As filed with the Securities and Exchange Commission on July 24, 1998
Securities Act Registration No. 333-_____
Investment Company Act Registration No. 811-8100
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
STRONG EQUITY FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
(Address of Principal Executive Offices:
Number, Street, City, State, Zip Code)
(414) 359-3400
(Area Code and Telephone Number)
Stephen J. Shenkenberg, Esq.
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
(Name and Address of Agent for Service)
Copies to:
Jane A. Kanter, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
Pursuant to Rule 488(a) under the Securities Act of 1933, this Registration
Statement will become effective on the thirtieth (30th) day after the date upon
which it is filed.
No filing fee is required because an indefinite number of shares have previously
been registered pursuant to Rule 24f-2 under the Investment Company Act of 1940
by a declaration included on its Form N-1A Registration Statement filed with the
Securities and Exchange Commission on October 22, 1993. The Registrant's Rule
24f-2 Notice for the fiscal year ended December 31, 1997 was filed on or about
February 27, 1998. Pursuant to Rule 429 under the Securities Act of 1933, this
Registration Statement relates to shares previously registered on the aforesaid
Registration Statement.
<PAGE>
STRONG EQUITY FUNDS, INC.
FORM N-14
Cross Reference Sheet
Pursuant to Rule 481(a) under the Securities Act of 1933
<TABLE>
<S> <C>
Item No. Location in Combined Proxy
Statement and Prospectus
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Part A
1. Cover Page Cover Page
2. Beginning and Outside Back Cover Page Table of Contents
3. Synopsis and Risk Factors Summary; Risk Considerations
4. Information About the Transaction Summary; 1. Proposal To Approve or Disapprove the
Reorganization Agreement; 2. Proposal To Approve
or Disapprove the Proposed Amendment; Comparison
of the Small Cap Fund and Growth Fund
5. Information About the Registrant Summary; 1. Proposal To Approve or Disapprove the
Reorganization Agreement; Additional Information
About Each Fund
6. Information About the Company Being Acquired Summary; 1. Proposal To Approve or Disapprove the
Reorganization Agreement; 2. Proposal To Approve
or Disapprove the Proposed Amendment; Additional
Information About Each Fund
7. Voting Information Summary; Information Relating to Voting Matters
8. Interest of Certain Persons and Experts Information Relating to Voting Matters; Additional
Information About Each Fund
9. Additional Information Required for Reoffering Not Applicable.
by Persons Deemed to be Underwriters
<PAGE>
Part B
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. Additional Information About the Registrant Incorporation of Documents by Reference in
Statement of Additional Information
13. Additional Information About the Company Being Not Applicable
Acquired
14. Financial Statements Incorporation of Documents by Reference in
Statement of Additional Information; Exhibit to
Statement of Additional Information
Part C
15-17 Information required to be included in Part C is
set forth under the appropriate item, so
numbered, in Part C of this Registration
Statement
</TABLE>
<PAGE>
Dear Shareholder:
Enclosed is a Combined Proxy Statement and Prospectus, which contains important
proposals for you to consider. You are eligible to vote on these proposals
because you were a shareholder of record of the Strong Small Cap Fund (the
"Small Cap Fund") on August 21, 1998.
The Small Cap Fund's Board of Directors has proposed that the Small Cap Fund be
reorganized into the Strong Growth Fund (the "Growth Fund"). If shareholders of
the Small Cap Fund approve, all of its assets (except a small reserve for
liabilities) will be exchanged for an equivalent dollar amount of Growth Fund
shares on October 30, 1998. Shareholders would face no tax liability as a result
of this exchange.
The Board believes this reorganization will be to investors' benefit. Recently,
the Small Cap Fund's performance has lagged that of similar, competitive funds.
As a result, investor interest in the Fund has declined. Since last Fall,
shareholder redemptions have reduced the Fund's asset base considerably. Given
current and foreseeable conditions, we don't anticipate that the Fund will
attract significant new assets soon. We expect this small asset base to result
in increased expense ratios to operate the Fund.
By reorganizing the Small Cap Fund into the larger Growth Fund, we believe we
can provide more efficient operation and better long-term value for investors.
The Growth Fund has a similar investment objective and substantially similar
investment policies as the Small Cap Fund. In addition, the Growth Fund offers
historically superior investment performance and lower expense ratios than the
Small Cap Fund. Accordingly, the Board of Directors strongly urges you to vote
for the proposed reorganization and for the related proposal to amend the
Amended and Restated Articles of Incorporation.
The enclosed materials provide more information about this vote. Please read
this information carefully and call us at 1-800-xxx-xxxx if you have any
questions. Your vote is important to us, no matter how many shares you own.
Please vote your shares early to avoid future mailings.
After you review the enclosed materials, we ask that you vote FOR the proposals
related to this reorganization. Please vote for each proposal by completing,
dating and signing your proxy card, and mailing it to us today. You also may
vote by phone at 1-800-xxx-xxxx, or by Internet at our website at
www.strong-funds.com.
Thank you for your support.
Sincerely,
Richard S. Strong
Chairman
<PAGE>
Questions and Answers
Q. I'm a small investor. Why should I bother to vote?
A. Your vote makes a difference. If numerous shareholders just like you fail to
vote their proxies, the Small Cap Fund may not receive enough votes to go
forward with its meeting. If this happens, we'll need to mail proxies again--a
costly proposition for the Small Cap Fund!
Q. Who gets to vote?
A. Any person who owned shares of the Small Cap Fund on the "record date," which
was August 21, 1998, gets to vote--even if the investor later sold the shares.
Shareholders are entitled to cast one vote for each Fund share owned on the
record date.
Q. How can I vote?
A. You can vote in any one of four ways:
. Through the Internet at www.strong-funds.com.
. By toll free telephone, call at 1-800-xxx-xxxx.
. By mail, with the enclosed ballot.
. In person at the meeting.
We encourage you to vote by Internet or telephone, using the number that appears
on your proxy card. These voting methods will save the Small Cap Fund a good
deal of money (no return-mail postage!). Whichever method you choose, please
take the time to read the full text of our proxy statement before you vote.
Q. Is it hard to vote by Internet?
A. If you have not yet visited Strong's website -- at www.strong-funds.com --
this is a great opportunity to check it out. Scan our website and, when you're
ready, click on the "Proxy Voting" link on our homepage to access
www.strong-funds.com (the voting location). If you have problems, please call us
at 1-800-xxx-xxxx.
Q. I plan to vote by mail. How should I sign my proxy card?
A. If you are an individual account owner, please sign exactly as your name
appears on the proxy card. Either owner of a joint account may sign the proxy
card, but the signer's name must exactly match one that appears on the card. You
should sign proxy cards for other types of accounts in a way that indicates your
authority (for instance, "John Brown, Custodian").
<PAGE>
[PRELIMINARY COPY]
STRONG EQUITY FUNDS, INC. -
STRONG SMALL CAP FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
The Strong Small Cap Fund (the "Small Cap Fund") a series of the Strong
Equity Funds, Inc. (the "Corporation") will hold a Special Meeting of
Shareholders on Thursday, October 29, 1998, at 8:00 a.m., Central Time. The
meeting will be held at 100 Heritage Reserve, Menomonee Falls, Wisconsin 53051.
At the meeting, shareholders will be asked to consider and act upon the
proposals noted below and to transact any other business properly brought before
the meeting.
PROPOSAL 1. To approve or disapprove an Agreement and Plan of
Reorganization by and among the Corporation, on behalf of the Small Cap
Fund and the Strong Growth Fund (the "Growth Fund"), and, with respect
to certain matters, Strong Capital Management, Inc. and Strong Funds
Distributors, Inc., and the transactions contemplated thereby.
PROPOSAL 2. To approve or disapprove an amendment to the Corporation's
Amended and Restated Articles of Incorporation (a) to cancel all of the
outstanding shares of the Small Cap Fund and convert them into rights
to receive shares of the Growth Fund in accordance with the
Reorganization Agreement and (b) to eliminate the Small Cap Fund as a
series of the Corporation. Such amendment will be subject to the
approval of Proposal 1 above by the Small Cap Fund's shareholders.
Only shareholders of record at the close of business on August 21,
1998, the record date for this Special Meeting, shall be entitled to vote at the
Special Meeting or any adjournments thereof.
Your Vote Is Important.
Please promptly return your proxy card or vote by toll free telephone call
(1-800-XXX-XXXX) or at our website (www.strong-funds.com).
- --------------------------------------------------------------------------------
As a shareholder of the Small Cap Fund, you are asked to attend the Special
Meeting either in person or by proxy. If you are unable to attend, we urge you
to complete and return the enclosed proxy card in the enclosed envelope, or vote
by toll-free telephone call (1-800-XXX-XXXX) or at our website
(www.strong-funds.com). Your prompt vote will help the Small Cap Fund avoid the
expense of follow-up solicitations. Voting your shares by proxy will not prevent
you from voting your shares in person at the Special Meeting and you may revoke
your proxy by advising the Secretary of the Funds in writing (by subsequent
proxy or through the website) or by telephone of such revocation at any time
before the Special Meeting.
- --------------------------------------------------------------------------------
By Order of the Board of Directors,
STEPHEN J. SHENKENBERG
Secretary
Menomonee Falls, Wisconsin
September 4, 1998
<PAGE>
[PRELIMINARY COPY]
STRONG EQUITY FUNDS, INC. --
STRONG GROWTH FUND
STRONG SMALL CAP FUND
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Telephone: (414) 359-1400
Toll Free: (800) 368-3863
Device for the Hearing Impaired: (800) 999-2780
COMBINED PROXY STATEMENT AND PROSPECTUS
Dated September 4, 1998
This Combined Proxy Statement and Prospectus (the "Proxy Statement") is
furnished in connection with the solicitation of proxies by the Board of
Directors of the Strong Equity Funds, Inc. (the "Corporation") in connection
with the Special Meeting (the "Special Meeting") of Shareholders of the Strong
Small Cap Fund (the "Small Cap Fund"), a series of the Corporation, to be held
at 100 Heritage Reserve, Menomonee Falls, Wisconsin 53051, on Thursday, October
29, 1998, at 8:00 a.m. Central Time. At the Special Meeting, the shareholders of
the Small Cap Fund will be asked to approve or disapprove the following two
proposals:
Proposal 1. an Agreement and Plan of Reorganization, dated July 24,
1998 (the "Reorganization Agreement"), by and among the
Corporation, on behalf of the Small Cap Fund and the Strong
Growth Fund (the "Growth Fund"), and, with respect to certain
matters, Strong Capital Management, Inc. (the "Advisor") and
Strong Funds Distributors, Inc., and the transactions
contemplated thereby (the "Reorganization"); and
Proposal 2. an amendment to the Amended and Restated Articles of
Incorporation of the Corporation (the "Proposed Amendment")
required in connection with the Reorganization. Such amendment
will be subject to the approval of Proposal 1 above by the
Small Cap Fund's shareholders.
The Corporation is an open-end management investment company consisting
of nine investment portfolios, interests in which are represented by separate
series of the Corporation's shares. The Small Cap Fund and the Growth Fund
(collectively, the "Funds") are two of these portfolios. The Corporation's
Directors, including the non-interested Directors, have determined that it is in
the best interests of the Small Cap Fund and its shareholders for the Small Cap
Fund to be reorganized into the Growth Fund. In making this determination, the
Board of Directors considered the small asset size and the lack of expected
asset growth of the Small Cap Fund, as well as the problems related to the lack
of economies of scale, and concluded that each of these disadvantages would be
addressed, to different degrees, by the Reorganization. Further, the Board of
Directors concluded that, among other advantages, the Reorganization will
provide Small Cap Fund shareholders with an investment vehicle that has the same
investment objective and restrictions and substantially similar policies as the
Small Cap Fund, and is likely both to reduce the expense ratios affecting Small
Cap Fund shareholders and may provide superior investment performance.
<PAGE>
The Reorganization Agreement provides that, on the closing date for the
Reorganization (the "Closing Date"), which currently is scheduled to take place
on October 30, 1998, substantially all of the property and assets of the Small
Cap Fund (except a reserve for certain expenses and liabilities) will be
transferred to the Growth Fund. In exchange, the Growth Fund simultaneously will
issue its shares ("Growth Fund Shares") to the Small Cap Fund. The Small Cap
Fund will then make a liquidating distribution of these Growth Fund Shares to
the shareholders of the Small Cap Fund, so that holders of shares of the Small
Cap Fund ("Small Cap Fund Shares") on the Closing Date will receive Growth Fund
Shares that are equivalent in value to their investments in the Small Cap Fund
at the time of the Reorganization.
In addition, with respect to the Proposed Amendment, the Reorganization
Agreement provides that, upon the closing of the Reorganization, (a) all of the
outstanding shares of the Small Cap Fund will be canceled and converted into
rights to receive the liquidating distribution of Growth Fund Shares, and (b)
the Corporation's Amended and Restated Articles of Incorporation will be amended
to eliminate the Small Cap Fund as a series of the Corporation. If the
shareholders approve the Proposed Amendment but do not approve the
Reorganization Agreement, or if for any other reason the Reorganization is not
completed, the Proposed Amendment will not go into effect.
This Proxy Statement provides the information that a shareholder of the
Small Cap Fund should know before voting on the Reorganization Agreement (and
its associated transactions) and the Proposed Amendment. It should be retained
for future reference. The Reorganization Agreement is attached to this Proxy
Statement as Exhibit A and is incorporated herein by reference.
A Prospectus for both the Growth Fund and Small Cap Fund dated May 1, 1998,
which describes the investment objectives, program objectives, and policies of
the Growth Fund, has previously been provided to all shareholders of the Small
Cap Fund. Additional information concerning the Growth Fund and the Small Cap
Fund is set forth in the Statement of Additional Information for the Funds,
dated May 1, 1998. Moreover, further information concerning the proposed
Reorganization is set forth in the Statement of Additional Information, dated
September 4, 1998. Each of these documents is on file with the Securities and
Exchange Commission ("SEC"), and is available without charge upon request by
writing or calling the Corporation at the address and telephone numbers shown on
the cover page of this Proxy Statement, or by calling toll-free at (800)
368-3863. The information contained in the Prospectus for each Fund, which has
previously been provided to each shareholder of the Small Cap Fund and each of
the Statements of Additional Information noted above is incorporated into this
Proxy Statement by reference.
<PAGE>
This Proxy Statement is the proxy statement of the Small Cap Fund for
the Special Meeting of Shareholders and the Prospectus for the Growth Fund
Shares, which are to be issued in connection with the Reorganization.
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 Proxy Statement. Any representation to the contrary
is a criminal offense.
No person has been authorized to give any information or to make any
representations other than those contained in this Proxy Statement and in the
materials expressly incorporated herein by reference and, if given or made, such
other information or representations must not be relied upon as having been
authorized by the Corporation, the Small Cap Fund, The Growth Fund, the Adviser,
or the Funds' distributor, Strong Funds Distributors, Inc.
Votes required: Proposals 1 and 2 shall be approved by the affirmative vote of a
majority of the outstanding Small Cap Fund shares.
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY
Proposed Reorganization and Reorganization Agreement..............
Proposed Amendment................................................
Reasons for Reorganization........................................
Federal Income Tax Consequences...................................
Overview of the Small Cap Fund and the Growth Fund................
Risk Considerations...............................................
1. PROPOSAL TO APPROVE OR DISAPPROVE THE REORGANIZATION AGREEMENT..........
Description of the Reorganization Agreement.......................
Board Consideration...............................................
Capitalization....................................................
Federal Income Tax Consequences...................................
Comparison of the Small Cap Fund and the Growth Fund..............
Investment Objectives and Policies.......................
Investment Limitations...................................
Purchase and Redemption Information, Exchange Privileges,
Distributions, Pricing, and Organization...............
Other Information........................................
2. PROPOSAL TO APPROVE OR DISAPPROVE THE PROPOSED AMENDMENT.....
Description of the Proposed Amendment.............................
Board Consideration...............................................
INFORMATION RELATING TO VOTING MATTERS................................
General Information...............................................
Shareholder and Board Approvals...................................
Appraisal Rights..................................................
Quorum............................................................
Annual Meetings...................................................
ADDITIONAL INFORMATION ABOUT EACH FUND.....................................
Directors and Officers............................................
Financial Information for the Growth Fund.........................
FINANCIAL STATEMENTS......................................................
OTHER BUSINESS............................................................
SHAREHOLDER INQUIRIES.....................................................
Exhibit A: Agreement and Plan of Reorganization...................
Exhibit B: Advisor's Investment Review for the Funds..............
Exhibit C: Proposed Amendment to Amended and Restated
Articles of Incorporation of the Strong
Equity Funds, Inc. ....................................
<PAGE>
SUMMARY
This section summarizes key information concerning the proposed
Reorganization and the Proposed Amendment. More detailed information is
contained elsewhere in this Proxy Statement and the Statement of Additional
Information hereto, the Prospectus and Statement of Additional Information of
the Funds, and the Reorganization Agreement dated July 24, 1998, which is
attached to this Proxy Statement as Exhibit A.
Proposed Reorganization And Reorganization Agreement
Based upon their evaluations of the relevant information presented to
them, and in light of their fiduciary duties under federal and state law, the
Corporation's Directors, including all of the non-interested Directors, have
determined that the proposed Reorganization is in the best interests of the
shareholders of each Fund. The Board of Directors recommends the approval of the
Reorganization Agreement by the shareholders of the Small Cap Fund.
Subject to shareholder approval, the Reorganization Agreement provides
for: (a) the transfer to the Growth Fund of substantially all of the property
and assets of the Small Cap Fund (except a reserve for certain expenses and
liabilities) (the "Small Cap Fund Net Assets") in exchange for Growth Fund
Shares equal in value to the Small Cap Fund Net Assets; (b) the distribution of
the Growth Fund Shares to the shareholders of the Small Cap Fund in liquidation
of the Small Cap Fund; (c) the cancellation of all outstanding Small Cap Fund
Shares; and (d) the elimination of the Small Cap Fund as a series of the
Corporation.
If the Reorganization is approved, each shareholder of the Small Cap
Fund will become a shareholder of the Growth Fund and, immediately after the
closing of the Reorganization, will hold Growth Fund Shares that are equal in
value to the shareholder's investment in the Small Cap Fund immediately before
the Closing Date with no tax effect to the shareholders. The Reorganization and
related transactions will be accomplished on a tax-free basis.
For further information, see "1. Proposal To Approve or Disapprove the
Reorganization Agreement -- Description of the Reorganization Agreement."
Proposed Amendment
Based upon their evaluation of the information presented to them, and
in light of their fiduciary duties, the Directors of the Corporation, including
all of the non-interested Directors, have determined that the Corporation's
Amended and Restated Articles of Incorporation should be amended in connection
with any shareholder approval of the Reorganization Agreement in order: (a) to
cancel all of the outstanding shares of the Small Cap Fund and to convert them
into rights to receive the liquidating distribution of Growth Fund Shares and
(b) to eliminate the Small Cap Fund as a series of the Corporation. In
considering this matter, the Board was advised that the Proposed Amendment is
necessary to effect these purposes.
<PAGE>
If the shareholders approve the Proposed Amendment but do not approve
the Reorganization Agreement, or if for any other reason the Reorganization is
not completed, the Proposed Amendment will not go into effect. Moreover, if
shareholders approve the Reorganization but do not approve the Proposed
Amendment, the outstanding shares of the Small Cap Fund will not be canceled and
automatically converted into rights to receive the liquidating distribution of
the Growth Fund Shares.
For further information, see "2. Proposal To Approve or Disapprove the
Proposed Amendment."
Reasons For Reorganization
In light of certain potential benefits and other factors, the
Corporation's Directors, including the non-interested Directors, have determined
that it is in the best interests of the Small Cap Fund and its shareholders to
reorganize into the Growth Fund. In making this determination, the Board of
Directors considered many factors as described more fully below under "Board
Consideration." Among other things, the Board considered the Small Cap Fund's
relatively poor investment performance, small current size, lack of expected
asset growth and likely further decrease in assets, and the resulting problems
associated with the Small Cap Fund's inability to achieve sufficient economies
of scale. The Board of Directors felt that each of these problems would be
addressed to different degrees by the Reorganization.
In addition, among other advantages, the Corporation's Board of
Directors felt that the Reorganization would: (a) provide an investment option
that has the same investment objective, identical investment restrictions and
substantially similar investment policies and programs as the Small Cap Fund;(b)
likely reduce the overall expense ratio for the Small Cap Fund's shareholders;
and (c) be a tax-free transaction. The Board of Directors also considered the
possible risks and disadvantages of the Reorganization and determined that the
Reorganization is likely to provide benefits to the Small Cap Fund and its
shareholders that outweigh any possible risks and disadvantages. Finally, the
Corporation's Board of Directors concluded that there are no significant risks
or disadvantages to the Small Cap Fund or its shareholders from the
Reorganization and that the interests of the Small Cap Fund's shareholders would
not be diluted.
Additionally, the Corporation's Board of Directors, in approving the
Reorganization, determined that it would be advantageous for the Growth Fund and
its current shareholders to acquire substantially all of the assets of the Small
Cap Fund in exchange for Growth Fund Shares and that the interests of the Growth
Fund's existing shareholders would not be diluted.
Federal Income Tax Consequences
Counsel for this transaction will issue an opinion as of the Closing
Date to the effect that the Reorganization will not give rise to the recognition
of income, gain, or loss for federal income tax purposes to the Small Cap Fund,
the Growth Fund, or their respective shareholders. See "1. Proposal To Approve
or Disapprove the Reorganization Agreement -- Federal Income Tax Consequences."
<PAGE>
Overview of the Small Cap Fund and the Growth Fund
Investment Objectives and Policies. The investment objective and
investment restrictions of the Funds are the same and the investment policies
and programs are substantially similar. Both Funds seek capital growth. The
primary distinctions between the Funds are that: (a) the Small Cap Fund
primarily invests in equity securities of small capitalization companies (i.e.,
companies with capitalization of $2 billion or less at the time of purchase),
whereas the Growth Fund may invest in equity securities of any capitalization
size; (b) the Growth Fund may invest 35% of its total assets in debt obligations
whereas the Small Cap Fund may only invest up to 20% of its net assets in such
securities; and (c) the Growth Fund may invest without limitation in cash and
short-term fixed income securities when the Advisor determines that market
conditions warrant a temporary defensive position whereas the Small Cap Fund is
limited in the amount of its total assets (i.e., 20% of its total assets) that
can be invested in such instruments under similar circumstances. Under normal
conditions, at least 80% of the Small Cap Fund's net assets must be invested in
equity securities and at least 65% of it's total assets must be invested in
equity securities of small market capitalization companies.
Attached as Exhibit B to this Proxy Statement are copies of the
Advisor's Investment Review for the Growth Fund, which appeared in the Annual
Report for the Fund for the fiscal year ended December 31, 1997.
See "Summary - Risk Considerations" and "Comparison of the Small Cap
Fund and the Growth Fund - Investment Objectives and Policies" below for a
further description of the similarities and differences between the investment
objectives, policies and risks of the Small Cap Fund and the Growth Fund.
Certain Service Provider Arrangements. The Advisor serves as investment
adviser for both Funds. The Advisor began conducting business in 1974. Since
then, its principal business has been providing continuous investment
supervision for individuals and institutional accounts, such as pension funds
and profit-sharing plans, as well as mutual funds. As of June 30, 1998, the
Advisor had over $31 billion under management. The Advisor's principal mailing
address is P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Richard S. Strong, the
Chairman of the Board of each Fund, is the controlling shareholder of the
Advisor. For its services to the Funds, the Advisor is entitled to receive a
monthly advisory fee from each Fund, computed on the basis of each Fund's
average daily net asset value at the following annual rates:
<PAGE>
ADVISORY FEE
(% OF AVERAGE
FUND DAILY NET ASSET VALUE)
Small Cap Fund 1.00%
Growth Fund 1.00%
The Advisor also serves as transfer agent and dividend disbursing agent
for the Funds. In the case of both Funds, the Advisor is compensated based on an
annual fee of $21.75 per open account, plus out-of-pocket expenses. The Advisor
also receives an annual fee per closed account of $4.20. The fees received and
the services provided to the Advisor as transfer agent and dividend disbursing
agent are in addition to those received and provided to the Advisor in its
capacity as investment adviser to the Funds.
In addition, the Advisor provides certain printing and mailing services for the
Funds.
From time to time, the Funds, directly or indirectly through
arrangements with the Advisor, may pay amounts to third parties that provide
transfer agent and other administrative services relating to the Funds to
persons who beneficially own interests in the Funds. In such cases, the Funds
will not pay fees based on the number of beneficial owners at a rate that is
greater than the rate the Funds are currently paying the Advisor for providing
these services to Fund shareholders.
Custodial services are provided to the Funds by Firstar Trust Company.
Strong Funds Distributors, Inc. (the "Distributor"), an indirect
subsidiary of the Advisor, serves as the distributor of each Fund's shares.
Since the Funds are "no-load" funds, no sales commissions are charged on the
purchase or sale of Fund shares. The Distributor bears certain printing costs,
advertising, and other costs attributable to the distribution of each Fund's
shares.
Comparative Fee Table: The following table sets forth the current fees
and expenses of the Small Cap Fund and the Growth Fund based on the actual
expenses incurred by each Fund for the fiscal year ended December 31, 1997.
Excluding extraordinary expenses, each Fund's "Total Operating Expenses," as
shown in the table below, are consistent with each Fund's current operating
expenses. The current fees and expenses of the Growth Fund are expected to
remain unchanged as a result of the Reorganization.
<PAGE>
Annual Fund Operating Expenses
(As a Percentage of Average Daily Net Assets as of 12/31/97)
SMALL CAP FUND GROWTH FUND
Management Fees 1.00% 1.00%
12b-1 Fees NONE NONE
Other Operating Expenses 0.42% 0.30%
Total Fund Operating Expenses 1.42% 1.30%
Example: An investor in the Small Cap Fund or the Growth Fund would pay the
following expenses on a $1,000 investment, assuming (a) 5% annual return, and
(b) redemption at the end of the following periods.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
Small Cap $14 $45 $78 $170
Growth Fund $13 $41 $71 $157
The Example is based on each Fund's "Total Fund Operating Expenses."
The example should not be considered as representative of past or future
expenses. Actual expenses may be higher or lower than those shown. The
assumption in the Example of 5% annual return is required by regulations of the
SEC applicable to all mutual funds. The assumed 5% annual return is not a
prediction of, and does not represent, the projected or actual performance of a
Fund's shares.
Organization and Purchase and Redemption Policies. The Small Cap Fund
and Growth Fund are each series of common stock of the Corporation, which is
incorporated in Wisconsin. The purchase, redemption, dividend, and other
practices and procedures, including exchange rights, of the Funds are identical,
as described further below under "Comparison of the Small Cap Fund and the
Growth Fund."
Risk Considerations.
The risks involved in investing in each Fund are in most respects
identical, given the similarities in the investment objectives and the types of
securities in which each Fund may invest. However, as described below, there is
one material difference between the risk factors associated with the Small Cap
Fund and the risk factors associated with the Growth Fund.
<PAGE>
The Small Cap Fund must invest at least 65% of its total assets in
small capitalization companies. Although the Growth Fund may invest in equity
securities of small companies, the Growth Fund is not required to invest any
particular percentage of its assets in such companies. While small companies
generally have potential for rapid growth, investments in small companies often
involve greater risks than investments in larger, more established companies
because small companies may lack the management experience, financial resources,
product diversification, and competitive strengths of larger companies. In
addition, in many instances the securities of small companies are traded only
over-the-counter or on a regional securities exchange, and the frequency and
volume of their trading is substantially less than is typical of larger
companies. Therefore, the securities of small companies may be subject to
greater and more abrupt price fluctuations. When making large sales of shares of
small companies, a fund may have to sell shares at discounts from quoted prices
or may have to make a series of small sales over an extended period of time due
to the trading volume of small company securities.
Other than as noted above, the main risks of investing in the Small Cap
Fund and Growth Fund are virtually identical. For instance, the Funds' major
risks are those of investing in the stock market. This means that the Funds may
experience sudden, unpredictable declines in value, as well as periods of poor
performance. Because stock values fluctuate, when you sell your investment you
may receive more or less money than you originally invested. Additionally, the
Funds may invest to a limited degree, in foreign securities. Foreign investments
involve additional risks, including currency fluctuations, political
instability, differences in financial reporting standards, and less stringent
regulation of securities markets.
1. PROPOSAL TO APPROVE OR DISAPPROVE THE
REORGANIZATION AGREEMENT
The terms and conditions under which the Reorganization may be
consummated are set forth in the Reorganization Agreement. Significant
provisions of the Reorganization Agreement are summarized below; however, this
summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Exhibit A to this Proxy Statement and
incorporated herein by reference.
Description Of The Reorganization Agreement.
The Reorganization Agreement provides that at the Closing Date
substantially all of the property and assets of the Small Cap Fund will be
transferred to the Growth Fund free and clear of all liens, encumbrances, and
claims, except for cash or bank deposits (the "Reserve Account") in an amount
necessary: (a) to pay the Small Cap Fund's costs and expenses of carrying out
this Agreement (including but not limited to fees of counsel and accountants,
any income dividends payable prior to the Closing Date, and expenses of its
liquidation and termination as a series of the Corporation contemplated under
the Reorganization Agreement); (b) to discharge all of the Small Cap Fund's
unpaid liabilities (other than unamortized organizational expenses) on its books
and records at the Closing Date; and (c) to pay such contingent liabilities, if
any, that the Corporation's Board of Directors shall reasonably deem to exist
against the Small Cap Fund at the Closing Date, for which contingent and other
appropriate liability reserves shall be established on the Small Cap Fund's
books. (The property and assets to be transferred to the Growth Fund are
referred to herein as the "Small Cap Fund Net Assets.") Upon the satisfaction or
other resolution of all such liabilities, costs and expenses, any amount
remaining from the Reserve Account will be transferred to the Growth Fund. The
Advisor will pay or waive, prior to the Closing Date, all of the remaining
unamortized organizational expenses of the Small Cap Fund reflected on the Small
Cap Fund's books and records as of the Closing Date.
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In exchange for the transfer to the Growth Fund of the Small Cap Fund
Net Assets as described above, the Growth Fund will simultaneously issue at the
Closing Date full and fractional Growth Fund Shares to the Small Cap Fund for
distribution pro rata by the Small Cap Fund to its then-current shareholders.
The number of Growth Fund Shares so issued by the Growth Fund will have an
aggregate net asset value equal to the value of the Small Cap Fund Net Assets on
the Closing Date.
Following the close of business on the Closing Date, the Small Cap Fund
will distribute pro rata to its shareholders the Growth Fund Shares received by
the Small Cap Fund in liquidation of the Small Cap Fund. Each shareholder owning
Small Cap Fund Shares at the Closing Date will receive an amount of Growth Fund
Shares equal to the value of his or her Small Cap Fund Shares, plus the right to
receive any dividends or distributions on the Small Cap Fund Shares that were
declared before the Closing Date but that remained unpaid at that time.
The stock transfer books of the Small Cap Fund will be permanently
closed as of the close of business on the day immediately preceding the Closing
Date. Redemption requests received thereafter by the Small Cap Fund will be
deemed to be redemption requests for Growth Fund Shares. If any Small Cap Fund
Shares held by a former Small Cap Fund shareholder are represented by a share
certificate, the certificate must be surrendered to the Growth Fund's transfer
agent for cancellation, or verification of such certificate's loss and
indemnification with respect to such loss must be established, before the Growth
Fund Shares issued to the shareholder in the Reorganization can be redeemed or
transferred.
The Reorganization with respect to the Small Cap Fund is subject to a
number of conditions, including, among other things: (a) approval of the
Reorganization Agreement and the related transactions described in this Proxy
Statement by the Small Cap Fund's shareholders; (b) the receipt of certain legal
opinions described in Sections 7 and 8 of the Reorganization Agreement (which
include a legal opinion that the Growth Fund Shares issued to Small Cap Fund
shareholders in accordance with the terms of the Reorganization Agreement will
be validly issued, fully paid, and non-assessable, except to the extent provided
in Section 180.0622(2)(b) of the Wisconsin Statutes, or any successor provision,
and a legal opinion that the Reorganization will not give rise to the
recognition of income, gain, or loss for federal income tax purposes to the
Small Cap Fund, the Growth Fund, or their respective shareholders); (c) the
receipt of certain certificates from the parties concerning the continuing
accuracy of the representations and warranties in the Reorganization Agreement
and other matters; and (d) the parties' performance of their respective
agreements and undertakings in the Reorganization Agreement. Assuming
satisfaction of the conditions in the Reorganization Agreement, the Closing Date
will be on October 30, 1998, or such other date as is agreed to by the parties.
<PAGE>
The Reorganization Agreement provides that the parties shall each be
responsible for the payment of their own expenses incurred in connection with
the Reorganization (which expenses include the fees and disbursements of
attorneys and auditors, proxy printing, and solicitation expenses) and any
related transfer fees and brokerage fees.
The Reorganization Agreement and the Reorganization may be terminated
by the mutual agreement of the Funds. In addition, either Fund may at its option
terminate the Reorganization Agreement at or prior to the Closing Date because
of: (a) a material breach by the other Fund of any representation, warranty, or
agreement contained in the Reorganization Agreement to be performed at or prior
to the Closing Date; (b) a condition precedent to the obligations of either Fund
which the Corporation's Board of Directors determines has not been met and which
reasonably appears will not or cannot be met; or (c) a determination by the
Corporation's Board of Directors that the Reorganization, either as a whole or
with respect to any Fund, will not be in the best interest of the Corporation,
any of the Corporation's series, or its shareholders. In such event, there shall
be no liability for damages on the part of either Fund, or the Board of
Directors or officers of the Corporation, but each shall bear its own expenses
incidental to the preparation and carrying out of the Reorganization Agreement.
The Reorganization Agreement provides further that, at any time prior to or
after approval of the Reorganization Agreement by the Small Cap Fund's
shareholders, the Funds, by written agreement, may amend, modify, or supplement
the Reorganization Agreement. The Reorganization Agreement further provides that
no such amendment, modification, or supplement may have the effect of changing
the provisions for determining the number of Growth Fund Shares to be
distributed to Small Cap Fund shareholders under the Reorganization Agreement to
the detriment of the Small Cap Fund shareholders, unless the Small Cap Fund
shareholders approve such change. However, the Funds may amend the
Reorganization Agreement to change the Closing Date or any other provision of
the Reorganization Agreement (to the fullest extent permitted by law).
Board Consideration
Based upon their evaluation of the relevant information presented to
them, and in light of their fiduciary duties under federal and state law, the
Corporation's Directors have unanimously determined that the proposed
Reorganization is in the best interest of the Small Cap Fund and its
shareholders, and recommends the approval of the Reorganization Agreement by the
Small Cap Fund's shareholders at the Special Meeting. The following is a summary
of the information that was presented to, and considered by, the Directors in
making their determination.
At a meeting of the Board of Directors of the Funds held on July 24,
1998, the Corporation's Board of Directors considered the proposed
Reorganization. During the course of their review and deliberation, the
Directors evaluated the potential benefits and detriments to the Small Cap Fund
and its shareholders. The Directors requested and received from the Advisor
written materials containing relevant information about the Growth Fund and the
proposed Reorganization, including fee structure and expense information, and
comparative performance data. The Advisor also provided the Directors with
historical asset growth information, comparative expense ratio information,
analyses of the benefits to the shareholders of the Small Cap Fund resulting
from the proposed Reorganization, and a variety of other information relevant to
the consideration of the proposed Reorganization. In this regard, the Board of
Directors evaluated the current actual and contractual expense levels of the
Growth Fund and compared such expense levels with the current actual and
contractual expense levels of the Small Cap Fund and considered the anticipated
expenses and charges of the Growth Fund after the Reorganization that would be
borne directly and indirectly by the shareholders of the Small Cap Fund. (The
Board of Directors noted that the Advisor will waive the obligation of the Small
Cap Fund to reimburse the Advisor for all of the Small Cap Fund's unamortized
organizational expenses of approximately $17,000, all of which previously were
paid by the Advisor.)
<PAGE>
The Board of Directors also considered other alternatives including:
(a) the complete liquidation and dissolution of the Small Cap Fund; and (b) the
reorganization of the Small Cap Fund into another one of the Strong Mutual
Funds. The Board of Directors carefully considered the advantages and
disadvantages of each other alternative. In particular, the Board considered the
tax consequences and other effects that each alternative would have on the Small
Cap Fund shareholders. However, the alternative that the Board of Directors felt
would be most beneficial to the Small Cap Fund shareholders was the
reorganization of the Small Cap Fund into an investment company with an
identical investment objective and similar investment policies and restrictions.
The Board of Directors considered the reasons for the proposed
Reorganization and the benefits for the shareholders of the Small Cap Fund
expected to result from the Reorganization. These benefits include superior
investment performance and potential asset growth with resulting economies of
scale, such as lower per share expenses. In this regard, the Board specifically
considered the fact that the Small Cap Fund's recent performance has
significantly lagged that of the Growth Fund, the Russell 2000 Index (the Small
Cap Fund's benchmark) and the Lipper Small Cap Index. The Growth Fund's
performance, however, has had a consistent track record of solid performance
exceeding that of the Small Cap Fund. Additionally, the Board considered the
fact that the Small Cap Fund had experienced a significant net decline of more
than $55 million in net assets from October 1997 through June 1998 and that its
current size and diminishing asset base would likely cause the Small Cap Fund's
expense ratio to increase, possibly exacerbating the Fund's subpar performance.
The Growth Fund's greater size and lower expense ratio, on the other hand, would
enable Small Cap Fund shareholders to realize the benefits of investing in a
fund that has achieved consistent economies of scale.
The Board of Directors considered the compatibility of the Funds. In
this regard, the Board noted that, as separate series of the same registered
investment company, the two Funds share the same board of directors, articles of
incorporation, and by-laws. Additionally, the Board of Directors specifically
considered the fact that the investment objectives and investment restrictions
of each Fund are identical and that the investment policies of each are
substantially similar. Both Funds seek to achieve capital growth by investing
primarily in equity securities, although under normal conditions, the Small Cap
Fund must invest at least 80% of its net assets in equity securities, whereas
the Growth Fund must invest at least 65% of its total assets in equity
securities. As a result of this difference, the Small Cap Fund may invest up to
20% of its net assets and the Growth Fund may invest up to 35% of its total
assets in debt obligations. Moreover the Board noted that shareholders of the
Small Cap Fund are currently subject to potentially more risk than they would be
as shareholders of the Growth Fund because the Small Cap Fund must invest at
least 65% of its net assets in equity securities of companies that have small
market capitalizations. The Growth Fund, by contrast, is not limited in this
respect and may purchase equity securities of any capitalization size. The Board
of Directors also considered those provisions of the Reorganization Agreement
relating to the price of shares to be exchanged.
<PAGE>
The Board of Directors further noted that the Reorganization would
result in continuity of investment advisory, transfer agent, and distributor
services, since both Funds currently employ the Advisor as investment adviser
and transfer agent and the Distributor as distributor. The Board of Directors
further noted that the terms of the agreements governing the provision of those
services to each of the Funds are the same. The Board of Directors also noted
that the purchase, redemption, and shareholder services offered by the Funds are
essentially identical, and that, therefore, the Reorganization would result in
continuity in the level of such services to the Small Cap Fund's shareholders.
The Board of Directors noted further that no sales or other charges would be
imposed on any shares of the Growth Fund acquired by shareholders of the Small
Cap Fund in connection with the Reorganization and that it was the Growth Fund's
intention to remain a "no-load" fund.
Finally, the Corporation's Board of Directors reviewed the terms of the
Reorganization Agreement. The Board of Directors noted that the Small Cap Fund
would be provided with an opinion of counsel for the transaction with respect to
the tax-free treatment of the Reorganization.
Based upon their evaluation of the relevant information presented to
them, and in light of their fiduciary duties under federal and state law, the
Corporation's Directors unanimously determined that (a) the proposed
Reorganization is in the best interests of the Small Cap Fund and its
shareholders and (b) the interests of the Small Cap Fund shareholders will not
be diluted as a result of the proposed Reorganization. Consequently, the Board
recommended the approval of the Reorganization Agreement by shareholders at the
Special Meeting.
Additionally, the Corporation's Board of Directors considered the
proposed Reorganization with respect to the Growth Fund. Based upon their
evaluation of the relevant information provided to them, and in light of their
fiduciary duties under federal and state law, the Directors unanimously
determined that (a) the proposed Reorganization is in the best interests of the
Growth Fund and its shareholders and (b) the interests of the existing Growth
Fund shareholders will not be diluted as a result of the proposed
Reorganization.
Capitalization
Because the Small Cap Fund will be combined in the Reorganization with
the Growth Fund, the total capitalization of the Growth Fund after the
Reorganization is expected to be greater than the current capitalization of the
Growth Fund. The following table sets forth as of June 30, 1998: (a) the
capitalization of the Small Cap Fund; (b) the capitalization of the Growth Fund;
and (c) the pro forma capitalization of the Growth Fund as adjusted to reflect
the Reorganization. If the Reorganization is consummated, the capitalization of
the Growth Fund is likely to be different than that in the table at the Closing
Date as a result of daily share purchase and redemption activity in the Small
Cap Fund and the Growth Fund.
<PAGE>
PRO FORMA
SMALL CAP FUND GROWTH FUND COMBINED
Total Net Assets $137.5 million $1.693 billion $1.83 billion
Shares Outstanding 11,131,286 79,529,566 85,988,848
Net Asset Value Per Share $12.36 $21.30 $21.30
Federal Income Tax Consequences
Consummation of the Reorganization is subject to the condition that the
Funds receive an opinion from counsel, substantially to the effect that, based
upon certain facts, assumptions and representations, the transactions
contemplated by the Reorganization Agreement with respect to the Small Cap Fund
and the Growth Fund constitute a tax-free reorganization for federal income tax
purposes. The delivery of such opinion is conditioned upon receipt by counsel of
representations it shall request of the Corporation.
The Funds have not sought a tax ruling from the Internal Revenue
Service ("IRS"). The opinion of counsel is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. Shareholders should consult
their own tax advisers concerning the potential tax consequences to them,
including state and local income tax consequences.
Comparison of the Small Cap Fund and the Growth Fund
The investment objectives and investment restrictions of both Funds are
identical and the investment policies of the Funds are, in many respects,
substantially similar. There are, however, some noteworthy differences. The
following discussion summarizes some of the more significant similarities and
differences in the investment policies of the Funds and is qualified in its
entirety by the discussion elsewhere herein, and in the Prospectus and Statement
of Additional Information of the Funds, which, as previously noted, is
incorporated by reference.
Investment Objectives and Policies. The investment objectives of the
Funds are fundamental, meaning that they may not be changed without a vote of
the holders of a majority of the particular Fund's outstanding shares. This
section describes certain policies that are common to the Small Cap Fund and the
Growth Fund and certain noteworthy differences.
<PAGE>
Although each Fund seeks capital growth, the Small Cap Fund invests
primarily in equity securities of companies that have small market
capitalizations ($2 billion or less). Under normal market conditions, at least
80% of the Small Cap Fund's net assets must be invested in equity securities,
including common stocks, preferred stocks, and securities that are convertible
into common or preferred stocks, (such as warrants and convertible bonds) and at
least 65% of the Small Cap Fund's total assets must be invested in equity
securities of small market capitalization companies. In general,
smaller-capitalization companies often involve greater risks than investments in
established companies. The Small Cap Fund may invest up to 20% of its net assets
in debt obligations, including intermediate- to long-term corporate or U.S.
government debt securities.
The Growth Fund, on the other hand, is not limited to any particular
capitalization for the equity securities in which it may invest. Under normal
market conditions, the Growth Fund invests at least 65% of its total assets in
equity securities, including common stocks, preferred stocks, and securities
that are convertible into common or preferred stocks, such as warrants and
convertible bonds. While the emphasis of the Growth Fund is on equity
securities, the Fund may invest up to 35% of its total assets in debt
obligations, including intermediate- to long-term corporate or U.S. government
debt securities.
Each Fund may invest in cash and short-term fixed income securities
when the Fund's Advisor determines that market conditions warrant a temporary
defensive position; however, the Growth Fund may do so without limitation
whereas the Small Cap Fund may do so only with respect to 20% of its net assets.
Each Fund may invest up to 5% of its net assets in non-investment-grade
debt obligations. Additionally, each Fund may invest up to 25% of its net assets
in foreign securities, including both direct investments and investments made
through depositary receipts.
Each Fund may also invest in fixed and variable-rate obligations,
debentures, notes, leases, certificates of deposit, commercial paper, repurchase
agreements, banker's acceptances, other short-term fixed income securities,
structured investments such as mortgage- and asset- backed securities, loan
participation, convertible debt and zero coupon, step-coupon, and pay-in-kind
securities. Each Fund may also borrow funds and engage in mortgage dollar roll
transactions and reverse repurchase agreements. In order to facilitate portfolio
liquidity, each Fund may acquire standby commitments from brokers, dealers, or
banks with respect to securities in its portfolio. Each Fund may also invest
without limitation in securities purchased on a when-issued or delayed delivery
basis.
Derivative instruments may be used by the Funds for any lawful purpose,
including hedging or managing risk. Derivative instruments are securities or
agreements the value of which is derived from the value of some underlying
asset, for example, securities, reference indexes, or commodities. Options,
futures, and options on futures transactions are considered derivative
transactions.
Please see the Prospectus for each Fund for further information
concerning each Fund's investment policies and risks.
<PAGE>
Investment Limitations. Neither the Growth Fund nor the Small Cap Fund
may change its fundamental investment limitations without the affirmative vote
of the holders of a majority of its outstanding shares (as defined in the
Investment Company Act of 1940, as amended (the "1940 Act")). However,
investment limitations which are non-fundamental policies ("non-fundamental" or
"operating" policies) of the Funds may be changed by the Corporation's Board of
Directors without shareholder approval. The fundamental and non-fundamental
investment limitations of the Growth Fund and the Small Cap Fund are identical
and are set forth in the Statement of Additional Information with respect to
both Funds. Please see the Statement of Additional Information for further
information concerning each Fund's investment limitations.
Purchase and Redemption Information, Exchange Privileges,
Distributions, Pricing, and Organization. Each Fund's shares are sold on a
continuous basis by the Distributor and may be purchased directly by individuals
and institutions or by broker-dealers, financial institutions, or other service
providers. Each Fund's shares are sold on a 100% no-load basis, meaning that
shares may be purchased, redeemed, and exchanged directly at net asset value
without paying a sales charge. Broker-dealers, financial institutions, and other
service providers, however, may charge an administrative fee on the purchase or
redemption of each Fund's shares. The purchase price for each Fund's shares is
the net asset value next determined after the Fund receives the shareholder's
request in proper form.
No sales charge will be imposed on the issuance of Growth Fund Shares
in connection with the Reorganization.
The minimum initial investment for each Fund is $2,500 per account
and $250 for UGMA/UTMA Accounts. The minimum initial investment amount is waived
for shareholders who enroll in a Fund's Automatic Investment Plan. The minimum
subsequent investment for each Fund is $50 per account. Purchase orders for
shares of each Fund are effected on any "business day," that is, any day on
which the New York Stock Exchange is open for trading. Each Fund offers an
automatic investment plan, payroll direct deposit plan, automatic exchange plan,
and systematic withdrawal plan in connection with the purchase and redemption of
its shares.
Each Fund's policies, procedures, and restrictions concerning share
redemption and exchange, dividend payment, and the determination of net asset
value are identical, as set forth in the Prospectus for the Funds. Please refer
to that Prospectus for further information on these subjects.
Other Information. The Corporation is registered as an open-end
management investment company under the 1940 Act, and the Small Cap Fund and
Growth Fund are two of the Corporation's investment portfolios. Currently, the
Corporation offers nine investment portfolios.
The Corporation is organized as a Wisconsin corporation and, as such,
is subject to the provisions of its Articles of Incorporation and Bylaws and to
the Wisconsin Business Corporation Law. The attributes of a share of common
stock of each Fund are identical.
<PAGE>
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT
SHAREHOLDERS VOTE FOR PROPOSAL 1
2. PROPOSAL TO APPROVE OR DISAPPROVE THE
PROPOSED AMENDMENT
Summarized below are the reasons for the Proposed Amendment and the
substance of the Proposed Amendment. However, this summary is qualified in its
entirety by reference to the Proposed Amendment, a copy of which is attached as
Exhibit C to this Proxy Statement and incorporated herein by reference.
Description of the Proposed Amendment
The Proposed Amendment has two purposes in connection with the
Reorganization: (a) on the Closing Date of the Reorganization, all of the
outstanding shares of the Small Cap Fund will be canceled and automatically
converted into the right to receive full or fractional Growth Fund Shares with a
net asset value equal to the value of the Small Cap Fund Shares, as described in
the Reorganization Agreement; and (b) following the Closing Date, the Small Cap
Fund will be eliminated as a series of the Corporation. If the shareholders
approve the Proposed Amendment but do not approve the Reorganization Agreement,
or if for any other reason the Reorganization is not completed, the Proposed
Amendment will not go into effect. Moreover, if the shareholders approve the
Reorganization but do not approve the Proposed Amendment, the above-stated
purposes of the Proposed Amendment in connection with the Reorganization will
not be realized.
Board Consideration
Based on their evaluation of the information presented to them, and in
light of their fiduciary duties, the Directors of the Corporation have
unanimously determined that the Proposed Amendment is in the best interest of
the Small Cap Fund and its shareholders and recommend the approval of the
Proposed Amendment at the Special Meeting.
The Board was advised by counsel that the Proposed Amendment would be
necessary, on the Closing Date, to cancel the Small Cap Fund's outstanding
shares in connection with the Reorganization of the Small Cap Fund and the
distribution of Growth Fund Shares to the Small Cap Fund's shareholders, as
contemplated under the Reorganization Agreement, and, following the
Reorganization, to eliminate the Small Cap Fund as a series of the Corporation.
<PAGE>
THE DIRECTORS UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS
VOTE FOR PROPOSAL 2
INFORMATION RELATING TO VOTING MATTERS
General Information
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Corporation's Board of Directors in connection
with the Special Meeting. It is expected that the solicitation of proxies will
be primarily by mail. Officers and service contractors of the Funds may also
solicit proxies by telephone, telegraph, personal interview or through the
Internet. Small Cap Fund shareholders can vote in any one of four ways: (1)
through the Internet at www.strong-funds.com; (2) by telephone, with a toll-free
call to ____________; (3) by mail, with the enclosed ballot; or (4) in person at
the meeting. Any shareholder giving a proxy may revoke it at any time before it
is exercised at the Special Meeting by submitting to the Small Cap Fund a
written notice of revocation or a subsequently executed proxy or by attending
the Special Meeting and voting in person. In addition, a prior proxy can be
revoked simply by voting again by toll-free telephone call or at our website.
Only shareholders of record at the close of business on August 21,
1998, will be entitled to vote at the Special Meeting. On that date there were
outstanding and entitled to be voted __________ shares of the Small Cap Fund.
Each share or fraction thereof is entitled to one vote or fraction thereof.
If the accompanying proxy is executed and returned in time for the
Special Meeting, or if prior to the Special Meeting you vote your shares by
telephone or through the Internet, the shares covered thereby will be voted in
accordance with the proxy on all matters that may properly come before the
Special Meeting or any adjournment thereof. For information on adjournment of
the Special Meeting, see "Quorum" below.
Shareholder and Board Approvals
The Reorganization Agreement (and the transactions contemplated
thereby) and the Proposed Amendment are being submitted at the Special Meeting
for approval by the shareholders of the Small Cap Fund. The affirmative vote of
the majority of the Small Cap Fund shares voting on the Proposals is required
for approval of the Proposals. Abstentions will not be counted as voting and,
therefore, will have no impact on the approval of the Proposals.
The vote of the shareholders of the Growth Fund is not being solicited,
because their approval or consent is not required for the Reorganization to be
consummated or the Proposed Amendment to be approved.
The approval of the Reorganization Agreement by the Board of Directors
of the Funds is discussed above under "1. Proposal To Approve or Disapprove the
Reorganization Agreement -- Board Consideration." The approval of the Proposed
Amendment by the Board of Directors of the Small Cap Fund is discussed above
under "2. Proposal To Approve or Disapprove the Proposed Amendment--Board
Consideration."
<PAGE>
On June 30, 1998, the name, address, and share ownership of the persons
who beneficially owned 5% or more of the Small Cap Fund's outstanding shares,
and the percentage of shares that would be owned by such persons upon
consummation of the Reorganization based upon their holdings and outstanding
shares on that date, are as follows:
Share Ownership of Share Ownership of Growth
Name/Address Small Cap Fund Fund after Reorganization
Charles Schwab & Co. Inc.
101 Montgomery Street 11.7% 0.88%
San Francisco, CA 94104-4122
On June 30, 1998, the name, address, and share ownership of the persons
who beneficially owned 5% or more of the outstanding shares of the Growth Fund
and the percentage of shares that would be owned by such persons upon
consummation of the Reorganization based upon their holdings and outstanding
shares on that date, are as follows:
Share Ownership of Share Ownership of Growth
Name/Address Growth Fund Fund after Reorganization
Charles Schwab & Co. Inc.
101 Montgomery Street 18.5% 18.5%
San Francisco, CA 94104-4122
On June 30, 1998, the directors and officers of the Corporation, as a
group, owned less than 1% of the outstanding shares of either the Growth Fund or
Small Cap Fund.
Quorum
In the event that a quorum is not present at the Special Meeting, or in
the event that a quorum is present at the Special Meeting but sufficient votes
to approve the Reorganization Agreement and the transactions contemplated
thereby are not received, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit further solicitation of proxies.
Any such adjournment will require the affirmative vote of a majority of those
shares voting on the adjournment. Abstentions will not be counted as voting and,
therefore, will have no impact on the approval of any adjournment. If a quorum
is present, the persons named as proxies will vote those proxies that they are
entitled to vote FOR the Reorganization Agreement in favor of such adjournments,
and will vote those proxies required to be voted AGAINST such proposal against
any adjournment. A quorum is constituted by the presence in person or by proxy
of the holders of more than 50% of the outstanding Small Cap Fund Shares.
Proxies properly executed and marked with a negative vote or an abstention, or
broker non-votes, will be considered to be present at the Special Meeting for
the purposes of determining the existence of a quorum for the transaction of
business. Broker non-votes exist where a broker proxy indicates that the broker
is not authorized to vote on a particular proposal.
Annual Meetings
The Growth Fund does not presently intend to hold annual meetings of
shareholders for the election of directors and other business unless and until
such time as less than a majority of the directors holding office have been
elected by the shareholders, at which time the directors then in office will
call a shareholders' special meeting for the election of directors. Shareholders
have the right to call a special meeting of the shareholders to consider any
matter on which the shareholders properly may act, provided that such a matter
has been requested in writing by the holders of record of 10% or more of the
Growth Fund's outstanding shares of common stock entitled to vote on any issue
proposed to be considered at the special meeting and upon the payment to the
Fund by such shareholders of the reasonable estimated costs of preparing and
mailing the notice of the special meeting. To the extent required by law, the
Growth Fund will assist in shareholder communications on such matters.
<PAGE>
ADDITIONAL INFORMATION ABOUT EACH FUND
The Corporation, the Small Cap Fund and the Growth Fund are each
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and the 1940 Act, as applicable, and, in accordance with such
requirements, file proxy materials, reports, and other information with the SEC.
These materials can be inspected and copied at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at the
offices of the Growth Fund listed on the first page hereof, and at the SEC's
Regional Offices at 7 World Trade Center, Room 1300, New York, New York 10007,
and at the Everett McKinley Dirksen Building, 219 S. Dearborn Street, Room 1204,
Chicago, Illinois 60604. Copies of such materials can also be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
Directors and Officers
The current directors and officers of the Corporation will continue as
directors and officers of the Growth Fund following the Reorganization. The
Growth Fund and Small Cap Fund are each series of the Corporation. Information
concerning such persons is contained in the Statement of Additional Information
for the Funds.
Financial Information For the Growth Fund
Below are financial highlights for the Growth Fund as of the fiscal
year ended December 31, 1997. It is based on a single share outstanding through
such period. This information is derived from financial statements audited by
Coopers & Lybrand L.L.P., independent accountants to the Funds. The data should
be read in conjunction with the financial statements, related notes, and Coopers
& Lybrand L.L.P.'s report thereon which are included in the Annual Report
incorporated by reference in the Statement of Additional Information to the
Proxy Statement, dated September 4, 1998.
<PAGE>
GROWTH FUND
FINANCIAL HIGHLIGHTS
Per Share Data and
Ratios for a Share
Outstanding Throughout
the Period Indicated:
<TABLE>
<S> <C> <C> <C> <C>
1997 1996 1995 1994
---- ---- ---- ----
Net asset value,
Beginning of period $18.50 $15.88 $11.61 $10.00
Income from Investment
Operations:
Net Investment Income (Loss)
(0.08) (0.03) (0.04) --
Net Gains or (Losses) 3.41 3.13 4.79 1.72
on Securities (both
realized and unrealized)
Total From Investment 3.33 3.10 4.75 1.72
Operations
In Excess of Net -- (0.02) (0.03) (0.11)
Investment Income
From Net Realized Gains (2.70) (0.46) (0.16) --
In Excess of Net Realized Gains (0.82) -- (0.29) --
Total Distributions (3.52) (0.48) (0.48) (0.11)
Net Asset Value, $18.31 $18.50 $15.88 $11.61
End of Period
Total Return: +19.1% +19.5% +41.0% +17.3%
Net Assets, End $1,597 $1,308 $643 $106
of Period (In Millions)
Ratio of Expenses 1.3% 1.3% 1.4% 1.6%
to Average Net Assets
Ratio of Net Investment (0.5%) (0.2%) (0.5%) (0.1%)
Income to Average Net Assets
Portfolio Turnover Rate 295.7% 294.9% 321.2% 385.8%
</TABLE>
<PAGE>
Inception date is December 31, 1993. Total return and portfolio
turnover rate are not annualized.
Information included in this Proxy Statement concerning the Small Cap
Fund was provided by the Small Cap Fund and the Advisor. Information included in
this Proxy Statement concerning the Growth Fund was provided by the Growth Fund
and the Advisor.
FINANCIAL STATEMENTS
The financial statements and financial highlights for each Fund for the
fiscal year ended December 31, 1997 which are included in the Prospectus and
Statement of Additional Information for the Funds and in the Proxy Statement and
the Statement of Additional Information related thereto, have been audited by
Coopers & Lybrand L.L.P., independent accountants, to the extent indicated in
its reports thereon. The financial statements and financial highlights audited
by Coopers & Lybrand L.L.P. and included in such Prospectus, Proxy Statement and
Statements of Additional Information have been included in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
OTHER BUSINESS
The Board of Directors of the Corporation knows of no other business to
be brought before the Special Meeting. However, if any other matters come before
the Special Meeting, it is the intention that proxies that do not contain
specific restrictions to the contrary will be voted on such matters in
accordance with the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Small Cap Fund in writing
at the address on the cover page of this Proxy Statement or by telephoning
1-800-368-3863.
* * *
Shareholders who do not expect to be present at the Special Meeting are urged to
date and sign the enclosed Proxy and promptly return it in the enclosed envelope
which is addressed for your convenience and needs no postage if mailed in the
United States or vote by toll-free telephone call or at our website. In order to
avoid the expense of further solicitation, we ask your cooperation in voting
promptly.
By Order of the Board of Directors
Stephen J. Shenkenberg
Secretary
Menomonee Falls, Wisconsin
September 4, 1998
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 24th day of July, 1998, by and between the Strong Small Cap Fund (the
"Acquired Fund") and the Strong Growth Fund (the "Acquiring Fund"). The Acquired
Fund and the Acquiring Fund are both series of the Strong Equity Funds, Inc.
(the "Corporation"), a Wisconsin corporation. It is understood that the
Corporation is acting on behalf of both the Acquired Fund and the Acquiring Fund
and that the Corporation is hereby undertaking the requirements imposed on each
series by this Agreement. (The Acquiring Fund and the Acquired Fund are
sometimes referred to collectively as the "Funds" and individually as a "Fund".)
This Agreement is intended to be and is adopted as a plan of
reorganization within the meaning of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended (the "Code"). The reorganization ("Reorganization")
will consist of the transfer of substantially all of the property, assets, and
goodwill of the Acquired Fund to the Acquiring Fund in exchange solely for
shares of the voting common stock of the Acquiring Fund ("Acquiring Fund
Shares"), followed by the distribution by the Acquired Fund, on or promptly
after the Closing Date, as defined herein, of the Acquiring Fund Shares to the
shareholders of the Acquired Fund, the cancellation of all of the outstanding
shares of the Acquired Fund ("Acquired Fund Shares") pursuant to an amendment of
the Acquired Fund's Amended and Restated Articles of Incorporation, and the
liquidation of the Acquired Fund and the termination of the Acquired Fund as a
series of Corporation as provided herein, all upon the terms and conditions
hereinafter set forth in this Agreement.
In consideration of the premises and of the covenants and agreements
hereinafter set forth, the parties hereto covenant and agree as follows:
1. TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND
SHARES AND LIQUIDATION OF THE ACQUIRED FUND
1.1 No later than the time of the closing of the
Reorganization as provided in Section 3.1 of this Agreement (the "Closing Time")
on the Closing Date, the Acquired Fund shall transfer substantially all of its
property and assets (consisting, without limitation, of portfolio securities and
instruments, dividends and interest receivables, claims, cash, cash equivalents,
deferred or prepaid expenses shown as assets on the Acquired Fund's books,
goodwill and intangible property, books and records, and other assets), as set
forth in the statement of assets and liabilities referred to in Section 8.2
hereof (the "Statement of Assets and Liabilities"), to the Acquiring Fund free
and clear of all liens, encumbrances, and claims, except for cash or bank
deposits in an amount necessary: (a) to pay its costs and expenses of carrying
out this Agreement (including but not limited to fees of counsel and independent
accountants, any income dividends payable prior to the Closing Date, and
expenses of its liquidation and termination as a series of the Corporation
contemplated hereunder); (b) to discharge all of the unpaid liabilities (other
than any unamortized organizational expenses) reflected on its books and records
at the Closing Date; and (c) to pay such contingent liabilities, if any, as the
Board of Directors of the Corporation shall reasonably deem to exist against the
Acquired Fund at the Closing Date, for which contingent and other appropriate
liability reserves shall be established on the Acquired Fund's books. Any
unspent portion of such cash or bank deposits retained shall be delivered to the
Acquiring Fund upon the satisfaction of all of the foregoing liabilities, costs,
and expenses of the Acquired Fund. (The property and assets to be transferred to
the Acquiring Fund under this Agreement are referred to herein as the "Acquired
Fund Net Assets".) In exchange for the transfer of the Acquired Fund Net Assets,
the Acquiring Fund shall deliver to the Acquired Fund, for distribution pro rata
by the Acquired Fund to its shareholders as of the close of business on the
Closing Date, a number of the Acquiring Fund Shares having an aggregate net
asset value equal to the value of the Acquired Fund Net Assets, all determined
as provided in Section 2 of this Agreement and as of the date and time specified
therein.
<PAGE>
1.2 The Acquired Fund reserves the right to purchase or sell
any of its portfolio securities prior to the Closing Date, except to the extent
such purchases or sales may be limited by the representations made in connection
with issuance of the tax opinion described in Section 8.9. hereof.
1.3 On or promptly after the Closing Date, the Acquired Fund
shall liquidate and distribute pro rata to its shareholders of record at the
Closing Time on the Closing Date (the "Acquired Fund Shareholders") the
Acquiring Fund Shares received by the Acquired Fund pursuant to Section 1.1 of
this Agreement. (The date of such liquidation and distribution is referred to as
the "Liquidation Date.") In addition, each Acquired Fund Shareholder shall have
the right to receive any dividends or other distributions that were declared
prior to the Closing Date, but unpaid at that time, with respect to the Acquired
Fund Shares that are held by such Acquired Fund Shareholders on the Closing
Date. Such liquidation and distribution shall be accomplished by Strong Capital
Management, Inc. ("SCM"), in its capacity as transfer agent for the Acquiring
Fund, opening accounts on the share records of the Acquiring Fund in the names
of the Acquired Fund Shareholders and transferring to each such Acquired Fund
Shareholder account the pro rata number of the Acquiring Fund Shares due each
such Acquired Fund Shareholder from the Acquiring Fund Shares then credited to
the account of the Acquired Fund on the Acquiring Fund's books and records. The
Acquiring Fund shall not issue certificates representing Acquiring Fund Shares
in connection with such exchange, except in accordance with the procedures set
forth in the Corporation's current Prospectus and Statement of Additional
Information or as provided in Section 1.4 hereof.
1.4 The Acquired Fund Shareholders holding certificates
representing their ownership of Acquired Fund Shares may be requested to
surrender such certificates or deliver an affidavit with respect to lost
certificates, in such form and accompanied by such surety bonds as the Acquired
Fund may require (collectively, an "Affidavit"), to the Acquired Fund prior to
the Closing Date. On the Closing Date, any Acquired Fund Share certificates that
remain outstanding shall be deemed to be canceled. Corporation's transfer books
with respect to the Acquired Fund shall be closed permanently as of the close of
business on the day immediately prior to the Closing Date. All unsurrendered
Acquired Fund Share certificates shall no longer evidence ownership of common
stock of the Acquired Fund and shall be deemed for all corporate purposes to
evidence ownership of the number of Acquiring Fund Shares into which the
Acquired Fund Shares were effectively converted. Unless and until any such
certificate shall be so surrendered or an Affidavit relating thereto shall be
delivered to the Acquiring Fund, dividends and other distributions payable by
the Acquiring Fund subsequent to the Liquidation Date with respect to such
Acquiring Fund Shares shall be paid to the holders of such certificate(s), but
such Shareholders may not redeem or transfer Acquiring Fund Shares received in
the Reorganization with respect to unsurrendered Acquired Fund Share
certificates.
<PAGE>
1.5 Any transfer taxes payable upon issuance of Acquiring
Fund Shares in a name other than the registered holder of the Acquiring Fund
Shares on the books of the Acquired Fund as of that time shall, as a condition
of such issuance and transfer, be paid by the person to whom such Acquiring Fund
Shares are to be issued and transferred.
1.6 As soon as practicable following the Liquidation Date,
the Corporation shall take all steps necessary to terminate the existence of the
Acquired Fund as a series of the Corporation.
2. VALUATION
2.1 The net asset value of the Acquiring Fund Shares and the
value of the Acquired Fund Net Assets shall in each case be determined as of the
close of regular trading on the New York Stock Exchange ("NYSE") and after the
declaration of any dividends on the Closing Date, unless on such date (a) the
NYSE is not open for unrestricted trading or (b) the reporting of trading on the
NYSE or elsewhere is disrupted or (c) any other extraordinary financial event or
market condition occurs (all such events described in (a), (b) and (c) are each
referred to as a "Market Disruption"). The net asset value per share of
Acquiring Fund Shares shall be computed in accordance with the policies and
procedures set forth in the then-current Prospectus and Statement of Additional
Information of the Corporation with respect to the Acquiring Fund and shall be
computed to not fewer than two (2) decimal places. The value of the Acquired
Fund Net Assets shall be computed in accordance with the policies and procedures
set forth in the then-current Prospectus and Statement of Additional Information
of the Corporation with respect to the Acquired Fund.
2.2 In the event of a Market Disruption on the proposed
Closing Date so that accurate appraisal of the net asset value of the Acquiring
Fund or the value of the Acquired Fund Net Assets is impracticable, the Closing
Date shall be postponed until the first business day when regular trading on the
NYSE shall have been fully resumed and reporting shall have been restored and
other trading markets are otherwise stabilized.
2.3 The number of Acquiring Fund Shares to be issued
(including fractional shares) in exchange for the Acquired Fund Net Assets shall
be determined by dividing the value of the Acquired Fund Net Assets by the
Acquiring Fund's net asset value per share, both as determined in accordance
with Section 2.1 of this Agreement.
<PAGE>
2.4 All computations of value regarding the Funds shall be
provided by SCM and shall be certified by the Treasurer for the Corporation.
3. CLOSING AND CLOSING DATE
3.1 The Closing Date shall be October 30, 1998 or such later
date as the parties may agree. The Closing Time shall be at 3:30 P.M., Central
Time. The Closing shall be held at the offices of SCM, 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051, or at such other time and/or place as the
parties may agree.
3.2 Portfolio securities that are not held in book-entry form
(together with cash or other assets) shall be transferred or delivered, as
appropriate, by Firstar Trust Company (the "Custodian") or its agents or
nominees from the Acquired Fund's account with the Custodian to the account of
the Acquiring Fund on the Closing Date, in accordance with applicable custody
provisions under the Investment Company Act of 1940, as amended ("1940 Act"),
and, as appropriate, duly endorsed in proper form for transfer, in such
condition as to constitute good delivery thereof. Such portfolio securities
shall be accompanied by any necessary federal and state stock transfer stamps or
a check for the appropriate purchase price of such stamps. Portfolio securities
held of record by the Custodian or its agents or nominees in book-entry form on
behalf of the Acquired Fund shall be transferred to the Acquiring Fund by the
Custodian by recording the transfer of beneficial ownership thereof on its
records and those of its agents and nominees. Any cash of the Acquired Fund
delivered on the Closing Date shall be in any form as is reasonably directed by
the Acquiring Fund and shall be delivered on the Closing Date by the Custodian
crediting the Acquiring Fund's account maintained with the Custodian with
immediately available funds.
3.3 If any of the Acquired Fund Net Assets, for any reason,
are not transferred on the Closing Date, the Acquired Fund shall cause the
Acquired Fund Net Assets to be transferred to the Acquiring Fund in accordance
with this Agreement at the earliest practicable date thereafter.
3.4 SCM, in its capacity as transfer agent for the Acquired
Fund, shall deliver to the Acquiring Fund at the Closing Time a list of the
names, addresses, federal taxpayer identification numbers, and backup
withholding and nonresident alien withholding status of Acquired Fund
Shareholders and the number and aggregate net asset value of outstanding shares
of common stock of the Acquired Fund owned by each such Acquired Fund
Shareholder, all as of the close of regular trading on the NYSE on the Closing
Date, certified by an appropriate officer of SCM (the "Shareholder List"). SCM,
in its capacity as transfer agent for the Acquiring Fund, shall issue and
deliver to the Acquired Fund a confirmation evidencing the Acquiring Fund Shares
to be credited to each Acquired Fund Shareholder on the Liquidation Date, or
provide evidence satisfactory to the Acquired Fund that such Acquiring Fund
Shares have been credited to each Acquired Fund Shareholder's account on the
books of the Acquiring Fund. At the Closing, each Fund shall deliver to the
other Fund such bills of sale, checks, assignments, certificates, receipts, or
other documents as the other Fund or its counsel may reasonably request.
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED FUND
The Acquired Fund represents and warrants to the Acquiring Fund as
follows:
4.1 The Acquired Fund is a duly organized series of the
Corporation, which is a corporation duly organized, validly existing, and in
"good standing" under the laws of the State of Wisconsin (meaning it has filed
its most recent annual report and has not filed articles of dissolution) and has
the power to own all of its properties and assets and, subject to approval of
the Acquired Fund Shareholders, to perform its obligations under this Agreement
and to consummate the transactions contemplated by this Agreement. The Acquired
Fund is not required to qualify to do business in any jurisdiction in which it
is not so qualified or where failure to qualify would not subject it to any
material liability or disability. The Acquired Fund has all necessary federal,
state, and local authorizations, consents, and approvals required, to own all of
its properties and assets and to carry on its business as now being conducted
and to consummate the transactions contemplated by this Agreement.
4.2 The Corporation is a registered investment company
classified as a management company of the open-end diversified type and its
registration with the SEC as an investment company under the 1940 Act, is in
full force and effect. The Acquired Fund is a separate series of the Corporation
for purposes of the 1940 Act.
4.3 The execution, delivery, and performance of this
Agreement have been duly authorized by all necessary action on the part of the
Corporation's Board of Directors on behalf of the Acquired Fund, and this
Agreement constitutes a valid and binding obligation of the Acquired Fund,
subject to the approval of the Acquired Fund Shareholders, enforceable in
accordance with the terms of this Agreement, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement, moratorium, and other
similar laws of general applicability relating to or affecting creditors' rights
and to general Corporation principles.
4.4 The Acquired Fund is not, and the execution, delivery,
and performance of this Agreement by the Acquired Fund will not result in
violation of any provision of the Amended and Restated Articles of Incorporation
or By-Laws of the Corporation or of any agreement, indenture, instrument,
contract, lease, or other arrangement or undertaking to which the Acquired Fund
is a party or by which it is bound.
4.5 The Acquired Fund has elected to be treated as a
regulated investment company ("RIC") for federal income tax purposes under Part
I of Subchapter M of the Code, has qualified as a RIC and has been eligible to
and has computed its federal income tax under Section 852 of the Code for each
taxable year of its operations, and will continue to so qualify as a RIC and be
eligible to and compute its income tax as of the Closing Date and with respect
to its final taxable year ending upon its liquidation, and will have distributed
all of its investment company taxable income and net capital gain (as defined in
the Code) that has accrued through the Closing Date.
<PAGE>
4.6 The financial statements of the Acquired Fund for the
fiscal years ended December 31, 1997 and 1996, (which were audited by the
independent accountants), present fairly the financial position of the
Acquired Fund as of the date indicated and the results of its operations and
changes in net assets for the respective stated periods (in accordance with
generally accepted accounting principles ("GAAP") consistently applied).
4.7 The Prospectus of the Corporation with respect to the
Acquired Fund, dated May 1, 1998, and the corresponding Statement of Additional
Information, dated May 1, 1998 and any supplements thereto, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and any amended,
revised, or new Prospectus or Statement of Additional Information of the
Corporation with respect to the Acquired Fund or any supplement thereto, that is
hereafter filed with the SEC (copies of which documents shall be provided to the
Acquiring Fund promptly after such filing), shall not contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
4.8 No material legal or administrative proceeding or
investigation of or before any court or governmental body is currently pending
or, to its knowledge, threatened as to the Acquired Fund or any of its
properties or assets. The Acquired Fund knows of no facts which might form the
basis for the institution of such proceedings. The Acquired Fund is not party to
or subject to the provisions of any order, decree, or judgment of any court or
governmental body which materially and adversely affects its business or its
ability to consummate the transactions herein contemplated.
4.9 The Corporation has furnished the Acquiring Fund with
copies or descriptions of all agreements or other arrangements to which the
Corporation, on behalf of the Acquired Fund, is a party. The Corporation with
respect to the Acquired Fund has no material contracts or other commitments
(other than this Agreement or agreements for the purchase of securities entered
into in the ordinary course of business and consistent with its obligations
under this Agreement) which will not be terminated by the Corporation with
respect to the Acquired Fund in accordance with its terms at or prior to the
Closing Date.
4.10 The Acquired Fund does not have any known liabilities,
costs or expenses of a material amount, contingent or otherwise, other than
those reflected in the financial statements referred to in Section 4.6 hereof
and those incurred in the ordinary course of business as a series of an
investment company since the dates of those financial statements. On the Closing
Date, the Corporation shall advise the Acquiring Fund in writing of all of the
Acquired Fund's known liabilities, contingent or otherwise, whether or not
incurred in the ordinary course of business, existing or accrued at such time.
4.11 Since December 31, 1997, there has not been any material
adverse change in the Acquired Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of its business,
other than those that have been fully disclosed to the Acquiring Fund.
<PAGE>
4.12 At the date hereof and by the Closing Date, all federal,
state, and other tax returns and reports, including information returns and
payee statements, of the Acquired Fund required by law to have been filed or
furnished by such dates shall have been filed or furnished and shall be correct
in all material respects, or extensions concerning such tax returns and reports
shall have been obtained, and all federal, state, and other taxes, interest, and
penalties shall have been paid so far as due, or adequate provision shall have
been made on the Acquired Fund's books for the payment thereof, and to the best
of the Acquired Fund's knowledge no such tax return is currently under audit and
no tax deficiency or liability has been asserted with respect to such tax
returns or reports by the Internal Revenue Service or any state or local tax
authority.
4.13 At the Closing Date, the Acquired Fund will have good
and marketable title to the Acquired Fund Net Assets, and subject to approval by
the Acquired Fund Shareholders, full right, power and authority to sell, assign,
transfer, and deliver such assets hereunder, and upon delivery and in payment
for such assets, the Acquiring Fund will acquire good and marketable title
thereto subject to no liens or encumbrances of any nature whatsoever or
restrictions on the ownership or transfer thereof, except (a) such imperfections
of title or encumbrances as do not materially detract from the value or use of
the assets subject thereto, or materially affect title thereto, or (b) such
restrictions as might arise under federal or state securities laws or the rules
and regulations thereunder.
4.14 No consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by the Acquired
Fund of the transactions contemplated by this Agreement, except such as may be
required under the federal or state securities laws or the rules and regulations
thereunder.
4.15 The Combined Proxy Statement/Prospectus of the Funds
referred to in Section 6.7 hereof (the "Proxy Statement/Prospectus") and any
Prospectus or Statement of Additional Information of the Corporation with
respect to the Acquired Fund contained or incorporated by reference into the
Form N-14 Registration Statement, and referred to in Section 6.7 hereof, any
supplement or amendment to such documents on the effective and clearance dates
of the Form N-14 Registration Statement, on the date of the Special Meeting of
Acquired Fund Shareholders, and on the Closing Date and only insofar as such
Proxy Statement/Prospectus and the Prospectus and Statement of Additional
Information relate to the Acquired Fund or the transactions contemplated by this
Agreement and is based on information furnished by the Acquired Fund for
inclusion therein: (a) shall comply in all material respects with the provisions
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), the 1940
Act, the rules and regulations thereunder, and all other applicable federal
securities laws and rules and regulations thereunder; and (b) shall not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein in
light of the circumstances under which such statements were made, not
misleading.
<PAGE>
4.16 All of the issued and outstanding shares of common stock
of the Acquired Fund are, and at the Closing Date will be, duly and validly
issued and outstanding, fully paid and nonassessable, except to the extent
provided in Section 180.0622(2)(b) of the Wisconsin Statutes, or any successor
provision, which provides that shareholders of a corporation organized under
Chapter 180 of the Wisconsin Statutes may be assessed up to the par value of
their shares to satisfy the obligations of such corporation to its employees for
services rendered, but not exceeding six months in the case of any individual
employee. All of the issued and outstanding shares of common stock of the
Acquired Fund will, at the time of Closing, be held by the persons and in the
amounts set forth in the Shareholder List.
4.17 All of the issued and outstanding shares of common stock
of the Acquired Fund have been offered for sale and sold in conformity, in all
material respects, with all applicable federal and state securities laws,
including the registration or exemption from registration of such shares, except
as may have been previously disclosed in writing to the Acquiring Fund.
4.18 The Acquired Fund is not under the jurisdiction of a
Court in Title 11 or similar case within the meaning of Section 368(a)(3)(A) of
the Code.
4.19 All information to be furnished by the Acquired Fund for
use in preparing any application for orders, the Form N-14 Registration
Statement referred to in Section 6.7 hereof, and the Proxy Statement/Prospectus
to be included in the Form N-14 Registration Statement, proxy materials, and
other documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
thereunder applicable thereto.
4.20 There is no intercorporate indebtedness existing between
the Acquired Fund and the Acquiring Fund that was issued, acquired, or will be
settled at a discount.
4.21 The Acquired Fund has valued and will continue to value
its portfolio securities and other assets in material compliance with all
applicable legal requirements.
5. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRING FUND
The Acquiring Fund represents and warrants to the Acquired Fund as
follows:
5.1 The Acquiring Fund is a duly organized series of the
Corporation, which is a corporation duly organized, validly existing, and in
"good standing" under the laws of the State of Wisconsin (meaning it has filed
its most recent annual report and has not filed articles of dissolution) and has
the power to own all of its properties and assets and to perform its obligations
under this Agreement and to consummate the transactions contemplated herein. The
Acquiring Fund is not required to qualify to do business in any jurisdiction in
which it is not so qualified or where failure to qualify would subject it to any
material liability or disability. The Acquiring Fund has all necessary federal,
state, and local authorizations, consents, and approvals required to own all of
its properties and assets and to carry on its business as now being conducted
and to consummate the transactions contemplated herein.
<PAGE>
5.2 The Corporation is a registered investment company
classified as a management company of the open-end diversified type and its
registration with the SEC as an investment company under the 1940 Act is in full
force and effect. The Acquiring Fund is a separate series of the Corporation for
purposes of the 1940 Act.
5.3 The execution, delivery, and performance of this
Agreement have been duly authorized by all necessary action on the part of the
Corporation's Board of Directors on behalf of the Acquiring Fund, and this
Agreement constitutes a valid and binding obligation of the Acquiring Fund,
enforceable in accordance with the terms of this Agreement, subject as to
enforcement to bankruptcy, insolvency, reorganization, arrangement, moratorium,
and other similar laws of general applicability relating to or affecting
creditors' rights and to general Corporation principles.
5.4 The Acquiring Fund is not, and the execution, delivery,
and performance of this Agreement by the Acquiring Fund will not result in
violation of any provisions of the Amended and Restated Articles of
Incorporation or By-Laws of the Acquiring Fund or of any agreement, indenture,
instrument, contract, lease, or other arrangement or undertaking to which the
Acquiring Fund is a party or by which it is bound.
5.5 The Acquiring Fund has elected to be treated as a RIC for
federal income tax purposes under Part I of Subchapter M of the Code, has
qualified as a RIC and has been eligible to and has computed its federal income
tax under Section 852 of the Code for each taxable year since its inception, and
will so qualify as a RIC and be eligible to and compute its income tax for its
taxable year, including the Closing Date, in accordance with those provisions
applicable to RICs.
5.6 The financial statements of the Acquiring Fund, for the
fiscal year ended December 31, 1997, and each of the previous two fiscal years
(which were audited by the independent accountants), present fairly the
financial position of the Acquiring Fund as of the dates indicated and the
results of its operations and changes in net assets for the respective stated
periods (in accordance with GAAP consistently applied).
5.7 The Prospectus of the Corporation with respect to the
Acquiring Fund, dated May 1, 1998, and the corresponding Statement of Additional
Information, dated May 1, 1998 and any supplements thereto, do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and any amended,
revised, or new Prospectus or Statement of Additional Information of the
Corporation with respect to the Acquiring Fund or any supplement thereto, that
is hereafter filed with the SEC (copies of which documents shall be provided to
the Acquired Fund promptly after such filing), shall not contain any untrue
statement of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
5.8 No material legal or administrative proceeding, or
investigation of or before any court or governmental body is currently pending
or, to its knowledge, threatened as to the Acquiring Fund or any of its
properties or assets. The Acquiring Fund knows of no facts which might form the
basis for the institution of such proceedings. The Acquiring Fund is not a party
to or subject to the provisions of any order, decree, or judgment of any court
or governmental body which materially and adversely affects the Acquiring Fund's
business or its ability to consummate the transactions herein contemplated.
<PAGE>
5.9 The Acquiring Fund does not have any known liabilities, costs or
expenses of a material amount, contingent or otherwise, other than those
reflected in the financial statements referred to in Section 5.6 hereof and
those incurred in the ordinary course of business as a series of an investment
company since the date of those financial statements. On the Closing Date, the
Acquiring Fund shall advise the Acquired Fund in writing of all of the Acquiring
Fund's known liabilities, contingent or otherwise, whether or not incurred in
the ordinary course of business, existing or accrued at such time.
5.10 Since December 31, 1997, there has not been any material
adverse change in the Acquiring Fund's financial condition, assets, liabilities,
or business other than changes occurring in the ordinary course of its business.
5.11 At the date hereof and by the Closing Date, all federal,
state, and other tax returns and reports, including information returns and
payee statements, of the Acquiring Fund required by law to have been filed or
furnished and shall be correct in all material respects, by such dates shall
have been filed or furnished or extensions concerning such tax returns and
reports shall have been obtained, and all federal, state, and other taxes,
interest, and penalties shall have been paid so far as due, or adequate
provision shall have been made on the Acquiring Fund's books for the payment
thereof, and to the best of the Acquiring Fund's knowledge no such tax return is
currently under audit and no tax deficiency or liability has been asserted with
respect to such tax returns or reports by the Internal Revenue Service or any
state or local tax authority.
5.12 No consent, approval, authorization, or order of any
court or governmental authority is required for the consummation by the
Acquiring Fund of the transactions contemplated by the Agreement, except for the
registration of the Acquiring Fund Shares under the Securities Act of 1933 (the
"1933 Act"), or as may otherwise be required under the federal and state
securities laws or the rules and regulations thereunder.
5.13 The Form N-14 Registration Statement and the Proxy
Statement/Prospectus referred to in Section 6.7 hereof (other than the portions
of such documents based on written information furnished by the Acquired Fund
for inclusion or incorporation by reference therein as covered by the Acquired
Fund's warranty in Section 4.15 and 4.19 hereof) and any Prospectus or Statement
of Additional Information of the Corporation with respect to the Acquiring Fund
contained or incorporated therein by reference, and any supplement or amendment
to the Form N-14 Registration Statement or any such Prospectus or Statement of
Additional Information, on the effective and clearance dates of the Form N-14
Registration Statement, on the date of the Special Meeting of the Acquired Fund
Shareholders, and on the Closing Date and only insofar as such Proxy
Statement/Prospectus and the Prospectus and Statement of Additional Information
relate to the Acquiring Fund or the transactions contemplated by this Agreement
and is based on information furnished by the Acquiring Fund for inclusion
therein: (a) shall comply in all material respects with the provisions of the
1934 Act, the 1940 Act, the rules and regulations thereunder, and all other
applicable federal securities laws and the rules and regulations thereunder; and
(b) shall not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which the statements
were made, not misleading.
<PAGE>
5.14 All of the issued and outstanding shares of common stock
of the Acquiring Fund are, and at the Closing Date will be, duly and validly
issued and outstanding, fully paid and nonassessable, except to the extent
provided in Section 180.0622(2)(b) of the Wisconsin Statutes (which is
summarized in Section 4.16 of this Agreement), or any successor provision.
5.15 All of the issued and outstanding shares of common stock
of the Acquiring Fund have been offered for sale and sold in conformity, in all
material respects, with all applicable federal and state securities laws,
including the registration or exemption from registration of such shares, except
as may previously have been disclosed in writing to the Acquired Fund.
5.16 The Acquiring Fund Shares to be issued and delivered to
the Acquired Fund pursuant to the terms of this Agreement, when so issued and
delivered, will be duly and validly issued shares of common stock of the
Acquiring Fund, will be fully paid and nonassessable by the Acquiring Fund,
except to the extent provided in Section 180.0622(2)(b) of the Wisconsin
Statutes (which is summarized in Section 4.16 of this Agreement), or any
successor provision, and will be duly registered in conformity with all
applicable federal securities laws, and no shareholder of the Acquiring Fund
shall have any option, warrant, or preemptive right of subscription or purchase
with respect thereto.
5.17 The Acquiring Fund is not under the jurisdiction of a
Court in a Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
5.18 All information to be furnished by the Acquiring Fund to
the Acquired Fund for use in preparing the Proxy Statement/Prospectus, and other
documents which may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete and shall comply in all
material respects with federal securities and other laws and regulations
applicable thereto.
5.19 There is no intercorporate indebtedness existing between
the Acquired Fund and the Acquiring Fund that was issued, acquired, or will be
settled at a discount.
5.20 The Acquiring Fund does not own, directly or indirectly,
nor has it owned during the past five years, directly or indirectly, any stock
of the Acquired Fund.
5.21 The Acquiring Fund has valued and will continue to value
its portfolio securities and other assets in material compliance with all
applicable legal requirements.
6. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
6.1 Except as expressly contemplated herein to the contrary,
each Fund shall operate its business in the ordinary course between the date
hereof and the Closing Date, it being understood that such ordinary course of
business will include customary dividends and distributions and any other
distribution necessary or desirable to avoid federal income or excise taxes.
6.2 After the effective date of the Form N-14 Registration
Statement referred to in Section 6.7 hereof, and before the Closing Date and as
a condition thereto, the Board of Directors of the Corporation on behalf of the
Acquired Fund shall call, and Corporation shall hold, a Special Meeting of the
Acquired Fund Shareholders to consider and vote upon this Agreement and the
transactions contemplated hereby (including the amendment of the Corporation's
Amended and Restated Articles of Incorporation to cancel all of the Acquired
Fund's outstanding shares, effective as of the Closing) and the Corporation with
respect to the Acquired Fund and the Acquiring Fund shall take all other actions
reasonably necessary to obtain approval of the transactions contemplated herein.
<PAGE>
6.3 The Acquired Fund covenants that it shall not sell or
otherwise dispose of any of the Acquiring Fund Shares to be received in the
transactions contemplated herein, except in distribution to the Acquired Fund
Shareholders as contemplated herein.
6.4 The Acquired Fund shall provide such information within
its possession or reasonably obtainable as the Acquiring Fund may reasonably
request concerning the beneficial ownership of the Acquired Fund Shares.
6.5 Subject to the provisions of this Agreement, the
Acquiring Fund and the Acquired Fund shall take, or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper, or
advisable to consummate the transactions contemplated by this Agreement.
6.6 The Acquired Fund shall furnish to the Acquiring Fund on
the Closing Date the Statement of the Assets and Liabilities of the Acquired
Fund as of the Closing Date, which statement shall be prepared in accordance
with GAAP consistently applied and shall be certified by the Corporation's
Treasurer or Assistant Treasurer. As promptly as practicable, but in any case
within forty-five (45) days after the Closing Date, the Acquired Fund shall
furnish to the Acquiring Fund, in such form as is reasonably satisfactory to the
Acquiring Fund, a statement of the earnings and profits of the Acquired Fund for
federal income tax purposes, and of any capital loss carryovers and other items
that will be carried over to the Acquiring Fund as a result of Section 381 of
the Code, which statement shall be certified by the Treasurer or Assistant
Treasurer of the Corporation. The Acquired Fund covenants that the Acquired Fund
has no earnings and profits that were accumulated by it or any acquired entity
during a taxable year when it or such entity did not qualify as a RIC under the
Code or, if it has such earnings and profits, shall distribute them to its
shareholders prior to the Closing Date.
6.7 The Corporation on behalf of the Acquiring Fund shall
prepare and file with the SEC a Registration Statement on Form N-14 (the "Form
N-14 Registration Statement"), which shall include the Proxy
Statement/Prospectus, as promptly as practicable in connection with the issuance
of the Acquiring Fund Shares and the holding of the Special Meeting of the
Acquired Fund Shareholders to consider approval of this Agreement as
contemplated herein and transactions contemplated thereunder. The Acquiring Fund
shall prepare any pro forma financial statement that may be required under
applicable law to be included in the Form N-14 Registration Statement. The
Acquired Fund shall provide the Acquiring Fund with all information about the
Acquired Fund that is necessary to prepare the pro forma financial statements.
The Funds shall cooperate with each other and shall furnish each other with any
information relating to itself that is required by the 1933 Act, the 1934 Act,
and the 1940 Act, the rules and regulations thereunder, and applicable state
securities laws, to be included in the Form N-14 Registration Statement and the
Proxy Statement/Prospectus.
<PAGE>
6.8 The Acquired Fund shall deliver to the Acquiring Fund at
the Closing Date confirmation or other adequate evidence as to the tax costs and
holding periods of the assets and property of the Acquired Fund delivered to the
Acquiring Fund in accordance with the terms of this Agreement.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund hereunder shall be subject to the
following conditions precedent provided, however, that the Acquired
Fund may, at its option, waive compliance with any conditions precedent
other than those in Sections 7.1, 7.8, 7.11 and 7.15.
7.1 This agreement and the transactions contemplated by this
Agreement shall have been approved by the Board of Directors of the Corporation
on behalf of the Acquiring Fund in the manner required by Corporation's Amended
and Restated Articles of Incorporation and applicable law, and this Agreement,
the transactions contemplated by this Agreement, and the proposed amendment to
Corporation's Amended and Restated Articles of Incorporation described in
Section 6.2 hereof shall have been approved by the Acquired Fund Shareholders in
the manner required by the Corporation's Articles of Incorporation and By-Laws
and applicable law.
7.2 As of the Closing Date, there shall have been no material
adverse change in the financial position, assets, or liabilities of the
Acquiring Fund since the dates of the financial statements referred to in
Section 5.6 of this Agreement. For purposes of this Section 7.2, a decline in
the net asset value per share of the Acquiring Fund due to the effect of normal
market conditions on liquid securities shall not constitute a material adverse
change.
7.3 All representations and warranties of Corporation or the
Acquiring Fund made in this Agreement, except as they may be affected by the
transactions contemplated by this Agreement, shall be true and correct in all
material respects as if made at and as of the Closing Date.
7.4 The Corporation and the Acquiring Fund shall have
performed and complied in all material respects with their obligations,
agreements, and covenants required by this Agreement to be performed or complied
with by each of them prior to or at the Closing Date.
7.5 The Acquiring Fund shall have furnished the Acquired Fund
at the Closing Date with a certificate or certificates of any of its Vice
Presidents and/or Treasurer as of the Closing Date to the effect that the
conditions precedent set forth in the Sections 7.2, 7.3, 7.4, 7.10 and 7.15
hereof have been fulfilled.
<PAGE>
7.6 The Acquired Fund shall have received a legal opinion or
opinions from counsel, in form reasonably satisfactory to the Acquired Fund, and
dated as of the Closing Date, to the effect that: (a) the Acquiring Fund is a
duly organized series of Corporation, which is a corporation that is duly
organized and validly existing under the laws of the State of Wisconsin; (b) the
shares of the Acquiring Fund issued and outstanding at the Closing Date are duly
authorized, validly issued, fully paid, and non-assessable by the Acquiring
Fund, except to the extent provided in Section 180.0622(2)(b) of the Wisconsin
Statutes (which is summarized in Section 4.16 of this Agreement), or any
successor provision, and the Acquiring Fund Shares to be delivered to the
Acquired Fund, as provided for by this Agreement, are duly authorized and upon
delivery pursuant to the terms of this Agreement will be validly issued, fully
paid and non-assessable by the Acquiring Fund, except to the extent provided in
Section 180.0622(2)(b) of the Wisconsin Statutes (which is summarized in Section
4.16 of this Agreement), or any successor provision, and to such counsel's
knowledge, no shareholder of the Acquiring Fund has any option, warrant, or
preemptive right to subscription or purchase in respect thereof; (c) this
Agreement has been duly authorized, executed, and delivered by the Acquiring
Fund and represents a valid and binding contract of the Acquiring Fund,
enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance, and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto and to the exercise of judicial discretion in accordance with
general principles of Corporation, whether in a proceeding at law or in
Corporation; provided, however, that no opinion need be expressed with respect
to provisions of this Agreement relating to indemnification; (d) the execution
and delivery of this Agreement did not, and the consummation of the transactions
contemplated by this Agreement will not, violate the Amended and Restated
Articles of Incorporation or By-Laws of Corporation or any material agreement
known to such counsel to which the Acquiring Fund is a party or by which it is
bound; (e) to the knowledge of such counsel, no consent, approval,
authorization, or order of any court or governmental authority is required for
the consummation, by the Acquiring Fund of the transactions contemplated by this
Agreement, except such as have been obtained under the 1933 Act, the 1934 Act,
the 1940 Act, the rules and regulations under those statutes, and such as may be
required by state securities laws, rules and regulations; and (f) Corporation is
registered as an investment company under the 1940 Act and the Acquiring Fund is
a separate series thereof and such registration with the SEC as an investment
company under the 1940 Act is in full force and effect. Such opinion: (a) shall
state that while such counsel have not verified, and are not passing upon and do
not assume responsibility for, the accuracy, completeness, or fairness of any
portion of the Form N-14 Registration Statement or any amendment thereof or
supplement thereto, they have generally reviewed and discussed certain
information included therein with respect to the Acquiring Fund with certain of
its officers and that in the course of such review and discussion no facts came
to the attention of such counsel which caused them to believe that, on the
respective effective or clearance dates of the Form N-14 Registration Statement
and any amendment thereof or supplement thereto and only insofar as they relate
to information with respect to the Acquiring Fund, the Form N-14 Registration
Statement or any amendment thereof or supplement thereto contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading; (b)
shall state that such counsel does not express any opinion or belief as to the
financial statements, other financial data, statistical data, or information
relating to the Acquiring Fund contained or incorporated by reference in the
Form N-14 Registration Statement or any exhibits or attachments to the text
thereof; (c) may rely on the opinion of other counsel to the extent set forth in
such opinion, provided such other counsel is reasonably acceptable to the
Acquired Fund; and (d) shall state that such opinion is solely for the benefit
of the Acquired Fund and the Corporation's Board of Directors and officers.
<PAGE>
7.7 The Acquired Fund shall have received an opinion of
counsel regarding the transaction addressed to the Funds in form reasonably
satisfactory to them and dated as of the Closing Date, with respect to the
matters specified in Section 8.9 hereof.
7.8 The Form N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order suspending the effectiveness
shall have been instituted, or to the knowledge of the Funds, contemplated by
the SEC.
7.9 The parties shall have received: a memorandum, in form
reasonably satisfactory to each of them, prepared by counsel regarding the
transaction or another person approved by the parties containing assurance
reasonably satisfactory to them that all authorizations or approvals necessary
under state securities laws to consummate the transactions contemplated herein
have been obtained.
7.10 No action, suit, or other proceeding shall be threatened
or pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
7.11 The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted any proceedings
seeking to enjoin consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
7.12 The Acquired Fund shall have received from the Acquiring
Fund all such documents, including but not limited to, checks, share
certificates, if any, and receipts, which the Acquired Fund or its counsel may
reasonably request.
7.13 The Acquiring Fund shall have furnished the Acquired
Fund on the Closing Date with a certificate or certificates of any of its Vice
Presidents and/or Treasurer or Assistant Treasurer of the Corporation dated as
of said date to the effect that: (a) the Acquiring Fund has no plan or intention
to reacquire any of the Acquiring Fund Shares to be issued in the
Reorganization, except in the ordinary course of business; (b) the Acquiring
Fund has no plan or intention to sell or otherwise dispose of any of the assets
of the Acquired Fund acquired in the Reorganization, except for dispositions
made in the ordinary course of business or transfers described in Section
368(a)(2)(C) of the Code; and (c) following the Closing, the Acquiring Fund will
continue the historic business of the Acquired Fund or use a significant portion
of the Acquired Fund's assets in a business.
7.14 SCM, in its capacity as transfer agent for the Acquiring
Fund, shall issue and deliver to any of the Vice Presidents of the Corporation
with respect to the Acquired Fund a confirmation statement evidencing the
Acquiring Fund Shares to be credited at the Closing Date or provide evidence
satisfactory to the Acquired Fund that the Acquiring Fund Shares have been
credited to the accounts of each of the Acquired Fund Shareholders on the books
of the Acquiring Fund.
<PAGE>
7.15 SCM shall have paid or waived all of the then
outstanding unamortized organizational expenses of the Acquired Fund then
reflected on its books and records.
7.16 At the Closing Date, the registration of the Corporation
with the Commission as an investment company under the 1940 Act and the
Acquiring Fund as a series thereof will be in full force and effect.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund hereunder shall be subject to the
following conditions precedent provided, however, that the Acquiring
Fund may, at its option, waive compliance with any conditions precedent
other than those in Sections 8.1, 8.11 and 8.14:
8.1 This Agreement and the transactions contemplated by this
Agreement, and the proposed amendment to the Corporation's Amended and Restated
Articles of Incorporation described in Section 6.2 of this Agreement shall have
been approved by the Board of Directors of the Corporation and the Acquired Fund
Shareholders in the manner required by the Corporation's Amended and Restated
Articles of Incorporation and By-Laws and applicable law.
8.2 The Acquired Fund shall have furnished the Acquiring Fund
with the Statement of Assets and Liabilities of the Acquired Fund, with values
determined as provided in Section 2 of this Agreement, with their respective
dates of acquisition and tax costs, all as of the Closing Date, certified on the
Acquired Fund's behalf by its Treasurer or Assistant Treasurer. The Statement of
Assets and Liabilities shall list all of the securities owned by the Acquired
Fund as of the Closing Date and a final statement of assets and liabilities of
the Acquired Fund prepared in accordance with GAAP consistently applied.
8.3 As of the Closing Date, there shall have been no material
adverse change in the financial position, assets, or liabilities of the Acquired
Fund since the dates of the financial statements referred to in Section 4.6 of
this Agreement. For purposes of this Section 8.3, a decline in the value of the
Acquired Fund Net Assets due to the effect of normal market conditions on liquid
securities shall not constitute a material adverse change.
8.4 All representations and warranties of Corporation or the
Acquired Fund made in this Agreement, except as they may be affected by the
transactions contemplated by this Agreement, shall be true and correct in all
material respects as if made at and as of the Closing Date.
8.5 The Corporation and the Acquired Fund shall have
performed and complied in all material respects with their obligations,
agreements, and covenants required by this Agreement to be performed or complied
with by each of them prior to or at the Closing Date.
<PAGE>
8.6 The Acquired Fund shall have furnished the Acquiring Fund
at the Closing Date with a certificate or certificates of any of its Vice
Presidents and/or Treasurer, dated as of the Closing Date, to the effect that
the conditions precedent set forth in Sections 8.1, 8.3, 8.4, 8.5, 8.13, 8.15
and 8.18 hereof have been fulfilled.
8.7 The Acquired Fund shall have duly executed and delivered
to the Acquiring Fund (a) bills of sale, assignments, certificates and other
instruments of transfer ("Transfer Documents") as the Acquiring Fund may deem
necessary or desirable to transfer all of the Acquired Fund's right, title, and
interest in and to the Acquired Fund Net Assets, and (b) all such other
documents, including but not limited to, checks, share certificates, if any, and
receipts, which the Acquiring Fund may reasonably request. Such assets of the
Acquired Fund shall be accompanied by all necessary state stock transfer stamps
or cash for the appropriate purchase price therefor.
8.8 The Acquiring Fund shall have received a legal opinion or
opinions from counsel, in form reasonably satisfactory to the Acquiring Fund,
and dated as of the Closing Date, to the effect that: (a) the Acquired Fund is a
duly organized series of the Corporation, which is a Wisconsin corporation duly
organized and validly existing under the laws of the State of Wisconsin; (b) the
shares of the Acquired Fund issued and outstanding at the Closing Date are duly
authorized, validly issued, fully paid and non-assessable by the Acquired Fund,
except to the extent provided in Section 180.0622(2)(b) of the Wisconsin
Statutes (which is summarized in Section 4.16 of this Agreement), or any
successor provision; (c) this Agreement and the Transfer Documents have been
duly authorized, executed, and delivered by the Acquired Fund and represent
valid and binding contracts of the Acquired Fund, enforceable in accordance with
their terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto and to the
exercise of judicial discretion in accordance with general principles of
Corporation, whether in a proceeding at law or in Corporation; provided,
however, that no opinion need be expressed with respect to provisions of this
Agreement relating to indemnification; (d) the execution and delivery of this
Agreement did not, and the consummation of the transactions contemplated by this
Agreement will not, violate the Amended and Restated Articles of Incorporation
or By-laws of Corporation or any material agreement known to such counsel to
which the Acquired Fund is a party or by which it is bound; (e) to the knowledge
of such counsel, no consent, approval, authorization, or order of any court or
governmental authority is required for the consummation by the Acquired Fund of
the transactions contemplated by this Agreement, except such as have been
obtained under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those statutes, and such as may be required under state
securities laws, rules, and regulations; and (f) Corporation is registered as an
investment company under the 1940 Act and the Acquired Fund is a separate series
thereof and such registration with the SEC is in full force and effect. Such
opinion: (a) shall state that while such counsel have not verified, and are not
passing upon and do not assume responsibility for, the accuracy, completeness,
or fairness of any portion of the Form N-14 Registration Statement or any
amendment thereof or supplement thereto, they have generally reviewed and
discussed certain information included therein with respect to the Acquired Fund
with certain of its officers and that in the course of such review and
discussion no facts came to the attention of such counsel which caused them to
believe that, on the respective effective or clearance dates of the Form N-14
Registration Statement, and any amendment thereof or supplement thereto and only
insofar as they relate to information with respect to the Acquired Fund, the
Form N-14 Registration Statement or any amendment thereof or supplement thereto
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; (b) shall state that such counsel does not express any
opinion or belief as to the financial statements, other financial data,
statistical data, or any information relating to the Acquired Fund contained or
incorporated by reference in the Form N-14 Registration Statement; (c) may rely
upon the opinion of other counsel to the extent set forth in the opinion,
provided such other counsel is reasonably acceptable to the Acquiring Fund; and
(d) shall state that such opinion is solely for the benefit of the Acquiring
Fund and its Board of Directors and officers.
<PAGE>
8.9 The Acquiring Fund shall have received a legal opinion or
opinions of counsel, addressed to the Funds and in form reasonably satisfactory
to them, and dated as of the Closing Date, substantially to the effect that,
based upon certain facts, assumptions and representations, the transactions
contemplated by this Agreement with respect to the Acquired Fund and the
Acquiring Fund constitute a tax-free reorganization for federal income tax
purposes. The delivery of such opinion or opinions is conditioned upon receipt
by counsel of all necessary representations that it shall request of the
Acquired Fund and Acquiring Fund.
8.10 The property and assets to be transferred to the
Acquiring Fund under this Agreement shall include no assets which the Acquiring
Fund may not properly acquire.
8.11 The Form N-14 Registration Statement shall have become
effective under the 1933 Act and no stop order suspending such effectiveness
shall have been instituted or, to the knowledge of the Funds, contemplated by
the SEC.
8.12 The parties shall have received: a memorandum, in form
reasonably satisfactory to each of them, prepared by counsel to the Acquiring
Fund or another person approved by the parties containing assurance reasonably
satisfactory to them that all authorizations and other approvals necessary under
state securities laws to consummate the transactions contemplated by this
Agreement have been obtained.
8.13 No action, suit, or other proceeding shall be threatened
or pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.14 The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this Agreement under
Section 25(c) of the 1940 Act.
8.15 Prior to the Closing Date, the Acquired Fund shall have
declared a dividend or dividends, which, together with all previous dividends,
shall have the effect of distributing to its shareholders all of its net
investment company income, if any, for each taxable period or year ending prior
to the Closing Date and for the periods from the end of each such taxable period
or year to and including the Closing Date (computed without regard to any
deduction for dividends paid), and all of its net capital gain, if any, realized
in each taxable period or year ending prior to the Closing Date and in the
periods from the end of each such taxable period or year to and including the
Closing Date.
<PAGE>
8.16 The Acquired Fund shall have furnished the Acquiring
Fund at the Closing Date with a certificate or certificates of any of its Vice
Presidents and/or Treasurer dated as of said date to the effect that: (a) the
Acquired Fund will tender for acquisition by the Acquiring Fund its assets
consisting of at least ninety percent (90%) of the fair market value of the
Acquired Fund's net assets and at least seventy percent (70%) of the fair market
value of its gross assets immediately prior to the Closing Date. For purposes of
this certification, all of the following shall be considered as assets of the
Acquired Fund held immediately prior to the Closing Date: (i) amounts used by
the Acquired Fund to pay its expenses in connection with the transactions
contemplated hereby or retained by the Acquired Fund to pay its liabilities; and
(ii) all amounts used to make redemptions of or distributions on the Acquired
Fund Shares (except for redemptions in the ordinary course of its business as
required by Section 22(e) of the 1940 Act pursuant to a demand for redemption by
an Acquired Fund Shareholder and not in connection with the Reorganization, and
distributions of net investment income and net capital gains in the ordinary
course to maintain its status and avoid Fund-level taxes); (b) the Acquired Fund
will distribute to Acquired Fund Shareholders in complete liquidation of the
Acquired Fund the Acquiring Fund Shares that it will receive in the transactions
contemplated hereby on or as promptly as practicable after the Closing Date and
in pursuance of the plan contemplated by this Agreement and having made such
distributions will take all necessary steps to liquidate and terminate the
Acquired Fund as a series of Corporation; and (c) with respect to the Acquired
Fund, there is no current plan or intention of any of its shareholders who own
five percent (5%) or more of the Acquired Fund Shares, and to the best of the
Acquired Fund's knowledge, there is no current plan or intention on the part of
the remaining shareholders of the Acquired Fund to sell, exchange, or otherwise
dispose of a number of shares of the Acquiring Fund received in the
Reorganization that would reduce the ownership of the Acquired Fund Shareholder
of Acquiring Fund Shares to a number of shares having a value, as of the Closing
Date, of less than fifty percent (50%) of the value of all of the formerly
outstanding Acquired Fund Shares as of the Closing Date. For purposes of this
certification, (i) Acquired Fund Shares surrendered by dissenters will be
treated as outstanding Acquired Fund Shares at the Closing Date; and (ii)
Acquired Fund Shares and the Acquiring Fund Shares held by Acquired Fund
Shareholders and otherwise sold, redeemed, or disposed of prior to or subsequent
to the Reorganization, will be taken into account, except for redemptions of
Acquired Fund Shares or Acquiring Fund Shares occurring in the ordinary course
of the respective business of the Funds as series of open-end investment
companies, as required by Section 22(e) of the 1940 Act, and not in connection
with the Reorganization.
8.17 SCM, in its capacity as transfer agent for the Acquired
Fund, shall have furnished to the Acquiring Fund immediately prior to the
Closing Date a list of the names and addresses of the Acquired Fund Shareholders
and the number and percentage ownership of outstanding Acquired Fund Shares
owned by each such shareholder as of the close of regular trading on the NYSE on
the Closing Date, certified on behalf of the Acquired Fund by any of its Vice
Presidents.
<PAGE>
8.18 At the Closing Date, the registration of the Acquired
Fund with the SEC as an investment company under the 1940 Act shall be in full
force and effect.
9. FINDER'S FEES AND OTHER EXPENSES
9.1 Each Fund represents and warrants to the other that there
is no person or entity entitled to receive any finder's fees or other similar
fees or commission payments in connection with the transactions provided for
herein.
9.2 Each Fund shall be liable solely for its own expenses
incurred in connection with entering into and carrying out the transactions
contemplated by this Agreement, whether or not the transactions contemplated
hereby are consummated. Any such expenses that are so borne by each Fund shall
be solely and directly related to the Reorganization within the meaning of
Revenue Ruling 73-54, 1973-1 C.B. 187.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The Funds and Corporation agree that neither party has
made any representation, warranty, or covenant not set forth herein or referred
to in Sections 4 and 5 of this Agreement, and that this Agreement constitutes
the entire agreement between the Funds and supersedes any and all prior
agreements, arrangements, and undertakings relating to the matters provided for
herein.
10.2 The representations, warranties, and covenants contained
in this Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
hereunder for a period of three years following the Closing Date. In the event
of a breach by the Acquired Fund of any such representation, warranty, or
covenant, the Acquired Fund, until the time of its liquidation and termination
as a series of the Corporation, and SCM jointly and severally shall be liable to
the Acquiring Fund for any such breach.
11. TERMINATION
11.1 This Agreement may be terminated by the mutual agreement
of the Funds. In addition, either Fund may at its option terminate this
Agreement at or prior to the Closing Date because of:
11.1(a) a material breach by the other Fund of any
representation, warranty, or agreement contained herein to be performed
at or prior to the Closing Date; or
11.1(b) a condition precedent to the obligations of either
Fund which the Corporation's Board of Directors determines has not been
met and which reasonably appears will not or cannot be met.
<PAGE>
11.1(c) a determination by the Board of Directors of the
Corporation that the Reorganization, either as a whole or with respect
to any Fund, will not be in the best interest of the Corporation, any
of Corporation's series, or its shareholders.
11.2 In the event of any such termination, there shall be no
liability for damages on the part of either Fund, or the Corporation's Boards of
Directors or officers, but each shall bear its expenses incidental to the
preparation and carrying out of this Agreement.
12. INDEMNIFICATION
12.1 The Acquiring Fund shall indemnify, defend, and hold
harmless the Acquired Fund, Corporation's Board of Directors, officers,
trustees, employees, and agents (collectively "Acquired Fund Indemnified
Parties") against all losses, claims, demands, liabilities, and expenses,
including reasonable legal and other expenses incurred in defending third party
claims, actions, suits, or proceedings, whether or not resulting in any
liability to such Acquired Fund Indemnified Parties and including amounts paid
by any one or more of the Acquired Fund Indemnified Parties in a compromise or
settlement of any such claim, action, suit, or proceeding, or threatened third
party claim, suit, action, or proceeding, made with the consent of the Acquiring
Fund, arising from any untrue statement or alleged untrue statement of a
material fact contained in the Form N-14 Registration Statement, as filed and in
effect with the SEC, or any exemptive application ("Application") prepared by
the Acquiring Fund with any regulatory agency in connection with the
transactions contemplated by this Agreement under the securities laws thereof;
or which arises out of or is based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that the Acquiring
Fund shall only be liable in such case to the extent that any such loss, claim,
demand, liability, or expense arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission about the Acquiring
Fund or the transactions contemplated by this Agreement made in the Form N-14
Registration Statement or any Application.
12.2 The Acquired Fund, until the time of its liquidation and
termination as a series of Corporation, and SCM on a joint and several basis
shall indemnify, defend, and hold harmless the Acquiring Fund, Corporation's
Board of Directors, officers, employees and agents ("Acquiring Fund Indemnified
Parties") against all losses, claims, demands, liabilities, and expenses,
including reasonable legal and other expenses incurred in defending third party
claims, actions, suits, or proceedings, whether or not resulting in any
liability to such Acquiring Fund Indemnified Parties and including amounts paid
by any one or more of the Acquiring Fund Indemnified Parties in a compromise or
settlement of any such claim, suit, action, or proceeding, made with the consent
of the Acquired Fund (if it still exists) or Strong Funds Distributors, Inc.
("SFD"), arising from any untrue statement or alleged untrue statement of a
material fact contained in the Form N-14 Registration Statement, as filed and in
effect with the SEC or any Application; or which arises out of or is based upon
any omission or alleged omission to state therein a material fact required to be
stated therein and necessary to make the statements therein not misleading;
provided, however, that the Acquired Fund and SFD shall only be liable in such
case to the extent that any such loss, claim, demand, liability, or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission about the Acquired Fund or about the
transactions contemplated by this Agreement made in the Form N-14 Registration
Statement or any Application.
<PAGE>
12.3 A party seeking indemnification hereunder is hereinafter
called the "indemnified party" and the party from whom the indemnified party is
seeking indemnification hereunder is hereinafter called the "indemnifying
party." Each indemnified party shall notify the indemnifying party in writing
within ten (10) days of the receipt by such indemnified party of any notice of
legal process of any suit brought against or claim made against such indemnified
party as to any matters covered by this Section, but the failure to notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have to any indemnified party otherwise than under this Section.
The indemnifying party shall be entitled to participate at its own expense in
the defense of any claim, action, suit, or proceeding covered by this Section,
or, if it so elects, to assume at its own expense the defense thereof with
reasonably counsel satisfactory to the indemnified parties; provided, however,
if the defendants in any such action include both the indemnifying party and any
indemnified party and the indemnified party shall have reasonably concluded that
there may be legal defenses available to it which are different from or
additional to those available to the indemnifying party, the indemnified party
shall have the right to select separate counsel to assume such legal defense and
to otherwise participate in the defense of such action on behalf of such
indemnified party.
Upon receipt of notice from the indemnifying party to the
indemnified parties of the election by the indemnifying party to assume the
defense of such action, the indemnifying party shall not be liable to such
indemnified parties under this Section for any legal or other expenses
subsequently incurred by such indemnified parties in connection with the defense
thereof unless (i) the indemnified parties shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the
provision of the immediately preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more than
one separate counsel), (ii) the indemnifying party does not employ counsel
reasonably satisfactory to the indemnified parties to represent the indemnified
parties within a reasonable time after notice of commencement of the action, or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified parties at its expenses.
12.4 This Section shall survive the termination of this
Agreement and for a period of three (3) years following the Closing Date.
13. LIABILITY OF THE FUNDS
13.1 Each party acknowledges and agrees that: (a) all obligations of
the Acquiring Fund under this Agreement are binding only with respect to the
Acquiring Fund; (b) any liability of the Acquiring Fund under this Agreement or
in connection with the transactions contemplated herein shall be discharged only
out of the assets of the Acquiring Fund; and (c) no other series of the
Corporation shall be liable with respect to this Agreement or in connection with
the transactions contemplated herein.
<PAGE>
Each party acknowledges and agrees that: (a) all obligations of the
Acquired Fund under this Agreement are binding only with respect to the Acquired
Fund; and (b) any liability of the Acquired Fund under this Agreement or in
connection with the transactions contemplated herein shall be discharged only
out of the assets of the Acquired Fund.
14. AMENDMENTS
This Agreement may be amended, modified, or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of the
Funds; provided, however, that following the Special Meeting of Acquired Fund
Shareholders called by the Board of Directors of Corporation pursuant to Section
6.2 hereof, no such amendment may have the effect of changing the provisions for
determining the number of Acquiring Fund Shares to be issued to Acquired Fund
Shareholders under this Agreement to the detriment of such shareholders without
their further approval, provided that nothing contained in this Section 13 shall
be construed to prohibit the parties from amending this Agreement to change the
Closing Date or any other provision of this Agreement (to the fullest extent
permitted by law).
15. NOTICES
Any notice, report, statement, or demand required or permitted by any
provisions of this Agreement shall be in writing and shall be deemed to be
properly given when delivered personally or by telecopier to the party entitled
to receive the notice or when sent by certified or registered mail, postage
prepaid, or delivered to a recognized overnight courier service, in each case
properly addressed to the party entitled to receive such notice or communication
at 100 Heritage Reserve, Menomonee Falls, Wisconsin 53051, or such other address
as may hereafter be furnished in writing by notice similarly given by one party
to the other.
16. FAILURE TO ENFORCE
The failure of any party hereto to enforce at any time any of the
provisions of this Agreement shall in no way be construed to be a waiver of any
such provision, nor in any way to affect the validity of this Agreement or any
part hereof as the right of any party thereafter to enforce each and every such
provision. No waiver of any breach of this Agreement shall be held to be a
waiver of any other or subsequent breach.
17. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT
17.1 The article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
17.2 This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original.
17.3 This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin.
17.4 This Agreement shall bind and inure to the benefit of
the parties hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations hereunder shall be
made by any party without the written consent of the other party. Nothing herein
expressed or implied is intended or shall be construed to confer upon or give
any person, firm, or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or by reason of
this Agreement.
<PAGE>
17.5 It is expressly understood and agreed that the
obligations of the Acquired Fund and the Acquiring Fund under this Agreement,
including but not limited to any liability as a result of the breach of any of
their respective representations and warranties, are not binding on their
respective Board of Directors, shareholders, nominees, officers, agents, or
employees individually, but bind only the respective assets of the Acquiring
Fund and the Acquired Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its Vice President and its seal to be affixed
thereto and attested by its Secretary.
Attest: STRONG EQUITY FUNDS, INC. on behalf
of STRONG GROWTH FUND
By:__________________________________________
Attest: STRONG EQUITY FUNDS, INC. on behalf
of STRONG SMALL CAP FUND
By:__________________________________________
Strong Capital Management, Inc. hereby joins in this Agreement with
respect to and agrees to the matters described in Sections 10.2 and 12.2.
Attest: STRONG CAPITAL MANAGEMENT, INC.
By:__________________________________________
Strong Funds Distributors, Inc. hereby joins in this Agreement with
respect to and agrees to the matters described in Sections 12.2.
Attest: STRONG FUNDS DISTRIBUTORS, INC.
By:__________________________________________
<PAGE>
EXHIBIT B
ADVISOR'S INVESTMENT REVIEW OF THE FUNDS
THE STRONG GROWTH FUND
WHILE WE ARE CAUTIOUS OVER THE NEAR TERM, WE REMAIN BULLISH FOR THE LONG RUN.
The Strong Growth Fund seeks capital growth. The Fund invests primarily in
equity securities that the Fund's Advisor believes have above-average growth
prospects. The Fund is able to invest in any company regardless of size.
For the year ended December 31, 1997, the Strong Growth Fund generated a
positive total return of 19.05% by maintaining a primarily mid-to-small-cap
portfolio of promising growth stocks.
ASSET ALLOCATION
Based on net assets as of 12-31-97
[PIE CHART]
Stocks 89.8%
Short-Term Investments 10.2%
The S&P 500 Index,* a broad stock market index and benchmark, finished the year
with a 33.36% total return. We believe this difference in performance can be
primarily attributed to an investor preference for very large companies which
were not heavily represented in our portfolio. Illustrating the strength of
large caps is the fact that the average performance of the top 50 companies in
terms of market capitalization size in the S&P 500 was 35.29% for 1997 vs. the
average for the remaining 450 stocks which was only 19.7% for the year.
TOP FIVE SECTORS
As of 12-31-97
Sector % of Net Assets
Technology 20.2%
Financial 14.9%
Healthcare 13.4%
Retail 12.6%
Consumer Cyclical 10.1%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
<PAGE>
SEEKING GROWTH OPPORTUNITIES IN A CHALLENGING MARKET
The strong performance of large-cap equities early in the year was followed by a
brief correction in March and early April, and then followed by a market rebound
to new highs in the second quarter. Even though large-cap stocks led this
rebound, there was a gradual broadening out to small- and mid-cap issues later
in the quarter which favored this Fund's portfolio.
Also, in the second quarter, when it appeared that the Fed would not raise
interest rates any further, we used our modest cash reserves and boosted the
Fund's weightings in higher-growth technology and health care stocks. We also
added to our current positions in retail and media stocks, which typically
benefit from high levels of employment and consumer confidence. At the same
time, we pared back our positions in financial stocks to their market weightings
after their big run-up in the first quarter.
The Strong Growth Fund narrowly outperformed the S&P 500 Index during the second
quarter with a quarterly return of 17.70% vs. 17.46%. And, as the broadening of
the market increased in the third quarter, the Fund's small- to mid-cap focus
continued to generate strong results. The specific sectors which did well--and
where the Fund was overweighted--were those of energy, technology, and consumer
cyclicals.
In October, the world's major markets were forced to deal with concerns over the
economies in Southeast Asia. Those concerns eventually halted the summer rally
in small- and mid-cap stocks, and money flowed into the perceived safety of U.S.
bonds and larger-cap stocks, such as utilities, telephones, drugs and consumer
staples. As a result, the S&P 500 Index had an up quarter, while small- and
mid-cap stocks, the Fund's primary focus, came under heavy selling pressure.
This led to the Fund's underperformance in the fourth quarter.
FIVE LARGEST HOLDINGS
As of 12-31-97
SECURITY INDUSTRY % OF NET ASSETS
Kohl's Corporation Retail-Department Store 2.3%
Cendant Corporation Retail-Specialty 2.3%
Chancellor Media Corporation Media-Radio/TV 2.0%
Travelers Group, Inc. Insurance-diversified 1.9%
Schlumberger, Ltd. Oil Well Equipment and Service1.8%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
<PAGE>
Specifically, while the Fund had previously sold its holdings in companies with
any significant Southeast Asian exposure early in the third quarter, the
portfolio was negatively impacted in the fourth quarter by the sell-off in most
of the technology and energy stocks. Overall, domestic-oriented groups, such as
media, regional banks, and retailers, were the top performers in the fourth
quarter.
A FOCUS ON FUNDAMENTALS GOING FORWARD
In our opinion, the market could remain in a set trading range over the next six
months until the full effects of the Asian crisis are understood, and we are
likely to see continued volatility in the meantime. Inflation and interest rates
should remain low as the economy and earnings show signs of slowing, and should
produce a better climate for investing in companies with solid assured earnings
growth.
Therefore, we will continue to pay strict attention to the fundamentals and
valuations of the companies in which we invest. While we are cautious over the
near term, we remain bullish for the long run. As always, it is our belief that
outstanding companies with superior earnings and revenue growth will outperform
the market over time.
Thank you for your investment in the Strong Growth Fund. We appreciate the
opportunity to serve you, and look forward to helping you pursue your important
financial goals in the years ahead.
Sincerely,
/s/ Ronald C. Ognar
Ronald C. Ognar
Portfolio Manager
[PHOTO OF RONALD C. OGNAR]
<PAGE>
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-31-93 to 12-31-97
The Strong Lipper Growth
Growth Fund S&P 500 Index* Funds Index*
12-93 10,000 10,000 10,000
12-94 11,727 10,132 9,843
12-95 16,535 13,940 13,057
12-96 19,763 17,140 15,339
12-97 23,528 22,859 19,645
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Standard & Poor's 500 Stock Index ("S&P 500") and the Lipper Growth Funds Index.
Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares.
AVERAGE ANNUAL TOTAL RETURNS
As of 12-31-97
1-Year 19.05%
3-Year 26.13%
Since Inception 23.85%
(on 12-31-93)
- -------------------------------------------------------------------------------
* The S& P 500 is an unmanaged index generally representative of the U.S.
stock market, without regard to company size. The Lipper Growth Funds Index
is an equally-weighted performance index of the largest qualifying funds in
this Lipper category. Source of the S&P index data is Standard & Poor's
Micropal. Source of the Lipper index data is Lipper Analytical Services,
Inc.
<PAGE>
EXHIBIT C
FORM OF AMENDMENT
TO
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
STRONG EQUITY FUNDS, INC.
The undersigned Secretary of Strong Equity Funds, Inc. (the
"Corporation"), hereby certifies that, in accordance with Section 180.1003 of
the Wisconsin Statutes, the following Amendment was duly adopted by the Board of
Directors of the Corporation on July 24, 1998 and approved by the shareholders
of Strong Small Cap Fund, a class of Common Stock of the Corporation, on October
[ ], 1998 in order to eliminate the Strong Small Cap Fund as a series of the
Corporation in connection with a reorganization effected pursuant to the terms
of the Agreement and Plan of Reorganization, attached hereto as Exhibit A (the
"Agreement") between the Corporation, on behalf of Strong Small Cap Fund, and
the Corporation, on behalf of Strong Growth Fund, another class of Common Stock
of the Corporation:
1. Paragraph A of Article IV is hereby amended by deleting Paragraph A
thereof and inserting the following as a new paragraph:
"A. The Corporation shall have the authority to issue an
indefinite number of shares of Common Stock with a par value
of $.00001 per share. Subject to the following paragraph the
authorized shares are classified as follows:
Class Authorized Number of Shares
----- ---------------------------
Strong Growth Fund Indefinite
Strong Value Fund Indefinite
Strong Mid Cap Fund Indefinite
Strong Index 500 Fund Indefinite
Strong Growth 20 Fund Indefinite
Strong Small Cap Value Fund Indefinite
Strong Dow 30 Value Fund Indefinite
Strong Strategic Growth Fund Indefinite"
2. Article IV is hereby amended by adding a new Paragraph, labeled
Paragraph J, and inserting the following language:
"J. On the Closing Date (as defined in the Agreement) of the
reorganization involving Strong Small Cap Fund and Strong Growth
Fund, each outstanding share of Strong Small Cap Fund shall be
deemed canceled and restored to the status of authorized but
unissued shares of the Corporation, and shall be automatically
converted into the right to receive shares of Strong Growth Fund
in accordance with the terms of the Agreement. Certificates
representing shares of Strong Small Cap Fund shall be surrendered
at the time and in the manner set forth in the Agreement. Any
such certificates that remain outstanding on the Closing Date
shall be deemed to be automatically canceled, and shares
represented by such certificates shall be restored to the status
of authorized but unissued shares, and shall be automatically
converted as noted above."
<PAGE>
3. The Amendment herein certified shall become effective on the date it
is received for filing by the Department of Financial Institutions.
Executed in duplicate this 30th day of October, 1998.
STRONG EQUITY FUNDS, INC.
By: ___________________
Stephen J. Shenkenberg
This instrument was drafted by:
John S. Weitzer
Strong Capital Management, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53202
<PAGE>
STRONG EQUITY FUNDS, INC.
STRONG SMALL CAP FUND
STRONG GROWTH FUND
P.O. Box 2936
Milwaukee, Wisconsin 53201
STATEMENT OF ADDITIONAL INFORMATION
(1998 Special Meeting of Shareholders of
Strong Small Cap Fund)
This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement and Prospectus (the
"Proxy Statement"), dated September 4, 1998, for the Special Meeting of
Shareholders of the Strong Small Cap Fund (the "Small Cap Fund") to be held on
October 29, 1998. Copies of the Proxy Statement may be obtained at no charge by
writing the Small Cap Fund at the address shown above or by calling
1-800-368-0930.
Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the Proxy
Statement.
Further information about each Fund is contained in and incorporated by
reference to the Statement of Additional Information for each Fund dated May 1,
1998, and the Funds' Annual Report to Shareholders, dated December 31, 1997, all
of which are included herewith. Each of the aforementioned documents may be
obtained without charge by writing to the address shown above or by calling
1-800-368-0930.
The date of this Statement of Additional Information is September 4,
1998.
<PAGE>
GENERAL INFORMATION
The shareholders of the Small Cap Fund are being asked to approve or
disapprove the Reorganization Agreement dated July 24, 1998, by and among the
Corporation, on behalf of the Small Cap Fund and the Growth Fund, and, with
respect to certain matters, the Advisor, and the transactions contemplated
thereby. The Reorganization Agreement contemplates the transfer of substantially
all of the property and assets of the Small Cap Fund in exchange for Growth Fund
Shares. Following the exchange, the Small Cap Fund will make a liquidating
distribution of the Growth Fund Shares to the Small Cap Fund's shareholders,
such that a Small Cap Fund shareholder at the Closing Date will receive full
and fractional Growth Fund Shares having an aggregate net asset value equal to
the aggregate net asset value of the shareholder's Small Cap Fund Shares. In
connection with the Reorganization, Corporation's Articles of Incorporation will
be amended (a) to cancel all of the Small Cap Fund's outstanding shares and to
convert them into rights to receive Growth Fund Shares, in accordance with the
Reorganization Agreement and (b) to eliminate the Small Cap Fund as a series of
the Corporation.
A Special Meeting of Shareholders of the Small Cap Fund to consider the
Reorganization Agreement and the transactions contemplated thereby will be held
at 100 Heritage Reserve, Menomonee Falls, Wisconsin, on Thursday, October 29,
1998, at 8:00 a.m. Central Time, or at such other location, date, or time as may
be selected by the Chairman of the Board or the President of the Corporation, or
at any adjournment thereof. For further information about the transaction, see
the Proxy Statement.
<PAGE>
PART C. OTHER INFORMATION
Item 15. 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 authority of 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 of (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 persons under Section 7.01; (b) individual
or group indemnification agreements with any one or more such persons;
and (c) advances for related expenses of such a person.
Section 7.03. Amendment. This Article VII may be amended or repealed
only by a vote of the shareholders and not by a vote of the Board of
Directors.
Section 7.04. Investment Company Act. In no event shall the Corporation
indemnify any person hereunder in contravention of any provision of the
Investment Company Act.
Item 16. Exhibits
(1) Amended and Restated Articles of Incorporation dated July 31, 1996 (4)
(1.1) Amendment to Amended and Restated Articles of Incorporation dated
October 22, 1996 (5)
(1.2) Amendment to Amended and Restated Articles of Incorporation dated
April 4, 1997 (7)
(1.3) Amendment to Amended and Restated Articles of Incorporation dated
June 24, 1997 (8)
<PAGE>
(1.4) Amendment to Amended and Restated Articles of Incorporation dated
December 9, 1997 (9)
(1.5) Amendment to Amended and Articles of Incorporation dated May 4,1998(11)
(2) Restated Bylaws of Registrant, dated October 20, 1995 (2)
(3) None
(4) Agreement and Plan of Reorganization. (See Exhibit A to the Combined
Proxy Statement and Prospectus)
(5) Specimen copy of stock certificate (1)
(6)(a) Investment Advisory Agreement (1)
(7) Distribution Agreement (1)
(8) None
(9) (a.1) Custody Agreement with Firstar (Growth, Value, Small Cap,
Mid Cap, Growth 20, and Strategic Growth Funds) (3)
(a.2) Global Custody Agreement with Brown Brothers Harriman & Co.
(Growth, Small Cap, Mid Cap, Growth 20, and Strategic
Growth Funds) (3)
(10) None
(11) Opinion of Counsel that shares of Registrant are validly issued,
fully paid, and non-assessable (including consent of such
firm)
(12) Form of Opinion of Counsel as to tax matters and consequences to
shareholders (including consent of such firm)
(13) Shareholder Servicing Agent Agreement (2)
(14) Consent of Independent Accountants
(15) None
(16) Power of Attorney
(17) (a) Form of Proxy
(b) Prospectus and Statement of Additional Information of the Strong
Equity Fund, Inc., dated May 1, 1998, incorporated herein by
reference (10)
(c) Proposed Amendment to Amended and Restated Articles of
Incorporation of the Strong Equity Funds, Inc. (See Exhibit C
to the Combined Proxy Statement and Prospectus)
<PAGE>
Key to Exhibit Reference Numbers
(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 the Post-Effective Amendment
No. 7 to 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
(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. 19
to the Registration Statement on Form N-1A filed on or
about April 29, 1998
(11) Incorporated herein by reference to Post-Effective Amendment No. 20
to the Registration Statement on Form N-1A filed on or
about May 4, 1998
Item 17. Undertakings
(1) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by
any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act of 1933, as
amended, the reoffering prospectus will contain the
information called for by the applicable registration form for
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of
the applicable form.
(2) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (1) above will be filed as part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and
the offering of the securities at that time shall be deemed to
be the initial bona fide offering of them.
<PAGE>
(3) Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
(4) The undersigned Registrant agrees to file, by post-effective
amendment, an opinion of counsel supporting the tax
consequences of the proposed reorganization within a
reasonable time after receipt of such opinion.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, as amended, the Registrant has duly caused this
Registration Statement on Form N-14 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Village of Menomonee Falls, and
State of Wisconsin on the 24th day of July, 1998.
STRONG EQUITY FUNDS, INC.
By: /s/ Thomas P. Lemke
Thomas P. Lemke, Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<S> <C> <C>
Name Title Date
/s/ Thomas P. Lemke Vice President (Principal July 24, 1998
Thomas P. Lemke Executive Officer)
/s/ Richard S. Strong Chairman of the Board July 24, 1998
Richard S. Strong and a Director
/s/ John A. Flanagan Treasurer (Principal July 24, 1998
John A. Flanagan Financial and
Accounting Officer)
Marvin E. Nevins* Director July 24, 1998
Marvin E. Nevins
Willie D. Davis* Director July 24, 1998
Willie D. Davis
William F. Vogt* Director July 24, 1998
William F. Vogt
Stanley Kritzik* Director July 24, 1998
Stanley Kritzik
</TABLE>
*John S. Weitzer signs this document on behalf of each director marked with an
asterisk pursuant to powers of attorney filed as Exhibit 16 to this Registration
Statement.
By: /s/ John S. Weitzer
John S. Weitzer
<PAGE>
<TABLE>
<S> <C> <C>
EXHIBIT INDEX
Exhibit No. Description Page No.
(11) Opinion of Counsel that shares of
Registrant are validly issued, fully
paid and non-assessable (including
consent of such firm)
(12) Form of Opinion of Counsel as to
tax matters and consequences to
shareholders (including consent of such firm.)
(14) Consent of Independent Accountants
(16) Power of Attorney
(17)(a) Form of Proxy
</TABLE>
G O D F R E Y & K A H N, S. C.
ATTORNEYS AT LAW
780 NORTH WATER STREET
MILWAUKEE, WI 53202-3590
www.gklaw.com
PHONE: 414-273-3500 FAX: 414-273-5198
July 23, 1998
Strong Equity Funds, Inc.
100 Heritage Reserve
Menomonee Falls, WI 53051
Gentlemen:
We have acted as counsel to the Strong Equity Funds, Inc. (the "Company"),
in connection with the acquisition by the Strong Growth Fund, a series of the
Company (the "Growth Fund"), of substantially all of the assets of the Strong
Small Cap Fund, a series of the Company (the "Small Cap Fund"), pursuant to an
Agreement and Plan of Reorganization to be entered into by the Growth Fund and
the Small Cap Fund (the "Agreement"). Pursuant to the Agreement, subject to the
approval of the shareholders of the Small Cap Fund, substantially all of the
Small Cap Fund's property, assets and goodwill (less a reserve for certain
expenses and liabilities) (the "Small Cap Fund Net Assets") will be exchanged
for shares of the Growth Fund common stock, $0.00001 par value per share (the
"Growth Fund Shares"), equal in value to the Small Cap Fund Net Assets, and the
Growth Fund Shares will then be distributed to shareholders of the Small Cap
Fund. In connection with the Growth Fund's issuance of the Growth Fund Shares
pursuant to the Agreement, a form of Registration Statement on Form N-14, which
includes a Prospectus/Proxy Statement, has been prepared (the "Registration
Statement").
In connection with this opinion, we have examined: (i) the Registration
Statement, including the Prospectus/Proxy Statement included therein, (ii) the
Agreement, (iii) the Company's Amended and Restated Articles of Incorporation
and By-Laws, (iv) resolutions of the Company's Board of Directors, and (v) such
other proceedings, documents and records as we have deemed necessary to enable
us to render this opinion.
Based on the foregoing, we are of the opinion that the Growth Fund Shares,
when issued as described in the Registration Statement, will be duly authorized
and validly issued, fully paid and non-assessable except to the extent provided
in Section 180.0622(2)(b) of the Wisconsin Statutes, or any successor provision,
which provides that shareholders of a corporation organized under Chapter 180 of
the Wisconsin Statutes may be assessed up to the par value of their shares to
satisfy the obligations of such corporation to its employees for services
rendered, but not exceeding six months' service in the case of any individual
employee. Certain Wisconsin courts have interpreted "par value" to mean the full
amount paid by the purchaser of shares upon the issuance thereof.
We consent to the use of this opinion as an exhibit in the Registration
Statement. In giving this consent, however, we do not admit that we are
"experts" within the meaning of Section 11 of the Securities Act of 1933, as
amended (the "Act"), or within the category of persons whose consent is required
by Section 7 of the Act.
Very truly yours,
/s/ Godfrey & Kahn, S.C.
GODFREY & KAHN, S.C.
Form of Opinion of Counsel as to Tax Matters and Consequences to Shareholders
[Closing Date], 1998
Strong Equity Funds, Inc.
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Ladies and Gentlemen:
You have requested our opinion regarding certain federal income tax
consequences to the Strong Small Cap Fund ("Target"), a separate series of
Strong Equity Funds, Inc., to the holders of the shares of beneficial interest
("shares") of Target ("Target shareholders"), and to the Strong Growth Fund
("Acquiring Fund"), a separate series of Strong Equity Funds, Inc., in
connection with the proposed transfer on the [Closing Date] of substantially all
of the assets of Target to Acquiring Fund in exchange solely for voting shares
of beneficial interest of Acquiring Fund ("Acquiring Fund shares"), followed by
the distribution of such Acquiring Fund shares received by Target in complete
liquidation, all pursuant to the Agreement and Plan of Reorganization ("Plan")
dated July 24, 1998 ("Reorganization").
For purposes of this opinion, we have examined and rely upon (1) the
Plan, (2) the Form N-14, filed by Strong Equity Funds, Inc., on behalf of Target
and Acquiring Fund, on July 24, 1998, with the Securities and Exchange
Commission, (3) the facts and representations contained in the two letters dated
[Closing Date], 1998, addressed to us from Target and the Acquiring Fund, and
(4) such other documents and instruments as we have deemed necessary or
appropriate for purposes of rendering this opinion.
This opinion is based upon the Internal Revenue Code of 1986, as
amended ("Code"), United States Treasury regulations, judicial decisions and
administrative rulings and pronouncements of the Internal Revenue Service, all
as in effect on the date hereof. This opinion is conditioned upon the
Reorganization taking place in the manner described in the Plan and the Form
N-14 referred to above.
Based upon the foregoing, it is our opinion that:
The acquisition by Acquiring Fund of substantially all of the assets of
Target in exchange solely for Acquiring Fund shares, followed by the
distribution of such Acquiring Fund shares to the Target shareholders in
exchange for their Target shares in complete liquidation of Target, will
constitute a reorganization within the meaning of Section 368(a) of the Code.
Acquiring Fund and Target will each be "a party to a reorganization" within the
meaning of Section 368(b) of the Code.
No gain or loss will be recognized to Target upon the transfer of
substantially all of its assets to Acquiring Fund in exchange solely for
Acquiring Fund shares, or upon the distribution to the Target shareholders of
the Acquiring Fund shares.
No gain or loss will be recognized by Acquiring Fund upon the receipt
of Target's assets in exchange for Acquiring Fund shares.
The basis of the assets of Target in the hands of Acquiring Fund will
be, in each instance, the same as the basis of those assets in the hands of
Target immediately prior to the Reorganization exchange.
The holding period of Target's assets in the hands of Acquiring Fund
will include the period during which the assets were held by Target.
No gain or loss will be recognized to Target shareholders or the
Acquiring Fund shareholders upon the receipt of Acquiring Fund shares by Target
shareholders solely in exchange for Target shares.
The basis of the Acquiring Fund shares received by the Target
shareholders will be the same as the basis of Target shares surrendered in
exchange therefor.
The holding period of the Acquiring Fund shares received by Target
shareholders will include the holding period of Target shares surrendered in
exchange therefor, provided that such Target shares were held as capital assets
in the hands of Target shareholders upon the date of the exchange.
We express no opinion as to the federal income tax consequences of the
Reorganization except as expressly set forth above, or as to any transaction
except those consummated in accordance with the Plan.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form N-14 filed with the Securities and Exchange
Commission by Strong Equity Funds, Inc. on behalf of Target and the Acquiring
Fund.
Very truly yours,
DECHERT PRICE & RHOADS
Consent of Independent Accountants
To the Board of Directors - Strong Equity
Funds, Inc. - Strong Growth Fund and Strong
Small Cap Fund
We consent to the incorporation by reference in the Initial Registration
Statement of the Strong Equity Funds, Inc. - Strong Growth Fund and Strong Small
Cap Fund on Form N-14 of our report dated February 4, 1998 on our audits of the
financial statements and financial highlights of the Strong Growth Fund and
Strong Small Cap Fund, which report is included in the Annual Report to
Shareholders for the year ended December 31, 1997, which is also incorporated by
reference in the Registration Statement. We also consent to the references to
our Firm under the captions "FINANCIAL INFORMATION FOR THE GROWTH FUND" and
"FINANCIAL STATEMENTS".
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
July 23, 1998
<PAGE>
POWER OF ATTORNEY
Each of the undersigned, all of whom are directors of the Strong Equity
Funds, Inc., whose signatures appear below, do hereby constitute and appoint
Thomas P. Lemke, Stephen J. Shenkenberg, and John S. Weitzer, and each of them,
as the true and lawful attorney-in-fact and agent for the undersigned, and each
of them, with full power of substitution and resubstitution, for them and in
their name, place and stead, in any and all capacities, to sign a Registration
Statement on Form N-14 for the Strong Equity Funds, Inc., and any and all
amendments thereto, and any and all other instruments such attorneys and agents
may deem necessary or advisable to enable the Fund to comply with federal and
state securities laws and any rules, regulations, orders or other requirements
of the Securities and Exchange Commission and the various state securities
regulators in connection with the registration or issuance of shares or
additional shares of common stock of the Fund, and to file the same, with all
exhibits thereto, and any other documents in connection therewith, with the
Securities and Exchange Commission and any other regulatory body, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes, as the undersigned, and each of them might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Name Title Date
Richard S. Strong Chairman of the Board July 24, 1998
and a Director
Marvin E. Nevins Director July 24, 1998
Willie D. Davis Director July 24, 1998
William F. Vogt Director July 24, 1998
Stanley Kritzik Director July 24, 1998
FORM OF PROXY
WE NEED YOUR VOTE BEFORE OCTOBER 29, 1998
- --------------------------------------------------------------------------------
PLEASE, your vote is important and, as a shareholder, you are asked to be at the
Special Meeting of Shareholders ("Special Meeting") either in person or by
proxy. If you are unable to attend the Special Meeting in person, we urge you to
vote by proxy. You can do this in one of three ways by (1) completing, signing,
dating, and promptly returning this Proxy using the enclosed postage prepaid
envelope; (2) calling our toll-free telephone number at 1-800-xxx-xxxx; or (3)
voting at the Strong website at www.strong-funds.com. Your prompt voting by
proxy will help assure a quorum at the Special Meeting and avoid additional
expenses associated with further solicitation. Voting by proxy will not prevent
you from personally voting your shares at the Special Meeting and you may revoke
your proxy by advising the Secretary of Strong Equity Funds, Inc. in writing (by
subsequent proxy or through the website) or by telephone of such revocation at
any time before the Special Meeting.
- --------------------------------------------------------------------------------
THANK YOU FOR YOUR TIME
Please fold and detach card at perforation before mailing
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
STRONG EQUITY FUNDS, INC. PROXY FOR SPECIAL MEETING
STRONG SMALL CAP FUND ("FUND") OF SHAREHOLDERS
The undersigned hereby constitutes and appoints Thomas P. Lemke, Stephen J.
Shenkenberg and John S. Weitzer as proxies, each with power to act without the
other, and with the power to appoint his substitute and hereby authorizes them
to represent and to vote, as designated on the reverse side, all shares of stock
of the Fund, which the undersigned is entitled to vote at the Special Meeting to
be held at 100 Heritage Reserve, Menomonee Falls, Wisconsin 53051 on October 29,
1998 at 8:00 a.m., Central Time, and any adjournments thereof, with respect to
the matters set forth on the reverse side and described in the Notice of Special
Meeting and Proxy Statement dated September 4, 1998, receipt of which is hereby
acknowledged.
DATE: ________________________
NOTE: Please sign exactly as
your name(s) appear(s) on this
Proxy. If joint owners, EITHER
may sign this Proxy. When
signing as attorney, executor,
administrator, trustee,
guardian or corporate officer,
please give your full title as
such. If a corporation, please
sign in full corporate name by
President or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
------------------------------
Signature(s) (Title(s), if applicable
<PAGE>
WE NEED YOUR VOTE BEFORE OCTOBER 29, 1998
- --------------------------------------------------------------------------------
Please fold and detach card at perforation before mailing
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED IN FAVOR OF THE PROPOSAL AND IN THE DISCRETION OF THE PROXIES UPON
SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. Please
indicate by filling in the appropriate boxes below, as shown, using blue or
black ink or dark pencil.
<PAGE>
<TABLE>
<S> <C> <C> <C>
FOR AGAINST ABSTAIN
Proposal 1: To approve or disapprove an Agreement and Plan of
Reorganization, as described in the Proxy Statement, and the transactions
contemplated thereby.
Proposal 2: Upon shareholder approval of Proposal 1, to approve
or disapprove an amendment to the Strong Equity Funds, Inc.'s
Amended and Restated Articles of Incorporation: (a) to cancel all
of the outstanding shares of Small Cap Fund and convert them into
rights to receive shares of the Growth Fund in accordance with the
Reorganization Agreement and (b) to eliminate the Small Cap Fund
as a series of the Strong Equity Funds, Inc.
</TABLE>
TO BE COMPLETED AND SIGNED ON REVERSE SIDE OF CARD.
