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THE STRONG
INSTITUTIONAL MONEY FUND
ANNUAL REPORT o FEBRUARY 28, 1998
[PHOTO OF ROUNDTABLE FINANCIAL PLANNING DISCUSSION]
[STRONG LOGO]
STRONG FUNDS
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THE STRONG
INSTITUTIONAL MONEY FUND
ANNUAL REPORT o FEBRUARY 28, 1998
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Institutional Money Fund......................................2
FINANCIAL INFORMATION
Schedule of Investments in Securities....................................3
Statement of Assets and Liabilities......................................4
Statement of Operations..................................................5
Statements of Changes in Net Assets......................................5
Notes to Financial Statements............................................6
FINANCIAL HIGHLIGHTS..........................................................7
REPORT OF INDEPENDENT ACCOUNTANTS.............................................8
<PAGE>
THE STRONG INSTITUTIONAL MONEY FUND
[PHOTO OF JAY N. MUELLER]
THE FUND ACHIEVED ITS SOLID PERFORMANCE BY INVESTING IN HIGH-QUALITY CORPORATE
DEBT AND PROPERLY POSITIONING ITSELF ON THE SHORT-END OF THE YIELD CURVE...
The Strong Institutional Money Fund is designed for institutional investors who
are seeking current income, a stable share price, and daily liquidity.(1)
For the 1-year period ending February 28, 1998, the Strong Institutional Money
Fund's total return was 5.63%, which was higher than its benchmark, the
Salomon Brothers 3-Month Treasury Bill Index, which posted a 5.26% return for
the same period.
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YIELD SUMMARY(2)
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As of 2-27-98
7-DAY CURRENT YIELD 5.48%
7-DAY EFFECTIVE YIELD 5.63%
AVERAGE MATURITY 15 DAYS
===================================
Since the Fund's inception on 9-21-95, the Strong Institutional Money Fund
earned an average annual total return of 5.66%--and a hypothetical $10,000
investment would have grown to $11,441.
A FOCUS ON QUALITY
For most of the fiscal year, short-term interest rates were stable. The Federal
Reserve was basically in a holding pattern with the exception of an increase of
25 basis points in the Federal Funds rate in March of 1997. Long-term interest
rates, in contrast, dropped significantly due to a substantial decline in
inflation.
The Fund achieved its solid performance by investing in high-quality corporate
debt and properly positioning itself on the short-end of the yield curve given
market conditions. In addition, the Fund maintained a low expense ratio of
0.21%.
We would like to thank you for investing in the Strong Institutional Money
Market Fund and for giving us the opportunity to serve you.
Cordially,
/s/ Jay N. Mueller
Jay N. Mueller
Portfolio Manager
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3-MONTH TREASURY BILL YIELDS
======================================================
Through 2-28-98
[GRAPH]
2-97 5.21%
3-97 5.32%
4-97 5.23%
5-97 4.93%
6-97 5.16%
7-97 5.23%
8-97 5.21%
9-97 5.09%
10-97 5.19%
11-97 5.19%
12-97 5.34%
1-98 5.17%
2-98 5.31%
Source: Bloomberg
======================================================
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 2-27-98. 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 0.17% 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%.
2
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<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES FEBRUARY 28, 1998
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<CAPTION>
Principal Yield to Maturity Amortized
Amount Maturity Date (a) Cost (Note 2)
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CERTIFICATES OF DEPOSIT 8.9%
<S> <C> <C> <C> <C>
Deutsche Bank AG New York, 6.18% $4,000,000 6.20% 4/03/98 $ 3,999,933
Huntington National Bank, 6.25% 5,000,000 6.29 4/24/98 4,999,792
Societe Generale:
6.08% 2,000,000 6.11 3/27/98 1,999,961
6.34% 3,000,000 6.38 4/16/98 2,999,859
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TOTAL CERTIFICATES OF DEPOSIT 13,999,545
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COMMERCIAL PAPER 67.8%
AESOP Funding Corporation (Acquired 2/26/98; Cost $998,762) (b) 1,000,000 5.57 3/06/98 999,381
Aetna Services, Inc. 2,300,000 5.50 3/30/98 2,290,161
AlliedSignal, Inc. 1,150,000 5.50 3/10/98 1,148,595
American Greetings Corporation 3,200,000 5.48 3/10/98 3,196,103
American Home Products Corporation 2,100,000 5.65 3/02/98 2,100,000
Ameritech Corporation 2,300,000 5.52 3/18/98 2,294,357
Aristar, Inc. 1,325,000 5.78 3/02/98 1,325,000
Bell Atlantic Financial Services, Inc. 2,300,000 5.50 3/10/98 2,297,189
Browning Ferris Industries, Inc. (Acquired 2/27/98; Cost $2,098,997) (b) 2,100,000 5.73 3/02/98 2,100,000
Budget Funding Corporation 1,000,000 5.50 3/17/98 997,708
1,000,000 5.53 3/05/98 999,539
Calcot, Ltd. 1,700,000 5.62 3/16/98 1,696,285
Certain Funding Corporation (Acquired 2/19/98; Cost $2,262,342) (b) 2,270,000 5.52 3/13/98 2,266,171
Delaware Funding Corporation (Acquired 2/23/98; Cost $1,544,128) (b) 1,551,000 5.50 3/24/98 1,545,787
Walt Disney Company 2,000,000 5.53 3/18/98 1,995,084
Edison Asset Securitization LLC (Acquired 1/07/98; Cost $3,159,547) (b) 3,200,000 5.55 3/30/98 3,186,187
Eureka Securitization, Inc. (Acquired 2/23/98; Cost $2,295,063) (b) 2,300,000 5.52 3/09/98 2,297,531
Finova Capital Corporation 1,200,000 5.47 3/18/98 1,197,083
2,480,000 5.50 3/05/98 2,478,863
Fountain Square Commercial Corporation (Acquired 2/04/98;
Cost $2,001,323) (b) 2,010,000 5.55 3/04/98 2,009,380
Frigate Funding Corporation (Acquired 2/19/98; Cost $2,253,795) (b) 2,259,000 5.53 3/06/98 2,257,612
General Electric Capital Corporation 2,300,000 5.55 3/13/98 2,296,100
General Mills, Inc. 59,800 5.23 Upon Demand 59,800
Goldman Sachs Group LP 3,300,000 5.47 3/12/98 3,294,986
Greenwich Funding Corporation (Acquired 2/25/98; Cost $2,290,072) (b) 2,300,000 5.55 3/25/98 2,291,845
Guardian Industries Corporation 1,848,000 5.50 3/10/98 1,845,741
Harley-Davidson Funding Corporation (Acquired 2/23/98; Cost $2,289,087) (b) 2,300,000 5.51 3/26/98 2,291,551
JES Developments, Inc. (Acquired 2/26/98; Cost $2,285,919) (b) 2,300,000 5.51 4/07/98 2,287,327
Jefferson Smurfit Finance Corporation 2,000,000 5.50 3/24/98 1,993,278
Johnson Controls, Inc. 314,300 5.23 Upon Demand 314,300
Lexington Parker Capital Corporation (Acquired 2/26/98; Cost $1,223,642) (b) 1,225,000 5.70 3/05/98 1,224,418
Monsanto Company 2,024,000 5.50 3/06/98 2,022,763
New York Life Capital Corporation (Acquired 2/04/98; Cost $3,281,448) (b) 3,300,000 5.47 3/13/98 3,294,484
Newell Company (Acquired 12/30/97; Cost $2,970,180) (b) 3,000,000 5.68 3/03/98 2,999,527
Old Line Funding Corporation (Acquired 2/23/98; Cost $2,291,536) (b) 2,300,000 5.52 3/19/98 2,294,005
PHH Corporation 1,747,000 5.47 3/11/98 1,744,611
Parker-Hannifin Corporation (Acquired 2/23/98; Cost $997,555) (b) 1,000,000 5.50 3/11/98 998,625
Peacock Funding Corporation (Acquired 2/10/98; Cost $2,983,958) (b) 3,000,000 5.50 3/17/98 2,993,125
Philip Morris Capital Corporation 2,100,000 5.66 3/02/98 2,100,000
Reliastar Mortgage Corporation 1,000,000 5.48 3/05/98 999,543
1,300,000 5.55 3/27/98 1,294,990
Repeat Offering Securitization Entity, Inc. (Acquired 1/07/98;
Cost $3,169,524) (b) 3,200,000 5.53 3/10/98 3,196,068
Salomon Smith Barney Holdings, Inc. 3,000,000 5.50 3/09/98 2,996,792
Sara Lee Corporation 154,200 5.22 Upon Demand 154,200
Sigma Finance, Inc. (Acquired 2/19/98; Cost $2,288,715) (b) 2,300,000 5.52 3/23/98 2,292,594
System Capital Finance Corporation 2,124,000 5.52 3/19/98 2,118,463
Torchmark Corporation 2,100,000 5.77 3/02/98 2,100,000
Triple-A One Funding Corporation (Acquired 2/23/98; Cost $2,027,006) (b) 2,032,000 5.53 3/11/98 2,029,191
USAA Capital Corporation 3,000,000 5.47 3/13/98 2,994,986
Variable Funding Capital Corporation (Acquired 2/10/98; Cost $2,987,120) (b) 3,000,000 5.52 3/10/98 2,996,320
Wisconsin Electric Power Company 100 5.21 Upon Demand 100
Wood Street Funding Corporation (Acquired 2/23/98; Cost $2,291,167) (b) 2,300,000 5.53 3/20/98 2,293,641
Xerox Overseas Holdings PLC (Acquired 2/24/98; Cost $2,295,072) (b) 2,300,000 5.51 3/10/98 2,297,183
Yorkshire Building Society 2,300,000 5.51 3/16/98 2,295,072
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TOTAL COMMERCIAL PAPER 107,083,645
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3
</TABLE>
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<TABLE>
SCHEDULE OF INVESTMENTS IN SECURITIES (CONTINUED) FEBRUARY 28, 1998
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<CAPTION>
Principal Yield to Maturity Amortized
Amount Maturity Date (a) Cost (Note 2)
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REPURCHASE AGREEMENT 10.4%
<S> <C> <C> <C> <C>
ABN-AMRO Chicago Corporation (Dated 2/27/98) (Proceeds $16,476,686);
Collateralized by: $19,138,000 United States Treasury Strips, Zero %,
Due 8/15/99 - 2/15/05 (Market Value $16,823,618) (c) $16,469,000 5.60% 3/02/98 $ 16,469,000
TAXABLE VARIABLE RATE PUT BONDS 12.8%
Alabama Industrial Development Authority Industrial Development Revenue 1,575,000 5.75 3/05/98 1,575,000
Bel Air, LLC 2,115,000 5.75 3/05/98 2,115,000
Berks County, Pennsylvania Industrial Development Authority Industrial
Development Revenue 2,460,000 5.75 3/04/98 2,460,000
Maine Regional Waste System, Inc. Solid Waste Resource Recovery Revenue 280,000 5.75 3/04/98 280,000
Med-Map, LLC 1,900,000 5.69 3/04/98 1,900,000
NuFunding, Inc. Health Care Revenue 4,965,000 5.70 3/04/98 4,965,000
Tifton Mall, Inc. 1,950,000 5.75 3/05/98 1,950,000
Virginia Housing Development Authority Multi-Family Housing Revenue 2,900,000 5.70 3/02/98 2,900,000
WLB, LLC 2,000,000 5.75 3/05/98 2,000,000
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TOTAL TAXABLE VARIABLE RATE PUT BONDS 20,145,000
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TOTAL INVESTMENTS IN SECURITIES 99.9% 157,697,190
Other Assets and Liabilities, Net 0.1% 221,691
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NET ASSETS 100.0% $157,918,881
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LEGEND
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(a) Maturity date represents actual maturity or the longer of the next put date or interest adjustment date.
(b) Restricted security.
(c) See Note 2(C) of notes to financial statements.
Percentages are stated as a percent of net assets.
</TABLE>
STATEMENT OF ASSETS AND LIABILITIES
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February 28, 1998
ASSETS:
Investments in Securities, at Amortized Cost $157,697,190
Interest Receivable 921,950
Other Assets 105,742
------------
Total Assets 158,724,882
LIABILITIES:
Dividends Payable 681,638
Accrued Operating Expenses and Other Liabilities 124,363
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Total Liabilities 806,001
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NET ASSETS $157,918,881
============
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $157,918,881
============
Capital Shares Outstanding (Unlimited Number Authorized) 157,918,881
NET ASSET VALUE PER SHARE $1.00
=====
4
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
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For the Year Ended February 28, 1998
INTEREST INCOME $15,046,117
EXPENSES:
Investment Advisory Fees 921,622
Custodian Fees 31,343
Shareholder Servicing Costs 87,357
Other 63,001
-----------
Total Expenses before Waivers and Absorptions by Advisor 1,103,323
Voluntary Expense Waivers and Absorptions by Advisor (549,800)
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Expenses, Net 553,523
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NET INVESTMENT INCOME $14,492,594
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STATEMENTS OF CHANGES IN NET ASSETS
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YEAR ENDED YEAR ENDED
FEB. 28, 1998 FEB. 28, 1997
------------- ---------------
OPERATIONS:
Net Investment Income $ 14,492,594 $ 10,026,949
Net Realized Loss -- (2,448,005)
------------ --------------
Increase in Net Assets Resulting from Operations 14,492,594 7,578,944
DISTRIBUTIONS:
From Net Investment Income (14,492,594) (10,026,949)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 837,476,991 1,126,703,545
Proceeds from Reinvestment of Distributions 8,803,381 6,979,994
Payment for Shares Redeemed (968,196,965) (981,308,685)
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Increase (Decrease) in Net Assets from
Capital Share Transactions (121,916,593) 152,374,854
CAPITAL CONTRIBUTION (NOTE 4) -- 2,448,005
------------ --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (121,916,593) 152,374,854
NET ASSETS:
Beginning of Period 279,835,474 127,460,620
------------ --------------
End of Period $157,918,881 $ 279,835,474
============ ==============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 837,476,991 1,126,703,545
Issued in Reinvestment of Distributions 8,803,381 6,979,994
Redeemed (968,196,965) (981,308,685)
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Increase (Decrease) in Shares of the Fund (121,916,593) 152,374,854
=========== =============
5
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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February 28, 1998
1. ORGANIZATION
Strong Institutional Money Fund 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 may own certain investment securities which are restricted as
to resale. These securities are valued 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 held at
February 28, 1998 was $52,285,958 and $52,441,953, respectively,
representing 33.2% 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) REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements
with institutions that the Fund's investment advisor, Strong Capital
Management, Inc. ("the Advisor") has determined are creditworthy
pursuant to criteria adopted by the Board of Directors. Each repurchase
agreement is recorded at cost. The Fund requires that the collateral,
represented by securities (primarily U.S. Government securities),
purchased in a repurchase transaction be maintained in a segregated
account with a custodian in a manner sufficient to enable the Fund to
obtain those securities in the event of a default under the repurchase
agreement. On a daily basis, the Advisor monitors the value of the
collateral transferred under each repurchase agreement to ensure the
value of the collateral exceeds the amounts owed to the Fund under each
repurchase agreement by at least 2%.
(D) 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.
(E) 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
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 0.35% 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 28, 1998 and unaffiliated
directors' fees for the year then ended were $96,307 and $5,005,
respectively.
Other funds sponsored and managed by the Advisor may invest cash reserves in
the Fund, subject to certain limitations. Funds sponsored and managed by
the Advisor owned 58.0% of the Fund as of February 28, 1998. Additionally,
the Advisor owned 11.5% of the Fund as of February 28, 1998.
6
<PAGE>
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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>
FINANCIAL HIGHLIGHTS
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SELECTED PER-SHARE DATA (a)
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INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -----------------------------
<CAPTION>
Net Asset Net Realized Total Distributions Net Asset
Value, Net Losses from From Net Value,
Beginning Investment on Investment Investment Total Capital End of
Period Ended of Period Income Investments Operations Income Distributions Contribution Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Feb. 28, 1998 $1.00 $0.05 -- $0.05 ($0.05) ($0.05) -- $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>
<TABLE>
<CAPTION>
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
Period Ended Return Millions) Net Assets Absorptions Net Assets
<S> <C> <C> <C> <C> <C>
Feb. 28, 1998 +5.6% $158 0.2% 0.4% 5.5%
Feb. 28, 1997 +5.5%(b) 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) Had the Advisor not made the capital contribution 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.
(c) For the period from September 21, 1995 (inception) to February 29, 1996. Total return is not annualized.
7
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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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 28, 1998, and the related statement of operations
for the year then ended, the statements of changes in net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated. 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 audits.
We conducted our audits 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 28, 1998 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 audits provide 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 28, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the periods indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
April 8, 1998
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
Mary F. Hoppa, 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 7556D98
