<PAGE> 1
SEMIANNUAL REPORT AUGUST 31, 1995
THE STRONG
HERITAGE
MONEY FUND
[STRONG FUNDS LOGO]
STRONG FUNDS
<PAGE> 2
EIGHT BASIC PRINCIPLES FOR
SUCCESSFUL MUTUAL FUND INVESTING
The common sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here
24 hours a day, seven days a week to take your call.
1. Have a plan. Even a simple plan can help you take control of your
financial future. Review your plan once a year, or if your
circumstances change.
2. Start investing as soon as possible. Make time a valuable ally. Let
it put the power of compounding to work for you, while helping to
reduce your potential investment risk.
3. Diversify your portfolio. By investing in different asset classes-
stocks, bonds, and cash-you help protect against poor performance in
one type of investment while including investments most likely to help
you achieve your important goals.
4. Invest regularly. Investing is a process, not a one-time event. By
investing regularly over the long term, you reduce the impact of short-
term market gyrations, and you attend to your long-term plan before
you're tempted to spend those assets on short-term needs.
5. Maintain a long-term perspective. For most individuals, the best
discipline is staying invested as market conditions change. Reactive,
emotional investment decisions are all too often a source of regret-
and of principal loss.
6. Consider stocks to help achieve major long-term goals. Over time,
stocks have provided the more powerful returns needed to help the value
of your investments stay well ahead of inflation.
7. Keep a comfortable amount of cash in your portfolio. To meet current
needs, including emergencies, use a money market fund or a bank
account-not your long-term investment assets.
8. Know what you're buying. Make sure you understand the potential risks
and rewards associated with each of your investments. Ask questions...
request information...make up your own mind. And choose a fund company
that helps you make informed investment decisions.
<PAGE> 3
TABLE OF CONTENTS
INVESTMENT REVIEW
---------------------------------------------------------------
Letter from the Portfolio Manager............................ 3
FINANCIAL INFORMATION
---------------------------------------------------------------
Schedule of Investments in Securities........................ 6
Statement of Operations...................................... 12
Statement of Assets and Liabilities.......................... 12
Statement of Changes in Net Assets........................... 13
Notes to Financial Statements................................ 14
Financial Highlights......................................... 16
1
<PAGE> 4
LETTER FROM THE PORTFOLIO MANAGER
The Strong Heritage Money Fund seeks current income, a stable share price, and
daily liquidity. The Fund invests in corporate, bank, and government
instruments that present minimal credit risk. - In addition, the Strong
Heritage
HERITAGE
Money Fund is designed to offer investors a permanent value. By keeping costs
low, it seeks to provide a higher yield over time than typical money funds.
It does so in two ways. First, investors must maintain higher account
balances, enabling the Fund to reduce costs through economies of scale.
Second, with certain exceptions, investors are charged a transaction fee that
is paid back to the Fund, helping to further defray costs.
3
<PAGE> 5
YIELD SUMMARY (1)
AS OF 8/31/95
THE STRONG HERITAGE MONEY FUND
5.97% 6.15%
7-DAY CURRENT YIELD 7-DAY EFFECTIVE YIELD
AVERAGE MATURITY: 67 DAYS
PERFORMANCE OVERVIEW
The Strong Heritage Money Fund ranked #1 for yield among the 220 general
purpose money funds tracked by IBC'S MONEY FUND REPORT(R), a service of
IBC/Donoghue, Inc., for the 7 days ended 8/29/95.(1)
SHORT RATES FALL
From the Fund's inception on June 29, 1995 through the end of August, we
maintained a moderately long average maturity--generally in the range of 60-80
days. This was due to our expectation for falling short-term interest rates
following the Federal Reserve's 0.25% cut in the federal funds rate on July 6.
Short rates did in fact decline throughout July and August, and our modestly
long maturity helped us support the Fund's income level despite the reduced
yields available in the market.
4
<PAGE> 6
OUTLOOK
Our current view is that economic growth for the balance of 1995 will be
relatively mild. Although we expect the economy will improve in the second
half of the year, we don't think it will accelerate enough to jeopardize our
forecast for continued low inflation. As a result of this outlook, we intend
to maintain the portfolio's moderately long maturity and monitor the economy
closely.
We thank you for your confidence and remain committed to meeting your
investment needs in the future.
Sincerely,
/s/Jay N. Mueller
Jay N. Mueller
Portfolio Manager
[Photo of Jay N. Mueller]
(1) Yields are annualized for the 7-day period ended August 31, 1995. Effective
yield reflects the compounding of income. Investments in the Fund are
neither insured nor guaranteed by the U.S. government. There can be no
assurance that the Fund will be able to maintain its stable net asset value
of $1.00 per share. Yields and rankings are historical and do not
represent future results, which will fluctuate. The Fund's advisor is
waiving all management fees and absorbing all Fund expenses through December
31, 1995. Otherwise, the Fund's current yield would have been 5.38%, and
its effective yield would have been 5.56%.
5
<PAGE> 7
SCHEDULE OF INVESTMENTS IN SECURITIES
<TABLE>
<CAPTION>
August 31, 1995 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST*
AMOUNT MATURITY DATE** (In
SECURITY (In Thousands) Thousands)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CERTIFICATE OF DEPOSIT 1.0%
C.I.B.C. Yankee Dollar Certificate of Deposit $2,000 6.10% 08/02/96 $2,000
CORPORATE COMMERCIAL PAPER 80.3%
American Home Products Corporation 1,500 5.93 09/12/95 1,497
American Honda Finance Corporation 1,360 5.80 10/10/95 1,351
American Honda Finance Corporation 5,000 5.75 10/30/95 4,953
Anaheim, California Electric System 2,000 5.90 02/01/96 2,000
Anthem Financial, Inc. 8,000 5.78 11/28/95 7,887
Aristar, Inc. 800 5.75 11/07/95 791
Barnett Banks, Inc. 1,500 5.82 09/08/95 1,498
Brazos River Authority, Texas Pollution Control Revenue 3,000 5.82 10/10/95 3,000
City of Brownsville, Texas Utility System, Series A 4,000 5.78 12/13/95 3,934
Calcot, Ltd. 2,000 5.85 09/07/95 1,998
Calcot, Ltd. 440 5.85 09/08/95 439
Calcot, Ltd. 3,500 5.85 09/11/95 3,494
Coca-Cola Enterprises, Inc. 5,750 5.73 11/29/95 5,669
Countrywide Funding Corporation 2,000 5.79 09/18/95 1,995
Dayton Hudson Corporation 8,000 5.80 10/03/95 7,959
Duracell, Inc. 1,650 5.89 10/06/95 1,641
Equitable of Iowa Companies 560 5.90 09/25/95 558
Equitable of Iowa Companies 5,000 5.85 09/27/95 4,979
Finova Corporation 1,200 5.92 09/05/95 1,199
Finova Corporation 750 5.84 09/26/95 747
Finova Corporation 3,100 5.65 10/05/95 3,083
Finova Corporation 900 5.81 10/12/95 894
Finova Corporation 2,250 5.80 11/20/95 2,221
Fleet Financial Group, Inc. 2,800 5.80 10/25/95 2,776
Franklin Resources, Inc. 650 5.75 11/09/95 643
Frontier Corporation 3,100 5.85 09/07/95 3,097
GTE Finance Corporation 600 5.83 09/07/95 599
GTE Finance Corporation 7,500 5.81 09/13/95 7,485
Great Western Financial Corporation 1,240 5.78 09/19/95 1,236
Great Western Financial Corporation 4,000 5.77 09/25/95 3,985
Great Western Financial Corporation 2,400 5.75 11/06/95 2,375
Great Western Financial Corporation 700 5.73 11/13/95 692
</TABLE>
See notes to financial statements.
6-7
<PAGE> 8
SCHEDULE OF INVESTMENTS IN SECURITIES
<TABLE>
<CAPTION>
August 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST*
AMOUNT MATURITY DATE** (In
SECURITY (In Thousands) Thousands)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ITT Corporation:
(Acquired 8/17/95; Cost $995,910) (r) $1,000 5.89% 09/11/95 $ 998
(Acquired 8/21/95; Cost $895,459) (r) 900 5.86 09/21/95 897
(Acquired 8/31/95; Cost $4,544,300) (r) 4,565 5.83 09/28/95 4,545
(Acquired 8/30/95; Cost $1,492,712) (r) 1,500 5.83 09/29/95 1,493
LOCAP, Inc. 7,000 5.83 10/04/95 6,963
Mercury Finance Corporation 1,200 5.88 09/29/95 1,194
Mercury Finance Corporation 1,800 5.88 10/03/95 1,791
Mercury Finance Corporation 1,100 5.88 10/11/95 1,093
Mercury Finance Corporation 825 5.88 10/13/95 819
Mercury Finance Corporation 1,775 5.87 10/19/95 1,761
Mercury Finance Corporation 1,000 5.88 10/20/95 992
Mercury Finance Corporation 1,000 5.85 10/26/95 991
Mercury Finance Corporation 1,300 5.88 11/01/95 1,287
City of New York General Obligation 7,000 5.90 10/25/95 7,000
Nynex Corporation 1,500 5.95 09/08/95 1,498
Nynex Corporation 1,800 5.83 11/09/95 1,780
Pitney Bowes Credit Corporation 36 5.50 Upon Demand 36
Quaker Oats Company 2,200 5.95 09/15/95 2,195
Quaker Oats Company 2,400 5.80 09/18/95 2,393
Salomon, Inc. 1,200 6.05 09/06/95 1,199
Salomon, Inc. 715 5.97 09/21/95 713
Salomon, Inc. 5,025 5.69 09/22/95 5,008
Salomon, Inc. 1,400 5.97 09/28/95 1,394
Sara Lee Corporation 10 5.48 Upon Demand 10
Strategic Asset Funding Corporation 2,194 5.68 10/20/95 2,177
Strategic Asset Funding Corporation 4,200 5.77 10/31/95 4,160
Strategic Asset Funding Corporation 800 5.79 11/10/95 791
Sunshine State Government Finance 3,000 5.72 10/13/95 2,980
Torchmark Corporation 400 5.80 10/27/95 396
Torchmark Corporation 2,000 5.76 11/02/95 1,980
Washington Square Mortgage Company 500 5.80 09/14/95 499
Washington Square Mortgage Company 2,500 5.55 09/18/95 2,493
Washington Square Mortgage Company 1,200 5.81 09/20/95 1,196
Washington Square Mortgage Company 3,000 5.71 10/18/95 2,977
Washington Square Mortgage Company 1,000 5.80 10/19/95 992
</TABLE>
See notes to financial statements.
8-9
<PAGE> 9
SCHEDULE OF INVESTMENTS IN SECURITIES
<TABLE>
<CAPTION>
August 31, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
AMORTIZED
PRINCIPAL YIELD TO MATURITY COST*
AMOUNT MATURITY DATE** (In
SECURITY (In Thousands) Thousands)
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Wisconsin Electric Power Company $ 44 5.54% Upon Demand $ 44
Working Capital Management Company, Limited Partnership 4,400 5.82 11/02/95 4,356
Yale University 1,060 5.78 10/17/95 1,052
TOTAL CORPORATE COMMERCIAL PAPER 160,818
CORPORATE OBLIGATIONS 10.1%
Beta Finance, Inc. Medium Term Notes, 6.00% 2,000 6.12 07/29/96 1,998
Chrysler Financial Corporation Medium Term Notes, 10.34% 4,090 6.18 05/15/96 4,206
First Interstate Bancorp Senior Notes, 10.50% 2,050 5.99 03/01/96 2,095
General Motors Acceptance Corporation Medium Term Notes:
Tranche #533, 8.70% 1,725 6.13 05/01/96 1,753
Tranche #728, 8.375% 2,000 6.06 09/04/96 2,045
Huntington National Bank Medium Term Notes, Tranche #30, 6.05% 3,000 6.14 08/01/96 2,998
Lehman Brothers, Inc. Notes, 9.75% 3,395 6.18 04/10/96 3,464
Waste Management, Inc. Liquid Yield Option Notes, Zero % 4,550 6.21 06/30/96 1,699
TOTAL CORPORATE OBLIGATIONS 20,258
TAXABLE MUNICIPAL SECURITIES 8.6%
Galliano Marine Service, Inc. Variable Rate Secured
Promissory Notes 6,300 6.05 09/06/95 6,300
Kinder-Care Learning Centers, Inc. Industrial Refunding
Variable Rate Weekly Put Bond - Kinder-Care Learning Centers,
Inc. Projects 3,500 6.10 09/06/95 3,500
Maine Regional Waste System, Inc. - Solid Waste
Resource Recovery Revenue Variable Rate Bonds 2,200 6.05 09/06/95 2,200
New Jersey Sports & Exposition Authority Sports Complex
Subordinated Refunding Revenue Bond 2,000 6.03 09/01/95 2,000
Thayer Properties, L.L.C. Variable Rate Securities 3,200 6.05 09/06/95 3,200
TOTAL TAXABLE MUNICIPAL SECURITIES 17,200
--------
TOTAL INVESTMENTS IN SECURITIES 100.0% 200,276
Other Assets And Liabilities, Net 0.0% 83
--------
NET ASSETS 100.0% $200,359
========
</TABLE>
The percentages shown represent the percentage of the investment
classifications to net assets.
* Cost for Federal income tax and financial reporting purposes is the same as
amortized cost.
** Maturity date represents actual maturity, earliest put date, or for U.S.
Government Agency Securities, the next adjustment date.
(r) Restricted security.
See notes to financial statements.
10-11
<PAGE> 10
STATEMENT OF OPERATIONS
For the Period from June 29, 1995, inception, to August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
INTEREST INCOME $ 866
EXPENSES:
Investment Advisory Fees 28
Shareholder Servicing Costs 1
----------
Total Expenses before Waivers and Absorptions 29
Voluntary Expense Waivers and Absorptions by Advisor (29)
----------
Expenses, Net 0
----------
NET INVESTMENT INCOME $ 866
==========
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
(In Thousands, Except
Per Share Amounts)
<S> <C>
ASSETS:
Investments in Securities, at Amortized Cost $ 200,276
Interest Receivable 654
Other 83
-----------
Total Assets 201,013
LIABILITIES:
Dividends Payable 571
Accrued Operating Expenses and Other Liabilities 83
-----------
Total Liabilities 654
-----------
NET ASSETS $ 200,359
Capital Shares ===========
Authorized 2,000,000
Outstanding 200,359
NET ASSET VALUE PER SHARE $ 1.00
NET ASSETS CONSIST OF: ===========
Capital (Par Value and Paid-in Surplus) $ 200,359
===========
</TABLE>
See notes to financial statements.
12
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the Period from June 29, 1995, inception, to August 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
OPERATIONS:
Net Investment Income $ 866
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 212,292
Proceeds from Reinvestment of Distributions 141
Payment for Shares Redeemed (12,174)
---------
Net Increase in Net Assets from
Capital Share Transactions 200,259
DISTRIBUTIONS:
From Net Investment Income (866)
---------
TOTAL INCREASE IN NET ASSETS 200,259
NET ASSETS:
Beginning of Period 100
---------
End of Period $200,359
=========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 212,292
Issued in Reinvestment of Distributions 141
Redeemed (12,174)
---------
Net Increase 200,259
=========
</TABLE>
See notes to financial statements.
13
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
August 31, 1995 (Unaudited)
1. ORGANIZATION
The Strong Heritage Money Fund is a diversified series of Strong
Heritage Reserve Series, Inc., an open-end management investment
company registered under the Investment Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed
by the Fund in the preparation of its financial statements.
(A) Security Valuation--Investments are valued using the
amortized cost method or original cost, both of which
approximate current value.
The Fund owns certain investment securities which are
restricted as to resale. These securities are valued by
the Fund after giving due consideration to pertinent
factors including recent private sales, market conditions
and the issuer's financial performance. The Fund bears the
costs, if any, associated with the disposition of
restricted securities. Where such disposition depends on
a security's registration under the Securities Act of
1933, the Fund will bear such registration costs unless
the Fund has registration rights, in which case the issuer
will bear such costs. Aggregate cost and fair value of
these restricted securities at August 31, 1995 were
$7,928,381 and $7,933,672, respectively, representing 4.0%
of net assets of the Fund.
(B) Federal Income and Excise Taxes and Distributions to
Shareholders--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute
substantially all of its taxable income to shareholders.
Accordingly, no Federal income or excise tax provision is
required.
(C) Deferred Organizational Costs--Costs incurred by the Fund
in connection with its organization and initial
registration and public offering of shares have been
deferred and are being amortized to expense over a
sixty-month period. These costs were advanced by the
Advisor and will be reimbursed by the Fund over a period
of not more than sixty months.
(D) Other--Investment security transactions are recorded on
the trade date. Dividend distributions to shareholders
are recorded on the ex-dividend date. Interest income is
recorded on the accrual basis and includes amortization of
premiums and discounts.
3. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain
officers and directors of the Fund are affiliated, provides investment
advisory services and shareholder recordkeeping and related services to
the Fund.
14
<PAGE> 13
The investment advisory fee, which is established by terms of the
Advisory Agreement, is based on an annualized rate of .50% of the
average daily net assets of the Fund. Advisory fees are subject to
reimbursement by the Advisor if the Fund's operating expenses exceed
certain levels. Shareholder recordkeeping and related service fees are
based on contractually established rates for each open and closed
shareholder account. In addition, the Advisor is compensated for certain
other services related to costs incurred for reports to shareholders.
4. INDUSTRY BREAKDOWN
The following is the industry breakdown calculated as a percentage of
net assets.
<TABLE>
<S> <C>
Agricultural Operation 2.96%
Automobile 7.14
Bank-Regional 3.29
Beverage-Soft Drink 2.83
Brokerage and Investment Management 6.20
Commercial Services 1.75
Consumer-Miscellaneous 0.82
Diversified Operation 3.96
Electric Power 0.02
Finance-Miscellaneous 15.13
Food 2.29
General Obligation 5.46
Healthcare-Drug/Diversified 0.75
Industrial Development Revenue 5.58
Insurance-Life 3.95
Leisure Product 3.14
Leisure Service 1.00
Mortgage and Related Service 6.45
Office Automation 0.02
Oil-North American Integrated 3.48
Personal and Commercial Lending 4.96
Retail-Major Chain 3.97
Saving and Loan 4.14
Telecommunication Service 1.64
Telephone 5.58
University Revenue 0.53
Water and Sewer Revenue 1.95
Yankee Corporate 1.00
Other Assets and Liabilities, Net 0.01
------
100.00%
======
</TABLE>
15
<PAGE> 14
The following presents information relating to a share of capital stock of the
Fund, outstanding for the entire period.
<TABLE>
<CAPTION>
1995**
----------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
Net Investment Income 0.01
Dividends from Net Investment Income (0.01)
----------
Net Asset Value, End of Period $ 1.00
==========
Total Return +1.0%
Net Assets, End of Period (In Thousands) $200,359
Ratio of Expenses to Average Net Assets 0.0%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.6%*
Ratio of Net Investment Income to Average Net Assets 6.0%*
</TABLE>
* Calculated on an annualized basis.
** For the period from June 29, 1995, inception, to August 31, 1995. Total
return is not annualized.
16
<PAGE> 15
SHAREHOLDER PRIVILEGES*
TELEPHONE PURCHASE
________________________________________________________________________________
Make additional investments into any Strong Fund by calling us toll-free at
1-800-368-3863.
TELEPHONE EXCHANGE
________________________________________________________________________________
If your financial goals change, you can exchange your investments between any
of the Strong Funds.
TELEPHONE REDEMPTION
________________________________________________________________________________
You can call toll-free to redeem your mutual fund shares at any time. Your
shares will be redeemed no later than the close of the next business day.
PAYROLL DIRECT DEPOSIT PLAN
________________________________________________________________________________
You can automatically transfer all or a portion of your net pay at each pay
period. This eliminates the delay of depositing paychecks to your bank and
then sending a check through the mail to Strong Funds.
AUTOMATIC EXCHANGE PLAN
________________________________________________________________________________
This plan allows you to exchange money from one Strong Fund to another. For
example, you may want to set up automatic exchanges from a money market fund
to an equity fund.
For more information about these privileges, call us at 1-800-368-3863.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household.
Please call 1-800-368-3863 if you wish to receive additional copies, free of
charge.
*Each Fund reserves the right to terminate or modify any of these privilges.
<PAGE> 16
FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030.
TO DISCUSS AN EXISTING ACCOUNT OR CONDUCT A TRANSACTION,
CALL 1-800-368-3863.
For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030. Please read it carefully
before investing or sending money. This semiannual report does not constitute
an offer for the sale of securities. Strong Funds are offered for sale via a
prospectus only. 1567195
[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
1-800-368-3863
