<PAGE>
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THE STRONG
INSTITUTIONAL MONEY FUND
SEMI-ANNUAL REPORT o AUGUST 31, 1997
[PHOTO OF ROUNDTABLE FINANCIAL PLANNING DISCUSSION]
[STRONG LOGO]
STRONG FUNDS
<PAGE>
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THE STRONG
INSTITUTIONAL MONEY FUND
SEMI-ANNUAL REPORT o AUGUST 31, 1997
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Institutional Money Fund ..................................2
FINANCIAL INFORMATION
Schedule of Investments in Securities ................................4
Statement of Assets and Liabilities ..................................6
Statement of Operations ..............................................7
Statement of Changes in Net Assets ...................................7
Notes to Financial Statements ........................................8
FINANCIAL HIGHLIGHTS ......................................................8
<PAGE>
THE STRONG INSTITUTIONAL MONEY FUND
THE RELATIVE STABILITY OF SHORT-TERM INTEREST RATES CAN BE ATTRIBUTED TO A
CONSISTENTLY BENIGN ECONOMIC ENVIRONMENT.
The Strong Institutional 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.(1)
================================
YIELD SUMMARY(2)
As of 8-29-97
================================
7-DAY CURRENT YIELD 5.51%
7-DAY EFFECTIVE YIELD 5.66%
AVERAGE MATURITY 34 DAYS
================================
The Strong Institutional Money Fund continued to perform well over the past six
months. Through August 31, 1997, Lipper Analytical Services, Inc. ranked the
Fund in the top 4% of institutional money funds for the 1-year and
since-inception periods, and in the top 20% of the category for the 6-month
period, out of 169, 156, and 176 institutional money market funds, respectively,
based on total returns.(2)
At the beginning of the Fund's fiscal year in March, money market yields rose in
anticipation of an interest-rate hike from the Federal Reserve. The Fed obliged
in late March by raising its target rate for Federal Funds by 25 basis points to
5.50%. Following the Fed's move, short-term rates stabilized. Commercial paper
yields ended the six-month period higher, exactly reflecting the amount of the
Fed's rate hike.
The relative stability of short-term interest rates can be attributed to a
consistently benign economic environment. While Gross Domestic Product growth
has remained firm, no signs of a significant risk of higher inflation have
emerged. The absence of inflationary pressure, in turn, has kept the Federal
Reserve on the sidelines since the rate increase in March. With no realistic
threat of a change in monetary policy, money market rates have had little reason
to vary.
The very low degree of volatility in short-term rates has kept us from using
duration management to add value to the Fund for most of 1997. Because our
analysis has indicated that the Federal Reserve has had no reason to either
raise or lower its rate targets, we have maintained a neutral average maturity.
Similarly, the shape of the money market yield curve has remained fairly stable,
particularly over the past three months, preventing us from making strategic
plays to benefit from any shifts in it.
2
<PAGE>
Therefore, our primary means of adding value over the past six months has been
through security selection. Certain issues of asset-backed commercial paper in
particular have offered us the opportunity to pick up a few extra basis points
of yield.
OUTLOOK
We don't see too many clouds on the horizon at present. The most likely scenario
we envision is that the U.S. economy will continue to generate decent growth
with little inflationary pressure.
Even with both labor and industrial production running near capacity, the
tendency for consumer and producer prices to move upward has yet to
appear in this economic cycle. With inflation tame, employment high, and growth
satisfactory, the Federal Reserve is likely to leave monetary policy on hold for
the next quarter or two. Consequently, short-term interest rates should continue
to be fairly stable. Thus we intend to keep our portfolio approach unchanged.
[PHOTO OF JAY N. MUELLER]
As always, we thank you for your confidence. We remain committed to meeting your
investment needs in the future.
Sincerely,
/s/Jay N. Mueller
Jay N. Mueller
Portfolio Manager
1 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.
2 Yields are annualized for the 7-day period ended 8-29-97. Effective yields
reflect the compounding of income. 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 0.20% in
management fees. Without this waiver, the Fund's current yield would have
been 5.31%, and its effective yield would have been 5.45%.
3
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<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES August 31, 1997 (Unaudited)
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<CAPTION>
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (b) COST (NOTE 2)
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CERTIFICATES OF DEPOSIT 7.0%
<S> <C> <C> <C> <C>
Deutsche Bank AG New York, 6.18% $4,000,000 6.20% 4/03/98 $ 3,999,554
Huntington National Bank, 6.25% 5,000,000 6.28 4/24/98 4,999,084
National Bank of Canada, 5.87% 5,000,000 5.87 9/29/97 5,000,000
Societe Generale:
6.08% 2,000,000 6.11 3/27/98 1,999,677
6.34% 3,000,000 6.38 4/16/98 2,999,292
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TOTAL CERTIFICATES OF DEPOSIT 18,997,607
COMMERCIAL PAPER 82.0%
AESOP Funding Corporation (Acquired 7/24/97; Cost $3,476,923) (a) 3,500,000 5.52 9/05/97 3,498,390
Alamo Funding L.P. (Acquired 7/30/97; Cost $396,670) (a) 400,000 5.55 9/22/97 398,767
AlliedSignal, Inc. 2,000,000 5.54 9/24/97 1,993,229
AlliedSignal, Inc. (Acquired 8/22/97; Cost $1,822,744) (a) 1,830,000 5.49 9/17/97 1,825,814
Alpine Securitization Corporation (Acquired 8/12/97; Cost $2,987,073) (a) 3,000,000 5.54 9/09/97 2,996,768
American Home Products Corporation (Acquired 8/29/97; Cost $2,998,140) (a) 3,000,000 5.58 9/02/97 3,000,000
Anaheim, California Electric System 3,500,000 5.60 9/02/97 3,500,000
Aon Corporation 3,500,000 5.57 9/05/97 3,498,375
Aristar, Inc. 2,500,000 5.59 9/04/97 2,499,224
Astro Capital Corporation (Acquired 8/15/97; Cost $3,471,588) (a) 3,500,000 5.62 10/06/97 3,481,423
Avon Capital Corporation (Acquired 6/25/97; Cost $3,946,828) (a) 4,000,000 5.63 9/18/97 3,989,991
B.A.T. Capital Corporation 1,800,000 5.56 9/18/97 1,795,552
Banner Receivables Corporation:
(Acquired 8/01/97; Cost $1,490,717) (a) 1,500,000 5.57 9/10/97 1,498,143
(Acquired 8/14/97; Cost $1,990,978) (a) 2,000,000 5.60 9/12/97 1,996,889
Barnett Banks, Inc. 3,500,000 5.51 9/19/97 3,490,893
Barton Capital Corporation (Acquired 8/29/97; Cost $2,581,562) (a) 2,600,000 5.55 10/14/97 2,583,165
Brazos River Authority, Texas Pollution Control Revenue 3,000,000 5.54 9/12/97 3,000,000
Budget Funding Corporation 3,000,000 5.55 10/01/97 2,986,587
CSC Enterprises 1,500,000 5.55 10/09/97 1,491,444
Calcot, Ltd. 3,000,000 5.60 9/24/97 2,989,733
Cigna Corporation 2,000,000 5.58 9/23/97 1,993,490
1,000,000 5.60 9/25/97 996,422
Cooper Industries, Inc. 3,200,000 5.63 9/02/97 3,200,000
Countrywide Home Loans 1,500,000 5.57 9/08/97 1,498,607
Delaware Funding Corporation (Acquired 8/19/97; Cost $1,787,155) (a) 1,791,000 5.52 9/02/97 1,791,000
Walt Disney Company 4,000,000 5.57 9/02/97 4,000,000
Duke Capital Corporation (Acquired 8/29/97; Cost $3,497,811) (a) 3,500,000 5.63 9/02/97 3,500,000
Equitable of Iowa Companies 3,300,000 5.56 10/02/97 3,284,710
Eureka Securitization, Inc. (Acquired 8/20/97; Cost $3,473,703) (a) 3,500,000 5.52 10/08/97 3,480,680
FP Funding Corporation (Acquired 8/05/97; Cost $2,985,147) (a) 3,000,000 5.57 9/08/97 2,997,215
Finova Capital Corporation 3,500,000 5.54 9/11/97 3,495,153
Franklin Resources, Inc.:
(Acquired 8/11/97; Cost $1,494,480) (a) 1,500,000 5.52 9/04/97 1,499,540
(Acquired 8/06/97; Cost $1,486,635) (a) 1,500,000 5.53 10/03/97 1,492,857
Frigate Funding Corporation (Acquired 8/04/97; Cost $3,477,338) (a) 3,500,000 5.55 9/15/97 3,492,985
Frontier Corporation (Acquired 8/22/97; Cost $3,492,985) (a) 3,500,000 5.55 9/04/97 3,498,921
Fundex Corporation 3,544,000 5.58 9/10/97 3,539,605
GTE Corporation 3,000,000 5.54 9/26/97 2,988,920
General Electric Capital Corporation 3,000,000 5.53 1/14/98 2,938,248
Goldman Sachs Group LP 3,000,000 5.53 9/09/97 2,996,774
Gotham Funding Corporation (Acquired 8/07/97; Cost $1,990,098) (a) 2,000,000 5.57 9/08/97 1,998,143
Green Tree Financial Corporation 3,000,000 5.69 9/03/97 2,999,526
Harris County, Texas Industrial Development Corporation
Solid Waste Disposal Revenue (Acquired 8/18/97; Cost $3,000,000) (a) 3,000,000 5.58 9/08/97 3,000,000
Heller Financial, Inc. 3,000,000 5.65 9/17/97 2,992,938
Household International, Inc. (Acquired 7/23/97; Cost $2,980,680) (a) 3,000,000 5.52 9/03/97 2,999,540
Industrial Funding Corporation 1,500,000 5.60 9/02/97 1,500,000
International Securitization Corporation:
(Acquired 8/07/97; Cost $896,136) (a) 900,000 5.52 9/04/97 899,724
(Acquired 8/21/97; Cost $1,992,012) (a) 2,000,000 5.53 9/16/97 1,995,699
Johnson Controls, Inc. 71,100 5.22 Upon Demand 71,100
Knight-Ridder, Inc. 1,190,000 5.60 9/23/97 1,186,113
Korea Development Bank 3,500,000 5.77 9/18/97 3,491,024
LaSalle National Bank 1,000,000 5.52 10/08/97 994,480
Lexington Parker Capital Corporation (Acquired 8/13/97; Cost $2,987,050) (a) 3,000,000 5.55 9/10/97 2,996,300
MEPC Finance, Inc. (Acquired 8/01/97; Cost $2,483,725) (a) 2,500,000 5.58 9/12/97 2,496,125
See notes to financial statements.
</TABLE>
4
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<TABLE>
<CAPTION>
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (b) COST (NOTE 2)
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<S> <C> <C> <C> <C>
Martin Marietta Materials, Inc. (Acquired 7/03/97; Cost $2,971,228) (a) $3,000,000 5.66% 9/02/97 $ 3,000,000
Matson Navigation Company, Inc. 3,000,000 5.50 10/07/97 2,983,958
Merrill Lynch & Company, Inc. 350,000 5.52 9/10/97 349,571
1,630,000 5.52 9/11/97 1,627,751
Monsanto Company 3,500,000 5.50 11/07/97 3,464,708
Newell Company (Acquired 8/29/97; Cost $3,482,194) (a) 3,500,000 5.55 10/01/97 3,484,352
Oakland-Alameda County, California Coliseum Authority 3,500,000 5.56 10/02/97 3,500,000
Old Line Funding Corporation:
(Acquired 8/18/97; Cost $995,691) (a) 1,000,000 5.54 9/15/97 997,999
(Acquired 8/11/97; Cost $995,529) (a) 1,000,000 5.55 9/09/97 998,921
(Acquired 8/14/97; Cost $995,067) (a) 1,000,000 5.55 9/15/97 997,996
PG&E Corporation (Acquired 8/21/97; Cost $2,282,430) (a) 2,300,000 5.50 10/10/97 2,286,647
Philip Morris Capital Corporation 3,500,000 5.53 9/02/97 3,500,000
SRD Finance, Inc. 3,000,000 5.60 10/02/97 2,986,000
SAFECO Credit Company, Inc. 3,500,000 5.57 9/10/97 3,495,668
Salomon, Inc. 3,500,000 5.61 9/02/97 3,500,000
Sanwa Business Credit Corporation 3,000,000 5.60 9/11/97 2,995,800
Seiko Corporation of America 1,000,000 5.63 10/09/97 994,214
Sigma Finance, Inc. (Acquired 8/29/97; Cost $1,981,808) (a) 2,000,000 5.55 10/27/97 1,983,042
Smith Barney Holdings, Inc. 3,000,000 5.52 10/03/97 2,985,740
Sony Capital Corporation (Acquired 8/22/97; Cost $3,407,696) (a) 3,415,000 5.50 9/05/97 3,413,435
Southern California Gas Company (Acquired 8/22/97; Cost $1,665,152) (a) 1,670,000 5.50 9/10/97 1,667,959
Strait Capital Corporation 1,000,000 5.60 10/15/97 993,311
2,474,000 5.60 10/31/97 2,451,294
Strategic Asset Funding Corporation (Acquired 8/08/97; Cost $3,207,014) (a) 3,223,000 5.58 9/09/97 3,219,503
Tambrands, Inc. 2,000,000 5.80 10/07/97 1,988,722
Torchmark Corporation 3,300,000 5.55 9/05/97 3,298,474
Tribune Company (Acquired 8/25/97; Cost $2,346,015) (a) 2,350,000 5.55 9/05/97 2,348,913
Tri-Lateral Capital, Inc. (Acquired 8/20/97; Cost $3,331,901) (a) 3,349,000 5.57 9/22/97 3,338,637
Triple-A One Funding Corporation (Acquired 8/21/97; Cost $1,999,160) (a) 2,009,000 5.51 9/22/97 2,002,850
UNIfunding, Inc. 4,400,000 5.70 11/12/97 4,350,537
Variable Funding Capital Corporation:
(Acquired 8/06/97; Cost $1,463,677) (a) 1,470,000 5.53 9/03/97 1,469,774
(Acquired 7/17/97; Cost $1,333,803) (a) 1,345,000 5.55 9/09/97 1,343,549
Wisconsin Electric Power Company 202,700 5.24 Upon Demand 202,700
Wood Street Funding Corporation (Acquired 8/19/97; Cost $1,992,627) (a) 2,000,000 5.53 9/12/97 1,996,928
Working Capital Management Company, Limited Partnership
(Acquired 8/18/97; Cost $3,479,422) (a) 3,500,000 5.57 9/25/97 3,487,545
Xerox Corporation 3,500,000 5.48 9/22/97 3,489,344
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TOTAL COMMERCIAL PAPER 222,016,068
CORPORATE OBLIGATIONS 1.9%
General Motors Acceptance Corporation Medium Term Notes, Tranche #598, 7.50% 3,000,000 5.85 11/04/97 3,008,521
Johnson Controls, Inc. Medium Term Notes, Tranche #8, 7.18% 2,000,000 6.04 10/03/97 2,001,972
------------
TOTAL CORPORATE OBLIGATIONS 5,010,493
TAXABLE VARIABLE RATE PUT BONDS 7.7%
Alabama State Industrial Development Authority Industrial Development Revenue 1,800,000 5.70 9/04/97 1,800,000
Bel Aire, LLC 2,160,000 5.70 9/04/97 2,160,000
Berks County, Pennsylvania Industrial Development Authority Industrial
Development Revenue 2,460,000 5.75 9/03/97 2,460,000
Gardena, California First-Time Homebuyer Refunding Program 1,285,000 5.85 9/03/97 1,285,000
Maine Regional Waste System, Inc. Solid Waste Resource Recovery Revenue 280,000 5.65 9/03/97 280,000
Nufunding, Inc. Adjustable Rate Taxable Health Care Revenue 5,000,000 5.73 9/03/97 5,000,000
Tifton Mall, Inc. 1,950,000 5.70 9/04/97 1,950,000
Virginia Housing Development Authority Multi-Family Housing Revenue 2,900,000 5.73 9/02/97 2,900,000
WLB, LLC 2,000,000 5.70 9/04/97 2,000,000
West Hollywood, California Certificates of Participation - Capital Projects 1,175,000 5.80 9/04/97 1,175,000
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TOTAL TAXABLE VARIABLE RATE PUT BONDS 21,010,000
UNITED STATES GOVERNMENT & AGENCY ISSUES 1.5%
Federal Home Loan Banks Consolidated Bonds, 5.78% 4,000,000 5.78 1/28/98 4,000,000
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TOTAL INVESTMENTS IN SECURITIES 100.1% 271,034,168
Other Assets and Liabilities, Net (0.1%) (335,331)
------------
NET ASSETS 100.0% $270,698,837
============
5
See notes to financial statements.
</TABLE>
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SCHEDULE OF INVESTMENTS IN SECURITIES (continued) August 31, 1997 (Unaudited)
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PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- --------------------------------------------------------------------------------
Non-Agency Asset-Backed ............................ 22.5%
Bank - Super Regional .............................. 6.5
Brokerage & Investment Management .................. 5.3
Bank - Regional .................................... 5.1
Industrial Development Revenue ..................... 4.7
Personal & Commercial Lending ...................... 4.6
Finance - Miscellaneous ............................ 4.4
Insurance - Diversified ............................ 2.4
Insurance - Life ................................... 2.4
Pollution Control Revenue .......................... 2.3
Cosmetic & Personal Care ........................... 2.2
Diversified Operations ............................. 2.2
Electric Power ..................................... 2.2
Real Estate ........................................ 2.0
Tobacco ............................................ 2.0
General Obligation ................................. 1.7
Healthcare - Patient Care .......................... 1.7
Mortgage & Related Service ......................... 1.7
FHLMC .............................................. 1.5
Leisure Product .................................... 1.5
Chemical ........................................... 1.3
Household Appliances & Furnishings ................. 1.3
Insurance - Property & Casualty .................... 1.3
Media - Publishing ................................. 1.3
Office Automation .................................. 1.3
Single Family Mortgage Revenue ..................... 1.3
Telecommunication Service .......................... 1.3
Machinery - Miscellaneous .......................... 1.2
Agricultural Operations ............................ 1.1
Automobile ......................................... 1.1
Electrical Equipment ............................... 1.1
Healthcare - Drug/Diversified ...................... 1.1
Metals & Mining .................................... 1.1
Shipping ........................................... 1.1
Telephone .......................................... 1.1
Savings & Loan ..................................... 0.9
Other Revenue ...................................... 0.7
Computer Service ................................... 0.6
Gas Utility ........................................ 0.6
Consumer - Miscellaneous ........................... 0.4
Other Assets and Liabilities, Net .................. (0.1)
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Total 100.0%
=====
LEGEND
- ------
(a) Restricted security.
(b) Maturity date represents actual maturity or the longer of the next put date
or interest adjustment date. For U.S. Government Agency Securities, maturity
date represents actual maturity or the next interest adjustment date.
Percentages are stated as a percent of net assets.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
August 31, 1997 (Unaudited)
ASSETS:
Investments in Securities, at Amortized Cost $271,034,168
Interest Receivable 923,603
Other Assets 115,571
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Total Assets 272,073,342
LIABILITIES:
Dividends Payable 1,252,636
Accrued Operating Expenses and Other Liabilities 121,869
------------
Total Liabilities 1,374,505
------------
NET ASSETS $270,698,837
============
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $270,698,837
============
Capital Shares Outstanding (Unlimited Number Authorized) 270,698,837
NET ASSET VALUE PER SHARE $1.00
=====
See notes to financial statements.
6
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended August 31, 1997 (Unaudited)
INTEREST INCOME $8,762,798
EXPENSES:
Investment Advisory Fees 538,436
Custodian Fees 15,765
Shareholder Servicing Costs 49,110
Federal and State Registration Fees 32,100
Other 20,728
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Total Expenses before Waivers and Absorptions by Advisor 656,139
Voluntary Expense Waivers and Absorptions by Advisor (332,249)
----------
Expenses, Net 323,890
----------
NET INVESTMENT INCOME $8,438,908
==========
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
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<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEB. 28, 1997
--------------- --------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 8,438,908 $ 10,026,949
Net Realized Loss -- (2,448,005)
------------ --------------
Increase in Net Assets Resulting from Operations 8,438,908 7,578,944
DISTRIBUTIONS:
From Net Investment Income (8,438,908) (10,026,949)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 575,911,877 1,126,703,545
Proceeds from Reinvestment of Dividends 4,966,079 6,979,994
Payment for Shares Redeemed (590,014,593) (981,308,685)
------------ --------------
Increase (Decrease) in Net Assets from Capital Share Transactions (9,136,637) 152,374,854
------------ --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (9,136,637) 149,926,849
CAPITAL CONTRIBUTION (NOTE 4) -- 2,448,005
NET ASSETS:
Beginning of Period 279,835,474 127,460,620
------------ --------------
End of Period $270,698,837 $ 279,835,474
============ ==============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 575,911,877 1,126,703,545
Issued in Reinvestment of Distributions 4,966,079 6,979,994
Redeemed (590,014,593) (981,308,685)
------------ --------------
Increase (Decrease) in Shares of the Fund (9,136,637) 152,374,854
============ ==============
See notes to financial statements.
7
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
August 31, 1997 (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 fair 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, 1997 were $101,118,592 and
$101,446,129, respectively, representing 37.5% of the net assets of
the Fund. Of these securities, which are restricted as to resale, all
are Section 4(2) commercial paper or are eligible for resale pursuant
to Rule 144A under the Securities Act of 1933 and also have been
determined to be liquid by the Advisor based upon guidelines
established by the Fund's Board of Directors.
(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) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(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. 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, 1997 and unaffiliated
directors' fees for the period then ended were $96,040 and $2,373,
respectively.
Funds sponsored and managed by the Advisor may invest cash reserves in money
market funds also sponsored and managed by the Advisor, subject to certain
limitations. The terms of such transactions are identical to those of
non-related entities except that, to avoid duplicate investment advisory
fees, the Advisor remits to each Fund an amount equal to all fees otherwise
due to them under their investment advisory agreement for the assets
invested in such money market funds. Funds sponsored and managed by the
Advisor own 33.8% of the Fund as of August 31, 1997.
4. CAPITAL CONTRIBUTION
On January 31, 1997, the Advisor purchased a security from the Fund for
$2,448,005 in excess of the security's fair value. The Fund recorded a
realized loss on the sale and a capital contribution of an equal amount from
the Advisor. The Advisor received no shares of the Fund or other
consideration in exchange for such contribution. For tax purposes, the
capital contribution reduced the realized losses for the year ended February
28, 1997.
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA (a)
---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -------------------------
Net Asset Net Realized Total Net Asset
Value, Net Losses From From Net Capital Value,
Beginning Investment on Investment Investment Total Contribution End of
Period Income Investments Operations Income Distributions (Note 4) Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Aug. 31, 1997 (b) $1.00 $0.03 -- $0.03 ($0.03) ($0.03) -- $1.00
Feb. 28, 1997 1.00 0.05 ($0.01) 0.04 (0.05) (0.05) $0.01 1.00
Feb. 29, 1996 (c) 1.00 0.03 -- 0.03 (0.03) (0.03) -- 1.00
</TABLE>
FINANCIAL HIGHLIGHTS (Continued)
- --------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
------------------------------------------------------------
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income
Total Period (In to Average Waivers and to Average
Return Millions) Net Assets Absorptions Net Assets
Aug. 31, 1997 (b) +2.8% $271 0.2%* 0.4%* 5.5%*
Feb. 28, 1997 +5.5%(d) 280 0.2% 0.5% 5.4%
Feb. 29, 1996 (c) +2.6% 127 0.2%* 0.4%* 5.6%*
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the six months ended August 31, 1997 (Unaudited). Total return is not
annualized.
(c) For the period from September 21, 1995 (inception) to February 29, 1996.
Total return is not annualized.
(d) Had the Advisor not made the capital contribution as described in the notes
to the financial statements, the adjusted total return would have been 4.8%
for the fiscal year ended February 28, 1997.
8
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Lawrence A. Totsky, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
John A. Flanagan, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201
AUDITOR
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management fees
and expenses, please call 1-800-733-2274. Please read it carefully before
investing or sending money. This 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 782 o Milwaukee, Wisconsin 53201 6028H97
