STRONG EQUITY FUNDS INC, 485BPOS, 1997-04-28

STRONG EQUITY FUNDS INC
485BPOS, 1997-04-28

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<PAGE> 1
As filed with the Securities and Exchange Commission on or about April 28, 1997

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. 12 [ X ]
-------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 13 [ 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)

Registrant has registered an indefinite amount of securities pursuant to
Rule 24f-2 under the Securities Act of 1933; the Registrant's Rule 24f-2 Notice
for the fiscal year ended December 31, 1996 was filed on or about February 19,
1997.

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

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

If appropriate, check the following box:

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

Master Investment Portfolio has also executed this Registration Statement
with respect to Strong Index 500 Fund, a series fund of Registrant.

<PAGE> 2

This Post-Effective Amendment to the Registration Statement of Strong
Equity Funds, Inc., which is currently comprised of five Funds, relates to
Strong Growth Fund, Strong Value Fund, Strong Mid Cap Fund, Strong Small Cap
Fund, and Strong Index 500 Fund. This Post-Effective Amendment does not relate
to, amend, supersede, or otherwise affect the separate Prospectus and Statement
of Additional Information contained in Post-Effective Amendment No. 11 which
was filed to add a series fund to Strong Equity Funds, Inc.

STRONG EQUITY FUNDS, INC.
CROSS-REFERENCE SHEET

STRONG GROWTH FUND
STRONG VALUE FUND
STRONG SMALL CAP FUND
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.)

<TABLE>
<CAPTION>
Caption or Subheading in Prospectus or
Item No. on Form N-1A Statement of Additional Information
--------------------- -----------------------------------
<S> <C>
PART A - Information Required in Prospectus

1. Cover Page Cover Page

2. Synopsis 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

</TABLE>

<PAGE> 3

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 Principal Shareholders; Directors and Officers
Securities of the Funds; Investment Advisor, Subadvisor,
and Distributor

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

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 Included in Prospectus under the headings:
Securities 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 Funds' Annual Report (Inapplicable
with respect to the Strong Mid Cap Fund).
** Complete answer to Item is contained in Funds' Prospectus.

<PAGE> 4

STRONG INDEX 500 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;
Master/Feeder Structure; About the Fund
- Organization; Appendix - Additional
Investment Policies

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

</TABLE>

<PAGE> 5

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 Principal Shareholders; Directors and
Securities Officers of the Fund

16. Investment Advisory and Other Services Investment Advisor; Administrator and
Placing Agent of the Master
Portfolio; Distributor of the Fund;
About the Fund - Management (in
Prospectus); Custodian; Transfer
Agent and Dividend-Disbursing Agent;
Shareholder Servicing 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 Fund
Organization and Master Portfolio
Organization

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

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

21. Underwriters Fund Distributor; Administrator and
Placing Agent of the Master Portfolio

22. Calculation of Performance Data Performance Information

23. Financial Statements Inapplicable

</TABLE>

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

<PAGE> 6

STRONG GROWTH FUNDS

<TABLE>
<S> <C>
STRONG VALUE FUND STRONG FUNDS
STRONG OPPORTUNITY FUND P.O. Box 2936
STRONG MID CAP FUND Milwaukee, Wisconsin 53201
STRONG COMMON STOCK FUND Telephone: (414) 359-1400
STRONG GROWTH FUND Toll-Free: (800) 368-3863
STRONG DISCOVERY FUND Device for the
STRONG SMALL CAP FUND 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 Growth Funds are described in this
Prospectus.

This Prospectus contains information you should consider before you invest.
Please read it carefully and keep it for future reference. A Statement of
Additional Information for the Funds, dated May 1, 1997, which contains further
information, is incorporated by reference into this Prospectus, and has been
filed with the Securities and Exchange Commission ("SEC"). This Statement, which
may be revised from time to time, is available without charge upon request to
the above-noted address or telephone number. If you would like to electronically
access additional information about the Funds after reading the prospectus, you
may do so by accessing the SEC's World Wide Web site (at http://www.sec.gov)
that contains the Statement of Additional Information regarding the Funds and
other related materials.

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

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

May 1, 1997

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

PROSPECTUS PAGE I-1
<PAGE> 7

STRONG GROWTH FUNDS

The Strong Opportunity Fund, Inc., Strong Common Stock Fund, Inc., and Strong
Discovery Fund, Inc. are separately incorporated, diversified, open-end
management investment companies. The Strong Growth, Value, Small Cap, and Mid
Cap Funds are diversified series of Strong Equity Funds, Inc., which is an
open-end management investment company.

STRONG VALUE FUND (the "Value Fund") seeks capital growth. The Fund invests
primarily in equity securities, seeking, through fundamental analysis, those
companies whose share price does not fully reflect the value of the company.
While the Fund may invest in companies of any size, it currently emphasizes
medium- to large-capitalization companies.

STRONG OPPORTUNITY FUND (the "Opportunity Fund") seeks capital growth. The
Fund invests at least 70% of its net assets in equity securities. It currently
emphasizes medium-sized companies that the Fund's Advisor believes are
under-researched and attractively valued.

STRONG MID CAP FUND (the "Mid Cap Fund") seeks capital growth. The Fund
invests primarily in equity securities of companies with medium market
capitalizations.

STRONG COMMON STOCK FUND (the "Common Stock Fund") seeks capital growth. The
Fund invests at least 80% of its net assets in equity securities. It currently
emphasizes small companies that the Fund's Advisor believes are under-researched
and attractively valued. The Common Stock Fund is currently closed to new
investors.

STRONG GROWTH FUND (the "Growth Fund") seeks capital growth. The Fund invests
primarily in equity securities that the Fund's Advisor believes have
above-average growth prospects.

STRONG DISCOVERY FUND (the "Discovery Fund") seeks capital growth. The Fund's
Advisor seeks to identify emerging investment trends and attractive growth
opportunities. While the Fund normally emphasizes equity investments, it also
has the flexibility to invest in debt obligations and short-term fixed income
securities.

STRONG SMALL CAP FUND (the "Small Cap Fund") seeks capital growth. The Fund
invests primarily in equity securities with small market capitalizations.

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

PROSPECTUS PAGE I-2
<PAGE> 8

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
EXPENSES................................. I-4
FINANCIAL HIGHLIGHTS..................... I-5
HIGHLIGHTS............................... I-10
INVESTMENT OBJECTIVES AND POLICIES....... I-11
Comparing the Funds............. I-11
Strong Value Fund............... I-12
Strong Opportunity Fund......... I-12
Strong Mid Cap Fund............. I-13
Strong Common Stock Fund........ I-14
Strong Growth Fund.............. I-15
Strong Discovery Fund........... I-16
Strong Small Cap Fund........... I-16
IMPLEMENTATION OF POLICIES AND RISKS..... I-17
ABOUT THE FUNDS.......................... I-24
SHAREHOLDER MANUAL....................... II-1
</TABLE>

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

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

PROSPECTUS PAGE I-3
<PAGE> 9

EXPENSES

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

SHAREHOLDER TRANSACTION EXPENSES

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

There are certain charges associated with retirement accounts and with
certain other special shareholder services offered by the Funds. Additionally,
purchases and redemptions may also be made through broker-dealers or other
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
Fund Fees Expenses Fees Expenses
<S> <C> <C> <C> <C>
Value 1.00% .50% NONE 1.50%
Opportunity 1.00 .27 NONE 1.27
Mid Cap 1.00 .46 NONE 1.46
Common Stock 1.00 .17 NONE 1.17
Growth 1.00 .34 NONE 1.34
Discovery 1.00 .37 NONE 1.37
Small Cap 1.00 .49 NONE 1.49
</TABLE>

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

From time to time, the Funds' investment advisor, Strong Capital Management,
Inc. (the "Advisor"), may voluntarily waive its management fee and/or absorb
certain expenses for a Fund. Except for the Mid Cap Fund, the expenses specified
in the table above are based on actual expenses incurred for the year ended
December 31, 1996. Since the Mid Cap Fund did not begin operations until
December 31, 1996, the Other Expenses have been estimated.

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

PROSPECTUS PAGE I-4
<PAGE> 10

For additional information concerning fees and expenses, see "About the Funds -
Management."

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

<TABLE>
<CAPTION>
Period (in years)
Fund 1 3 5 10
<S> <C> <C> <C> <C>
Value $ 15 $ 47 $ 82 $179
Opportunity 13 40 70 153
Mid Cap 15 46 -- --
Common Stock 12 37 64 142
Growth 14 42 73 161
Discovery 14 43 75 165
Small Cap 15 47 81 178
</TABLE>

The Example is based on each 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 a Fund's shares.

FINANCIAL HIGHLIGHTS

The following annual Financial Highlights for each of the Funds that has
completed a fiscal year has been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants. Their report for the fiscal year ended
December 31, 1996 is included in the Annual Report of the Growth Funds that is
contained in the Funds' Statement of Additional Information. The Financial
Highlights for the Funds should be read in conjunction with the Financial
Statements and related notes included in the Funds' Annual Report. Additional
information about each Fund's performance is contained in the Funds' Annual
Report, which may be obtained without charge by calling or writing Strong Funds.
The following interim Financial Highlights for the Mid Cap Fund for the
three-month period ended March 31, 1997 are unaudited. The following presents
information relating to a share of common stock of each of the Funds,
outstanding for the entire period ended as indicated.

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

PROSPECTUS PAGE I-5
<PAGE> 11

<TABLE>
<CAPTION>
STRONG STRONG STRONG
SMALL CAP VALUE MID CAP
STRONG GROWTH FUND FUND FUND FUND
12-31-96 12-31-95 12-31-94 12-31-96 12-31-96 3-31-97(2)
---------- -------- -------- -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 15.88 $ 11.61 $ 10.00 $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income (Loss) (0.03) (0.04) -- (0.01) 0.13 (0.01)
---------- -------- -------- -------- -------- --------
Net Realized and Unrealized Gains (Losses) on
Investments 3.13 4.79 1.72 2.28 1.55 (1.03)
---------- -------- -------- -------- -------- --------
Total from Investment Operations 3.10 4.75 1.72 2.27 1.68 (1.04)
LESS DISTRIBUTIONS
From Net Investment Income -- -- -- -- (0.13) --
In Excess of Net Investment Income (0.02) (0.03) (0.11) (0.19) -- --
From Net Realized Gains (0.46) (0.16) -- -- -- --
In Excess of Net Realized Gains -- (0.29) -- -- -- --
---------- -------- -------- -------- -------- --------
Total Distributions (0.48) (0.48) (0.11) (0.19) (0.13) --
---------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 18.50 $ 15.88 $ 11.61 $ 12.08 $ 11.55 $ 8.96
========== ======== ======== ======== ======== ========
Total Return +19.5% +41.0% +17.3% +22.7% +16.8% -10.4%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (In Thousands) $1,308,157 $642,822 $106,009 $157,059 $ 55,495 $ 12,476
Ratio of Expenses to Average Net Assets 1.3% 1.4% 1.6% 1.5% 1.5% 1.7%*
Ratio of Net Investment Income to Average Net Assets (0.2%) (0.5%) (0.1%) (0.7%) 1.5% (0.3%)*
Portfolio Turnover Rate 294.9% 321.2% 385.8% 419.8% 89.5% 67.9%
Average Commission Rate Paid(1) $ 0.0478 $ 0.0372 $ 0.0513 $ 0.0581
</TABLE>

*Calculated on an annualized basis.

(1)Disclosure required, effective for reporting periods beginning after
September 1, 1995.

(2)Inception date is December 31, 1996. Total return and portfolio turnover rate
are not annualized.

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

PROSPECTUS PAGE I-6
<PAGE> 12

<TABLE>
<CAPTION>
STRONG OPPORTUNITY FUND
12-31-96 12-31-95 12-31-94 12-31-93 12-31-92 12-31-91 12-31-90
---------- ---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 33.35 $ 27.71 $ 28.23 $ 24.70 $ 21.24 $ 16.29 $ 19.21
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.20 0.20 0.13 0.06 0.06 0.21 0.63
Net Realized and Unrealized
Gains (Losses) on Investments 5.78 7.28 0.76 5.10 3.62 4.93 (2.77)
---------- ---------- -------- -------- -------- -------- --------
Total from Investment Operations 5.98 7.48 0.89 5.16 3.68 5.14 (2.14)
LESS DISTRIBUTIONS:
From Net Investment Income (0.20) (0.20) (0.13) (0.06) (0.06) (0.19) (0.74)
In Excess of Net Investment
Income (0.05) (0.01) -- -- -- -- --
From Net Realized Gains (3.82) (1.63) (1.28) (1.57) (0.16) -- (0.04)
Return of Capital -- -- -- -- -- -- --
---------- ---------- -------- -------- -------- -------- --------
Total Distributions (4.07) (1.84) (1.41) (1.63) (0.22) (0.19) (0.78)
---------- ---------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 35.26 $ 33.35 $ 27.71 $ 28.23 $ 24.70 $ 21.24 $ 16.29
========== ========== ======== ======== ======== ======== ========
Total Return +18.1% +27.3% +3.2% +21.2% +17.4% +31.7% -11.3%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (In
Thousands) $1,769,570 $1,327,660 $805,700 $443,503 $193,208 $159,667 $131,919
---------- ---------- -------- -------- -------- -------- --------
Ratio of Expenses to Average Net
Assets 1.3% 1.3% 1.4% 1.4% 1.5% 1.7% 1.7%
Ratio of Net Investment Income to
Average Net Assets 0.6% 0.7% 0.5% 0.2% 0.3% 1.1% 3.3%
Portfolio Turnover Rate 103.3% 92.5% 59.2% 109.1% 138.5% 270.5% 275.0%
Average Commission Rate Paid(1) $ 0.0503

<CAPTION>
STRONG OPPORTUNITY FUND
12-31-89 12-31-88 12-31-87
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 16.90 $ 15.87 $ 15.99
INCOME FROM INVESTMENT
OPERATIONS:
Net Investment Income 0.84 1.35 0.27
Net Realized and Unrealized
Gains (Losses) on Investments 2.31 1.23 1.65
-------- -------- --------
Total from Investment Operations 3.15 2.58 1.92
LESS DISTRIBUTIONS:
From Net Investment Income (0.68) (1.37) (0.24)
In Excess of Net Investment
Income -- -- --
From Net Realized Gains (0.16) -- (1.80)
Return of Capital -- (0.18) --
-------- -------- --------
Total Distributions (0.84) (1.55) (2.04)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 19.21 $ 16.90 $ 15.87
======== ======== ========
Total Return +18.5% +16.5% +11.9%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (In
Thousands) $205,043 $157,353 $153,573
-------- -------- --------
Ratio of Expenses to Average Net
Assets 1.6% 1.6% 1.5%
Ratio of Net Investment Income to
Average Net Assets 4.3% 7.4% 1.7%
Portfolio Turnover Rate 305.6% 352.4% 371.2%
Average Commission Rate Paid(1)
</TABLE>

(1) Disclosure required, effective for reporting periods beginning after
September 1, 1995.

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

PROSPECTUS PAGE I-7
<PAGE> 13

STRONG COMMON STOCK FUND
12-31-96 12-31-95 12-31-94 12-31-93 12-31-92 12-31-91
---------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 19.77 $ 16.74 $ 17.94 $ 15.07 $ 12.84 $ 10.02
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.06 0.11 0.04 0.04 0.03 (0.02)
Net Realized and Unrealized Gains
(Losses) on Investments 3.87 5.25 (0.13) 3.74 2.59 5.42
---------- ---------- -------- -------- -------- --------
Total from Investment Operations 3.93 5.36 (0.09) 3.78 2.62 5.40
LESS DISTRIBUTIONS
From Net Investment Income (0.06) (0.10) (0.04) (0.04) (0.01) --
In Excess of Net Investment Income (0.05) (0.02) -- -- -- --
From Net Realized Gains (3.35) (2.21) (1.07) (0.87) (0.38)(2) (2.58)(3)
---------- ---------- -------- -------- -------- --------
Total Distributions (3.46) (2.33) (1.11) (0.91) (0.39) (2.58)
---------- ---------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 20.24 $ 19.77 $ 16.74 $ 17.94 $ 15.07 $ 12.84
========== ========== ======== ======== ======== ========
Total Return +20.5% +32.4% -0.5% +25.2% +20.8% +57.1%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(In Thousands) $1,243,646 $1,061,010 $790,125 $762,086 $179,113 $ 48,549
Ratio of Expenses to Average
Net Assets 1.2% 1.2% 1.3% 1.4% 1.4% 2.0%
Ratio of Net Investment Income
to Average Net Assets 0.3% 0.5% 0.3% 0.2% 0.1% (0.5%)
Portfolio Turnover Rate 90.9% 91.5% 83.0% 80.9% 291.7% 2,460.7%
Average Commission Rate Paid(1) $ 0.0456

12-31-90
--------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (Loss) 0.07
Net Realized and Unrealized Gains
(Losses) on Investments 0.03
--------
Total from Investment Operations 0.10
LESS DISTRIBUTIONS
From Net Investment Income (0.08)
In Excess of Net Investment Income --
From Net Realized Gains --
--------
Total Distributions (0.08)
--------
NET ASSET VALUE, END OF PERIOD $ 10.02
========
Total Return +1.0%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period
(In Thousands) $ 2,432
Ratio of Expenses to Average
Net Assets 2.0%
Ratio of Net Investment Income
to Average Net Assets 0.9%
Portfolio Turnover Rate 291.2%
Average Commission Rate Paid(1)
</TABLE>

(1)Disclosure required, effective for reporting periods beginning after
September 1, 1995.

(2)Includes $0.22 ordinary income distribution for tax purposes.

(3)Ordinary income distribution for tax purposes.

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

PROSPECTUS PAGE I-8
<PAGE> 14

<TABLE>
<CAPTION>
STRONG DISCOVERY FUND
12-31-96 12-31-95 12-31-94 12-31-93 12-31-92 12-31-91 12-31-90 12-31-89 12-31-88
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 18.96 $ 15.67 $ 18.05 $ 16.01 $ 17.49 $ 12.51 $ 13.18 $ 11.44 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) (0.15) (0.05) 0.16 (0.01) (0.06) -- 0.27 0.30 0.95
Net Realized and Unrealized
Gains (Losses) on
Investments 0.35 5.48 (1.17) 3.48 0.23 8.41 (0.63) 2.43 1.49
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total from Investment
Operations 0.20 5.43 (1.01) 3.47 0.17 8.41 (0.36) 2.73 2.44
LESS DISTRIBUTIONS
From Net Investment Income -- -- (0.11) -- -- -- (0.31) (0.28) (0.97)
In Excess of Net Investment
Income (1.12) (0.10) (0.58) (0.45) -- -- -- -- --
From Net Realized Gains (0.59) (2.04) (0.68) (0.98) (1.65)(2) (3.43)(3) -- (0.71) (0.03)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions (1.71) (2.14) (1.37) (1.43) (1.65) (3.43) (0.31) (0.99) (1.00)
-------- -------- -------- -------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 17.45 $ 18.96 $ 15.67 $ 18.05 $ 16.01 $ 17.49 $ 12.51 $ 13.18 $ 11.44
======== ======== ======== ======== ======== ======== ======== ======== ========
Total Return +1.5% +34.8% -5.7% +22.2% +1.9% +67.6% -2.7% +24.0% +24.5%
RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (In
Thousands) $513,793 $599,060 $388,410 $301,789 $193,276 $162,499 $ 56,260 $ 57,914 $ 13,648
Ratio of Expenses to Average
Net Assets 1.4% 1.4% 1.5% 1.5% 1.5% 1.6% 1.9% 1.9% 2.0%
Ratio of Net Investment Income
to Average Net Assets (0.3%) (0.4%) 0.7% (0.2%) (0.4%) 0.0% 2.1% 2.4% 11.9%
Portfolio Turnover Rate 792.8% 516.0% 606.1% 668.2% 1,258.6% 1,059.9% 493.9% 549.6% 441.6%
Average Commission Rate Paid(1) $ 0.0339
</TABLE>

(1)Disclosure required, effective for reporting periods beginning after
September 1, 1995.

(2)Includes $1.50 ordinary income distribution for tax purposes.

(3)Includes $0.83 ordinary income distribution for tax purposes.

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

PROSPECTUS PAGE I-9
<PAGE> 15

HIGHLIGHTS

INVESTMENT OBJECTIVES AND POLICIES

Each Fund seeks capital growth consistent with its investment policies as set
forth under "Investment Objectives and Policies."

IMPLEMENTATION OF POLICIES AND RISKS

Subject to certain limitations, each Fund may invest in foreign securities
(except the Value Fund may only invest in foreign securities through depositary
receipts) and engage in foreign currency and derivative transactions, including
options, futures, and options on futures transactions. Each Fund may invest in
illiquid securities, engage in substantial short-term trading, and may invest a
significant portion of its assets in small and medium companies, some of which
may be unseasoned. Each Fund may also invest in repurchase agreements and
when-issued securities. These investment practices and techniques involve risks
that are different in some respects from those associated with similar funds
that do not use them. (See "Implementation of Policies and Risks.")

MANAGEMENT

The Advisor, Strong Capital Management, Inc., serves as investment advisor to
the Funds. The Advisor provides investment management services for mutual funds
and other investment portfolios representing assets of over $23 billion. Sloate,
Weisman, Murray & Company, Inc. (the "Subadvisor") is the Subadvisor for the
Value Fund. (See "About the Funds - Management.")

PURCHASE AND REDEMPTION OF SHARES

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

SHAREHOLDER SERVICES

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

DIVIDENDS AND OTHER DISTRIBUTIONS

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

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

PROSPECTUS PAGE I-10
<PAGE> 16

INVESTMENT OBJECTIVES AND POLICIES

The descriptions that follow are designed to help you choose the Fund that
best fits your investment objective. You may want to pursue more than one
objective by investing in more than one of the Funds or by investing in one of
the other Strong Funds, which are described in separate prospectuses. Each
Growth Fund's investment objective is discussed below in connection with the
Fund's investment policies. Because of the risks inherent in all investments,
there can be no assurance that the Funds will meet their objectives.
The Funds are each required or permitted to invest a substantial portion of
their assets in equity securities. Accordingly, each Fund's net asset value will
fluctuate based upon changes in the value of the securities in its portfolio,
and each Fund's net asset value is likely to fluctuate more than that of a fund
invested principally in fixed income securities. The Funds, therefore, are not
appropriate for investors' short-term financial needs.

COMPARING THE FUNDS

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

<TABLE>
<CAPTION>
Anticipated Maximum
Equity Debt
Fund Exposure Exposure Focus
<S> <C> <C> <C>
Mid- and Large-Cap
Value 70-100% 30% Value
Opportunity 70-100% 30% Mid-Cap
Mid Cap 80-100% 20% Mid-Cap
Common Stock 80-100% 20% Small-Cap
Growth 65-100% 35% Growth
Discovery 0-100% 100% Emerging Growth
Small Cap 80-100% 20% Small-Cap
</TABLE>

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

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

PROSPECTUS PAGE I-11
<PAGE> 17

size, exchange listing, earnings history, or other factors. When selecting
securities, the Advisor will, except as otherwise limited below, be limited only
by its best judgment as to what will help achieve each Fund's investment
objective.

STRONG VALUE FUND

The Value Fund seeks capital growth. The Fund invests primarily in equity
securities, seeking, through fundamental analysis, those companies whose share
price does not fully reflect the value of the company. While the Fund may invest
in companies of any size, it currently emphasizes medium- to large-
capitalization companies.

The Fund will invest at least 70% 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. Under
normal market conditions, the Fund expects to be fully invested in equities. The
Fund may, however, invest up to 30% of its net assets in debt obligations,
including intermediate- to long-term corporate or U.S. government debt
securities and, when the Subadvisor determines that market conditions warrant a
temporary defensive position, it 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 does not intend to invest
directly in foreign securities; however, it may invest up to 10% of its net
assets in foreign securities in domestic markets through depositary receipts.
See "Implementation of Policies and Risks - Foreign Securities and Currencies"
for the special risks associated with foreign investments.

The Subadvisor seeks to maximize long-term total rates of return by investing
in securities that represent excellent value in relation to companies' assets,
earning power, and cash-generating ability. The Subadvisor employs a bottom-up
stock selection process that is based on intensive fundamental research using
early trend analysis in seeking to identify catalysts that will increase the
value of a company. These catalysts include corporate restructuring, significant
management change, cyclical turnaround of a depressed company or industry, or
secular trends.

STRONG OPPORTUNITY FUND

The Opportunity Fund seeks capital growth. The Fund invests primarily in
equity securities and currently emphasizes investments in medium-sized companies
the Advisor believes are under-researched and attractively valued.
The Fund will invest at least 70% 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.

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

PROSPECTUS PAGE I-12
<PAGE> 18

Under normal market conditions, the Fund expects to be fully invested in
equities. The Fund may, however, invest up to 30% of its net assets in debt
obligations, including intermediate- to long-term corporate or U.S. government
debt securities and, when the Advisor determines that market conditions warrant
a temporary defensive position, it 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
investments made through depositary receipts. (See "Implementation of Policies
and Risks - Foreign Securities and Currencies" for the special risks associated
with foreign investments.)

In selecting its equity investments, the Advisor seeks to identify attractive
investment opportunities that have not become widely recognized by other stock
analysts or the financial press. Through first-hand research that often includes
on-site visits with the leaders of companies, the Advisor looks for companies
with fundamental value or growth potential that is not yet reflected in their
current market prices.

In many cases, companies in the small- and medium-capitalization markets are
underfollowed and, as a result, less efficiently priced than their larger,
better-known counterparts. The Opportunity Fund's investments are therefore
likely to consist, in part, of securities in small- and medium-sized companies.
Many of these companies may have successfully emerged from the start-up phase
and have potential for future growth. Because of their longer track records and
more seasoned management, they generally pose less investment uncertainty than
do the smallest companies. In general, however, smaller-capitalization companies
often involve greater risks than investments in established companies. (See
"Implementation of Policies and Risks - Small and Medium Companies.")

STRONG MID CAP FUND

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

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

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

PROSPECTUS PAGE I-13
<PAGE> 19

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 investments made through depositary
receipts. (See "Implementation of Policies and Risks - Foreign Securities and
Currencies" for the special risks associated with foreign investments.)

STRONG COMMON STOCK FUND

The Common Stock Fund is closed to new investors, except the Fund may
continue to offer its shares through certain 401(k) plans and similar company-
sponsored retirement plans. Current shareholders of the Fund may continue to add
to existing accounts and open new accounts. (See "Shareholder Manual - How to
Buy Shares.") Although the Fund may resume sales to new investors in the future,
it has no present intention to do so.

The Common Stock Fund seeks capital growth. The Fund invests primarily in
equity securities and currently emphasizes the stocks of small companies the
Advisor believes are under-researched and attractively valued.

The Fund will invest at least 80% of its net assets in equity securities,
including common stocks (which must constitute at least 65% of its total
assets), preferred stocks, and securities that are convertible into common or
preferred stocks, such as warrants and convertible bonds. Under normal market
conditions, the Fund expects to be fully invested in equity securities. The Fund
may, however, invest up to 20% of its net assets in debt obligations, including
intermediate- to long-term corporate or U.S. government debt securities and,
when the Advisor determines that market conditions warrant a temporary defensive
position, it 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.")

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

PROSPECTUS PAGE I-14
<PAGE> 20

In many cases, companies in the small- and medium-capitalization markets are
underfollowed and, as a result, less efficiently priced than their larger,
better-known counterparts. The Common Stock Fund's investments are therefore
likely to consist, in part, of securities in small- and medium-sized companies.
Many of these companies may have successfully emerged from the start-up phase
and have potential for future growth. Because of their longer track records and
more seasoned management, they generally pose less investment uncertainty than
do the smallest companies. In general, however, smaller-capitalization companies
often involve greater risks than investments in established companies. (See
"Implementation of Policies and Risks - Small and Medium Companies.")

STRONG GROWTH FUND

The Growth Fund seeks capital growth. The Fund invests primarily in equity
securities that the Advisor believes have above-average growth prospects.

Under normal market conditions, the Fund will invest at least 65% of its
total 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. While the emphasis of the Fund is clearly on
equity securities, the Fund may invest a limited portion of its assets in debt
obligations when the Advisor perceives that they are more attractive than stocks
on a long-term basis. The Fund may invest up to 35% of its total 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 invest without limitation 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 generally will invest in companies whose earnings are believed to be
in a relatively strong growth trend, and, to a lesser extent, in companies in
which significant further growth is not anticipated but whose market value is
thought to be undervalued. In identifying companies with favorable growth
prospects, the Advisor ordinarily looks to certain other characteristics, such
as the following:

- - prospects for above-average sales and earnings growth;

- - high return on invested capital;

- - overall financial strength, including sound financial and accounting policies
and a strong balance sheet;

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

PROSPECTUS PAGE I-15
<PAGE> 21

- - competitive advantages, including innovative products and service;

- - effective research, product development, and marketing; and

- - stable, capable management.

STRONG DISCOVERY FUND

The Discovery Fund seeks capital growth. The Fund invests in securities that
the Advisor believes represent attractive growth opportunities.

The Fund normally emphasizes equity securities, although it has the
flexibility to invest in any type of security that the Advisor believes has the
potential for capital appreciation. The Fund may invest up to 100% of its total
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. The Fund may also invest up to 100% of its total
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 invest without
limitation 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 Advisor seeks to uncover emerging investment trends and attractive growth
opportunities. In its search for potential investments, the Advisor attempts to
identify companies that are poised for accelerated earnings growth due to
innovative products or services, new management, or favorable economic or market
cycles. These companies may be small, unseasoned firms in the early stages of
development, or they may be mature organizations. (See "Implementation of
Policies and Risks - Small and Medium Companies.") Whatever their size, history,
or industry, the Advisor believes their potential earnings growth is not yet
reflected in their market value and that, over time, the market prices of these
securities will move higher.

STRONG SMALL CAP FUND

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

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

PROSPECTUS PAGE I-16
<PAGE> 22

the time of the Fund's investment. In general, smaller-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.")

IMPLEMENTATION OF POLICIES AND RISKS

In addition to the investment policies described above (and subject to
certain restrictions described below), the Funds may invest in some or all of
the following securities and may employ some or all of the following investment
techniques, some of which may present special risks as described below. Each
Fund may 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 Funds' SAI.

FOREIGN SECURITIES AND CURRENCIES

The Opportunity, Mid Cap, Common Stock, Growth, Discovery and Small Cap Funds
may invest in foreign securities either directly or indirectly through the use
of depositary receipts. (See "Investment Objectives and Policies.") The Value
Fund may only invest in foreign securities through depositary receipts.
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

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

PROSPECTUS PAGE I-17
<PAGE> 23

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 Funds generally invest only in securities that are regularly traded
on recognized exchanges or in over-the-counter markets, from time to time
foreign securities may be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign investing, such as custody
charges and brokerage costs, may be higher than those attributable to domestic
investing.

The Funds may invest in securities of issuers in developing or emerging
markets and economies. Risks of investing in developing or emerging markets
include:

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

In addition, brokerage commissions, custodial services, withholding taxes,
and other costs relating to investment in emerging markets generally are more
expensive than in the U.S. and certain more established foreign markets.
Economies in emerging markets generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be affected adversely by
trade barriers, exchange controls, managed adjustments in relative currency
values, and other protectionist measures negotiated or imposed by the countries
with which they trade.
Because most foreign securities are denominated in non-U.S. currencies, the
investment performance of the Funds could be affected by changes in foreign
currency exchange rates to some extent. The value of a Fund's assets denominated
in foreign currencies will increase or decrease in response to fluctuations in
the value of those foreign currencies relative to the U.S. dollar. Currency
exchange rates can be volatile at times in response to supply and demand in the
currency exchange markets, international balances of pay-

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

PROSPECTUS PAGE I-18
<PAGE> 24

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

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 Investment Company Act of 1940 (the "1940 Act"). The Funds
do 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

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

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

PROSPECTUS PAGE I-19
<PAGE> 25

movements in the price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the value of the underlying
asset. The writer of an option-based derivative generally will receive fees or
premiums but generally is exposed to losses due to changes in the value of the
underlying asset.
A forward is a sales contract between a buyer (holding the "long" position)
and a seller (holding the "short" position) for an asset with delivery deferred
until a future date. The buyer agrees to pay a fixed price at the agreed future
date and the seller agrees to deliver the asset. The seller hopes that the
market price on the delivery date is less than the agreed upon price, while the
buyer hopes for the contrary. The change in value of a forward-based derivative
generally is roughly proportional to the change in value of the underlying
asset.
Derivative instruments may include (i) options; (ii) futures; (iii) options
on futures; (iv) short sales against the box, in which a Fund sells a security
it owns for delivery at a future date; (v) swaps, in which two parties agree to
exchange a series of cash flows in the future, such as interest-rate payments;
(vi) interest-rate caps, under which, in return for a premium, one party agrees
to make payments to the other to the extent that interest rates exceed a
specified rate, or "cap"; (vii) interest-rate floors, under which, in return for
a premium, one party agrees to make payments to the other to the extent that
interest rates fall below a specified level, or "floor"; (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, a Fund will set aside permissible liquid assets in a
segregated account to secure its obligations under the derivative.

The successful use of derivatives by a 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, a Fund may be in a worse position
than if no hedging had occurred. In addition, there may be imperfect correlation
between a Fund's derivative transactions and the instruments being hedged. To
the extent that the Fund is engaging in derivative transactions for risk
management, the Fund's successful use of such transactions is more dependent
upon the Advisor's ability to correctly anticipate such trends, since losses in
these transactions may not be offset in gains in the Fund's portfolio or in
lower purchase prices for assets it intends to acquire. The Advisor's prediction
of trends in underlying assets may prove to be inaccurate, which could result in
substantial losses to a Fund.

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

PROSPECTUS PAGE I-20
<PAGE> 26

In addition to the derivative instruments and strategies described above, the
Advisor expects to discover additional derivative instruments and other trading
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.

ILLIQUID SECURITIES

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

SMALL AND MEDIUM COMPANIES

The Funds may invest a substantial portion of their 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,
a 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 Funds 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 Funds than in a
fund that invests in larger, more established companies.

DEBT OBLIGATIONS

IN GENERAL. Debt obligations in which the Funds may invest will be primarily
investment-grade debt obligations, although each Fund may invest up to 5% of its
net assets in non-investment-grade debt obligations. The market

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

PROSPECTUS PAGE I-21
<PAGE> 27

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.

Investment-grade debt obligations are generally believed to have relatively
low degrees of credit risk. All ratings are determined at the time of
investment. Any subsequent rating downgrade of a debt obligation will be
monitored by the Advisor to consider what action, if any, a Fund should take
consistent with its investment objective. For purposes of determining whether a
security is investment grade, the Advisor may use the highest rating assigned to
that security by any nationally recognized statistical rating organizations
("NRSROs"). 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.

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.

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

PROSPECTUS PAGE I-22
<PAGE> 28

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

Each Fund may invest in securities purchased on a when-issued or delayed-
delivery basis. Although the payment and interest terms of these securities are
established at the time the purchaser enters into the commitment, these
securities may be delivered and paid for at a future date, generally within 45
days. Purchasing when-issued securities allows a Fund to lock in a fixed price
or yield on a security it intends to purchase. However, when a Fund purchases a
when-issued security, it immediately assumes the risk of ownership, including
the risk of price fluctuation.

The greater a Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of a Fund.
Purchasing when-issued securities may involve the additional risk that the yield
available in the market when the delivery occurs may be higher or the market
price lower than that obtained at the time of commitment. Although a Fund may be
able to sell these securities prior to the delivery date, it will purchase
when-issued securities for the purpose of actually acquiring the securities,
unless after entering into the commitment a sale appears desirable for
investment reasons. When required by SEC guidelines, a Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.

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

PROSPECTUS PAGE I-23
<PAGE> 29

CASH MANAGEMENT

Each Fund may invest directly in cash and short-term fixed-income securities,
including, for this purpose, shares of one or more money market funds managed by
the Advisor (collectively, the "Strong Money Funds"). The Strong Money Funds
seek current income, a stable share price of $1.00, and daily liquidity. All
money market instruments can change in value when interest rates or an issuer's
creditworthiness change dramatically. The Strong Money Funds cannot guarantee
that they will always be able to maintain a stable net asset value of $1.00 per
share.

PORTFOLIO TURNOVER

Each Fund's (except for the Mid Cap Fund) historical portfolio turnover rate
is listed under "Financial Highlights." The annual portfolio turnover rate
indicates changes in a 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 redemption of shares. High
portfolio turnover in any year will result in the payment by a 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 Mid Cap
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 FUNDS

MANAGEMENT

The Board of Directors of each Fund is responsible for managing its business
and affairs. Each of the Funds has entered into an investment advisory agreement
(collectively the "Advisory Agreements") with Strong Capital Management, Inc.
(the "Advisor"). The Advisory Agreements are substantially identical. Under the
terms of these agreements, the Advisor manages each Fund's investments and
business affairs subject to the supervision of each Fund's Board of Directors.

ADVISOR. The Advisor began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans, as well as mutual funds, several of which are funding vehicles for
variable insurance products. As of March 31, 1997, the Advisor had over $23
billion under management. The Advisor's principal mailing address is P.O. Box
2936, Milwaukee, Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the
Board of each Fund, is the controlling shareholder of the Advisor.

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

PROSPECTUS PAGE I-24
<PAGE> 30

As compensation for its services, each Fund pays the Advisor a monthly
management fee. The annual fee for each Fund is 1.0% of a Fund's average daily
net asset value. Such fees are in excess of fees paid by many other funds. From
time to time, the Advisor may voluntarily waive all or a portion of its
management fee and/or absorb certain Fund expenses without further notification
of the commencement or termination of such waiver or absorption. Any such waiver
or absorption will temporarily lower a Fund's overall expense ratio and increase
a Fund's overall return to investors.
Except for expenses assumed by the Advisor, Subadvisor, or Strong Funds
Distributors, Inc., each Fund is responsible for all its other expenses,
including, without limitation, interest charges, taxes, brokerage commissions,
and similar expenses; expenses of issue, sale, repurchase, or redemption of
shares; expenses of registering or qualifying shares for sale with the states
and the SEC; expenses of printing and distribution of prospectuses to existing
shareholders; charges of custodians (including fees as custodian for keeping
books and similar services for a Fund), transfer agents (including the printing
and mailing of reports and notices to shareholders), registrars, auditing and
legal services, and clerical services related to recordkeeping and shareholder
relations; printing of stock certificates; fees for directors who are not
"interested persons" of the Advisor; expenses of indemnification; extraordinary
expenses; and costs of shareholder and director meetings.

The Advisor and the Subadvisor permit portfolio managers and other persons
who may have access to information about the purchase or sale of securities in
the Fund's portfolio ("access persons") to purchase and sell securities for
their own accounts, subject to the Advisor's or Subadvisor's policy governing
personal investing. These policies require access persons to conduct their
personal investment activities in a manner that the Advisor or Subadvisor
believes is not detrimental to a Fund or to the Advisor or Subadvisor's other
advisory clients. Among other things, these policies require access persons to
obtain preclearance before executing personal trades and prohibits access
persons from keeping profits derived from the purchase or sale of the same
security within 60 calendar days. See the SAI for more information.

SUBADVISOR -- VALUE FUND. Under a subadvisory agreement between the Advisor
and Sloate, Weisman, Murray and Company, Inc. (the "Subadvisory Agreement"), the
Subadvisor, pursuant to the oversight and supervision of the Fund's Board of
Directors and the Advisor, provides a continuous investment program for the
Fund. Under the Subadvisory Agreement, the Subadvisor is responsible both for
determining the securities to be purchased and sold by the Fund and for
executing those transactions. However, the Advisor is responsible for managing
the cash-equivalent investments maintained by the Fund in the ordinary course of
its business, which are expected to be no more than 10%-15% of the Fund's total
assets. As compensation for its services, the Advisor (not the Fund) pays the
Subadvisor a monthly fee based on the following annual rates. For the first
eighteen (18) months, the Advisor will pay the

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

PROSPECTUS PAGE I-25
<PAGE> 31

Subadvisor 60% of the management fees collected by the Advisor from the Fund on
the first $150 million of net assets in the Fund, 50% of the management fees
collected by the Advisor from the Fund on net assets from $150 to $300 million
in the Fund, and 40% of the management fees collected by the Advisor from the
Fund on net assets in excess of $300 million in the Fund. After the first
eighteen (18) months, the Advisor will pay the Subadvisor 60% of the 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 (18) months (this amount
being "base" net assets), 50% of the 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 the management fees collected by the Advisor from the Fund on net
assets in excess of $300 million in the Fund. The Subadvisor bears all of its
own expenses in providing subadvisory services to the Fund.

The Subadvisor began conducting business in 1974. Its principal business has
been providing investment supervision to institutional investors and high net
worth clients. The Subadvisor is a Delaware corporation. Ms. Laura J. Sloate,
the Subadvisor's Chairman and Chief Investment Officer, is the controlling
shareholder of the Subadvisor. As of March 31, 1997, the Subadvisor had
approximately $1 billion under management. Its address is 540 Madison Avenue,
New York, New York 10022.

HISTORICAL PERFORMANCE DATA OF THE SUBADVISOR

The following table sets forth the composite performance data of the
Subadvisor relating to the historical performance of actual, fee-paying,
discretionary 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 1000 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)*

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

* 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.

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

PROSPECTUS PAGE I-26
<PAGE> 32

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 taxes. Custodial fees, if any, were not included in the
calculation. 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 1940 Act 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 Russell
Value Equity 1000
Time Period Composite Value(1) S&P 500(2)
<S> <C> <C> <C>
Average Annual Returns
1 Year 17.05% 21.64% 22.96%
3 Year 17.55% 18.15% 19.68%
5 Year 17.66% 17.27% 15.22%
4/1/88 -
12/31/96(3) 20.59% 15.57% 16.23%
Cumulative Returns
4/1/88 -
12/31/96(3) 414.57% 254.80% 272.92%
</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.

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

PROSPECTUS PAGE I-27
<PAGE> 33

PORTFOLIO MANAGERS. The following individuals serve as portfolio managers for
the Strong Growth Funds.

STRONG OPPORTUNITY FUND
STRONG COMMON STOCK FUND

RICHARD T. WEISS. Mr. Weiss joined the Advisor in 1991 from Chicago-based
Stein Roe & Farnham, where he began his career as a research analyst in 1975. He
was named a portfolio manager in 1981. Mr. Weiss attended Harvard Graduate
School of Business Administration, where he was awarded his M.B.A. in 1975, and
the University of Southern California, where he received his bachelor's degree
in Business Administration in 1973. Mr. Weiss has managed the Strong Opportunity
and Common Stock Funds since 1991. In addition, Mr. Weiss is a member of the
Advisor's Executive Committee.
From November 1981 through March 1991, Mr. Richard T. Weiss 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 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 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 for the one-year, three-year, and
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
Year Fund(1) Index(2) S&P 500 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.

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

PROSPECTUS PAGE I-28
<PAGE> 34

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.

MARINA T. CARLSON. Before she joined the Advisor as an equity research
analyst in 1991, Ms. Carlson worked in a similar capacity at Stein Roe &
Farnham, where she began her investment career in 1986. She has worked with
portfolio manager Richard T. Weiss since 1989, and, in 1993, she was named a
co-manager of the Strong Opportunity and Common Stock Funds. A Chartered
Financial Analyst, Ms. Carlson received her M.B.A. from DePaul University in
1989 and her bachelor's degree in Finance from Drake University in 1986.

STRONG GROWTH FUND

RONALD C. OGNAR. Mr. Ognar, a Chartered Financial Analyst with more than 25
years of investment experience, joined the Advisor in April 1993 after two years
as a principal and portfolio manager with RCM Capital Management. For
approximately three years prior to that, he was a portfolio manager at Kemper
Financial Services in Chicago. Mr. Ognar began his investment career in 1968 at
LaSalle National Bank in Chicago after serving two years in the U.S. Army. He
received his bachelor's degree in Accounting from the University of Illinois in
1968.
From February 1989 through July 1991, Mr. Ronald C. Ognar 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
and no other person played a significant part in that management. 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

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

PROSPECTUS PAGE I-29
<PAGE> 35

the Kemper Growth Fund compared with the performance of the S&P 500 Index were:

<TABLE>
<CAPTION>
Kemper
Growth S&P
Year Fund(1) 500 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.
(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)From July 1991 until he joined Strong Capital Management in April of 1993,
Mr. Ognar served RCM Capital Management as a principal and as a portfolio
manager of certain growth separate accounts. Mr. Ognar has been managing the
Strong Growth Fund since its inception on December 31, 1993.

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 VALUE FUND

LAURA J. SLOATE. Ms. Sloate, blind since the age of six, is a leading figure
in the field of money management. After graduating from Barnard College and
Columbia University, she began working as a Securities Analyst at Scheinman
Hochstein & Trotta, Neuberger Berman & Company and Drexel Burnham & Company. In
1974, Ms. Sloate was one of the founders of Sloate, Weisman, Murray & Company,
the Fund's Subadvisor. As a principal of one of the first woman-owned money
management firms, Ms. Sloate has been responsible for the successful expansion
of assets under her management to their current level of approximately $1
billion. In addition to her role as portfolio manager, she is the Subadvisor's
Chairman and Chief Investment Officer.

JEFFREY B. COHEN. Mr. Cohen joined Sloate, Weisman, Murray & Company in 1987
where he presently serves as a senior portfolio manager. Prior to joining
Sloate, Weisman, he spent three years as Credit Officer, Analyst at J.P. Morgan.
Mr. Cohen graduated from the Wharton School at the University of Pennsylvania
with a B.S.E. in Finance and an M.B.A. from New York University. Mr. Cohen is a
principal of the Subadvisor.

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

PROSPECTUS PAGE I-30
<PAGE> 36

STRONG SMALL CAP FUND

MARY LISANTI. 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. 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. Ms.
Lisanti has managed or co-managed the Small Cap Fund since August 1996.

While at Bankers Trust, Ms. Lisanti served as a portfolio manager of the BT
Investment Small Cap Fund since its inception in October 1993. As portfolio
manager, Ms. Lisanti was primarily responsible for the day-to-day management of
the BT Investment Small Cap Fund and no other person played a significant part
in that management. 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 S&P
Year Small Cap Fund(1,2) 2000 Index(3) 500 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 .22%).
(3)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.
(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.

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

PROSPECTUS PAGE I-31
<PAGE> 37

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.

STRONG MIDCAP FUND

MARY LISANTI. Information concerning Ms. Lisanti is set forth above under
"Strong Small Cap Fund." While at Bankers Trust, Ms. Lisanti served as the
portfolio manager of the BT Investment Capital Appreciation Fund since its
inception in March 1993. As portfolio manager, Ms. Lisanti was primarily
responsible for the day-to-day management of the BT Investment Capital
Appreciation Fund and no other person played a significant part in that
management. 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 Stock 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 and three-year period ended July 31, 1996,
and for the entire period that Ms. Lisanti managed the Fund compared with the
performance of the S&P MidCap 400 and S&P 500 Indices were:

<TABLE>
<CAPTION>
BT Investment Capital S&P MidCap S&P
Appreciation Fund(1,2) 400 Index(3) 500 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 Investment Capital Appreciation Fund was capped
at 1.25% for the period from March 9, 1993 (inception) to December 31, 1993
(reflecting 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 .26%).

(3)The S&P 400 MidCap Stock Index is an unmanaged index generally representative
of the U.S. market for mid-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.

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

PROSPECTUS PAGE I-32
<PAGE> 38

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.

JEFFREY M.K. BERNSTEIN. Prior to joining the Advisor, Mr. Bernstein served at
Berkeley Capital Management as a Senior Vice President and portfolio manager.
From September 1993 until November 1995, Mr. Bernstein acted as a Vice President
and portfolio manager for Bankers Trust in New York. For three years prior to
that, he was a Vice President and securities analyst for Cowen & Co. Mr.
Bernstein received his B.A. degree in English from Union College in 1988. He has
co-managed the Fund since February 1997.

STRONG DISCOVERY FUND

RICHARD S. STRONG. Mr. Strong founded the Advisor in 1974. He began his
investment career at Employers Insurance of Wausau in 1966, after receiving his
master's degree in Finance from the University of Wisconsin-Madison that
January. He received his undergraduate degree in 1963 from Baldwin-Wallace
College. Mr. Strong has managed or co-managed the Strong Discovery Fund since
its inception in December 1987. In addition to his role as a portfolio manager,
he is the Chairman of the Board, Director, Chief Investment Officer, and a
member of the Advisor's Executive Committee.

CHARLES A. PAQUELET. On August 31, 1996, Mr. Paquelet joined Mr. Strong as a
portfolio co-manager of the Strong Discovery Fund. 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
on December 31, 1995 through August 31, 1996.

TRANSFER AND DIVIDEND-DISBURSING AGENT

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

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

PROSPECTUS PAGE I-33
<PAGE> 39

DISTRIBUTOR

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

ORGANIZATION

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

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

DISTRIBUTIONS AND TAXES

PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. Unless you choose otherwise,
all your dividends and capital gains distributions will be automatically
reinvested in additional Fund shares. Or, you may elect to have all your
dividends and capital gain distributions from a 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, a Fund will credit your bank
account by Electronic Funds Transfer ("EFT") or issue a check to you within five
business days of the payment date. You may change your election at any time by
calling or writing Strong Funds. Strong Funds must receive any such change 7
days (15 days for EFT) prior to a dividend or capital gain distribution payment
date in order for the change to be effective for that payment. The policy of
each Fund is to pay dividends from net investment income quarterly and to
distribute substantially all net realized capital gains and gains from foreign
currency transactions annually. Each Fund may make additional

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

PROSPECTUS PAGE I-34
<PAGE> 40

distributions if necessary to avoid imposition of a 4% excise tax on
undistributed income and gains.

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

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

SHARES SOLD OR EXCHANGED. Your redemption of Fund shares may result in 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 a Fund
within thirty days before or after redeeming shares of the same Fund at a loss,
a portion or all of that loss will not be deductible and will increase the cost
basis of the newly purchased shares. If you redeem shares out of a 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 a Fund will reduce the net asset value of the shares by the amount of
the distribution, which nevertheless will be taxable to you even though it
represents a return of a portion of your investment.

BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish a Fund with a correct taxpayer identification
number, the Fund is required to withhold federal income tax at a rate of 31%
(backup withholding) from all dividends, capital gain distributions, and
redemption proceeds payable to you. Withholding at that rate from

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

PROSPECTUS PAGE I-35
<PAGE> 41

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 under-reporting of your income. This
certification is included as part of your application. Please complete it when
you open your account.

TAX STATUS OF THE FUNDS. Each Fund intends to continue to qualify for
treatment as a regulated investment company under Subchapter M of the Internal
Revenue Code and, if so qualified, will not be liable for federal income tax on
earnings and gains distributed to its shareholders in a timely manner.
This section is not intended to be a full discussion of present or proposed
federal income tax law and its effects on the Funds and investors therein. See
the SAI for a further discussion. There may be other federal, state, or local
tax considerations applicable to a particular investor. You are therefore urged
to consult your own tax adviser.

PERFORMANCE INFORMATION

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

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

PROSPECTUS PAGE I-36
<PAGE> 42

SHAREHOLDER MANUAL

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

HOW TO BUY SHARES

All the Strong Funds are 100% no-load, meaning you may purchase, redeem, or
exchange shares directly at net asset value without paying a sales charge.
Because the Funds' net asset value changes daily, your purchase price will be
the next net asset value determined after Strong receives and accepts your
purchase order.

Whether you are opening a new account or adding to an existing one, Strong
provides you with several methods to buy Fund shares.

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

PROSPECTUS PAGE II-1
<PAGE> 43

<TABLE>
<S> <C>
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, 900 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 ac-
24 HOURS A DAY, count.
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.
Or use Strong Direct (SM), Strong Funds' automated tele-
phone response system. Call 1-800-368-7550.
- ----------------------------------------------------------------------------
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 and contribute
monthly, 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 a Fund through a
broker-dealer or other institution that may charge
a transaction fee.
- Strong Funds may only accept requests to purchase
shares into a broker-dealer street name account
from the broker-dealer.
</TABLE>

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

PROSPECTUS PAGE II-2
<PAGE> 44

- ------------------------------------------------------------------------------
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, 900 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 Direct (SM), 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 a Fund through a broker-dealer or other
institution that may charge a transaction fee.
- - Strong Funds may only accept requests to purchase additional shares into a
broker-dealer street name account from the broker-dealer.

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

PROSPECTUS PAGE II-3
<PAGE> 45

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES

- - A Fund reserves the right to decline to accept your purchase order upon
receipt for any reason.

- - Minimum Investment Requirements:

To open a regular account
Opportunity, Growth, Common Stock, and Discovery Funds............$1,000

Value, Small Cap, and Mid Cap Funds...............................$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 Funds offer a No-Minimum Investment Plan that waives the minimum initial
investment requirements for investors who participate in the Strong Automatic
Investment Plan and contribute monthly (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 a Fund's minimum initial investment), each
Fund reserves the right to close your account. Before taking such action, a Fund
will provide you with written notice and at least 60 days in which to reinstate
an investment program or otherwise reach the minimum initial investment
required.

COMMON STOCK FUND IS CLOSED TO NEW INVESTORS

The Common Stock Fund is closed to new investors, except the Fund may
continue to offer its shares through certain 401(k) plans and similar company-
sponsored retirement plans. Current shareholders of the Common Stock Fund may
continue to add to an account through the reinvestment of dividends and cash
distributions on any Common Stock Fund shares owned, through the purchase of
additional Common Stock Fund shares, and through exchanges from other Strong
Fund accounts, which includes accounts where the

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

PROSPECTUS PAGE II-4
<PAGE> 46

shareholder is the owner, a joint owner, or a custodian for a minor child.
Employee benefit plans (that are not 401(k) retirement plans) that became
shareholders on or before the March 19, 1993 closing date may continue to
purchase Fund shares in the course of their normal operations. Additionally,
directors of the Fund and employees and directors of the Fund's Advisor and
Distributor may continue to open new Fund accounts. Shareholders of other Strong
Funds are not able to exchange into the Fund. The Fund may resume sales to new
investors at some future date, but it has no present intention to do so.

DETERMINING YOUR SHARE PRICE

Generally, when you make any purchases, sales, or exchanges, the price of
your shares will be the net asset value ("NAV") next determined after Strong
Funds receives your request in proper form. If Strong Funds receives such
request prior to the close of the New York Stock Exchange (the "Exchange") on a
day on which the Exchange is open, your share price will be the NAV determined
that day. The NAV for each Fund is normally determined as of 3:00 p.m. Central
Time ("CT") each day the Exchange is open. The Funds reserve the right to change
the time at which purchases, redemptions, and exchanges are priced if the
Exchange closes at a time other than 3:00 p.m. CT or if an emergency exists.
Each Fund's NAV is calculated by taking the fair value of a Fund's total assets,
subtracting all its liabilities, and dividing by the total number of shares
outstanding. Expenses are accrued daily and applied when determining the NAV.
A Fund's portfolio securities are valued based on market quotations or at
fair value as determined by the method selected by each Fund's Board of
Directors. Equity securities traded on a national securities exchange or NASDAQ
are valued at the last sales price on the national securities exchange or NASDAQ
on which such securities are primarily traded. Securities traded on NASDAQ for
which there were no transactions on a given day or securities not listed on an
exchange or NASDAQ are valued at the average of the most recent bid and asked
prices. Other exchange-traded securities (generally foreign securities) will be
valued based on market quotations.
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 Funds value their foreign assets in U.S.
dollars on a daily basis, they do not intend to convert their holdings of
foreign currencies into U.S. dollars on a daily basis. Foreign currency exchange
rates are generally determined prior to the close of trading on the Exchange.
Occasionally, events affecting the value of foreign investments and such
exchange rates occur between the time at which they are determined and the close
of trading on the Exchange. Such events would not normally be reflected in a
calculation of a Fund's NAV on that day. If events that materially affect the
value of a Fund's foreign investments or the foreign currency exchange rates

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

PROSPECTUS PAGE II-5
<PAGE> 47

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. (See "Special Situations -- Signature Guarantees.")

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

PROSPECTUS PAGE II-6
<PAGE> 48

<TABLE>
<S> <C>
TO SELL SHARES
- -----------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
For your protection following information: your account number, the
certain redemption dollar amount or number of shares you wish to
requests may require redeem, each owner's name, your street address, and
a signature guarantee. the signature of each owner as it appears on the
See "Special Situations - account.
Signature Guarantees." - Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to 900 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 your account by checking the "Yes" box in the
1-800-368-3863 appropriate section of the account application. To
24 HOURS A DAY, add the telephone redemption option to your account,
7 DAYS A WEEK call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares by phone and arrange to receive the
proceeds in one of three ways:
TO RECEIVE A CHECK BY MAIL
- At no charge, we will mail a check to the address
to which your account is registered.
TO DEPOSIT BY EFT
- At no charge, we will transmit the proceeds by
Electronic Funds Transfer (EFT) to a pre-authorized
bank account. Usually, the funds will arrive at
your bank two banking days after we process your
redemption.
TO DEPOSIT BY WIRE
- For a $10 fee, we will transmit the proceeds by
wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next banking day
after we process your redemption.
You may also use Strong Direct (SM), Strong Funds'
automated telephone response system. Call
1-800-368-7550.
- -----------------------------------------------------------------------------
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
others who may charge a commission or other
transaction fee.
</TABLE>

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

PROSPECTUS PAGE II-7
<PAGE> 49

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 a Fund not reasonably practicable.
- - If you are selling shares you hold in certificate form, you must submit the
certificates with your redemption request. Each registered owner must endorse
the certificates and all signatures must be guaranteed.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.

REDEMPTIONS IN KIND

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 a Fund's shares. Shareholders receiving securities or
other financial assets on redemption may realize a gain or loss for tax
purposes, and will incur any costs of sale, as well as the associated
inconveniences.

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

- - The Funds reserve the right to refuse a telephone redemption if they believe
it advisable to do so.
- - Once you place your telephone redemption request, it cannot be canceled or
modified.
- - Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund reasonably
believes that such instructions are genuine. The Funds and their transfer
agent employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. The Funds may incur liability if they do not follow
these procedures.

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

PROSPECTUS PAGE II-8
<PAGE> 50

Strong Direct, our automated telephone system, to effect such a transaction by
calling 1-800-368-7550.

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 DIRECT (SM) AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day,
the Strong Direct (SM) automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity
(1-800-368-5550), and perform purchases, exchanges or redemptions among your
existing Strong accounts (1-800-368-7550). You may also perform an exchange to
open a new Strong account provided that your account has the telephone exchange
option. Please note that your accounts must be identically registered and you
must exchange enough into the new account to meet the minimum initial
investment. Your account information is protected by a personal code that you
establish. For more information on this service, call 1-800-368-3863.

STRONG nETDIRECT. Available 24 hours a day from your personal computer,
Strong netDirect allows you to use the Internet to access your Strong Funds
account information. You may access specific account history, view current
account balances, obtain recent dividend activity, and perform purchases,
exchanges, or redemptions among your existing Strong accounts.

To register for netDirect, please visit our website at http://www.
strong-funds.com. Your account information is protected by a personal password
and Internet encryption technology. For more information on this service, please
call 1-800-359-3379 or e-mail us at [email protected].

STATEMENTS AND REPORTS. At a minimum, each Fund will confirm all transactions
for your account on a quarterly basis. We recommend that you file each quarterly
statement - and, especially, each calendar year-end statement - with your other
important financial papers, since you may need to refer to them at a later date
for tax purposes. Should you need additional copies of previous statements, you
may order confirmation statements for the current and preceding year at no
charge. Statements for earlier years are available for $10 each. Call
1-800-368-3863 to order past statements.

Each year, you will also receive a statement confirming the tax status of any
distributions paid to you, as well as a semi-annual report and an annual report
containing audited financial statements.

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

PROSPECTUS PAGE II-9
<PAGE> 51

To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household. Call
1-800-368-3863 if you wish to receive additional copies, free of charge.

More complete information regarding each Fund's investment policies and
services is contained in its SAI, which you may request by calling or writing
Strong Funds at the phone number and address on the cover of this Prospectus.

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

TRANSACTION SERVICES

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

REGULAR INVESTMENT PLANS

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

PROSPECTUS PAGE II-10
<PAGE> 52

price is low and fewer shares when the price is high. Ultimately, by using this
principle in conjunction with fluctuations in share price, your average cost per
share may be less than your average transaction price. A program of regular
investment cannot ensure a profit or protect against a loss during declining
markets. Since such a program involves continuous investment regardless of
fluctuating share values, you should consider your ability to continue the
program through periods of both low and high share-price levels.

AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan allows you to make
regular, systematic investments in a Fund from your bank checking or NOW
account. You may choose to make investments on any day of the month in amounts
of $50 or more. You can set up the Automatic Investment Plan with any financial
institution that is a member of the Automated Clearing House. Because each Fund
has the right to close an investor's account for failure to reach the minimum
initial investment, please consider your ability to continue this Plan until you
reach the minimum initial investment. 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 a Fund's minimum initial
investment requirement, you may purchase additional Fund shares through the
Payroll Direct Deposit Plan. Through this Plan, periodic investments (minimum
$50) are made automatically from your payroll check into your existing Fund
account. By enrolling in the Plan, you authorize your employer or its agents to
deposit a specified amount from your payroll check into the Fund's bank account.
In most cases, your Fund account will be credited the day after the amount is
received by the Fund's bank. In order to participate in the Plan, your employer
must have direct deposit capabilities through 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
request a 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.

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

PROSPECTUS PAGE II-11
<PAGE> 53

and may result in a capital gain or loss. To establish the Plan, request a form
by calling 1-800-368-3863.
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial
investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be terminated. You may also terminate the Plan at any time by calling
or writing to the Fund. Once participation in the Plan has been terminated for
any reason, to reinstate the Plan you must do so in writing; simply investing
additional funds will not reinstate the Plan.

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

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 Funds. 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.

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

PROSPECTUS PAGE II-12
<PAGE> 54

Failure to provide these documents or signatures as required when you invest may
result in delays in processing redemption requests.

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 a 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 a 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, a Fund may pay, directly or indirectly through
arrangements with the Advisor, amounts to financial intermediaries that provide
transfer agent and/or 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. Certain financial intermediaries
may charge a commission or other transaction fee for their services. You will
not be charged for such fees if you purchase or redeem your Fund shares directly
from a Fund without the intervention of a financial intermediary.

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

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

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

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

PROSPECTUS PAGE II-13
<PAGE> 55

NOTES
<PAGE> 56

NOTES
<PAGE> 57

NOTES
<PAGE> 58

STATEMENT OF ADDITIONAL INFORMATION

STRONG VALUE FUND

STRONG OPPORTUNITY FUND

STRONG MID CAP FUND

STRONG COMMON STOCK FUND

STRONG GROWTH FUND

STRONG DISCOVERY FUND

STRONG SMALL 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 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 Mid
Cap Fund (the "Mid Cap Fund") and Strong Value Fund (the "Value Fund"), all of
which are series of Strong Equity Funds, Inc. (individually, a "Fund", and
collectively the "Funds") dated May 1, 1997. Requests for copies of the
Prospectus should be made by calling one of the numbers listed above. The
financial statements appearing in the Value, Opportunity, Growth, Common Stock,
Small Cap and Discovery Funds' Annual Report, which accompanies this Statement
of Additional Information, are incorporated herein by reference. The unaudited
Financial Statements for the Mid Cap Fund for the period from December 31, 1996
through March 31, 1997, accompany this Statement of Additional Information.

<PAGE> 59

This Statement of Additional Information is dated May 1, 1997.

<PAGE> 60

STRONG GROWTH FUNDS

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

INVESTMENT RESTRICTIONS 3
INVESTMENT POLICIES AND TECHNIQUES 4
Borrowing 4
Convertible Securities 5
Debt Obligations 5
Depositary Receipts 6
Derivative Instruments 6
Foreign Investment Companies 15
Foreign Securities 16
High-Yield (High-Risk) Securities 16
Illiquid Securities 18
Lending of Portfolio Securities 19
Mortgage- and Asset-Backed Securities 19
Mortgage Dollar Rolls and Reverse Repurchase Agreements 20
Repurchase Agreements 21
Short Sales Against the Box 21
Small and Medium Companies 21
Temporary Defensive Position 21
Warrants 21
When-Issued Securities 22
Zero-Coupon, Step-Coupon and Pay-in-Kind Securities 22
DIRECTORS AND OFFICERS OF THE FUNDS 22
PRINCIPAL SHAREHOLDERS 26
INVESTMENT ADVISOR, SUBADVISOR, AND DISTRIBUTOR 26
PORTFOLIO TRANSACTIONS AND BROKERAGE 30
CUSTODIAN 33
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT 33
TAXES 34
DETERMINATION OF NET ASSET VALUE 37
ADDITIONAL SHAREHOLDER INFORMATION 37
FUND ORGANIZATION 38
SHAREHOLDER MEETINGS 39
PERFORMANCE INFORMATION 39
GENERAL INFORMATION 45
PORTFOLIO MANAGEMENT 47
INDEPENDENT ACCOUNTANTS 50
LEGAL COUNSEL 50
FINANCIAL STATEMENTS 50
APPENDIX A-1
</TABLE>

______________________________________

No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated May 1, 1997 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> 61

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.
3
<PAGE> 62

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

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

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

Except for the fundamental investment limitations listed above and 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.
4
<PAGE> 63

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.

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 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.
5
<PAGE> 64

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.

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."
6
<PAGE> 65

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 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 Strong
Capital Management, Inc.'s (the "Advisor") 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
7

<PAGE> 66

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.

(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.
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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.

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 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) cash or liquid
securities positions 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
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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.

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.
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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.

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
and/or other appropriate liquid assets in an amount generally equal to 10% or
less of the contract value. Margin must also be deposited when writing a call
or put option on a futures contract, in accordance with applicable exchange
rules. Unlike margin in securities transactions, initial margin on futures
contracts does not represent a borrowing, but rather is in the nature of a
performance bond or good-faith deposit that is returned to 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.
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Positions in futures and options on futures may be closed only on an exchange
or board of trade that provides a secondary market. The Funds intend to enter
into futures transactions only on exchanges or boards of trade where there
appears to be a liquid secondary market. However, there can be no assurance
that such a market will exist for a particular contract at a particular time.

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

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

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

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
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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;" 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

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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 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
16

<PAGE> 75

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, 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
17

<PAGE> 76

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.

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

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
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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 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.
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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 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.

SMALL AND MEDIUM COMPANIES

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

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, Small Cap, and Mid 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. 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

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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 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 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 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 38 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
22

<PAGE> 81

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); Value Fund
(since November 1995); and Mid Cap Fund (since October 1996).

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); Value Fund
(since November 1995); and Mid Cap Fund (since October 1996).

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); Value Fund (since November 1995)
; and Mid Cap Fund (since October 1996).

*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 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); Value Fund (since November
1995) ; and Mid Cap Fund (since October 1996).

<PAGE> 82

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); Value Fund
(since November 1995) ; and Mid Cap Fund (since October 1996).

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); Value Fund (since November
1995) ; and Mid Cap Fund (since October 1996).

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); Value Fund (since November
1995) ; and Mid Cap Fund (since October 1996).

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); Value Fund
(since November 1995) ; and Mid Cap Fund (since October 1996).

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); Value Fund (since November 1995)
; and Mid Cap Fund (since October 1996).

<PAGE> 83

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

Mr. Shenkenberg has been Deputy General Counsel to the Advisor since
November 1996. From 1992 until November 1996, Mr. Shenkenberg acted as
Associate Counsel to the Advisor. From June 1987 until December 1992, Mr.
Shenkenberg was an attorney for Godfrey & Kahn, S.C., a Milwaukee law firm.
Mr. Shenkenberg has served the Funds as follows:

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); Value Fund (since April
1996) ; and Mid Cap Fund (since October 1996).

SECRETARY - Opportunity Fund (since October 1996); Growth Fund (since
October 1996); Common Stock Fund (since October 1996); Discovery Fund
(since October 1996); Small Cap Fund (since October 1996); Value Fund
(since October 1996) ; and Mid Cap Fund (since October 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), Value
Fund (since 1996) ; and Mid Cap 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 34108. Mr. Davis'
address is 161 North La Brea, Inglewood, California 90301, Mr. Kritzik's
address is 1123 North Astor Street, P.O. Box 92547, Milwaukee, Wisconsin
53202-0547. Mr. Vogt's address is 2830 East Third Avenue, Denver, Colorado
80206.

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

RICHARD S. STRONG:

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

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

JOHN DRAGISIC:

PRESIDENT AND A DIRECTOR - Holdings (since December 1995 and July 1994,
respectively); Distributors (since September 1996 and July 1994,
respectively); Heritage (since May 1994 and August 1994, respectively);
and SSC (since November 1995).

VICE CHAIRMAN AND A MEMBER OF THE MANAGING BOARD - Real Estate and
Fussville Development (since December 1995 and August 1994,
respectively); and Sherwood (since October 1994).
25

<PAGE> 84

THOMAS P. LEMKE:

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

STEPHEN J. SHENKENBERG:

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

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

As of March 31, 1997, the officers and directors of the Funds (except the
Mid Cap Fund) in the aggregate beneficially owned less than 1% of each Fund's
then outstanding shares. As of March 31, 1997, the officers and directors of
the Mid Cap Fund in the aggregate beneficially owned 59,796 shares of the
Fund's common stock which is 4.42% of the Fund's outstanding shares.

PRINCIPAL SHAREHOLDERS

As of March 31, 1997 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:

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

DISCOVERY FUND
-------------------------------
Lincoln National Life Insurance 1,778,479 7.79%
P.O. Box 1110
Fort Wayne, IN 46801

</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 Deputy General 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 Mid Cap Fund's Advisory Agreement
dated December 30, 1996 was last approved by the Fund's sole shareholder on
December 30, 1996, and will remain in effect as to the Fund 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. 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
26

<PAGE> 85

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, Small Cap, Value, and Mid Cap Funds were approximately $31,418,
$25,560, $19,942, and $37,413, respectively, were advanced by the Advisor, and
will be reimbursed by the Funds over a period of not more than 60 months from
each 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> <C>
Opportunity Fund
1994 $6,335,605 $ 0 $6,335,605
1995 10,843,733 0 10,843,733
1996 15,840,688 0 15,840,688
---------------------------------------------------------

Growth Fund
1994 $484,396 $ 0 $484,396
1995 3,861,111 0 3,861,111
1996 10,356,327 0 10,356,327
---------------------------------------------------------

Common Stock Fund
1994 $7,989,263 $ 0 $7,979,263
1995 9,152,976 0 9,152,976
1996 11,498,902 0 11,498,902
---------------------------------------------------------

Discovery Fund
1994 $3,647,967 $ 0 $3,647,967
1995 4,713,024 0 4,713,024
1996 5,503,157 0 5,503,157
---------------------------------------------------------

Value Fund
----------
1996 $303,298 $ 0 $303,298
---------------------------------------------------------

Small Cap Fund
--------------
1996 $721,130 $ 0 $721,130
---------------------------------------------------------

</TABLE>

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 two percent (2%) of the average net asset value of the Fund
for such year, as determined by valuations made as of the close of each
business day of the year. Reimbursement of expenses in excess of the
applicable limitation will be made on a monthly basis and will be paid to the
Fund by reduction of the Advisor's fee, subject to later adjustment, month by
month, for the remainder of the Fund's fiscal year. The Advisor may from time
to time voluntarily absorb expenses for a Fund in addition to the reimbursement
of expenses in excess of application limitations.
27

<PAGE> 86

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

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

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 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.

<PAGE> 87

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 Funds, 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 Funds and the Advisor or Subadvisor's other
clients ahead of their own.

The Code requires Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor or
Subadvisor, including the 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, is contemporaneously 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 of seven calendar
days during which time Access Persons who are portfolio managers may not trade
in securities which have been purchased or sold by any mutual fund or other
account managed by the portfolio manager.

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

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, a Distribution Agreement dated December
28, 1995 for the Small Cap and Value Funds, and a Distribution Agreement dated
December 30, 1996 for the Mid Cap Fund (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 Advisor acted as underwriter for the Opportunity, Common
Stock, and

<PAGE> 88

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
30

<PAGE> 89

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
31

<PAGE> 90

services to each of the accounts (including the Funds) managed by the Advisor.
Because the volume and nature of the trading activities of the accounts are not
uniform, the amount of commissions in excess of those charged by another broker
paid by each account for brokerage and research services will vary. However,
in the opinion of the Advisor, such costs to the Funds will not be
disproportionate to the benefits received by the Funds on a continuing basis.

The Advisor seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by 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.

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

Opportunity Fund Brokerage Commissions
- ---------------- ---------------------
<S> <C>
1994 $2,114,000
1995 3,873,000
1996 5,343,000

Growth Fund
- -----------
1994 $549,000
1995 2,125,360
1996 4,616,000

</TABLE>

<PAGE> 91

<TABLE>

<S> <C> <C>
Common Stock Fund
- -----------------
1994 $2,905,000
1995 3,060,000
1996 3,968,000
Discovery Fund
- --------------
1994 $5,548,000
1995 6,380,000
1996 6,920,000
Value Fund
- ----------
1996 $129,000
Small Cap Fund
- --------------
1996 $788,000

</TABLE>

For the 1994, 1995, and 1996 fiscal periods ended December 31, the
Discovery Fund's portfolio turnover rates were 606%, 516%, and 792%,
respectively. This portfolio turnover was higher than anticipated primarily
because the Discovery Fund employed a trading strategy to preserve the
favorable tax treatment available to the Fund under the Internal Revenue Code
of 1986 (the "Code"), as amended. For the 1996 fiscal period ended December
31, the Small Cap Fund's portfolio turnover rate was 419%. This portfolio
turnover rate was higher than anticipated partially because the Small Cap Fund
employed a trading strategy to preserve the favorable tax treatment available
to it under the Code and partially because the Small Cap Fund experienced a
change of portfolio managers during the fiscal period.

As of December 31, 1996, the Growth, Small Cap, and Value Funds 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>

Regular Broker or Dealer Value of Securities Owned
or Parent Issuer as of December 31, 1996
- ------------------------ -------------------------
<S> <C>
Travelers Group, Inc. $15,125,000 (Growth)
Cantor Fitzgerald & Company $10,900,000 (Small Cap)
Cantor Fitzgerald & Company $11,400,000 (Value)

</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:
33

<PAGE> 92

Transfer Agency and Dividend Disbursement
Services Charges Incurred

<TABLE>
<CAPTION>
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
1994 $1,512,509 $305,446 $34,044 $0 $1,851,999
1995 2,291,454 216,920 40,488 0 2,548,862
1996 3,113,825 238,493 45,987 0 3,398,305
Growth Fund
1994 $142,921 $34,501 $3,818 $0 $181,240
1995 1,029,731 99,888 17,794 0 1,147,413
1996 2,426,168 253,532 45,376 0 2,725,076
Common Stock Fund
1994 $1,449,445 $398,828 $41,781 $0 $1,890,054
1995 1,424,965 186,368 33,018 0 1,644,351
1996 1,390,697 221,759 27,985 0 1,640,441
Discovery Fund
1994 $1,021,993 $215,173 $24,127 $0 $1,261,293
1995 1,172,370 126,755 23,139 0 1,322,264
1996 1,401,758 121,947 25,678 0 1,549,383
Value Fund
1996 $78,018 $11,609 $1,365 $0 $90,992
Small Cap Fund
1996 $184,588 $23,356 $3,883 $0 $211,827
_________________________________________________________________________________

</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
34

<PAGE> 93

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.

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
35

<PAGE> 94

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. 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
36

<PAGE> 95

each Fund or its shareholders. These tax provisions are subject to change by
legislative or administrative action at the federal, state or local level, and
any changes may be applied retroactively. Any such action that limits or
restricts each Fund's current ability to pass-through earnings without taxation
at the Fund level, or otherwise materially changes a Fund's tax treatment,
could adversely affect the value of a shareholder's investment in a Fund.
Because each Fund's taxes are a complex matter, you should consult your tax
adviser for more detailed information concerning the taxation of a Fund and the
federal, state, and local tax consequences to shareholders of an investment in
a Fund.

DETERMINATION OF NET ASSET VALUE

As set forth in the Prospectus under the caption "Shareholder Manual -
Determining Your Share Price," the net asset value of each Fund will be
determined as of the close of trading on each day the New York Stock Exchange
(the "NYSE") is open for trading. The NYSE is open for trading Monday through
Friday except, New Year's Day, 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 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

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.

REDEMPTION-IN-KIND

The Funds have elected to be governed by Rule 18f-1 under the 1940 Act,
which obligates each Fund to redeem shares in cash, with respect to any one
shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the
assets of the Fund. If the Advisor determines that existing conditions make
cash payments undesirable, redemption payments may be made in whole or in part
in securities or other financial assets, valued for this purpose as they are
valued in computing the NAV for the Fund's shares (a "redemption-in-kind").
Shareholders receiving securities or other financial assets in a
redemption-in-kind may realize a gain or loss for tax purposes, and will incur
any costs of sale, as well as the associated inconveniences. If you expect to
make a redemption in excess of 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 bing
paid with securities in-kind, you may do so by providing Strong Funds with an
unconditional instruction to redeem at least 15 calendar days prior to the date
on which the redemption transaction is to occur, specifying the dollar amount
or number of shares to be redeemed and the date of the transaction (please call
1-800-368-3863). This will provide the Fund with sufficient time to raise the
cash in an orderly manner to pay the redemption and thereby minimize the effect
of the redemption on the interests of the Fund's remaining shareholders.
Redemption checks in excess of the lesser of $250,000 or 1% of the Fund's
assets during any 90-day period may not be honored by the Fund if the Advisor
determines that existing conditions make cash payments undesirable.

<PAGE> 96

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 (or up to
$4,000 between your IRA and your non-working spouses' 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. The distribution must be
eligible for rollover. 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 plan allows an employer
to make deductible contributions to separate IRA accounts established for each
eligible employee.

Salary Reduction Simplified Employee Pension Plan (SAR SEP-IRA): A SAR SEP-IRA
plan is a type of SEP-IRA plan 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. Please note that you may no longer
open new SAR SEP-IRA plans (since December 31, 1996). However, employers with
SAR SEP-IRA plans that were established prior to January 31, 1997 may still
open accounts for new employees.

Simplified Incentive Match Plan for Employees (SIMPLE-IRA): A SIMPLE-IRA plan
is a retirement savings plan that allows employees to contribute a percentage
of their compensation, up to $6,000, on a pre-tax basis, to a SIMPLE-IRA
account. The employer is required to make annual contributions to eligible
employees' accounts. All contributions grow tax-deferred.

Defined Contribution Plan: A defined contribution plan allows self-employed
individuals, partners, or a corporation to provide retirement benefits for
themselves and their employees. Plan types include: profit-sharing plans,
money purchase pension plans, and paired plans (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 on a pre-tax basis 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

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

<TABLE>
<S> <C> <C> <C> <C>
Incorporation Date Series Authorized Par
Corporation Date Created Shares Value ($)
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 Mid Cap Fund 10/28/96 Indefinite .00001
- - Strong Index 500 Fund* 04/08/97 Indefinite .00001
Strong Common Stock Fund, Inc. 11/11/88 Indefinite .001
Strong Discovery Fund, Inc. 09/24/87 Indefinite .001
</TABLE>

* Described in a different prospectus and Statement of Additional Information.

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

<PAGE> 97

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, Value, and
Mid Cap 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.

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:

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.
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.
</TABLE>
39

<PAGE> 98

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.

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
December 31, 1996. No adjustment has been made for taxes, if any, payable on
dividends. Securities prices fluctuated during these periods.

<TABLE>
<CAPTION>
OPPORTUNITY FUND
- ----------------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1996 Increase Increase
---------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $63,637 536.37% 18.32%
Ten Years 10,000 39,798 297.98 14.81
Five Years 10,000 22,062 120.62 17.15
One Year 10,000 11,814 18.14 18.14
_______________________
(1) Commenced operations on December 31, 1985.

</TABLE>

GROWTH FUND
- -----------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1996 Increase Increase
---------- ------------- ---------- ----------
<S> <C> <C> <C> <C>

Life of Fund(1) $10,000 $19,763 97.63% 25.49%
One Year 10,000 11,952 19.52 19.52
____________________
(1) Commenced operations on December 31, 1993.
</TABLE>

<PAGE> 99

<TABLE>
<CAPTION>
COMMON STOCK FUND
- -----------------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1996 Increase Increase
---------- ------------- --------- ----------
<S> <C> <C> <C> <C>

Life of Fund(1) $10,000 $38,078 280.78% 21.05%
Five Year 10,000 24,002 140.02 19.14
One Year 10,000 12,047 20.47 20.47
________________________
(1) Commenced operations on December 29, 1989.

</TABLE>

<TABLE>
<CAPTION>
DISCOVERY FUND
- --------------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1996 Increase Increase
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>

Life of Fund(1) $10,000 $40,439 304.39% 16.79%
Five Years 10,000 16,078 60.78 9.96
One Year 10,000 10,149 1.49 1.49
________________________
(1) Commenced operations on December 31, 1987.

</TABLE>

<TABLE>
<CAPTION>
VALUE FUND
- ----------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1996 Increase Increase
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>

Life of Fund(1) $10,000 $11,681 16.82% 16.82%
One Year 10,000 11,681 16.82 16.82
________________________
(1) Commenced operations on December 31, 1995.

</TABLE>

<TABLE>
<CAPTION>
SMALL CAP FUND
- --------------
Total Average Annual
Return Total Return
------ --------------
Initial Ending Value
$10,000 December 31, Percentage Percentage
Investment 1996 Increase Increase
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>

Life of Fund(1) $10,000 $12,270 22.70% 22.70%
One Year 10,000 12,270 22.70 22.70
________________________
(1) Commenced operations on December 31, 1995.

</TABLE>

The Opportunity, Growth, Common Stock, Discovery, Value, Small Cap, and
Mid Cap Funds' total returns for the three months ending March 31, 1997, were
- -1.93%, -6.83%,-0.11%, -10.14%, 0.62%, -18.04% and -10.36%, respectively.

41
<PAGE> 100

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.

(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. 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
42

<PAGE> 101

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.

FUND NAME INVESTMENT OBJECTIVE

<TABLE>
<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 Index 500 Fund To approximate as closely as practicable (before fees and expenses) the
capitalization-weighted total rate of return of that portion of the
U.S. market for publicly traded common stocks composed of the larger
capitalized companies.
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 Mid Cap Fund Capital growth
Strong Common Stock Fund* Capital growth.
Strong Growth Fund Capital growth.
Strong Discovery Fund Capital growth.
Strong Small Cap Fund Capital growth.
Strong International Stock Fund Capital growth.
Strong Asia Pacific Fund Capital growth.
</TABLE>

* The Fund is closed to new investors, except the Fund may continue to offer
its shares through certain 401(k) plans and similar company-sponsored
retirement plans.
43

<PAGE> 102

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.

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 Index 500 Fund
Heritage Money Fund Municipal Advantage Fund Municipal Bond Fund Total Return Fund
Municipal Money Market Fund Corporate Bond Fund Opportunity Fund
2 TO 4 YEARS International Bond Fund Growth Fund
Short-Term Bond Fund High-Yield Municipal Bond Fund Common Stock Fund*
Short-Term Mundicipal Bond Fund Asset Allocation Fund Discovery Fund
Short-Term Global Bond Fund American Utilities Fund International Stock Fund
High-Yield Bond Fund Asia Pacific Fund
Equity Income Fund Value Fund
Small Cap Fund
Mid Cap Fund
Growth and Income Fund
Schafer Value Fund

</TABLE>

* This Fund is closed to new investors, except the Fund may continue to offer
its shares through certain 401(k) plans and similar company-sponsored
retirement plans.

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.
44

<PAGE> 103

(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>
Standard deviation = the square root of (xi - xm)2
---------
n-1
where = "the sum of",
xi = each individual return during the time period,
xm = the average return over the time period, and
n = the number of individual returns during the time period.
</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.

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.
45

<PAGE> 104

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.

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.
46

<PAGE> 105

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.

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.
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<PAGE> 106

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.

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.
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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 Subadvisor'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:

o corporate restructuring or reorganization - including acquisition or
divestiture of assets
o significant management change
o cyclical turnaround of a depressed business or industry
o 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.

SMALL CAP AND MID CAP FUNDS

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

o Macro analysis to identify attractive sectors or industries;
o Bottom-up investment analysis on the companies in the identified
sectors or industries to select individual stocks;
o 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
o 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
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<PAGE> 108

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.

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 1996 Annual Report for the Value, Opportunity, Common Stock, Growth,
Discovery, and Small Cap 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) Reports of Independent Accountants.

The unaudited financial statements for the Mid Cap Fund for the period
December 31, 1996 through March 31, 1997 that are attached hereto contain the
following financial information for the Fund:

(a) Schedule of Investments in Securities.
(b) Statement of Operations.

<PAGE> 109

(c) Statement of Assets and Liabilities.
(d) Statement of Changes in Net Assets.
(e) Notes to Financial Statements.
(f) Financial Highlights.

<PAGE> 110

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

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

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

FITCH INVESTORS SERVICE, INC. BOND RATINGS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

C Bonds are in imminent default in payment of interest or
principal or suspension of preferred stock dividends is imminent.

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

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

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

Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security classes
in the capital structure, the overall credit strength of the issuer, and the
nature of covenant protection. Review of indenture restrictions is important
to the analysis of a company's operating and financial constraints. From time
to time, Duff & Phelps Credit Rating Co. places issuers or security classes on
Rating Watch. The Rating Watch Status results from a need to notify investors
and the issuer that there are conditions present leading us to re-evaluate the
current rating(s). A listing on Rating Watch, however, does not mean a rating
change is inevitable. The Rating Watch Status can either be resolved quickly
or over a longer period of time, depending on the reasons surrounding the

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placement on Rating Watch. The "up" designation means a rating may be
upgraded; the "down" designation means a rating may be downgraded, and the
uncertain designation means a rating may be raised or lowered.

The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary). Ratings of 'BBB-' and higher fall within the
definition of investment grade securities, as defined by bank and insurance
supervisory authorities. Structured finance issues, including real estate,
asset-backed and mortgage-backed financings, use this same rating scale with
minor modification in the definitions. Thus, an investor can compare the
credit quality of investment alternatives across industries and structural
types. A "Cash Flow Rating" (as noted for specific ratings) addresses the
likelihood that aggregate principal and interest will equal or exceed the rated
amount under appropriate stress conditions.

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

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

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

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

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

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

B+ Below investment grade and possessing risk that obligations will not be met
B when due. Financial protection factors will fluctuate widely according to
B- economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a higher
or lower rating grade.

CCC Well below investment grade securities. Considerable uncertainty exists as to
timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.

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

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

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

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

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

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

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

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

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

C - Obligations which are currently in default.

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

THOMSON BANKWATCH LONG-TERM DEBT RATINGS

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

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

INVESTMENT GRADE

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

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

A-6

<PAGE> 116

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

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

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

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

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

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

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

D (LC-D) - Default.

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

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

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

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

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

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

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

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

STANDARD & POOR'S NOTE RATINGS
A-7

<PAGE> 117

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:

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

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

Note rating symbols and definitions are as follows:

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

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

SP-3 Speculative capacity to pay principal and interest.

MOODY'S SHORT-TERM RATINGS

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

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

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

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

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

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

FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS
A-8
<PAGE> 118

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

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

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

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

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

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

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

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

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

DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

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

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

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

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

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

Rating Scale: Definition
------------- ----------
A-9

<PAGE> 119

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.

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

Good Grade

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

Satisfactory Grade

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

Non-Investment Grade

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

Default

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

THOMSON BANKWATCH (TBW) SHORT-TERM RATINGS

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

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

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

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

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

IBCA SHORT-TERM RATINGS

IBCA Short-Term Ratings assess the borrowing characteristics of banks and
corporations, and the capacity for timely repayment of debt obligations. The
Short-Term Ratings relate to debt which has a maturity of less than one year.
A-10

<PAGE> 120

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

A2 Obligations supported by a good capacity for timely repayment.

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.

SCHEDULE OF INVESTMENTS IN SECURITIES March 31, 1997 (Unaudited)
- ----------------------------------------------------------------------------------------
STRONG MID CAP FUND
- ----------------------------------------------------------------------------------------
SHARES OR
PRINCIPAL VALUE
AMOUNT (NOTE 2)

<S> <C> <C>
COMMON STOCKS 104.3%
AUTO & TRUCK PARTS 1.8%
Borg-Warner Automotive, Inc. 3,300 $140,663
Lear Corporation (b) 2,400 80,100
-------
220,763
BANK - MONEY CENTER 1.0%
Bankers Trust New York Corporation 1,500 123,000

BROKERAGE & INVESTMENT MANAGEMENT 5.6%
Avalon Properties, Inc. 2,500 68,750
Cali Realty Corporation 2,100 67,200
First Industrial Realty Trust, Inc. 4,100 129,663
Liberty Property Trust 5,800 142,100
Patriot American Hospitality, Inc. 5,600 135,800
Starwood Lodging Trust 3,850 150,150
-------
693,663

CHEMICAL 0.5%
Potash Corporation of Saskatchewan, Inc. 800 60,800

COMMERCIAL SERVICE 3.0%
Manpower, Inc. 5,300 190,800
National Education Corporation (b) 4,400 55,550
Outdoor Systems, Inc. (b) 4,100 122,488
-------
368,838
COMPUTER - PERIPHERAL EQUIPMENT 1.7%
Adaptec, Inc. (b) 1,900 67,925
Quantum Corporation (b) 3,800 146,775
-------
214,700
COMPUTER - PERSONAL & WORKSTATION 1.3%
Data General Corporation (b) 9,400 159,800

COMPUTER SERVICE 2.7%
America Online, Inc. (b) 3,400 144,075
HBO & Company 2,700 128,250
Yahoo, Inc. (b) 2,400 67,500
-------
339,825
COMPUTER SOFTWARE 7.0%
Ascend Communications, Inc. (b) 1,400 57,050
Baan Company NV (b) 2,100 93,712
Cognos, Inc. (b) 3,300 85,800
Compuware Corporation (b) 2,100 131,775
McAfee Associates, Inc. (b) 3,400 150,450
PeopleSoft, Inc. (b) 3,200 128,000
Remedy Corporation (b) 1,900 72,675
3Com Corporation (b) 4,800 157,200
-------
876,662
CONSUMER - MISCELLANEOUS 1.2%

</TABLE>

Page 1
<PAGE> 122
<TABLE>
<CAPTION>

<S> <C> <C>
Blyth Industries, Inc. (b) 4,100 148,112

COSMETIC & PERSONAL CARE 0.5%
General Nutrition Companies, Inc. (b) 3,100 62,775

ELECTRONIC INSTRUMENTATION 0.9%
Millipore Corporation 2,600 110,175

ELECTRONICS - SEMICONDUCTOR/COMPONENT 6.6%
Altera Corporation (b) 1,500 64,500
Analog Devices, Inc. (b) 3,100 69,750
Cypress Semiconductor, Inc. (b) 10,300 128,750
LSI Logic Corporation (b) 1,900 66,025
Lam Research Corporation (b) 900 30,375
Lattice Semiconductor Corporation (b) 2,800 128,100
Maxim Integrated Products, Inc. (b) 1,500 72,563
Teradyne, Inc. (b) 3,900 112,612
Xilinx, Inc. (b) 3,000 146,250
---------
818,925
FINANCE - MISCELLANEOUS 1.7%
Dean Witter, Discover & Company 3,000 104,625
First USA, Inc. 2,400 101,700
---------
206,325
FOOD 1.7%
Interstate Bakeries Corporation 4,500 212,625

HEALTHCARE - BIOMEDICAL/GENETIC 8.0%
Agouron Pharmaceuticals, Inc. (b) 2,400 169,500
BioChem Pharma, Inc. (b) 3,200 137,600
Centocor, Inc. (b) 3,800 115,900
Cephalon, Inc. (b) 1,000 21,000
Genzyme Corporation (b) 9,000 202,500
Gilead Sciences, Inc. (b) 1,800 41,175
Incyte Pharmaceuticals, Inc (b) 2,400 124,800
Protein Design Labs, Inc. (b) 2,100 63,000
Vertex Pharmaceuticals, Inc. (b) 3,100 124,775
---------
1,000,250
HEALTHCARE - DRUG/DIVERSIFIED 3.1%
Dura Pharmaceuticals, Inc. (b) 2,500 89,375
Elan Corporation PLC ADR (b) 3,700 126,263
The Liposome Company, Inc. (b) 4,700 95,762
Teva Pharmaceutical Industries, Ltd. ADR 1,400 77,700
---------
389,100
HEALTHCARE - INSTRUMENTATION 2.1%
Endovascular Technologies, Inc. (b) 7,000 96,250
Sofamor/Danek Group, Inc. (b) 2,600 93,925
United States Surgical Corporation 2,500 76,250
---------
266,425
HEALTHCARE - MEDICAL SUPPLY 2.2%
Amerisource Distribution Corporation Class A (b) 2,900 126,875
Parexel International Corporation (b) 3,900 89,700
Pharmaceutical Product Development, Inc. (b) 2,600 52,000
---------
268,575
HEALTHCARE - PATIENT CARE 5.9%

</TABLE>

Page 2
<PAGE> 123

<TABLE>
<S> <C> <C>
Genesis Health Ventures, Inc. (b) 2,900 90,625
Oxford Health Plans, Inc. (b) 3,000 175,875
Pacificare Health Systems, Inc. (b) 1,700 146,625
Tenet Healthcare Corporation (b) 7,900 194,538
United Healthcare Corporation 2,800 133,350
---------
741,013
HEALTHCARE - PRODUCT 0.8%
DePuy, Inc. (b) 4,400 96,250

HOUSEHOLD APPLIANCES & FURNISHINGS 1.4%
Pillowtex Corporation 4,500 79,875
WestPoint Stevens, Inc. (b) 2,500 95,312
---------
175,187
INSURANCE - MULTI-LINE 1.2%
MBIA, Inc. 1,500 143,812

LEISURE SERVICE 2.1%
La Quinta Inns, Inc. 6,100 125,050
Royal Caribbean Cruises, Ltd. 4,400 134,200
---------
259,250
MACHINERY - AGRICULTURE 0.5%
Case Corporation 1,200 60,900

MACHINERY - CONSTRUCTION & MINING 1.1%
JLG Industries, Inc. 7,100 139,338

MACHINERY - TRANSPORTATION EQUIPMENT & PARTS 0.5%
Stewart & Stevenson Services, Inc. 3,600 72,000

MEDIA - RADIO/TV 1.7%
Clear Channel Communications, Inc. (b) 3,000 128,625
Univision Communications, Inc. (b) 2,600 84,825
---------
213,450
OIL - NORTH AMERICAN EXPLORATION & PRODUCTION 1.1%
Anadarko Petroleum Corporation 1,200 67,350
Apache Corporation 2,100 70,350
---------
137,700
OIL WELL EQUIPMENT & SERVICE 13.3%
Camco International, Inc. 3,100 136,400
Diamond Offshore Drilling, Inc. (b) 3,100 212,350
ENSCO International, Inc. (b) 4,100 201,925
Energy Ventures, Inc.(b) 2,600 160,225
Falcon Drilling Company, Inc. (b) 3,800 140,600
Global Industries, Ltd. (b) 7,600 162,450
Marine Drilling Companies, Inc. (b) 9,200 163,300
Petroleum Geo-Services A/S ADR (b) 1,800 77,400
Smith International, Inc. (b) 3,000 136,875
Tidewater, Inc. 1,500 69,000
Transocean Offshore, Inc. 3,600 202,050
---------
1,662,575
POLLUTION CONTROL 2.6%
Newpark Resources, Inc. (b) 2,000 87,500
USA Waste Services, Inc. (b) 2,300 81,650
United Waste Systems, Inc. (b) 4,000 149,000
---------

</TABLE>

Page 3
<PAGE> 124
<TABLE>
<S> <C> <C>
318,150
RETAIL - DEPARTMENT STORE 1.0%
Saks Holdings, Inc. (b) 4,300 123,625

RETAIL - DISCOUNT & VARIETY 1.1%
Family Dollar Stores, Inc. 6,000 140,250

RETAIL - RESTAURANT 1.4%
CKE Restaurants, Inc. 3,600 79,650
Starbucks Corporation (b) 3,300 97,762
-----------
177,412
RETAIL - SPECIALTY 7.7%
Corporate Express, Inc. (b) 14,600 149,650
Gucci Group NV 1,900 137,038
Intimate Brands, Inc. 9,400 177,425
The Mens Wearhouse, Inc. (b) 7,000 192,500
The Pep Boys - Manny, Moe & Jack 4,000 120,000
Tiffany & Company 5,000 190,000
-----------
966,613
SHOE & APPAREL MANUFACTURING 2.0%
Jones Apparel Group, Inc. (b) 3,400 126,225
Tommy Hilfiger Corporation (b) 2,400 125,400
-----------
251,625
TELECOMMUNICATION EQUIPMENT 5.4%
ADC Telecommunications, Inc. (b) 5,000 134,375
Andrew Corporation (b) 1,800 65,025
CIENA Corporation (b) 4,200 119,437
Newbridge Networks Corporation (b) 4,400 125,950
Pair Gain Technologies, Inc. (b) 4,300 127,388
Scientific-Atlanta, Inc. 6,400 97,600
-----------
669,775
TELECOMMUNICATION SERVICE 0.9%
WorldCom, Inc. (b) 5,400 118,800
-----------
TOTAL COMMON STOCKS (COST $13,572,046) 13,009,063

SHORT-TERM INVESTMENTS (A) 9.5%
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.29% $59,600 59,600
Johnson Controls, Inc., 5.31% 942,300 942,300
Sara Lee Corporation, 5.27% 165,800 165,800
Wisconsin Electric Power Company, 5.33% 20,700 20,700
TOTAL SHORT-TERM INVESTMENTS
-----------
(COST $1,188,400) 1,188,400
-----------
TOTAL INVESTMENTS IN SECURITIES
(COST $14,760,447) 113.8% 14,197,463
Other Assets and Liabilities, Net (13.8%) (1,721,526)
-----------
NET ASSETS 100.0% $12,475,937
===========
</TABLE>

Page 4
<PAGE> 125
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- -------------------------------------------------------------------------------
United States ................................................... 108.1%
Canada .......................................................... 1.6%
Netherlands ..................................................... 1.4%
Italy ........................................................... 1.1%
Ireland ......................................................... 1.0%
Israel .......................................................... 0.6%
Other Assets and Liabilities, Net ............................... (13.8%)
------
Total ........................................................... 100.0%
======

LEGEND

(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.

Percentages are stated as a percent of net assets.
<PAGE> 126
<TABLE>
<CAPTION>

STATEMENT OF OPERATIONS
For the Period Ended March 31, 1997 (Note 1) (Unaudited)
<S> <C>
INCOME:
Dividends $10,541
Interest 30,330
-----------
Total Income 40,871

EXPENSES:
Investment Advisory Fees 28,784
Custodian Fees 4,248
Shareholder Servicing Costs 6,261
Reports to Shareholders 3,267
Federal and State Registration Fees 6,264
Other 712
-----------
Total Expenses 49,536
-----------
NET INVESTMENT LOSS (8,665)

REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Loss on Investments (1,175,634)
Change in Unrealized Appreciation/Depreciation on Investments (562,984)
-----------
NET LOSS (1,738,618)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($1,747,283)
===========

</TABLE>

See notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997 (Unaudited)

<S> <C>
ASSETS:
Investments in Securities, at Value
(Cost of $14,760,446) $14,197,463
Receivable for Fund Shares Sold 500
Dividends and Interest Receivable 13,976
Other Assets 36,747
-----------
Total Assets 14,248,686

LIABILITIES:
Payable to Brokers for Securities and
Forward Foreign Currency Contracts Purchased 1,730,694
Accrued Operating Expenses and Other Liabilities 42,055
-----------
Total Liabilities 1,772,749
-----------
NET ASSETS $12,475,937
===========

Capital Shares Outstanding (Unlimited Number 1,393,130
(Authorized)
NET ASSET VALUE PER SHARE $8.96
===========

</TABLE>

See notes to financial statements.
<PAGE> 128
<TABLE>
<CAPTION>

STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------
PERIOD ENDED
MARCH 31, 1997
(UNAUDITED)
--------------
(NOTE 1)
<S> <C>
OPERATIONS:
Net Investment Loss ($8,665)
Net Realized Loss (1,175,634)
Change in Unrealized Appreciation/Depreciation (562,984)
-----------
Decrease in Net Assets Resulting from Operations (1,747,283)

CAPITAL SHARE TRANSACTIONS 14,229,070

DISTRIBUTIONS FROM NET INVESTMENT INCOME (5,850)
-----------
TOTAL INCREASE IN NET ASSETS 12,475,937

NET ASSETS:
Beginning of Period ---
-----------
End of Period $12,475,937
===========

</TABLE>

See notes to financial statements.
<PAGE> 129
FINANCIAL HIGHLIGHTS

3-31-97(b)
-----------
(UNAUDITED)

<S> <C>
SELECTED PER-SHARE DATA (A)
Net Asset Value, Beginning of Period $ 10.00
Income from Investment Operations:
Net Investment Loss (0.01)
Net Realized and Unrealized Losses on
Investments (1.03)
---------
Total from Investment Operations (1.04)
---------
NET ASSET VALUE, END OF PERIOD $ 8.96
=========

TOTAL RETURN -10.4%

RATIOS AND SUPPLEMENTAL DATA
Net Assets, End of Period (In Thousands) $ 12,476
Ratio of Expenses to Average Net Assets 1.7%*
Ratio of Net Investment Income to Average
Net Assets (0.3%)*
Portfolio Turnover Rate 67.9%
Average Commission Rate Paid $ 0.0581
</TABLE>

* Calculated on an annualized basis.

(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.

(b) Inception date is December 31, 1996. Total return and portfolio turnover
rate are not annualized.

<PAGE> 130
NOTES TO FINANCIAL STATEMENTS

March 31, 1997 (Unaudited)

1. ORGANIZATION
The Strong Mid Cap Fund commenced operations on December 31, 1996, and is a
diversified series of the Strong Equity Funds, Inc., an open-end management
investment company registered under the Investment Company Act of 1940.

2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.

(A) Security Valuation -- Portfolio securities traded primarily on a
principal securities exchange are valued at the last reported sales
price or the mean between the latest bid and asked prices where no last
sales price is available. Securities traded over-the-counter are valued
at the mean of the latest bid and asked prices or the last reported
sales price. Debt securities not traded on a principal securities
exchange are valued through valuation obtained from a commercial pricing
service, otherwise sale or bid prices are used. Securities for which
market quotations are not readily available when held by the Fund are
valued at fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of
the Board of Directors. Securities which are purchased within 60 days
of their stated maturity are valued at amortized cost, which
approximates current value.

The Fund may own certain investment securities which are restricted as to
resale. These securities are valued after giving due consideration to
pertinent factors, including recent private sales, market conditions and
the issuer's financial performance. The Fund generally bears the costs,
if any, associated with the disposition of restricted securities.

(B) Federal Income and Excise Taxes and Distributions to Shareholders --
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders
in a manner which results in no tax cost to the Fund. Therefore, no
Federal income or excise tax provision is required.

The character of distributions made during the year from net investment
income or net realized gains may differ from the characterization for
Federal income tax purposes due to differences in the recognition of
income and expense items for financial statement and tax purposes.
Where appropriate, reclassifications between net asset accounts are made
for such differences that are permanent in nature.

(C) Realized Gains and Losses on Investment Transactions -- Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.

(D) Futures -- Upon entering into a futures contract, the Fund pledges to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. The Fund also receives from
or pays to the broker an amount of cash equal to the daily fluctuation
in the value of the contract. Such receipts or payments are known
as "variation margin," and are recorded as unrealized gains or losses.
When the futures contract is closed, a realized gain or loss is recorded
equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.

(E) Options -- Premiums received by the Fund upon writing put or call
options are recorded as an asset with a corresponding liability which is
subsequently adjusted to the current market value of the option.
When an option expires, is exercised, or is closed, the Fund realizes a
gain or loss, and the liability is eliminated. The Fund continues to
bear the risk of adverse movements in the price of the underlying asset
during the period of the option, although any potential loss during the
period would be reduced by the amount of the option premium received.

(F) Foreign Currency Translation -- Investment securities and other
assets and liabilities initially expressed in foreign currencies are
converted to U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income are converted to
U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. The effect of changes in foreign
exchange rates on realized and unrealized security gains or losses is
reflected as a component of such gains or losses.

(G) Forward Foreign Currency Exchange Contracts -- Forward foreign
currency exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the Fund records
an exchange gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it was
closed.

(H) Additional Investment Risk -- The use of futures contracts, options,
foreign denominated assets, forward foreign currency exchange contracts
and other similar instruments for purposes of hedging the Fund's
investment portfolio involves, to varying degrees, elements of market
risk in excess of the amount recognized in the statement of assets and
liabilities. The predominant risk with futures contracts is an
imperfect correlation between the value of the contracts and the
underlying securities. Foreign denominated assets and forward foreign
currency exchange contracts may involve greater risks than domestic
transactions, including currency, political and economic, regulatory and
market risks.

<PAGE> 131

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

March 31, 1997 (Unaudited)

(I) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.

(J) Other -- Investment security transactions are recorded as of the
trade date. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premium and discounts.

3. NET ASSETS
Net assets as of March 31, 1997 were as follows:

<TABLE>
<S> <C>
Capital Stock $14,229,070
Undistributed Net Investment Income 5,499
Undistributed Net Realized Loss (1,195,648)
Net Unrealized Depreciation (562,984)
-----------
$12,475,937
===========
</TABLE>

4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund for the period ended March 31, 1997 were
as follows:

<TABLE>
<CAPTION>
1997
----------------------------
Shares Dollars
--------- ----------
<S> <C> <C>

Shares Sold 1,907,948 $19,372,582
Dividends Reinvested 612 5,738
Shares Redeemed (515,430) (5,149,250)
--------- ----------
1,393,130 $14,229,070
========= ==========
</TABLE>

5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Fund are affiliated, provides investment advisory
services and shareholder recordkeeping and related services to the Fund.
Investment advisory fees, which are established by terms of the Advisory
Agreement, are based on an annualized rate of 1.00% of the average daily net
assets of the Fund. Advisory fees are subject to reimbursement by the
Advisor if the Fund's operating expenses exceed certain levels. Shareholder
recordkeeping and related service fees are based on contractually
established rates for each open and closed shareholder account. In addition,
the Advisor is compensated for certain other services related to costs
incurred for reports to shareholders.

The Fund may invest cash reserves in money market funds sponsored and managed
by Strong Capital Management, Inc., subject to certain limitations. The
terms of such transactions are identical to those of non-related entities
except that, to avoid duplicate investment advisory fees, the Advisor remits
to the Fund an amount equal to all fees otherwise due to the Fund under its
investment advisory agreement for the assets invested in such money market
funds.

Certain information regarding related party transactions for the period ended
March 31, 1997 is as follows:

<TABLE>

<S> <C>
Payable to Advisor at March 31, 1997 $36,073
Other Shareholder Servicing Expenses Paid to Advisor 98
Unaffiliated Directors' Fees 375
</TABLE>

6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the period
ended March 31, 1997 were $23,018,770 and $8,251,076, respectively.
<PAGE> 132

STRONG INDEX 500 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. There are no sales charges or 12b-1 fees. Strong Funds
include growth funds, conservative equity funds, income funds, municipal income
funds, international funds, and cash management funds. The Strong Index 500 Fund
(the "Fund") is described in this Prospectus. The Fund seeks to approximate as
closely as practicable (before fees and expenses) the capitalization-weighted
total rate of return of that portion of the U.S. market for publicly-traded
common stocks composed of the larger capitalized companies. THE FUND INVESTS ALL
OF ITS ASSETS IN THE S&P 500 INDEX MASTER PORTFOLIO (THE "MASTER PORTFOLIO") OF
MASTER INVESTMENT PORTFOLIO, AN OPEN-END, MANAGEMENT INVESTMENT COMPANY ("MIP"),
RATHER THAN IN A PORTFOLIO OF SECURITIES. THE MASTER PORTFOLIO HAS SUBSTANTIALLY
THE SAME INVESTMENT OBJECTIVE AS THE FUND. The Fund is a diversified series of
Strong Equity Funds, Inc., an open-end, management investment company.

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 May 1, 1997, 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. If you would like to electronically
access additional information about the Fund after reading the Prospectus, you
may do so by accessing the SEC's World Wide Web site (at http://www.sec.gov)
that contains the Statement of Additional Information regarding the Fund and
other related materials.

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

May 1, 1997

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

PROSPECTUS PAGE I-1
<PAGE> 133

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
EXPENSES................................. I-3
INVESTMENT OBJECTIVE AND POLICIES........ I-5
MASTER/FEEDER STRUCTURE.................. I-6
ABOUT THE FUND........................... I-8
SHAREHOLDER MANUAL....................... II-1
APPENDIX................................. A-1
</TABLE>

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

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

PROSPECTUS PAGE I-2
<PAGE> 134

EXPENSES

The following information, which reflects expenses for the Fund at both the
Fund and the Master Portfolio levels, 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 (for shares held less than six
months).............................................. 0.50%
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 other
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 net assets)

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

<TABLE>
<CAPTION>
Shareholder Total
Management Servicing Other 12b-1 Operating
Fund Fees Fees Expenses Fees Expenses
<S> <C> <C> <C> <C> <C>
Index 500 Fund 0.05% 0.25% 0.50% NONE 0.45%*
</TABLE>

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

* Total Operating Expenses reflect the waiver of fees and/or absorption of
expenses as described below. Without such waivers and/or absorptions, the
Total Operating Expenses would have been .80%.

From time to time, Strong Capital Management, Inc., the Fund's shareholder
servicing agent and transfer and dividend-disbursing agent ("Strong") may
voluntarily waive its fees and/or absorb certain expenses for the Fund. Since
the Fund is new and did not begin operations until May 1, 1997, Total Operating
Expenses without waivers and/or absorptions have been estimated.

STRONG HAS AGREED TO VOLUNTARILY WAIVE ITS FEES AND/OR ABSORB OTHER EXPENSES
TO THE EXTENT NECESSARY TO MAINTAIN THE FUND'S TOTAL OPERATING EXPENSES AT NO
MORE THAN 0.45% UNTIL JANUARY 1, 1999. For additional information concerning
fees and expenses, see "About the Fund - Management."

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

PROSPECTUS PAGE I-3
<PAGE> 135

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>
Index 500 Fund $8 $26
</TABLE>

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

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

With regard to the combined fees and expenses of the Fund and the Master
Portfolio, the Fund's Board of Directors has considered whether the various
costs and benefits of investing all of the Fund's assets in the Master Portfolio
rather than directly in a portfolio of securities would be more or less than if
the Fund invested in portfolio securities directly. The Fund's Board of
Directors believes that the aggregate per share expenses of the Fund and the
Master Portfolio will be less than or approximately equal to the expenses the
Fund would incur if it directly acquired and managed the type of securities held
by the Master Portfolio. Other mutual funds may invest in the Master Portfolio.
The expenses and, accordingly, the investment returns of such other mutual funds
may differ from those of the Fund.

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

PROSPECTUS PAGE I-4
<PAGE> 136

INVESTMENT OBJECTIVE AND POLICIES

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.

STRONG INDEX 500 FUND

The Fund seeks to approximate as closely as practicable (before fees and
expenses) the capitalization-weighted total rate of return of that portion of
the U.S. market for publicly-traded common stocks composed of the larger
capitalized companies. This investment objective is fundamental and cannot be
changed without shareholder approval. The Fund seeks to achieve its investment
objective by investing all of its assets in the Master Portfolio of MIP, which
has substantially the same fundamental investment objective as the Fund. The
Master Portfolio seeks to achieve its objective by investing substantially all
its assets in the same stocks and in substantially the same percentages as the
S&P 500 Index*. The weightings of stocks in the S&P 500 Index are based on each
stock's relative total market capitalization; that is, its market price per
share times the number of shares outstanding.

No attempt is made to manage the portfolio of the Master Portfolio using
economic, financial and market analysis. The Master Portfolio is managed by
determining which securities are to be purchased or sold to replicate, to the
extent feasible, the investment characteristics of the S&P 500 Index. Under
normal market conditions, at least 90% of the value of the Master Portfolio's
total assets is invested in securities comprising the S&P 500 Index. The Master
Portfolio attempts to achieve, in both rising and falling markets, a correlation
of at least 95% between the total return of its net assets before expenses and
the total return of the S&P 500 Index. Perfect (100%) correlation would be

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

*S&P does not sponsor the Fund or the Master Portfolio, nor is it affiliated in
any way with Barclays Global Fund Advisors, the Master Portfolio's investment
advisor, the Master Portfolio, or the Fund. "Standard & Poor's(R)," "S&P(R),"
"S&P 500(R)," and "Standard & Poor's 500(R)" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by the Fund. The Fund and the
Master Portfolio are not sponsored, endorsed, sold, or promoted by S&P and S&P
makes no representation regarding the advisability of investing in the Fund and
the Master Portfolio. S&P's only relationship to the Master Portfolio and the
Fund is the licensing of certain trademarks and trade names of S&P and of the
S&P 500 Index. The S&P 500 Index is determined, composed and calculated by S&P
without regard to the Fund or the Master Portfolio.

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

PROSPECTUS PAGE I-5
<PAGE> 137

achieved if the total return of the Master Portfolio's net assets increased or
decreased exactly as the total return of the S&P 500 Index increased or
decreased.

The Master Portfolio's ability to match its investment performance to the
investment performance of the S&P 500 Index may be affected by, among other
things, the Fund's and the Master Portfolio's expenses, the amount of cash and
cash equivalents held by the Master Portfolio's investment portfolio, the manner
in which the total return of the S&P 500 Index is calculated and the timing,
frequency and size of shareholder purchases and redemptions. The Master
Portfolio uses cash flows from shareholder purchase and redemption activity to
maintain, to the extent feasible, the similarity of its portfolio to the
securities comprising the S&P 500 Index. Barclays Global Fund Advisors, the
Master Portfolio's investment advisor ("BGFA"), regularly monitors the Master
Portfolio's correlation to the S&P 500 Index and adjusts the portfolio of the
Master Portfolio to the extent necessary to seek at least a 95% correlation to
the S&P 500 Index. The Fund's performance will correspond directly to the
experience of the Master Portfolio.

In seeking to replicate the performance of the S&P 500 Index, the Master
Portfolio also may engage in futures and options transactions and other
derivative securities transactions, and may lend its portfolio securities, each
of which involves risk. (See "Appendix - Additional Investment Policies.")
Generally, the Master Portfolio attempts to be fully invested at all times in
securities comprising the S&P 500 Index and in futures and options on stock
index futures.

The Master Portfolio may invest some of its assets (no more than 10% of total
assets under normal market conditions) in high-quality money market instruments,
which include U.S. Government obligations, obligations of domestic and foreign
banks, repurchase agreements, commercial paper (including variable amount master
demand notes) and short-term corporate debt obligations. Such investments will
be made on an ongoing basis to provide liquidity and, to a greater extent, on a
temporary basis, when there is an unexpected or abnormal level of investor
purchases or redemptions of Fund shares or when "defensive" strategies are
appropriate. In addition, the Master Portfolio may engage in securities lending
to increase its income. A more complete description of the Master Portfolio's
investments and investment activities is contained in "Appendix - Additional
Investment Policies."

MASTER/FEEDER STRUCTURE

The Fund is a feeder fund in a master/feeder structure. Accordingly, the Fund
invests all of its assets in the Master Portfolio which has substantially the
same investment objective as the Fund. (See "About the Fund - Management.") In
addition to selling its shares to the Fund, the Master Portfolio has and may
continue to sell its shares to certain other mutual funds or other accredited
investors. Information regarding additional options, if any, for investment in
shares of the Master Portfolio is available from Stephens, Inc., the Master

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

PROSPECTUS PAGE I-6
<PAGE> 138

Portfolio's placement agent ("Stephens"), and may be obtained by calling
1-800-643-9691. The expenses and, correspondingly, the returns of other
investment options in the Master Portfolio may differ from those of the Fund.

The Fund's Board of Directors believes that, as other investors invest their
assets in the Master Portfolio, certain economic efficiencies may be realized
with respect to the Master Portfolio. For example, fixed expenses that otherwise
would have been borne solely by the Fund (and the other existing interestholders
in the Master Portfolio) would be spread across a larger asset base as more
funds invest in the Master Portfolio. The Fund is liable for its proportionate
share of the obligations of the Master Portfolio. However, the risk of the Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance exists and the Master Portfolio
itself is unable to meet its obligations. Accordingly, the Board believes that
the Fund and its shareholders will not be adversely affected by reason of
investing the Fund's assets in the Master Portfolio. However, if a mutual fund
or other investor withdraws its investment from the Master Portfolio, the
economic efficiencies (e.g., spreading fixed expenses across a larger asset
base) that the Fund's Board believes should be available through investment in
the Master Portfolio may not be fully achieved or maintained. In addition, given
the relatively novel nature of the master/feeder structure, accounting and
operational difficulties could occur.

The Master Portfolio's investment objective and other fundamental policies,
which are substantially the same as those of the Fund, cannot be changed without
approval by the holders of a majority (as defined in the Investment Company Act
of 1940 (the "1940 Act")) of the Master Portfolio's outstanding voting
interests. Whenever the Fund, as a Master Portfolio interestholder, is requested
to vote on matters pertaining to any fundamental policy of the Master Portfolio,
the Fund will hold a meeting of its shareholders to consider such matters and
the Fund will cast its votes in proportion to the votes received from the Fund's
shareholders. The Fund will vote the Master Portfolio shares for which it
receives no voting instructions in the same proportion as the votes received
from Fund shareholders. In addition, certain policies of the Master Portfolio
which are non-fundamental can be changed by vote of a majority of its Board of
Trustees without a vote of interestholders. If the Master Portfolio's investment
objective or policies are changed, the Fund could subsequently change its
investment objective or policies to correspond to those of the Master Portfolio
or the Fund could redeem its Master Portfolio interests and either seek a new
investment company with a matching objective in which to invest or retain its
own investment advisor to manage its portfolio in accordance with its objective.
In the latter case, the Fund's inability to find a substitute investment company
in which to invest or equivalent management services could adversely affect
shareholders' investments in the Fund.

The Fund may withdraw its investments in the Master Portfolio only if the
Board of Directors of the Fund determines that is in the best interests of the
Fund and its shareholders to do so. Upon any such withdrawal, the Board of
Directors of the Fund would consider what action might be taken, including

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

PROSPECTUS PAGE I-7
<PAGE> 139

the investment of all the assets of the Fund in another pooled investment entity
having the same investment objective as the Fund or the hiring of an investment
advisor to manage the Fund's assets in accordance with the investment policies
described above with respect to the Master Portfolio.

The Fund's investment objective and other fundamental policies cannot be
changed without approval by the holders of a majority (as defined in the 1940
Act) of the Fund's outstanding voting shares.

Information on the Fund's and Master Portfolio's investment objectives,
policies and restrictions is included under "Investment Objective and Policies"
and "Appendix - Additional Investment Policies" in this Prospectus and
"Investment Restrictions" and "Investment Policies and Techniques" in the SAI.

ABOUT THE FUND

MANAGEMENT

GENERAL. The Fund has not retained the services of an investment advisor
because the Fund's assets are invested in the Master Portfolio, which has
retained investment advisory services (see "Master Portfolio Investment Advisor"
below). However, the Fund bears a pro rata portion of the investment advisory
and certain other fees paid by the Master Portfolio, such as accounting, legal,
and SEC registration fees. The Fund is also responsible for its own expenses
relating to, among other things, custodial and fund accounting services, and
transfer and dividend-disbursing agent services. MIP is registered under the
1940 Act as an open-end management investment company. MIP was organized on
October 21, 1993 as a Delaware business trust.

BOARD OF DIRECTORS/TRUSTEES. The business and affairs of the Fund are managed
under the direction of its Board of Directors. The Board of Directors of the
Fund supervises the Fund's activities and monitors its contractual arrangements
with various service providers. The Board of Trustees of MIP act in the same
capacity with regard to the Master Portfolio.

MASTER PORTFOLIO INVESTMENT ADVISOR. BGFA serves as investment advisor to the
Master Portfolio. Pursuant to an Investment Advisory Contract with the Master
Portfolio, BGFA provides investment guidance and policy direction in connection
with the management of the Master Portfolio's assets, subject to the overall
authority of the Board of Trustees and in conformity with Delaware Law and the
stated policies of the Master Portfolio. BGFA is an indirect subsidiary of
Barclays Bank PLC ("Barclays") and is located at 45 Fremont Street, San
Francisco, California 94105. As of February 28, 1997, BGFA and its affiliates
provided investment advisory services for over $423 billion of assets. For its
advisory services to the Master Portfolio, BGFA is contractually enti-

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

PROSPECTUS PAGE I-8
<PAGE> 140

tled to receive a monthly fee at the annual rate of 0.05% of the Master
Portfolio's average daily net assets. This investment advisory fee is an expense
of the Master Portfolio borne proportionately by its interestholders, such as
the Fund.

BGFA, Barclays and their affiliates deal, trade and invest for their own
account in the types of securities in which the Master Portfolio may invest and
may have deposit, loan and commercial banking relationships with the issuers of
securities purchased by the Master Portfolio. BGFA has informed the Master
Portfolio that in making investment decisions it does not use material inside
information in its possession.

Independent legal counsel to MIP and special counsel to BGFA, has advised MIP
and BGFA that BGFA and its affiliates may perform the services contemplated by
the Investment Advisory Contract and this Prospectus without violation of the
Glass-Steagall Act. Such counsel has pointed out, however, that there are no
controlling judicial or administrative interpretations or decisions and that
future judicial or administrative interpretations of, or decisions relating to,
present federal or state statutes, including the Glass-Steagall Act, and
relating to the permissible activities of banks and their subsidiaries or
affiliates, as well as future changes in such statutes, regulations and judicial
or administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any such services, it is expected that new
agreements would be proposed or entered into with another entity or entities
qualified to perform such services.

MASTER PORTFOLIO CO-ADMINISTRATORS AND PLACEMENT AGENT. Stephens, located at
111 Center Street, Little Rock, Arkansas 72201, and Barclays Global Investors,
N.A. ("BGI"), located at 45 Fremont Street, San Francisco, CA 94105, serve as
the Master Portfolio's co-administrators pursuant to a Co-Administration
Agreement with the Master Portfolio. Under the Co-Administration Agreement,
Stephens and BGI provide general supervision of the operations of the Master
Portfolio, other than the provision of investment advice. The administrative
services provided to the Master Portfolio also include coordination of the other
services provided to the Master Portfolio, compilation of information for
reports to the SEC and state securities commissions, preparation of proxy
statements and interestholder reports and general supervision of data
compilation in connection with preparing periodic reports to the Master
Portfolio's Board of Trustees and Officers. In addition, Stephens furnishes
office space and certain facilities to conduct business, and compensates the
Master Portfolio's trustees, officers and employees who are affiliated with
Stephens. Stephens has delegated certain of its administrative duties to IBT (as
defined below). Stephens and BGI will not be entitled to receive compensation
for these services for so long as each receives compensation for providing
co-administration services to a fund that invests in the Master Portfolio.
Stephens also serves as the placement agent of the Master Portfolio's shares.

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

PROSPECTUS PAGE I-9
<PAGE> 141

CUSTODIAN AND FUND ACCOUNTING SERVICES AGENT. Investors Bank & Trust Company
("IBT") acts as custodian to the Fund and the Master Portfolio. The principal
business address of IBT is 89 South Street, Boston, MA 02111. IBT also acts as
the Fund's accounting services agent.

MASTER PORTFOLIO TRANSFER AND DIVIDEND-DISBURSING AGENT. Wells Fargo Bank, 25
Market Street, San Francisco, CA 94163, acts as transfer and dividend-disbursing
agent for the Master Portfolio.

FUND TRANSFER AND DIVIDEND-DISBURSING AGENT. Strong Capital Management, Inc.
("Strong"), P.O. Box 2936, Milwaukee, Wisconsin 53201, acts as transfer and
dividend-disbursing agent for the Fund. Strong is compensated for its services
based on an annual fee per account plus certain out-of-pocket expenses.

FUND SHAREHOLDER SERVICING AGENT. Strong also acts as the Fund's shareholder
servicing agent. As shareholder servicing agent, Strong provides personal
services to the Fund's shareholders and maintains the Fund's shareholder
accounts. Such services include, without limitation, answering shareholder
inquiries, assisting shareholders with fund transactions, and assisting
shareholders with changes to their accounts.

As compensation for its services, the Fund pays Strong a monthly fee based on
a percentage of the Fund's average daily net asset value. The annual rate is
0.25%. From time to time, Strong may voluntarily waive all or a portion of its
shareholder servicing and/or absorb certain Fund expenses without further
notification of the commencement or termination of such waiver or absorption.
Any such waiver or absorption will temporarily lower the Fund's overall expense
ratio and increase the Fund's overall return to investors.

FUND DISTRIBUTOR. Strong Funds Distributors, Inc. ("SFDI"), P.O. Box 2936,
Milwaukee, Wisconsin 53201, an indirect subsidiary of Strong, acts as
distributor of the shares of the Fund.

FUND EXPENSES. Except for expenses assumed by Strong, the Fund is responsible
for (i) its pro rata portion of certain fees paid by the Master Portfolio, such
as accounting, legal, and SEC registration, and (ii) the Fund's other expenses,
including, without limitation, interest charges, taxes, brokerage commissions,
and similar expenses; expenses of issue, sale, repurchase, or redemption of
shares; expenses of registering or qualifying shares for sale with the states
and the SEC; expenses of printing and distribution of prospectuses to existing
shareholders; charges of custodians (including fees as custodian for keeping
books and similar services for a Fund), transfer agents (including the printing
and mailing of reports and notices to shareholders), registrars, auditing and
legal services, and clerical services related to recordkeeping and shareholder
relations; printing of stock certificates; fees for directors who are

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PROSPECTUS PAGE I-10
<PAGE> 142

not "interested persons" of Strong; expenses of indemnification; extraordinary
expenses; and costs of shareholder and director meetings.

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 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 annually. The Fund may make
additional distributions if necessary to avoid imposition of a 4% excise tax on
undistributed income and gains.

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PROSPECTUS PAGE I-11
<PAGE> 143

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 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, all or a portion of those distributions may be
treated as a return of capital to shareholders for tax purposes.

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 qualify for treatment as a
regulated investment company under Subchapter M of the Internal Revenue

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PROSPECTUS PAGE I-12
<PAGE> 144

Code (the "Code") and, if so qualified, will not be liable for federal income
tax on earnings and gains distributed to its shareholders in a timely manner.
The Fund seeks to qualify as a regulated investment company by investing all
of its assets in the Master Portfolio. The Master Portfolio will be treated as a
non-publicly traded partnership rather than as a regulated investment company or
a corporation under the Code, and as such, shall not be subject to federal
income tax. As a non-publicly traded partnership, any interest, dividends, gains
and losses of the Master Portfolio are deemed to be "passed through" to the Fund
in proportion to the Fund's interest in the Master Portfolio. If the Master
Portfolio were to accrue but not distribute any interest, dividends or gains,
the Fund would be deemed to have recognized its allocable share of such income,
regardless of whether or not such income has been distributed by the Master
Portfolio. However, the Master Portfolio seeks to minimize recognition by the
Fund and other investors of interest, dividends and gains without a
corresponding distribution.
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. Investors should remember that performance is a function of the type
and quality of portfolio securities held by the Master Portfolio in which the
Fund invests and is affected by the operating expenses of the Master Portfolio
and the Fund.

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<PAGE> 145

This page has been left blank intentionally.

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PROSPECTUS PAGE I-14
<PAGE> 146

SHAREHOLDER MANUAL

<TABLE>
<S> <C>
HOW TO BUY SHARES...................... II-1
DETERMINING YOUR SHARE PRICE........... II-4
HOW TO SELL SHARES..................... II-5
SHAREHOLDER SERVICES................... II-8
REGULAR INVESTMENT PLANS............... II-10
RETIREMENT PLAN SERVICES............... II-11
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 value changes 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.

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PROSPECTUS PAGE II-1
<PAGE> 147

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

<TABLE>
<S> <C>
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, 900 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
1-800-368-3863 - Call 1-800-368-3863 to establish a new account by
24 HOURS A DAY, exchanging funds from an existing Strong Funds
7 DAYS A WEEK 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 your accounts must be identically
registered and that you must exchange enough into the
new account to meet the minimum initial investment.
Or use Strong DirectSM, Strong Funds' automated
telephone response system. Call 1-800-368-7550.
- ----------------------------------------------------------------------------
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.
</TABLE>

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PROSPECTUS PAGE II-2
<PAGE> 148

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.

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PROSPECTUS PAGE II-3
<PAGE> 149

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.
- - Minimum Investment Requirements:
----------------------------------------------------------------------------

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

To open an IRA or Defined Contribution account......................$1,000

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-10). Unless you participate in the Strong
No-Minimum Investment Program, please ensure your purchases meet the minimum
investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach 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.

DETERMINING YOUR SHARE PRICE

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PROSPECTUS PAGE II-4
<PAGE> 150

or if an emergency exists. The Fund's NAV is calculated by taking the fair value
of the Fund's total assets (i.e., the value of its investments in the Master
Portfolio plus cash and other 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 investment in the Master Portfolio is valued at the NAV of the
Master Portfolio's shares. The Master Portfolio calculates the NAV of its shares
on the same day and at the same time as the Fund. Except for debt obligations
with remaining maturities of 60 days or less, which are valued at amortized
cost, the Master Portfolio's other assets are valued at current market prices,
or if such prices are not readily available, at fair value as determined in good
faith in accordance with guidelines approved by the Board of Trustees of MIP.
Prices used for such valuations may be provided by independent pricing services.

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. PLEASE NOTE THAT THE FUND ASSESSES
A 0.50% FEE ON REDEMPTIONS (INCLUDING EXCHANGES) OF FUND SHARES HELD FOR LESS
THAN SIX MONTHS. 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.

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

PROSPECTUS PAGE II-5
<PAGE> 151

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

<TABLE>
<S> <C>
TO SELL SHARES
- -----------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
For your protection - Write a "letter of instruction" that includes the
certain redemption following information: your account number, the
requests may require a dollar amount or number of shares you wish to
signature guarantee. See redeem, each owner's name, your street address, and
"Special Situations -- the signature of each owner as it appears on the
Signature Guarantees." account.
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express delivery
service, send to 900 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 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>

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PROSPECTUS PAGE II-6
<PAGE> 152

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.

CONTINGENT REDEMPTION FEE

The Fund can experience substantial price fluctuations and is intended for
long-term investors. Short-term "market timers" who engage in frequent purchases
and redemptions can disrupt the Fund's investment program and create additional
transaction costs that are borne by all shareholders. For these reasons, the
Fund assesses a 0.50% fee on redemptions (including exchanges) of fund shares
held for less than six months.

Redemption fees will be paid to the Fund to help offset transaction costs.
The Fund will use the "first-in, first-out" (FIFO) method to determine the six-
month holding period. Under this method, the date of the redemption or exchange
will be compared with the earliest purchase date of shares held in the account.
If this holding period is less than six months, the fee will be assessed. The
fee may apply to shares held through omnibus accounts.

In determining "six months" the Fund will use the six-month anniversary date
of the transaction. Thus, shares purchased on May 1, 1997, for example, will be
subject to the fee if they are redeemed on or prior to October 31, 1997. If they
are redeemed on or after November 1, 1997, they will not be subject to the fee.

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

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

- - Once you place your telephone redemption request, it cannot be canceled or
modified.
- - Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund reasonably

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

PROSPECTUS PAGE II-7
<PAGE> 153

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. In these situations, investors may want to consider using
Strong Direct(SM), our automated telephone system, to effect such a
transaction by calling 1-800-368-7550.

SHAREHOLDER SERVICES

INFORMATION SERVICES

STRONG DIRECT(SM) Automated Telephone System. Also available 24 hours a day,
the Strong Direct(SM) automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity
(1-800-368-5550), and perform purchases, exchanges or redemptions among your
existing Strong accounts (1-800-368-7550). You may also perform an exchange to
open a new Strong account provided that your account has the telephone exchange
option. Please note that your accounts must be identically registered and you
must exchange enough into the new account to meet the minimum initial
investment. Your account information is protected by a personal code that you
establish.

STRONG NETDIRECT. Available 24 hours a day from your personal computer,
Strong netDirect allows you to use the Internet to access your Strong Funds
account information. You may access specific account history, view current
account balances, obtain recent dividend activity, and perform purchases,
exchanges or redemptions among your existing Strong accounts.

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

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

PROSPECTUS PAGE II-8
<PAGE> 154

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

Changes to your account's 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. Please note that the Fund assesses a 0.50% fee on redemptions
(including exchanges) of fund shares held for less than six months.

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

PROSPECTUS PAGE II-9
<PAGE> 155

REGULAR INVESTMENT PLANS

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

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.

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

PROSPECTUS PAGE II-10
<PAGE> 156

AUTOMATIC EXCHANGE PLAN. The Automatic Exchange Plan allows you to make
regular, systematic exchanges (minimum $50) from one Strong Funds account into
another Strong Funds account. By setting up the Plan, you authorize the Fund and
its agents to redeem a set dollar amount or number of shares from the first
account and purchase shares of a second Strong Fund. In addition, you authorize
the Fund and its agents to accept telephone instructions to change the dollar
amount and frequency of the exchange. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result in a capital
gain or loss. To establish the Plan, request a form by calling 1-800-368-3863.
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial
investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be terminated. You may also terminate the Plan at any time by calling
or writing to the Fund. Once participation in the Plan has been terminated for
any reason, to reinstate the Plan you must do so in writing; simply investing
additional funds will not reinstate the Plan.

RETIREMENT PLAN SERVICES

We offer a wide variety of retirement plans for individuals and institutions,
including large and small businesses. For information on IRAs or SEP-IRAs for a
one-person business, call 1-800-368-3863. If you are interested in opening a
401(k) or other company-sponsored retirement plan (Simples, SEP plans, Keoghs,
403(b)(7) plans, pension and profit sharing plans), call 1-800-368-0805 and a
Strong Retirement Plan Specialist will help you determine which retirement plan
would be best for your company. Complete instructions about how to establish and
maintain your plan and how to open accounts for you and your employees will be
included in the retirement plan kit you receive in the mail.

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

PROSPECTUS PAGE II-11
<PAGE> 157

SPECIAL SITUATIONS

If you are investing as a trustee (including trustees of a retirement plan),
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.

FINANCIAL INTERMEDIARIES. Broker-dealers, financial institutions, and other
financial intermediaries that have entered into agreements with SFDI 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 SFDI. 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 Strong, amounts to financial intermediaries that provide
transfer agent and/or 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. Certain financial intermediaries
may charge a commission or other transaction fee for their services. You will
not be charged for such fees if you purchase or redeem your Fund shares directly
from the Fund without the intervention of a financial intermediary.

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

PROSPECTUS PAGE II-12
<PAGE> 158

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:

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.

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PROSPECTUS PAGE II-13
<PAGE> 159

APPENDIX

ADDITIONAL INVESTMENT POLICIES

The Master Portfolio, subject to the terms of this Prospectus and the Fund's
SAI, may invest in the securities described below.

U.S. GOVERNMENT OBLIGATIONS. The Master Portfolio may invest in various types
of U.S. government obligations. U.S. government obligations include securities
issued or guaranteed as to principal and interest by the U.S. government and
supported by the full faith and credit of the U.S. Treasury. U.S. Treasury
obligations differ mainly in the length of their maturity. Treasury bills, the
most frequently issued marketable government securities, have a maturity of up
to one year and are issued on a discount basis. U.S. government obligations also
include securities issued or guaranteed by federal agencies or
instrumentalities, including government-sponsored enterprises. Some obligations
of such agencies or instrumentalities of the U.S. government are supported by
the full faith and credit of the United States or U.S. Treasury guarantees;
others, by the right of the issuer or guarantor to borrow from the U.S.
Treasury; still others, by the discretionary authority of the U.S. government to
purchase certain obligations of the agency or instrumentality; and others, only
by the credit of the agency or instrumentality issuing the obligation. In the
case of obligations not backed by the full faith and credit of the United
States, the investor must look principally to the agency or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, which agency or
instrumentality may be privately owned. There can be no assurance that the U.S.
government would provide financial support to its agencies or instrumentalities
(including government-sponsored enterprises) where it is not obligated to do so.
In addition, U.S. government obligations are subject to fluctuations in market
value due to fluctuations in market interest rates. As a general matter, the
value of debt instruments, including U.S. government obligations, declines when
market interest rates increase and rises when market interest rates decrease.
Certain types of U.S. government obligations are subject to fluctuations in
yield or value due to their structure or contract terms.

REPURCHASE AGREEMENTS. The Master Portfolio may enter into repurchase
agreements wherein the seller of a security to the Master Portfolio agrees to
repurchase that security from the Master Portfolio at a mutually-agreed upon
time and price. The Master Portfolio's custodian has custody of, and holds in a
segregated account, securities acquired as collateral by the Master Portfolio
under a repurchase agreement. Repurchase agreements are considered by the staff
of the SEC to be loans by the Master Portfolio. In an attempt to reduce the risk
of incurring a loss on a repurchase agreement, the Master Portfolio enters into
repurchase agreements only with federally regulated or insured banks or primary
government securities dealers reporting to

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PROSPECTUS PAGE A-1
<PAGE> 160

the Federal Reserve Bank of New York or, under certain circumstances, banks with
total assets in excess of $5 billion or domestic broker/dealers with total
equity capital in excess of $100 million. The Master Portfolio enters into
repurchase agreements only with respect to securities of the type in which the
Master Portfolio may invest, including government securities and mortgage-
related securities, regardless of their remaining maturities, and requires that
additional securities be deposited with the custodian if the value of the
securities purchased should decrease below the repurchase price. The Master
Portfolio's advisor monitors on an ongoing basis the value of the collateral to
assure that it always equals or exceeds the repurchase price. Certain costs may
be incurred by the Master Portfolio in connection with the sale of the
underlying securities if the seller does not repurchase them in accordance with
the repurchase agreement. In addition, if bankruptcy proceedings are commenced
with respect to the seller of the securities disposition of the securities by
the Master Portfolio may be delayed or limited. The Master Portfolio considers
on an ongoing basis the creditworthiness of the institutions with which it
enters into repurchase agreements. The Master Portfolio may enter into
repurchase agreements only with registered broker/dealers commercial banks and
other financial institutions which meet guidelines established by the Board of
Trustees and are not affiliated with the Master Portfolio's investment advisor.

INVESTMENT COMPANY SECURITIES. The Master Portfolio may invest in securities
issued by other investment companies which principally invest in securities of
the type in which the Master Portfolio invests. Under the 1940 Act, the Master
Portfolio's investment in such securities currently is limited to, subject to
certain exceptions, (i) 3% of the total voting stock of any one investment
company, (ii) 5% of the Master Portfolio's net assets with respect to any one
investment company and (iii) 10% of the Master Portfolio's net assets in the
aggregate. Investments in the securities of other investment companies generally
will involve duplication of advisory fees and certain other expenses and BGFA
will waive its advisory fees for that portion of a Master Portfolio's assets so
invested, except when such purchase is part of a plan of merger, consolidation,
reorganization or acquisition.

FUTURES TRANSACTIONS. To the extent permitted by applicable regulations, the
Master Portfolio is permitted to use futures as a substitute for a comparable
market position in the underlying securities. The Master Portfolio will not be a
commodity pool.

A futures contract is an agreement between two parties, a buyer and a seller,
to exchange a particular commodity at a specific price on a specific date in the
future. Futures contracts are traded on exchanges, where the exchange serves as
the ultimate counterparty for all contracts. Consequently, the only credit risk
on futures contracts is the creditworthiness of the

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PROSPECTUS PAGE A-2
<PAGE> 161

exchange. Futures contracts are, however, subject to market risk (i.e., exposure
to adverse price changes).
The Master Portfolio may trade futures contracts and options on futures
contracts in U.S. domestic markets, such as the Chicago Board of Trade and the
International Monetary Market of the Chicago Mercantile Exchange.
The Master Portfolio's futures transactions must constitute permissible
transactions pursuant to regulations promulgated by the CFTC. In addition, the
Master Portfolio may not engage in futures transactions if the sum of the amount
of initial margin deposits and premiums paid for unexpired options on futures
contracts, other than those contracts entered into for bona fide hedging
purposes, would exceed 5% of the liquidation value of the Master Portfolio's
assets, after taking into account unrealized profits and unrealized losses on
such contracts; provided, however, that in the case of an option on a futures
contract that is in-the-money at the time of purchase, the in-the-money amount
may be excluded in calculating the 5% liquidation limit. Pursuant to regulations
and/or published positions of the SEC, the Master Portfolio may be required to
segregate cash or high quality money market instruments in connection with its
futures transactions in an amount generally equal to the entire value of the
underlying security.
Initially, when purchasing or selling futures contracts the Master Portfolio
is required to deposit with the Master Portfolio's custodian in the broker's
name an amount of cash or cash equivalents up to approximately 10% of the
contract amount. This amount is subject to change by the exchange or board of
trade on which the contract is traded, and members of such exchange or board of
trade may impose their own higher requirements. This amount is known as "initial
margin" and is in the nature of a performance bond or good faith deposit on the
contract which is returned to the Master Portfolio upon termination of the
futures position, assuming all contractual obligations have been satisfied.
Subsequent payments, known as "variation margin," to and from the broker will be
made daily as the price of the index or securities underlying the futures
contract fluctuates, making the long and short positions in the futures contract
more or less valuable. At any time prior to the expiration of a futures
contract, the Master Portfolio may elect to close the position by taking an
opposite position, at the then prevailing price, thereby terminating its
existing position in the contract.
Although the Master Portfolio intends to purchase or sell futures contracts
only if there is an active market for such contracts, no assurance can be given
that a liquid market will exist for any particular contract at any particular
time. Many futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the trading day. Futures contract prices could move to the limit for
several consecutive trading days with little or no trading, thereby preventing
prompt liquidation of futures positions and potentially subjecting the Master
Portfolio to substantial losses. If it is not possible to close, or the Master

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PROSPECTUS PAGE A-3
<PAGE> 162

Portfolio determines not to close, a futures position in anticipation of adverse
price movements, it will be required to make daily cash payments of variation
margin.
An option on a futures contract gives the purchaser the right, in return for
the premium paid, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the option exercise period. The writer (i.e.,
seller) of the option is required upon exercise to assume an offsetting futures
position (a short position if the option is a call and a long position if the
option is a put). Upon exercise of the option, the assumption of offsetting
futures positions by both the writer and the holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account in the amount by which the market price of the futures contract,
at exercise, exceeds (in the case of a call) or is less than (in the case of a
put) the exercise price of the option on the futures contract.

STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES. The Master Portfolio
may purchase and sell stock index futures contracts and options on stock index
futures contracts.
A stock index future obligates the seller to deliver (and the purchaser to
take), effectively, an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock index at the close of the
last trading day of the contract and the price at which the agreement is made.
No physical delivery of the underlying stocks in the index is made. With respect
to stock indices that are permitted investments, the Master Portfolio intends to
purchase and sell futures contracts on the stock index for which it can obtain
the best price with consideration also given to liquidity.

MONEY MARKET INSTRUMENTS AND TEMPORARY INVESTMENTS. The Master Portfolio may
invest in non-convertible corporate debt securities (e.g., bonds and debentures)
with not more than one year remaining to maturity at the date of settlement. The
Master Portfolio will invest only in such corporate bonds and debentures that
are rated at the time of purchase at least "Aa" by Moody's or "AA" by S&P.
Subsequent to its purchase by the Master Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum rating required
for purchase by the Master Portfolio. The investment advisor to the Master
Portfolio will consider such an event in determining whether the Master
Portfolio should continue to hold the obligation. To the extent the Master
Portfolio continues to hold such obligations, it may be subject to additional
risks of default.

LENDING PORTFOLIO SECURITIES. The Master Portfolio may lend securities from
its portfolio to domestic brokers, dealers and financial institutions (but not
individuals) if cash, U.S. Government obligations or other liquid, high-quality
debt obligations equal to at least 100% of the current market value of

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<PAGE> 163

the securities loaned (including accrued interest thereon) plus the interest
payable to the Master Portfolio with respect to the loan, is maintained with the
Master Portfolio. In determining whether to lend a security to a particular
broker, dealer or financial institution, the Master Portfolio's investment
advisor considers all relevant facts and circumstances, including the size,
creditworthiness and reputation of the broker, dealer, or financial institution.
Any loans of portfolio securities are fully collateralized and marked to market
daily. Any securities that the Master Portfolio receives as collateral do not
become part of the Master Portfolio's investment portfolio at the time of the
loan and, in the event of a default by the borrower, the Master Portfolio, if
permitted by law, disposes of such collateral except for such part thereof that
is a security in which the Master Portfolio is permitted to invest. During the
time securities are on loan, the borrower pays the Master Portfolio any accrued
income on those securities, and the Master Portfolio invests the cash collateral
in high-quality money market instruments and earns income or receives an
agreed-upon fee from a borrower that has delivered cash-equivalent collateral.
The securities acquired with such cash collateral are segregated as discussed
above. In the event that the borrower defaults on its obligation to return
borrowed securities, because of insolvency or otherwise, the Master Portfolio
could experience delays and costs in gaining access to the collateral and could
suffer a loss to the extent that the value of the collateral falls below the
market value of the securities borrowed. However, loans are made only to
borrowers deemed by the Master Portfolio's advisor to be of good standing and
when, in its judgment, the income to be earned from the loan justifies the
attendant risks. The Master Portfolio does not lend securities having a value
that exceeds 33% of the current value of its total assets. Loans of securities
by the Master Portfolio are subject to termination at the Master Portfolio's or
the borrower's option. The Master Portfolio may pay reasonable administrative
and custodial fees in connection with a securities loan and may pay a negotiated
portion of the interest or fee earned with respect to the collateral to the
borrower or the placing broker. Borrowers and placing brokers are not affiliated
directly or indirectly with the Fund, MIP, BGFA, Stephens, or SFDI.

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PROSPECTUS PAGE A-5
<PAGE> 164
STATEMENT OF ADDITIONAL INFORMATION

STRONG INDEX 500 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 Market Index Fund (the
"Fund"), which is a series of Strong Equity Funds, Inc., dated May 1, 1997.
Requests for copies of the Prospectus should be made by calling one of the
numbers listed above. THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
INVESTING SUBSTANTIALLY ALL OF ITS ASSETS IN THE S&P 500 INDEX MASTER PORTFOLIO
(THE "MASTER PORTFOLIO"), WHICH IS A SERIES OF MASTER INVESTMENT PORTFOLIO
("MIP"), AN OPEN-END, MANAGEMENT INVESTMENT COMPANY.

The Master Portfolio has substantially the same investment objective as
the Fund. The Fund may withdraw its investment in the Master Portfolio at any
time, if the Board of Directors of the Fund determines that such action is in
the best interests of the Fund and its shareholders. Upon such withdrawal, the
Fund's Board of Directors would consider alternative investments, including
investing all of the Fund's assets in another investment company with the same
investment objective as the Fund or hiring an investment adviser to manage the
Fund's assets in accordance with the investment policies and restrictions
described in the Fund's Prospectus and this Statement of Additional Information
("SAI").

This Statement of Additional Information is dated May 1, 1997.
<PAGE> 165

STRONG INDEX 500 FUND

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

INVESTMENT RESTRICTIONS..........................................3
INVESTMENT POLICIES AND TECHNIQUES...............................6
Unrated, Downgraded and Below Investment Grade Investments......6
Letters of Credit...............................................7
When-Issued Securities..........................................7
Loans of Portfolio Securities...................................7
Futures Contracts...............................................8
Investment in Warrants.........................................9
DIRECTORS AND OFFICERS OF THE FUND...............................9
Directors and Officers of the Fund..............................9
PRINCIPAL SHAREHOLDERS..........................................11
INVESTMENT ADVISOR..............................................11
ADMINISTRATOR AND PLACEMENT AGENT OF THE MASTER PORTFOLIO.......12
DISTRIBUTOR OF THE FUND.........................................12
PORTFOLIO TRANSACTIONS AND BROKERAGE............................13
CUSTODIAN AND FUND ACCOUNTING SERVICES AGENT....................14
FUND TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT...............14
FUND SHAREHOLDER SERVICING AGENT................................15
MASTER PORTFOLIO TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT...15
TAXES...........................................................15
DETERMINATION OF NET ASSET VALUE................................16
ADDITIONAL SHAREHOLDER INFORMATION..............................16
FUND ORGANIZATION...............................................17
MASTER PORTFOLIO ORGANIZATION...................................18
PERFORMANCE INFORMATION.........................................18
GENERAL INFORMATION.............................................23
INDEPENDENT ACCOUNTANTS.........................................25
LEGAL COUNSEL...................................................25
</TABLE>

______________________________________

No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated May 1, 1997, and, if given or made, such
information or representations may not be relied upon as having been authorized
by the Fund.

This Statement of Additional Information does not constitute an offer to sell
securities.
2
<PAGE> 166

INVESTMENT RESTRICTIONS

The investment objective of the Fund is to seek to approximate as closely
as practicable (before fees and expenses) the capitalization-weighted total
rate of return of that portion of the U.S. market for publicly traded common
stocks composed of the larger capitalized companies. 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.

<PAGE> 167

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. 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.

6. 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.

7. 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.

The Master Portfolio is subject to the following fundamental investment
limitations which cannot be changed without approval by the holders of a
majority (as defined in the 1940 Act) of the Master Portfolio's outstanding
voting securities.

The Master Portfolio may not:

1. invest more than 5% of its assets in the obligations of any single
issuer, except that up to 25% of the value of its total assets may be
invested, and securities issued or guaranteed by the U.S. government, or
its agencies or instrumentalities may be purchased, without regard to any
such limitation.

2. hold more than 10% of the outstanding voting securities of any single
issuer. This investment restriction applies only with respect to 75% of
its total assets.

3. invest in commodities, except that the Master Portfolio may purchase and
sell (i.e., write) options, forward contracts, futures contracts,
including those relating to indexes, and options on futures contracts or
indexes.

<PAGE> 168

4. purchase, hold or deal in real estate, or oil, gas or other mineral
leases or exploration or development programs, but the Master Portfolio
may purchase and sell securities that are secured by real estate or issued
by companies that invest or deal in real estate.

5. borrow money, except to the extent permitted under the 1940 Act, provided
that the Master Portfolio may borrow up to 20% of the current value of its
net assets for temporary purposes only in order to meet redemptions, and
these borrowings may be secured by the pledge of up to 20% of the current
value of its net assets (but investments may not be purchased while any
such outstanding borrowing in excess of 5% of its net assets exists). For
purposes of this investment restriction, the Master Portfolio's entry into
options, forward contracts, futures contracts, including those relating to
indexes, and options on futures contracts or indexes shall not constitute
borrowing to the extent certain segregated accounts are established and
maintained by the Master Portfolio.

6. make loans to others, except through the purchase of debt obligations and
the entry into repurchase agreements. However, the Master Portfolio may
lend its portfolio securities in an amount not to exceed one-third of the
value of its total assets. Any loans of portfolio securities will be made
according to guidelines established by the SEC and the Master Portfolio's
Board of Trustees.

7. act as an underwriter of securities of other issuers, except to the
extent that the Master Portfolio may be deemed an underwriter under the
Securities Act of 1933, as amended, by virtue of disposing of portfolio
securities.

8. invest 25% or more of its total assets in the securities of issuers in
any particular industry or group of closely related industries except that
there shall be no limitation with respect to investments in (i)
obligations of the U.S. government, its agencies or instrumentalities; or
(ii) any industry in which the S&P 500 Index becomes concentrated to the
same degree during the same period, the Master Portfolio will be
concentrated as specified above only to the extent the percentage of its
assets invested in those categories of investments is sufficiently larger
than 25% or more of its total assets would be invested in a single
industry.

9. issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except to the extent the activities permitted in the Master
Portfolio's fundamental policies (3) and (5) and non-fundamental policies
(2) and (3), may be deemed to give rise to a senior security.

10. purchase securities on margin, but each Master Portfolio may make margin
deposits in connection with transactions in options, forward contracts,
futures contracts, including those related to indexes, and options on
futures contracts or indexes.

The Master Portfolio is subject to the following non-fundamental operating
policies which may be changed by the Board of Trustees of the Master Portfolio
without the approval of the holders of the Master Portfolio's outstanding
securities.

The Master Portfolio may not:

1. invest in the securities of a company for the purpose of exercising
management or control, but the Master Portfolio will vote the securities
it owns in its portfolio as a shareholder in accordance with its views.

2. pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
purchase of securities on a when-issued or forward commitment basis and
the deposit of assets in escrow in connection with writing covered put and
call options and collateral and initial or variation margin arrangements
with respect to options, forward contracts, futures contracts, including
those relating to indexes, and options on futures contracts or indexes.

3. purchase, sell or write puts, calls or combinations thereof, except as
may be described in the Master Portfolio's offering documents.

<PAGE> 169

4. purchase securities of any company having less than three years'
continuous operations (including operations of any predecessors) unless
the securities are fully guaranteed or insured by the U.S. government, a
state, commonwealth, possession, territory, the District of Columbia or by
an entity in existence at least three years, or the securities are backed
by the assets and revenues of any of the foregoing if such purchase would
cause the value of its investments in all such companies to exceed 5% of
the value of its total assets.

5. enter into repurchase agreements providing for settlement in more than
seven days after notice or purchase securities which are illiquid, if, in
the aggregate, more than 15% of the value of the Master Portfolio's net
assets would be so invested.

6. purchase securities of other investment companies, except to the extent
permitted under the 1940 Act.

7. purchase or retain securities of any issuer if the officers or trustees
of the Master Portfolio or officers or directors of any affiliated
investment companies or the investment advisor owning beneficially more
than one-half of one percent (0.5%) of the securities of the issuer
together owned beneficially more than 5% of such securities.

If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from a change in values or assets except
with respect to compliance with fundamental investment limitation number 5,
will not constitute a violation of such 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
"Appendix - Additional Investment Policies."

UNRATED, DOWNGRADED AND BELOW INVESTMENT GRADE INVESTMENTS

The Master Portfolio may purchase instruments that are not rated if, in
the opinion of the advisor, Barclays Global Fund Advisors ("BGFA"), such
obligations are of investment quality comparable to other rated investments
that are permitted to be purchased by such Master Portfolio. After purchase by
the Master Portfolio, a security may cease to be rated or its rating may be
reduced below the minimum required for purchase by the Master Portfolio.
Neither event will require a sale of such security by the Master Portfolio
provided that the amount of such securities held by the Master Portfolio does
not exceed 5% of the Master Portfolio's net assets. To the extent the ratings
given by Moody's or S&P may change as a result of changes in such organizations
or their rating systems, the Master Portfolio will attempt to use comparable
ratings as standards for investments in accordance with the investment policies
contained in its Prospectus and in this SAI. The ratings of Moody's and S&P
and other nationally recognized statistical rating organizations are more fully
described in the SAI Appendix.

Because the Master Portfolio is not required to sell downgraded
securities, the Master Portfolio could hold up to 5% of its net assets in debt
securities rated below "Baa" by Moody's or below "BBB" by S&P or in unrated,
low quality (below investment grade) securities.

Although they may offer higher yields than do higher rated securities, low
rated and unrated low quality debt securities generally involve greater
volatility of price and risk of principal and income, including the possibility
of default by, or bankruptcy of, the issuers of the securities. In addition,
the markets in which low rated and unrated low quality debt are traded are more
limited than those in which higher rated securities are traded. The existence
of limited markets for particular securities may diminish the Master
Portfolio's ability to sell the securities at fair value either to meet
redemption requests or to respond to changes in the economy or in the financial
markets and could adversely affect and cause fluctuations in the daily net
asset value of the Master Portfolio's shares.

Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated or
unrated low quality debt securities, especially in a thinly traded market.
Analysis of the creditworthiness of issuers of low rated or unrated low quality
debt securities may be more complex than for issuers of higher

<PAGE> 170

rated securities, and the ability of the Master Portfolio to achieve its
investment objective may, to the extent it holds low rated or unrated low
quality debt securities, be more dependent upon such creditworthiness analysis
than would be the case if the Master Portfolio held exclusively higher rated or
higher quality securities.

Low rated or unrated low quality debt securities may be more susceptible
to real or perceived adverse economic and competitive industry conditions than
investment grade securities. The prices of such debt securities have been
found to be less sensitive to interest rate changes than higher rated or higher
quality investments, but more sensitive to adverse economic downturns or
individual corporate developments. A projection of an economic downturn or of
a period of rising interest rates, for example, could cause a decline in low
rated or unrated low quality debt securities prices because the advent of a
recession could dramatically lessen the ability of a highly leveraged company
to make principal and interest payments on its debt securities. If the issuer
of the debt securities defaults, the Master Portfolio may incur additional
expenses to seek recovery.

LETTERS OF CREDIT

Certain of the debt obligations (including municipal securities,
certificates of participation, commercial paper and other short-term
obligations) which the Master Portfolio may purchase may be backed by an
unconditional and irrevocable letter of credit of a bank, savings and loan
association or insurance company which assumes the obligation for payment of
principal and interest in the event of default by the issuer. Only banks,
savings and loan associations and insurance companies which, in the opinion of
BGFA, as investment advisor, are of comparable quality to issuers of other
permitted investments of the Master Portfolio may be used for letter of
credit-backed investments.

WHEN-ISSUED SECURITIES

Certain of the securities in which the Master Portfolio may invest will be
purchased on a when-issued basis, in which case delivery and payment normally
take place within 45 days after the date of the commitment to purchase. The
Master Portfolio only will make commitments to purchase securities on a
when-issued basis with the intention of actually acquiring the securities, but
may sell them before the settlement date if it is deemed advisable.
When-issued securities are subject to market fluctuation, and no income accrues
to the purchaser during the period prior to issuance. The purchase price and
the interest rate that will be received on debt securities are fixed at the
time the purchaser enters into the commitment. Purchasing a security on a
when-issued basis can involve a risk that the market price at the time of
delivery may be lower than the agreed-upon purchase price, in which case there
could be an unrealized loss at the time of delivery. The Master Portfolio
currently does not intend on investing more than 5% of its assets in
when-issued securities during the coming year. The Master Portfolio will
establish a segregated account in which it will maintain cash or liquid
securities in an amount at least equal in value to the Master Portfolio's
commitments to purchase when-issued securities. If the value of these assets
declines, the Master Portfolio will place additional liquid assets in the
account on a daily basis so that the value of the assets in the account is
equal to the amount of such commitments.

LOANS OF PORTFOLIO SECURITIES

The Master Portfolio may lend securities from its portfolio to brokers,
dealers and financial institutions (but not individuals) if cash or liquid
securities equal to at least 100% of the current market value of the securities
loan (including accrued interest thereon) plus the interest payable to the
Master Portfolio with respect to the loan is maintained with the Master
Portfolio. In determining whether to lend a security to a particular broker,
dealer or financial institution, BGFA will consider all relevant facts and
circumstances, including the size, creditworthiness and reputation of the
broker, dealer, or financial institution. Any loans of portfolio securities
will be fully collateralized based on values that are marked to market daily.
The Master Portfolio will not enter into any portfolio security lending
arrangement having a duration of longer than one year. Any securities that the
Master Portfolio may receive as collateral will not become part of the Master
Portfolio's investment portfolio at the time of the loan and, in the event of a
default by the borrower, the Master Portfolio will, if permitted by law,
dispose of such collateral except for such part thereof that is a security in
which the Master Portfolio is permitted to invest. During the time securities
are on loan, the borrower will pay the Master Portfolio any accrued income on
those securities, and the Master Portfolio may invest the cash collateral and
earn income or receive an agreed-upon fee from a borrower that has delivered
cash-equivalent collateral. The Master Portfolio will not lend securities
having a value that exceeds one-third of the current value of

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its total assets. Loans of securities by the Master Portfolio will be subject
to termination at the Master Portfolio's or the borrower's option. The Master
Portfolio may pay reasonable administrative and custodial fees in connection
with a securities loan and may pay a negotiated portion of the interest or fee
earned with respect to the collateral to the borrower or the placing broker.
Borrowers and placing brokers may not be affiliated, directly or indirectly,
with the Fund, MIP, BGFA, Stephens (the Master Portfolio's under writer), or
Strong Funds Distributors, Inc. (the Fund's distributor "Distributors").

FUTURES CONTRACTS

The Master Portfolio may use futures contracts as a hedge against the
effects of interest rate changes or changes in the market value of the stocks
comprising the index in which the Master Portfolio invests. In managing its
cash flows, the Master Portfolio also may use futures contracts as a substitute
for holding the designated securities underlying the futures contract. A
futures contract is an agreement between two parties, a buyer and a seller, to
exchange a particular commodity at a specific price on a specific date in the
future. At the time it enters into a futures transaction, the Master Portfolio
is required to make a performance deposit (initial margin) of cash or liquid
securities in a segregated account in the name of the futures broker.
Subsequent payments of "variation margin" are then made on a daily basis,
depending on the value of the futures position which is continually "marked to
market."

The Master Portfolio may engage only in futures contract transactions
involving (i) the sale of a futures contract (i.e., short positions) to hedge
the value of securities held by the Master Portfolio; (ii) the purchase of a
futures contract when the Master Portfolio holds a short position having the
same delivery month (i.e., a long position offsetting a short position); or
(iii) the purchase of a futures contract to permit the Master Portfolio to, in
effect, participate in the market for the designated securities underlying the
futures contract without actually owning such designated securities. When the
Master Portfolio purchases a futures contract, it will create a segregated
account consisting of cash or other liquid assets in an amount equal to the
total market value of such futures contract, less the amount of initial margin
for the contract.

If the Master Portfolio enters into a short position in a futures contract
as a hedge against anticipated adverse market movements and the market then
rises, the increase in the value of the hedged securities will be offset, in
whole or in part, by a loss on the futures contract. If instead the Master
Portfolio purchases a futures contract as a substitute for investing in the
designated underlying securities, the Master Portfolio will experience gains or
losses that correspond generally to gains or losses in the underlying
securities. The latter type of futures contract transactions permit the Master
Portfolio to experience the results of being fully invested in a particular
asset class, while maintaining the liquidity needed to manage cash flows into
or out of the Master Portfolio (e.g., from purchases and redemptions of Master
Portfolio shares). Under normal market conditions, futures contract positions
may be closed out on a daily basis. The Master Portfolio expects to apply a
portion of its cash or cash equivalents maintained for liquidity needs to such
activities.

Transactions by the Master Portfolio in futures contracts involve certain
risks. One risk in employing futures contracts as a hedge against cash market
price volatility is the possibility that futures prices will correlate
imperfectly with the behavior of the prices of the securities in the Master
Portfolio's investment portfolio. Similarly, in employing futures contracts as
a substitute for purchasing the designated underlying securities, there is a
risk that the performance of the futures contract may correlate imperfectly
with the performance of the direct investments for which the futures contract
is a substitute. In addition, commodity exchanges generally limit the amount
of fluctuation permitted in futures contract prices during a single trading
day, and the existence of such limits may prevent the prompt liquidation of
futures positions in certain cases. Limits on price fluctuations are designed
to stabilize prices for the benefit of market participants; however, there
could be cases where the Master Portfolio could incur a larger loss due to the
delay in trading than it would have if no limit rules had been in effect.

In order to comply with undertakings made by the Master Portfolio pursuant
to Commodity Futures Trading Commission ("CFTC") Regulation 4.5, the Master
Portfolio will use futures and option contracts solely for bona fide hedging
purposes within the meaning and intent of CFTC Reg. 1.3(z); provided, however,
that in addition, with respect to positions in commodity futures or commodity
option contracts which do not come within the meaning and intent of CFTC Reg.
1.3(z), the aggregate initial margin and premiums required to establish such
positions will not exceed 5% of the liquidation value of the Master Portfolio's
portfolio, after taking into account unrealized profits and unrealized losses
on any such contract it has entered into; and provided further, that in the
case of an option that is in-the-money at the time of purchase, the
in-the-money amount as defined in CFTC Reg. 190.01(x) may be excluded in
computing such 5%.

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INVESTMENT IN WARRANTS

The Master Portfolio may invest up to 5% of its net assets in warrants.
Warrants represent rights to purchase securities at a specific price valid for
a specific period of time. The prices of warrants do not necessarily correlate
with the prices of the underlying securities. The Master Portfolio may only
purchase warrants on securities in which the Master Portfolio may invest
directly.

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 and officer who is deemed an
"interested person," as defined in the 1940 Act, is indicated by an asterisk
(*). Each director and officer holds the same position with the 25 registered
open-end management investment companies consisting of 38 mutual funds (the
"Strong Funds"), which are managed by Strong Capital Management, Inc.
("Strong"). The Strong Funds, in the aggregate, pays each Director who is not
a director, officer, or employee of Strong, 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 directors and officers of the Strong Funds
receive no compensation or expense reimbursement from the Strong Funds.

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

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

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

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

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

Mr. Dragisic has been President of Strong since October 1995 and a
director of Strong since July 1994. Mr. Dragisic served as Vice Chairman of
Strong 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 Fund as a director and President since
April 1997.

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.

Mr. Totsky has been Senior Vice President of Strong since September 1994.
Mr. Totsky served as Vice President of Strong from December 1992 to September
1994. Mr. Totsky acted as Strong's Manager of Shareholder Accounting and
Compliance from June 1987 to June 1991 when he was named Director of Mutual
Fund Administration. Mr. Totsky has served the Fund as a Vice President since
April 1997.

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

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

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

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

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

Mr. Weitzer has been an Associate Counsel to Strong since July 1993. Mr.
Weitzer has served the Fund as a Vice President since April 1997.

<PAGE> 174

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

RICHARD S. STRONG:

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

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

JOHN DRAGISIC:

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

THOMAS P. LEMKE:

STEPHEN J. SHENKENBERG:

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

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

As of April 30, 1997, the officers and directors of the Fund did not own
any of the Fund's shares.

PRINCIPAL SHAREHOLDERS

As of April 30, 1997, no one owned of record and beneficially any shares
of the Fund.

INVESTMENT ADVISOR

The advisor to the Master Portfolio is Barclays Global Fund Advisors
("BGFA"). BGFA is an indirect subsidiary of Barclays Bank PLC. Pursuant to an
Investment Advisory Contract dated January 1, 1996 (the "Advisory Contract")
with the

<PAGE> 175

Master Portfolio, BGFA provides investment guidance and policy direction in
connection with the management of the Master Portfolio's assets. Pursuant to
the Advisory Contract, BGFA furnishes to the Master Portfolio's Boards of
Trustees periodic reports on the investment strategy and performance of the
Master Portfolio.

BGFA is entitled to receive monthly fees at the annual rate of 0.05% of
the average daily net assets of the Master Portfolio as compensation for its
advisory services to the Master Portfolio. The Advisory Contract provides that
the advisory fee is accrued daily and paid monthly. This advisory fee is an
expense of the Master Portfolio borne proportionately by its interestholders,
such as the Fund.

The Advisory Contract for the Master Portfolio provides that if, in any
fiscal year, the total expenses of the Master Portfolio (excluding taxes,
interest, brokerage commissions and its extraordinary expenses but including
the fees provided for in the Advisory Contract) exceed the most restrictive
expense limitation applicable to the Master Portfolio imposed by the securities
laws or regulations of the states having jurisdiction over the Master
Portfolio, BGFA shall waive its fees under the Advisory Contract for the fiscal
year to the extent of the excess or reimburse the excess, but only to the
extent of its fees.

BGFA has agreed to provide to the Master Portfolio, among other things,
money market security and fixed-income research, analysis and statistical and
economic data and information concerning interest rate and security market
trends, portfolio composition, credit conditions and average maturities of the
Master Portfolio's investment portfolio.

The Advisory Contract will continue in effect for more than two years
provided the continuance is approved annually (i) by the holders of a majority
of the Master Portfolio's outstanding voting securities or by the Master
Portfolio's Boards of Trustees and (ii) by a majority of the Trustees of the
Master Portfolio who are not parties to the Advisory Contract or "interested
persons" (as defined in the 1940 Act) of any such party. The Advisory Contract
may be terminated on 60 days' written notice by either party and will terminate
automatically if assigned.

ADMINISTRATOR AND PLACEMENT AGENT OF THE MASTER PORTFOLIO

Stephens and Barclays Global Investors, N.A. ("BGI") serve as
co-administrators on behalf of the Master Portfolio. Under the
Co-Administration Agreement between Stephens, BGI and the Master Portfolio,
Stephens and BGI provide as administrative services, among other things: (i)
general supervision of the operation of the Master Portfolio, including
coordination of the services performed by the investment advisor, transfer and
dividend disbursing agent, custodian, shareholder servicing agent(s),
independent auditors and legal counsel; (ii) general supervision of regulatory
compliance matters, including the compilation of information for documents such
as reports to, and filings with, the SEC and state securities commissions; and
preparation of proxy statements and shareholder reports for the Master
Portfolio; and (iii) general supervision relative to the compilation of data
required for the preparation of periodic reports distributed to the Master
Portfolio's officers and Board. Stephens also furnishes office space and
certain facilities required for conducting the business of the Master Portfolio
together with those ordinary clerical and bookkeeping services that are not
furnished by BGFA. Stephens also pays the compensation of the Master
Portfolio's trustees, officers and employees who are affiliated with Stephens.
Furthermore, except as provided in the Advisory Contract, Stephens and BGI
bears substantially all costs of the Master Portfolio and the Master
Portfolio's operations. However, Stephens and BGI are not required to bear any
cost or expense which a majority of the disinterested trustees of the Master
Portfolio deem to be an extraordinary expense.

Stephens also acts as the placement agent of Master Portfolio's shares
pursuant to a Placement Agency Agreement (the "Placement Agency Agreement")
with the Master Portfolio.

DISTRIBUTOR OF THE FUND

Under a Distribution Agreement with the Fund dated April 30, 1997, Strong
Funds Distributors, Inc. ("Distributors"), a subsidiary of Strong, 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

<PAGE> 176

any other costs attributable to the distribution of the Fund's shares. The
Distributor is an indirect subsidiary of Strong and controlled by Strong and
Richard S. Strong. The Distribution Agreement is subject to the same
termination and renewal provisions as are described above with respect to the
Advisory Agreement.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Master Portfolio has no obligation to deal with any dealer or group of
dealers in the execution of transactions in portfolio securities. Subject to
policies established by the Master Portfolio's Board of Trustees, BGFA as
advisor, is responsible for the Master Portfolio's investment portfolio
decisions and the placing of portfolio transactions. In placing orders, it is
the policy of the Master Portfolio to obtain the best results taking into
account the broker/dealer's general execution and operational facilities, the
type of transaction involved and other factors such as the broker/dealer's risk
in positioning the securities involved. While BGFA generally seek reasonably
competitive spreads or commissions, the Master Portfolio will not necessarily
be paying the lowest spread or commission available.

Purchase and sale orders of the securities held by the Master Portfolio
may be combined with those of other accounts that BGFA manages, and for which
it has brokerage placement authority, in the interest of seeking the most
favorable overall net results. When BGFA determines that a particular security
should be bought or sold for the Master Portfolio and other accounts managed by
BGFA, BGFA undertakes to allocate those transactions among the participants
equitably.

Under the 1940 Act, persons affiliated with the Master Portfolio such
as Stephens, BGFA and their affiliates are prohibited from dealing with the
Master Portfolio as a principal in the purchase and sale of securities unless
an exemptive order allowing such transactions is obtained from the SEC or
an exemption is otherwise available.

Except in the case of equity securities purchased by the Master Portfolio,
purchases and sales of securities usually will be principal transactions.
Portfolio securities normally will be purchased or sold from or to dealers
serving as market makers for the securities at a net price. The Master
Portfolio also will purchase portfolio securities in underwritten offerings and
may purchase securities directly from the issuer. Generally, money market
securities, adjustable rate mortgage securities ("ARMS"), municipal
obligations, and collateralized mortgage obligations ("CMOs") are traded on a
net basis and do not involve brokerage commissions. The cost of executing the
Master Portfolio's investment portfolio securities transactions will consist
primarily of dealer spreads and underwriting commissions.

Purchases and sales of equity securities on a securities exchange are
effected through brokers who charge a negotiated commission for their services.
Orders may be directed to any broker including, to the extent and in the
manner permitted by applicable law, Stephens or BGI. In the over-the-counter
market, securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. In underwritten
offerings, securities are purchased at a fixed price that includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount.

In placing orders for portfolio securities of the Master Portfolio, BGFA
is required to give primary consideration to obtaining the most favorable price
and efficient execution. This means that BGFA seeks to execute each
transaction at a price and commission, if any, that provide the most favorable
total cost or proceeds reasonably attainable in the circumstances. While BGFA
generally seeks reasonably competitive spreads or commissions, the Master
Portfolio will not necessarily be paying the lowest spread or commission
available. In executing portfolio transactions and selecting brokers or
dealers, BGFA seeks to obtain the best overall terms available for the Master
Portfolio. In assessing the best overall terms available for any

<PAGE> 177

transaction, BGFA considers factors deemed relevant, including the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Rates are established pursuant to negotiations with the broker based on
the quality and quantity of execution services provided by the broker in the
light of generally prevailing rates. The allocation of orders among brokers
and the commission rates paid are reviewed periodically by the Master
Portfolio's Board of Trustees.

Certain of the brokers or dealers with whom the Master Portfolio may
transact business offers commission rebates to the Master Portfolio. BGFA
considers such rebates in assessing the best overall terms available for any
transaction. The overall reasonableness of brokerage commissions paid is
evaluated by BGFA based upon its knowledge of available information as to the
general level of commission paid by other institutional investors for
comparable services.

The portfolio turnover rate for the Master Portfolio generally is not
expected to exceed 50%. This portfolio turnover rate will not be a limiting
factor when BGFA deems portfolio changes appropriate.

CUSTODIAN AND FUND ACCOUNTING SERVICES AGENT

Investors Bank & Trust Company ("IBT") located at 89 South Street, Boston,
MA 02111, serves as custodian of the assets of the Fund and Master Portfolio.
As a result, IBT has custody of all securities and cash of the Fund and the
Master Portfolio, 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 and the
Master Portfolio. The custodian is in no way responsible for any of the
investment policies or decisions of the Fund and the Master Portfolio. IBT
also acts as the Fund's Accounting Services Agent.

FUND TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

Strong acts as transfer agent and dividend-disbursing agent for the Fund.
Strong 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. Strong also receives an annual fee
per closed account of $4.20 from the Fund. In addition, Strong 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 Strong, and/or Strong 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 Strong for
providing these services to Fund shareholders.

On July 12, 1994, the Securities and Exchange Commission (the "SEC") filed
an administrative action (the "Order") against Strong, Mr. Strong, and another
employee of Strong 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 Strong 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
Strong 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 Strong's policy on personal trading and by failing to disclose
trading by Harbour, an entity in which principals of Strong 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 Strong agreed to

<PAGE> 178

various undertakings, including adoption of certain procedures and a limitation
for six months on accepting certain types of new advisory clients.

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

FUND SHAREHOLDER SERVICING AGENT

Under a Shareholder Servicing Agreement with the Fund dated April 30,
1997, Strong acts as shareholder servicing agent for the Fund. As shareholder
servicing agent, Strong provides personal services to the Fund's shareholders
and maintains the Fund's shareholder accounts. Such services include, (i)
answering shareholder inquiries regarding account status and history, the
manner in which purchases and redemptions of the Fund's shares may be effected,
and certain other matters pertaining to the Fund; (ii) assisting shareholders
in designating and changing dividend options, account designations and
addresses; (iii) providing necessary personnel and facilities to coordinate the
establishment and maintenance of shareholder accounts and records with the
Fund's transfer agent; (iv) transmitting shareholders' purchase and redemption
orders to the Fund's transfer agent; (v) arranging for the wiring or other
transfer of funds to and from shareholder accounts in connection with
shareholder orders to purchase or redeem shares of the Fund; (vi) verifying
purchase and redemption orders, transfers among and changes in
shareholder-designated accounts; (vii) informing the distributor of the Fund of
the gross amount of purchase and redemption orders for the Fund's shares;
(viii) monitoring the activities of the Fund's transfer agent related to
shareholders' accounts, and to statements, confirmations or other reports
furnished to shareholders by the Fund's transfer agent; and (ix) providing such
other related services as the Fund or a shareholder may reasonably request, to
the extent permitted by applicable law.

As compensation for its services, the Fund pays Strong a monthly fee based
on a percentage of the Fund's average daily net asset value. The annual rate
is 0.25%. From time to time, Strong may voluntarily waive all or a portion of
its shareholder servicing fee and/or absorb certain Fund expenses without
further notification of the commencement or termination of such waiver or
absorption. Any such waiver or absorption will temporarily lower the Fund's
overall expense ratio and increase the Fund's overall return to investors.

MASTER PORTFOLIO TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

Wells Fargo Bank, 525 Market Street, San Francisco, CA 94163, acts as
transfer agent and dividend-disbursing agent for the Master Portfolio.

TAXES

GENERAL

As indicated under "About the Fund - Distributions and Taxes" in the
Prospectus, the Fund intends to continue to qualify annually for treatment as a
regulated investment company ("RIC") under the Internal Revenue Code (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

<PAGE> 179

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 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, BGFA may find it necessary to make certain types of investments
for the purpose of ensuring that the Master Portfolio, and therefore the Fund,
continues to qualify for treatment as a RIC under the Code. For purposes of
complying with these qualification requirements the Fund will be deemed to own
a proportionate share of the Master Portfolio.

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.

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

DETERMINATION OF NET ASSET VALUE

As set forth in the Prospectus under the caption "Shareholder Manual -
Determining Your Share Price," the net asset value of 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.

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.
16

<PAGE> 180

RETIREMENT PLANS

Simplified Employee Pension Plan (SEP-IRA): A SEP-IRA plan 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 (the
"Corporation"). The Corporation was incorporated on December 28, 1990 and is
authorized to issue an indefinite number of shares of common stock and series
and classes of series of shares of common stock, with a par value of .00001 per
share. 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 five series of common stock outstanding, each with an
indefinite number of authorized

<PAGE> 181

shares. If the Corporation issues additional series, the assets belonging to
each series of shares will be held separately by a custodian, and in effect
each series will be a separate fund.

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 its discretion, not hold an annual meeting in any year in
which the election of directors is not required to be acted on by shareholders
under the 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.

MASTER PORTFOLIO ORGANIZATION

The Master Portfolio is a series of Master Investment Portfolio ("MIP"),
an open-end, series management investment company organized as Delaware
business trust. MIP was organized on October 21 1993. In accordance with
Delaware law and in connection with the tax treatment sought by MIP, the
Declaration of Trust provides that its investors are personally responsible for
Trust liabilities and obligations, but only to the extent the Trust property is
insufficient to satisfy such liabilities and obligations. The Declaration of
Trust also provides that MIP must maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its investors, trustees, officers, employees and agents covering
possible tort and other liabilities, and that investors will be indemnified to
the extent they are held liable for a disproportionate share of MIP's
obligations. Thus, the risk of an investor incurring financial loss on account
of investor liability is limited to circumstances in which both inadequate
insurance existed and MIP itself was unable to meet its obligations.

The Declaration of Trust further provide that obligations of MIP are not
binding upon its trustees individually but only upon the property of MIP and
that the trustees will not be liable for any action or failure to act, but
nothing in the Declarations of Trust protects a trustee against any liability
to which the trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of the trustee's office.

The interests in the Master Portfolio have substantially identical voting
and other rights as those rights enumerated above for shares of the Fund. MIP
is generally not required to hold annual meetings, but is required by Section
16(c) of the 1940 Act to hold a special meeting and assist investor
communications under certain circumstances. Whenever the Fund is requested to
vote on a matter with respect to the Master Portfolio, the Fund will hold a
meeting of Fund shareholders and will cast its votes as instructed by such
shareholders.

In a situation where the Fund does not receive instruction from certain of
its shareholders on how to vote the corresponding shares of the Master
Portfolio, such Fund will vote such shares in the same proportion as the
shares for which the Fund does receive voting instructions.

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, Strong may voluntarily waive all or a portion of
its shareholder servicing fee and/or absorb certain expenses for the Fund.

AVERAGE ANNUAL TOTAL RETURN
18

<PAGE> 182

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:
n
P (1 + T) = 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

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

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.

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
19

<PAGE> 183

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.

<PAGE> 184

(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.

(7) INDICES

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

FUND NAME INVESTMENT OBJECTIVE

</TABLE>

<PAGE> 185

<TABLE>
<S> <C>
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 Index 500 Fund To approximate as closely as practicable (before fees and expenses) the
capitalization-weighted total rate of return of that portion of the
U.S. market for publicly traded common stocks composed of the larger
capitalized companies.
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 Mid Cap Fund Capital growth.
Strong Common Stock Fund* Capital growth.
Strong Growth Fund Capital growth.
Strong Discovery Fund Capital growth.
Strong Small Cap Fund Capital growth.
Strong International Stock Fund Capital growth.
Strong Asia Pacific Fund Capital growth.
</TABLE>

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

Strong also serves as advisor or subadvisor to several management
investment companies, some of which fund variable annuity separate accounts of
certain insurance companies.

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

Financial goals vary from person to person. You may choose one or more of
the Strong Funds to help you reach your financial goals.

<PAGE> 186

(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. Strong developed the following suggested holding periods to help our
investors set realistic expectations for both the risk and reward potential of
our funds. (See table below.) Of course, time is just one element to consider
when making your investment decision.

STRONG FUNDS SUGGESTED MINIMUM HOLDING PERIODS

<TABLE>
<CAPTION>
UNDER 1 YEAR 1 TO 2 YEARS 4 TO 7 YEARS 5 OR MORE YEARS
- -------------------- --------------------------- -------------------------- ------------------------
<S> <C> <C> <C>
Money Market Fund Advantage Fund Government Securities Fund Index 500 Fund
Heritage Money Fund Municipal Advantage Fund Municipal Bond Fund Total Return Fund
Municipal Money Corporate Bond Fund Opportunity Fund
Market Fund 2 TO 4 YEARS International Bond Fund Growth Fund
--------------------------- High-Yield Municipal Bond Common Stock Fund*
Short-Term Bond Fund Fund Discovery Fund
Short-Term Municipal Bond Asset Allocation Fund International Stock 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 closed to new investors except the Fund may continue to offer
its shares through certain 401(k) plans and similar company-sponsored
retirement plans.

ADDITIONAL FUND INFORMATION

(1) PORTFOLIO CHARACTERISTICS

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

(2) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

<PAGE> 187

Standard deviation is calculated using the following formula:

2
Standard deviation = the square root of E(xi - xm)
----------
n-1
where E= "the sum of",
xi= each individual return during the time period,
xm= the average return over the time period, and
n= the number of individual returns during the time period.

Statistics may also be used to discuss 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

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.

<PAGE> 188

STRONG RETIREMENT PLAN SERVICES

Markets:

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

3. Women-owned businesses.

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

Turnkey approach:

The retirement plans offered by Strong are designed to be streamlined and
simple to administer. To this end, Strong has invested heavily in the
equipment, systems, and people necessary to adopt or convert a plan, and to
keep it running smoothly. Strong provides all aspects of the plan, including
plan design, administration, recordkeeping, and investment management. To
streamline plan design, Strong provides customizable IRS-approved prototype
documents. Strong'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.

Strong 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 Strong 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
Strong provides. Strong'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, Strong provides attractive, readable print
materials that are supplemented with audio and video tapes, and retirement
education programs.

Service:

Strong'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. Strong is committed to delivering accurate and timely
information, evidenced by straightforward, complete, and understandable
reports, participant account statements, and plan summaries.

<PAGE> 189

Strong 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 Strong, access to portfolio managers
through special conference calls, consolidated mailings of duplicate
confirmation statements, access to Strong's network of regional
representatives, and other specialized services. For more information on the
Strong Financial Advisors Group, call 1-800-368-1683.

INDEPENDENT ACCOUNTANTS

KPMG Peat Marwick LLP, Three Embarcadero Center, San Francisco, California
94111, have been selected as the independent accountants for the Fund and the
Master Portfolio, providing audit services and assistance and consultation with
respect to the preparation of filings with the SEC.

LEGAL COUNSEL

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

26
<PAGE> 190

STRONG EQUITY FUNDS, INC.

PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

(1) Strong Growth, Value, and Small Cap Funds (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

Incorporated by reference to the Annual Report to Shareholders
of the Strong Growth Funds dated December 31, 1996, pursuant
to Rule 411 under the Securities Act of 1933. (File Nos.
33-70764 and 811-8100)

(2) Strong Mid Cap Fund (Unaudited)

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

Included in Parts A&B.

(3) Strong Index 500 and Growth 20 Funds

Inapplicable

(b) Exhibits

(1) Articles of Incorporation dated July 31, 1996(4)
(1.1) Amendment to Articles of Incorporation dated October
22, 1996(5)
(1.2) Amendment to Articles of Incorporation dated April 4,
1997
(1.3) Amendment to Articles of Incorporation dated
_______________*
(2) Bylaws dated October 20, 1995(1)
(3) Inapplicable
(4) Specimen Stock Certificate(1)
(5) Investment Advisory Agreement(1) [Excluding Index 500
Fund.]
(5.1) Subadvisory Agreement (Value Fund)(1)
(6) Distribution Agreement(1)
(7) Inapplicable
(8.1) Custody Agreement with Firstar (Growth, Value, Small
Cap, Mid Cap, and Growth 20 Funds)(3)

C-1

<PAGE> 191
(8.2) Global Custody Agreement with Brown Brothers Harriman &
Co. (Growth, Small Cap, Mid Cap, and Growth 20 Funds)(3)
(8.3) Custody Agreement with Investors Bank and Trust (Index
500 Fund)
(9) Shareholder Servicing Agent Agreement (relating to
Transfer and Dividend-Disbursing Agent activities)(1)
(9.1) Shareholder Servicing Agent Agreement (relating to
personal services provided to shareholders)
(9.2) Third Party Feeder Fund Agreement with Master
Investment Portfolio and BZW Barclays Global Fund
Advisors (Index 500 Fund)
(10) Opinion of Counsel (Index 500 Fund)
(10.1) Opinion of Counsel (Growth 20 Fund)*
(11) Consent of Auditor
(12) Inapplicable
(13) Stock Subscription Agreement (Index 500 Fund)
(13.1) Stock Subscription Agreement (Growth 20 Fund)*
(14.1) Prototype Defined Contribution Retirement Plan - No. 1(2)
(14.1.1) Prototype Defined Contribution Retirement Plan - No. 2(2)
(14.2) Individual Retirement Custodial Account(2)
(14.3) Section 403(b)(7) Retirement Plan dated 6/96(4)
(14.4) Simplified Employee Pension Plan(3)
(15) Inapplicable
(16) Computation of Performance Figures
(17) Financial Data Schedule
(18) Inapplicable
(19) Power of Attorney for the Registrant dated December 27,
1996(5)
(19.1) Power of Attorney for the Master Investment Portfolio
dated February 27, 1997
(20) Letter of Representation
(21.1) Code of Ethics for Access Persons dated October 18,
1996(5)
(21.2) Code of Ethics for Non-Access Persons dated October 18,
1996(5)

__________________________

(1) Incorporated herein by reference to 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 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 Post-Effective Amendment No. 7 to
the Registration Statement on Form N-1A filed on or about July 30, 1996.

(4) Incorporated herein by reference to Post-Effective Amendment No. 8 to
the Registration Statement on Form N-1A filed on or about October 17,
1996.

(5) Incorporated herein by reference to Post-Effective Amendment No. 9 to
the Registration Statement on Form N-1A filed on or about December 30,
1996.

(*) To be filed by amendment.

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

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

C-2

<PAGE> 192

Item 26. Number of Holders of Securities

<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of March 31, 1997
-------------- --------------------
<S> <C>
Common Stock, $.00001 par value
Strong Growth Fund 120,243
Strong Small Cap Fund 16,546
Strong Value Fund 5,244
Strong Mid Cap Fund 1,476
Strong Index 500 Fund 0

</TABLE>

Item 27. Indemnification

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

ARTICLE VII. INDEMNIFICATION OF OFFICERS AND DIRECTORS

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

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

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

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

Item 28. Business and Other Connections of Investment Advisor

Growth, Value, Small Cap, and Mid Cap Funds

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

Index 500 Fund

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

C-3

<PAGE> 193

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) Growth, Value, Small Cap, and Mid Cap Funds

Index 500 Fund

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
Index 500 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, Strong Value, Strong Small Cap, and Strong Mid Cap Funds' latest annual
report to shareholders.

C-4

<PAGE> 194

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 12 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 12 to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the Village of Menomonee Falls, and State of Wisconsin on the
24th day of April, 1997.

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. 12 to the Registration Statement on Form N-1A has
been signed below by the following persons in the capacities and on the date
indicated.

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
President (Principal Executive
Officer and acting Principal
Financial and Accounting
/s/ John Dragisic Officer) and a Director April 24, 1997
- ---------------------
John Dragisic

/s/ Richard S. Strong Chairman of the Board and a Director April 24, 1997
- ---------------------
Richard S. Strong

Director April 24, 1997
- ---------------------
Marvin E. Nevins*

Director April 24, 1997
- ---------------------
Willie D. Davis*

Director April 24, 1997
- ---------------------
William F. Vogt*

Director April 24, 1997
- ---------------------
Stanley Kritzik*

</TABLE>

* John S. Weitzer signs this document pursuant to powers of attorney filed
with Post-Effective Amendment No. 9 to the Registration Statement on Form
N-1A.

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

<PAGE> 195

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 12 to the Registration Statement to be signed on
its behalf by the undersigned, thereto duly authorized, in the City of Little
Rock, and State of Arkansas on the 24th day of April, 1997.

MASTER INVESTMENT PORTFOLIO -
S&P 500 INDEX MASTER PORTFOLIO

By: /s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)

<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
Chairman, President (Principal
Executive Officer), and Trustee April 24, 1997
- -------------------------
R. Greg Feltus*

Secretary and Treasurer (Principal
/s/ Richard H. Blank, Jr. Financial Officer) April 24, 1997
- -------------------------
Richard H. Blank, Jr.

Trustee April 24, 1997
- -------------------------
Jack S. Euphrat*

Trustee April 24, 1997
- -------------------------
Thomas S. Goho*

Trustee April 24, 1997
- -------------------------
Zoe Ann Hines*

Trustee April 24, 1997
- -------------------------
W. Rodney Hughes*

Trustee April 24, 1997
- -------------------------
Robert M. Joses*

Trustee April 24, 1997
- -------------------------
J. Tucker Morse

</TABLE>
* Richard H. Blank, Jr. signs this document pursuant to powers of attorney
filed with this Post-Effective Amendment No. 12 to the Registration
Statement on Form N-1A.

By: /s/ Richard H. Blank, Jr.
--------------------------------
Richard H. Blank, Jr.
Secretary and Treasurer
(Principal Financial Officer)

<PAGE> 196

EXHIBIT INDEX

<TABLE>
<CAPTION>
EDGAR
Exhibit No. Exhibit Exhibit No.
- ----------- ---------------------------------------------------------------------- -----------
<S> <C> <C>
(1.2) Amendment to Articles of Incorporation EX-99.B1.2

(8.3) Custody Agreement with Investors Bank & Trust Company (Index 500 Fund) EX-99.B8.3

(9.1) Shareholder Servicing Agreement (relating to personal services EX-99.B9.1
provided to shareholders)

(9.2) Third Party Feeder Fund Agreement with Master Investment Portfolio EX-99.B9.2
and BZW Barclays Global Fund Advisors (Index 500 Fund)

(10) Opinion of Counsel (Index 500 Fund) EX-99.B10

(11) Consent of Auditor EX-99.B11

(13) Stock Subscription Agreement (Index 500 Fund) EX-99.B13

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

(17) Financial Data Schedule 27.1 Growth
27.2 Value
27.3 Small Cap

(19.1) Power of Attorney for the Master Investment Portfolio EX-99.B19.1

(20) Letter of Representation EX-99.B20
</TABLE>

<PAGE> 1
EXHIBIT 99.B1.2

AMENDMENT OF ARTICLES OF INCORPORATION

STRONG EQUITY FUNDS, INC.

The undersigned Vice President of Strong Equity Funds, Inc. (the
"Corporation"), hereby certifies that in accordance with Section 180.1002 of
the Wisconsin Statutes, the following Amendment was duly adopted to create
Strong Index 500 Fund as an additional class of Common Stock:

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

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

Class Authorized Number of Shares
----- ---------------------------

Strong Growth Fund Indefinite
Strong Small Cap Fund Indefinite
Strong Value Fund Indefinite
Strong Mid Cap Fund Indefinite
Strong Index 500 Fund Indefinite' "

This Amendment to the Articles of Incorporation of the Corporation was
adopted by the Board of Directors on January 31, 1997 in accordance with
Section 180.1002 and 180.1002(2) of the Wisconsin Statutes without shareholder
approval.

Executed in duplicate this 4th day of April, 1997.

STRONG EQUITY FUNDS, INC.

Thomas P. Lemke
-------------------------------
Thomas P. Lemke, Vice President

This instrument was drafted by:

John S. Weitzer
Strong Capital Management, Inc.
100 Hertiage Reserve
Menomonee Falls, Wisconsin 53501

<PAGE> 1
EXHIBIT 99.B8.3

CUSTODIAN AGREEMENT

BETWEEN

STRONG EQUITY FUNDS, INC.,

ON BEHALF OF THE

STRONG INDEX 500 FUND,

AND

INVESTORS BANK & TRUST COMPANY

<PAGE> 2

TABLE OF CONTENTS

Page
----

<TABLE>
<S> <C> <C>
1. Bank Appointed Custodian ............................................ 1

2. Definitions ......................................................... 1

2.1 Authorized Person .............................. 1
2.2 Board .......................................... 1
2.3 Security ....................................... 1
2.4 Portfolio Security ............................. 1
2.5 Officers' Certificate .......................... 1
2.6 Book-Entry System .............................. 2
2.7 Depository ..................................... 2
2.8 Proper Instructions ............................ 2

3. Separate Accounts ................................................... 2

4. Certification as to Authorized Persons .............................. 2

5. Custody of Cash ..................................................... 3

5.1 Purchase of Securities ......................... 3
5.2 Redemptions .................................... 3
5.3 Distributions and Expenses of Fund ............. 3
5.4 Payment in Respect of Securities ............... 3
5.5 Repayment of Loans ............................. 3
5.6 Repayment of Cash .............................. 3
5.7 Foreign Exchange Transactions .................. 4
5.8 Other Authorized Payments ...................... 4
5.9 Termination .................................... 4

6. Securities .......................................................... 4

6.1 Segregation and Registration ................... 4
6.2 Voting and Proxies ............................. 5
6.3 Corporate Action ............................... 5
6.4 Book-Entry System .............................. 5
6.5 Use of a Depository ............................ 6
6.6 Use of Book-Entry System for Commercial Paper .. 7
6.7 Use of Immobilization Programs ................. 8
6.8 Eurodollar CDs 8
6.9 Options and Futures Transactions ............... 8
(a) Puts and Calls Traded on Securities
Exchanges, NASDAQ or Over-the-Counter... 8
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges ............... 9
6.10 Segregated Account ............................. 9
</TABLE>

<PAGE> 3

Page
----

<TABLE>
<S><C> <C>
6.11 Interest Bearing Call or Time Deposits .......... 10
6.12 Transfer of Securities .......................... 10

7. Redemptions .......................................................... 12

8. Merger, Dissolution, etc. of Fund .................................... 12

9. Actions of Bank Without Prior Authorization .......................... 12

10. Collection and Defaults .............................................. 13

11. Maintenance of Records and Accounting Services ....................... 13

12. Fund Evaluation and Performance Calculation .......................... 13

12.1 Fund Evaluation ................................. 13
12.2 Performance Calculation ......................... 14

13. Additional Services .................................................. 14

14. Duties of the Bank ................................................... 14

14.1 Performance of Duties and
Standard of Care ................................ 14
14.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States ........... 15
14.3 Duties of the Bank with Respect to Property
Held Outside of the United States ............... 15
14.4 Insurance ....................................... 18
14.5 Fees and Expenses of Bank ....................... 18
14.6 Advances by Bank ............................... 18

15. Limitation of Liability .............................................. 18

16. Termination .......................................................... 19

17. Confidentiality ...................................................... 21

18. Notices .............................................................. 21

19. Amendments ........................................................... 21

20. Parties .............................................................. 21

21. Governing Law ........................................................ 21
</TABLE>

<PAGE> 4

Page
----
<TABLE>
<S> <C> <C>
22. Counterparts ......................................................... 22

23. Entire Agreement ..................................................... 22

24. Limitation of Liability .............................................. 22
</TABLE>

APPENDICES

<TABLE>
<S> <C>
Appendix A ........................... Fee Schedule

Appendix B ........................... Fund Accounting Duties
</TABLE>

iii

<PAGE> 5

CUSTODIAN AGREEMENT

AGREEMENT made as of this day of April, 1997, between Strong Equity
Funds, Inc., a company organized under the laws of the state of Wisconsin (the
"Corporation"), on behalf of the Strong Index 500 Fund (the "Fund"), and
INVESTORS BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").

The Fund, an open-end management investment company, desires to place and
maintain all of its portfolio securities and cash in the custody of the Bank.
The Bank has at least the minimum qualifications required by Section 17(f)(1)
of the Investment Company Act of 1940 (the "1940 Act") to act as custodian of
the portfolio securities and cash of the Fund, and has indicated its
willingness to so act, subject to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:

1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on Appendix A
hereto.

2. Definitions. Whenever used herein, the terms listed below will have
the following meaning:

2.1 Authorized Person. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.

2.2 Board. Board will mean the Board of Directors of the Corporation.

2.3 Security. The term security as used herein will have the same
meaning assigned to such term in the Securities Act of 1933, as amended (the
"1933 Act"), including, without limitation, any note, stock, treasury stock,
bond, debenture, evidence of indebtedness, certificate of interest or
participation in any profit sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, voting-trust certificate, certificate of deposit for a security,
fractional undivided interest in oil, gas, or other mineral rights, any put,
call, straddle, option, or privilege on any security, certificate of deposit,
or group or index of securities (including any interest therein or based on the
value thereof), or any put, call, straddle, option, or privilege entered into
on a national securities exchange relating to a foreign currency, or, in
general, any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, guarantee of, or warrant or right to subscribe to, or option
contract to purchase or sell any of the foregoing, and futures, forward
contracts and options thereon.

2.4 Portfolio Security. Portfolio Security will mean any security owned
by the Fund.

2.5 Officers' Certificate. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.

<PAGE> 6

2.6 Book-Entry System. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.

2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission (the "SEC") under Section 17A of the Securities Exchange Act of 1934
("Exchange Act"), its successor or successors and its nominee or nominees. The
term "Depository" shall further mean and include any other person authorized to
act as a depository under the 1940 Act, its successor or successors and its
nominee or nominees, specifically identified in a certified copy of a
resolution of the Board.

2.8 Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person, such
instructions to be given in such form and manner as the Bank and the Fund shall
agree upon from time to time, and (ii) instructions (which may be continuing
instructions) regarding other matters signed or initialed by an Authorized
Person. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by an Authorized Person. The Fund
shall cause all oral instructions to be promptly confirmed in writing. The Bank
shall act upon and comply with any subsequent Proper Instruction which modifies
a prior instruction and the sole obligation of the Bank with respect to any
follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Fund. The Fund shall be responsible, at
the Fund's expense, for taking any action, including any reprocessing,
necessary to correct any such discrepancy or error resulting from the Fund's
actions or instructions, and to the extent such action requires the Bank to
act, the Fund shall give the Bank specific Proper Instructions as to the action
required. Upon receipt by the Bank of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of procedures
approved by the Fund, Proper Instructions may include communication effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Fund's assets.

3. Separate Accounts. If the Fund has more than one series or portfolio,
the Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be deemed to refer to
the Fund acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Fund shall be deemed to refer to duties and obligations with
respect to such individual series and any obligation or liability of the Fund
hereunder shall be binding only with respect to such individual series, and
shall be discharged only out of the assets of such series.

4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank,
of (i) the names and signatures of the Authorized Persons and (ii) the names of
the members of the Board, it being understood that upon the occurrence of any
change in the information set forth in the most recent certification on file
(including without limitation any person named in the most recent certification
who is no longer an Authorized Person as designated therein), the Secretary or
Assistant Secretary of the Fund will sign a new or amended certification
setting forth the change and the new, additional or omitted names or
signatures. The Bank will be entitled to rely and act upon any Officers'
Certificate given to it by the Fund which has been signed by Authorized Persons
named in the most recent certification received by the Bank.

<PAGE> 7

5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Fund into a separate savings deposit
account upon which the Bank reserves the right to require seven (7) days notice
prior to withdrawal of cash from such an account. Upon receipt by the Bank of
Proper Instructions (which may be continuing instructions) or in the case of
payments for redemptions and repurchases of outstanding shares of common stock
of the Fund, notification from the Fund's transfer agent as provided in Section
7, requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below, which payment may be made, upon Proper Instructions,
to the joint Strong Funds accounts, including on behalf of the Fund, maintained
at Firstar Trust Company.

5.1 Purchase of Securities. Upon the purchase of securities for the
Fund, against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper
(as that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.

5.2 Redemptions. In such amount as may be necessary for the repurchase
or redemption of common shares of the Fund offered for repurchase or redemption
in accordance with Section 7 of this Agreement.

5.3 Distributions and Expenses of Fund. For the payment on the account
of the Fund of dividends or other distributions to shareholders as may from
time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services
hereunder and reimbursement of the expenses and liabilities of the Bank as
provided hereunder, fees of any transfer agent, fees for legal, accounting, and
auditing services, or other operating expenses of the Fund.

5.4 Payment in Respect of Securities. For payments in connection with
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.

5.5 Repayment of Loans. To repay loans of money made to the Fund, but,
in the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;

5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.

<PAGE> 8

5.7 Foreign Exchange Transactions.

(a) For payments in connection with foreign exchange contracts or options
to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may
be the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Fund deals or for their failure to comply with the terms of any
contract or option.

(b) In order to secure any payments in connection with Foreign Exchange
Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books.

5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made,
setting forth the purpose for which such obligation was incurred and declaring
such purpose to be a proper corporate purpose.

5.9 Termination: Upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 16 of this Agreement.

6. Securities.

6.1 Segregation and Registration. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive
and hold pursuant to the provisions hereof, in a separate account or accounts
and physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for
the account of the Fund. All such Portfolio Securities will be held or disposed
of by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise
directed by Proper Instructions or an Officers' Certificate), in the name of a
registered nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute and
deliver all such certificates in connection therewith as may be required by
such laws or regulations or under the laws of any state.

The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.

<PAGE> 9

6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank
will vote any of the Portfolio Securities held hereunder, except in accordance
with Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.

6.3 Corporate Action. If at any time the Bank is notified that an issuer
of any Portfolio Security has taken or intends to take a corporate action (a
"Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or
stock dividend, which Corporate Action requires an affirmative response or
action on the part of the holder of such Portfolio Security (a "Response"), the
Bank shall notify the Fund promptly of the Corporate Action, the Response
required in connection with the Corporate Action and the Bank's deadline for
receipt from the Fund of Proper Instructions regarding the Response (the
"Response Deadline"). The Bank shall forward to the Fund via telecopier and/or
overnight courier all notices, information statements or other materials
relating to the Corporate Action within twenty-four (24) hours of receipt of
such materials by the Bank.

(a) The Bank shall act upon a required Response only after receipt by the
Bank of Proper Instructions from the Fund no later than 5:00 p.m. on the date
specified as the Response Deadline and only if the Bank (or its agent or
subcustodian hereunder) has actual possession of all necessary Securities,
consents and other materials no later than 5:00 p.m. on the date specified as
the Response Deadline.

(b) The Bank shall have no duty to act upon a required Response if Proper
Instructions relating to such Response and all necessary Securities, consents
and other materials are not received by and in the possession of the Bank no
later than 5:00 p.m. on the date specified as the Response Deadline.
Notwithstanding, the Bank may, in its sole discretion, use its best efforts to
act upon a Response for which Proper Instructions and/or necessary Securities,
consents or other materials are received by the Bank after 5:00 p.m. on the
date specified as the Response Deadline, it being acknowledged and agreed by
the parties that any undertaking by the Bank to use its best efforts in such
circumstances shall in no way create any duty upon the Bank to complete such
Response prior to its expiration.

(c) In the event that the Fund notifies the Bank of a Corporate Action
requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the Response
expiration time set by the depository processing such Corporate Action.

(d) Section 14.3(g) of this Agreement shall govern any Corporate Action
involving Foreign Portfolio Securities held by a Selected Foreign
Sub-Custodian.

6.4 Book-Entry System. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund
assets in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:

<PAGE> 10

(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;

(b) The records of the Bank (and any such agent) with respect to the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during
the regular business hours of the Bank (or such agent) be open for inspection
by duly authorized officers, employees or agents of the Fund. Where securities
are transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in a
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal
Reserve Bank;

(c) The Bank (or its agent) shall pay for securities purchased for the
account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Bank (or its agent) to
reflect such payment and transfer for the account of the Fund. The Bank (or its
agent) shall transfer securities sold or loaned for the account of the Fund
upon

(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the delivery
of securities loaned by the Fund has been transferred to the Account; and

(ii) the making of an entry on the records of the Bank (or its agent)
to reflect such transfer and payment for the account of the Fund. Copies of all
advices from the Book-Entry System of transfers of securities for the account
of the Fund shall identify the Fund, be maintained for the Fund by the Bank and
shall be provided to the Fund at its request. The Bank shall send the Fund a
confirmation, as defined by Rule 17f-4 of the 1940 Act, of any transfers to or
from the account of the Fund;

(d) The Bank will promptly provide the Fund with any report obtained by
the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System;

6.5 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement
and has not delivered an Officer's Certificate to the Bank indicating that the
Board has withdrawn its approval:

(a) The Bank may use a Depository to hold, receive, exchange, release,
lend, deliver and otherwise deal with Portfolio Securities including stock
dividends, rights and other items of like nature, and to receive and remit to
the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;

(b) Registration of Portfolio Securities may be made in the name of any
nominee or nominees used by such Depository;

<PAGE> 11

(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Fund shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund only upon delivery of the Securities to or for the account
of the Fund; and upon any sale of Portfolio Securities, delivery of the
Securities will be made only against payment therefor or, in the event
Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and

(d) The Bank shall use its best efforts to provide that:

(i) The Depository obtains replacement of any certificated Portfolio
Security deposited with it in the event such Security is lost, destroyed,
wrongfully taken or otherwise not available to be returned to the Bank upon its
request;

(ii) Proxy materials received by a Depository with respect to Portfolio
Securities deposited with such Depository are forwarded immediately to the Bank
for prompt transmittal to the Fund;

(iii) Such Depository promptly forwards to the Bank confirmation of any
purchase or sale of Portfolio Securities and of the appropriate book entry made
by such Depository to the Fund's account;

(iv) Such Depository prepares and delivers to the Bank such records
with respect to the performance of the Bank's obligations and duties hereunder
as may be necessary for the Fund to comply with the recordkeeping requirements
of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and

(v) Such Depository delivers to the Bank all internal accounting
control reports, whether or not audited by an independent public accountant, as
well as such other reports as the Fund may reasonably request in order to
verify the Portfolio Securities held by such Depository.

6.6 Use of Book-Entry System for Commercial Paper. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-Entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:

(a) The Bank will maintain all Book-Entry Paper held by the Fund in an
account of the Bank that includes only assets held by it for customers;

(b) The records of the Bank with respect to the Fund's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Fund which is included in the Book-Entry System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;

<PAGE> 12

(c) The Bank shall pay for Book-Entry Paper purchased for the account of
the Fund upon contemporaneous (i) receipt of advice from the Issuer that such
sale of Book-Entry Paper has been effected, and (ii) the making of an entry on
the records of the Bank to reflect such payment and transfer for the account of
the Fund;

(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund; and

(e) The Bank will send to the Fund such reports on its system of internal
accounting control with respect to the Book-Entry Paper as the Fund may
reasonably request from time to time.

6.7 Use of Immobilization Programs. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.

6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs
may be physically held by the European branch of the U.S. banking institution
that is the issuer of such Eurodollar CD (a "European Branch"), provided that
such Portfolio Securities are identified on the books of the Bank as belonging
to the Fund and that the books of the Bank identify the European Branch holding
such Portfolio Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Fund.

6.9 Options and Futures Transactions.

(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over-the-
Counter.

(i) The Bank shall take action as to put options ("puts") and call
options ("calls") purchased or sold (written) by the Fund regarding escrow or
other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions among the Bank, any
broker-dealer registered with the National Association of Securities Dealers,
Inc. (the "NASD"), and, if necessary, the Fund, relating to the compliance with
the rules of the Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations.

(ii) Unless another agreement requires it to do so, the Bank shall
be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with
any option, nor shall the Bank be under duty or obligation to present such
option to the broker for exercise unless it receives Proper Instructions from
the Fund. The Bank shall have no responsibility for the legality of any put or
call purchased or sold on behalf of the Fund, the propriety of any such
purchase or sale, or the adequacy of any collateral delivered to a broker in
connection with an option or deposited to or withdrawn from a Segregated
Account (as defined in subsection 6.10 below). The Bank specifically, but not
by way of limitation, shall not be under any duty or obligation to: (i)
periodically check or notify the Fund that the amount of such collateral held
by a broker or held in a Segregated Account is sufficient to protect such
broker or the Fund against any loss; (ii) effect the return of any

<PAGE> 13

collateral delivered to a broker; or (iii) advise the Fund that any option
it holds, has or is about to expire. Such duties or obligations shall be the
sole responsibility of the Fund.

(b) Puts, Calls and Futures Traded on Commodities Exchanges

(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.

(ii) The responsibilities of the Bank as to futures, puts and calls
traded on commodities exchanges, any Futures Commission Merchant account and
the Segregated Account shall be limited as set forth in subparagraph (a)(2) of
this Section 6.8 as if such subparagraph referred to Futures Commission
Merchants rather than brokers, and Futures and puts and calls thereon instead
of options.

6.10 Segregated Account. The Bank shall upon receipt of Proper
Instructions establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund.

(a) Cash and/or Portfolio Securities may be transferred into a Segregated
Account upon receipt of Proper Instructions in the following circumstances:

(i) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;

(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;

(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding
commitments under reverse repurchase agreements entered into with broker-dealer
firms;t

(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;

(v) for other proper corporate purposes, upon the receipt of Proper
Instructions and an Officer's Certificate setting forth the purpose or purposes
of such Segregated Account and declaring such purposes to be proper corporate
purposes.

<PAGE> 14

(b) Cash and/or Portfolio Securities may be withdrawn from a Segregated
Account pursuant to Proper Instructions in the following circumstances:

(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;

(ii) with respect to assets deposited pursuant to
(a)(iii) or (a)(iv) above, for sale or delivery to meet the Fund's obligations
under outstanding forward commitment or when-issued agreements for the purchase
of Portfolio Securities and under reverse repurchase agreements;

(iii) for exchange for other liquid assets of equal or greater value
deposited in the Segregated Account;

(iv) to the extent that the Fund's outstanding forward commitment or
when-issued agreements for the purchase of portfolio securities or reverse
repurchase agreements are sold to other parties or the Fund's obligations
thereunder are met from assets of the Fund other than those in the Segregated
Account;

(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or

(vi) with respect to assets deposited pursuant to (a)(v) above, in
accordance with the purposes of such account as set forth in Proper
Instructions.

6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Fund of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect
of other Portfolio Securities of the Fund.

6.12 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section only upon receipt of Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.12,
and shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank
will transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:

(a) Upon sales of Portfolio Securities for the account of the Fund,
against contemporaneous receipt by the Bank of payment therefor in full, or
against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such
payment is made;

<PAGE> 15

(b) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided,
however, that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank
(or its agent or subcustodian hereunder) has actual possession of such Security
at least two business days prior to the date of tender;

(d) For the purpose of redeeming in-kind shares of the Fund upon
authorization from the Fund;

(e) In the case of option contracts owned by the Fund, for presentation
to the endorsing broker;

(f) When such Portfolio Securities are called, redeemed or retired or
otherwise become payable;

(g) For the purpose of effectuating the pledge of Portfolio Securities
held by the Bank in order to collateralize loans made to the Fund by any bank,
including the Bank; provided, however, that such Portfolio Securities will be
released only upon payment to the Bank for the account of the Fund of the moneys
borrowed, provided further, however, that in cases where additional collateral
is required to secure a borrowing already made, and such fact is made to appear
in the Proper Instructions, Portfolio Securities may be released for that
purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender that an event of deficiency or default on the loan has occurred, the Bank
may deliver such pledged Portfolio Securities to or for the account of the
lender;

(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market
value of such security, as set forth in the Proper Instructions received by the
Bank before such payment is made;

(i) for the purpose of delivering securities lent by the Fund to a bank
or broker dealer, but only against receipt in accordance with street delivery
custom except as otherwise provided herein, of adequate collateral as agreed
upon from time to time by the Fund and the Bank, and upon receipt of payment in
connection with any repurchase agreement relating to such securities entered
into by the Fund;

(j) for other authorized transactions of the Fund or for other proper
corporate purposes; provided that before making such transfer, the Bank will
also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and

<PAGE> 16

(k) upon termination of this Agreement as hereinafter set forth pursuant
to Section 8 and Section 16 of this Agreement.

As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.

7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of outstanding
common shares, the Bank will rely on notification by the Fund's transfer agent
of receipt of a request for redemption and certificates, if issued, in proper
form for redemption before such payment is made. Payment shall be made in
accordance with the Articles of Incorporation and By-laws of the Fund (the
"Articles"), from assets available for said purpose.

8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund
set forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate and the
Bank shall be released from any and all obligations hereunder.

9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:

9.1 Endorse for collection and collect on behalf of and in the name of
the Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the
Fund and hold for the account of the Fund all income, dividends, interest and
other payments or distributions of cash with respect to the Portfolio
Securities held thereunder;

9.2 Present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation and hold the
cash received by it upon such payment for the account of the Fund;

9.3 Receive and hold for the account of the Fund all securities received
as a distribution on Portfolio Securities as a result of a stock dividend,
share split-up, reorganization, recapitalization, merger, consolidation,
readjustment, distribution of rights and similar securities issued with respect
to any Portfolio Securities held by it hereunder.

9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with
Portfolio Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, or under the laws of any State;

<PAGE> 17

9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon payment for the account of the Fund; and

9.6 Exchange interim receipts or temporary securities for definitive
securities.

10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay
within two business days from the day on which it receives knowledge of such
default or refusal.

11. Maintenance of Records and Accounting Services. The Bank will
maintain records with respect to transactions for which the Bank is responsible
pursuant to the terms and conditions of this Agreement, and in compliance with
the applicable rules and regulations of the 1940 Act. The books and records of
the Bank pertaining to its actions under this Agreement and reports by the Bank
or its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Fund and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.

The Bank shall perform the fund accounting services listed on Appendix B
hereto and shall keep the books of account and render statements or copies from
time to time as reasonably requested by the Treasurer or any executive officer
of the Fund.

The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.

12. Fund Evaluation and Performance Calculation

12.1 Fund Evaluation. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the
New York Stock Exchange on each day on which said Exchange is open for
unrestricted trading and as of such other days, or hours, if any, as may be
authorized by the Board, the net asset value and the public offering price of a
share of capital stock of the Fund, such determination to be made in accordance
with the provisions of the Articles and By-laws of the Fund and the Prospectus
and Statement of Additional Information relating to the Fund, as they may from
time to time be amended, and any applicable resolutions of the Board at the time
in force and applicable; and promptly to notify the Fund, the proper exchange
and the NASD or such other persons as the Fund may request of the results of
such computation and determination. In computing the net asset value hereunder,
the Bank may rely in good faith upon information furnished to it by any
Authorized Person in respect of (i) the manner of accrual of the liabilities of
the Fund and in respect of liabilities of the Fund not appearing on its books of
account kept by the Bank, (ii) reserves, if any, authorized by the Fund or that
no such reserves have been authorized, (iii) the source of the quotations to be
used in computing the net asset value, (iv) the value to be assigned to any
security for which no price quotations are available, and (v) the method of
computation of the public offering price on the basis of the net asset value of
the shares, and the Bank shall not be responsible for any loss occasioned by
such reliance or for any good faith reliance on any quotations received from a
source pursuant to (iii) above.

<PAGE> 18

2.2. Performance Calculation. The Bank will compute the performance
results of the Fund (the "Performance Calculation") in accordance with the
applicable provisions of the 1933 Act and the 1940 Act and the rules thereunder
promulgated by the SEC, and any subsequent amendments to, published
interpretations of or general conventions accepted by the staff of the SEC with
respect to such applicable provisions of such Acts, subject to the terms set
forth below:

(a) The Bank shall compute the Performance Calculation for the Fund for
the stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Fund.

(b) In performing the Performance Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for the Fund pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers.

(c) At the request of the Bank, the Fund shall provide, and the Bank
shall be entitled to rely on, written standards and guidelines to be followed by
the Bank in interpreting and applying the computation methods used in this
Section 12.2 as they specifically apply to the Fund, provided the Bank shall be
responsible to have general knowledge of the SEC requirements discussed above.
In the event that the computation methods used in this Section 12.2 are not free
from doubt or in the event there is any question of interpretation as to the
characterization of a particular security or any aspect of a security or a
payment with respect thereto (e.g., original issue discount, participating debt
security, income or return of capital, etc.) or otherwise or as to any other
element of the computation which is pertinent to the Fund, the Fund or its
designated agent shall have the full responsibility for making the determination
of how the security or payment is to be treated for purposes of the computation
and how the computation is to be made and shall inform the Bank thereof on a
timely basis. The Bank shall have no responsibility to make independent
determinations with respect to any item which is covered by this Section, and
shall not be responsible for its computations made in accordance with such
determinations so long as such computations are mathematically correct.

(d) The Fund shall keep the Bank informed of all publicly available
information and of any non-public advice, or information obtained by the Fund
from its independent auditors or by its personnel or the personnel of its
investment adviser, related to the computations to be undertaken by the Bank
pursuant to this Agreement and the Bank shall not be deemed to have knowledge
of such information (except as contained in the Registration Statement of the
Fund) unless it has been furnished to the Bank in writing; provided that the
Bank shall keep itself informed of the SEC requirements necessary to perform
the calculations set forth above.

13. Additional Services. The Bank shall perform the additional services
for the Fund as are set forth on Appendix C hereto. Appendix C may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix A shall be appropriately increased.

14. Duties of the Bank.

14.1 Performance of Duties and Standard of Care. The Bank shall use
reasonable care with regard to its obligations under this Agreement. In
performing its duties hereunder and any other duties listed on any Schedule
hereto, if any, the Bank will be entitled to receive and act upon the advice of
independent counsel of its own selection and will be without liability for any
action taken or thing done or
14

<PAGE> 19

omitted to be done in accordance with this Agreement in good faith in
conformity with such advice, provided Bank's actions or omissions are without
negligence and not in breach of this Agreement. The Bank shall indemnify and
hold the Fund harmless from any losses, costs or expenses resulting from a
breach of the standard of care set forth in this section or a breach of this
Agreement.

The Bank will be under no duty or obligation to inquire into and will not
be liable for:

(a) the validity of the issue of any Portfolio Securities purchased by or
for the Fund, the legality of the purchases thereof or the propriety of the
price incurred therefor;

(b) the legality of any sale of any Portfolio Securities by or for the
Fund or the propriety of the amount for which the same are sold;

(c) the legality of an issue or sale of any common shares of the Fund or
the sufficiency of the amount to be received therefor;

(d) the legality of the repurchase of any common shares of the Fund or
the propriety of the amount to be paid therefor;

(e) the legality of the declaration of any dividend by the Fund or the
legality of the distribution of any Portfolio Securities as payment in kind of
such dividend; and

(f) any property or moneys of the Fund unless and until received by it,
and any such property or moneys delivered or paid by it pursuant to the terms
hereof.

Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.

14.2 Agents and Subcustodians with Respect to Property of the Fund Held
in the United States. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder, provided that the requirements of
the 1940 Act are satisfied with respect to the employment of such agents.
Without limiting the foregoing, certain duties of the Bank hereunder may be
performed by one or more affiliates of the Bank, provided that the requirements
of the 1940 Act are satisfied with respect to the employment of such
affiliates.

Upon receipt of Proper Instructions, the Bank may employ subcustodians,
provided that any such subcustodian meets at least the minimum qualifications
required by Section 17(f)(1) of the 1940 Act to act as a custodian of the Fund's
assets with respect to property of the Fund held in the United States. The Bank
shall have no liability to the Fund or any other person by reason of any act or
omission of any subcustodian and the Fund shall indemnify the Bank and hold it
harmless from and against any and all actions, suits and claims, arising
directly or indirectly out of the performance of any subcustodian. Upon request
of the Bank, the Fund shall assume the entire defense of any action, suit, or
claim subject to the foregoing indemnity. The Fund shall pay all fees and
expenses of any subcustodian.

14.3 Duties of the Bank with Respect to Property of the Fund Held Outside
of the United States.

(a) Appointment of Foreign Sub-Custodians. The Fund hereby authorizes
and instructs the Bank to employ as sub-custodians for the Fund's Portfolio
Securities and other assets

<PAGE> 20

maintained outside the United States the foreign banking institutions and
foreign securities depositories designated on the Schedule attached hereto
(each, a "Selected Foreign Sub-Custodian"). Upon receipt of Proper
Instructions, together with a certified resolution of the Fund's Board of
Directors, the Bank and the Fund may agree to designate additional foreign
banking institutions and foreign securities depositories to act as Selected
Foreign Sub-Custodians hereunder. Upon receipt of Proper Instructions, the Fund
may instruct the Bank to cease the employment of any one or more such Selected
Foreign Sub-Custodians for maintaining custody of the Fund's assets, and the
Bank shall so cease to employ such sub-custodian as soon as alternate custodial
arrangements have been implemented.

(b) Foreign Securities Depositories. Except as may otherwise be agreed
upon in writing by the Bank and the Fund and upon receipt of Proper
Instructions, together with a certified resolution of the Fund's Board of
Directors, assets of the Fund shall be maintained in foreign securities
depositories only through arrangements implemented by the foreign banking
institutions serving as Selected Foreign Sub-Custodians pursuant to the terms
hereof. Where possible, such arrangements shall include entry into agreements
containing the provisions set forth in subparagraph (d) hereof.
Notwithstanding the foregoing, except as may otherwise be agreed upon in
writing by the Bank and the Fund, Foreign Depositories, if authorized, will
include Euro-clear, the securities clearance and depository facilities operated
by Morgan Guaranty Trust Company of New York in Brussels, Belgium, until
notified to the contrary pursuant to subparagraph (a) hereunder.

(c) Segregation of Securities. The Bank shall identify on its books as
belonging to the Fund the Foreign Portfolio Securities held by each Selected
Foreign Sub-Custodian. Each agreement pursuant to which the Bank employs a
foreign banking institution shall require that such institution establish a
custody account for the Bank and hold in that account Foreign Portfolio
Securities and other assets of the Fund, and, in the event that such
institution deposits Foreign Portfolio Securities in a foreign securities
depository, that it shall identify on its books as belonging to the Bank the
securities so deposited.

(d) Agreements with Foreign Banking Institutions. Each of the
agreements pursuant to which a foreign banking institution holds assets of the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in the
form provided to the Fund and shall provide that: (a) the Fund's assets will
not be subject to any right, charge, security interest, lien or claim of any
kind in favor of the foreign banking institution or its creditors or agent,
except a claim of payment for their safe custody or administration (including,
without limitation, any fees or taxes payable upon transfers or reregistration
of securities); (b) beneficial ownership of the Fund's assets will be freely
transferable without the payment of money or value other than for custody or
administration (including, without limitation, any fees or taxes payable upon
transfers or reregistration of securities); (c) adequate records will be
maintained identifying the assets as belonging to the Bank; (d) officers of or
auditors employed by, or other representatives of the Bank, including to the
extent permitted under applicable law, the independent public accountants for
the Fund, will be given access to the books and records of the foreign banking
institution relating to its actions under its agreement with the Bank; and (e)
assets of the Fund held by the Selected Foreign Sub-Custodian will be subject
only to the instructions of the Bank or its agents.

(e) Access of Independent Accountants of the Fund. Upon request of the
Fund, the Bank will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a Selected Foreign Sub-Custodian
insofar as such books and records relate to the performance of such foreign
banking institution under its Foreign Sub-Custodian Agreement.

(f) Reports by Bank. The Bank will supply to the Fund from time to time,
as mutually agreed upon, statements in respect of the securities and other
assets of the Fund held by Selected

<PAGE> 21

Foreign Sub-Custodians, including but not limited to an identification of
entities having possession of the Foreign Portfolio Securities and other assets
of the Fund.

(g) Transactions in Foreign Custody Account. Transactions with respect
to the assets of the Fund held by a Selected Foreign Sub-Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable Foreign Sub-Custodian Agreement. If
at any time any Foreign Portfolio Securities shall be registered in the name of
the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold any
such nominee harmless from any liability by reason of the registration of such
securities in the name of such nominee.

Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the
account of the Fund and delivery of Foreign Portfolio Securities maintained for
the account of the Fund may be effected in accordance with the customary
established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities
from such purchaser or dealer.

In connection with any action to be taken with respect to the Foreign
Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to such
Rights, and any instructions relating to the actions to be taken in connection
therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no further
duty or obligation with respect to such Rights, including, without limitation,
the determination of whether the Fund is entitled to participate in such Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or market
practices within the market in which such action is to be taken or omitted.

(h) Liability of Selected Foreign Sub-Custodians. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require the
institution to exercise reasonable care in the performance of its duties and to
indemnify, and hold harmless, the Bank and each Fund from and against certain
losses, damages, costs, expenses, liabilities or claims arising out of or in
connection with the institution's performance of such obligations, all as set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise or
assert any and all rights or claims in respect of actions or omissions of, or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities and
other assets.

(i) Monitoring Responsibilities. The Bank shall furnish annually to the
Fund information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign
Sub-Custodians to ensure compliance with the requirements of Rule 17f-5 of the
1940 Act. In addition, the Bank will promptly inform the Fund in the event
that the Bank is notified

<PAGE> 22

by a Selected Foreign Sub-Custodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below US$200 million (or
the equivalent thereof) or that its shareholders' equity has declined below
US$200 million (in each case computed in accordance with generally accepted U.S.
accounting principles) or any other capital adequacy test applicable to it by
exemptive order, or if the Bank has actual knowledge of any material loss of the
assets of the Fund held by a Foreign Sub-Custodian.

(j) Tax Law. The Bank shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Bank as custodian of
the Fund by the tax laws of any jurisdiction, and it shall be the
responsibility of the Fund to notify the Bank of the obligations imposed on the
Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Selected Foreign Sub-custodian with
regard to such tax law shall be to use reasonable efforts to assist the Fund
with respect to any claim for exemption or refund under the tax law of
jurisdictions for which the Fund has provided such information.

14.4 Insurance. The Bank shall use reasonable care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it, but it
need not maintain any special insurance for the benefit of the Fund.

14.5. Fees and Expenses of the Bank. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of
Portfolio Securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or expense
to the Bank as provided above. For the services rendered by the Bank hereunder,
the Fund will pay to the Bank such compensation or fees as set forth in
Appendix A hereto.

14.6 Advances by the Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Fund. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Fund's account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Fund payable on demand.
Such overdraft shall bear interest at the current rate charged by the Bank for
such loans unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any such overdraft or indebtedness, in and
to any property at any time held by it for the Fund's benefit or in which
the Fund has an interest and which is then in the Bank's possession or control
(or in the possession or control of any third party acting on the Bank's
behalf). The Fund authorizes the Bank, in the Bank's sole discretion, at any
time to charge any overdraft or indebtedness, together with interest due
thereon, against any balance of account standing to the credit of the Fund on
the Bank's books.

15. Limitation of Liability.

15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except for any Claim resulting solely from the negligence,
recklessness, willful misfeasance or bad faith of the Bank or any Indemnified
Party or breach of this Agreement by the Bank.

<PAGE> 23

Without limiting the foregoing, neither the Bank nor the Indemnified Parties
shall be liable for, and the Bank and the Indemnified Parties shall be
indemnified against, any Claim arising as a result of:

(a) Any act or omission by the Bank or any Indemnified Party in good
faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;

(b) Any act or omission of any subcustodian selected by or at the
direction of the Fund;

(c) Any act or omission of a Selected Foreign Sub-Custodian for to the
extent which such Selected Foreign Sub-Custodian is not liable to the Bank;

(d) Any Corporate Action requiring a Response for which the Bank has not
received Proper Instructions or obtained actual possession of all necessary
Securities, consents or other materials by 5:00 p.m. on the date specified as
the Response Deadline;

(e) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;

(f) Information relied on in good faith by the Bank and supplied by the
Fund in connection with the calculation of (i) the net asset value and public
offering price of the shares of capital stock of the Fund or (ii) the
Performance Calculation; or

(g) Any acts of God, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, strikes, riots, nationalization,
expropriation, currency restrictions, acts of war, civil war or terrorism,
insurrection, nuclear fusion, fission or radiation, the interruption, loss or
malfunction of utilities, transportation or computers (hardware or software)
and computer facilities, the unavailability of energy sources and other similar
happenings or events, except as results from the Bank's own negligence,
provided the Bank shall make all reasonable efforts to provide adequate
computer and facilities back-up capabilities.

15.2 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank or the Indemnified Parties be liable to the Fund or any
third party for any special, consequential or punitive damages of any kind
whatsoever in connection with this Agreement or any activities hereunder.

16. Termination.

16.1 The term of this Agreement shall be eighteen months commencing upon
the date of this Agreement (the "Initial Term"), unless earlier terminated as
provided herein. After the expiration of the Initial Term, the term of this
Agreement shall automatically renew for successive one-year terms (each a
"Renewal Term") unless notice of non-renewal is delivered by the non-renewing
party to the other party no later than ninety days prior to the expiration of
the Initial Term or any Renewal Term, as the case may be.

(a) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.

<PAGE> 24

(b) The Corporation may terminate this Agreement on behalf of the Fund at
any time prior to the expiration of the Initial Term in the event that (i) the
Board of Directors of the Corporation determines that the performance of the
Bank does not meet the reasonable satisfaction (considered in light of industry
standards) of the Board of Directors, provided that the Bank does not cure such
unsatisfactory performance within ninety (90) days of receipt of written notice
specifying such unsatisfactory performance; or (ii) if Bank becomes the subject
of any state or federal bankruptcy proceeding that is not dismissed within
sixty (60) days of the initiation of such proceeding.

(c) The Corporation may terminate this Agreement on behalf of the Fund
prior to the expiration of the Initial Term on sixty (60) days written notice
to the Bank in the event that the Fund no longer invests all of its assets in
the S&P 500 Index Master Portfolio (the "Master Portfolio") of the Master
Investment Portfolio.

(d) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term or any Renewal Term, as the case may be, in the
event that the Master Portfolio terminates its custodian agreement with the
Bank.

(e) Either party may terminate this Agreement during any Renewal Term
upon sixty days written notice to the other party. Any termination pursuant to
this paragraph 16.1(e) shall be effective upon expiration of such sixty days,
provided, however, that the effective date of such termination may be postponed
to a date not more than ninety days after delivery of the written notice: (i)
at the request of the Bank, in order to prepare for the transfer by the Bank of
all of the assets of the Fund held hereunder; or (ii) at the request of the
Fund, in order to give the Fund an opportunity to make suitable arrangements for
a successor custodian.

16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of
all cash and the delivery of all Portfolio Securities duly endorsed and all
records maintained under Section 11 to the successor custodian when appointed
by the Fund, and all reasonable expenses associated with such transfer shall be
borne by the Fund. The obligation of the Bank to deliver and transfer over the
assets of the Fund held by it directly to such successor custodian will
commence as soon as such successor is appointed and will continue until
completed as aforesaid. If the Fund does not select a successor custodian
within ninety (90) days from the date of delivery of notice of termination the
Bank may, subject to the provisions of section 16.3, deliver the Portfolio
Securities and cash of the Fund held by the Bank to a bank or trust company of
the Bank's own selection which
meets the requirements of the 1940 Act, to be held as the property of the Fund
under terms similar to those on which they were held by the Bank, whereupon
such bank or trust company so selected by the Bank will become the successor
custodian of such assets of the Fund with the same effect as though selected by
the Board. All reasonable expenses associated with any such transfer to a
successor custodian shall be borne by the Fund. Thereafter, the Bank shall be
released from any and all obligations under this Agreement.

16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an

<PAGE> 25

opinion of counsel to the Fund in form and content satisfactory to the Bank.
Thereafter, the Bank shall be released from any and all obligations under this
Agreement.

16.4 At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.

16.5 This Agreement may not be assigned by the Bank, except by operation
of law, without the consent of the Corporation, authorized or approved by a
resolution of its Board of Directors.

17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in
addition to all other remedies at law or in equity to an injunction or
injunctions without bond or other security to prevent breaches of this
provision.

18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (I) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:

(a) In the case of notices sent to the Fund to:

Strong Equity Funds, Inc.
c/o Strong Index 500 Fund
100 Heritage Reserve
Menomonee Falls, WI 53051
Attention: General Counsel

(b) In the case of notices sent to the Bank to:

Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Andrew E. Nesvet, Client Manager
With a copy to: John E. Henry, General Counsel

or at such other place as such party may from time to time designate in
writing.

19. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.

20. Parties. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed
to be an assignment within the meaning of this provision.

21. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.

<PAGE> 26

22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.

23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.

24. Limitation of Liability. The Bank agrees that the obligations
assumed by the Fund hereunder shall be limited in all cases to the assets of
the Fund and that the Bank shall not seek satisfaction of any such obligation
from the officers, agents, employees, directors, or shareholders of the Fund or
other classes of the Corporation's shares.

<PAGE> 27

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.

STRONG EQUITY FUNDS, INC., ON
BEHALF OF STRONG INDEX 500FUND

By:
-----------------------------
Name:
Title:

INVESTORS BANK & TRUST COMPANY

By:
-----------------------------
Name:
Title:

<PAGE> 1
EXHIBIT 99.B9.1

SHAREHOLDER SERVICING AGREEMENT
(PERSONAL SERVICES PROVIDED TO SHAREHOLDERS)

THIS AGREEMENT is entered into on this ______ day of ________ 1997
between Stong Equity Funds, Inc., a Wisconsin corporation (the "Corporation"),
on behalf of the Strong Index 500 Fund ("Fund"), and Strong Capital Management,
Inc., a Wisconsin corporation ("SCM").

WITNESSETH:

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

WHEREAS, it is in the interest of the Corporation to make shareholder
services available to Customers who are or may become shareholders of the Fund,
and

WHEREAS, SCM wishes to act as the shareholder servicing agent for
investors in the Fund (the "Customer") in performing certain administrative
functions in connnection with purchases and redemptions of shares of the Fund
("Shares") from time to time upon the order and for the account of Customers
and to provide related services to Customers in connection with their
investments in the Fund.

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

1. Appointment. SCM hereby agrees to perform certain shareholder services
as agent for the Corporation with respect to the Fund as hereinafter set forth.

2. Services to be Performed.

2.1 Shareholder Services. SCM shall be responsible for performing
shareholder account administrative and servicing functions, which shall include
without limitation:

(a) answereing Customer inquiries regarding account status and
history, the manner in which purchases and redemptions of the Shares may be
effected, and certain other matters pertaining to the Fund; (b) assisting
Customers in designating and changing dividend options, account designations
and addresses; (c) providing necessary personnel and facilities to coordinate
the establishment and maintenance of shareholder accounts and records with the
Fund's transfer agent; (d) transmitting Customers' purchase and redemption
orders to the Fund's transfer agent; (e) arranging for the wiring or other
transfer of funds to and from Customer accounts in connection with Customer
orders to purchase or redeem Shares; (f) verifying purchase and redemption
orders, transfers among and changes in Customer-designated accounts; (g)
informing the distributor of the

<PAGE> 2

Fund of the gross amount of purchase and redemption orders for Shares; (h)
monitoring the activities of the Fund's transfer agent related to Customers'
accounts, and to statements, confirmations or other reports furnished to
Customers by the Fund's transfer agent; and (i) providing such other related
services as the Fund or a Customer may reasonably request, to the extent
permitted by applicable law. SCM shall provide all personnel and facilities
necessary in order for it to perform the functions contemplated by this
paragraph with respect to Customers.

2.2 Standard of Services. All services to be rendered by SCM hereunder
shall be performed in a professional, competent and timely manner subject to
the supervision of the Board of Directors of the Corporation on behalf of the
Fund. The details of the operating standards and procedures to be followed by
SCM in the performance of the services described above shall be determined from
time to time by agreement between SCM and the Corporation.

3. Fees. As full compensation for the services described in Section 2
hereof and expenses incurred by SCM, the Fund shall pay SCM a fee at an annual
rate of .25% of the average daily net asset value of the Fund. This fee will be
computed daily and will be payable as agreed by the Fund and SCM, but no more
frequently than monthly.

4. Information Pertaining to the Shares. SCM and its officers,
employees and agents are not authorized to make any representations concerning
the Fund or the Shares except to communicate to Customers accurately factual
information contained in the Fund's Prospectus and Statement of Additional
Information and objective historical performance information. SCM shall act as
agent for Customers only in furnishing information regarding the Fund and shall
have no other authority to act as agent for the Fund.

During the term of this Agreement, the Fund agrees to furnish SCM all
prospectuses, statements of additional information, proxy statements, reports
to shareholders, sales literature, or other material the Fund will distribute
to shareholders of the Fund or the public, which refer in any way to SCM, and
SCM agrees to furnish the Fund all material prepared for Customers, in each
case prior to use thereof. The Fund shall furnish or otherwise make available
to SCM such other information relating to the business affairs of the Fund as
SCM may, from time to time, reasonably request in order to discharge its
obligations hereunder.

Nothing in this Section 4 shall be construed to make the Fund liable for
the use of any information about the Fund which is disseminated by SCM.

5. Use of SCM's Name. The Fund shall not use the name of SCM in any
prospectus, sales literature or other material relating to the Fund in a manner
not approved by SCM prior thereto; provided, however, that the approval of SCM
shall not be required for any use of its name which merely refers in accurate
and factual terms to its appointment hereunder or which is required by the
Securities and Exchange

<PAGE> 3

Commission (the "SEC") or any state securities authority or any other
appropriate regulatory, governmental or judicial authority; provided, further,
that in no event shall such approval be unreasonably withheld or delayed.

6. Use of the Fund's Name. SCM shall not use the name of the Fund on
any checks, bank drafts, bank statements or forms for other than internal use
in a manner not approved the Fund prior thereto; provided, however, that
the approval of the Fund shall not be required for the use of the Fund's name
in connection with communications permitted by Sections 2 and 4 hereof or for
any use of the Fund's name which merely refers in accurate and factual terms to
SCM's role hereunder or which is required by the SEC or any state securities
authority or any other appropriate regulatory, governmental or judicial
authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.

7. Security. SCM represents and warrants that the various procedures and
systems which it has implemented with regard to safeguarding from loss or
damage attributable to fire, theft or any other cause any Fund records and
other data and SCM's records, data, equipment, facilities and other property
used in the performance of its obligations hereunder are adequate and that it
will make such changes therein from time to time as in its judgment are
required for the secure performance of its obligations hereunder. The parties
shall review such systems and procedures on a periodic basis, and the Fund
shall from time to time specify the types of records and other data of the Fund
to be safeguarded in accordance with this Section 7.

8. Compliance with Laws. SCM assumes no responsibilities under this
Agreement other than to render the services called for hereunder, on the terms
and conditions provided herein. SCM shall comply with all applicable federal
and state laws and regulations. SCM represents and warrants to the Fund that
the performance of all its obligations hereunder will comply with all
applicable laws and regulations, the provisions of its articles of
incorporation and by-laws and all material contractual obligations binding upon
SCM. SCM furthermore undertakes that it will promptly inform the Fund of any
change in applicable laws or regulations (or interpretations thereof) which
would prevent or impair full performance of any of its obligations hereunder.

9. Force Majeure. SCM shall not be liable or responsible for delays or
errors by reason of circumstances beyond its control, including, but not
limited to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.

<PAGE> 4
10. Indemnification

10.1 Indemnification of SCM. The Fund will indemnify and hold SCM
harmless, from all losses, claims, damages, liabilities or expenses (including
reasonable fees and disbursements of counsel) from any claim, demand, action or
suit (collectively, "Claims") (a) arising in connection with misstatements or
omissions in the Fund's prospectus, actions or inactions by the Fund or any of
its agents or contractors or the performance of SCM's obligations hereunder and
(b) not resulting from the willful misfeasance, bad faith, or gross negligence
of SCM, its officers, employees or agents, in the performance of SCM's duties
or from reckless disregard by SCM, its officers, employees or agents of SCM's
obligations and duties under this Agreement.

Notwithstanding anything herein to the contrary, the Fund will indemnify
and hold SCM harmless from any and all losses, claims, damages, liabilities or
expenses (including reasonable counsel fees and expenses) resulting from any
Claim as a result of SCM's acting in accordance with any received instructions
from the Fund.

10.2 Indemnification of the Fund. Without limiting the rights of the
Fund under applicable law, SCM will indemnify and hold the Fund harmless from
all losses, claims, damages, liabilities or expenses (including reasonable fees
and disbursements of counsel) from any Claim (a) resulting from the willful
misfeasance, bad faith or gross negligence of SCM, its officers, employees, or
agents, in the performance of SCM's duties or from reckless disregard by SCM,
its officers, employees or agents of SCM's obligations and duties under this
Agreement, and (b) not resulting from SCM's actions in accordance with
instructions reasonably believed by SCM to have been given by any person duly
authorized by the Fund.

10.3 Survival of Indemnities. The indemnities granted by the parties in
this Section 10 shall survive the termination of this Agreement.

11. Insurance. SCM shall maintain such reasonable insurance coverage as
is appropriate against any and all liabilities which may arise in connection
with the performance of its duties hereunder.

12. Further Assurances. Each party agrees to perform such further acts
and execute further documents as are necessary to effectuate the purposes
hereof.

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

<PAGE> 5
14. Non-Exclusivity. Nothing in this Agreement shall limit or
restrict the right of SCM to engage in any other business or to render services
of any kind to any other corporation, firm, individual or association.

15. Amendments. This Agreement may be amended only by mutual written
consent.

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

17. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Wisconsin.

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

Attest: STRONG CAPITAL MANAGEMENT, INC.

______________________________________ _________________________________
Stephen J. Shenkenberg, Vice President John Dragisic, President
and Assistant Secretary

Attest: STRONG EQUITY FUNDS, INC.

______________________________________ _________________________________
Stephen J. Shenkenberg, Vice President John S. Weitzer, Vice President
and Secretary

<PAGE> 1
EXHIBIT 9.2

THIRD PARTY FEEDER FUND
AGREEMENT
AMONG
STRONG EQUITY FUNDS, INC.
STRONG FUNDS DISTRIBUTORS, INC.
AND
MASTER INVESTMENT PORTFOLIO

DATED AS OF
APRIL 25, 1997

<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
Preambles 1

ARTICLE I. REPRESENTATIONS AND WARRANTIES
1.1 Corporation
1.2 Portfolio
1.3 SFDI

ARTICLE II. COVENANTS
2.1 Corporation
2.2 MIP
2.3 Reasonable Actions

ARTICLE III. INDEMNIFICATION
3.1 Corporation and SFDI
3.2 MIP
3.3 Survival

ARTICLE IV. ADDITIONAL AGREEMENTS
4.1 Access to Information
4.2 Confidentiality
4.3 Public Announcements

ARTICLE V. TERMINATION, AMENDMENT
5.1 Termination
5.2 Amendment

ARTICLE VI. GENERAL PROVISIONS
6.1 Expenses
6.2 Headings
6.3 Entire Agreement
6.4 Successors
6.5 Governing Law
6.6 Counterparts
6.7 Third Parties
6.8 Notices
6.9 Interpretation
6.10 Operation of Fund
6.11 Relationship of Parties; No Joint Venture, Etc.
6.12 Use of Name

Signatures
</TABLE>

<PAGE> 3

AGREEMENT
---------

THIS AGREEMENT (the "Agreement") is made and entered into as of the 25th
day of April, 1997, by and among Strong Equity Funds, Inc., a Wisconsin
corporation (the "Corporation"), for itself and on behalf of its series, the
Strong Index 500 Fund ("Fund"), Strong Funds Distributors, Inc. ("SFDI"), a
Wisconsin corporation, and Master Investment Portfolio ("MIP"), a Delaware
business trust, for itself and on behalf of its series, the S & P 500 Index
Master Portfolio ("Portfolio").

WITNESSETH
----------

WHEREAS, Fund and Portfolio are each open-end management investment
companies having the same investment objectives and substantially the same
investment policies;

WHEREAS, Fund desires to invest on an ongoing basis all of its investable
assets (the "Assets") in Portfolio (the "Investments") on the terms and
conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the foregoing, the mutual promises
made herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I

REPRESENTATIONS AND WARRANTIES
------------------------------

1.1 Corporation. Corporation represents and warrants to MIP that:

(a) Organization. Corporation is a Wisconsin corporation duly
organized, validly existing and in good standing under the laws of the
State of Wisconsin and Fund is a duly and validly designated series of
Corporation. Each of Corporation and Fund has the requisite power and
authority to own its property and conduct its business as proposed to be
conducted pursuant to this Agreement. For purposes hereof, "good
standing" means that Corporation (i) has filed with the Division of
Financial Institutions of the State of Wisconsin all annual reports
required to be filed by Section 180.1622 of the Wisconsin Business
Corporation Law (the "WBCL"), and Section 180.1403 of the WBCL.

(b) Authorization of Agreement. The execution and delivery of this
Agreement by Corporation on behalf of Fund and the conduct of business
contemplated hereby, including the implementation of the Investments,
have been duly authorized by all necessary action on the part of
Corporation's Board of Directors and no other action or proceeding is
necessary for the execution and delivery of this Agreement by Fund, or
the performance by Fund of its obligations hereunder. This Agreement
when executed and delivered by Corporation on behalf of Fund shall
constitute a legal, valid and binding

<PAGE> 4

obligation of Corporation and Fund, enforceable against Corporation and
Fund in accordance with its terms. No meeting of, or consent by,
shareholders of Fund is necessary to approve or implement the
Investments.

(c) 1940 Act Registration. Corporation is duly registered as an
open-end management investment company under the Investment Company Act
of 1940 (the "1940 Act") and such registration is in full force and
effect.

(d) SEC Filings. Corporation has duly filed all SEC Filings, as
defined herein, relating to Fund and required to be filed with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act of 1933 (the "1933 Act") and the 1940 Act. All SEC Filings relating
to Fund comply in all material respects with the requirements of the
applicable Securities Laws, as defined herein, and do not, as of the date
of this Agreement, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.

(e) Fund Assets. Fund's Assets currently consist solely of cash and
Fund intends on an ongoing basis to invest its Assets solely in
Portfolio.

(f) Registration Statement. Fund has reviewed Portfolio's
registration statement on Form N-lA, as filed with the SEC, and agrees
that its Investments will be subject to the terms thereof. Fund
understands and acknowledges that Portfolio has the right, in its sole
discretion, at any time, to limit or reject additional Investments from
Fund.

(g) Insurance. Fund has in force reasonable insurance coverage
against any and all liabilities that may arise as a result of Fund's
business as a registered investment company.

1.2 Portfolio. MIP represents and warrants to Corporation that:

(a) Organization. MIP is a trust duly organized, validly existing
and in good standing under the laws of the State of Delaware and
Portfolio is a duly and validly designated series of MIP. Each of MIP
and Portfolio has the requisite power and authority to own its property
and conduct its business as now being conducted.

(b) Authorization of Agreement. The execution and delivery of this
Agreement by MIP on behalf of Portfolio and the conduct of business
contemplated hereby have been duly authorized by all necessary action on
the part of MIP's Board of Trustees and no other action or proceeding is
necessary for the execution and delivery of this Agreement by Portfolio,
or the performance by Portfolio of its obligations hereunder. This
Agreement when executed and delivered by MIP on behalf of Portfolio shall
constitute a legal, valid and binding obligation of MIP and Portfolio,
enforceable against

<PAGE> 5

MIP and Portfolio in accordance with its terms. No meeting of, or
consent by, interestholders of Portfolio is necessary to approve the
issuance of the Interests (as defined below) to Fund.

(c) Authorization of Issuance of Beneficial Interest. The issuance
by Portfolio of shares of beneficial interest ("Interests") in exchange
for the Investments by Fund of its Assets has been duly authorized by all
necessary action on the part of the Board of Trustees of Portfolio.

(d) 1940 Act Registration. MIP is duly registered as an open-end
management investment company under the 1940 Act and such registration is
in full force and effect.

(e) SEC Filings; Securities Exemptions. MIP has duly filed all SEC
Filings, as defined herein, relating to Portfolio required to be filed
with the SEC pursuant to the 1940 Act. Interests in Portfolio are not
required to be registered under the 1933 Act, because such Interests are
offered solely in private placement transactions which do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act. In
addition, Interests in Portfolio are either registered or exempt from
registration under applicable securities laws in those states or
jurisdictions in which Interests are offered and sold. All SEC Filings
relating to Portfolio comply in all material respects with the
requirements of the applicable Securities Laws, as defined herein, and do
not, as of the date of this Agreement, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.

(f) Tax Status. Based upon applicable IRS interpretations and
rulings, Portfolio is treated as a partnership for federal income tax
purposes under the Code for its current taxable year.

1.3 SFDI. SFDI represents and warrants to MIP that the execution and
delivery of this Agreement by SFDI have been duly authorized by all necessary
action on the part of SFDI and no other action or proceeding is necessary for
the execution and delivery of this Agreement by SFDI, or the performance by
SFDI of its obligations hereunder. This Agreement when executed and delivered
by SFDI shall constitute a legal, valid and binding obligation of SFDI,
enforceable against SFDI in accordance with its terms.

ARTICLE II

COVENANTS
---------

2.1 Corporation. Corporation covenants that:

<PAGE> 6

(a) Advance Review of Certain Documents. Corporation will furnish
MIP at least ten (10) business days prior to the earlier of filing or
first use, as the case may be, with drafts of Fund's registration
statement on Form N-lA and any amendments thereto, and any prospectus and
statement of additional information supplements or amendments. In
addition, Corporation and SFDI will furnish MIP at least five (5)
business days prior to the earlier of filing or first use, as the case
may be, with any proposed advertising or sales literature that contains
language that describes or refers to MIP or Portfolio and that was not
previously approved by MIP. Corporation agrees that it will include in
all such Fund documents any disclosures that may be required by law, and
that it will incorporate in all such Fund documents any material and
reasonable comments made by MIP. MIP will not, however, in any way be
liable for any errors or omissions in such documents, whether or not it
makes any objection thereto, except to the extent such errors or
omissions result from information provided by MIP expressly for inclusion
therein. In addition, neither Fund nor SFDI will make any other written
or oral representations about MIP or Portfolio other than those contained
in such documents without MIP's prior written consent.

(b) SEC and Blue Sky Filings. Corporation will file all forms,
reports, proxy statements and other documents (collectively, the "SEC
Filings") required to be filed with the SEC under the 1933 Act, the 1934
Act and the 1940 Act, and the rules and regulations thereunder,
(collectively, the "Securities Laws") in connection with the registration
of Fund's shares, any meetings of its shareholders and its registration
as a series of an investment company. Corporation will file such similar
or other documents as may be required to be filed with any securities
commission or similar authority by the laws or regulations of any state,
territory or possession of the United States, including the District of
Columbia, in which shares of Fund are or will be registered for sale
("State Filings"). Fund's SEC Filings will comply in all material
respects with the requirements of the applicable Securities Laws, and
will not, at the time they are filed or used to offer Fund shares,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they
were made, not misleading. Fund's State Filings will be prepared in
accordance with the requirements of applicable state and federal law and
the rules and regulations thereunder.

(c) 1940 Act Registration. Fund will be duly registered as an
open-end management investment company under the 1940 Act and in any
states where such registration is necessary and such registrations will
be and remain in full force and effect.

(d) Tax Status. Fund will qualify for treatment as a regulated
investment company under Subchapter M of the Code for any taxable year
during which this Agreement continues in effect, unless such lack of
qualification is solely as a result of Portfolio's failure to meet the
diversification requirements of Subchapter M of the Code.

(e) Fiscal Year. Fund shall take appropriate action to adopt and
maintain the same fiscal year end as Portfolio (currently February 28).

<PAGE> 7

(f) Proxy Voting. If requested to vote on matters pertaining to
Portfolio, Fund will, if required under the 1940 Act or by SEC staff
policy or interpretation, seek instructions from its shareholders
regarding such matters and will cast all of its votes proportionally as
instructed by its shareholders. Fund will vote the shares held by Fund
shareholders who do not give voting instructions in the same proportion
as the shares of Fund shareholders who do give voting instructions or in
such other manner as is permissible under the 1940 Act.

(g) Compliance with Laws. Corporation shall comply, in all material
respects, with all applicable laws, rules and regulations in connection
with conducting its operations as a registered investment company.

(h) Insurance. Fund will maintain in full force and effect for so
long as this Agreement is in effect reasonable insurance coverage against
any and all liabilities that may arise as a result of Fund's business as
a registered investment company.

2.2 MIP. MIP covenants that:

(a) Signature Pages. MIP shall promptly provide all required
signature pages to Corporation for inclusion in any SEC Filings of
Corporation, provided Corporation is in material compliance with its
covenants and other obligations under this Agreement at the time such
signature pages are provided and included in the SEC Filing. Corporation
and SFDI acknowledge and agree that the provision of such signature pages
does not constitute a representation by MIP, its Trustees or Officers,
that such SEC Filing complies with the requirements of the applicable
Securities Laws, or that such SEC Filing does not contain any untrue
statement of a material fact or does not omit to the state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, except with respect to information provided by MIP
for inclusion in such SEC Filing or for use by Corporation in preparing
such filing, including but not limited to any written information
obtained from MIP's current registration statement on Form N-1A.

(b) Redemption. Except as otherwise provided in this Section
2.2(b), redemptions of Interests owned by Fund will be effected pursuant
to Section 2.2(c). In the event Fund desires to withdraw its entire
Investment from Portfolio, either by submitting a redemption request or
by terminating this Agreement in accordance with Section 5.1 hereof,
Portfolio, unless otherwise agreed to by the parties, and in all cases
subject to Section 18 of the 1940 Act and the rules and regulations
thereunder, will effect such redemption "in kind" and in such a manner
that the securities delivered to Fund or its custodian for the account of
Fund mirror, as closely as practicable, the composition of Portfolio
immediately prior to such redemption. Portfolio further agrees that, to
the extent legally possible, it will not take or cause to be taken any
action without Fund's prior approval that would cause the withdrawal of
Fund's Investments to be treated as a

<PAGE> 8

taxable event to Fund. Portfolio further agrees to conduct its
activities in accordance with all applicable requirements of Rule
1.731-2(e) under the Internal Revenue Code or any successor regulation.

(c) Ordinary Course Redemptions. Portfolio will effect its
redemptions in accordance with the provisions of the 1940 Act and the
rules and regulations thereunder. All redemption requests other than a
withdrawal of Fund's entire Investment in Portfolio under Section 2.2(b)
or, at the sole discretion of MIP, a withdrawal (or series of withdrawals
over any 3 consecutive business days) of an amount that exceeds 10% of
Portfolio's net asset value will be effected in cash at the next
determined net asset value after the redemption request is received.
Portfolio will use its best efforts to settle redemptions on the business
day following the receipt of a redemption request by Fund and if such
next business day settlement is not practicable, will immediately notify
Fund and SFDI regarding the anticipated settlement date.

(d) SEC Filings. MIP will file all SEC Filings required to be filed
with the SEC under the Securities Laws in connection with any meetings of
Portfolio's investors and Portfolio's registration as a series of an
investment company. Portfolio's SEC Filings will comply in all material
respects with the requirements of the applicable Securities Laws, and
will not, at the time they are filed or used, contain any untrue
statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.

(e) 1940 Act Registration. MIP will remain duly registered as an
open-end management investment company under the 1940 Act.

(f) Tax Status. Based upon applicable IRS interpretations and
rulings, Portfolio will continue to be treated as a partnership for
federal income tax purposes under the Code. Portfolio will continue to
satisfy the diversification requirements of Subchapter M as if such
requirements were applicable directly to it for so long as this Agreement
continues in effect. MIP agrees to forward to Fund prior to Fund's
initial Investment a copy of its opinion of counsel or private letter
ruling relating to the tax status of Portfolio and agrees that Fund may
rely upon such opinion or ruling during the term of this Agreement.

(g) Securities Exemptions. Interests in Portfolio have been and
will continue to be offered and sold solely in private placement
transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act.

(h) Advance Notice of Certain Changes. MIP shall provide
Corporation with at least one hundred twenty (120) days' advance notice,
or such lesser time as may be agreed to by the parties, of any change in
Portfolio's investment objective, and at least sixty (60) days' advance
notice, or if MIP has knowledge that one of the following changes is
likely to occur more than sixty (60) days in advance of such event,
notice shall

<PAGE> 9

be provided as soon as reasonably possible after MIP obtains such
knowledge, of any material change in Portfolio's investment policies or
activities, any material increase in Portfolio's fees or expenses or any
change in Portfolio's fiscal year.

(i) Compliance with Laws. MIP shall comply, in all material
respects, with all applicable laws, rules and regulations in connection
with conducting its operations as a registered investment company.

2.3 Reasonable Actions. Each party covenants that it will, subject to
the provisions of this Agreement, from time to time, as and when requested by
another party or in its own discretion, as the case may be, execute and deliver
or cause to be executed and delivered all such documents, assignments and other
instruments, take or cause to be taken such actions, and do or cause to be done
all things reasonably necessary, proper or advisable in order to conduct the
business contemplated by this Agreement and to carry out its intent and
purpose.

ARTICLE III

INDEMNIFICATION

3.1 Corporation and SFDI

(a) Corporation and SFDI agree, jointly and severally, to indemnify
and hold harmless MIP, Portfolio and Portfolio's investment adviser, and
any director/trustee, officer, employee or agent of MIP, Portfolio or
Portfolio's investment adviser (in this Section, each, a "Covered Person"
and collectively, "Covered Persons"), against any and all losses, claims,
demands, damages, liabilities or expenses (including, with respect to
each Covered Person, the reasonable cost of investigating and defending
against any claims therefor and any counsel fees incurred in connection
therewith, except as provided in subparagraph (b)), that:

(i) arise out of or are based upon any violation or alleged
violation of any of the Securities Laws, or any other applicable
statute, rule, regulation or common law, or are incurred in
connection with or as a result of any formal or informal
administrative proceeding or investigation by a regulatory agency,
insofar as such violation or alleged violation, proceeding or
investigation arises out of or is based upon any direct or indirect
omission or commission (or alleged omission or commission) by
Corporation or any of its directors, officers, employees or agents,
or by SFDI or any of its directors, officers, employees or agents,
but only insofar as such omissions or commissions relate to SFDI's
activities with respect to Fund; or

(ii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
advertising or sales literature,

<PAGE> 10

prospectus, registration statement, or any other SEC Filing
relating to Fund, or any amendments or supplements to the foregoing
(hereinafter referred to collectively as the "Offering Documents"),
or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein in light of the
circumstances under which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged
omission was not made in the Offering Documents in reliance upon
and in conformity with written information furnished to Fund by MIP
expressly for use therein or for use by Fund in preparing such
documents, including but not limited to any written information
contained in MIP's current registration statement on Form N-1A;

provided, however, that in no case shall Corporation or SFDI be
liable for indemnification hereunder with respect to any claims made
against any Covered Person unless a Covered Person shall have notified
Corporation or SFDI in writing within a reasonable time after the
summons, other first legal process, notice of a federal, state or local
tax deficiency, or formal initiation of a regulatory investigation or
proceeding giving information of the nature of the claim shall have
properly been served upon or provided to a Covered Person seeking
indemnification. Failure to notify Corporation or SFDI of such claim
shall not relieve Corporation or SFDI from any liability that it may have
to any Covered Person otherwise than on account of the indemnification
contained in this Section.

(b) Corporation and SFDI each will be entitled to participate at its
own expense in the defense or, if it so elects, to assume the defense of
any suit brought to enforce any such liability, but, if Corporation
and/or SFDI elect(s) to assume the defense, such defense shall be
conducted by counsel chosen by Corporation and/or SFDI, as applicable.
In the event Corporation and/or SFDI elect(s) to assume the defense of
any such suit and retain such counsel, each Covered Person in the suit
may retain additional counsel but shall bear the fees and expenses of
such counsel unless (A) Corporation and SFDI shall have specifically
authorized the retaining of and payment of fees and expenses of such
counsel or (B) the parties to such suit include any Covered Person and
Corporation and/or SFDI, and any such Covered Person has been advised in
a written opinion by counsel reasonably acceptable to Corporation and
SFDI that one or more legal defenses may be available to it that may not
be available to Corporation and/or SFDI, in which case Corporation and/or
SFDI shall not be entitled to assume the defense of such suit
notwithstanding their obligation to bear the fees and expenses of one
counsel to such persons. Corporation shall not be required to indemnify
any Covered Person for any settlement of any such claim effected without
its written consent and SFDI shall not be required to indemnify any
Covered Person for any settlement of any such claim effected without its
written consent, which consent, in each case, shall not be unreasonably
withheld or delayed. The indemnities set forth in paragraph (a) will be
in addition to any liability that Corporation and/or SFDI might otherwise
have to Covered Persons.

<PAGE> 11

(c) MIP agrees that the obligations of Corporation under the
indemnities set forth in paragraph (a) shall be limited in all cases
to the assets of Fund, including, but not limited to, any insurance
proceeds, and that MIP shall not seek satisfaction of any such obligation
from the officers, agents, employees, directors or shareholders of Fund
or other classes or series of Corporation's shares.

3.2 MIP.

(a) MIP agrees to indemnify and hold harmless Corporation, SFDI and
Fund, and any director, officer, employee or agent of Corporation, SFDI
or Fund (in this Section, each, a "Covered Person" and collectively,
"Covered Persons"), against any and all losses, claims, demands, damages,
liabilities or expenses (including, with respect to each Covered Person,
the reasonable cost of investigating and defending against any claims
therefor and any counsel fees incurred in connection therewith, except as
provided in subparagraph (b)), that:

(i) arise out of or are based upon any violation or alleged
violation of any of the Securities Laws, or any other applicable
statute, rule, regulation or common law or are incurred in
connection with or as a result of any formal or informal
administrative proceeding or investigation by a regulatory agency,
insofar as such violation or alleged violation, proceeding or
investigation arises out of or is based upon any direct or indirect
omission or commission (or alleged omission or commission) by MIP,
or any of its trustees, officers, employees or agents; or

(ii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Offering Documents relating to Portfolio, or arise out of or are
based upon the omission or alleged omission to state therein, a
material fact required to be stated therein, or necessary to make
the statements therein in light of the circumstances under which
they were made, not misleading; or

(ii) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in any
Offering Documents relating to Corporation or Fund, or arise out of
or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein in light of the circumstances under which
they were made, not misleading, in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon
and in conformity with written information furnished to Fund by MIP
expressly for use therein or for use by Fund in preparing such
documents, including but not limited to any written information
contained in MIP's current registration statement on Form N-1A.

<PAGE> 12

provided, however, that in no case shall MIP be liable for
indemnification hereunder with respect to any claims made against any
Covered Person unless a Covered Person shall have notified MIP in writing
within a reasonable time after the summons, other first legal process,
notice of a federal, state or local tax deficiency, or formal initiation
of a regulatory investigation or proceeding giving information of the
nature of the claim shall have properly been served upon or provided to a
Covered Person seeking indemnification. Failure to notify MIP of such
claim shall not relieve MIP from any liability that it may have to any
Covered Person otherwise than on account of the indemnification contained
in this Section.

(b) MIP will be entitled to participate at its own expense in the
defense or, if it so elects, to assume the defense of any suit brought to
enforce any such liability, but, if MIP elects to assume the defense,
such defense shall be conducted by counsel chosen by MIP. In the event
MIP elects to assume the defense of any such suit and retain such
counsel, each Covered Person in the suit may retain additional counsel
but shall bear the fees and expenses of such counsel unless (A) MIP shall
have specifically authorized the retaining of and payment of fees and
expenses of such counsel or (B) the parties to such suit include any
Covered Person and MIP, and any such Covered Person has been advised in a
written opinion by counsel reasonably acceptable to MIP that one or more
legal defenses may be available to it that may not be available to MIP,
in which case MIP shall not be entitled to assume the defense of such
suit notwithstanding its obligation to bear the fees and expenses of one
counsel to such persons. MIP shall not be required to indemnify any
Covered Person for any settlement of any such claim effected without its
written consent, which consent shall not be unreasonably withheld or
delayed. The indemnities set forth in paragraph (a) will be in addition
to any liability that MIP might otherwise have to Covered Persons.

(c) Corporation agrees that the obligations of MIP under the
indemnities set forth in paragraph (a) shall be limited to in all cases
to the assets of Portfolio and that Corporation shall not seek
satisfaction of any such obligation from the Officers, agents, employees,
trustees or shareholders of Portfolio or other classes or series of MIP's
shares.

3.3 Survival. The indemnities granted by the parties in this Article III
shall survive the termination of this Agreement.

ARTICLE IV

ADDITIONAL AGREEMENTS
---------------------

4.1 Access to Information. Throughout the life of this Agreement,
Corporation and MIP shall afford each other reasonable access at all reasonable
times to such party's officers, employees, agents and offices and to all
relevant books and records and shall furnish each other party with all relevant
financial and other data and information as such other party may reasonably
request.

<PAGE> 13

4.2 Confidentiality. Each party agrees that it shall hold in strict
confidence all data and information obtained from another party (unless such
information is or becomes readily ascertainable from public or published
information or trade sources or public disclosure of such information is
required by law) and shall ensure that its officers, employees and authorized
representatives do not disclose such information to others without the prior
written consent of the party from whom it was obtained, except if disclosure is
required by the SEC, any other regulatory body, Fund's or Portfolio's
respective auditors, or in the opinion of counsel to the disclosing party such
disclosure is required by law, and then only with as much prior written notice
to the other party as is practical under the circumstances. Each party hereto
acknowledges that the provisions of this Section 4.2 shall not prevent
Corporation from filing a copy of this Agreement as an exhibit to Corporation's
registration statement on Form N-1A as it relates to Fund, and that such
disclosure by Corporation shall not require any additional consent from MIP.

4.4 Public Announcements. Each party shall consult with the other parties
and with legal counsel before issuing any press release or otherwise making any
public statements with respect to the matters covered by this Agreement and
shall not issue any press release or make any public statement prior to such
consultation, except if in the opinion of counsel to the disclosing party such
disclosure is required by law and then only with as much prior written notice
to the other party as is practical under the circumstances.

ARTICLE V

TERMINATION, AMENDMENT
----------------------

5.1 Termination. This Agreement may be terminated at any time by the
mutual agreement of all parties, or by any party on ninety (90) days' advance
written notice to the other parties hereto; provided, however, that this
Section 5.1 shall not limit Corporation's right to redeem all or a portion of
its Investment in Portfolio pursuant to the 1940 Act and the rules thereunder.

5.2 Amendment. This Agreement may be amended, modified or supplemented at
any time in such manner as may be mutually agreed upon in writing by the
parties.

ARTICLE VI

GENERAL PROVISIONS
------------------

6.1 Expenses. All costs and expenses incurred in connection with this
Agreement and the conduct of business contemplated hereby shall be paid by the
party incurring such costs and expenses.

<PAGE> 14

6.2 Headings. The headings and captions contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.

6.3 Entire Agreement. Except as set forth below, this Agreement sets
forth the entire understanding between the parties concerning the subject
matter of this Agreement and incorporates or supersedes all prior negotiations
and understandings. There are no covenants, promises, agreements, conditions
or understandings, either oral or written, between the parties relating to the
subject matter of this Agreement other than those set forth herein and the
terms, conditions and descriptions set forth in MIP's Registration Statement,
as in effect from time to time.

6.4 Successors. Each and all of the provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that neither this
Agreement, nor any rights herein granted may be assigned to, transferred to or
encumbered by any party, without the prior written consent of the other parties
hereto.

6.5 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California; provided, however, that in
the event of any conflict between the 1940 Act and the laws of California, the
1940 Act shall govern.

6.6 Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and
any party hereto may execute this Agreement by signing one or more
counterparts.

6.7 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give any person, other than the parties
hereto and their successors or assigns, any rights or remedies under or by
reason of this Agreement.

6.8 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
when delivered in person or three days after being sent by certified or
registered United States mail, return receipt requested, postage prepaid,
addressed:

If to Corporation of SFDI:

General Counsel
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051

If to MIP:

<PAGE> 15

Chief Operating Officer
Master Investment Portfolio
c/o Stephens Inc.
111 Center Street
Little Rock, AR 72201

6.9 Interpretation. Any uncertainty or ambiguity existing herein shall
not be interpreted against any party, but shall be interpreted according to the
application of the rules of interpretation for arms' length agreements.

6.10 Operation of Fund. Except as otherwise provided herein, this
Agreement shall not limit the authority of Fund, Corporation or SFDI to take
such action as it may deem appropriate or advisable in connection with all
matters relating to the operation of Fund and the sale of its shares.

6.11 Relationship of Parties; No Joint Venture, Etc. It is understood and
agreed that neither Corporation nor SFDI shall hold itself out as an agent of
MIP with the authority to bind such party, nor shall MIP hold itself out as an
agent of Corporation or SFDI with the authority to bind such party.

6.12 Use of Name. Except as otherwise provided herein, neither
Corporation, Fund nor SFDI shall describe or refer to the name of MIP or any
derivation thereof, or any affiliate thereof, or to the relationship
contemplated by this Agreement in any advertising or promotional materials
without the prior written consent of MIP, nor shall MIP describe or refer to
the name of Corporation, Fund or SFDI or any derivation thereof, or any
affiliate thereof, or to the relationship contemplated by this Agreement in any
advertising or promotional materials without the prior written consent of
Corporation, Fund or SFDI, as the case may be. In no case shall any such
consents be unreasonably withheld or delayed. In addition, the party required
to give its consent shall have at least five (5) business days prior to the
earlier of filing or first use, as the case may be, to review the proposed
advertising or promotional materials.

<PAGE> 16

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers, thereunto duly authorized, as of the date first
written above.

STRONG EQUITY FUNDS, INC.,
on behalf of its series, the STRONG
INDEX 500 FUND

By /s/
___________________________________
Name:
Title:

MASTER INVESTMENT PORTFOLIO,
on behalf of its series, the S&P 500 INDEX
MASTER PORTFOLIO

By /s/
___________________________________
Name:
Title:

STRONG FUNDS DISTRIBUTORS, INC.

By /s/
__________________________________
Name:
Title:

<PAGE> 1
EXHIBIT 99.B10

[GODFREY & KAHN, S.C. LETTERHEAD]

April 22, 1997

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

Re: Strong Index 500 Fund
---------------------

Gentlemen:

We have acted as your counsel in connection with the preparation of a
Registration Statement on Form N-1A (Registration Nos. 33-70764; 811-8100) (the
"Registration Statement") relating to the sale by you of an indefinite number
of shares (the "Shares") of common stock, $.00001 par value of Strong Index 500
Fund (the "Fund"), a series of Strong Equity Funds, Inc. (the "Company") in the
manner set forth in the Registration Statement (and the Prospectus of the Fund
included therein).

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

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

<PAGE> 2

Strong Equity Funds, Inc.
April 22, 1997
Page 2

We consent to the use of this opinion as an exhibit to the Registration
Statement. In giving this consent, however, we do not admit that we are
"experts" within the meaning of Section 11 of the Securities Act of 1933, as
amended, or within the category of persons whose consent is required by Section
7 of said Act.

Very truly yours,
/s/ Godfrey & Kahn, S.C.

Godfrey & Kahn, S.C.

<PAGE> 1
EXHIBIT 99.B11

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. 12
to the Registration Statement of Strong Equity Funds, Inc. on Form N-1A of our
report dated February 3, 1997 on our audits of the financial statements and
financial highlights of Strong Growth Fund, Strong Value Fund and Strong Small
Cap Fund (each a series of Strong Equity Funds, Inc.), which report is included
in these Funds' Annual Report to Shareholders for the year ended December 31,
1996, 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
April 24, 1997

<PAGE> 1
EXHIBIT 99.B13

STRONG <<FUND>>, INC. -

STOCK SUBSCRIPTION AGREEMENT

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

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

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

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

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

Strong Capital Management, Inc.

By: _________________________
Officer

ACCEPTANCE

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

STRONG <<FUND>>, INC.

By: _________________________
Officer

Attest: _____________________
Officer

<PAGE> 1
Strong Growth Fund, Inc.

EXHIBIT 16

SCHEDULE OF COMPUTATION OF
PERFOMANCE QUOTATIONS

I. AVERAGE ANNUAL TOTAL RETURN

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

Where: P= a hypothetical inital payment of $10,000

T= average annual total return

n= number of years

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

B. CALCULATION
____
T=\n/ERV/P-1

1. One-year period 12-31-95 through 12-31-96
_____________
19.52% = \1/11,952/10,000-1

2. Since inception 12-31-93 through 12-31-96
_____________
25.49% = \3/19,763/10,000-1

<PAGE> 2
III. TOTAL RETURN

A. FORMULA

EV-IV
-----
IV = TR

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

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

TR = Total Return

B. CALCULATION

EV-IV
-----
IV = TR

One-year period ended December 31, 1996

11,952-10,000
-------------
10,000 = 19.52%

<PAGE> 3
Strong Value Fund

EXHIBIT 16
----------

SCHEDULE OF COMPUTATION OF
PERFORMANCE QUOTATIONS

I. AVERAGE ANNUAL TOTAL RETURN

A. Formula
-------

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

1. One-year period 12-31-95 through 12-31-96
1 _____________
16.82% = \ /11,682/10,000 - 1

2. Since inception 12-29-95 through 12-31-96
1 _____________
16.82% = \ /11,682/10,000 - 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 December 31, 1996

11,682-10,000
-------------
10,000 = 16.82%

<PAGE> 4
Strong Small Cap Fund

EXHIBIT 16
----------

SCHEDULE OF COMPUTATION OF
PERFORMANCE QUOTATIONS

I. AVERAGE ANNUAL TOTAL RETURN

A. Formula
-------
n n ____
P (1+T) =ERV or T = \ /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
-----------
n ____
T = \ /ERV/P - 1

1. One-year period 12-31-95 through 12-31-96
1 _____________
22.70% = \ /12,270/10,000 - 1

2. Since inception 12-29-95 through 12-31-96
1 _____________
22.70% = \ /12,270/10,000 - 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 December 31, 1996

12,270-10,000
-------------
10,000 = 22.70%

<ARTICLE> 6
<CIK> 0000914231
<NAME> STRONG EQUITY FUNDS, INC.
<SERIES>
<NUMBER> 1
<NAME> STRONG GROWTH FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1093374
<INVESTMENTS-AT-VALUE> 1309812
<RECEIVABLES> 19967
<ASSETS-OTHER> 57
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1329836
<PAYABLE-FOR-SECURITIES> 20027
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1652
<TOTAL-LIABILITIES> 21679
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1074422
<SHARES-COMMON-STOCK> 70704
<SHARES-COMMON-PRIOR> 40479
<ACCUMULATED-NII-CURRENT> 91
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17206
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 216438
<NET-ASSETS> 1308157
<DIVIDEND-INCOME> 7582
<INTEREST-INCOME> 3947
<OTHER-INCOME> 0
<EXPENSES-NET> (13961)
<NET-INVESTMENT-INCOME> (2432)
<REALIZED-GAINS-CURRENT> 67404
<APPREC-INCREASE-CURRENT> 87465
<NET-CHANGE-FROM-OPS> 152437
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1456)
<DISTRIBUTIONS-OF-GAINS> (31662)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52717
<NUMBER-OF-SHARES-REDEEMED> (24245)
<SHARES-REINVESTED> 1753
<NET-CHANGE-IN-ASSETS> 665335
<ACCUMULATED-NII-PRIOR> 72
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 14629
<GROSS-ADVISORY-FEES> 10356
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13961
<AVERAGE-NET-ASSETS> 1036585
<PER-SHARE-NAV-BEGIN> 15.88
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 3.13
<PER-SHARE-DIVIDEND> (0.02)
<PER-SHARE-DISTRIBUTIONS> (0.46)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 18.5
<EXPENSE-RATIO> 1.3
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000914231
<NAME> STRONG EQUITY FUNDS, INC.
<SERIES>
<NUMBER> 3
<NAME> Strong Value Fund
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 55761
<INVESTMENTS-AT-VALUE> 58783
<RECEIVABLES> 175
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58984
<PAYABLE-FOR-SECURITIES> 3390
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 99
<TOTAL-LIABILITIES> 3489
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52403
<SHARES-COMMON-STOCK> 4806
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 69
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3022
<NET-ASSETS> 55495
<DIVIDEND-INCOME> 419
<INTEREST-INCOME> 496
<OTHER-INCOME> 0
<EXPENSES-NET> (458)
<NET-INVESTMENT-INCOME> 457
<REALIZED-GAINS-CURRENT> 69
<APPREC-INCREASE-CURRENT> 3022
<NET-CHANGE-FROM-OPS> 3548
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (456)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5736
<NUMBER-OF-SHARES-REDEEMED> (969)
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> 55495
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 303
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 458
<AVERAGE-NET-ASSETS> 30392
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 1.55
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.55
<EXPENSE-RATIO> 1.5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000914231
<NAME> STRONG EQUITY FUNDS, INC.
<SERIES>
<NUMBER> 2
<NAME> STRONG SMALL CAP FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 144869
<INVESTMENTS-AT-VALUE> 156998
<RECEIVABLES> 520
<ASSETS-OTHER> 31
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 157549
<PAYABLE-FOR-SECURITIES> 113
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 377
<TOTAL-LIABILITIES> 490
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 157492
<SHARES-COMMON-STOCK> 13002
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (12568)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 12129
<NET-ASSETS> 157059
<DIVIDEND-INCOME> 130
<INTEREST-INCOME> 473
<OTHER-INCOME> 0
<EXPENSES-NET> (1079)
<NET-INVESTMENT-INCOME> (476)
<REALIZED-GAINS-CURRENT> (9983)
<APPREC-INCREASE-CURRENT> 12129
<NET-CHANGE-FROM-OPS> 1670
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2103)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 19415
<NUMBER-OF-SHARES-REDEEMED> (6583)
<SHARES-REINVESTED> 170
<NET-CHANGE-IN-ASSETS> 157059
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 721
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1079
<AVERAGE-NET-ASSETS> 72297
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> (0.01)
<PER-SHARE-GAIN-APPREC> 2.28
<PER-SHARE-DIVIDEND> (0.19)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.08
<EXPENSE-RATIO> 1.5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE> 1
EXHIBIT 99.B19.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Marco E. Adelfio, Richard H. Blank, Jr., R. Greg Feltus and Robert M.
Kurucza, and each of them, his true and lawful attorney-in-fact and agent
(each, an "Attorney-in-Fact") with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, (i) to execute the Registration Statement of each of MasterWorks
Funds Inc., Managed Series Investment Trust, Master Investment Portfolio and
any investment company whose fund(s) invest in a Master Portfolio of Managed
Series Investment Trust or Master Investment Portfolio (each, a "Company"), and
any or all amendments (including post-effective amendments) thereto and to
file the same, with any and all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission and any state
securities commissions or authorities, and (ii) to execute any and all federal
or state regulatory filings, including all applications with regulatory
authorities, state charter or organizational documents and any amendments or
supplements thereto, to be executed by, on behalf of, or for the benefit of, a
Company. The undersigned hereby grants to each Attorney-in-Fact full power and
authority to do and perform each and every act and thing contemplated above, as
fully and to all intents and purposes as he might or could do in person, and
hereby ratifies and confirms all that said Attorney-in-Fact may lawfully do or
cause to be done by virtue hereof.

Dated: February 27, 1997 /s/ Zoe-Ann Hines
---------------------
Zoe-Ann Hines
<PAGE> 2

POWER OF ATTORNEY

Dated: February 27, 1997 /s/ Robert M. Joses
---------------------
Robert M. Joses
<PAGE> 3

POWER OF ATTORNEY

Dated: February 27, 1997 /s/ R. Greg Feltus
---------------------
R. Greg Feltus
<PAGE> 4

POWER OF ATTORNEY

Dated: February 27, 1997 /s/ J. Tucker Morse
---------------------
J. Tucker Morse
<PAGE> 5

POWER OF ATTORNEY

Dated: February 27, 1997 /s/ Thomas S. Goho
---------------------
Thomas S. Goho
<PAGE> 6

POWER OF ATTORNEY

Dated: February 27, 1997 /s/ Jack S. Euphrat
---------------------
Jack S. Euphrat
<PAGE> 7

POWER OF ATTORNEY

Dated: February 27, 1997 /s/ W. Rodney Hughes
---------------------
W. Rodney Hughes

<PAGE> 1
EXHIBIT 99.B20

[GODFREY & KAHN, S.C. LETTERHEAD]

April 23, 1997

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

Re: Strong Equity Funds, Inc.

Gentlemen:

We represent Strong Equity Funds, Inc. (the "Company"), in connection
with its filing of Post-Effective Amendment No. 12 (the "Post-Effective
Amendment") to the Company's registration Statement (Registration Nos. 33-70764;
811-8100) on Form N-1A under the Securities Act of 1933 (the "Securities Act")
and the Investment Company Act of 1940. The Post-Effective Amendment is being
filed pursuant to Rule 485(b) under the Securities Act.

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

Very truly yours,

GODFREY & KAHN, S.C.

/s/ Pamela M. Krill

Pamela M. Krill