As filed with the Securities and Exchange Commission on or about June 26, 1998
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. 21 [ X ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 22 [ 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)
It is proposed that this filing will become effective (check appropriate
box).
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on July 1, 1998 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.
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STRONG EQUITY FUNDS, INC.
CROSS-REFERENCE SHEET
This Post-Effective Amendment to the Registration Statement of Strong Equity
Funds, Inc., which is currently comprised of eight funds, relates only to
Strong Index 500 Fund. This Post-Effective Amendment does not relate to,
amend, supersede, or otherwise affect any of the separate Prospectus and
Statement of Additional Information contained in Post-Effective Amendment No.
16, 19, & 20.
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.)
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Caption or Subheading in Prospectus or
ITEM NO. ON FORM N-1A STATEMENT OF ADDITIONAL INFORMATION
- ----------------------------------------------------------------------
PART A - Information Required in Prospectus
1. Cover Page Cover Page
2. Synopsis Expenses
3. Condensed Financial Information Financial Highlights
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 *
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
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Caption or Subheading in Prospectus or
ITEM NO. ON FORM N-1A STATEMENT OF ADDITIONAL INFORMATION
- -----------------------------------------------------------
12. General Information and History **
13. Investment Objectives and Policies Investment Restrictions; Investment Policies and
Techniques
14. Management of the Fund Directors and Officers
15. Control Persons and Principal Holders of Securities Principal Shareholders; Directors and Officers
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 Securities Included in Prospectus under the headings:
Being Offered Shareholder Manual - How to Buy Shares,
- Determining Your Share Price, - How to Sell
Shares, - Shareholder Services; and in the Statement
of Additional Information under the headings:
Additional Shareholder Information; 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 Financial Statements
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* Complete answer to Item is contained in the Fund's Annual Report.
** Complete answer to Item is contained in the Fund's Prospectus.
STRONG INDEX 500 FUND
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
www.strong-funds.com
The Strong Family of Funds ("Strong Funds") is a family of more than forty
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
("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 ("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 July 1, 1998 ("SAI"), which contains
further information, is incorporated by reference into this Prospectus, and has
been filed with the Securities and Exchange Commission ("SEC"). The SAI, 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 this
Prospectus, you may do so by accessing the SEC's World Wide Web site
(http://www.sec.gov) that contains the SAI regarding the Fund 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.
July 1, 1998
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TABLE OF CONTENTS
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EXPENSES I-3
FINANCIAL HIGHLIGHTS I-4
INVESTMENT OBJECTIVE AND POLICIES I-6
MASTER/FEEDER STRUCTURE I-8
ABOUT THE FUND I-10
SHAREHOLDER MANUAL II-1
APPENDIX A-1
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the SAI, 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.
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
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
There are certain charges associated with retirement accounts (such as a $10
charge for closing an IRA account) 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
fees 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)
SHAREHOLDER TOTAL
MANAGEMENT SERVICING OTHER 12B-1 OPERATING
FUND FEES FEES EXPENSES FEES EXPENSES
Index 500 Fund 0.05% 0.25% 1.04% NONE 0.45%*
* 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 1.34%.
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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.
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."
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:
FUND PERIOD (IN YEARS)
1 3 5 10
Index 500 Fund $14 $42 $73 $161
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.
FINANCIAL HIGHLIGHTS
The following annual Financial Highlights for the Fund have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The Fund's
report for the fiscal year ended February 28, 1998 is included in its Annual
Report that is attached to the SAI. The Financial Highlights for the Fund
should be read in conjunction with the Financial Statements and related notes
included in the Fund's Annual Report. Additional information about the Fund's
performance is contained in the Fund's Annual Report, which may be obtained
without charge by calling or writing Strong Funds. The following presents
information relating to a share of common stock of the Fund outstanding for the
entire period as indicated.
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SELECTED PER-SHARE DATA (a)
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Income From Investment Operations Less Distributions Ratios and Supplemental Data
--------------------------------- ------------------ ------------------------------
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Net Asset Net Realized
Value, Net and Unrealized Total from From Net From Net
Beginning Investment Gains on Investment Investment Realized Total
Year Ended of Period Income Investments Operations Income Gains Distributions
Feb. 28, 1998(b) $10.00 $0.11 $3.15 $3.26 ($0.09) ($0.01) ($0.10)
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Ratio of Ratio of Net
Net Assets, Ratio of Expenses to Investment
Net Asset End of Period Expenses to Average Net Income to
Value, End of (In Thousands) Average Net Assets Without Average Net
Year Ended Period Total Return Assets Waivers Assets
Feb. 28, 1998(b) $13.16 +32.7% $32,096 0.44%* 1.53%* 1.43%*
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* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the
Fund outstanding for the entire period.
(b) For the period from May 1, 1997 (inception) to February 28, 1998.
Total return is not annualized.
The Portfolio turnover rate for the Master Portfolio was 6% for the fiscal year
ended February 28, 1998.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund has adopted certain fundamental investment restrictions that are set
forth in the 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 the vote of a majority of the Fund's outstanding
voting shares. There can be no assurance that the Fund will achieve its
investment objective; the success of the Fund depends to a great extent upon
changes in market conditions.
The Fund seeks to achieve its investment objective by investing all of its
assets in the Master Portfolio of MIP. The Master Portfolio has substantially
the same investment objective as the Fund. The Master Portfolio seeks to
achieve its objective by investing substantially all of its assets in the same
stocks and in substantially the same percentages as the Standard & Poor's 500
Composite Stock Price Index* (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.
The Master Portfolio has represented that no attempt is made to manage its
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 has also represented that it 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. Notwithstanding the factors described below,
perfect (100%) correlation would be 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 of both the
Fund and the Master Portfolio. 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
adviser ("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 achieve a correlation of at least 95% with the S&P 500 Index. The
Fund's performance will correspond directly to the experience of the Master
Portfolio.
* 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.
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. 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 up to 10%
of its total assets in high-quality money market instruments to provide
liquidity. See "Appendix - Additional Investment Policies."
INVESTMENT PRACTICES OF THE FUND AND RELATED RISKS
GENERAL. The Fund's net asset value per share should be expected to fluctuate.
Investors should invest only if they are willing to undertake the risks
involved. For additional information on the risks involved in investing in the
Fund, see "Appendix - Additional Investment Policies."
EQUITY SECURITIES. The stock investments of the Master Portfolio are subject
to equity market risk. Equity market risk is the possibility that common stock
prices will fluctuate or decline over short or even extended periods. The U.S.
stock market tends to be cyclical, with periods when stock prices generally
5
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rise and periods when prices generally decline. Throughout the first six
months of 1998, the stock market, as measured by the S&P 500 Index and other
commonly used indices, was trading at or close to record levels. There can be
no guarantee that these performance levels will continue. Changes in the value
of the Master Portfolio's investments will result in changes in the value of
its shares and thus the Fund's total return to investors.
USE OF DERIVATIVES. The Master Portfolio may invest, to a limited extent, in
derivatives. These are financial instruments which derive their performance,
at least in part, from the performance of an underlying asset or index. The
derivatives the Master Portfolio may use include stock index futures. While
derivatives can be used effectively in furtherance of the Master Portfolio's
investment objective, under certain market conditions, they can increase the
volatility of the Master Portfolio's net asset value and can decrease the
accurate pricing of the Master Portfolio's portfolio. See "Appendix -
Additional Investment Policies" and "Additional Investment Policies" in the
Statement of Additional Information.
FOREIGN SECURITIES. Since the stocks of some foreign issuers are included in
the S&P 500 Index, the Master Portfolio's portfolio may contain securities of
such foreign issuers, as well as American Depositary Receipts and similar
instruments, which may subject the Master Portfolio to additional investment
risks with respect to those securities that are different in some respects from
those incurred by a fund which invests only in securities of domestic issuers.
Such risks include possible adverse political and economic developments,
seizure or nationalization of foreign deposits or adoption of governmental
restrictions which might adversely affect the value of the securities of a
foreign issuer to investors located outside the country of the issuer, whether
from currency blockage or otherwise.
OTHER INVESTMENT CONSIDERATIONS. Asset allocation and modeling strategies are
employed by BGFA for other investment companies and accounts advised or
sub-advised by BGFA. If these strategies indicate particular securities should
be purchased or sold at the same time by the Master Portfolio and one or more
of these investment companies or accounts, available investments or
opportunities for sales will be allocated equitably to each by BGFA. In some
cases, these procedures may adversely affect the size of the position obtained
for or disposed of by the Master Portfolio or the price paid or received by the
Master Portfolio.
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
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 ("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,
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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. Investment of the Fund's assets in the Master
Portfolio is not a fundamental policy of the Fund and a shareholder vote is not
required for the Fund to withdraw its investment from the Master Portfolio.
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 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.
As of June 1, 1998, the S&P 500 Stock Fund of MasterWorks Funds Inc., 111
Center Street, Little Rock, Arkansas 72201, owned approximately 88.41% of the
outstanding voting securities of the Master Portfolio and could be considered a
"controlling person" of the Master Portfolio for purposes of the 1940 Act.
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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 a direct subsidiary of
Barclays Global Investors, N.A. (which, in turn, is an indirect subsidiary of
Barclays Bank PLC ("Barclays")) and is located at 45 Fremont Street, San
Francisco, California 94105. As of April 30, 1998, BGFA and its affiliates
provided investment advisory services for over $575 billion of assets. For its
advisory services to the Master Portfolio, BGFA is contractually entitled to
receive a monthly fee at the annual rate of 0.05% of the Master Portfolio's
average daily net assets. No advisory fees were waived during the fiscal year
ended February 28, 1998. 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.
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 200 Clarendon Street, Boston, Massachusetts 02111.
IBT also acts as the Fund's accounting services agent.
MASTER PORTFOLIO TRANSFER AND DIVIDEND-DISBURSING AGENT. IBT also 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.
YEAR 2000 RISKS. Like other mutual funds and financial and business operations
around the world, the Fund could be adversely affected if the computer
software, and to a lesser extent, hardware used by Strong and other service
providers are not able to process and calculate date-related information and
data before, during, and after January 1, 2000. This is commonly known as the
"Year 2000 Issue." Strong is taking steps that it believes are reasonably
designed to address the Year 2000 Issue with respect to the computer software
and hardware that it uses and to obtain satisfactory assurances that comparable
steps are being taken by the Fund's other major service providers. However,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Fund.
ORGANIZATION
SHAREHOLDER RIGHTS. The Fund is a series of Strong Equity Funds, Inc., a
Wisconsin corporation that is authorized to issue an indefinite number of
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. Shareholders have certain rights, including the right to call an
annual meeting upon a vote of 10% of the Fund's outstanding shares for the
purpose of voting to remove one or more directors or to transact any other
business. The 1940 Act requires the Fund to assist the shareholders in calling
such a meeting.
8
<PAGE>
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 and 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.
If you have chosen to receive dividends and/or capital gain distributions in
cash and the postal or other delivery service is unable to deliver checks to
your address of record, your distribution option will automatically be
converted to having all dividend and other distributions reinvested in
additional Fund shares. No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
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, and net short-term capital gain). Distributions of net
capital gain (the excess of net long-term capital gain over net short-term
capital loss), when designated as such by the Fund, are taxable to you as
long-term capital gains, regardless of how long you have held your Fund shares.
The Fund's distributions are taxable in the year they are paid, whether they
are taken in cash or reinvested in additional shares, except that certain
distributions 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.
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 shares of the Fund 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
shares of the Fund for shares of another Strong Fund. If you purchase shares of
the Fund within 30 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 Code
("IRC") 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 IRC, 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.
SHAREHOLDER MANUAL
<TABLE>
<CAPTION>
<S> <C>
HOW TO BUY SHARES II-1
DETERMINING YOUR SHARE PRICE II-5
HOW TO SELL SHARES II-5
SHAREHOLDER SERVICES II-8
REGULAR INVESTMENT PLANS II-10
RETIREMENT PLAN SERVICES II-11
SPECIAL SITUATIONS II-11
</TABLE>
HOW TO BUY SHARES
9
<PAGE>
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 the Fund receives and accepts your
purchase order.
Whether you are opening a new account or adding to an existing one, the Fund
provides you with several methods to buy its shares.
TO OPEN A NEW ACCOUNT
<TABLE>
<CAPTION>
<S> <C>
MAIL BY CHECK
Complete and sign the application. Make your check or money order
payable to "Strong Funds."
Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If
you're using an express delivery service, send to Strong Funds, 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
TELEPHONE BY EXCHANGE
Call 1-800-368-3863 to establish a new account by exchanging funds from
1-800-368-3863 an existing Strong Funds account.
24 HOURS A DAY, Sign up for telephone exchange services when you open your account. To add
7 DAYS A WEEK the telephone exchange option to your account, call 1-800-368-3863 for a
Shareholder Account Options 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
IN PERSON Stop by our Investor Center in Menomonee Falls, Wisconsin. Call 1-800
368-3863 for hours and directions.
The Investor Center
canwill only accept checks or money orders
made payable to "Strong Funds."
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
WIRE Call 1-800-368-3863 for instructions on opening an account by wire.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
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>
10
<PAGE>
dealer street name account from the broker-dealer.
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
Shareholder Account Options 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 Shareholder
Account Options 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 will only accept checks or money orders made payable to
"Strong Funds."
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, savings, or NOW
account. Complete the Automatic Investment Plan section on the account
application.
- - AUTOMATIC EXCHANGE PLAN. Make regular, systematic exchanges (minimum $50)
from one eligible 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 shares into a broker-dealer
street name account from the broker-dealer.
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.
11
<PAGE>
- - 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.
- - Exchange Feature - Please note that certain Strong Funds that you may
exchange into may impose a redemption fee of 0.5% on shares held for less
than six months.
- - Minimum Investment Requirements:
<TABLE>
<CAPTION>
<S> <C>
To open a regular account $2,500
To open a regular IRA, Roth IRA, or one-person SEP-IRA account $250
To open an Education IRA account $500*
To open an UGMA/UTMA account $250
To open a SIMPLE, SEP-IRA, Keogh, Profit Sharing the lesser of $250
or Money Purchase Pension Plan, or 403(b) account or $25 per month
To open a qualified retirement plan account where Strong
or a financial intermediary provides administrative services No Minimum
To add to an existing account $50
</TABLE>
* Not eligible for the Automatic Investment Plan and No-Minimum Investment
Program.
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 and invest monthly (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
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 ("Exchange") on a day on
which the Exchange is open, your share price will be the NAV determined that
day. The NAV for each Fund is normally determined as of 3:00 p.m. Central Time
("CT") each day the Exchange is open. The Fund reserves the right to change the
time at which purchases, redemptions, and exchanges are priced if the Exchange
closes at a time other than 3:00 p.m. CT or if an emergency exists. The Fund's
NAV is calculated by taking the fair value of the Fund's total assets (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.
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
12
<PAGE>
custodian. For your protection, certain requests may require a signature
guarantee. (See "Special Situations - Signature Guarantees.")
<TABLE>
<CAPTION>
<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 following information:
CERTAIN REDEMPTION your account number, the dollar amount or number of shares you wish
REQUESTS MAY REQUIRE A to redeem, each owner's name, your street address, and the signature of
SIGNATURE GUARANTEE. SEE each owner as it appears on the account.
"SPECIAL
SITUATIONS - SIGNATURE Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If
GUARANTEES." 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
TELEPHONE Sign up for telephone redemption services when you open your account. To
add the telephone redemption option to your account, call 1-800-368-3863
1-800-368-3863 for a Shareholder Account Options Form.
24 HOURS A DAY, Once the telephone redemption option is in place, you may sell shares by
7 DAYS A WEEK 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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
BROKER-DEALER You may also redeem shares through broker-dealers or other financial
intermediaries who may charge a transaction fee.
</TABLE>
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 or electronic transaction
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.
13
<PAGE>
- - 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 or certain
retirement plans.
In determining "six months" the Fund will use the six-month anniversary date of
the transaction. Thus, shares purchased on May 1, 1998, for example, will be
subject to the fee if they are redeemed on or prior to October 31, 1998. If
they are redeemed on or after November 1, 1998, 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
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 DIRECTSM, 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 DIRECTSM AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day, the
STRONG DIRECTSM automated response system enables you to use a touch-tone phone
to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity
(1-800-368-5550), 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.
STRONG NETDIRECTSM. Available 24 hours a day from your personal computer,
STRONG NETDIRECTSM 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 web site 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, the Fund will confirm all transactions
for your account on a quarterly basis. We recommend that you file each
quarterly statement - and, especially, each calendar year-end statement - with
your other important financial papers, since you may need to refer to them at a
later date for tax purposes. Should you need additional copies of previous
statements, you may order confirmation statements for the current and preceding
year at no charge. Statements for earlier years are available for $10 each.
Call 1-800-368-3863 to order past statements.
Each year, you will also receive a statement confirming the tax status of any
distributions paid to you, as well as an annual report containing audited
financial statements and a semi-annual report.
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.
14
<PAGE>
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.
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 or call us at 1-800-368-3863 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 an 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, by telephone, or through your
personal computer. By establishing exchange services, you authorize the Fund
and its agents to act upon your instruction through the telephone or personal
computer 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 at any time.
Please note that the Fund assesses a 0.50% fee on redemptions (including
exchanges) of fund shares held for less than six months.
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, savings,
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. To establish the Plan, complete
the Automatic Investment Plan section on the account application, or call
1-800-368-3863 for an application.
PAYROLL DIRECT DEPOSIT PLAN. Once you meet the Fund's minimum initial
investment requirement, you may purchase additional Fund shares through the
Payroll Direct Deposit Plan. Through this Plan, periodic investments (minimum
$50) are made automatically from your payroll check into your existing Fund
account. By enrolling in the Plan, you authorize your employer or its agents to
deposit a specified amount from your payroll check into the Fund's bank
account. In most cases, your Fund account will be credited the day after the
amount is received by the Fund's bank. In order to participate in the Plan,
your employer must have direct deposit capabilities through the Automated
Clearing House available to its employees. The Plan may be used for other
direct deposits, such as social security checks, military allotments, and
annuity payments.
To establish 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.
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. However, the minimum initial investment in
the second account is waived if you select a monthly investment schedule.
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.
RETIREMENT PLAN SERVICES
We offer a wide variety of retirement plans for individuals and institutions,
including large and small businesses. For information on IRAs, including Roth
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
(SIMPLE, SEP, Keogh, 403(b)(7), pension or profit sharing), call 1-800-368-2882
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.
SPECIAL SITUATIONS
POWER OF ATTORNEY. If you are investing as attorney-in-fact for another person,
please complete the account application in the name of such person and sign the
back of the application in the following form: "[applicant's name] by [your
name], attorney-in-fact." To avoid having to file an affidavit prior to each
transaction, please complete the Power of Attorney form available from Strong
Funds at 1-800-368-3863. However, if you would like to use your own power of
attorney form, please call the same number for instructions.
CORPORATIONS AND TRUSTS. If you are investing for a corporation, please include
with your account application a certified copy of your corporate resolution
indicating which officers are authorized to act on behalf of the corporation.
As an alternative, you may complete a Certification of Authorized Individuals,
which can be obtained from the Fund. Until a valid corporate resolution or
Certification of Authorized Individuals form is received by the Fund, services
such as telephone and wire redemption will not be established.
If you are investing as a trustee (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.
15
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FINANCIAL INTERMEDIARIES. 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 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 type and/or other
administrative services 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 an advisory, transaction, or other
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.
SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and
the Fund against fraudulent transactions by unauthorized persons. In the
following instances, the Fund will require a signature guarantee for all
authorized owners of an account:
- - when you add the telephone redemption option to your existing account;
- - if you transfer the ownership of your account to another individual or
organization;
- - when you submit a written redemption request for more than $50,000;
- - when you request to redeem or redeposit shares that have been issued in
certificate form;
- - if you open an account and later decide that you want certificates;
- - when you request that redemption proceeds be sent to a different name or
address than is registered on your account;
- - if you add/change your name or add/remove an owner on your account; and
- - if you add/change the beneficiary on your transfer-on-death account.
A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks, savings
associations, credit unions, brokerage firms, and financial intermediaries.
PLEASE NOTE THAT A NOTARY PUBLIC STAMP OR SEAL IS NOT ACCEPTABLE.
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 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 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
<PAGE>
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 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 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.
17
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
STRONG INDEX 500 FUND
P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863
e-mail: [email protected]
Web Site: http://www.strong-funds.com
This SAI is not a Prospectus and should be read together with the Prospectus
for the Fund dated July 1, 1998. Requests for copies of the Prospectus should
be made by calling any number listed above. The financial statements
appearing in the Annual Report, which accompanies this SAI, are incorporated
into this SAI by reference.
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 SAI.
July 1, 1998
1
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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.........................................................9
PRINCIPAL SHAREHOLDERS........................................................11
INVESTMENT ADVISOR............................................................11
ADMINISTRATOR AND PLACEMENT AGENT OF THE MASTER PORTFOLIO.....................12
DISTRIBUTOR...................................................................12
PORTFOLIO TRANSACTIONS AND BROKERAGE..........................................12
CUSTODIAN AND FUND ACCOUNTING SERVICES AGENT..................................14
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT..................................14
FUND SHAREHOLDER SERVICING AGENT..............................................15
TAXES.........................................................................16
DETERMINATION OF NET ASSET VALUE..............................................16
ADDITIONAL SHAREHOLDER INFORMATION............................................17
ORGANIZATION..................................................................18
SHAREHOLDER MEETINGS..........................................................19
MASTER PORTFOLIO ORGANIZATION.................................................19
PERFORMANCE INFORMATION.......................................................20
GENERAL INFORMATION...........................................................25
INDEPENDENT ACCOUNTANTS.......................................................27
LEGAL COUNSEL.................................................................27
FINANCIAL STATEMENTS..........................................................27
No person has been authorized to give any information or to make any
representations other than those contained in this SAI and its corresponding
Prospectus, and if given or made, such information or representations may not
be relied upon as having been authorized. This SAI does not constitute an
offer to sell securities.
3
<PAGE>
INVESTMENT RESTRICTIONS
FUNDAMENTAL INVESTMENT LIMITATIONS
The following are the Fund's fundamental investment limitations which, along
with the Fund's investment objective (which is described in the Prospectus),
cannot be changed without shareholder approval.
Unless indicated otherwise below, the Fund:
1. May not with respect to 75% of its total assets, purchase the securities
of any issuer (except securities issued or guaranteed by the U.S. government or
its agencies or instrumentalities) if, as a result, (1) more than 5% of the
Fund's total assets would be invested in the securities of that issuer, or (2)
the Fund would hold more than 10% of the outstanding voting securities of that
issuer.
2. May (1) borrow money from banks and (2) make other investments or engage
in other transactions permissible under the Investment Company Act of 1940
("1940 Act") which may involve a borrowing, provided that the combination of
(1) and (2) 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 (1) purchases of
debt securities or other debt instruments, or (2) 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.
4
<PAGE>
NON-FUNDAMENTAL OPERATING POLICIES
The following are the Fund's non-fundamental operating policies which may be
changed by the Fund's Board of Directors without shareholder approval.
Unless indicated otherwise below, the Fund may not:
1. Sell securities short, unless the Fund owns or has the right to obtain
securities equivalent in kind and amount to the securities sold short, or
unless it covers such short sale as required by the current rules and positions
of the Securities and Exchange Commission ("SEC") or its staff, and provided
that transactions in options, futures contracts, options on futures contracts,
or other derivative instruments are not deemed to constitute selling securities
short.
2. Purchase securities on margin, except that the Fund may obtain such
short-term 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% (10% with respect to a money fund) 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 (1) from banks or (2) 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
(1) purchases of debt securities or other debt instruments, or (2) engaging in
repurchase agreements.
Non-Fundamental Policy No. 5 does not apply because the Fund seeks to achieve
its investment objective by investing substantially all of its assets in the
Master Portfolio of MIP.
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:
5
<PAGE>
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.
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.
6
<PAGE>
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.
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 described in the Prospectus.
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
7
<PAGE>
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 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
8
<PAGE>
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 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 underwriter), 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
9
<PAGE>
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%.
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
Directors and officers of the Fund, together with information as to their
principal business occupations during the last five years, and other
information are shown below. Each director who is deemed an "interested
person," as defined in the 1940 Act, is indicated by an asterisk (*). Each
officer and director holds the same position with the 26 registered open-end
management investment companies consisting of 48 mutual funds ("Strong Funds").
The Strong Funds, in the aggregate, pay each Director who is not a director,
officer, or employee of Strong Capital Management, Inc. ("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 officers and
directors of the Strong Funds receive no compensation or expense reimbursement
from the Strong Funds.
*RICHARD S. STRONG (DOB 5/12/42), Director and Chairman of the Board of the
Strong Funds.
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.
MARVIN E. NEVINS (DOB 7/19/18), Director of the Strong 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.
WILLIE D. DAVIS (DOB 7/24/34), Director of the Strong 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, 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 and Marquette University since 1988. 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.
STANLEY KRITZIK (DOB 1/9/30), Director of the Strong Funds.
10
<PAGE>
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.
WILLIAM F. VOGT (DOB 7/19/47), Director of the Strong 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.
THOMAS P. LEMKE (DOB 7/30/54), Vice President of the Strong Funds.
Mr. Lemke has been Senior Vice President, Secretary, and General Counsel of
Strong since September 1994 and Chief Operating Officer of Strong since
November 1997. 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
SEC, 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).
STEPHEN J. SHENKENBERG (DOB 6/14/58), Vice President and Secretary of the
Strong Funds.
Mr. Shenkenberg has been Acting General Counsel of Strong since January 1998.
From November 1996 until January 1998, Mr. Shenkenberg acted as Deputy General
Counsel to Strong. 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.
JOHN S. WEITZER (DOB 10/31/67), Vice President of the Strong Funds.
Mr. Weitzer has been Senior Counsel of Strong since December 1997. From July
1993 until December 1997, Mr. Weitzer acted as Associate Counsel to Strong.
MARY F. HOPPA (DOB 5/31/64), Vice President of the Strong Funds.
Ms. Hoppa has been Vice President and Director of Mutual Fund Administration of
Strong since January 1998. From October 1996 to January 1998, Ms. Hoppa acted
as Director of Transfer Agency Services of Strong and, from January 1988 to
October 1996, as Transfer Agency Systems Liaison Manager of Strong. From
January 1987 to January 1988, Ms. Hoppa acted as a Shareholder Services
Associate of Strong.
JOHN A. FLANAGAN (DOB 6/5/46), Treasurer of the Strong Funds.
Mr. Flanagan has been Senior Vice President of Strong since April 1997. For
three years prior to joining Strong, Mr. Flanagan was a Partner with Coopers &
Lybrand L.L.P. (an international professional services firm). From November
1992 to April 1994, Mr. Flanagan was an independent consultant. From October
1970 to November 1992, Mr. Flanagan was with Ernst & Young (an international
professional services firm), most notably as Partner in charge of the
Investment Company Practice of that firm's Boston office from 1982 to 1992.
11
<PAGE>
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.
Unless otherwise noted below, as of May 31, 1998, the officers and directors of
the Fund in the aggregate beneficially owned less than 1% of the Fund's then
outstanding shares.
<TABLE>
<CAPTION>
<S> <C> <C>
FUND SHARES PERCENT
- ------ ------ -------
None
</TABLE>
PRINCIPAL SHAREHOLDERS
Unless otherwise noted below, as of May 31, 1998 no persons owned of record or
are known to own of record or beneficially more than 5% of the Fund's then
outstanding shares.
<TABLE>
<CAPTION>
<S> <C> <C>
NAME AND ADDRESS SHARES PERCENT
- --------------------------------- ---------------- ----------------
EMRE & Co. FBO 211,883 5.46%
Accustaff Retirement Plan Savings
P.O. Box 1408
Milwaukee, WI 53201-1408
</TABLE>
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
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 Fund paid the following management fees for the time period indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MANAGEMENT FEE
FISCAL PERIOD ENDED MANAGEMENT FEE ($) WAIVER($) BY BGFA AFTER WAIVER ($)
- ------------------- ------------------ ------------------ ------------------
2/28/98* 5,726 0 5,726
</TABLE>
* Commenced operations on May 1, 1997.
The Master Portfolio paid the following management fees for the time period
indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
MANAGEMENT FEE
FISCAL YEAR ENDED MANAGEMENT FEE ($) WAIVER($) BY BGFA AFTER WAIVER ($)
- ------------------ ------------------ ------------------ ------------------
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
2/28/98 939,051 0 939,051
</TABLE>
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.
The Advisor also provides a program of custom portfolio management called the
Strong Advisor. This program is designed to determine which investment
approach fits an investor's financial needs and then provides the investor with
a custom built portfolio of Strong Funds based on that allocation. The
Advisor, on behalf of participants in the Strong Advisor program, may determine
to invest a portion of the program's assets in any one Strong Fund, which
investment, particularly in the case of a smaller Strong Fund, could represent
a material portion of the Fund's assets. In such cases, a decision to redeem
the Strong Advisor program's investment in a Fund on short notice could raise a
potential conflict of interest for the Advisor, between the interests of
participants in the Strong Advisor program and of the Fund's other
shareholders. In general, the Advisor does not expect to direct the Strong
Advisor program to make redemption requests on short notice. However, should
the Advisor determine this to be necessary, the Advisor will use its best
efforts and act in good faith to balance the potentially competing interests of
participants in the Strong Advisor program and the Fund's other shareholders in
a manner the Advisor deems most appropriate for both parties in light of the
circumstances
For more complete information about the Advisor, including its services,
investment strategies, policies, and procedures, please call 1-800-368-3863 and
ask for a copy of the Advisor's Form ADV.
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
Under a Distribution Agreement with the Fund ("Distribution Agreement"), Strong
Funds Distributors, Inc. ("Distributor") acts as underwriter of the Fund's
shares. Mr. Strong is the Chairman and Director of the Distributor, Mr. Lemke
is a Vice President of the Distributor, and Mr. Shenkenberg is a Vice President
and Secretary of the Distributor. 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
13
<PAGE>
commissions are charged on the purchase of Fund shares. The Distribution
Agreement further provides that the Distributor will bear the additional costs
of printing prospectuses and shareholder reports which are used for selling
purposes, as well as advertising and any other costs attributable to the
distribution of the Fund's shares. The Distributor is an indirect subsidiary
of 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.
From time to time, the Distributor may hold in-house sales incentive programs
for its associated persons under which these persons may receive non-cash
compensation awards in connection with the sale and distribution of the Fund's
shares. These awards may include items such as, but not limited to, gifts,
merchandise, gift certificates, and payment of travel expenses, meals, and
lodging. As required by the proposed rule amendments of the National
Association of Securities Dealers, Inc. ("NASD"), 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 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 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.
14
<PAGE>
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.
The Master Portfolio paid the following brokerage commissions for the time
periods indicated below. None of these brokerage commissions were paid to
affiliated brokers.
<TABLE>
<CAPTION>
<S> <C>
FISCAL YEAR ENDED BROKERAGE COMMISSIONS ($)
- ---------------------- -------------------------
2/28/98 112,100
</TABLE>
Unless otherwise noted below, the Master Portfolio has not acquired securities
of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act)
or their parents.
<TABLE>
<CAPTION>
<S> <C>
REGULAR BROKER OR DEALER (OR PARENT) ISSUER VALUE OF SECURITIES OWNED AS OF FEBRUARY 28, 1998
- ----------------------------------------------- -------------------------------------------------
Goldman Sachs & Co. $19,000,000
J.P. Morgan $5,565,474
Lehman Bros. Holdings $1,763,606
Morgan Stanley $10,841,222
</TABLE>
CUSTODIAN AND FUND ACCOUNTING SERVICES AGENT
Investors Bank & Trust Company ("IBT") located at 200 Clarendon 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.
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
equity funds, $31.50 for income and municipal income funds, and $32.50 for
money market funds, 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 type services 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 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 SEC filed an administrative action ("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
15
<PAGE>
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 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 ("DOL") filed an action against Strong
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
Strong. Contemporaneous with this filing, Strong, 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) ("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.
The organizational expenses for the Fund which were advanced by Strong and
which will be reimbursed by the Fund over a period of not more than 60 months
from the Fund's date of inception are listed below.
<TABLE>
<CAPTION>
<S> <C>
FUND ORGANIZATIONAL EXPENSES
- ----------------------- -----------------------
Strong Index 500 Fund $22,975
</TABLE>
The Fund paid the following amounts for the time periods indicated for transfer
agency and dividend disbursing and printing and mailing services:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
FISCAL YEAR PER ACCOUNT OUT-OF-POCKET PRINTING/MAILING TOTAL COST AFTER
ENDED CHARGES ($) EXPENSES ($) SERVICES ($) WAIVER ($) WAIVER ($)
- ------------- ------------- ------------- ---------------- ------------- ----------------
2/28/98* 21,551 5,731 720 7,642 20,360
</TABLE>
* Commenced operations on May 1, 1997.
MASTER PORTFOLIO TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Investors Bank & Trust Company ("IBT"), 200 Clarendon Street, Boston, MA
02111, acts as transfer agent and dividend-disbursing agent for the Master
Portfolio.
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.
16
<PAGE>
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.
The Fund paid the following servicing fees for the time periods indicated:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FISCAL YEAR ENDED
SERVICING FEE ($)
WAIVER($) BY STRONG SERVICING FEE
AFTER WAIVER ($)
- ----------------------- ----------------------- ----------------------- -------------------------------
2/28/98* 28,770 28,770 0
</TABLE>
* Commenced operations on May 1, 1997.
TAXES
GENERAL
The Fund intends to qualify annually for treatment as a regulated investment
company ("RIC") under the IRC. This qualification does not involve government
supervision of the Fund's management practices or policies. The following
federal tax discussion 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.
In order to qualify for treatment as a RIC under the IRC, the Fund must
distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of taxable net
investment income, net short-term capital gain, and net gains from certain
foreign currency transactions, if applicable) ("Distribution Requirement") and
must meet several additional requirements. 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 if applicable) or other income (including gains from options,
futures, or forward contracts) derived with respect to its business of
investing in securities ("Income Requirement"); (2) at the close of each
quarter of the Fund's taxable year, at least 50% of the value of its total
assets must be represented by cash and cash items, U.S. government securities,
securities of other RICs, and other securities, with these other securities
limited, in respect of any one issuer, to an amount that does not exceed 5% of
the value of the Fund's total assets and that does not represent more than 10%
of the issuer's outstanding voting securities; and (3) at the close of each
quarter of the Fund's taxable year, not more than 25% of the value of its total
assets may be invested in securities (other than U.S. government securities or
the securities of other RICs) of any one issuer.
If Fund shares are sold at a loss after being held for six months or less, the
loss will be treated as long-term, instead of short-term, capital loss to the
extent of any capital gain distributions received on those shares.
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.
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.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Fund will be determined as of the close of trading
on each day the New York Stock Exchange ("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
17
<PAGE>
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 AND INTERNET EXCHANGE/REDEMPTION PRIVILEGES
The Fund employs reasonable procedures to confirm that instructions
communicated by telephone or the Internet 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 or the
Internet, providing written confirmations of such transactions to the address
of record, tape recording telephone instructions and backing up Internet
transactions.
RIGHT OF SET-OFF
To the extent not prohibited by law, the Fund, any other Strong Fund, and
Strong, each has the right to set-off against a shareholder's account balance
with a Strong Fund, and redeem from such account, any debt the shareholder may
owe any of these entities. This right applies even if the account is not
identically registered.
BROKERS RECEIPT OF PURCHASE AND REDEMPTION ORDERS
The Fund has authorized certain brokers to accept purchase and redemption
orders on the Fund's behalf. These brokers are, in turn, authorized to
designate other intermediaries to accept purchase and redemption orders on the
Fund's behalf. The Fund will be deemed to have received a purchase or
redemption order when an authorized broker or, if applicable, a broker's
authorized designee, accepts the order. Purchase and redemption orders
received in this manner will be priced at the Fund's net asset value next
computed after they are accepted by an authorized broker or the broker's
authorized designee.
RETIREMENT PLANS
TRADITIONAL INDIVIDUAL RETIREMENT ACCOUNT (IRA): Everyone under age 70 1/2 with
earned income may contribute to a tax-deferred Traditional IRA. The Strong
Funds offer a prototype plan for you to establish your own Traditional IRA. You
are allowed to contribute up to the lesser of $2,000 or 100% of your earned
income each year to your Traditional IRA (or up to $4,000 between your
Traditional IRA and your non-working spouses' Traditional IRA). Under certain
circumstances, your contribution will be deductible.
ROTH IRA: Taxpayers, of any age, who have earned income, and whose adjusted
gross income ("AGI") does not exceed $110,000 (single) or $160,000 (joint) can
contribute to a Roth IRA. Allowed contributions begin to phase-out at $95,000
(single) or $150,000 (joint). You are allowed to contribute up to the lesser
of $2,000 or 100% of earned income each year into a Roth IRA. If you also
maintain a Traditional IRA, the maximum contribution to your Roth IRA is
reduced by any contributions that you make to your Traditional IRA.
Distributions from a Roth IRA, if they meet certain requirements, may be
federally tax free. If your AGI is $100,000 or less, you can convert your
Traditional IRAs into a Roth IRA. Conversions of earnings and deductible
contributions are taxable in the year of the distribution. The early
distribution penalty does not apply to amounts converted to a Roth IRA even if
you are under age 59 1/2.
EDUCATION IRA: Taxpayers may contribute up to $500 per year into an Education
IRA for the benefit of a child under age 18. Total contributions to any one
child cannot exceed $500 per year. The contributor must have adjusted income
under $110,000 (single) or $160,000 (joint) to contribute to an Education IRA.
Allowed contributions begin to phase-out at $95,000 (single) or $150,000
(joint). Withdrawals from the Education IRA to pay qualified higher education
expenses are federally tax free. Any withdrawal in excess of higher education
expenses for the year are potentially subject to tax and an additional 10%
penalty.
18
<PAGE>
DIRECT ROLLOVER IRA: To avoid the mandatory 20% federal withholding tax on
distributions, you must transfer the qualified retirement or IRC 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 1, 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 $6,000, on a pre-tax basis, to a SIMPLE-IRA
account. The employer is required to make annual contributions to eligible
employees' accounts. All contributions grow tax-deferred.
DEFINED CONTRIBUTION PLAN: A defined contribution plan allows self-employed
individuals, partners, or a corporation to provide retirement benefits for
themselves and their employees. Plan types include: profit-sharing plans,
money purchase pension plans, and paired plans (a combination of a
profit-sharing plan and a money purchase plan).
401(K) PLAN: A 401(k) plan is a type of profit-sharing plan that allows
employees to have part of their salary contributed on a pre-tax basis to a
retirement plan which will earn tax-deferred income. A 401(k) plan is funded by
employee contributions, employer contributions, or a combination of both.
403(B)(7) PLAN: A 403(b)(7) plan is a tax-sheltered custodial account designed
to qualify under section 403(b)(7) of the IRC and is available for use by
employees of certain educational, non-profit, hospital, and charitable
organizations.
ORGANIZATION
The Fund is either a "Corporation" or a "Series" of common stock of a
Corporation, as described in the chart below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Incorporation Date Series Authorized Par
Corporation Date Created Shares Value ($)
- ------------------------------- ------------- ----------- ---------------- ---------
Strong Equity Funds, Inc.(1) 12/28/90 Indefinite .00001
- - Strong Growth Fund* 12/28/90 Indefinite .00001
- - Strong Value Fund* 11/01/95 Indefinite .00001
- - Strong Small Cap Fund* 11/01/95 Indefinite .00001
- - Strong Mid Cap Fund* 10/28/96 Indefinite .00001
- - Strong Index 500 Fund 04/08/97 Indefinite .00001
- - Strong Growth 20 Fund* 06/04/97 Indefinite .00001
- - Strong Small Cap Value Fund* 12/10/97 Indefinite .00001
- - Strong Dow 30 Value Fund* 12/10/97 Indefinite .00001
- - Strong Strategic Growth Fund* 5/4/98 Indefinite .00001
</TABLE>
* Described in a different prospectus and SAI.
(1) Prior to November 1, 1995, the Corporation's name was Strong Growth Fund,
Inc.
The Corporation is a Wisconsin corporation that is authorized to offer separate
series of shares representing interests in separate portfolios of securities,
each with differing investment 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 the
Corporation provide that if additional series of shares are issued by the
Corporation, such new series of shares may not affect the preferences,
limitations or relative rights of the Corporation's outstanding shares. In
addition, the Board of Directors of the
19
<PAGE>
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 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 Corporation have no preemptive, conversion, or
subscription rights. If the Corporation issues additional series, the assets
belonging to each series of shares will be held separately by the custodian,
and in effect each series will be a separate fund.
SHAREHOLDER MEETINGS
The Wisconsin Business Corporation Law permits registered investment companies,
such as the Fund, to operate without an annual meeting of shareholders under
specified circumstances if an annual meeting is not required by the 1940 Act.
The Fund 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 Fund'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 Fund shall promptly call a special meeting of
shareholders for the purpose of voting upon the question of removal of any
director. The Secretary shall inform such shareholders of the reasonable
estimated costs of preparing and mailing the notice of the meeting, and upon
payment to the Fund of such costs, the Fund 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
The Strong Funds may advertise a variety of types of performance information as
more fully described below. The Fund's performance is historical and past
performance does not guarantee the future performance of the Fund. From time
to time, Strong
20
<PAGE>
may agree to waive or reduce its management fee and/or to absorb certain
operating expenses for the Fund. Waivers of management fees and absorption of
expenses will have the effect of increasing the Fund's performance.
DISTRIBUTION RATE
The distribution rate for the Fund is computed, according to a non-standardized
formula, by dividing the total amount of actual distributions per share paid by
the Fund over a twelve month period by the Fund's net asset value on the last
day of the period. The distribution rate differs from the Fund's yield because
the distribution rate includes distributions to shareholders from sources other
than dividends and interest, such as short-term capital gains. Therefore, the
Fund's distribution rate may be substantially different than its yield. Both
the Fund's yield and distribution rate will fluctuate.
AVERAGE ANNUAL TOTAL RETURN
The Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the SEC. The average annual total
return for the Fund for a specific period is calculated by first taking a
hypothetical $10,000 investment ("initial investment") in the Fund's shares on
the first day of the period and computing the "redeemable value" of that
investment at the end of the period. The redeemable value is then divided by
the initial investment, and this quotient is taken to the Nth root (N
representing the number of years in the period) and 1 is subtracted from the
result, which is then expressed as a percentage. The calculation assumes that
all income and capital gains dividends paid by the Fund have been reinvested at
net asset value on the reinvestment dates during the period.
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 of the Fund on the reinvestment dates during the period. Total return
may also be shown as the increased dollar value of the hypothetical investment
over the period.
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.
TOTAL RETURN
INDEX 500 FUND
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Initial $10,000 Ending $ value Cumulative Average Annual
Time Period Investment February 28, 1998 Total Return Total Return
- -------------- --------------- ----------------- --------------- ------------------
Life of Fund* $10,000 $13,270 32.71% N/A
- -------------- --------------- ----------------- --------------- ------------------
</TABLE>
* Commenced operations on May 1, 1997.
COMPARISONS
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
21
<PAGE>
the Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities.
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.
MONEY MARKET FUNDS. Investors may also want to compare performance of the Fund
to that of money market funds. Money market fund yields will fluctuate and
shares are not insured, but share values usually remain stable.
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 gains 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.
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.
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 and
articles about the Fund may include publications such as Money, Forbes,
Kiplinger's, Smart Money, Financial World, Business Week, U.S. News and World
Report, The Wall Street Journal, Barron's, and a variety of investment
newsletters.
INDICES. The Fund may compare its performance to a wide variety of indices.
There are differences and similarities between the investments that a Fund may
purchase and the investments measured by the indices.
HISTORICAL ASSET CLASS RETURNS. From time to time, marketing materials may
portray the historical returns of various asset classes. Such presentations
will typically compare the average annual rates of return of inflation, U.S.
Treasury bills, bonds, common stocks, and small stocks. There are important
differences between each of these investments that should be considered in
viewing any such comparison. The market value of stocks will fluctuate with
market conditions, and small-stock prices generally will fluctuate more than
large-stock prices. Stocks are generally more volatile than bonds. In return
for this volatility, stocks have generally performed better than bonds or cash
over time. Bond prices generally will fluctuate inversely with interest rates
and other market conditions, and the prices of bonds with longer maturities
generally will fluctuate more than those of shorter-maturity bonds. Interest
rates for bonds may be fixed at the time of issuance, and payment of principal
and interest may be guaranteed by the issuer and, in the case of U.S. Treasury
obligations, backed by the full faith and credit of the U.S. Treasury.
STRONG FUNDS. The Strong Funds offer a comprehensive range of conservative to
aggressive investment options. The Strong Funds and their investment objectives
are listed below. The Funds are listed in ascending order of risk and return,
as determined by the Funds' Advisor.
FUND NAME INVESTMENT OBJECTIVE
<TABLE>
<CAPTION>
<S> <C>
Strong Step 1 Money Fund Current income, a stable share price, and daily liquidity.
- --------------------------- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<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 Fund Federally tax-exempt current income, a stable share-price, and daily 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 Bond Total return by investing for a high level of federally tax-exempt current income
Fund 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 Fund Total return by investing for a high level of income with a low degree of share-price
fluctuation.
- --------------------------------------- -------------------------------------------------------------------------------------
Strong Short-Term High Yield Total return by investing for a high level of federally tax-exempt current income
Municipal Fund with a moderate degree of share-price fluctuation.
- --------------------------------------- -------------------------------------------------------------------------------------
Strong Short-Term High Yield Bond Total return by investing for a high level of current income with a moderate degree
Fund of share-price fluctuation.
- --------------------------------------- -------------------------------------------------------------------------------------
Strong Government Securities Fund Total return by investing for a high level of current income with a moderate degree
of share-price fluctuation.
- --------------------------------------- -------------------------------------------------------------------------------------
Strong 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 Bond Total return by investing for a high level of federally tax-exempt current income.
Fund
- --------------------------------------- -------------------------------------------------------------------------------------
Strong High-Yield Bond Fund Total return by investing for a high level of current income and capital growth.
- --------------------------------------- -------------------------------------------------------------------------------------
Strong Global 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.
- --------------------------------------- -------------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Strong American Utilities Fund Total return by investing for both income and capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Blue Chip 100 Fund Total return by investing for both income and capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Limited Resources Fund Total return by investing for both capital growth and income.
- --------------------------------------- -------------------------------------------------------------------------------
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 Balanced Fund Total return by investing for both income and capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
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 Dow 30 Value Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Value Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Opportunity Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Mid Cap Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Common Stock Fund* Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Strategic Growth Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Small Cap Value Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Growth Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Discovery Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Small Cap Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Growth 20 Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong International Stock Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Foreign MajorMarketsSM Fund Capital growth.
- --------------------------------------- -------------------------------------------------------------------------------
Strong Overseas 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 investment adviser 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 other Strong 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.
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>
<S> <C> <C> <C>
UNDER 1 YEAR 1 TO 2 YEARS 4 TO 7 YEARS 5 OR MORE YEARS
- ---------------------------- ------------------------------- ------------------------------ -------------------------
Money Market Fund Advantage Fund Government Securities Fund Asset Allocation Fund
Heritage Money Fund Municipal Advantage Fund Municipal Bond Fund American Utilities Fund
Municipal Money Market Fund Corporate Bond Fund Index 500 Fund
Step 1 Money Fund 2 TO 4 YEARS International Bond Fund Total Return Fund
Short-Term Bond Fund High-Yield Municipal Bond Fund Opportunity Fund
Short-Term Municipal Bond Fund High-Yield Bond Fund Growth Fund
Short-Term Global Bond Fund Global High-Yield Bond Fund Common Stock Fund*
Short-Term High Yield Bond Fund Discovery Fund
Short-Term High Yield Municipal International Stock Fund
Fund Asia Pacific Fund
Value Fund
Small Cap Fund
Growth and Income Fund
Equity Income Fund
Mid Cap Fund
Schafer Value Fund
Growth 20 Fund
Blue Chip 100 Fund
Small Cap Value Fund
Dow 30 Value Fund
Schafer Balanced Fund
Limited Resources Fund
Overseas Fund
Foreign MajorMarketsSM
Fund
Strategic Growth Fund
</TABLE>
23
* 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
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.
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:
24
<PAGE>
Standard deviation = the square root of S(xi - xm)2
n-1
Where: S = "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
BUSINESS PHILOSOPHY
Strong is an independent, Midwestern-based investment advisor, owned by
professionals active in its management. Recognizing that investors are the
focus of its business, Strong 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, Strong believes that
active management should produce greater returns than a passively managed
index. Strong has brought together a group of top-flight investment
professionals with diverse product expertise, and each concentrates on their
investment specialty. Strong believes that people are the firm's most important
asset. For this reason, continuity of professionals is critical to the firm's
long-term success.
INVESTMENT ENVIRONMENT
Discussions of economic, social, and political conditions and their impact on
the Fund may be used in advertisements and sales materials. Such factors that
may impact the Fund include, but are not limited to, changes in interest rates,
political developments, the competitive environment, consumer behavior,
industry trends, technological advances, macroeconomic trends, and the supply
and demand of various financial instruments. In addition, marketing materials
may cite the portfolio management's views or interpretations of such factors.
EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING
These common sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863.
1. HAVE A PLAN - even a simple plan can help you take control of your
financial future. Review your plan once a year, or if your circumstances change.
25
<PAGE>
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 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.
1. SMALL COMPANY PLANS. Small company plans are designed for companies
with 1-50 plan participants. The objective is to incorporate the features and
benefits typically reserved for large companies, such as sophisticated
recordkeeping systems, outstanding service, and investment expertise, into a
small company plan without administrative hassles or undue expense. Small
company plan sponsors receive a comprehensive plan administration manual as
well as toll-free telephone support.
2. LARGE COMPANY PLANS. Large company plans are designed for companies
with between 51 and 1,000 plan participants. Each large company plan is
assigned a team of professionals consisting of an account manager, who is
typically an attorney, CPA, or holds a graduate degree in business, a
conversion specialist (if applicable), an accounting manager, a legal/technical
manager, and an education/communications educator.
3. WOMEN-OWNED BUSINESSES.
4. NON-PROFIT AND EDUCATIONAL ORGANIZATIONS (THE 403(B) MARKET).
TURNKEY APPROACH. The retirement plans offered by 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
26
<PAGE>
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.
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 legal counsel for the Fund.
FINANCIAL STATEMENTS
The Annual Report for the Fund and the Master Investment Portfolio - S&P 500
Index Master Portfolio that is attached to this SAI contains the following
audited financial information:
1. Schedule of Investments in Securities.
2. Statements of Operations.
3. Statements of Assets and Liabilities.
4. Statements of Changes in Net Assets.
5. Notes to Financial Statements.
6. Financial Highlights.
7. Report of Independent Accountants.
28
<PAGE>
STRONG EQUITY FUNDS, INC.
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(1) Strong Growth, Growth 20, Mid Cap, Small Cap, and Value Funds
(all included or incorporated by reference in Parts A & B) (Audited)
Schedules of Investments in Securities
Statements of Operations
Statements of Assets and Liabilities
Statements of Changes in Net Assets
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Incorporated by reference to the Annual Report to Shareholders of the Strong
Growth Funds dated December 31, 1997, pursuant to Rule 411 under the Securities
Act of 1933. (File Nos. 33-70764 and 811-8100)
(2) Strong Index 500 Fund (all included or incorporated by reference in
Parts A & B) (Audited)
Schedule of Investments in Securities
Statement of Operations
Statement of Assets and Liabilities
Statement of Changes in Net Assets
Notes to Financial Statements
Financial Highlights
Report of Independent Accountants
Incorporated by reference to the Annual Report to Shareholders of The
Strong Index 500 Fund dated February 28, 1998, pursuant to Rule 411 under the
Securities Act of 1933. (File Nos. 33-70764 and 811-8100)
(3) Strong Small Cap Value, Dow 30 Value, and Strategic Growth
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(7)
(1.3) Amendment to Articles of Incorporation dated June 24,
1997(8)
(1.4) Amendment to Articles of Incorporation dated December 9,
1997(9)
(1.5) Amendment to Articles of Incorporation dated May 4,
1998(10)
(2) Bylaws dated October 20, 1995(1)
(2.1) Amendment to Bylaws dated May 1, 1998(10)
1
<PAGE>
(3) Inapplicable
(4) Specimen Stock Certificate(1)
(5) Investment Advisory Agreement(1) [Excluding Index 500 Fund.]
(5.1) Subadvisory Agreement (Value Fund)(1)
(5.2) Subadvisory Agreement (Dow 30 Value Fund)(9)
(6) Distribution Agreement(1)
(7) Inapplicable
(8.1) Custody Agreement with Firstar (Growth, Value, Small Cap,
Mid Cap, Growth 20, and Strategic Growth Funds) (3)
(8.2) Global Custody Agreement with Brown Brothers Harriman & Co.
(Growth, Small Cap, Mid Cap, Growth 20, and Strategic
Growth Funds)(3)
(8.3) Custody Agreement with Investors Bank and Trust (Index 500
Fund)(7)
(9) Shareholder Servicing Agent Agreement (relating to transfer
and dividend-disbursing agent activities)[Excluding Index
500 Fund](1)
(9.1) Shareholder Servicing Agent Agreement (relating to personal
services provided to shareholders)[Index 500 Fund](7)
(10) Inapplicable
(11) Consent of Independent Accountants
(12) Inapplicable
(13) Inapplicable
(14) Inapplicable
(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 13, 1997(7)
(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.
(6) Incorporated herein by reference to Post-Effective Amendment No. 10 to
the Registration Statement on Form N-1A filed on or about February 14, 1997.
(7) Incorporated herein by reference to Post-Effective Amendment No. 12 to
the Registration Statement on Form N-1A filed on or about April 25, 1997.
2
<PAGE>
(8) Incorporated herein by reference to Post-Effective Amendment No. 13 to
the Registration Statement on Form N-1A filed on or about June 27, 1997.
(9) Incorporated herein by reference to Post-Effective Amendment No. 16 to
the Registration Statement on Form N-1A filed on or about December 24, 1997.
(10) Incorporated herein by reference to Post-Effective Amendment No. 20 to
the Registration Statement on Form N-1A filed on or about May 18, 1998.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Registrant neither controls any person nor is under common control with
any other person.
Item 26. NUMBER OF HOLDERS OF SECURITIES
Number of Record Holders
TITLE OF CLASS AS OF MAY 31, 1998
Common Stock, $.00001 par value
Strong Growth Fund 117,352
Strong Small Cap Fund 13,349
Strong Value Fund 6,325
Strong Mid Cap Fund 2,483
Strong Index 500 Fund 5,837
Strong Growth 20 Fund 5,333
Strong Small Cap Value Fund 2,471
Strong Dow 30 Value Fund 4,173
Strong Strategic Growth Fund 0
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 $100,000,000, subject to
certain deductions. Pursuant to the authority of the Wisconsin Business
Corporation Law ("WBCL"), Article VII of Registrant's Bylaws provides as
follows:
ARTICLE VII. INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 7.01. MANDATORY INDEMNIFICATION. The Corporation shall
indemnify, to the full extent permitted by the WBCL, as in effect from time to
time, the persons described in Sections 180.0850 through 180.0859 (or any
successor provisions) of the WBCL or other provisions of the law of the State
of Wisconsin relating to indemnification of directors and officers, as in
effect from time to time. The indemnification afforded such persons by this
section shall not be exclusive of other rights to which they may be entitled as
a matter of law.
SECTION 7.02. PERMISSIVE SUPPLEMENTARY BENEFITS. The Corporation
may, but shall not be required to, supplement the right of indemnification
under Section 7.01 by (a) the purchase of insurance on behalf of any one or
more of such persons, whether or not the Corporation would be obligated to
indemnify such person under Section 7.01; (b) individual or group
indemnification agreements with any one or more of such persons; and (c)
advances for related expenses of such a person.
SECTION 7.03. AMENDMENT. This Article VII may be amended or
repealed only by a vote of the shareholders and not by a vote of the Board of
Directors.
3
<PAGE>
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, GROWTH 20, SMALL CAP, SMALL CAP VALUE, AND MID CAP FUNDS
The information contained under "About the Funds - Management" in the
Prospectus and under "Directors and Officers," "Investment Advisor," and
"Distributor" in the Statement of Additional Information is hereby incorporated
by reference pursuant to Rule 411 under the Securities Act of 1933.
VALUE FUND
The information contained under "About the Fund - Management" in the
Prospectus and under "Directors and Officers," "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" and "Investment Advisor" in the
Statement of Additional Information is hereby incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
DOW 30 VALUE FUND
The information contained under "About the Fund - Management" in the
Prospectus and under "Directors and Officers of the Fund" and "Investment
Advisor, Subadvisor, and Distributor" in the Statement of Additional
Information is hereby incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
STRATEGIC GROWTH FUND
The information contained under "About the Fund - Management" in the
Prospectus and under "Directors and Officers," "Investment Advisor," and
"Distributor" in the Statement of Additional Information is hereby incorporated
by reference pursuant to Rule 411 under the Securities Act of 1933.
Item 29. PRINCIPAL UNDERWRITERS
(a) Strong Funds Distributors, Inc., principal underwriter for Registrant,
also serves as principal underwriter for Strong Advantage Fund, Inc.; Strong
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 Equity Funds, Inc.; Strong International Income Funds, Inc.;
Strong Money Market Fund, Inc.; Strong Municipal Bond Fund, Inc.; Strong
Municipal Funds, Inc.; Strong Opportunity Fund, Inc.; Strong Opportunity Fund
II, Inc.; Strong Schafer Funds, 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 Total Return Fund, Inc.; and
Strong Variable Insurance Funds, Inc.
(b) GROWTH, GROWTH 20, SMALL CAP, SMALL CAP VALUE, AND MID CAP
FUNDS
The information contained under "About the Funds - Management" in the
Prospectus and under "Directors and Officers," "Investment Advisor," and
"Distributor" in the Statement of Additional Information is hereby incorporated
by reference pursuant to Rule 411 under the Securities Act of 1933.
4
<PAGE>
VALUE FUND
The information contained under "About the Fund - Management" in the
Prospectus and under "Directors and Officers," "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" and "Investment Advisor" in the
Statement of Additional Information is hereby incorporated by reference
pursuant to Rule 411 under the Securities Act of 1933.
DOW 30 VALUE FUND
The information contained under "About the Fund - Management" in the
Prospectus and under "Directors and Officers of the Fund" and "Investment
Advisor, Subadvisor, and Distributor" in the Statement of Additional
Information is hereby incorporated by reference pursuant to Rule 411 under the
Securities Act of 1933.
STRATEGIC GROWTH FUND
The information contained under "About the Fund - Management" in the
Prospectus and under "Directors and Officers," "Investment Advisor," and
"Distributor" in the Statement of Additional Information is hereby incorporated
by reference pursuant to Rule 411 under the Securities Act of 1933.
(c) Inapplicable
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
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered, upon request and without charge, a copy of Strong Index 500 Fund's
latest annual report to shareholders.
5
<PAGE>
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. 21 to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 21 to the Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the Village of Menomonee Falls, and State of Wisconsin on the
25th day of June, 1998.
STRONG EQUITY FUNDS, INC.
(Registrant)
By: /S/ THOMAS P. LEMKE
Thomas P. Lemke, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 21 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>
<S> <C> <C>
NAME TITLE DATE
- ---------------------------- ------------------------------------ ----------------
Vice President (Principal Executive
/s/ Thomas P. Lemke Officer) June 25, 1998
- ----------------------------
Thomas P. Lemke
/s/ Richard S. Strong Chairman of the Board and a Director June 25, 1998
- ----------------------------
Richard S. Strong
Treasurer (Principal Financial and
/s/ John A. Flanagan Accounting Officer) June 25, 1998
- ----------------------------
John A. Flanagan
Director June 25, 1998
- ----------------------------
Marvin E. Nevins*
Director June 25, 1998
- ----------------------------
Willie D. Davis*
Director June 25, 1998
- ----------------------------
William F. Vogt*
Director June 25, 1998
- ----------------------------
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
1
<PAGE>
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 of
the requirements for effectiveness of this Post-Effective Amendment No. 21 to
the Registration Statement pursuant to Rule 485(b) under the Securities Act of
1933 and has duly caused this Post-Effective Amendment No. 21 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 25th
day of June, 1998.
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)
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 21 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>
<S> <C> <C>
NAME TITLE DATE
- ------------------------------- ---------------------------------------- ------------------
Chairman, President (Principal Executive
Officer) and Trustee June 25, 1998
- -------------------------------
R. Greg Feltus*
Secretary and Treasurer (Principal
/s/ Richard H. Blank, Jr. Financial Officer) June 25, 1998
- -------------------------------
Richard H. Blank, Jr.
Trustee June 25, 1998
- -------------------------------
Jack S. Euphrat*
Trustee June 25, 1998
- -------------------------------
Thomas S. Goho*
Trustee June 25, 1998
- -------------------------------
Zoe Ann Hines*
Trustee June 25, 1998
- -------------------------------
W. Rodney Hughes*
Trustee June 25, 1998
- -------------------------------
Robert M Joses*
Trustee June 25, 1998
- -------------------------------
J. Tucker Morse*
</TABLE>
* Richard H. Blank, Jr. signs this document pursuant to powers of attorney
filed with 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)
1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
EDGAR
EXHIBIT NO. EXHIBIT EXHIBIT NO.
(11) Consent of Independent Accountants EX-99.B11
(16) Computation of Performance Figures EX-99.B16
(17) Financial Data Schedule EX-27.1 Index 500
(20) Letter of Representation EX-99.B20
</TABLE>
1
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Strong Equity Funds, Inc.
The Board of Trustees
Master Investment Portfolio:
We consent to the use of our report dated April 3, 1998 for Strong Index 500
Fund.(one of the series comprising Strong Equity Funds, Inc. ) incorporated by
reference herein.
We also consent to the use of our report dated April 3, 1998 for S&P 500 Index
Master Portfolio (one of the series comprising Master Investment Portfolio)
incorporated by reference herein.
We also consent to the reference to our Firm under the headings "Financial
Highlights" in the prospectus and "Independent Accountants" in the Statement of
Additional Information.
/s/ KPMG Peat Marwick LLP
San Francisco, California
June 25, 1998
1
<PAGE>
Strong Index 500 Fund
EXHIBIT 16
SCHEDULE OF COMPUTATION OF
PERFORMANCE QUOTATIONS
I. AVERAGE ANNUAL TOTAL RETURN
A. FORMULA
_____
P (1 + T)n = ERV or T = \n/ERV/P - 1
Where: P = a hypothetical initial payment of $10,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $10,000
payment made
at the beginning of the stated periods at the end of the stated
periods.
B. CALCULATION
_____
T = \n/ERV/P - 1
1. Since inception 5-01-97 through 2-28-98
___________
32.71% = \0.84/13,271/10,000 - 1
1
<PAGE>
[ARTICLE] 6
[CIK] 0000914231
[NAME] "Strong Equity Funds, Inc."
[SERIES]
[NUMBER] 5
[NAME] Strong Index 500 Fund
<TABLE>
<S> <C>
[PERIOD-TYPE] 10-mos
[FISCAL-YEAR-END] Feb-28-1998
[PERIOD-START] May-01-1997
[PERIOD-END] Feb-28-1998
[INVESTMENTS-AT-COST] 28647255
[INVESTMENTS-AT-VALUE] 31987008
[RECEIVABLES] 140512
[ASSETS-OTHER] 22542
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 32150062
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 54115
[TOTAL-LIABILITIES] 54115
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 28629609
[SHARES-COMMON-STOCK] 2438109
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 50790
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 75795
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 3339753
[NET-ASSETS] 32095947
[DIVIDEND-INCOME] 180647
[INTEREST-INCOME] 35558
[OTHER-INCOME] 0
[EXPENSES-NET] " (45,636)"
[NET-INVESTMENT-INCOME] 164843
[REALIZED-GAINS-CURRENT] 88899
[APPREC-INCREASE-CURRENT] 3339753
[NET-CHANGE-FROM-OPS] 3593495
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] "(114,053)"
[DISTRIBUTIONS-OF-GAINS] "(13,104)"
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2745317
1
<PAGE>
[NUMBER-OF-SHARES-REDEEMED] "(317,580)"
[SHARES-REINVESTED] 10372
[NET-CHANGE-IN-ASSETS] 32095947
[ACCUMULATED-NII-PRIOR] 0
[ACCUMULATED-GAINS-PRIOR] 0
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 5726
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 177068
[AVERAGE-NET-ASSETS] 13872798
[PER-SHARE-NAV-BEGIN] 10.00
[PER-SHARE-NII] 0.11
[PER-SHARE-GAIN-APPREC] 3.15
[PER-SHARE-DIVIDEND] (0.09)
[PER-SHARE-DISTRIBUTIONS] (0.01)
[RETURNS-OF-CAPITAL] 0.00
[PER-SHARE-NAV-END] 13.16
[EXPENSE-RATIO] 0.4 1.5 w/out waivers
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
2
<PAGE>
GODFREY & KAHN, S.C.
ATTORNEYS AT LAW
780 North Water Street
Milwaukee, Wisconsin 53202
Phone: (414) 273-3500 Fax: (414) 273-5198
June 25, 1998
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. 21 (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
MW1-121465-1
1
<PAGE>
