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THE STRONG
INSTITUTIONAL MONEY FUND
SEMI-ANNUAL REPORT o AUGUST 31, 1996
[PHOTO OF 2 MEN AND A WOMAN SEATED AT A TABLE]
[STRONG FUNDS LOGO]
STRONG FUNDS
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THE STRONG
INSTITUTIONAL MONEY FUND
SEMI-ANNUAL REPORT o AUGUST 31, 1996
Table of Contents
INVESTMENT REVIEW
The Strong Institutional Money Fund...............................2
FINANCIAL INFORMATION
Schedule of Investments in Securities.............................4
Statement of Operations...........................................6
Statement of Assets and Liabilities...............................6
Statement of Changes in Net Assets................................7
Notes to Financial Statements.....................................8
FINANCIAL HIGHLIGHTS.....................................................8
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The Strong INSTITUTIONAL MONEY Fund
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The Strong Institutional Money Market 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.
[PHOTO OF NICKELS]
THE FUND CONTINUED TO PERFORM WELL
The Strong Institutional Money Fund continued to provide a competitive yield,
ranking #5 of 141 (top 4%) for yield among institutional money funds tracked by
IBC's Money Fund Report(TM), a service of IBC Financial Data, Inc., for the 7
days ended 9-10-96.(1)
INTEREST RATES TAKE OFF
As 1996 began, the consensus economic view was for weak growth in the U.S.
economy. Gross domestic product estimates were being revised downward, and some
economists even projected a recession beginning in the first half of the year.
However, an unexpectedly strong employment report - indicating that a much
larger than anticipated number of jobs were created in February - shattered this
pessimistic view of the economy, and subsequent economic data tended to support
the idea that the economy was strengthening rather than weakening. As the
accompanying chart illustrates, the result was that interest rates staged an
abrupt reversal and headed higher. Short-term rates (as measured by 3-month
T-Bills) moved from 5.03% at the end of February to 5.28% by the end of August,
and this move was modest compared to that of longer maturities.
OUR STRATEGY: TRIM THE SAILS SLIGHTLY
Although the market's view of the economy changed a great deal during the last
six months, our view changed little over this period. We never expected a
recession to occur this year, while the market swung from fear of a recession to
an equal fear of too-rapid growth. Thus, we needed to make only slight
calibrations, rather than major shifts, to keep the Fund performing well.
As March began, the Fund was positioned somewhat aggressively, with an average
maturity of 55 days. This enabled the Fund to lock in attractive yields for a
longer period of time as interest rates trended down through the first two
months of 1996. When interest rates reversed course in March, we began to
gradually shorten the Fund's maturity to a more neutral maturity (between 40 and
50 days, generally). Shortening the Fund's maturity helped to reduce the
negative impact of rising rates. We maintained this neutral maturity through the
end of August.
RATES MAY MOVE SLIGHTLY HIGHER NEAR-TERM
During recent months, the economy has continued to show sustained strength,
particularly in the form of lower unemployment and hints of accelerating wage
2
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growth. As a result, there is a reasonable chance that the Federal Reserve will
raise short-term rates by 0.25%-0.50% before the year is out. In fact, the
market appears to have already priced in such a tightening by ratcheting up
short-term rates during July.
YIELD SUMMARY(1)
as of 9-10-96
7-Day Current Yield
5.37%
7-Day Effective Yield
5.51%
Average Maturity
as of 8-31-96
58 days
That said, from this point it is difficult to justify a sustained move in rates
in either direction, at least for the near term. In our view, the underlying
fundamentals of the U.S. bond market remain positive. We expect to see growth in
the gross domestic product near 2.5% this year, which we believe should pose no
threat to the current subdued level of inflation.
As always, we thank you for your confidence and remain committed to meeting your
investment needs in the future.
Cordially,
/s/ Jay N. Mueller
Jay N. Mueller
Portfolio Manager
[PHOTO OF JAY N. MUELLER]
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3-MONTH TREASURY BILL YIELDS HEADED HIGHER
3 month T-Bill yields through 8-30-96
Source: Bloomberg
2-96 5.03%
3-96 5.14%
4-96 5.15%
5-96 5.18%
6-96 5.16%
7-96 5.31%
8-96 5.28%
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(1) Yields are annualized for the 7-day period ended 9-10-96. Due to an
accounting adjustment, the yields reported for the 7-day period ended
8-30-96 were less than the yield actually produced by the Fund. The yields
for the 7-day period ended 9-10-96 are a more accurate representation of
the Fund's true yield. Effective yields reflect 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. Yields will fluctuate.
Currently, the Fund's Advisor has voluntarily agreed to maintain the Fund's
Total Operating Expenses at no more than 0.21%, resulting in a waiver of
0.35% in management fees. Without this waiver, the Fund's current yield
would have been 5.02%, and its effective yield would have been 5.15%.
3
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<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES August 31, 1996 (Unaudited)
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<CAPTION>
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (b) COST (NOTE 2)
(In Thousands) (In Thousands)
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<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT 1.5%
Advanta National Bank $2,000 5.18% 2/07/97 $ 2,009
COMMERCIAL PAPER 68.4%
Alamo Funding L.P. (Acquired 7/25/96; Cost $2,677) (a) 2,700 5.39 9/20/96 2,693
Anaheim, California Electric System 1,000 5.61 11/01/96 1,000
Anchor Funding Corporation (Acquired 7/01/96; Cost $4,933) (a) 5,000 5.50 9/26/96 4,982
Broadway Capital Corporation (Acquired 8/19/96; Cost $2,893) (a) 2,906 5.35 9/17/96 2,900
Calcot, Ltd. 3,000 5.47 9/06/96 2,999
Cigna Corporation 2,840 5.41 11/22/96 2,806
Coca-Cola Enterprises, Inc. 4,000 5.36 11/14/96 3,957
Creative Capital Corporation:
(Acquired 7/24/96; Cost $444) (a) 450 5.50 10/23/96 447
(Acquired 8/16/96; Cost $6,609) (a) 6,700 5.45 11/14/96 6,627
Dynamic Funding Corporation 5,000 5.56 10/07/96 4,974
2,000 5.50 10/15/96 1,987
Empire District Electric Company 895 5.35 9/18/96 893
Finova Capital Corporation 3,000 5.51 10/03/96 2,986
First Data Corporation 1,500 5.45 9/17/96 1,497
Guardian Industries Corporation 3,850 5.32 10/07/96 3,831
Heller Financial, Inc. 2,100 5.58 9/10/96 2,098
Locap, Inc. (Acquired 8/22/96; Cost $6,182) (a) 6,245 5.35 10/29/96 6,193
Mercury Finance Corporation 1,150 5.48 9/06/96 1,149
4,000 5.55 9/10/96 3,996
1,000 5.45 9/12/96 998
Mitsubishi Motor Credit of America, Inc. 4,000 5.40 11/04/96 3,963
New York City General Obligation 4,500 5.52 10/15/96 4,500
New York State Dormitory Authority 2,637 5.56 9/17/96 2,637
New York State Job Development Authority 3,200 5.57 11/12/96 3,200
Nynex Corporation 2,500 5.47 10/16/96 2,484
Oakland-Alameda County, California Coliseum Authority 4,000 5.43 11/21/96 4,000
Oklahoma State Investment Finance Authority 1,490 5.70 11/01/96 1,490
Salomon, Inc. 1,250 5.33 9/03/96 1,250
Sotheby's, Inc. 1,000 5.38 9/23/96 997
US WEST Capital Funding, Inc. 1,100 5.45 9/19/96 1,097
3,420 5.50 10/22/96 3,394
West Baton Rouge Parish, Louisiana 2,000 5.55 9/25/96 2,000
Wisconsin Electric Power Company 194 5.07 Upon Demand 194
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TOTAL COMMERCIAL PAPER 90,219
CORPORATE FLOATING RATE NOTES 1.4%
Lehman Brothers Holdings, Inc. Medium Term Notes, Tranche #4, 4.625% 1,870 5.98 10/15/96 1,867
CORPORATE OBLIGATIONS 12.8%
Banponce Financial Corporation Medium Term Notes, Tranche #34, 5.45% 2,000 6.03 1/07/97 1,996
GTE Finance Corporation, 9.78% 1,500 6.01 4/30/97 1,536
General Motors Acceptance Corporation Medium Term Notes, Tranche #254, 6.70% 3,000 5.66 4/21/97 3,019
MGM Grand Hotel Finance Corporation First Mortgage Floating Rate Notes, 12.00% 6,000 6.65 5/01/97 6,511
Public Service Electric and Gas Company First and Refunding Mortgage,
Series EE, 8.75% 3,551 6.01 11/01/96 3,809
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TOTAL CORPORATE OBLIGATIONS 16,871
TAXABLE MUNICIPAL VARIABLE RATE PUT BONDS 15.7%
Alabama State Industrial Development Authority Industrial Development Revenue 2,025 5.60 9/05/96 2,025
Bel Aire, LLC 2,200 5.60 9/05/96 2,200
Berks County, Pennsylvania Industrial Development Authority Industrial
Development Revenue 2,525 5.55 9/05/96 2,525
Gardena, California First-Time Homebuyer Refunding Program 1,300 5.75 9/04/96 1,300
Maine Regional Waste System, Inc. Solid Waste Resource Recovery Revenue 280 5.60 9/04/96 280
State of Virginia Housing Development Authority Multi-Family Housing Revenue 2,900 5.57 9/01/96 2,900
Tifton Mall, Inc. 2,000 5.60 9/05/96 2,000
WLB, LLC 6,500 5.60 9/05/96 6,500
West Hollywood, California Certificates of Participation - Capital Projects 890 5.75 9/05/96 890
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TOTAL TAXABLE MUNICIPAL VARIABLE RATE PUT BONDS 20,620
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TOTAL INVESTMENTS IN SECURITIES 99.8% 131,586
Other Assets and Liabilities, Net 0.2% 243
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NET ASSETS 100.0% $131,829
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See notes to financial statements.
4
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<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
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<S> <C>
Non-Agency Asset Backed ..................................................................................................16.5%
Industrial Development Revenue ...........................................................................................12.8
Personal & Commercial Lending ............................................................................................ 8.5
General Obligation ....................................................................................................... 6.6
Leisure Service .......................................................................................................... 5.6
Automobile ............................................................................................................... 5.3
Telecommunication Service ................................................................................................ 5.3
Parking Revenue .......................................................................................................... 4.9
Oil - North American Integrated .......................................................................................... 4.7
Bank - Regional .......................................................................................................... 3.0
Beverage - Soft Drink .................................................................................................... 3.0
Auto & Truck Parts ....................................................................................................... 2.9
Electric & Gas Utilities ................................................................................................. 2.9
Single Family Mortgage Revenue ........................................................................................... 2.7
Brokerage & Investment Management ........................................................................................ 2.4
Agricultural Operations .................................................................................................. 2.3
Finance - Miscellaneous .................................................................................................. 2.2
Insurance - Multi-Line ................................................................................................... 2.1
University Revenue ....................................................................................................... 2.0
Telecommunication ........................................................................................................ 1.2
Computer Service ......................................................................................................... 1.1
Consumer - Miscellaneous ................................................................................................. 0.8
Electric Utility ......................................................................................................... 0.7
Other Revenue ............................................................................................................ 0.2
Electric Power ........................................................................................................... 0.1
Other Assets and Liabilities, Net ........................................................................................ 0.2
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Total 100.0%
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LEGEND
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(a)Restricted security.
(b)Maturity date represents actual maturity, earliest put date, or for U.S.
Government Agency Securities, the next interest adjustment date.
All costs are stated in thousands.
Percentages are stated as a percent of net assets.
See notes to financial statements.
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STATEMENT OF OPERATIONS
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For the Six Months Ended August 31, 1996 (Unaudited)
(In Thousands)
INTEREST INCOME $3,566
EXPENSES:
Investment Advisory Fees 219
Custodian Fees 11
Shareholder Servicing Costs 18
Other 35
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Total Expenses before Waivers 283
Voluntary Fee Waivers by Advisor (150)
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Expenses, Net 133
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NET INVESTMENT INCOME $3,433
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STATEMENT OF ASSETS AND LIABILITIES
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August 31, 1996 (Unaudited)
(In Thousands, Except Per Share Amounts)
ASSETS:
Investments in Securities, at Amortized Cost $131,586
Interest Receivable 738
Other Assets 212
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Total Assets 132,536
LIABILITIES:
Dividends Payable 585
Accrued Operating Expenses and Other Liabilities 122
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Total Liabilities 707
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NET ASSETS $131,829
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Capital Shares Outstanding (Unlimited Number Authorized) 131,829
NET ASSET VALUE PER SHARE $1.00
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NET ASSETS CONSIST OF:
Capital (Par Value and Paid-In Capital) $131,829
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See notes to financial statements.
6
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STATEMENT OF CHANGES IN NET ASSETS
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<CAPTION>
(In Thousands)
SIX MONTHS ENDED PERIOD ENDED
AUG. 31, 1996 FEB. 29, 1996
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(UNAUDITED) (NOTE 1)
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 3,433 $ 1,769
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 303,607 347,284
Proceeds from Reinvestment of Dividends 2,450 1,036
Payment for Shares Redeemed (301,689) (220,959)
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Net Increase in Net Assets from Capital Share Transactions 4,368 127,361
DISTRIBUTIONS:
From Net Investment Income (3,433) (1,769)
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TOTAL INCREASE IN NET ASSETS 4,368 127,361
NET ASSETS:
Beginning of Period 127,461 100
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End of Period $131,829 $127,461
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TRANSACTIONS IN SHARES OF THE FUND:
Sold 303,607 347,284
Issued in Reinvestment of Distributions 2,450 1,036
Redeemed (301,689) (220,959)
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Net Increase 4,368 127,361
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7
See notes to financial statements.
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NOTES TO FINANCIAL STATEMENTS
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August 31, 1996 (Unaudited)
1. ORGANIZATION
The Strong Institutional Money Fund commenced operations on September 21,
1995, and is a diversified series of Strong Institutional Funds, Inc., an
open-end management investment company registered under the Investment
Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation -- Investments are valued using the amortized cost
method, which approximates current value. Amortized cost for Federal
income tax and financial reporting purposes is the same.
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
generally bears the costs, if any, associated with the disposition of
restricted securities. Aggregate cost and fair value of these restricted
securities at August 31, 1996 were (in thousands) $23,738 and $23,842,
respectively, representing 18.1% of the 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 its shareholders
in a manner which results in no tax cost to the Fund.
Accordingly, no Federal income or excise tax provision is required.
(C) 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. The
investment advisory fee, which is established by terms of the Advisory
Agreement, is based on an annualized rate of .35% of the average daily net
assets of the Fund. Advisory fees are subject to reimbursement by the
Advisor if the Fund's operating expenses exceed certain levels. Shareholder
recordkeeping and related service fees are based on contractually
established rates for each open and closed shareholder account. In addition,
the Advisor is compensated for certain other services related to costs
incurred for reports to shareholders.
The amount payable to the Advisor at August 31, 1996 and unaffiliated
directors' fees for the period then ended were (in thousands) $119 and $1,
respectively.
FINANCIAL HIGHLIGHTS
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SIX MONTHS PERIOD ENDED
ENDED AUG.31 FEB.29
1996(a) 1996(b)
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(Unaudited) (Note 1)
SELECTED PER-SHARE DATA
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NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
Net Investment Income 0.03 0.03
Dividends from Net Investment Income (0.03) (0.03)
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NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
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TOTAL RETURN +2.8% +2.6%
RATIOS AND SUPPLEMENTAL DATA
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Net Assets, End of Period (In Thousands) $131,829 $127,461
Ratio of Expenses to Average Net Assets 0.2%* 0.2%*
Ratio of Expenses to Average Net Assets
Without Waivers 0.4%* 0.4%*
Ratio of Net Investment Income to Average
Net Assets 5.4%* 5.6%*
* Calculated on an annualized basis.
(a)Total return is not annualized.
(b)For the period from September 21, 1995 (inception) to February 29, 1996.
Total return is not annualized.
8
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FOR LITERATURE AND INFORMATION REQUESTS,
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-733-CASH(2274).
For a prospectus containing more complete information, including
management fees and expenses, please call 1-800-733-CASH(2274). Please
read it carefully before investing or sending money. This annual
report does not constitute an offer for the sale of securities. Strong
Funds are offered for sale by prospectus only.
[STRONG LOGO]
STRONG CAPITAL MANAGEMENT, INC.
P.O. Box 782
Milwaukee, Wisconsin 53201
3616I96O
