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THE STRONG
INSTITUTIONAL MONEY FUND
ANNUAL REPORT - FEBRUARY 29, 1996
[COVER ART AND PHOTO]
[STRONG LOGO]
STRONG FUNDS
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THE STRONG
INSTITUTIONAL MONEY FUND
ANNUAL REPORT - FEBRUARY 29, 1996
Table of Contents
<TABLE>
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . . 7
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
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The Strong INSTITUTIONAL MONEY Fund
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The Strong Institutional Money Fund seeks current income, a stable share price,
and daily liquidity(1). The Fund is designed for institutional investors who are
seeking a high rate of return, a stable net asset value, and convenient
liquidation privileges. The Fund's minimum account size is $2,000,000.
[COIN PICTURE]
Strong Performance and Asset Growth
In its short history, the Strong Institutional Money Fund has provided
shareholders with consistently good yields. For the 7 days ended February 27,
1996, the Fund ranked #9 for yield among the 119 institutional money market
funds tracked by IBC/Donoghue(2). We had presumed that good performance would
lead to asset growth in the Fund and, in fact, assets under management grew to
$127 million by the end of February.
Positioned for Interest-Rate Cuts
Money market rates fell since the Fund's inception on 9-21-95 through
the end of February, eased downward by cuts in short-term lending rates. In
well-anticipated moves, the Federal Reserve Open Market Committee cut its
target Fed Funds rate to 5.50% from 5.75% in December 1995, and again to 5.25%
from 5.50% in January of this year. Money rates had begun to fall prior to the
December move, and continued to decline after each cut.
The Fund was reasonably well prepared for the rate cuts, having maintained a
longer-than-neutral portfolio maturity throughout the period. However, an
inversion in the yield curve that emerged during December made it expensive to
push average maturity out further. The Fund had an average maturity of 57 days
at the end of February, which compares to a neutral range of 40 to 50 days.
Near-Term Outlook for Lower Rates
We expect current economic conditions--including slow-to-moderate GDP growth,
low inflation, and a stable-to-firmer dollar--to persist over the next few
quarters. Under these circumstances, we anticipate the Fed will move again to
cut rates, and that we will see short-term rates at 5% before the end of the
year. Consequently, we expect to continue the Fund's stance of a
longer-than-neutral average maturity.
The upcoming presidential election, along with the breakdown in budget talks,
clouds the future for longer-term rates at this time.
2
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Any meaningful budget reform is now unlikely in 1996, and we expect fiscal
policy will continue to be restrictive--but less so than previously thought.
Monetary policy should continue to be biased toward ease until the "soft
landing" is complete, although whether that will be this year or next year is
uncertain.
Despite conflicting data, we believe economic fundamentals are still positive
for interest rates--U.S. economic growth is clearly below potential, suggesting
few inflationary pressures, and creating a favorable combination for income
investors.
We thank you for your confidence and remain committed to meeting your
investment needs in the future.
Cordially,
Jay N. Mueller
Portfolio Manager
[Mueller Pic]
Yield Summary(3)
(as of 2-29-96)
7-DAY CURRENT YIELD
5.29%
7-DAY EFFECTIVE YIELD
5.43%
AVERAGE MATURITY
57 days
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<TABLE>
<CAPTION>
3-Month Treasury Bill Yields
from 3-95 to 2-96
<S> <C> <C> <C>
3-95 5.87% 9-95 5.41%
4-95 5.87% 10-95 5.50%
5-95 5.80% 11-95 5.49%
6-95 5.57% 12-95 5.08%
7-95 5.58% 1-96 5.05%
8-95 5.45% 2-96 5.01%
Source: Bloomberg
</TABLE>
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1 An investment in the Fund is neither insured nor guaranteed by the
U.S. government. There can be no assurance that the Fund will be able
to maintain a stable net asset value of $1.00 per share.
2 Source: IBC's Money Fund Report.(R) Rankings are historical and do not
represent future performance.
3 Yields are annualized for the 7-day period ended February 29, 1996.
Effective yield reflects the compounding of income. The Fund's advisor
temporarily waived fees of .20% during the 7-day period ended February
29, 1996. Otherwise, the Fund's current and effective yields would
have been 5.09% and 5.22%, respectively. Yields are historical and do
not represent future yields, which will fluctuate.
3
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SCHEDULE OF INVESTMENTS IN SECURITIES February 29, 1996
<TABLE>
<CAPTION>
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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>
CERTIFICATE OF DEPOSIT 1.6%
Advanta National Bank $2,000 5.17% 2/07/97 $ 2,020
CORPORATE COMMERCIAL PAPER 73.8%
American Family Financial Services, Inc. 26 4.94 Upon Demand 26
Anthem Financial, Inc. 2,200 5.25 4/18/96 2,185
Aristar, Inc. 2,310 5.22 4/08/96 2,297
Astro Capital Corporation 1,000 5.30 3/01/96 1,000
Creative Capital Corporation 3,000 5.22 5/07/96 2,971
Diamond Asset Funding Corporation 5,200 5.20 3/29/96 5,179
Dynamic Funding Corporation 2,708 5.55 4/01/96 2,695
2,300 5.25 4/18/96 2,284
2,000 5.25 4/25/96 1,984
Embarcadero Center Associates 6,250 5.30 3/21/96 6,232
Finova Capital Corporation 2,400 5.24 4/03/96 2,388
2,700 5.28 4/04/96 2,687
2,000 5.30 4/12/96 1,988
Fleetwood Credit Corporation 1,534 5.29 3/06/96 1,533
Frontier Corporation 2,000 5.70 3/19/96 1,994
GTE Finance Corporation 6,000 5.29 3/28/96 5,976
General Signal Corporation (Acquired 2/23/96; Cost $300) (a) 300 5.25 3/01/96 300
Heller Financial, Inc. 5,000 5.33 6/24/96 4,915
Hilton Hotels Corporation 3,000 5.35 3/04/96 2,999
Jet Funding Corporation 2,800 5.25 4/01/96 2,787
Lehman Brothers Holdings, Inc. 3,400 5.17 5/07/96 3,367
Mercury Finance Corporation 2,000 5.31 4/26/96 1,983
900 5.25 5/10/96 891
3,000 5.27 5/23/96 2,964
1,000 5.45 6/21/96 983
Mitsubishi Motors Credit of America, Inc. 1,960 5.45 3/25/96 1,953
New York State Job Development Authority 3,200 5.22 8/09/96 3,200
Orix America, Inc. 3,000 5.20 5/15/96 2,968
1,600 5.25 7/15/96 1,568
2,000 5.24 7/26/96 1,957
Salomon, Inc. 2,000 5.55 3/01/96 2,000
Sapphire Funding Corporation 1,000 5.25 5/17/96 989
Spintab AB 2,200 5.49 4/15/96 2,185
2,985 5.38 4/19/96 2,963
Stellar Capital Corporation 3,500 5.50 3/11/96 3,495
Sunshine State Government Finance 2,000 5.75 3/20/96 1,994
Tri-Lateral Capital, Inc. 2,700 5.60 4/04/96 2,686
Whirlpool Corporation 1,500 5.26 4/11/96 1,490
Wisconsin Electric Power Company 40 4.98 Upon Demand 40
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TOTAL CORPORATE COMMERCIAL PAPER 94,096
CORPORATE OBLIGATIONS 11.8%
AT & T Capital Corporation Medium Term Notes, 6.30%, Tranche #440 2,020 6.01 7/25/96 2,022
Chrysler Financial Corporation Notes, 10.34% 3,390 6.30 5/15/96 3,418
General Motors Acceptance Corporation Medium Term Notes:
Tranche #428, 6.375% 1,600 5.77 5/23/96 1,602
Tranche #694, 8.70% 1,000 6.13 8/02/96 1,011
Lehman Brothers Holdings, Inc. Medium Term Notes, 4.625%, Tranche #004 1,870 6.07 10/15/96 1,854
Shawmut Corporation Notes, 8.875% 2,600 6.02 4/01/96 2,606
Smith Barney Holdings, Inc. Notes, 5.375% 2,500 6.02 6/01/96 2,496
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TOTAL CORPORATE OBLIGATIONS 15,009
</TABLE>
See notes to financial statements.
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<TABLE>
<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>
TAXABLE MUNICIPAL VARIABLE RATE PUT BONDS 12.8%
Bel Aire, L.L.C. $2,200 5.50% 3/07/96 $ 2,200
Berks County, Pennsylvania Industrial Development
Authority Industrial Development Revenue 2,575 5.65 3/07/96 2,575
Gardena, California First-Time Homebuyer Refunding Program 1,300 5.75 3/06/96 1,300
State of Virginia Housing Development Authority
Multi-Family Housing Revenue 2,900 5.54 3/01/96 2,900
WLB, L.L.C. 6,500 5.50 3/07/96 6,500
West Hollywood, California Certificates of
Participation - Capital Projects 890 5.70 3/07/96 890
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TOTAL TAXABLE MUNICIPAL VARIABLE RATE PUT BONDS 16,365
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TOTAL INVESTMENTS IN SECURITIES 100.0% 127,490
Other Assets and Liabilities, Net 0.0% (29)
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NET ASSETS 100.0% $127,461
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</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
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<S> <C>
Non-Agency Asset-Backed 20.5%
Personal & Commercial Lending 19.8
Brokerage & Investment Management 7.6
Automobile 6.3
Industrial Development Revenue 5.9
Finance - Miscellaneous 5.1
Parking Revenue 5.1
Commercial Service 4.9
Telephone 4.7
Yankee Corporate 4.0
Leisure Service 3.1
Single Family Mortgage Revenue 2.7
General Obligation 2.5
Bank - Super Regional 2.0
Bank - Regional 1.6
Telecommunication Service 1.6
Household Appliance & Furnishings 1.2
Manufacturing 1.2
Electrical Equipment 0.2
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Total 100.0%
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</TABLE>
LEGEND
(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.
5
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STATEMENT OF OPERATIONS
For the Period from September 21, 1995 (inception) to February 29, 1996
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
INTEREST INCOME $1,834
EXPENSES:
Investment Advisory Fees 113
Custodian Fees 4
Shareholder Servicing Costs 9
Other 5
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Total Expenses before Waivers 131
Voluntary Fee Waivers by Advisor (66)
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Expenses, Net 65
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NET INVESTMENT INCOME $1,769
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</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
February 29, 1996
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
<S> <C>
ASSETS:
Investments in Securities, at Amortized Cost $ 127,490
Interest Receivable 399
Other 181
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Total Assets 128,070
LIABILITIES:
Dividends Payable 471
Accrued Operating Expenses and Other Liabilities 138
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Total Liabilities 609
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NET ASSETS $ 127,461
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Capital Shares
Authorized 10,000,000
Outstanding 127,461
NET ASSET VALUE PER SHARE $ 1.00
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NET ASSETS CONSIST OF:
Capital (Par Value and Paid-In Capital) $ 127,461
===========
</TABLE>
See notes to financial statements.
6
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STATEMENT OF CHANGES IN NET ASSETS
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For the Period from September 21, 1995 (inception) to February 29, 1996
<TABLE>
<CAPTION>
<S> <C>
(In Thousands)
OPERATIONS:
Net Investment Income $ 1,769
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 347,284
Proceeds from Reinvestment of Dividends 1,036
Payment for Shares Redeemed (220,959)
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Net Increase in Net Assets from Capital Share Transactions 127,361
DISTRIBUTIONS:
From Net Investment Income (1,769)
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TOTAL INCREASE IN NET ASSETS 127,361
NET ASSETS:
Beginning of Period 100
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End of Period $127,461
========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 347,284
Issued in Reinvestment of Distributions 1,036
Redeemed (220,959)
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Net Increase 127,361
========
</TABLE>
See notes to financial statements.
NOTES TO FINANCIAL STATEMENTS
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February 29, 1996
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 February 29, 1996 was (in thousands) $300,
representing 0.2% 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 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 February 29, 1996 and unaffiliated
directors' fees for the period then ended were (in thousands) $136 and
$1, respectively.
7
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FINANCIAL HIGHLIGHTS
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The following presents information relating to a share of capital stock
of the Fund, outstanding for the entire period.
<TABLE>
<CAPTION>
1996(a)
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(NOTE 1)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
Net Investment Income 0.03
Dividends from Net Investment Income (0.03)
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NET ASSET VALUE, END OF PERIOD $ 1.00
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Total Return +2.6%
Net Assets, End of Period (In Thousands) $127,461
Ratio of Expenses to Average Net Assets 0.2%*
Ratio of Expenses to Average Net Assets
Without Waivers 0.4%*
Ratio of Net Investment Income to Average Net Assets 5.6%*
</TABLE>
* Calculated on an annualized basis.
(a) For the period from September 21, 1995 (inception) to February 29,
1996. Total return is not annualized.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of the
Strong Institutional Money Fund
We have audited the accompanying statement of assets and liabilities of Strong
Institutional Money Fund (one of the portfolios constituting the Strong
Institutional Funds, Inc.), including the schedule of investments in
securities, as of February 29, 1996, and the related statements of operations
and changes in net assets, and financial highlights for the period from
September 21, 1995 (inception) to February 29, 1996. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of February 29, 1996 by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Strong Institutional Money Fund as of February 29, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for the
period from September 21, 1995 to February 29, 1996, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
March 20, 1996
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 FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
http://www.strong-funds.com
