the spread between bid and asked prices is likely to increase
significantly. In addition, adverse publicity and investor perceptions,
whether or not based on fundamental analysis, may decrease the values and
liquidity of lower-quality and comparable unrated securities, especially in a
thinly traded market.

ILLIQUID SECURITIES

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

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

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

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

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

LENDING OF PORTFOLIO SECURITIES

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

MORTGAGE- AND ASSET-BACKED SECURITIES

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

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

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

MORTGAGE DOLLAR ROLLS AND REVERSE REPURCHASE AGREEMENTS

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

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

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

REPURCHASE AGREEMENTS

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

SHORT SALES AGAINST THE BOX

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

SHORT-TERM CASH MANAGEMENT

SMALL AND MEDIUM COMPANIES

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

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investment in a fund that invests primarily in larger, more established
companies. The Advisor's research efforts may also play a greater role in
selecting securities for the Fund than in a fund that invests in larger, more
established companies.

TEMPORARY DEFENSIVE POSITION.

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

WARRANTS

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

WHEN-ISSUED SECURITIES

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

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

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

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

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Code and avoid a certain excise tax, the Fund may be required to distribute a
portion of such discount and income and may be required to dispose of other
portfolio securities, which may occur in periods of adverse market prices, in
order to generate cash to meet these distribution requirements.

DIRECTORS AND OFFICERS OF THE FUND

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

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

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

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

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

Mr. Dragisic has been President of the Advisor since October 1995 and a
director of the Advisor, Holdings, and Distributor since July 1994. Mr.
Dragisic previously served as a director of Opportunity, Growth, Common Stock,
and Discovery Funds between 1991 and 1994, and as Vice Chairman of the Funds
from July 1994 until October 1995. Mr. Dragisic was the President and Chief
Executive Officer of Grunau Company, Inc. (a mechanical contracting and
engineering firm), Milwaukee, Wisconsin from 1987 until July 1994. From 1981
to 1987, he was an Executive Vice President with Grunau Company, Inc. From
1969 until 1973, Mr. Dragisic worked for the InterAmerican Development Bank.
Mr. Dragisic received his Ph.D. in Economics in 1971 from the University of
Wisconsin-Madison and his B.A. degree in Economics in 1962 from Lake Forest
College. Mr. Dragisic has served as a director and president of the Fund since
October, 1996.

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<PAGE> 132

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

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

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

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

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

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

Mr. Weitzer has been an Associate Counsel to the Advisor since July 1993.
Mr. Weitzer has served as a vice president of the Fund since October, 1996.

Except for Messrs. Nevins, Davis, Kritzik and Vogt, the address of all of
the above persons is P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Nevins'
address is 6075 Pelican Bay Boulevard, Naples, Florida 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.
In addition to the positions listed above, Mr. Strong has been Chairman
and a director of Strong Holdings, Inc., a Wisconsin corporation and subsidiary
of the Advisor ("Holdings") since October 1993; Chairman and a director of the
Funds' underwriter, Strong Funds Distributors, Inc., a Wisconsin Corporation
and subsidiary of Holdings ("Distributor") since October 1993; Chairman and a
director of Heritage Reserve Development Corporation, a Wisconsin corporation
and subsidiary of Holdings ("Heritage") since January 1994; Chairman and a
director of Strong Service Corporation, a Wisconsin corporation and subsidiary
of Holdings ("SSC") since November 1995; Chairman and a member of the Managing
Board of Fussville Real Estate Holdings L.L.C., a Wisconsin Limited Liability
Company and subsidiary of the Advisor ("Real Estate Holdings") since February
1994; Chairman and a member of the Managing Board of Fussville Development
L.L.C., a Wisconsin Limited

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Liability Company and subsidiary of the Advisor and Real Estate Holdings
("Fussville Development") since February 1994; and Chairman and a member of
the Managing Board of Sherwood Development L.L.C., a Wisconsin Limited
Liability Company and subsidiary of the Advisor ("Sherwood") since December
1995 and April 1995, respectively. In addition to the positions listed above,
Mr. Dragisic has been a director of Distributors since July 1994; President and
a director of Holdings since December 1995 and July 1994, respectively;
President and a director of SSC since November 1995; Vice Chairman and a
director of Heritage since August 1994; Vice Chairman and a member of the
Managing Board of Fussville Development since December 1995 and August 1994,
respectively; Vice Chairman and a member of the Managing Board of Real Estate
Holdings since December 1995 and August 1994, respectively; and Vice Chairman
and a member of the Managing Board of Sherwood since December 1995 and April
1995, respectively. In addition to the positions listed above, Mr. Lemke has
been President of Distributors since December 1995; Vice President of Holdings
since December 1995; Vice President of SSC since November 1995; Vice President
of Heritage since December 1995; Vice President of Fussville Development since
December 1995; Vice President of Real Estate Holdings since December 1995; and
Vice President of Sherwood since December 1995. In addition to the positions
listed above, Mr. Shenkenberg has been Vice President and Secretary of
Distributors since December 1995; Secretary of SSC since November 1995; and
Secretary of Holdings, Heritage, Fussville Development, Real Estate Holdings,
and Sherwood since December 1995.

As of ________ ___, 1996 the officers and directors of the Fund did not
own any of the Fund's shares.

PRINCIPAL SHAREHOLDERS

As of ________ ___, 1996 , no one owned of record and beneficially any
shares of the Fund.

INVESTMENT ADVISOR AND DISTRIBUTOR

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

The Advisory Agreement for the Fund dated December ___, 1996 was last
approved by its sole shareholder on December ___, 1996, and will remain in
effect for a period of two years. The Advisory Agreement is required to be
approved annually by either the Board of Directors of the Fund or by vote of a
majority of the Fund's outstanding voting securities (as defined in the 1940
Act). In either case, each annual renewal must be approved by the vote of a
majority of the Fund's directors who are not parties to the Advisory Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. The Advisory Agreement is terminable,
without penalty, on 60 days' written notice by the Board of Directors of the
Fund, by vote of a majority of the Fund's outstanding voting securities, or by
the Advisor, and will terminate automatically in the event of its assignment.

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

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

The Advisory Agreement requires the Advisor to reimburse the Fund in the
event that the expenses and charges payable by the Fund in any fiscal year,
including the management fee but excluding taxes, interest, brokerage
commissions,

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and similar fees and to the extent permitted extraordinary expenses, exceed
that percentage of the average net asset value of the Fund for such year, as
determined by valuations made as of the close of each business day of the year,
which is the most restrictive percentage expense limitation provided by the
laws of the various states in which the Fund's common stock is qualified for
sale; or if the states in which the Fund's common stock is qualified for sale
impose no restrictions, then 2%. The most restrictive percentage limitation
currently applicable to the Fund is 2.5% of its average daily net assets up to
$30,000,000, 2% on the next $70,000,000 of its average daily net assets and
1.5% of its average daily net assets in excess of $100,000,000. Reimbursement
of expenses in excess of the applicable limitation will be made on a monthly
basis and will be paid to the Fund by reduction of the Advisor's fee, subject
to later adjustment, month by month, for the remainder of the Fund's fiscal
year. The Advisor may from time to time voluntarily absorb expenses for the
Fund in addition to the reimbursement of expenses in excess of application
limitations.

Except for expenses assumed by the Advisor, as set forth above, or by the
Distributor, as described below with respect to the distribution of the Fund's
shares, the Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions and similar
expenses; 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 Fund, as well as certain
employees of the Advisor who have access to information relating to the
purchase or sale of securities by the Advisor on behalf of accounts managed by
it. The Code is based upon the principal that such Access Persons have a
fiduciary duty to place the interests of the Advisor's clients ahead of their
own.

The Code requires Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor,
including the Fund) to, among other things, preclear their securities
transactions (with limited exceptions, such as transactions in shares of mutual
funds, direct obligations of the U.S. government, and certain options on
broad-based securities market indexes) and to execute such transactions through
the Advisor's trading department. The Code, which applies to all Access
Persons (other than Access Persons who are independent directors of the
investment companies managed by the Advisor, including the Fund), includes a
ban on acquiring any securities in an initial public offering, other than a new
offering of a registered open-end investment company, and a prohibition from
profiting on short-term trading

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in securities. In addition, no Access Person may purchase or sell any security
which, at the time, is being purchased or sold, or to the knowledge of the
Access Person, is being considered for purchase or sale, by the Advisor on
behalf of any mutual fund or other account managed by it. Finally, the Code
provides for trading "black out" periods which prohibit trading by Access
Persons who are portfolio managers within seven calendar days of trading in the
same securities by any mutual fund or other account managed by the portfolio
manager.

Under a Distribution Agreement with the Fund dated December ___, 1996,
Strong Funds Distributors, Inc. ("Distributor"), a subsidiary of the Advisor,
acts as underwriter of the Fund's shares. The Distribution Agreement provides
that the Distributor will use its best efforts to distribute the Fund's shares.
Since the Fund is a "no-load" fund, no sales commissions are charged on the
purchase of Fund shares. The Distribution Agreement further provides that the
Distributor will bear the additional costs of printing Prospectuses and
shareholder reports which are used for selling purposes, as well as advertising
and any other costs attributable to the distribution of the Fund's shares. The
Distributor is an indirect subsidiary of the Advisor and controlled by the
Advisor and Richard S. Strong. The Distribution Agreement is subject to the
same termination and renewal provisions as are described above with respect to
the Advisory Agreements.

PORTFOLIO TRANSACTIONS AND BROKERAGE

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

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<PAGE> 136

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

In carrying out the provisions of the Advisory Agreements, the Advisor may
cause the Fund to pay a broker, which provides brokerage and research services
to the Advisor, a commission for effecting a securities transaction in excess
of the amount another broker would have charged for effecting the transaction.
The Advisor believes it is important to its investment decision-making process
to have access to independent research. The Advisory Agreement provides that
such higher commissions will not be paid by the Fund unless (a) the Advisor
determines in good faith that the amount is reasonable in relation to the
services in terms of the particular transaction or in terms of the Advisor's
overall responsibilities with respect to the accounts as to which it exercises
investment discretion; (b) such payment is made in compliance with the
provisions of Section 28(e), other applicable state and federal laws, and the
Advisory Agreement; and (c) in the opinion of the Advisor, the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. The investment management fee paid by the Fund
under the Advisory Agreement is not reduced as a result of the Advisor's
receipt of research services.

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

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

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<PAGE> 137

as to the level of brokerage commissions it will allocate to a broker, nor will
it commit to pay cash if any informal targets are not met. The Advisor
anticipates it will continue to enter into such brokerage arrangements.

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

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

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

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

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<PAGE> 138

CUSTODIAN

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

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

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

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

TAXES

GENERAL

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

In order to qualify for treatment as a RIC under the Code, the Fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign
currency transactions) ("Distribution Requirement") and must meet several
additional requirements. For the Fund, these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies or other income (including gains from options, futures, or forward
contracts) derived with respect to its business of investing in securities of
those currencies ("Income Requirement"); (2) the Fund must derive less than 30%
of its gross income each taxable year from the sale or other disposition of
securities, or any of the following that were held for less than three months
- -- options or futures (other than those on foreign currencies), or foreign
currencies (or options, futures, or forward contracts thereon) that are not
directly related to the Fund's principal business of

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<PAGE> 139

investing in securities (or options and futures with respect to securities)
("30% Limitation"); (3) at the close of each quarter of the Fund's taxable
year, at least 50% of the value of its total assets must be represented by cash
and cash items, U.S. government securities, securities of other RICs, and other
securities, with these other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets
and that does not represent more than 10% of the issuer's outstanding voting
securities; and (4) at the close of each quarter of the Fund's taxable year,
not more than 25% of the value of its total assets may be invested in
securities (other than U.S. government securities or the securities of other
RICs) of any one issuer. From time to time the Advisor may find it necessary
to make certain types of investments for the purpose of ensuring that the Fund
continues to qualify for treatment as a RIC under the Code.

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

FOREIGN TRANSACTIONS

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

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

The Fund may invest in the stock of "passive foreign investment companies"
("PFICs"). A PFIC is a foreign corporation that, in general, meets either of
the following tests: (1) at least 75% of its gross income is passive or (2) an
average of at least 50% of its assets produce, or are held for the production
of, passive income. Under certain circumstances, the Fund will be subject to
federal income tax on a portion of any "excess distribution" received on the
stock or of any gain on disposition of the stock (collectively, "PFIC income"),
plus interest thereon, even if the Fund distributes the PFIC income 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 the Fund invests in a PFIC and elects to treat the PFIC as a
"qualified electing fund," then in lieu of the foregoing tax and interest
obligation, the Fund will be required to include in income each year its pro
rata share of the qualified electing fund's annual ordinary earnings and net
capital gain (the excess of net long-term capital gain over net short-term
capital loss) -- which probably would have to be distributed to its
shareholders to satisfy the Distribution Requirement and avoid imposition of
the

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<PAGE> 140

Excise Tax -- even if those earnings and gain were not received by the Fund.
In most instances it will be very difficult, if not impossible, to make this
election because of certain requirements thereof.

DERIVATIVE INSTRUMENTS

The use of derivatives strategies, such as purchasing and selling
(writing) options and futures and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the
character and timing of recognition of the gains and losses the Fund realizes
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 the Fund's principal
business of investing in securities (or options and futures with respect to
securities) also will be subject to the 30% Limitation if they are held for
less than three months.

If the Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease in
value (whether realized or not) of the offsetting hedging position during the
period of the hedge for purposes of determining whether the Fund satisfies the
30% Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. The Fund
intends that, when they engage in hedging strategies, the hedging transactions
will qualify for this treatment, but at the present time it is not clear
whether this treatment will be available for all of the Fund's hedging
transactions. To the extent this treatment is not available or is not elected
by the Fund, it may be forced to defer the closing out of certain options,
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, the Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on options,
futures, or forward currency contracts that are subject to section 1256 of the
Code ("Section 1256 Contracts") and are held by the Fund as of the end of the
year, as well as gains and losses on Section 1256 Contracts actually realized
during the year. Except for Section 1256 Contracts that are part of a "mixed
straddle" and with respect to which the Fund makes a certain election, any gain
or loss recognized with respect to Section 1256 Contracts is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the Section 1256 Contract. Unrealized
gains on Section 1256 Contracts that have been held by the Fund for less than
three months as of the end of its taxable year, and that are recognized for
federal income tax purposes as described above, will not be considered gains on
investments held for less than three months for purposes of the 30% Limitation.

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

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

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<PAGE> 141

ability to pass-through earnings without taxation at the Fund level, or
otherwise materially changes the Fund's tax treatment, could adversely affect
the value of a shareholder's investment in the Fund. Because the Fund's taxes
are a complex matter, you should consult your tax adviser for more detailed
information concerning the taxation of the Fund and the federal, state, and
local tax consequences to shareholders of an investment in the Fund.

DETERMINATION OF NET ASSET VALUE

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

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

ADDITIONAL SHAREHOLDER INFORMATION

TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES AND AUTOMATIC EXCHANGE PLAN

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

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<PAGE> 142

RETIREMENT PLANS

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.

FUND ORGANIZATION

The Fund is a series of common stock of Strong Equity Funds, Inc.,
(formerly known as Strong Growth Funds, Inc.) a Wisconsin corporation (a
"Corporation"). The shares in any one portfolio may, in turn, be offered in
separate classes, each with differing preferences, limitations or relative
rights. However, the Corporation's Articles of Incorporation provides that if
additional classes of shares are issued by the Fund, such new classes of shares
may not affect the preferences, limitations or relative rights of the Fund's
outstanding shares. In addition, the Corporation's Board is authorized to
allocate assets, liabilities, income and expenses to each series and class.
Classes within a series may have different expense arrangements than other
classes of the same series and, accordingly, the net asset value of shares
within a series may differ. Finally, all holders of shares of the 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 Fund have no preemptive, conversion, or subscription rights. The
Corporation currently has four series of common stock outstanding, each with an
indefinite number of authorized shares. If the Corporation issues additional
series, the assets belonging to each series of shares will be held separately
by the custodian, and in effect each series will be a separate fund.

SHAREHOLDER MEETINGS

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

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<PAGE> 143

annual meeting in any year in which the election of directors is not required
to be acted on by shareholders under the 1940 Act.

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

PERFORMANCE INFORMATION

As described under "About the Fund - Performance Information" in the
Prospectus, the Fund's historical performance or return may be shown in the
form of "average annual total return," "total return," and "cumulative total
return." From time to time, the Advisor may voluntarily waive all or a portion
of its management fee and/or absorb certain expenses for the Fund.

AVERAGE ANNUAL TOTAL RETURN

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

P (1 + T)n = ERV

<TABLE>
<S> <C>
P = a hypothetical initial payment of $10,000.
T = average annual total return.
n = number of years.
</TABLE>

ERV = ending redeemable value of a hypothetical $10,000 payment
made at the beginning of the stated periods at the end of the
stated periods.

TOTAL RETURN

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

CUMULATIVE TOTAL RETURN

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

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<PAGE> 144

COMPARISONS

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

(2) CERTIFICATES OF DEPOSIT
Investors may want to compare the 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 the Fund to that of
money market funds. Money market fund yields will fluctuate and shares are not
insured, but share values usually remain stable.

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

(5) MORNINGSTAR, INC.
The Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. which rates funds on the basis of historical
risk and total return. Morningstar's ratings range from five stars (highest)
to one star (lowest) and represent Morningstar's assessment of the historical
risk level and total return of 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 the Fund, including reprints of, or
selections from, editorials or articles about the Fund, especially those with
similar objectives. Sources for Fund performance information and articles
about the Fund may include publications such as Money, Forbes, Kiplinger's,
Smart Money, Morningstar, Inc., Financial World, Business Week, U.S. News and
World Report, The Wall Street Journal, Barron's, and a variety of investment
newsletters.

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<PAGE> 145

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

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

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

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<PAGE> 146

FUND NAME INVESTMENT OBJECTIVE
==========================================================================================================
<S> <C>
Strong Money Market Fund Current income, a stable share price, and daily liquidity.
- ----------------------------------------------------------------------------------------------------------
Strong Heritage Money Fund Current income, a stable share price, and daily liquidity.
- ----------------------------------------------------------------------------------------------------------
Strong Municipal Money Market Federally tax-exempt current income, a stable share-price, and daily
Fund liquidity.
- ----------------------------------------------------------------------------------------------------------
Strong Municipal Advantage Fund Federally tax-exempt current income with a very low degree of
share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong Advantage Fund Current income with a very low degree of share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong Short-Term Municipal Total return by investing for a high level of federally tax-exempt
Bond Fund current income with a low degree of share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong Short-Term Bond Fund Total return by investing for a high level of current income with a low
degree of share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong Short-Term Global Bond Total return by investing for a high level of income with a low degree
Fund of share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong Government Securities Total return by investing for a high level of current income with a
Fund moderate degree of share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong Municipal Bond Fund Total return by investing for a high level of federally tax-exempt
current income with a moderate degree of share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong Corporate Bond Fund Total return by investing for a high level of current income with a
moderate degree of share-price fluctuation.
- ----------------------------------------------------------------------------------------------------------
Strong High-Yield Municipal Total return by investing for a high level of federally tax-exempt
Bond Fund current income.
- ----------------------------------------------------------------------------------------------------------
Strong High-Yield Bond Fund Total return by investing for a high level of current income and
capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong International Bond Fund High total return by investing for both income and capital appreciation.
- ----------------------------------------------------------------------------------------------------------
Strong Asset Allocation Fund High total return consistent with reasonable risk over the long term.
- ----------------------------------------------------------------------------------------------------------
Strong Equity Income Fund Total return by investing for both income and capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong American Utilities Fund Total return by investing for both income and capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Total Return Fund High total return by investing for capital growth and income.
- ----------------------------------------------------------------------------------------------------------
Strong Growth and Income Fund High total return by investing for capital growth and income.
- ----------------------------------------------------------------------------------------------------------
Strong Schafer Value Fund Long-term capital appreciation principally through investment in common
stocks and other equity securities. Current income is a secondary
objective.
- ----------------------------------------------------------------------------------------------------------
Strong Value Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Opportunity Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Growth Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Common Stock Fund* Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Mid Cap Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Small Cap Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Discovery Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong International Stock Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
Strong Asia Pacific Fund Capital growth.
- ----------------------------------------------------------------------------------------------------------
</TABLE>

* The Fund is currently closed to new investors.

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

- 39 -

<PAGE> 147

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

(10) TYING TIME FRAMES TO YOUR GOALS

STRONG FUNDS SUGGESTED MINIMUM HOLDING PERIODS

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

*This fund is currently closed to new investors.

ADDITIONAL FUND INFORMATION

(1) PORTFOLIO CHARACTERISTICS

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

- 40 -

<PAGE> 148

(2) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

Standard deviation is calculated using the following formula:

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

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

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

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

GENERAL INFORMATION

BUSINESS PHILOSOPHY

INVESTMENT ENVIRONMENT

- 41 -

<PAGE> 149

EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING

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.

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.

STRONG RETIREMENT PLAN SERVICES

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.

- 42 -

<PAGE> 150

3. Women-owned businesses.

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

Turnkey approach:

Education:

Service:

STRONG FINANCIAL ADVISORS GROUP

PORTFOLIO MANAGEMENT

[ADD STYLE SECTION]

- 43 -

<PAGE> 151

APPENDIX

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

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, 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.

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-1

<PAGE> 152

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

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

MOODY'S LONG-TERM DEBT RATINGS

A-2

<PAGE> 153

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 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.

A-3

<PAGE> 154

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.

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

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

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

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

A-4

<PAGE> 155

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

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

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

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

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

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

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

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

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

DD Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arrearages.
- ------------------------------------------------------------------------------------------------
</TABLE>

A-5

<PAGE> 156

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

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

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

A-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'.

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

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

STANDARD & POOR'S NOTE RATINGS

The following criteria will be used in making the assessment:

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

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

Note rating symbols and definitions are as follows:

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

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

SP-3 Speculative capacity to pay principal and interest.

A-6

<PAGE> 157

MOODY'S SHORT-TERM RATINGS

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

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

MOODY'S NOTE RATINGS

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

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

A-7

<PAGE> 158

FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS

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+'.

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

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

DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

<TABLE>
<S> <C>
Rating Scale: Definition
------------- ----------

High Grade
----------
</TABLE>

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

A-8

<PAGE> 159

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

Good Grade

Satisfactory Grade

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

Non-Investment Grade

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

Default

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

THOMSON BANKWATCH (TBW) SHORT-TERM RATINGS

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

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

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

A-9

<PAGE> 160

IBCA SHORT-TERM RATINGS

<TABLE>
<S> <C>
A1+ Obligations supported by the highest capacity for timely
repayment and possess a particularly strong credit feature.

A1 Obligations supported by the highest capacity for timely repayment.

A2 Obligations supported by a good capacity for timely repayment.

A3 Obligations supported by a satisfactory capacity for timely repayment.

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

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

A-10

<PAGE> 161

STRONG EQUITY FUNDS, INC.

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

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

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 Small Cap and Value Funds (all included or
incorporated by reference in Parts A & B). (Unaudited)

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

(3) Strong Mid Cap Fund

Inapplicable

(b) Exhibits

(1) Articles of Incorporation
(1.1) Amendment to Articles of Incorporation
(2) Bylaws
(3) Inapplicable
(4) Specimen Stock Certificate
(5) Investment Advisory Agreement
(5.1) Subadvisory Agreement (Value)
(6) Distribution Agreement
(7) Inapplicable
(8.1) Custody Agreement with Firstar (Growth, Small Cap, and
Mid Cap Funds)
(8.2) Global Custody Agreement with Brown Brothers Harriman &
Co. (Growth, Small Cap, and Mid Cap Funds)
(9) Shareholder Servicing Agent Agreement
(10) Inapplicable
(11) Consent of Auditor
(12) Inapplicable
(13) Inapplicable
(14.1) Prototype Defined Contribution Retirement Plan with
Standardized Adoption Agreements - No. 1

C-1
<PAGE> 162

(14.1.1) Prototype Defined Contribution Retirement Plan with
Standardized Adoption Agreements - No. 2
(14.2) Individual Retirement Custodial Account
(14.3) Section 403(b)(7) Retirement Plan
(14.4) Simplified Employee Pension Plan
(15) Inapplicable
(16) Computation of Performance Figures
(17) Financial Data Schedule
(18) Power of Attorney

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, 1996
-------------- ------------------------
<S> <C>
Common Stock, $.00001 par value

Strong Growth Fund 97,839
Strong Small Cap Fund 10,616
Strong Value Fund 4,415
Strong Mid Cap Fund 0
</TABLE>

Item 27. Indemnification

Officers and directors are insured under a joint errors and omissions
insurance policy underwritten by American International Group, First State
Insurance Company, Chubb Group, and Gulf Insurance Companies in the aggregate
amount of $40,000,000, 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.

C-2
<PAGE> 163

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" with respect to the Strong Growth, Strong
Small Cap, and Strong Value Funds and "Investment Advisor and Distributor" with
respect to Strong Mid Cap Fund in the Statement of Additional Information is
hereby incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933.

Item 29. Principal Underwriters

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

(b) The information contained under "About the Funds - Management" in
the Prospectus and under "Directors and Officers of the Funds" and "Investment
Advisor, Subadvisor, and Distributor" with respect to Strong Growth, Strong
Small Cap, Strong Value Funds and "Investment Advisor and Distributor" with
respect to Strong Mid Cap Fund in the Statement of Additional Information is
hereby incorporated by reference pursuant to Rule 411 under the Securities Act
of 1933.

Item 30. Location of Accounts and Records

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

Item 31. Management Services

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

Item 32. Undertakings

(a) Inapplicable

(b) The Registrant undertakes to file a post-effective amendment, using
financial statements which need not be certified, within four to six months
from the effective date of this Registration Statement with respect to Strong
Mid Cap 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
Growth Fund's latest annual report to shareholders.

C-3
<PAGE> 164

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. 8 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
16th day of October, 1996.

STRONG EQUITY FUNDS, INC.
(Registrant)

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

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 8 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated.

Name Title Date
---- ----- ----
<S> <C> <C>

/s/ John Dragisic President (Principal Executive Officer October 16, 1996
- --------------------------------- and acting Principal Financial and
John Dragisic Accounting Officer) and a Director

October 16, 1996

/s/ Richard S. Strong Chairman of the Board and a Director
- --------------------------------
Richard S. Strong
October 16, 1996

Director
- --------------------------------
Marvin E. Nevins*
October 16, 1996

Director
- --------------------------------
Willie D. Davis*
October 16, 1996

Director
- --------------------------------
William F. Vogt*
October 16, 1996

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

* Thomas P. Lemke signs this document pursuant to powers of attorney filed
with Post Effective Amendment No. 3 to the Registration Statement of
Registrant filed with the SEC on or about April 18, 1995.

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

<PAGE> 165

EXHIBIT INDEX

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

(1.1) Amendment to Articles of Incorporation EX-99.B1.1*

(2) Bylaws EX-99.B2(1)

(3) Inapplicable

(4) Specimen Stock Certificate EX-99.B4(1)

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

(5.1) Subadvisory Agreement (Value) EX-99.B5.2(1)

(6) Distribution Agreement EX-99.B6(1)

(7) Inapplicable

(8.1) Custody Agreement with Firstar (Growth, Small Cap and Mid Cap Funds) EX-99.B8.1(3)

(8.2) Global Custody Agreement with Brown Brothers Harriman & Co. (Growth, EX-99.B8.2(3)
Small Cap, and Mid Cap Funds)

(9) Shareholder Servicing Agent Agreement EX-99.B9(1)

(10) Inapplicable

(11) Consent of Auditor EX-99.B11

(12) Inapplicable

(13) Inapplicable

(14.1) Prototype Defined Contribution Retirement Plan with EX-99.B14.1(2)
Standardized Adoption Agreements - No. 1

(14.1.1) Prototype Defined Contribution Retirement Plan with EX-99.B14.1.1(2)
Standardized Adoption Agreements - No. 2

(14.2) Individual Retirement Custodial Account EX-99.B14.2(2)

(14.3) Section 403(b)(7) Retirement Plan EX-99.B14.3

(14.4) Simplified Employee Pension Plan Brochure EX-99.B14.4(3)

(15) Inapplicable

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

</TABLE>
<PAGE> 166

<TABLE>
<S> <C> <C>
(17) Financial Data Schedule EX-27 Growth
EX-27 Small Cap
EX-27 Value

(18) Power of Attorney(1)
</TABLE>

__________________________

(1) Incorporated herein by reference to the Post-Effective Amendment No. 5 to
the Registration Statement on Form N-1A filed on or about December 15,
1995.

(2) Incorporated herein by reference to the Post-Effective Amendment No. 6 to
the Registration Statement on Form N-1A filed on or about April 25, 1996.

(3) Incorporated herein by reference to the Post-Effective Amendment No. 7 to
the Registration Statement on Form N-1A filed on or about July 30, 1996.

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

<PAGE> 1

AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF STRONG EQUITY FUNDS, INC.

These Amended and Restated Articles of Incorporation shall supersede and
replace the heretofore existing Articles of Incorporation of Strong Equity
Funds, Inc., as amended to date, a corporation organized under Chapter 180 of
the Wisconsin Statutes:

ARTICLE I

The name of the corporation (hereinafter, the "Corporation") is:

Strong Equity Funds, Inc.

ARTICLE II

The period of existence of the Corporation shall be perpetual.

ARTICLE III

The purpose for which the Corporation is organized is, without limitation,
to act as a registered management investment company under 15 USC 80a-1 to
80a-64, as amended from time to time (the "Investment Company Act"), and for
any other purposes for which corporations may be organized under Chapter 180 of
the Wisconsin Statutes, as amended from time to time (the "WBCL").

ARTICLE IV

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

Class Authorized Number of Shares
--------------------- ---------------------------

Strong Growth Fund Indefinite
Strong Small Cap Fund Indefinite
Strong Value Fund Indefinite

B. The Board of Directors is authorized to classify or to reclassify (i.e.
into classes and series of classes), from time to time, any unissued shares of
the Corporation by setting, changing, or eliminating the distinguishing
designation and the preferences, limitations, and relative rights, in whole or
in part, to the fullest extent permissible under the WBCL.

Unless otherwise provided by the Board of Directors prior to the issuance
of shares, the shares of any and all classes and series shall be subject to the
following:

1. The Board of Directors may redesignate a class or series whether or not
shares of such class or series are issued and outstanding, provided that such
redesignation does not affect the preferences, limitations, and relative
rights, in whole or in part, of such class or series.

<PAGE> 2

2. The assets and liabilities and the income and expenses for each class
shall be attributable to that class. The assets and liabilities and the income
and expenses of each series within a class shall be determined separately and,
accordingly, the net asset value of shares may vary from series to series
within a class. The income or gain and the expense or liabilities of the
Corporation shall be allocated to each class or series as determined by or
under the direction of the Board of Directors.

3. Shares of each class or series shall be entitled to such dividends or
distributions, in shares or in cash or both, as may be declared from time to
time by the Board of Directors with respect to such class or series. Dividends
or distributions shall be paid on shares of a class or series only out of the
assets belonging to that class or series.

4. Any shares redeemed by the Corporation shall be deemed to be canceled
and restored to the status of authorized but unissued shares of the particular
class or series.

5. In the event of the liquidation or dissolution of the Corporation, the
holders of a class or series shall be entitled to receive, as a class or
series, out of the assets of the Corporation available for distribution to
shareholders, the assets belonging to that class or series less the liabilities
allocated to that class or series. The assets so distributable to the holders
of a class or series shall be distributed among such holders in proportion to
the number of shares of that class or series held by them and recorded on the
books of the Corporation. In the event that there are any assets available for
distribution that are not attributable to any particular class or series, such
assets shall be allocated to all classes or series in proportion to the net
asset value of the respective class or series.

6. All holders of shares shall vote as a single class and series except
with respect to any matter which affects only one or more series or class of
shares, in which case only the holders of shares of the class or series
affected shall be entitled to vote.

7. For purposes of the Corporation's Registration Statement filed with the
Securities and Exchange Commission under the Securities Act of 1933 and the
Investment Company Act of 1940, including all prospectuses and Statements of
Additional Information, and other reports filed under the Investment Company
Act of 1940, references therein to "classes" of the Corporation's common stock
shall mean "series", as used in these Articles of Incorporation and the WBCL,
and references therein to "series" shall mean "classes", as used in these
Articles of Incorporation and the WBCL.

C. The Corporation may issue fractional shares. Any fractional shares
shall carry proportionately all the rights of whole shares, including, without
limitation, the right to vote and the right to receive dividends and
distributions.

D. The Board of Directors of the Corporation may authorize the issuance
and sale of any class or series of shares from time to time in such amount and
on such terms and conditions, for such purposes and for such amounts or kind of
consideration as the Board of Directors shall determine, subject to any limits
required by then applicable law. Nothing in this paragraph shall be construed
in any way as limiting the Board of Directors authority to issue the
Corporation's shares in connection with a share dividend under the WBCL.

E. Subject to the suspension of the right of redemption or postponement of
the date of payment or satisfaction upon redemption in accordance with the
Investment Company Act, each holder of any class or series of the Common Stock
of the Corporation, upon request and after complying with the redemption
procedures established by or under the supervision of the Board of Directors,
shall be entitled to require the Corporation to redeem out of legally available
funds all or any part of the Common Stock standing in the name of such holder
on the books of the Corporation at the net asset value (as determined in
accordance with the Investment Company Act) of such shares (less any applicable
redemption fee). Any such redeemed shares shall be canceled and restored to the
status of authorized but unissued shares.

<PAGE> 3

F. The Board of Directors may authorize the Corporation, at its option and
to the extent permitted by and in accordance with the Investment Company Act,
to redeem any shares of Common Stock of any class or series of the Corporation
owned by any shareholder under circumstances deemed appropriate by the Board of
Directors in its sole discretion from time to time, including without
limitation the failure to maintain ownership of a specified minimum number or
value of shares of Common Stock of any class or series of the Corporation, at
the net asset value (as determined in accordance with the Investment Company
Act) of such shares (less any applicable redemption fee).

G. The Board of Directors of the Corporation may, upon reasonable notice
to the holders of Common Stock of any class or series of the Corporation,
impose a fee for the redemption of shares, such fee to be not in excess of the
amount set forth in the Corporation's then existing Bylaws and to apply in the
case of such redemptions and under such terms and conditions as the Board of
Directors shall determine. The Board of Directors shall have the authority to
rescind imposition of any such fee in its discretion and to reimpose the
redemption fee from time to time upon reasonable notice.

H. No holder of the Common Stock of any class or series of the Corporation
shall, as such holder, have any right to purchase or subscribe for any shares
of the Common Stock of any class or series of the Corporation which it may
issue or sell other than such right, if any, as the Board of Directors, in its
sole discretion, may determine.

I. With respect to any class or series, the Board of Directors may adopt
provisions to seek to maintain a stable net asset value per share. Without
limiting the foregoing, the Board of Directors may determine that the net asset
value per share of any class or series should be maintained at a designated
constant value and may establish procedures, not inconsistent with applicable
law, to accomplish that result. Such procedures may include a requirement, in
the event of a net loss with respect to the particular class or series from
time to time, for automatic pro rata capital contributions from each
shareholder of that class or series in amounts sufficient to maintain the
designated constant share value.

ARTICLE V

The number of directors shall be fixed by the Bylaws of the Corporation.

ARTICLE VI

The Corporation reserves the right to enter into, from time to time,
investment advisory agreements providing for the management and supervision of
the investments of the Corporation, the furnishing of advice to the Corporation
with respect to the desirability of investing in, purchasing or selling
securities or other assets and the furnishing of clerical and administrative
services to the Corporation. Such agreements shall contain such other terms,
provisions and conditions as the Board of Directors of the Corporation may deem
advisable and as are permitted by the Investment Company Act.

The Corporation may, without limitation, designate distributors,
custodians, transfer agents, registrars and/or disbursing agents for the stock
and assets of the Corporation and employ and fix the powers, rights, duties,
responsibilities and compensation of each such distributor, custodian, transfer
agent, registrar and/or disbursing agent.

ARTICLE VII

If the Board of Directors redesignate the outstanding Common Stock in
accordance with paragraph A of Article IV, the Board of Directors shall
designate the corporation with a generic name that is consistent with the name
of the first series and any subsequent series.

<PAGE> 4

ARTICLE VIII

The registered office of the Corporation is located at 100 Heritage
Reserve, in the Village of Menomonee Falls, Waukesha County, Wisconsin 53051
and the name of the registered agent at such address is Thomas P. Lemke.

This instrument was drafted by:

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

<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of
Strong Equity Funds, Inc.

We consent to the incorporation by reference in Post-Effective Amendment No. 8
to the Registration Statement of Strong Equity Funds, Inc. on Form N-1A of our
reports dated February 5, 1996 on our audits of the financial statements and
financial highlights of Strong Growth Fund (a series of Strong Equity Funds,
Inc.), Strong Discovery Fund, Inc., Strong Opportunity Fund, Inc. and Strong
Common Stock Fund, Inc., which reports are included in the Annual Report to
Shareholders for the year ended December 31, 1995, which is also incorporated
by reference in the Registration Statement. We also consent to the reference
to our Firm under the caption "Independent Accountants" in the Statement of
Additional Information.

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

Milwaukee, Wisconsin
October 16, 1996

<PAGE> 1
EXHIBIT 99.B14.3

STRONG

RETIREMENT PLAN SERVICES
---------------

Helping You Build a Strong 403(b) Retirement Fund

403(b)(7) Tax-Sheltered
Custodial Account Agreement

403(b) PLAN DOCUMENT

[STRONG LOGO]

<PAGE> 2

This Agreement allows you to establish a tax-sheltered custodial account
authorized under Section 403(b)(7) of the Internal Revenue Code. By electing
to reduce your Compensation and have your Employer contribute into your
tax-sheltered custodial Account, you will not be taxed on the amounts
contributed or earnings attributable to such amounts until the funds are
withdrawn from your Account.

SECTION ONE: DEFINITIONS

The following words and phrases when used in this Agreement with initial
capital letters shall have the meanings set forth below.

1.01 ACCOUNT - Means the tax-sheltered custodial Account established pursuant
to this Agreement for the benefit of the Participant and when the context
so implies refers to the assets, if any, then held by the Custodian
hereunder.

1.02 AGREEMENT - Means this 403(b)(7) Tax-Sheltered Custodial Account
Agreement.

1.03 BENEFICIARY - Means the person or persons designated by the Participant
in accordance with Section 4.04 to receive any distributions from the
Account upon the Participant's death.

1.04 CODE - Means the Internal Revenue Code of 1986, as amended from time to
time.

1.05 CUSTODIAN - Means Firstar Trust Company or any successor thereto which
qualifies to serve as Custodian in the manner prescribed by Section
401(f)(2) of the Code.

1.06 EMPLOYER - Means the entity so designated on this Agreement. The
Employer must be an entity described in Section 501(c)(3) of the Code
which is exempt from tax under Section 501(a) of the Code, a public
educational organization described in Section 170(b)(1)(A)(ii) of the Code
or any other entity eligible under Section 403(b) of the Code to make
contributions to tax-sheltered custodial accounts.

1.07 PARTICIPANT - Means any person who is regularly employed by the Employer
who elects to participate in this Agreement by completing and signing a
Salary Reduction Agreement or such other form as may be acceptable to the
Employer.

1.08 SALARY REDUCTION AGREEMENT - Means the Salary Reduction Agreement signed
by the Employee and delivered to the Employer whereby the Employee
authorizes a reduction of salary to be contributed by the Employer to the
Employee's Account established hereunder.

1.09 SPONSOR - Means your employer.

<PAGE> 3

SECTION TWO: CONTRIBUTIONS

2.01 SALARY REDUCTION AGREEMENT - The Custodian may accept contributions from
the Employer on behalf of a Participant made pursuant to a Salary
Reduction Agreement which satisfies the following requirements: (1) such
agreement must be legally binding and irrevocable with respect to amounts
earned by the Participant while the agreement is in effect, (2) such
agreement shall apply only to amounts earned after the agreement becomes
effective, and (3) only one such agreement may be made or changed in any
single taxable year. A Participant shall designate, in the Salary
Reduction Agreement, the amount or percentage of his or her compensation
which is to be deferred. Such amount or percentage shall be effective
until otherwise modified in writing by the Participant. A Participant may
terminate his or her Salary Reduction Agreement at any time. However, the
Participant may make or change his or her Salary Reduction Agreement only
once in a single taxable year.

2.02 MAXIMUM CONTRIBUTION LIMITS - In no event shall the contributions to the
Account for a tax year on behalf of a Participant exceed the maximum
allowable deferrals permitted under current law or regulation.

a. The maximum salary deferral made during a tax year on behalf of
a Participant, when aggregated with other salary deferral amounts
made through the Employer (or controlled group of Employers under IRC
414(b), (c), (m) or (o)), shall not exceed the lesser of the maximum
permitted amount for a Participant under Sections 403(b)(2) and
415(c) of the Code for that year.

b. The maximum of all salary deferrals made during the
Participant's tax year shall not exceed the limitations set forth in
Section 402(g) of the Code.

c. The maximum salary deferrals may be based on a valid election
by the Participant to use available special increase options.

2.03 TRANSFER TO CUSTODIAL ACCOUNT - The Participant may transfer (or arrange
for the transfer of) assets from another annuity contract or custodial
account described in Section 403(b) of the Code to this Account. The
transfer shall be accepted by the Custodian if the Participant certifies
the transaction satisfies all current requirements for such a transaction.
The Custodian may request the Participant to provide such information it
deems necessary prior to accepting the transfer. The Custodian shall not
be responsible for determining whether any transfer is proper.

<PAGE> 4

SECTION THREE: INVESTMENT OF CONTRIBUTIONS

3.01 SHARES OF REGULATED INVESTMENT COMPANIES - All Contributions by a
Participant to his or her Account shall be invested by the Custodian
pursuant to written instructions concerning investment delivered by the
Participant to the Custodian prior to or at the time a contribution is
made to the Account. The Custodian shall, within a reasonable time
following receipt of written instructions from the Participant, invest
such contributions in full or fractional shares of certain regulated
investment companies.

For purposes of this Agreement, "regulated investment companies" means any
regulated investment company or companies within the meaning of Section
851(a) of the Code or any series issued by such company which has an
investment advisory agreement and/or a distribution agreement with the
company, or any of its affiliated or associated companies and which has
agreed to offer shares for use as funding vehicles for the Account.

If the investment instructions provided by the Participant to the
Custodian are not received by the Custodian or are, in the opinion of the
Custodian, ambiguous, the Custodian may hold or return all or a portion of
the contribution uninvested without liability for loss of income or
appreciation, without liability for interest, dividends or any other gain
whatsoever, pending receipt of proper instructions or clarification. The
Custodian shall advise the Participant of the form and manner in which
investment instructions must be given.

3.02 PARTICIPANT CHANGE OF INVESTMENT - Subject to rules and procedures
adopted by the Custodian, a Participant may, at his or her election,
direct the Custodian to redeem any or all regulated investment company
shares held by the Custodian pursuant to this Agreement and to reinvest
the proceeds in such other regulated investment company shares as
directed. Transactions of this character must conform with the provisions
of the current prospectus for the regulated investment company shares
subject to purchase.

3.03 DIVIDENDS AND DISTRIBUTIONS - Dividends and other distributions received
by the Custodian on shares of any regulated investment company held in the
Account shall be reinvested in additional shares of the regulated
investment company from which the dividend or other distribution
originates, unless the Participant directs the Custodian to act otherwise.
Should a Participant have the choice of receiving a distribution of
shares from a regulated investment company in additional shares, cash or
other

<PAGE> 5

property, the Custodian shall nonetheless elect to receive such
distribution in additional shares.

3.04 REGISTERED OWNER, VOTING RIGHTS - All regulated investment company shares
acquired by the Custodian pursuant to this Agreement shall be registered
in the name of the Custodian or its nominee. The Custodian shall deliver
or cause to be executed and delivered to the Participant all notices,
prospectuses, financial statements, proxies and related proxy information.
The Custodian shall vote the shares in accordance with instructions from
the Participant.

3.05 SALES CHARGES - All sales charges, transfer fees, investment fees or
other administrative charges associated with the purchase of transfer of
or sale of regulated investment company shares shall be charged to the
Account of the Participant.

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

SECTION FOUR: DISTRIBUTIONS

4.01 LIMITATIONS ON DISTRIBUTIONS - Subject to the limitations described in
this Agreement, a Participant may request a distribution from the Account.
A Participant's Account may not be distributed prior to the Participant's

(a) attainment of age 59 1/2,
(b) incurring a disability within the meaning of Section 72(m)(7) of the
Code,
(c) death,
(d) encountering a financial hardship, or
(e) separation from service.

No distribution shall be made to a Participant (or Beneficiary, if
applicable) until he or she completes such written forms and provides such
additional information and documentation as the Custodian, in its sole
discretion, may deem necessary.

If the value of the Account immediately preceding the 1989 Plan Year is
ascertainable, such pre-1989 amounts are not subject to the limitations of
Section 4.01.

4.02 FINANCIAL HARDSHIP - For purposes of this Agreement, "financial hardship"
shall include a financial need incurred by the Participant due to illness,
temporary disability, purchase of a home, or educational expenses of the
Participant or any member of his or her immediate family, or any other
immediate and heavy financial need of the Participant; provided, however,
no financial hardship shall exceed or otherwise not conform to the
requirements of Section 403(b)(7) of the Code. No distributions

3
<PAGE> 6

on account of financial hardship shall exceed the amount determined to be
required to meet the immediate financial need created by the hardship
which cannot be otherwise reasonably accommodated from other resources of
the Participant. Any distribution made on account of a Participant's
financial hardship shall be made to such Participant in a single sum
payment in cash pursuant to written instructions in a form acceptable to
the Custodian, and delivered to the Custodian as may be provided in
Section 403(b)(7) of the Code.

Hardship distributions may consist only of the amounts contributed
pursuant to a Participant's Salary Reduction Agreement.

4.03 FORM OF DISTRIBUTION - Distributions for other than a financial hardship
shall be made in any one or more or any combination of the following
forms:

(a) single lump sum payment;
(b) monthly, quarterly, semiannual or annual payments over a period
elected by the Participant not to extend beyond the Participant's
life expectancy; or
(c) in monthly, quarterly, semiannual or annual payments over a
period selected by the Participant not to exceed the joint life and
last survivor expectancy of the Participant and his or her
Beneficiary.

At any time prior to commencement of distribution, the Participant may
make or change the foregoing distribution forms by delivering a written
notice to the Custodian.

Notwithstanding any other provision to the contrary, the Custodian may
make an immediate single sum distribution to the Participant or
Beneficiary (if applicable) if the value of the Account does not exceed
$3,500.

In the event a Participant does not elect any of the methods of
distribution described above on or before such Participant's 70 1/2
birthday, the Participant shall be deemed to have elected distribution
made on his or her 70 1/2 birthday in the form of periodic payments over
the single life expectancy of the participant using the declining years
method of determining the Participant's life expectancy multiple;
provided, however, the Custodian shall have no liability to the
Participant for any tax penalty or other damages which may result from any
inadvertent failure by the Custodian to make such a distribution.

Notwithstanding anything in this Agreement to the contrary distributions
shall conform to the minimum distribution requirements of Section
401(a)(9) of the Code and the regulations thereunder, including Treasury
Regulations Sections 1.401(a)(9)-2 and 1.403(b)-2.

If the value of the Account prior to 1987 is determinable, the pre-1987
amount need not be subject to a required minimum distribution until the
calendar year the Participant attains age 75, or such later date as may be
allowed by law or regulation.

<PAGE> 7

4.04 DESIGNATION OF BENEFICIARY - Each Participant may designate, upon a form
provided by the Custodian, any person or persons (including an entity
other than a natural person) as primary or contingent Beneficiary to
receive all or a specified portion of the Participant's Account in the
event of the Participant's death. A Participant may change or revoke such
Beneficiary designation from time to time by completing and delivering the
proper form to the Custodian.

4.05 DISTRIBUTION UPON DEATH OF PARTICIPANT - If a Participant dies before his
or her entire interest in the Account is distributed to him or her, or if
distribution has commenced to the Participant and his or her surviving
spouse and such surviving spouse dies before the entire interest is
distributed to such spouse, the entire interest or remaining undistributed
balance of such interest shall be distributed in the form of a single sum
cash payment, or other form of payment as permitted under current
applicable code or regulations, to the Beneficiary or Beneficiaries, if
any, designated by the Participant or his or her spouse as the case may
be. In the event no such Beneficiary has been designated, the
Participant's estate shall receive the balance of the Account.

4.06 DISTRIBUTION OF EXCESS AMOUNTS - The Custodian may make distribution of
any excess to the Participant.

4.07 ELIGIBLE ROLLOVER DISTRIBUTIONS - At the election of a Participant (or
the surviving spouse Beneficiary of a deceased Participant) the Custodian
shall pay any eligible rollover distribution to an individual retirement
plan described in Section 408 of the Code or another annuity contract or
custodial account described in Section 403(b) of the Code in a direct
rollover for that Participant (or beneficiary). The term "eligible
rollover distribution" shall have the meaning set forth in Sections
402(c)(2) and (4) of the Code and Q&A-3 through Q&A-8 of Treasury
Regulations Section 1.402(c)-2T.

The Participant (or surviving spouse beneficiary) who desires a direct
rollover must specify the individual retirement plan or 403(b) plan to
which the eligible rollover distribution is to be paid and satisfy such
other reasonable requirements as the Custodian may impose.

5
<PAGE> 8

SECTION FIVE: ADMINISTRATION

5.01 DUTIES OF THE CUSTODIAN - The Custodian shall have the following
obligations and responsibilities:

(a) To hold contributions to the Account it receives, invest such
contributions pursuant to the Participant's instructions and
distribute Account assets pursuant to this Agreement;
(b) To register any property held by the Custodian in its own name,
or in nominal bearer form, that will pass delivery;
(c) To maintain records of all relevant information as may be
necessary for the proper administration of the Account;
(d) To allocate earnings, if any, realized from such contributions
and such other data information as may be necessary;
(e) To file such returns, reports and other information with the
Internal Revenue Service and other government agencies as may be
required of the Custodian under applicable laws and regulations.

5.02 REPORTS - As soon as practicable after December 31st of each calendar
year, and whenever required by regulations under the Code, the Custodian
shall deliver to the Participant a written report of the Custodian's
transactions relating to the Account during the period from the last
previous accounting and shall file such other reports as may be required
under the Code.

On receipt of the Custodian's report referenced in the preceding paragraph
a Participant shall have a period of 60 days following receipt to deliver
a written objection to the Custodian concerning information provided in
the report. In the event the Participant neglects to file such written
objection, the report shall be deemed approved and in such case, the
Custodian shall be forever released and discharged with respect to all
matters and things included herein.

5.03 CUSTODIAN NOT RESPONSIBLE FOR CERTAIN ACTIONS - Notwithstanding the
foregoing, the Custodian shall have no responsibility for determining the
amount of or collecting contributions to the Account made pursuant to this
Agreement; determining the amount, character or timing of any distribution
to a Participant under this Agreement; determining a Participant's maximum
contribution amount; maintaining or defending any legal action in
connection with this Agreement, unless agreed upon by the Custodian,
Employer and Participant.

5.04 INDEMNIFICATION OF CUSTODIAN - The Employer and Participant shall, to the
extent permitted under law, indemnify and hold the Custodian harmless from
and against any liability which may occur in the administration of the
Account unless arising from the Custodian's breach of its responsibilities
under this Agreement. By execution of this

<PAGE> 9

Agreement, it is the specific intention of the parties that no
fiduciary duties be conferred upon the Custodian nor shall any be implied
from this Agreement or the acts of this Custodian.

5.05 CUSTODIAN'S FEES AND EXPENSES - The Custodian may charge fees in
connection with the Account. In addition, the Custodian has the right to
be reimbursed for any taxes or expenses incurred by or on behalf of the
Account. All such fees, taxes or expenses may be charged against the
Account or, at the option of the Custodian, may be paid directly by the
Participant or Employer. The Custodian reserves the right to change its
fee schedule, or add new fees, at any time upon 30 days prior written
notice to the Participant.

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

SECTION SIX: AMENDMENT AND TERMINATION

6.01 AMENDMENT OF AGREEMENT - This Agreement may be amended by an agreement in
writing between the Employee and Custodian. In addition, by execution of
this Agreement, the Employer and the Participant delegate to the Custodian
all authority to amend this Agreement by written notification from the
Custodian to the Participant as to any term hereof, at any time (including
retroactively) except that no amendment shall be made which may operate to
disqualify the Account under Section 403(b)(7) of the Code. The effective
date of any amendment hereto shall be the date specified in said amendment
or 30 days subsequent to the time notification of amendment is delivered
by the Custodian to the Participant.

6.02 TERMINATION BY PARTICIPANT - The Participant reserves the right to
terminate further contributions to his or her Account pursuant to this
Agreement by executing and delivering to the Custodian an executed copy of
an agreement terminating said contributions. The Participant further
reserves the right to terminate his or her adoption of this Agreement in
the event that he or she shall be unable to secure a favorable ruling from
the Internal Revenue Service with respect to the Agreement. In the event
of such termination, the Custodian shall distribute the Account to the
Participant.

6.03 RESIGNATION OR REMOVAL OF CUSTODIAN - The Custodian may resign as
Custodian of any Participant's Account upon 30 days written notice to the
Participant. The Participant may remove a Custodian upon 30 days prior
written notice. Upon such resignation or removal, a successor Custodian
shall be named. Upon designation of a successor Custodian, the Custodian
shall transfer the assets held pursuant to the terms of this Agreement to
the successor Custodian. The Custodian may retain a portion of the assets
to the extent necessary to cover reasonable administrative fees and
expenses.

<PAGE> 10

Where the Custodian is serving as a nonbank custodian pursuant to Section
1.401-12(n) of the Treasury Regulations, the Participant will appoint a
successor custodian upon notification by the Commissioner of Internal
Revenue that such substitution is required because the Custodian has
failed to comply with the requirements of Section 1.401-12(n) or is not
keeping such records or making such returns or rendering such statements
as are required by forms or regulations.

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

SECTION SEVEN: MISCELLANEOUS

7.01 APPLICABLE LAW - This Agreement is established with the intention that it
qualify as a tax-sheltered custodial account under Section 403(b)(7) of
the Code and that contributions to the same be treated accordingly. To
the extent not governed by Federal law, this Agreement shall be construed,
administered and enforced in accordance with the laws of the Custodian's
state of incorporation.

If any provision of this Agreement shall for any reason be deemed invalid
or unenforceable, the remaining provisions shall, nevertheless, continue
in full force and effect and shall not be invalidated.

7.02 NONALIENATION - The assets of a Participant in his or her Account shall
be nonforfeitable at all times and shall not be subject to alienation,
assignment, trustee process, garnishment, attachment, execution or levy of
any kind, nor shall such assets be subject to the claims of the
Participant's creditors.

7.03 TERMS OF EMPLOYMENT - Neither the fact of the implementation of this
Agreement nor the fact that a common law employee has become a
Participant, shall give to such employee any right to continued
employment; nor shall either fact limit the right of the Employer to
discharge or to deal otherwise with an employee without regard to the
effect such treatment may have upon the employee's rights as a Participant
under this Agreement.

7.04 NOTICES - Any notice or other communication which the Custodian may give
to a Participant shall be deemed given when sent by first class mail to
the Participant's last known address on the Custodian's records. Any
notice or other communication to the Custodian shall not become effective
until the Custodian actually receives it.

7.05 LOANS - If so permitted by the Custodian, the Participant may borrow a
portion of his or her Account pursuant to the applicable rules under the
Code. The Custodian may charge against the Account, any fees and expenses
incurred in connection with loan processing and/or recordkeeping.

<PAGE> 11

The Participant acknowledges that failure to repay a loan in the
prescribed manner may result in the immediate taxability of the loan
amount.

7.06 EMPLOYER CONTRIBUTIONS - The Employer may make contributions to the
Account on behalf of the Participant. The Custodian is not obligated to
operate the Account in accordance with any plan executed by the Employer
unless the Custodian so agrees and the Employer notifies the Custodian and
provides to the Custodian a copy of the Plan Document.

7.07 MATTERS RELATING TO DIVORCE - Upon receipt of a domestic relations order,
the Custodian may retain an independent third party to determine whether
the order is a Qualified Domestic Relations Order pursuant to Section
414(p) of the Code. The Custodian may charge to the Account any and all
expenses associated with the determination.

<PAGE> 12

[STRONG LOGO]
STRONG RETIREMENT PLAN SERVICES
P.O. Box 2936
Milwaukee, Wisconsin 53201-2936
1-800-368-3863
http://www.strong-funds.com

6/96 Universal Pensions, Inc., Brainerd, MN 56401

<PAGE> 1
Strong Growth Fund, Inc.

EXHIBIT 16

SCHEDULE OF COMPUTATION (OF
PERFORMANCE QUOTATIONS

I. AVERAGE ANNUAL TOTAL RETURN

A. Formula

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

Where: P = a hypothetical initial payment of $10,000

T = average annual total return

n = number of years

ERV = ending redeemable value of a hypothetical $10,000 payment
made at the beginning of the stated periods at the end of
the stated periods.

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

1. One-year period 6-30-95 through 6-30-96

-------------
38.91% = \1/13,891/10,000-1

2. Since inception 12-31-93 through 6-30-96

-------------
30.44% = \2.5/19,433/10,000-1

III. TOTAL RETURN

A. Formula

EV-IV
-----
IV = TR

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

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

TR = Total Return

B. Calculation

EV-IV
-----
IV = TR

One-year period ended June 30, 1996

13,891-10,000
-------------
10,000 = 38.91%

<PAGE> 1
Strong Small Cap Fund

EXHIBIT 16

SCHEDULE OF COMPUTATION OF
PERFORMANCE QUOTATIONS

1. TOTAL RETURN

A. Formula

EV-IV
-----
IV = TR

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

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

TR = Total Return

B. Calculation

EV-IV
-----
IV = TR

Since Inception 12-29-95 through 06-30-96

12,469-10,000
-------------
10,000 = 24.69%

<PAGE> 1
Strong Value Fund

EXHIBIT 16

SCHEDULE OF COMPUTATION OF
PERFORMANCE QUOTATIONS

1. TOTAL RETURN

A. Formula

EV-IV
-----
IV = TR

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

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

TR = Total Return

B. Calculation

EV-IV
-----
IV = TR

Since Inception 12-29-95 through 06-30-96

11,073-10,000
-------------
10,000 = 10.73%

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STRONG EQUITY FUNDS, INC. FOR THE SIX MONTHS ENDED JUNE
30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<NAME> STRONG EQUITY FUNDS, INC.
<CIK> 0000914231
<SERIES>
<NUMBER> 1
<NAME> STRONG GROWTH FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 943,765
<INVESTMENTS-AT-VALUE> 1,154,615
<RECEIVABLES> 8,588
<ASSETS-OTHER> 396
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,163,599
<PAYABLE-FOR-SECURITIES> 48,451
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 983
<TOTAL-LIABILITIES> 49,434
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 872,301
<SHARES-COMMON-STOCK> 59,709
<SHARES-COMMON-PRIOR> 40,479
<ACCUMULATED-NII-CURRENT> (3,239)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 34,253
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 210,850
<NET-ASSETS> 1,114,165
<DIVIDEND-INCOME> 858
<INTEREST-INCOME> 1,494
<OTHER-INCOME> 0
<EXPENSES-NET> (5,583)
<NET-INVESTMENT-INCOME> (3,231)
<REALIZED-GAINS-CURRENT> 48,918
<APPREC-INCREASE-CURRENT> 81,877
<NET-CHANGE-FROM-OPS> 127,564
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (79)
<DISTRIBUTIONS-OF-GAINS> (37)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,059
<NUMBER-OF-SHARES-REDEEMED> (9,836)
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 471,343
<ACCUMULATED-NII-PRIOR> 72
<ACCUMULATED-GAINS-PRIOR> 14,629
<OVERDISTRIB-NII-PRIOR> 1,160
<OVERDIST-NET-GAINS-PRIOR> 11,537
<GROSS-ADVISORY-FEES> 4,218
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,583
<AVERAGE-NET-ASSETS> 855,340
<PER-SHARE-NAV-BEGIN> 15.88
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 2.83
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 18.66
<EXPENSE-RATIO> 1.3
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STRONG EQUITY FUNDS, INC. FOR THE SIX MONTHS ENDED JUNE
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<NAME> STRONG EQUITY FUNDS, INC.
<CIK> 0000914231
<SERIES>
<NUMBER> 2
<NAME> STRONG SMALL CAP FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 76,599
<INVESTMENTS-AT-VALUE> 78,043
<RECEIVABLES> 962
<ASSETS-OTHER> 436
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 79,441
<PAYABLE-FOR-SECURITIES> 1,162
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 48
<TOTAL-LIABILITIES> 1,210
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 76,192
<SHARES-COMMON-STOCK> 6,277
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 66
<ACCUMULATED-NET-GAINS> 661
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,444
<NET-ASSETS> 78,231
<DIVIDEND-INCOME> 64
<INTEREST-INCOME> 163
<OTHER-INCOME> 0
<EXPENSES-NET> (273)
<NET-INVESTMENT-INCOME> (46)
<REALIZED-GAINS-CURRENT> 661
<APPREC-INCREASE-CURRENT> 1,444
<NET-CHANGE-FROM-OPS> 2,059
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,716
<NUMBER-OF-SHARES-REDEEMED> (1,441)
<SHARES-REINVESTED> 2
<NET-CHANGE-IN-ASSETS> 78,231
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 167
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 273
<AVERAGE-NET-ASSETS> 34,255
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 2.45
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.46
<EXPENSE-RATIO> 1.6
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF STRONG EQUITY FUNDS, INC. FOR THE SIX MONTHS ENDED
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<NAME> STRONG EQUITY FUNDS, INC.
<CIK> 0000914231
<SERIES>
<NUMBER> 3
<NAME> STRONG VALUE FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<INVESTMENTS-AT-COST> 36,698
<INVESTMENTS-AT-VALUE> 37,211
<RECEIVABLES> 30
<ASSETS-OTHER> 51
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 37,292
<PAYABLE-FOR-SECURITIES> 4,043
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 21
<TOTAL-LIABILITIES> 4,064
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,564
<SHARES-COMMON-STOCK> 3,014
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 3
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 148
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 513
<NET-ASSETS> 33,228
<DIVIDEND-INCOME> 107
<INTEREST-INCOME> 142
<OTHER-INCOME> 0
<EXPENSES-NET> 122
<NET-INVESTMENT-INCOME> 127
<REALIZED-GAINS-CURRENT> 148
<APPREC-INCREASE-CURRENT> 513
<NET-CHANGE-FROM-OPS> 788
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (124)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,166
<NUMBER-OF-SHARES-REDEEMED> (163)
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 33,228
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 73
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 122
<AVERAGE-NET-ASSETS> 14,911
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 1.01
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.02
<EXPENSE-RATIO> 1.6
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>