<PAGE>
THE STRONG
CONSERVATIVE EQUITY
Funds
ANNUAL REPORT o OCTOBER 31, 1996
[PHOTO OF WOMAN & CHILD]
[PIE CHART]
THE STRONG ASSET ALLOCATION FUND
THE STRONG EQUITY INCOME FUND
THE STRONG AMERICAN UTILITIES FUND
THE STRONG TOTAL RETURN FUND
THE STRONG GROWTH AND INCOME FUND
[STRONG FUNDS LOGO]
STRONG FUNDS
<PAGE>
EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING
These common-sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here 24
hours a day, seven days a week to take your call.
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Have a plan.
[PICTURE OF FOLDER LABELED INVESTMENTS]
Even a simple plan can help you take control of your financial future. Review
your plan once a year, or if your circumstances change.
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Start investing as soon as possible.
[PICTURE OF CLOCK]
Make time a valuable ally. Let it put the power of compounding to work for you,
while helping to reduce your potential investment risk.
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Diversify your portfolio.
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION]
By investing in different asset classes - stocks, bonds, and cash - you help
protect against poor performance in one type of investment while including
investments most likely to help you achieve your important goals.
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Invest regularly.
[PICTURE OF MEMO REMINDER TO INVEST]
Investing is a process, not a one-time event. By investing regularly over the
long term, you reduce the impact of short-term market gyrations, and you attend
to your long-term plan before you're tempted to spend those assets on short-term
needs.
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Maintain a long-term perspective.
[PICTURE OF GRAPH SLOPING UPWARD]
For most individuals, the best discipline is staying invested as market
conditions change. Reactive, emotional investment decisions are all too often a
source of regret - and of principal loss.
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Consider stocks to help achieve major long-term goals.
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION EMPASIZING STOCKS]
Over time, stocks have provided the more powerful returns needed to help the
value of your investments stay well ahead of inflation.
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Keep a comfortable amount of cash in your portfolio.
[PICTURE OF DOLLAR SIGN]
To meet current needs, including emergencies, use a money market fund or a bank
account - not your long-term investment assets.
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Know what you're buying.
[PICTURE OF MAGNIFYING GLASS]
Make sure you understand the potential risks and rewards associated with each of
your investments. Ask questions...request information...make up your own mind.
And choose a fund company that helps you make informed investment decisions.
<PAGE>
THE STRONG
CONSERVATIVE EQUITY
Funds
ANNUAL REPORT o OCTOBER 31, 1996
Table of Contents
INVESTMENT REVIEWS
The Strong Asset Allocation Fund...................................2
The Strong Equity Income Fund......................................4
The Strong American Utilities Fund.................................6
The Strong Total Return Fund.......................................8
The Strong Growth and Income Fund.................................10
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Asset Allocation Fund.............................12
The Strong Equity Income Fund................................16
The Strong American Utilities Fund...........................18
The Strong Total Return Fund.................................19
The Strong Growth and Income Fund............................21
Statements of Operations..........................................24
Statements of Assets and Liabilities..............................25
Statements of Changes in Net Assets...............................26
Notes to Financial Statements.....................................27
FINANCIAL HIGHLIGHTS.....................................................30
REPORT OF INDEPENDENT ACCOUNTANTS........................................33
<PAGE>
The Strong ASSET ALLOCATION Fund
================================================================================
The Strong Asset Allocation Fund seeks high total return consistent with
reasonable risk over the long term. The Fund allocates its assets globally among
a diversified portfolio of equity securities, bonds, and short-term fixed income
securities.
ASSET ALLOCATION
based on net assets as of 10-31-96
Stocks (including convertibles) 52.0%
Bonds (including convertibles) 40.8%
Short-Term Investments 7.2%
This asset allocation does not reflect any futures positions held by the Fund.
THE FUND'S BENCHMARK ADJUSTED ON JULY 1
As reported in the Fund's semi-annual report, the normal benchmark allocations
for the Fund were changed on July 1 to allow for a larger weighting in equities.
Previously, the Fund's benchmark allocations to stocks, bonds and cash had been
40%, 40% and 20%, respectively. Specifically, the Fund's allowable maximum and
minimum ranges were modified as follows:
Range prior to July 1 Range after July 1
Stocks 10% - 60% 30% - 70%
Bonds 20% - 60% 20% - 70%
Cash 0% - 70% 0% - 50%
This expanded ability to invest in stocks will give the Fund the opportunity to
pursue higher total returns than did its prior benchmark allocation. Of course,
this change may increase the Fund's share price volatility; however, we expect
our greater flexibility in managing the Fund will enable us to provide
shareholders with higher returns over time while helping to keep risks within
reasonable limits.
A YEAR OF DIVERSE PERFORMANCE FOR THE MARKETS
Overall, the stock market performed well during the fiscal year, while bonds
experienced more challenging conditions. Coming into the year, many investors
and analysts expected weak economic growth to continue in the U.S. In fact, the
Federal Reserve cut the federal funds rate in January, a continuation of the
easing it began the previous July, and a sign that the Fed believed the economy
needed at least modest stimulus.
However, in February, an unexpectedly large number of new jobs -- and subsequent
indications of a strengthening economy-- led many to believe that economic
growth was accelerating rather than weakening. In response, yields across all
maturities reversed direction and headed higher, producing price declines in
most sectors of the bond market. Stocks, for the most part, ignored the effect
of rising rates and continued higher.
Through June and July, however, stocks experienced a brief but sharp correction
as equity investors, too, began to worry about the effect of higher rates on
stock valuations. But as the fiscal year drew to a close, stock and bond
investors seemed to become more comfortable with the underlying fundamentals of
the economy. Despite slightly stronger growth, inflation remained subdued and it
appeared that GDP was unlikely to grow faster than 3%. Against this backdrop,
the chances of substantially higher rates diminished, the Federal Reserve left
the fed funds rate unchanged, interest rates began to retreat and stocks
rebounded to new highs.
OVERALL, THE NEW PORTFOLIO POSITIONING WORKED WELL
In general, the Fund's new benchmark allocation performed well. Unfortunately,
the timing of the change was slightly off, as we increased the portfolio's
equity weighting at what turned out to a high point in the market, and reduced
the bond position during a decline.
After the July 1 reallocation, we tended to keep the portfolio between 50-60%
weighted in equities, with about 10% of that in international stocks. During the
first half of the year, the domestic portion of the equity portfolio was biased
toward "cyclical" stocks, which tend to perform best when the economy is
accelerating. At mid-year, as economic signals began to moderate, we cut back on
this position in favor of more defensive stocks -- pharmaceutical and health
care stocks, for example -- which appeared attractively priced following the
sharp July correction. We also took advantage of the lower prices to accumulate
technology holdings.
We tended to keep the bond portion neutrally positioned, with assets split about
evenly between corporate and government bonds. This positioning helped the Fund
during the end of the fiscal year, when interest rates began to decline,
resulting in higher bond prices.
2
<PAGE>
WE'LL LIKELY REMAIN NEUTRAL FOR THE NEAR TERM
For the near term, we'll likely maintain the Fund's current, fairly neutral
posture. While the financial markets have performed quite well recently, there
is still quite a bit of uncertainty regarding the economy's real strength, and
whether it can maintain its current growth rate. As the fiscal year ended, the
markets had adopted a fairly rosy view of the economy--slow growth, low
inflation, and the possibility of lower interest rates. This scenario may in
fact occur, but there are likely to be some occasional bouts of volatility along
the way.
That said, there are fundamental reasons for optimism. The Federal Reserve
remains vigilant against inflation, and the November elections have kept in
place a balance that, so far, has been proven good for financial markets.
In addition, one advantage of the Strong Asset Allocation Fund is that we have
the flexibility to adapt if conditions change. We intend to closely monitor the
investment climate both here and abroad, and make the changes we believe will
provide shareholders with an attractive total return.
We appreciate your confidence in the Strong Asset Allocation Fund, and we look
forward to serving your investment needs in the years to come.
Sincerely,
/s/ Bradley C. Tank
Bradley C. Tank
Lead Portfolio Manager
November 15, 1996
[PHOTO OF BRADLEY C. TANK]
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GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 12-30-81 to 10-31-96
The Strong Asset S&P 500 Lipper Flexible
Allocation Fund Index* Portfolio Average*
12-81 10,000 10,000 10,000
12-82 13,320 12,155 12,883
12-83 19,344 14,896 15,197
12-84 21,234 15,830 15,764
12-85 25,346 20,853 19,685
12-86 29,819 24,745 22,581
12-87 29,734 26,045 24,052
12-88 32,467 30,370 26,112
12-89 36,104 39,993 30,537
12-90 37,107 38,751 30,408
12-91 44,393 50,557 37,958
12-92 45,824 54,408 41,131
12-93 52,469 59,892 45,599
12-94 51,679 60,684 44,707
12-95 63,028 83,487 55,876
10-96 66,091 97,370 61,331
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception, with a similar investment
in the Standard & Poor's 500 Stock Index ("S&P 500"), and the Lipper Flexible
Portfolio Average. Results include the reinvestment of all dividends and capital
gains distributions. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you may have a gain or
loss when you sell shares.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS(1)
as of 10-31-96
1-YEAR
9.46%
3-YEAR
8.15%
5-YEAR
9.50%
10-YEAR
8.26%
SINCE INCEPTION
(on 12-30-81)
13.58%
- --------------------------------------------------------------------------------
* The S&P 500 is an unmanaged index generally representative of the U.S.
stock market. The Lipper Flexible Portfolio Average represents funds which
allocate their assets across various asset classes, including domestic
common stocks, bonds, and money market instruments, with a focus on total
return. Previous comparisons have included the 40/40/20 Balanced Index. The
40/40/20 Balanced Index is a hybrid index containing 40% stocks, 40%
intermediate-term bonds, and 20% short-term instruments. This index has
been replaced by the Lipper Flexible Portfolio Average, because we believe
it is a more accurate comparison of the Fund to its peers, given the Fund's
new benchmark allocation. For the 1-year period ended 10-31-96, the Fund's
total return was 9.46%, the 40/40/20 Balanced Index's total return was
12.75%, and the Lipper Flexible Portfolio Average's total return was
14.69%. Source of S&P index data is Micropal. Source of the Lipper Index
data is Lipper Analytical Services, Inc.
1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change,
while total return reflects aggregate change.
3
<PAGE>
The Strong EQUITY INCOME Fund
================================================================================
The Strong Equity Income Fund seeks total return by investing for both income
and capital growth. The Fund invests primarily in dividend-paying equity
securities.
FUND PROVIDED SUPERIOR RETURNS THIS FIRST YEAR
We are pleased to present the Fund's first annual report, which covers its
performance from its inception on December 29, 1995, through the fiscal year
ending October 31, 1996. We are even more pleased to report that the Fund
provided shareholders with an impressive gain for the period. The Fund achieved
a total return of 21.51%, which compared favorably with the 16.63% return of the
S&P 500, and the 12.25% return posted by our peers, as measured by the Lipper
Equity Income Funds Index.1 By the end of October, total assets under management
in the Fund had grown to $29 million.*
ASSET ALLOCATION
based on net assets as of 10-31-96
Common Stocks 82.4%
Convertible Securities 12.0%
Short-Term Investments 5.6%
LARGE CAP STOCKS OUTPERFORM THE MARKET
The Fund benefited during this period from a significant exposure to the stocks
of large, well-established, dividend-paying companies--also called "large
capitalization" stocks. These stocks typically enjoy certain advantages over
those of smaller companies: greater stability stemming from the underlying
company's financial strength and flexibility, solid yield support from a steady
stream of dividends, ready liquidity, and earnings visibility. Throughout 1996,
your Fund benefited from its bias towards such issues.
MIXED ECONOMIC SIGNALS
Economic indicators sent contradictory signals this year, making it difficult to
get a clear and definitive view of the economy's growth. Going into the year,
many analysts expected the weak growth that characterized 1995 to continue into
1996. But early in the year, severe winter weather on the East Coast negatively
affected economic activity, and a government shutdown delayed the release of key
economic reports. When these reports were finally released, they indicated
stronger growth than most investors anticipated.
Throughout 1996, investors tried to determine the likelihood of a stronger
economy. Sentiment regarding the pace of economic growth ebbed and flowed with
every monthly employment figure, creating periods of volatility in the financial
markets. As the year progressed, however, economic activity appeared to moderate
to a pace of growth strong enough to allow corporations to meet earnings
expectations, but subdued enough to keep inflation under control. This "not too
hot, not too cold" view of the economy prevailed as the fiscal year drew to a
close.
THE FUND BENEFITED FROM ITS BIAS TOWARDS LARGE COMPANY STOCKS
Despite occasional indications to the contrary, we never expected the economy to
sustain significantly strong growth. Our research indicated a greater likelihood
for a "steady state" economy hovering in the range of 2-3% annual growth. We
therefore positioned the portfolio accordingly, maintaining increased exposure
to sectors that typically outperform in such an environment, because they are
less dependent on a fast-growing economy to increase their earnings--examples
include health care, financial services, consumer non-durables, and energy. This
positioning added value to the Fund throughout 1996, as stocks in these sectors
performed particularly well.
In addition, whenever possible we used convertible securities--that is, bonds
that can be converted into a company's stock when it reaches a certain price.
Convertibles offer several advantages. First, because they pay a dividend, they
enhance the Fund's income earning power, and they tend to be less volatile than
shares of common stock. Also, convertible securities allow the Fund to gain
exposure to attractive industries that may not otherwise offer dividend-paying
stocks.
THE ECONOMY'S NEAR-TERM DIRECTION REMAINS CLOUDED
The outlook for the pace of future economic activity is uncertain, at least for
the near term. Currently, however, the economic environment appears to be
healthy for investors: high employment, low inflation and moderate economic
growth that is strong enough to help corporations sustain their earnings.
Given this slow-growth, low-inflation outlook, we will likely continue to
emphasize large capitalization stocks from companies that tend to display
superior financial performance, including above-average revenue and earnings
growth, moderate levels of financial leverage, above-average return on equity,
positive cash flow, and management teams focused on enhancing shareholder value.
4
<PAGE>
FIVE LARGEST HOLDINGS
based on net assets as of 10-31-96
SECURITY INDUSTRY % OF NAV
................................................................................
Merrill Lynch Brokerage &
& Company, Inc. Investment Management 1.7%
................................................................................
Monsanto Company Chemical 1.3%
................................................................................
Chase Manhattan Bank-Money Center 1.2%
Corporation
................................................................................
Kimberly-Clark Paper & Forest
Corporation Products 1.1%
................................................................................
Schlumberger, Ltd. Oil Well Equipment
& Service 1.1%
................................................................................
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
In addition, the Fund's holdings will continue to be diversified among sectors
and industries that we believe offer positive dynamics that can serve as a solid
base for future revenue and earnings growth.
Thank you for choosing the Strong Equity Income Fund. We appreciate your
confidence, and we look forward to helping you pursue your investment goals.
Sincerely,
/s/ Rimas Milaitis
Rimas Milaitis
Portfolio Manager
[PHOTO OF RIMAS MILAITIS]
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 12-29-95 to 10-31-96
The Strong Equity S&P 500 Lipper Equity Income
Income Fund Index* Funds Index*
12-95 10,000 10,000 10,000
3-96 11,054 10,537 10,433
6-96 11,296 11,010 10,700
9-96 11,817 11,350 10,966
10-96 12,151 11,663 11,225
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Standard & Poor's 500 Stock Index ("S&P 500"), and the Lipper Equity Income
Funds Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares.
- --------------------------------------------------------------------------------
TOTAL RETURN(1)
Since inception
on 12-29-95
to 10-31-96
21.51%
- --------------------------------------------------------------------------------
* The S&P 500 is an unmanaged index generally representative of the U.S.
stock market. The Lipper Equity Income Funds Index is an equally- weighted
performance index of the largest qualifying funds in this Lipper category.
Source of the S&P 500 index data is Micropal. Source of the Lipper index
data is Lipper Analytical Services, Inc.
1 Total return is not annualized, and measures aggregate change in the value
of an investment in the Fund, assuming reinvestment of dividends.
5
<PAGE>
The Strong AMERICAN UTILITIES Fund
================================================================================
The Strong American Utilities Fund seeks total return by investing for both
income and capital growth. The Fund invests primarily in the equity securities
of public utility companies headquartered in the United States.(1)
THE FUND CONTINUED TO PERFORM WELL
Despite an often turbulent market, the Strong American Utilities Fund continued
to perform well versus its benchmark index and its peer group. For the year
ended October 31, 1996, the Fund achieved a total return of 11.17%. This return
compared favorably with a 9.80% gain for the Standard & Poor's Utilities Fund
Index, and a 10.55% return for the Lipper Utility Funds Index.(2)*
ASSET ALLOCATION
based on net assets as of 10-31-96
Common Stocks 94.3%
Short-Term Investments 5.7%
A CHALLENGING ENVIRONMENT FOR UTILITY INVESTORS
Uncertainty over the direction of interest rates and the strength of the economy
produced volatile markets for utility stocks throughout the fiscal year. After
anticipating continued slow economic growth coming into the year, many investors
were surprised by stronger-than-expected economic indicators, particularly
during the spring and early summer months. As a result, the yield on the 30-year
Treasury bond rose from 6.33% at the start of the fiscal year to 7.12% in
August.
These signals began to moderate during the summer, however. In fact, the Federal
Reserve declined to raise the federal funds rate at any time during the fiscal
year, creating the potential for an improvement in the interest rate climate. By
the time the fiscal year drew to a close, the 30-year T-Bond yield had fallen to
6.64%.
FIVE LARGEST HOLDINGS
based on net assets as of 10-31-96
SECURITY INDUSTRY % OF NAV
................................................................................
Ameritech Corporation Telecommunication 9.7%
................................................................................
SBC Communications, Inc. Telecommunication 8.0%
................................................................................
SCANA Corporation Electric Utility 6.8%
................................................................................
American Electric Power Electric Utility 6.0%
Company, Inc.
................................................................................
The Southern Company Electric Utility 4.9%
................................................................................
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
30-DAY
ANNUALIZED YIELD
3.24%
As of 10-31-96
KEEPING OUR EYE ON THE BALL
Throughout this often difficult environment, we worked to keep focused on the
matter at hand: adjusting the portfolio's weightings and sector holdings in
order to capitalize on opportunities presented by the utilities market.
O ELECTRIC UTILITIES
Of the Fund's five largest holdings, three are electric utility companies, and
during the year we increased the portfolio's weighting from 31.2% to 39.1%.
This weighting reflects our belief that the portfolio's electric utilities have
a good outlook for earnings and dividend growth. In addition, they have
continued to sell at a substantial price/earnings discount to the broad market,
which bodes well for their investment potential. As states enact legislation
exposing their utilities to competition, and establish procedures for electric
companies to recover all or part of their "stranded costs,"-i.e., costs already
incurred that would be difficult to recoup in a more competitive
environment-investor anxiety over deregulation should abate.
Therefore, we believe fundamentals continue to improve for the electrics. We
expect their earnings to increase, with a corresponding reduction in the percent
of earnings paid out as dividends. This should lead to stronger balance sheets
and higher dividends in the future. In our view, this potential has not been
fully recognized by the market.
O TELECOMMUNICATIONS
We reduced the Fund's holdings in telecommunication stocks from 37.4% to 28.4%
during the year, in part due to profit taking following their significant price
appreciation in the first half. The second half of the year was characterized by
investor concern over the direction of interest rates, and regulatory
uncertainty following the signing of the telecommunications bill into law in
February.
As a result, the Fund's telephone holdings experienced market price weakness,
despite the fact that the companies continued to have a good outlook for
earnings and dividend growth. We expect double-digit earnings growth this year
and in 1997 from the Fund's major telephone holdings, with the possible
exception of SBC Communications, Inc. which may have somewhat lower earnings
growth in 1997 due to its pending acquisition of Pacific Telesis.
INDUSTRY ALLOCATION
based on net assets as of 10-31-96
Electric Utility 39.1%
Telecommunication 28.4%
Energy Related 16.1%
Gas Utility 10.5%
Other Utility 0.2%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
6
<PAGE>
O ENERGY
We increased the portfolio's combined holdings of gas utilities and energy
stocks from 20.1% to 26.6% at year end. These companies experienced good
earnings growth, due in part to cold winter weather and sustained economic
growth. In addition, oil prices have risen following the collapse of the U.N.
agreement with Iraq on the sale of oil as the winter heating season approaches.
Major energy companies continue to restructure and apply new technology to
reduce costs and increase profitability.
OUR OUTLOOK IS FUNDAMENTALLY POSITIVE
Economic growth in the U.S. continues to be moderate, and it is difficult to
make a case for either substantially higher or substantially lower economic
growth in the near term. In addition, earnings growth for stocks in general, as
measured by the S&P 500 Index, slowed in the third quarter.
Given this view, investors should not forget how well utility portfolios can
perform relative to other sectors in a benign interest rate climate. With their
ability to provide stable earnings growth without a fast-growing economy, the
financially strong, dividend-paying companies that populate the Fund's portfolio
may provide good investment returns over full market cycles.
As always, we appreciate your investment in the Strong American Utilities Fund,
and we look forward to earning your continued confidence.
Sincerely,
/s/ William H. Reaves
William H. Reaves
Portfolio Manager
[PHOTO OF WILLIAM H. REAVES]
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 7-1-93 to 10-31-96
The Strong American S&P Utilities Lipper Utility
Utilities Fund Index* Funds Index*
6-93 10,000 10,000 10,000
12-93 10,450 10,090 10,167
12-94 10,178 9,289 9,223
12-95 13,939 13,109 11,724
10-96 14,356 13,303 12,233
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Standard and Poor's Utilities Index and the Lipper Utility Funds Index. Results
include the reinvestment of all dividends and capital gains distributions.
Performance is historical and does not represent future results. Investment
returns and principal value vary, and you may have a gain or loss when you sell
Fund shares.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS(2)
as of 10-31-96
1-YEAR
11.17%
2-YEAR
16.80%
3-YEAR
9.88%
SINCE INCEPTION
(on 7-1-93)
11.46%
- --------------------------------------------------------------------------------
* The S&P Utility Fund Index is an unmanaged index generally representative
of utility funds. The Lipper Utility Funds Index is an equally-weighted
performance index of the largest qualifying funds in this Lipper category.
Previous comparisons have included the S&P 500 Stock Index. The S&P 500
Stock Index is an unmanaged index generally considered representative of
the U.S. stock market. We have replaced this index with the Lipper Utility
Funds Index, because we believe it is a more relevant index with which to
compare the Fund's performance. For the 1-year period ended 10-31-96, the
S&P 500's total return was 24.09%. Source of the S&P index data is
Micropal. Source of the Lipper index data is Lipper Analytical Services,
Inc.
1 The American Utilities Fund is a non-diversified sector fund. As such, it
may concentrate its assets in fewer individual holdings than a diversified
fund may, and it may concentrate its investments in the utilities sector.
Therefore, the Fund is more exposed to individual stock volatility and
negative market pressures in the utilities sector.
2 Average annual total return measures change in the value of an investment
in the Fund as an annualized average, assuming reinvestment of all
dividends and capital gains.
7
<PAGE>
The Strong TOTAL RETURN Fund
================================================================================
The Strong Total Return Fund seeks high total return by investing for capital
growth and income. Using a conservative approach to equity management, the Fund
emphasizes investments in large- to medium-sized growth companies with steady or
growing dividends.
FIVE LARGEST HOLDINGS
based on net assets as of 10-31-96
SECURITY INDUSTRY % OF NAV
................................................................................
Monsanto Company Chemical 3.1%
................................................................................
Danka Business Office Automation 3.0%
Systems PLC
................................................................................
Intel Corporation Electronics-Semiconductor 2.9%
Component
................................................................................
Texaco, Inc. Oil-International l2.3%
Integrated
................................................................................
Tellabs, Inc. Telecommunication 2.0%
Equipment
................................................................................
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
ASSET ALLOCATION
based on net assets as of 10-31-96
Common Stocks 88.5%
Convertible Securities 7.6%
Short-Term Investments 3.9%
A CAPRICIOUS BUT PROFITABLE YEAR FOR STOCKS
Although it isn't immediately apparent in the broad market averages, the
one-year period ended October 31, 1996, was a challenging time for equity
managers. The S&P 500's 24.09% gain for the period belied a market characterized
by rotating corrections between different areas: big stocks versus small stocks,
growth stocks versus value stocks, and mini-bear markets striking individual
sectors.(1)*
Primarily, this "under the surface" turbulence was the result of investors'
changing perceptions regarding the economy and interest rates. The year began
with many investors expecting the sluggish economy that characterized 1995 to
continue into 1996. However, the economy showed surprising strength,
particularly in the spring and early summer months. But as the year wore on,
these signs of strength began to abate, and, in fact, the Federal Reserve was
not compelled to raise short-term rates at any time during 1996. As the fiscal
year drew to a close, interest rates had begun to decline, and the stock market,
after skidding momentarily in June and July, bounced back to record highs.
Market leaders in 1996 were predominantly in the financial services, health
care, and energy sectors. The Fund's portfolio was well represented in these
sectors and, as a result, achieved a total return of 18.03% for the 1-year
period.(1)
THE FUND'S "BLUE CHIP GROWTH" FOCUS
In managing the Strong Total Return Fund, we emphasize the stocks of large,
well-established, dividend-paying companies that offer the potential for a
steady and growing stream of earnings. On top of this base, we add carefully
selected mid-sized companies that enhance the portfolio's growth potential.
In all our holdings, we seek companies with strong sales growth, a dominant
market position, a healthy balance sheet, excellent product development
capability, and talented management with a definite vision of where they want to
go and how they plan to get there.
Given its focus on quality growth companies, this Fund can be thought of as a
core holding, a "meat and potatoes" type of investment for people who want to
venture into stocks, but seek to do so in a conservative way. The Strong Total
Return Fund is not designed to be a spectacular growth vehicle. Rather, we
manage it to seek solid, steady, capital growth and rising dividend income over
the long term.
Research is fundamental to our investment approach. With growth stocks, you're
dealing with high quality companies. So it's not a guessing game as to whether
they will increase earnings. The question is how much, and how consistently. So
we do a lot of fundamental, `bottom-up' research--including on-site visits and
meetings with management--to get a handle on how well the company is put
together. To us, the key to success with growth stocks is to be selective, and
buy them at a reasonable price.
WE STAYED THE COURSE IN 1996
Overall, our goal is to make the Fund a relatively low volatility growth
vehicle, with stocks that also provide income potential. This strategy was
reflected in changes we made to the portfolio during the year.
Over the course of the year, we continued to find many good growth stocks in our
favorite themes for the 1990s: financial services; health care; energy services;
select technology companies in telecommunications, networking, computers and
software; and changing companies and consolidating industries.
During the early part of the year, the bonds we held to provide income tended to
hinder performance versus the S&P 500, so we sold our straight-debt bonds and
replaced them with convertible issues, and with stocks that provided the
potential for rising dividends. This move helped improve performance during the
course of the fiscal year. In early November, we also took profits by selling
our Texaco position and investing those assets elsewhere in the energy sector.
8
<PAGE>
Currently, the portfolio is structured according to our expectations for slower
economic growth, low interest rates, and moderate levels of inflation in the
U.S. during the coming months.
NEAR-TERM UNCERTAINTY SHOULD GIVE WAY TO POSITIVE FUNDAMENTALS
Near term, there are several reasons to be optimistic regarding the outlook for
stocks. First, the November elections have kept in place a political balance
that, so far, has been good for the financial markets. In addition, the Federal
Reserve appears determined to maintain a slow growing economy. And finally, if
economic growth remains moderate as we expect, inflation should continue to be
subdued, and interest rates should have an opportunity to move lower.
In such an investment climate, we believe "growth cyclical" stocks and
restructured companies will be the place to be, since they should be best able
to provide rising dividends and relatively attractive returns in a slowly
growing economy.
While market corrections are always possible as 1997 evolves, underlying
fundamentals are extremely positive for the long term. Therefore, we believe any
corrections--whether broad-based or in specific sectors--should be viewed as
buying opportunities, particularly since many investors continue to keep a high
level of assets in short-term instruments.
Overall, we expect a good environment for the high-quality, established
companies that this Fund will continue to emphasize. We thank you for your
confidence, and we look forward to serving your investment needs in the future.
Sincerely,
/s/ Ronald C. Ognar
Ronald C. Ognar,
Portfolio Manager
/s/ Ian J. Rogers
Ian J. Rogers,
Portfolio Manager
November 21, 1996
[PHOTO OF RONALD C. OGNAR & IAN J. ROGERS]
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 12-30-81 to 10-31-96
The Strong Total S&P 500 Lipper Growth and
Return Fund Index* Income Funds Index*
12-81 10,000 10,000 10,000
12-82 13,250 12,155 12,417
12-83 18,720 14,896 15,243
12-84 20,685 15,830 15,897
12-85 25,936 20,853 20,436
12-86 31,121 24,745 24,039
12-87 33,002 26,044 24,673
12-88 38,141 30,370 29,201
12-89 39,140 39,993 36,132
12-90 36,367 38,751 33,966
12-91 48,578 50,557 43,393
12-92 48,844 54,408 47,573
12-93 59,851 59,892 54,528
12-94 59,027 60,684 54,302
12-95 74,963 83,487 71,211
10-96 83,480 97,370 81,535
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Standard & Poor's 500 Stock Index, ("S&P 500") and in the Lipper Growth and
Income Funds Index. Results include the reinvestment of all dividends and
capital gains distributions. Performance is historical and does not represent
future results. Investment returns and principal value vary, and you may have a
gain or loss when you sell shares.
- --------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS(1)
as of 10-31-96
1-YEAR
18.03%
3-YEAR
11.65%
5-YEAR
13.14%
10-YEAR
10.26%
SINCE INCEPTION
(on 12-30-81)
15.38%
- --------------------------------------------------------------------------------
* The S&P 500 is an unmanaged index generally representative of the U.S.
stock market. The Lipper Growth and Income Funds Index is an
equally-weighted performance index of the largest qualifying funds in this
Lipper category. Source of the S&P index data is Micropal. Source of the
Lipper index data is Lipper Analytical Services Inc.
1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change,
while total return reflects aggregate change.
9
<PAGE>
The Strong GROWTH & INCOME Fund
================================================================================
The Strong Growth and Income Fund seeks total return by investing for capital
growth and income. The Fund invests primarily in companies that pay current
dividends and offer potential growth of earnings.
FUND PROVIDED SUPERIOR RETURNS THIS YEAR
We are pleased to present the Fund's first annual report, which covers its
performance from its inception on December 29, 1995, through the fiscal year
ending October 31, 1996. We are even more pleased to report that the Fund
provided shareholders with an impressive gain for the period. The Fund achieved
a total return of 24.19%, which compared favorably with the 16.63% return of the
S&P 500, and the 14.50% return posted by its peers, as measured by the Lipper
Growth and Income Funds Index.1 By the end of October, total assets under
management in the Fund had grown to $18 million.*
FIVE LARGEST HOLDINGS
based on net assets as of 10-31-96
SECURITY INDUSTRY % OF NAV
................................................................................
Merrill Lynch Brokerage &
& Company, Inc. Investment
Management 1.5%
................................................................................
Kimberly-Clark Paper &
Corporation Forest Products 1.1%
................................................................................
Sonat, Inc. Natural Gas
Distribution 1.1%
................................................................................
Avon Products, Inc. Cosmetic &
Personal Care 1.1%
................................................................................
Transocean Offshore, Inc. Oil Well
Equipment & Service 1.1%
................................................................................
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
THE FUND FAVORED THE STOCKS OF LARGER COMPANIES
While the Fund has the flexibility to invest in the stocks of smaller companies,
we tended to maintain a significant bias to the stocks of large,
well-established, dividend-paying companies throughout the fiscal year. Under
certain conditions--for example, rising interest rate environments such as the
one that characterized much of 1996--these stocks enjoy advantages over those of
smaller companies.
RATES ROSE AS THE ECONOMY SHIFTED GEARS
Economic indicators sent contradictory signals this year, making it difficult to
get a clear and definitive view of the economy's growth. Going into the year,
many analysts expected 1995's weak growth to continue into 1996. But early in
the year, severe winter weather on the East Coast negatively affected economic
activity, and a government shutdown delayed the release of key economic reports.
When these reports were finally released, they indicated stronger growth than
most investors anticipated.
Throughout 1996, sentiment regarding the pace of economic growth ebbed and
flowed with every monthly employment figure. Investors, anxious over higher
interest rates spawned by a stronger economy, in turn created periods of
volatility in the financial markets. As the year progressed, however, economic
activity appeared to moderate to a near idyllic pace--strong enough to allow
corporations to meet earnings expectations, but subdued enough to keep inflation
under control. This "not too hot, not too cold" view of the economy prevailed as
the fiscal year drew to a close.
OUR BIAS TOWARD LARGE COMPANY STOCKS PRODUCED EXCELLENT RESULTS
Throughout the fiscal year, we never expected the economy to sustain
significantly strong growth. Despite occasional indications to the contrary, our
research suggested a greater likelihood for a "steady state" economy hovering in
the range of 2-3% annual growth. We therefore positioned the portfolio
accordingly, with a bias towards larger companies. These firms offer investors
greater stability stemming from the underlying company's financial strength and
flexibility, solid yield support from a steady stream of dividends, ready
liquidity, and earnings visibility.
We also maintained increased exposure to sectors that typically outperform in
such an environment, because they are less dependent on a fast-growing economy
to increase their earnings--health care, financial services, consumer
non-durables, and energy are examples, as well as selected technology companies,
particularly those that offer products that can help enhance productivity. This
positioning added value to the Fund throughout 1996, as stocks in these sectors
performed particularly
well.
In addition, to help enhance the Fund's income earning power, we made ample use
of convertible securities--that is, bonds that can be converted into a company's
stock when it reaches a certain price. Convertibles offer several advantages.
Because they pay a consistent dividend, they tend to be less volatile than
shares of common stock. Also, convertible securities allow the Fund to gain
exposure to attractive industries that may not otherwise offer dividend-paying
stocks.
10
<PAGE>
ASSET ALLOCATION
based on net assets as of 10-31-96
Common Stocks 81.9%
Convertible Securities 11.6%
United States Government Issues 0.2%
Short-Term Investments 6.3%
THE ECONOMY REMAINS UNSETTLED
Economic indicators continue to be contradictory, at least for the near term.
Overall, the environment appears to be healthy for investors; high employment,
low inflation and moderate economic growth that is strong enough to help
corporations sustain their earnings. In addition, inflation remains modest, and
the November elections have re-established a political balance that, so far, has
been good for the financial markets. Therefore, it's difficult to make a strong
case for a substantial change from the current climate.
Given this slow-growth, low-inflation outlook, we will likely continue to
emphasize large capitalization stocks from companies that tend to display
superior financial performance, including above-average revenue and earnings
growth, moderate levels of financial leverage, above-average return on equity,
positive cash flow, and management teams focused on enhancing shareholder value.
In addition, the Fund's holdings will continue to be diversified among sectors
and industries that we believe offer positive dynamics that can serve as a solid
base for future revenue and earnings growth.
Thank you for choosing the Strong Growth and Income Fund. We appreciate your
confidence, and we look forward to helping you pursue your investment goals.
Sincerely,
/s/ Rimas Milaitis
Rimas Milaitis
Portfolio Manager
November 13, 1996
[PHOTO OF RIMAS MILAITIS]
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 12-29-95 through 10-31-96
The Strong Growth S&P 500 Lipper Growth and
& Income Fund Index* Income Funds Index*
12-95 10,000 10,000 10,000
3-96 11,145 10,537 10,574
6-96 11,556 11,010 10,846
9-96 12,078 11,350 11,196
10-96 12,419 11,663 11,450
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Standard & Poor's 500 Stock Index ("S&P 500"), and the Lipper Growth and Income
Funds Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares.
- --------------------------------------------------------------------------------
TOTAL RETURN(1)
Since inception on 12-29-95
to 10-31-96
24.19%
- --------------------------------------------------------------------------------
* The S&P 500 is an unmanaged index generally representative of the U.S.
stock market. The Lipper Growth and Income Funds Index is an
equally-weighted performance index of the largest qualifying funds in this
Lipper category. Source of the S&P index data is Micropal. Source of the
Lipper index data is Lipper Analytical Services, Inc.
1 Total return is not annualized, and measures the aggregate change in the
value of an investment in the Fund, assuming reinvestment of dividends.
11
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES October 31, 1996
- --------------------------------------------------------------------------------
STRONG ASSET ALLOCATION FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS 48.5%
AEROSPACE & DEFENSE 0.3%
Litton Industries, Inc. (b) 3,300 $ 148
Thiokol Corporation 16,500 691
-----
839
AIRLINE 0.1%
Korean Airline Company, Ltd. 6,800 127
Thai Airways International PCL (Fgn Reg) 130,000 229
-----
356
AUTO & TRUCK PARTS 0.4%
Borg-Warner Automotive, Inc. 25,000 959
AUTOMOBILE 0.0%
Pininfarina Spa 13,000 107
BANK - MONEY CENTER 0.2%
The Development Bank of Singapore, Ltd. (Fgn Reg) 27,000 324
Hong Leong Finance, Ltd. (Fgn Reg) 89,000 272
-----
596
BANK - REGIONAL 1.8%
City National Corporation 9,200 161
First American Corporation 27,000 1,343
First Bank System, Inc. 2,400 158
First Security Corporation 42,500 1,248
Mercantile Bancorporation, Inc. 3,300 164
Old Kent Financial Corporation 3,700 167
Southern National Corporation 39,500 1,368
-----
4,609
BANK - SUPER REGIONAL 1.1%
Bank of Boston Corporation 2,800 179
Fleet Financial Group, Inc. 30,000 1,496
U.S. Bancorp 27,500 1,100
-----
2,775
BEVERAGE - ALCOHOLIC 0.7%
The Seagram Company, Ltd. 50,000 1,894
BEVERAGE - SOFT DRINK 0.1%
The Coca-Cola Company 3,100 157
BROKERAGE & INVESTMENT MANAGEMENT 3.0%
Amway Japan, Ltd. Premium Exchangeable
Participating Shares Trust 3,500 65
Apartment Investment & Management Company
Class A 7,700 179
Commercial Net Lease Realty, Inc. 120,000 1,650
Equity Residential Properties Trust 69,600 2,558
Kay Hian James Capel Holdings, Ltd. 250,000 208
Manufactured Home Communities, Inc. 115,000 2,242
Nomura Securities Company, Ltd. 21,000 346
Peregrine Investment Holdings, Ltd. 235,000 378
Peregrine Investment Holdings, Ltd. Warrants,
Expire 5/15/98 (b) 25,500 5
Starwood Lodging Trust 3,800 171
-----
7,802
CHEMICAL 0.1%
IMC Global, Inc. 4,000 150
CHEMICAL - SPECIALTY 0.1%
Cabot Corporation 5,800 140
CLOSED-END FUND 0.5%
The Central European Growth Fund PLC 481,000 467
The Fleming Poland Fund, Ltd. Redeemable
Participating Preference 'A' Shares 25,510 252
The Fleming Poland Fund, Ltd. Warrants,
Expire 1/31/99 (b) 5,102 13
Mexico Fund 18,000 254
The R.O.C. Taiwan Fund (b) 9,600 94
The Taipei Fund IDR (b) 30 260
-----
1,340
COMMERCIAL SERVICE 0.8%
APAC Teleservices, Inc. (b) 3,200 148
Caribiner International, Inc. (b) 3,700 168
Comdisco, Inc. 45,000 1,344
Flightsafety International, Inc. 3,700 183
Getty Communications PLC Sponsored ADR (b) 4,000 55
Outdoor Systems, Inc. (b) 1,300 58
-----
1,956
COMPUTER - MAINFRAME 0.0%
International Business Machines Corporation 400 52
COMPUTER - PERIPHERAL EQUIPMENT 0.7%
Seagate Technology, Inc. (b) 26,400 1,762
Storage Technology Corporation (b) 3,900 166
-----
1,928
COMPUTER - PERSONAL & WORKSTATION 0.1%
Dell Computer Corporation (b) 2,100 171
COMPUTER SERVICE 0.0%
Sykes Enterprises, Inc. (b) 1,700 79
COMPUTER SOFTWARE 1.9%
Ascend Communications, Inc. (b) 2,500 163
Autodesk, Inc. 6,900 158
Cisco Systems, Inc. (b) 2,700 167
Netscape Communications Corporation (b) 45,000 1,991
Parametric Technology Corporation (b) 3,300 161
Sterling Commerce, Inc. (b) 1,800 51
Sterling Software, Inc. (b) 5,400 176
Sybase, Inc. (b) 9,100 160
3Com Corporation (b) 29,900 2,022
-----
5,049
COMPUTER SYSTEMS 0.1%
Oracle Systems Corporation (b) 3,800 161
CONGLOMERATE 1.2%
Guinness Peat Group PLC 1,063,113 586
Jardine Matheson Holdings, Ltd. 64,371 364
Keppel Corporation, Ltd. 74,000 552
Lonrho PLC 60,000 146
Loxley PCL (Fgn Reg) 25,000 181
Mitsubishi Corporation 34,000 379
Oerlikon - Buehrle Holding AG 'R' (b) 3,000 295
Pathe SA (b) 1,000 269
Trans Zambezi Industries, Ltd. GDR
(Acquired 7/16/96; Cost $247) (b) (d) 110,000 225
-----
2,997
CONSUMER - MISCELLANEOUS 0.1%
Duracell International, Inc. 2,600 174
COSMETIC & PERSONAL CARE 0.1%
Estee Lauder Companies, Inc. Class A 3,800 163
The Gillette Company 2,300 172
-----
335
DIVERSIFIED OPERATIONS 0.7%
Dial Corporation 140,000 1,925
ELECTRIC POWER 0.7%
NIPSCO Industries, Inc. 4,500 170
Public Service Company of Colorado 46,500 1,720
-----
1,890
ELECTRICAL EQUIPMENT 0.2%
Amphenol Corporation (b) 7,400 147
Honeywell, Inc. 2,700 168
Molex, Inc. Class A 4,700 152
-----
467
ELECTRONIC INSTRUMENTATION 0.7%
Fisher Scientific International, Inc. 40,000 1,795
ELECTRONIC PRODUCTS - MISCELLANEOUS 0.1%
AVX Corporation 7,300 135
See notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
STRONG ASSET ALLOCATION FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
ELECTRONICS - SEMICONDUCTOR/COMPONENT 2.7%
Altera Corporation (b) 25,500 $1,581
Analog Devices, Inc. (b) 45,600 1,186
Atmel Corporation (b) 5,100 129
Intel Corporation 17,500 1,923
KLA Instruments Corporation (b) 6,600 160
National Semiconductor Corporation (b) 8,700 167
Xilinx, Inc. (b) 60,000 1,965
-----
7,111
ENGINEERING & CONSTRUCTION 0.2%
Italian-Thai Development PCL (Fgn Reg) 30,000 159
Ohmoto Gumi Company, Ltd. 10,000 154
Semen Cibinong PT (Fgn Reg) 94,000 206
-----
519
FINANCE - MISCELLANEOUS 0.5%
Finance One PCL (Fgn Reg) 50,000 141
Gemina SPA (b) 725,000 323
SGS (Societe Generale de Surveillance) Holdings SA 285 645
SunAmerica, Inc. 4,300 161
-----
1,270
FOOD 2.6%
CPC International, Inc. 15,300 1,207
Davomas Abadi PT 300,000 277
Dean Foods Company 5,500 160
Hershey Foods Corporation 3,600 174
Interstate Bakeries Corporation 40,000 1,695
Lancaster Colony Corporation 1,300 49
Nabisco Holdings Corporation 4,900 183
Nestle AG 495 536
Unilever NV 17,000 2,599
-----
6,880
HEALTHCARE - BIOMEDICAL/GENETIC 0.6%
Centocor, Inc. (b) 49,900 1,466
HEALTHCARE - DRUG/DIVERSIFIED 0.9%
Abbott Laboratories 3,200 162
Astra AB 29,000 1,331
Biovail Corporation International (b) 20,000 585
Pfizer, Inc. 2,000 166
Rhone Poulenc Rorer, Inc. 1,400 94
-----
2,338
HEALTHCARE - MEDICAL SUPPLY 0.6%
Amerisource Distribution Corporation Class A (b) 4,000 169
NCS Healthcare, Inc. Class A (b) 4,900 149
Patterson Dental Company (b) 5,500 154
Steris Corporation (b) 30,000 1,133
-----
1,605
HEALTHCARE - PATIENT CARE 0.7%
Compdent Corporation (b) 4,300 148
Medpartners, Inc. (b) 70,000 1,479
Renal Treatment Centers, Inc. (b) 5,100 136
Tenet Healthcare Corporation (b) 7,100 148
-----
1,911
HEALTHCARE - PRODUCT 0.6%
Boston Scientific Corporation (b) 2,900 158
Cellegy Pharmaceuticals, Inc. (b) 20,000 97
R.P. Scherer Corporation (b) 31,000 1,438
-----
1,693
HOUSEHOLD APPLIANCE & FURNISHINGS 0.1%
Harman International Industries, Inc. 1,000 51
Philips Electronics NV ADR 7,500 264
-----
315
HOUSING RELATED 0.4%
Loctite Corporation 3,600 211
Nichiha 8,800 162
Owens Corning 4,300 167
Royal Plastics Group, Ltd. (b) 32,000 600
-----
1,140
INSURANCE - DIVERSIFIED 0.3%
Equitable Companies, Inc. 25,700 604
Travelers Corporation 3,100 168
-----
772
INSURANCE - LIFE 0.7%
Conseco, Inc. 2,100 112
Equitable of Iowa Companies 42,500 1,780
-----
1,892
INSURANCE - MULTI-LINE 0.8%
Horace Mann Educators Corporation 60,000 2,055
MGIC Investment Corporation 2,400 165
-----
2,220
INSURANCE - PROPERTY & CASUALTY 1.2%
ACE, Ltd. 2,900 159
ITT Hartford Group, Inc. 30,000 1,890
Mid Ocean, Ltd. 19,000 893
TIG Holdings, Inc. 5,400 156
-----
3,098
LEISURE PRODUCT 0.0%
Ek Chor China Motorcycle Company, Ltd. 7,800 46
LEISURE SERVICE 1.8%
CDL Hotels International, Ltd. 705,075 365
CDL Hotels New Zealand, Ltd. (b) 638,000 207
Circus Circus Enterprises, Inc. (b) 5,000 173
Mirage Resorts, Inc. (b) 6,700 147
Sodak Gaming, Inc. (b) 47,500 861
Sydney Aquarium, Ltd. 137,000 379
Toho Company 4,090 628
Tourism Holdings, Ltd. 5,000 11
WMS Industries, Inc. (b) 75,000 1,837
-----
4,608
MACHINE TOOL 0.6%
Kennametal, Inc. 45,000 1,530
MACHINERY - AGRICULTURE 0.1%
Deere & Company 3,600 150
MACHINERY - MISCELLANEOUS 0.1%
Bukaka Teknik Utama PT (Fgn Reg) 177,000 160
Greenwich Air Services, Inc. (b) 7,400 125
-----
285
MEDIA - PUBLISHING 0.2%
Arnoldo Mondadori Editore Spa 32,000 236
Matichon Public Company, Ltd. 92,000 357
-----
593
MEDIA - RADIO/TV 2.6%
American Radio Systems Corporation (b) 4,500 137
American Telecasting, Inc. Warrants,
Expire 8/10/00 (b) 350 5
Comcast UK Cable Partners, Ltd. Class A ADR (b) 135,000 1,704
Cox Communications, Inc. Class A (b) 100,000 1,850
Mediaset Spa Sponsored ADR
(Acquired 7/05/96; Cost $46) (b) (d) 1,000 47
Tele-Communications, Inc. Class A (b) 80,000 995
Telemundo Group, Inc. Class A (b) 75,000 2,081
-----
6,819
METAL PRODUCTS & FABRICATION 0.1%
Email, Ltd. 115,387 317
METALS & MINING 0.7%
Aberfoyle, Ltd. 97,000 203
Ashanti Goldfields Company, Ltd. GDR 20,000 327
Normandy Mining, Ltd. (b) 508,000 691
Phelps Dodge Corporation 1,200 75
Tambang Timah PT GDR 35,000 535
-----
1,831
NATURAL GAS DISTRIBUTION 1.5%
El Paso Natural Gas Company 3,400 165
Enron Corporation 48,900 2,274
KN Energy, Inc. 4,700 176
See notes to financial statements.
13
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1996
- --------------------------------------------------------------------------------
STRONG ASSET ALLOCATION FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
Sonat, Inc. 25,000 $ 1,231
WICOR, Inc. 4,300 153
--------
3,999
OIL - INTERNATIONAL INTEGRATED 1.5%
Royal Dutch Petroleum Company 21,000 3,473
YPF Sociedad Anonima ADR 24,000 546
--------
4,019
OIL - NORTH AMERICAN EXPLORATION &
PRODUCTION 0.2%
Burlington Resources, Inc. 3,500 176
Flores & Rucks, Inc. (b) 3,900 184
Union Pacific Resources Group, Inc. 5,600 154
United Meridian Corporation (b) 1,800 85
--------
599
OIL - NORTH AMERICAN INTEGRATED 0.5%
Ultramar Corporation 50,000 1,431
OIL WELL EQUIPMENT & SERVICE 2.1%
Cooper Cameron Corporation (b) 3,000 192
Noble Drilling Corporation (b) 109,100 2,032
Seitel, Inc. (b) 3,100 123
Smith International, Inc. (b) 3,300 125
Transocean Offshore, Inc. 15,600 987
Weatherford Enterra, Inc. (b) 49,800 1,444
Western Atlas, Inc. 10,000 694
--------
5,597
PAPER & FOREST PRODUCTS 0.3%
Fletcher Challenge, Ltd. Forestry Division 182,263 304
Kimberly-Clark Corporation 1,900 177
The Mead Corporation 2,900 165
Willamette Industries, Inc. 2,500 169
--------
815
PERSONAL & COMMERCIAL LENDING 0.1%
Household International, Inc. 2,000 177
POLLUTION CONTROL 0.0%
United Waste Systems, Inc. (b) 3,600 124
RAILROAD 0.0%
Burlington Northern Santa Fe Corporation 1,100 91
REAL ESTATE 0.9%
Ciputra Development PT (Fgn Reg) 242,000 177
Ciputra Development PT Rights 121,000 12
Diamond City Company 36,000 281
Shortland Properties, Ltd. 1,111,500 770
Singapore Land, Ltd. 40,000 221
Sotogrande SA (b) 130,000 249
TOC Company, Ltd. 70,000 768
--------
2,478
RETAIL - FOOD CHAIN 0.1%
Familymart, Inc. 6,600 276
The Kroger Company (b) 1,500 67
--------
343
RETAIL - RESTAURANT 0.2%
Brinker International, Inc. (b) 9,600 163
McDonald's Corporation 3,300 146
Quality Dining, Inc. (b) 5,100 110
--------
419
RETAIL - SPECIALTY 1.1%
Cortefiel, SA 10,000 279
CUC International, Inc. (b) 85,000 2,082
The Home Depot, Inc. 2,900 159
MSC Industrial Direct Company, Inc. Class A (b) 4,400 163
Movie Gallery, Inc. (b) 2,300 31
Tech Data Corporation (b) 5,900 152
--------
2,866
SAVINGS & LOAN 0.3%
Great Western Financial Corporation 30,500 854
SHOE & APPAREL MANUFACTURING 0.9%
Adidas AG 17,500 1,497
Saha Union PCL (Fgn Reg) 250,000 292
Simint Spa (b) 120,000 332
Warnaco Group, Inc. Class A 6,300 157
--------
2,278
STEEL 0.9%
Chubu Steel Plate Company, Ltd. 47,000 257
UCAR International, Inc. (b) 55,000 2,152
--------
2,409
TELECOMMUNICATION EQUIPMENT 1.2%
Ericsson (LM) Telephone Company ADR Class B 6,200 171
Nokia Corporation Sponsored ADR 65,000 3,014
--------
3,185
TELECOMMUNICATION SERVICE 1.6%
American Communications Services, Inc. Warrants,
Expire 11/01/05 (b) 1,750 149
Nippon Telegraph & Telephone Corporation 48 335
Portugal Telecom SA Sponsored ADR 7,000 181
360 Communications Company (b) 102,000 2,308
U.S. West, Inc. Media Group (b) 80,000 1,250
--------
4,223
TELEPHONE 0.1%
Cincinnati Bell, Inc. 3,000 148
Telefonos de Mexico SA ADR Series L 6,000 183
--------
331
TRUCKING 0.1%
Consolidated Freightways, Inc. 7,100 170
US Freightways Corporation 1,800 39
--------
209
--------
TOTAL COMMON STOCKS (COST $122,720) 127,694
PREFERRED STOCKS 2.7%
Cablevision Systems Corporation Depositary
Shares Representing 1/100th Preferred
Series M 11.125% 10,278 943
Fresenius National Medical Care, Inc. Class D (b) 1,700 0
The News Corporation, Ltd. 140,248 616
Panamsat Corporation 12.75% Senior Preferred 2,000 2,483
SI Financing Trust I Preferred Stock Units 9.50% 120,000 3,090
--------
TOTAL PREFERRED STOCKS (COST $6,916) 7,132
CONVERTIBLE PREFERRED STOCKS 0.8%
Sun Company, Inc. Depositary Shares Representing
1/2 Preferred Series A $1.80 (COST $2,440) 90,000 2,126
CONVERTIBLE BONDS 2.0%
Apache Corporation Subordinated Debentures,
6.00%, Due 1/15/02 (Acquired 8/09/96;
Cost $1,740) (d) $1,500 1,909
Equitable Companies, Inc. Subordinated Debentures,
6.125%, Due 12/15/24 177 199
Hexcel Corporation Subordinated Notes, 7.00%,
Due 8/01/03 1,500 1,978
North American Vaccine, Inc. Subordinated Notes,
6.50%, Due 5/01/03 (Acquired 5/01/96 - 8/26/96;
Cost $1,211) (d) 1,210 1,198
--------
TOTAL CONVERTIBLE BONDS (COST $4,756) 5,284
CORPORATE BONDS 22.5%
Acme Metals, Inc. Senior Secured Discount Notes,
13.50%, Due 8/01/04 1,165 1,148
AES Corporation Senior Subordinated Notes,
10.25%, Due 7/15/06 1,000 1,069
Aztar Corporation Senior Subordinated Notes,
13.75%, Due 10/01/04 1,000 1,095
CalEnergy, Inc. Senior Notes, 9.50%, Due 9/15/06
(Acquired 9/18/96; Cost $1,494) (d) 1,500 1,515
Casino Magic Louisiana Corporation Senior
Secured Notes, 13.00%, Due 8/15/03
(Acquired 8/19/96; Cost $1,521) (d) 1,500 1,523
See notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
STRONG ASSET ALLOCATION FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
Cinemark USA, Inc. Senior Subordinated Notes,
9.625%, Due 8/01/08 (Acquired 8/12/96;
Cost $996) (d) $ 1,000 $ 975
Comtel Brasileira, Ltd. Secured Yankee Notes,
10.75%, Due 9/26/04 (Acquired 9/18/96;
Cost $3,000) (d) 3,000 3,067
Empresa Electrica Guacolda SA Yankee Senior
Secured Loan Participation Certificates, 7.60%,
Due 4/30/01(Acquired 10/04/96; Cost $1,519) (d) 1,500 1,527
First Nationwide Parent Holdings, Ltd. Senior
Exchange Notes, 12.50%, Due 4/15/03
(Acquired 4/12/96 - 5/03/96; Cost $1,500) (d) 1,500 1,631
Frontiervision Operating Partners LP/Frontiervision
Capital Corporation Senior Subordinated Notes,
11.00%, Due 10/15/06 1,000 998
HUBCO, Inc. Subordinated Debentures, 8.20%,
Due 9/15/06 (Acquired 9/10/96; Cost $998) (d) 1,000 1,041
Intermedia Capital Partners IV LP/Intermedia
Partners IV Capital Corporation Senior Discount
Notes, 11.25%, Due 8/01/06 (Acquired 8/05/96 -
8/20/96; Cost $4,290) (d) 4,200 4,200
International CableTel, Inc. Senior Discount Notes,
Series B, Zero %, Due 2/01/06 (Rate Reset Effective
2/01/00) 2,500 1,525
International Home Foods Senior Subordinated
Notes, 10.375%, Due 11/01/06 (Acquired 10/29/96;
Cost $2,000) (d) 2,000 2,025
International Wireless Communications Holdings, Inc.
Senior Secured Discount Notes, Zero %,
Due 8/15/01 (Acquired 8/09/96; Cost $2,033) (d) 4,000 2,180
JPS Automotive Products Corporation Senior Notes,
11.125%, Due 6/15/01 2,000 2,065
Majestic Star Casino LLC Senior Secured Notes,
12.75%, Due 5/15/03 (Acquired 8/05/96;
Cost $1,087) (d) 1,000 1,077
Marcus Cable Operating Company LP/Marcus Cable
Capital Corporation II Senior Subordinated
Discount Notes, Zero %, Due 8/01/04
(Rate Reset Effective 8/01/99) 1,000 760
MYDFA Trust Floating Rate Certificates, 6.6875%,
Due 9/15/07 (Acquired 10/02/96; Cost $4,232) (d) 5,000 4,181
National Energy Group, Inc. Senior Notes, 10.75%,
Due 11/01/06 (Acquired 10/29/96; Cost $1,500) (d) 1,500 1,506
Nextlink Communications LLC Senior Notes, 12.50%,
Due 4/15/06 1,500 1,541
Noble Drilling Corporation Senior Notes, 9.125%,
Due 7/01/06 2,500 2,656
Owens-Illinois, Inc. Senior Debentures, 11.00%,
Due 12/01/03 1,417 1,562
Pagemart, Inc. Senior Discount Notes, Zero %,
Due 11/01/03 1,000 770
Pagemart Nationwide, Inc. Senior Discount Notes,
Zero %, Due 2/01/05 (Rate Reset Effective 2/01/00) 1,000 675
Paging Network, Inc. Senior Subordinated Notes,
11.75%, Due 5/15/02 110 119
Panamsat L.P./ Panamsat Capital Corporation Senior
Secured Notes, 9.75%, Due 8/01/00 1,105 1,174
Printpack, Inc. Senior Subordinated Notes, Series A,
10.625%, Due 8/15/06 (Acquired 8/16/96;
Cost $2,028) (d) 2,000 2,060
Ralphs Grocery Company Senior Notes, 10.45%,
Due 6/15/04 1,500 1,526
Republic of Argentina Bonds, 9.25%, Due 2/23/01 1,000 980
Revlon Worldwide Corporation Senior Secured
Discount Notes, Series B, Zero %, Due 3/15/98 1,650 1,462
Santa Fe Pacific Gold Corporation Senior
Debentures, 8.375%, Due 7/01/05 2,770 2,819
Teekay Shipping Corporation Guaranteed First
Preferred Mortgage Notes, 8.32%, Due 2/01/08 2,000 1,940
UIH Australia/PAC, Inc. Senior Discount Notes,
Series B, Zero%, Due 5/15/06 (Rate Reset Effective
5/15/01) 2,025 1,068
U.S. Air, Inc. Guaranteed Senior Notes, 10.00%,
Due 7/01/03 500 480
USAir 1993-A Pass-Thru Trust Certificates, Series
1993-A2, 9.625%, Due 9/01/03 1,675 1,650
Western Wireless Corporation Senior Subordinated
Notes, 10.50%, Due 2/01/07 (Acquired 10/18/96;
Cost $1,500) (d) 1,500 1,504
-------
TOTAL CORPORATE BONDS (COST $58,550) 59,094
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 9.7%
Aircraft Lease Portfolio Securitization Pass-Thru
Trust Certificates, Series 1996-1, Class D, 12.75%,
Due 6/15/06 (Acquired 6/18/96; Cost $2,500) (d) 2,500 2,575
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 1990-G, Class A-Z1,
9.50%, Due 12/25/21 1,114 1,136
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1992-5, Class M, 8.00%,
Due 3/25/22 (c) 2,996 2,997
First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates:
Series 1993-2, Class A-3, 7.50%, Due 3/25/33 (c) 3,029 3,080
Series 1994-MHC1, Class A-1X, Interest Only,
3.2976%, Due 4/25/11 10,264 180
Lennar U.S. Partners, Ltd. Partnership Structured
Notes, Series 1995-1, Class E, 9.75%, Due 5/15/05
(Acquired 9/27/95; Cost $5,509) (c) (d) 5,500 5,507
MDC Asset Investors Trust V Collateralized
Mortgage Obligation, Class V-2, 9.325%,
Due 12/01/17 109 110
Prudential Home Mortgage Securities Company, Inc.
Real Estate Mortgage Investment Conduit
Pass-Thru Certificates, Series 1992-33, Class B3,
7.50%, Due 11/25/22 (c) 2,500 2,341
RTC Variable Rate Mortgage Pass-Thru Securities,
Inc., Series 1992-7, Class A-3, 7.3614%,
Due 3/25/22 (c) 2,253 2,284
Ryland Mortgage Securities Corporation III Variable
Rate Collateralized Mortgage Bonds, Series 1992-C,
Class 3-A, 11.7766%, Due 11/25/30 561 596
Westam Mortgage Financial Corporation
Collateralized Mortgage Bonds, Series 10,
Class 10-D, Principal Only, Due 7/26/18 (c) 7,371 4,828
-------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES (COST $25,381) 25,634
UNITED STATES GOVERNMENT & AGENCY
ISSUES 6.4%
FHLMC Guaranteed Multiclass Mortgage
Participation Certificates:
Series 1181, Class 1181-G, 7.50%, Due 8/15/05 421 427
Series 1257, Class 1257-J, 7.00%, Due 4/15/07 210 205
FHLMC Guaranteed Pass-Thru Certificates:
9.50%, Due 1/01/06 165 175
10.25%, Due 3/01/15 177 193
10.50%, Due 1/01/16 35 39
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates,
11.00%, Due 10/01/00 thru 11/01/00 183 194
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
Series 1992-137, Class BA, 3.50%, Due 1/25/17 521 497
Series 1992-187, Class SA, 8.40%, Due 10/25/07(c) 2,290 2,157
See notes to financial statements.
15
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1996
- --------------------------------------------------------------------------------
STRONG ASSET ALLOCATION FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Pass-Thru
Certificates, Series G92-61, Class FJ, 5.939%,
Due 10/25/22 $ 585 $ 574
GNMA Guaranteed Pass-Thru Certificates:
7.50%, Due 12/15/07 2,400 2,493
10.25%, Due 10/15/98 21 22
11.00%, Due 9/15/17 2,135 2,398
Small Business Administration Guaranteed Loan,
Interest Only Custodial Receipts, Series 1993-1A,
2.531%, Due 2/15/18 20,009 1,907
United States Treasury Notes:
6.00%, Due 9/30/98 4,000 4,020
6.375%, Due 9/30/01 1,500 1,518
--------
TOTAL UNITED STATES GOVERNMENT & AGENCY
ISSUES (COST $16,863) 16,819
OPTIONS 0.2%
Merrill Lynch Swaption (The option to receive a fixed
interest rate of 7.75%; exercisable at a strike price
of $100 beginning 4/09/04 and expiring 4/09/25.)
(COST $440) 9,500 567
SHORT-TERM INVESTMENTS (a) 5.3%
COMMERCIAL PAPER 5.0%
DISCOUNTED 4.8%
Painewebber Group, Inc., Due 11/01/96 $3,600 3,600
Salomon, Inc., Due 11/01/96 9,000 9,000
--------
12,600
INTEREST BEARING, DUE UPON DEMAND 0.2%
Johnson Controls, Inc., 5.04% 449 449
Wisconsin Electric Power Company, 5.06% 113 113
--------
562
--------
Total Commercial Paper 13,162
CORPORATE BONDS 0.1%
Chrysler Financial Corporation Medium Term Notes,
6.21%, Due 7/21/97 200 201
UNITED STATES GOVERNMENT ISSUES 0.2%
United States Treasury Bills:
Due 11/21/96 (c) 75 75
Due 12/12/96 (c) 175 174
Due 12/19/96 (c) 100 99
Due 1/02/97 (c) 150 149
Due 1/09/97 10 10
--------
507
--------
TOTAL SHORT-TERM INVESTMENTS (COST $13,870) 13,870
--------
TOTAL INVESTMENTS IN SECURITIES
(COST $251,936) 98.1% 258,220
Other Assets and Liabilities, Net 1.9% 4,950
--------
NET ASSETS 100.0% $263,170
========
FUTURES
- -------
UNDERLYING
FACE AMOUNT UNREALIZED
EXPIRATION AT VALUE APPRECIATION
DATE (In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
Purchased:
15 S&P Midcap 12/96 $1,830 $14
25 Five-Year U.S.Treasury Notes 12/96 2,681 60
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- -------------------------------------------
VALUE UNREALIZED
SETTLEMENT IN USD DEPRECIATION
DATE (In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
Sold:
20,520,000 FRF 4/25/97 ($4,045) ($45)
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- ------------------------------------------------------------
United States .................................... 79.8%
Brazil ........................................... 2.8%
Netherlands ...................................... 2.4%
Japan ............................................ 1.4%
Australia ........................................ 1.2%
Finland .......................................... 1.1%
Canada ........................................... 1.0%
New Zealand ...................................... 0.7%
United Kingdom ................................... 0.7%
Argentina ........................................ 0.6%
Chile ............................................ 0.6%
Germany .......................................... 0.6%
Singapore ........................................ 0.6%
Sweden ........................................... 0.6%
Switzerland ...................................... 0.6%
Indonesia ........................................ 0.5%
Thailand ......................................... 0.5%
Bermuda .......................................... 0.4%
Hong Kong ........................................ 0.4%
Italy ............................................ 0.4%
Mexico ........................................... 0.2%
Russia ........................................... 0.2%
Spain ............................................ 0.2%
France ........................................... 0.1%
Ghana ............................................ 0.1%
Poland ........................................... 0.1%
Portugal ......................................... 0.1%
Taiwan ........................................... 0.1%
Zimbabwe ......................................... 0.1%
China ............................................ 0.0%
South Korea ...................................... 0.0%
Other Assets & Liabilities, Net .................. 1.9%
------
Total 100.0%
======
- --------------------------------------------------------------------------------
STRONG EQUITY INCOME FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS 82.4%
AEROSPACE & DEFENSE 3.2%
B.F. Goodrich & Company 6,700 $ 284
Boeing Company 3,200 305
Gulfstream Aerospace Corporation (b) 1,500 35
United Technologies Corporation 2,300 296
------
920
AUTO & TRUCK PARTS 0.4%
SPX Corporation 4,500 128
BANK - MONEY CENTER 3.1%
Bankers Trust New York Corporation 3,300 279
Chase Manhattan Corporation 3,900 334
Citicorp 2,900 287
------
900
BANK - REGIONAL 1.0%
Northern Trust Company 4,000 277
BANK - SUPER REGIONAL 4.3%
Banc One Corporation 6,400 271
Comerica, Inc. 4,000 212
First Union Corporation 3,400 247
KeyCorp 4,900 228
PNC Bank Corporation 7,480 271
------
1,229
BROKERAGE & INVESTMENT MANAGEMENT 6.1%
Equity Residential Properties Trust 6,300 232
Felcor Suite Hotels, Inc. 7,700 252
First Industrial Realty Trust, Inc. 10,500 272
See notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
STRONG EQUITY INCOME FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
Prentiss Properties Trust (b) 13,600 $ 280
Reckson Associates Realty Corporation 4,200 150
Standard & Poors Depositary Receipt Trust
Unit Series 1 3,500 248
Starwood Lodging Trust 6,800 306
------
1,740
CHEMICAL 1.8%
Monsanto Company 9,500 376
Potash Corporation of Saskatchewan, Inc. 2,100 149
------
525
CHEMICAL - SPECIALTY 1.2%
Betzdearborn, Inc. 3,900 205
W.R. Grace & Company (b) 2,800 148
------
353
COMMERCIAL SERVICE 0.7%
Avery Dennison Corporation 3,150 207
COMPUTER - MAINFRAME 1.0%
International Business Machines Corporation 2,300 297
COSMETIC & PERSONAL CARE 1.9%
Alberto Culver Company Class A 6,500 258
Avon Products, Inc. 5,300 288
------
546
DIVERSIFIED OPERATIONS 5.8%
Allied Signal, Inc. 3,600 236
Dial Corporation 12,100 166
E.I. du Pont de Nemours & Company 2,800 260
Lockheed Martin Corporation 2,800 251
Minnesota Mining & Manufacturing Company 3,500 268
Textron, Inc. 3,200 284
Viad Corporation 12,900 187
------
1,652
ELECTRIC POWER 0.9%
Allegheny Power Systems, Inc. 8,400 251
ELECTRICAL EQUIPMENT 3.5%
Emerson Electric Company 3,200 285
General Electric Company 2,300 223
Honeywell, Inc. 4,500 280
Westinghouse Electric Corporation 13,300 228
------
1,016
ELECTRONIC INSTRUMENTATION 1.6%
Fisher Scientific International, Inc. 5,200 233
Perkin Elmer Corporation 4,400 236
------
469
ELECTRONICS - SEMICONDUCTOR/COMPONENT 1.0%
Intel Corporation 2,600 286
ENGINEERING & CONSTRUCTION 0.9%
Fluor Corporation 3,800 249
FINANCE - MISCELLANEOUS 1.6%
American Express Company 3,900 183
Dean Witter, Discover & Company 4,600 271
------
454
FOOD 4.0%
Dole Food Company, Inc. 4,810 188
Interstate Bakeries Corporation 6,700 284
Ralston Purina Company - Ralston Purina Group 4,000 264
Sara Lee Corporation 4,800 170
Unilever NV 1,600 245
------
1,151
HEALTHCARE - DRUG/DIVERSIFIED 5.2%
American Home Products Corporation 3,700 227
Johnson & Johnson 4,200 207
Eli Lilly and Company 4,000 282
Merck & Company, Inc. 3,750 278
Pfizer, Inc. 3,400 281
Warner-Lambert Company 3,400 216
------
1,491
HEALTHCARE - MEDICAL SUPPLY 0.8%
Becton, Dickinson & Company 5,000 217
HEALTHCARE - PATIENT CARE 0.7%
Columbia/HCA Healthcare Corporation 5,700 204
HEALTHCARE - PRODUCT 0.5%
Pall Corporation 5,700 146
HOUSEHOLD APPLIANCE & FURNISHINGS 1.9%
Harman International Industries, Inc. 5,000 257
Tupperware Corporation 5,600 288
------
545
HOUSING RELATED 0.8%
Sherwin Williams Company 4,700 236
INSURANCE - DIVERSIFIED 0.9%
Travelers Corporation 5,000 271
INSURANCE - LIFE 0.9%
Reliastar Financial Corporation 4,900 260
INSURANCE - PROPERTY & CASUALTY 0.4%
American Bankers Insurance Group, Inc. 2,600 125
LEISURE PRODUCT 0.6%
Hasbro, Inc. 4,100 159
MACHINERY - AGRICULTURE 0.8%
Deere & Company 5,200 217
MEDIA - PUBLISHING 1.0%
Houghton Mifflin Company 5,700 283
MORTGAGE & RELATED SERVICE 0.9%
Green Tree Financial Corporation 6,400 254
NATURAL GAS DISTRIBUTION 4.9%
El Paso Natural Gas Company 6,300 306
Enron Corporation 5,900 274
NGC Corporation 14,100 254
PanEnergy Corporation 6,900 266
Sonat, Inc. 6,400 315
------
1,415
OIL - INTERNATIONAL INTEGRATED 2.0%
Mobil Corporation 2,500 292
Royal Dutch Petroleum Company 1,650 273
------
565
OIL - NORTH AMERICAN INTEGRATED 0.6%
USX-Marathon Group 8,100 177
OIL WELL EQUIPMENT & SERVICE 3.8%
Halliburton Company 2,800 159
Schlumberger, Ltd. 3,200 317
Transocean Offshore, Inc. 4,700 297
Western Atlas, Inc. (b) 4,500 312
------
1,085
PAPER & FOREST PRODUCTS 1.1%
Kimberly-Clark Corporation 3,500 326
PERSONAL & COMMERCIAL LENDING 1.8%
Associates First Capital Corporation 6,000 260
Household International, Inc. 2,800 248
------
508
RAILROAD 0.5%
Burlington Northern Santa Fe Corporation 1,700 140
RETAIL - DEPARTMENT STORE 0.9%
J.C. Penney Company, Inc. 5,000 262
See notes to financial statements.
17
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1996
- -------------------------------------------------------------------------------
STRONG EQUITY INCOME FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
RETAIL - FOOD CHAIN 0.9%
Safeway, Inc. (b) 6,200 $ 266
RETAIL - SPECIALTY 1.7%
Footstar, Inc. (b) 1,497 33
Intimate Brands, Inc. 13,800 250
Melville Corporation 5,200 194
-------
477
SOAP & CLEANING PREPARATION 1.8%
Clorox Company 2,600 284
Colgate Palmolive Company 2,850 262
-------
546
TELECOMMUNICATION EQUIPMENT 1.0%
Nokia Corporation Sponsored ADR 6,000 278
TELEPHONE 1.3%
BellSouth Corporation 5,000 204
Frontier Corporation 6,000 174
-------
378
TOBACCO 0.7%
Philip Morris Companies, Inc. 2,100 195
-------
TOTAL COMMON STOCKS (COST $21,623) 23,676
PREFERRED STOCKS 0.0%
Fresenius National Medical Care, Inc. Preferred
Class D (b) (COST $0) 2,800 0
CONVERTIBLE PREFERRED STOCKS 4.6%
Corning LP Monthly Income 6.00% Preferred
Securities 3,800 213
MFS Communications, Inc. Depositary Shares
Representing 1/100 Share 8.00% 1,900 165
Merrill Lynch & Company, Inc. Structured
Yield Product 7.25% 3,800 236
Merrill Lynch & Company, Inc. Strypes, 6.50%,
Due 8/15/98 (Exchangeable for MGIC Investment
Corporation Common Stock) 4,300 264
SCI Financial LLC Terminal Convertible Shares
Series A $3.125 1,910 180
Wendy's Financing I Guaranteed Terminal
Convertible Preferred Trust Securities,
Series A 5.00% 5,000 254
-------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $1,231) 1,312
CONVERTIBLE BONDS 7.4%
Altera Corporation Subordinated Notes, 5.75%,
Due 6/15/02 (Acquired 8/02/96; Cost $203) (d) $185 254
Danka Business Systems PLC Subordinated Notes,
6.75%, Due 4/01/02 135 198
Federated Department Stores, Inc. Subordinated
Notes, 5.00%, Due 10/01/03 200 227
Hexcel Corporation Subordinated Notes, 7.00%,
Due 8/01/03 200 264
Magna International, Inc. Yankee Subordinated
Debentures, 5.00%, Due 10/15/02 57 63
Nabors Industries, Inc. Subordinated Notes, 5.00%,
Due 5/15/06 185 210
Saks Holdings, Inc. Subordinated Notes, 5.50%,
Due 9/15/06 210 221
Sanifill, Inc. Subordinated Debentures, 5.00%,
Due 3/01/06 200 257
Scholastic Corporation Subordinated Debentures,
5.00%, Due 8/15/05 (Acquired 7/12/96 - 9/25/96;
Cost $212) (d) 200 227
Staples, Inc. Subordinated Debentures, 4.50%,
Due 10/01/00 (Acquired 9/04/96 - 9/10/96;
Cost $221) (d) 210 216
-------
TOTAL CONVERTIBLE BONDS (COST $1,905) 2,137
UNITED STATES GOVERNMENT ISSUES 0.0%
United States Treasury Bonds, 6.875%, Due 8/15/25
(COST $11) 10 10
SHORT-TERM INVESTMENTS (a) 8.8%
COMMERCIAL PAPER 8.8%
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.02% 1,121 1,121
Johnson Controls, Inc., 5.04% 1,091 1,091
Sara Lee Corporation, 5.00% 132 132
Wisconsin Electric Power Company, 5.06% 170 170
-------
TOTAL SHORT-TERM INVESTMENTS (COST $2,514) 2,514
-------
TOTAL INVESTMENTS IN SECURITIES
(COST $27,284) 103.2% 29,649
Other Assets and Liabilities, Net (3.2%) (926)
-------
NET ASSETS 100.0% $28,723
=======
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- --------------------------------------------------------------------------------
United States ................................... 99.0%
Netherlands ..................................... 1.8%
Finland ......................................... 1.0%
Canada .......................................... 0.7%
United Kingdom .................................. 0.7%
Other Assets and Liabilities, Net ............... (3.2%)
------
Total 100.0%
======
- --------------------------------------------------------------------------------
STRONG AMERICAN UTILITIES FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS 94.3%
ELECTRIC UTILITY 39.1%
American Electric Power Company, Inc. 176,000 $ 7,304
Baltimore Gas & Electric Company 10,000 272
Boston Edison Company 31,000 744
CMS Energy Corporation 187,000 5,914
Duke Power Company 8,000 391
Entergy Corporation 98,000 2,744
FPL Group, Inc. 15,000 690
NIPSCO Industries, Inc. 96,000 3,636
PECO Energy Company 167,000 4,217
Potomac Electric Power Company 26,000 666
SCANA Corporation 313,000 8,373
The Southern Company 273,000 6,040
TECO Energy 233,000 5,738
TNP Enterprises, Inc. 10,000 259
Texas Utilities Electric Company 22,000 891
------
47,879
ENERGY RELATED 16.1%
Amoco Corporation 45,400 3,439
Camco International, Inc. 10,700 415
Chevron Corporation 19,000 1,249
Exxon Corporation 34,300 3,040
Imperial Oil, Ltd. 65,900 2,900
McDermott International, Inc. 17,000 302
Mobil Corporation 7,300 852
Occidental Petroleum Corporation 5,000 122
Petroleum Geo-Services A/S ADR (b) 14,100 483
Schlumberger, Ltd. 12,400 1,229
Shell Transport & Trading ADR 48,820 4,784
Tidewater, Inc. 500 22
Total SA Sponsored ADR 2,500 97
Union Pacific Resources Group, Inc. 11,000 303
Union Texas Petroleum Holdings, Inc. 10,000 214
Vastar Resources, Inc. 8,000 297
------
19,748
See notes to financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
STRONG AMERICAN UTILITIES FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
GAS UTILITY 10.5%
Brooklyn Union Gas Company 2,000 $ 58
Consolidated Natural Gas Company 500 27
Enron Corporation 6,500 302
MCN Corporation 145,000 3,987
National Fuel Gas Company 65,000 2,421
Questar Corporation 12,000 432
Southwestern Energy Corporation 58,900 876
The Williams Companies, Inc. 91,000 4,755
--------
12,858
OTHER UTILITY 0.2%
American Water Works Company, Inc. 12,200 249
TELECOMMUNICATION 28.4%
AT&T Corporation 67,000 2,337
Alltel Corporation 16,000 488
Ameritech Corporation 218,000 11,935
Bell Atlantic Corporation 83,000 5,001
BellSouth Corporation 55,000 2,241
GTE Corporation 7,000 295
Nynex Corporation 55,000 2,447
Pacific Telesis Group 8,000 272
SBC Communications, Inc. 202,000 9,822
--------
34,838
--------
TOTAL COMMON STOCKS (COST $106,954) 115,572
SHORT-TERM INVESTMENTS (a) 6.0%
COMMERCIAL PAPER 6.0%
DISCOUNTED 4.9%
Green Tree Financial Corporation, Due 11/07/96 $3,000 2,997
Painewebber Group, Inc., Due 11/01/96 3,000 3,000
--------
5,997
INTEREST BEARING, DUE UPON DEMAND 1.1%
Johnson Controls, Inc., 5.04% 940 940
Wisconsin Electric Power Company, 5.06% 365 365
--------
1,305
--------
TOTAL SHORT-TERM INVESTMENTS (COST $7,302) 7,302
--------
TOTAL INVESTMENTS IN SECURITIES
(COST $114,256) 100.3% 122,874
Other Assets & Liabilities, Net (0.3%) (388)
--------
NET ASSETS 100.0% $122,486
========
- --------------------------------------------------------------------------------
STRONG TOTAL RETURN FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS 88.5%
AEROSPACE & DEFENSE 2.4%
Boeing Company 95,000 $ 9,061
United Technologies Corporation 70,000 9,012
-------
18,073
BANK - MONEY CENTER 2.4%
Chase Manhattan Corporation 50,000 4,288
Citicorp 135,000 13,365
-------
17,653
BANK - REGIONAL 2.3%
First Bank System, Inc. 60,000 3,960
Firstar Corporation 40,000 1,960
Northern Trust Company 160,000 11,080
-------
17,000
BANK - SUPER REGIONAL 1.9%
Bank of Boston Corporation 135,000 8,640
Norwest Corporation 135,000 5,923
-------
14,563
BEVERAGE - SOFT DRINK 0.2%
The Coca-Cola Company 30,000 1,515
BROKERAGE & INVESTMENT MANAGEMENT 0.9%
Patriot American Hospitality, Inc. 75,000 2,634
Starwood Lodging Trust 100,000 4,500
-------
7,134
CHEMICAL 3.1%
Monsanto Company 600,000 23,775
COMMERCIAL SERVICE 1.7%
Accustaff, Inc. (b) 130,000 3,477
Robert Half International, Inc. (b) 230,000 9,229
-------
12,706
COMPUTER - MAINFRAME 1.4%
International Business Machines Corporation 85,000 10,965
COMPUTER - PERIPHERAL EQUIPMENT 0.8%
U.S. Robotics, Inc. (b) 100,000 6,287
COMPUTER - PERSONAL & WORKSTATION 0.9%
Compaq Computer Corporation (b) 55,000 3,829
Dell Computer Corporation (b) 40,000 3,255
-------
7,084
COMPUTER SERVICE 0.8%
HBO & Company 50,000 3,006
Sykes Enterprises, Inc. (b) 67,500 3,139
-------
6,145
COMPUTER SOFTWARE 6.0%
Cisco Systems, Inc. (b) 225,000 13,922
Computer Associates International, Inc. 100,000 5,913
FORE Systems, Inc. (b) 80,000 3,180
McAfee Associates, Inc. (b) 202,500 9,214
Microsoft Corporation (b) 65,000 8,921
3Com Corporation (b) 70,000 4,734
-------
45,884
COMPUTER SYSTEMS 0.8%
Oracle Systems Corporation (b) 150,000 6,347
CONSUMER - MISCELLANEOUS 1.0%
Hillenbrand Industries, Inc. 90,000 3,330
Service Corporation International 170,000 4,845
-------
8,175
CONTAINER 0.5%
Crown Cork & Seal Company, Inc. 80,000 3,840
COSMETIC & PERSONAL CARE 2.5%
Avon Products, Inc. 135,000 7,324
The Gillette Company 150,000 11,212
-------
18,536
DIVERSIFIED OPERATIONS 2.5%
E.I. du Pont de Nemours & Company 115,000 10,666
Minnesota Mining & Manufacturing Company 105,000 8,046
-------
18,712
ELECTRICAL EQUIPMENT 3.4%
General Electric Company 140,000 13,545
Honeywell, Inc. 200,000 12,425
-------
25,970
ELECTRONICS - SEMICONDUCTOR/COMPONENT 3.9%
Altera Corporation (b) 50,000 3,100
Intel Corporation 200,000 21,975
National Semiconductor Corporation (b) 230,000 4,427
-------
29,502
FINANCE - MISCELLANEOUS 1.9%
MBNA Corporation 110,000 4,153
SunAmerica, Inc. 285,000 10,687
-------
14,840
FOOD 1.5%
ConAgra, Inc. 145,000 7,232
Interstate Bakeries Corporation 50,000 2,119
Sara Lee Corporation 50,000 1,775
-------
11,126
HEALTHCARE - DRUG/DIVERSIFIED 6.9%
Abbott Laboratories 150,000 7,593
See notes to financial statements.
19
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1996
- --------------------------------------------------------------------------------
STRONG TOTAL RETURN FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
American Home Products Corporation 130,000 $ 7,963
Johnson & Johnson 140,000 6,895
Merck & Company, Inc. 90,000 6,671
Pfizer, Inc. 165,000 13,654
Warner-Lambert Company 150,000 9,544
--------
52,320
HEALTHCARE - INSTRUMENTATION 0.8%
Medtronic, Inc. 90,000 5,794
HEALTHCARE - MEDICAL SUPPLY 1.5%
Cardinal Health, Inc. 150,000 11,775
HEALTHCARE - PATIENT CARE 1.1%
Healthsouth Corporation (b) 220,000 8,250
HOUSEHOLD APPLIANCE & FURNISHINGS 0.3%
Newell Companies, Inc. 75,000 2,128
INSURANCE - DIVERSIFIED 1.4%
Travelers Corporation 190,000 10,307
INSURANCE - LIFE 0.9%
Conseco, Inc. 130,000 6,955
INSURANCE - MULTI-LINE 1.3%
MGIC Investment Corporation 140,000 9,608
INSURANCE - PROPERTY & CASUALTY 0.5%
American International Group, Inc. 35,000 3,802
LEISURE SERVICE 3.0%
The Walt Disney Company 20,000 1,318
HFS, Inc. (b) 135,000 9,889
Hilton Hotels Corporation 225,000 6,834
Marriott International, Inc. 85,000 4,834
--------
22,875
MORTGAGE & RELATED SERVICE 0.3%
Green Tree Financial Corporation 60,000 2,377
NATURAL GAS DISTRIBUTION 0.8%
The Williams Companies, Inc. 110,000 5,748
OFFICE AUTOMATION 1.4%
Danka Business Systems PLC Sponsored ADR 130,000 5,151
Pitney Bowes, Inc. 95,000 5,308
--------
10,459
OIL - INTERNATIONAL INTEGRATED 2.3%
Texaco, Inc. 170,000 17,276
OIL - NORTH AMERICAN INTEGRATED 1.3%
Atlantic Richfield Company 50,000 6,625
Unocal Corporation 90,000 3,296
--------
9,921
OIL WELL EQUIPMENT & SERVICE 7.2%
Baker Hughes, Inc. 300,000 10,687
Cooper Cameron Corporation (b) 130,000 8,304
Diamond Offshore Drilling, Inc. (b) 65,000 3,957
Dresser Industries, Inc. 195,000 6,411
ENSCO International, Inc. (b) 150,000 6,487
Global Marine, Inc. (b) 100,000 1,838
Reading & Bates Corporation (b) 150,000 4,312
Schlumberger, Ltd. 55,000 5,452
Smith International, Inc. (b) 100,000 3,800
Transocean Offshore, Inc. 60,000 3,795
--------
55,043
PAPER & FOREST PRODUCTS 0.8%
Kimberly-Clark Corporation 65,000 6,061
PERSONAL & COMMERCIAL LENDING 2.3%
Associates First Capital Corporation 175,000 7,591
Household International, Inc. 110,000 9,735
--------
17,326
RETAIL - DEPARTMENT STORE 1.1%
Kohl's Corporation (b) 70,000 2,520
May Department Stores Company 125,000 5,922
--------
8,442
RETAIL - DISCOUNT & VARIETY 0.8%
Consolidated Stores Corporation (b) 150,000 5,794
RETAIL - FOOD CHAIN 0.1%
Safeway, Inc. (b) 20,000 858
RETAIL - MAJOR CHAIN 0.4%
Toys `R' Us, Inc. (b) 100,000 3,388
RETAIL - SPECIALTY 2.1%
CUC International, Inc. (b) 280,000 6,860
Global Directmail Corporation (b) 80,000 3,940
Gucci Group NV 20,000 1,380
Lowe's Companies, Inc. 85,000 3,432
--------
15,612
SHOE & APPAREL MANUFACTURING 1.1%
Jones Apparel Group, Inc. (b) 40,000 1,250
NIKE, Inc. Class B 120,000 7,065
--------
8,315
SOAP & CLEANING PREPARATION 1.3%
Clorox Company 90,000 9,821
TELECOMMUNICATION EQUIPMENT 4.5%
ADC Telecommunications, Inc. (b) 130,000 8,889
Ericsson (LM) Telephone Company ADR Class B 80,000 2,210
Lucent Technologies, Inc. 165,000 7,755
Tellabs, Inc. (b) 182,100 15,501
--------
34,355
TELEPHONE 0.2%
Cincinnati Bell, Inc. 35,200 1,738
--------
TOTAL COMMON STOCKS (COST $604,452) 672,180
CONVERTIBLE PREFERRED STOCKS 1.8%
Salomon, Inc. 5.00% Microsoft Common Equity
Linked Securities, Due 11/01/96 10,000 1,098
Salomon, Inc. 5.25% Hewlett Packard Equity
Linked Securities, Due 1/01/97 10,000 1,063
SCI Financial LLC Terminal Convertible Shares
Series A $3.125 (b) 50,000 4,700
Vanstar Financing Trust Convertible Preferred Trust
Securities (Acquired 9/27/96; Cost $4,430) (d) 88,600 4,629
Wendy's Financing I Guaranteed Terminal
Convertible Preferred Trust Securities,
Series A 5.00% 40,000 2,035
--------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $13,189) 13,525
CONVERTIBLE BONDS 5.8%
Altera Corporation Subordinated Notes, 5.75%,
Due 6/15/02 (Acquired 9/16/96 - 9/26/96;
Cost $3,601) (d) $3,000 4,118
Comverse Technology, Inc. Subordinated Debentures,
5.75%, Due 10/01/06 1,000 1,990
Corporate Express, Inc. Subordinated Notes, 4.50%,
Due 7/01/00 (Acquired 6/19/96 - 9/13/96;
Cost $1,961) (d) 2,000 1,885
Danka Business Systems PLC Subordinated Notes,
6.75%, Due 4/01/02 6,000 17,655
First Financial Management Corporation Debentures,
5.00%, Due 12/15/99 1,000 1,893
Home Depot, Inc. Subordinated Notes, 3.25%,
Due 10/01/01 1,000 2,005
RAC Financial Group, Inc. Subordinated Notes,
7.25%, Due 8/15/03 (Acquired 8/14/96;
Cost $2,000) (d) 2,000 3,520
Renal Treatment Centers, Inc. Subordinated Notes,
5.625%, Due 7/15/06 (Acquired 6/06/96;
Cost $2,000) (d) 1,000 1,990
See notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
STRONG TOTAL RETURN FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
Saks Holdings, Inc. Subordinated Notes, 5.50%,
Due 9/15/06 $ 1,650 $ 3,368
Sports Authority, Inc. Subordinated Notes, 5.25%,
Due 9/15/01 (Acquired 9/17/96; Cost $2,000) (d) 2,000 1,992
Staples, Inc. Subordinated Debentures, 4.50%,
Due 10/01/00 (Acquired 9/12/95 - 4/23/96;
Cost $4,225) (d) 2,000 4,120
--------
TOTAL CONVERTIBLE BONDS (COST $38,043) 44,536
SHORT-TERM INVESTMENTS (a) 4.9%
COMMERCIAL PAPER 4.9%
DISCOUNTED 4.3%
Green Tree Financial Corporation, Due 11/07/96 5,240 5,235
Humana, Inc., Due 11/01/96 5,000 5,000
Mattel, Inc., Due 11/01/96 4,500 4,500
North American Mortgage, Due 11/12/96 8,000 7,987
Rite Aid Corporation, Due 11/05/96 10,200 10,194
--------
32,916
INTEREST BEARING, DUE UPON DEMAND 0.6%
Johnson Controls, Inc., 5.04% 4,818 4,818
Wisconsin Electric Power Company, 5.06% 63 63
--------
4,881
--------
TOTAL SHORT-TERM INVESTMENTS (COST $37,797) 37,797
--------
TOTAL INVESTMENTS IN SECURITIES
(COST $693,481) 101.0% 768,038
Other Assets & Liabilities, Net (1.0%) (7,818)
--------
NET ASSETS 100.0% $760,220
========
OPTIONS
- -------
PREMIUMS
NUMBER (In Thousands)
- --------------------------------------------------------------------------------
Options outstanding at Beginning of Period 1,000 $119
Options written during the period 2,200 543
Options expired (1,000) (119)
Options closed (2,200) (543)
------- -----
Options outstanding at End of Period -- --
======= =====
Closed and expired options resulted in a capital gain (in thousands) of $345.
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- --------------------------------------------------------------------------------
United States ...................................... 97.5%
United Kingdom ..................................... 3.5%
Other Assets and Liabilities, Net .................. (1.0%)
------
Total 100.0%
======
- --------------------------------------------------------------------------------
STRONG GROWTH & INCOME FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
COMMON STOCKS 81.9%
AEROSPACE & DEFENSE 3.1%
B.F. Goodrich & Company 4,200 $ 178
Boeing Company 1,800 172
Gulfstream Aerospace Corporation (b) 1,200 28
United Technologies Corporation 1,400 180
------
558
BANK - MONEY CENTER 3.0%
Bankers Trust New York Corporation 2,000 169
Chase Manhattan Corporation 2,150 184
Citicorp 1,800 178
------
531
BANK - REGIONAL 0.6%
Northern Trust Company 1,600 111
BANK - SUPER REGIONAL 3.5%
Banc One Corporation 4,000 170
Comerica, Inc. 2,900 154
KeyCorp 3,000 140
PNC Bank Corporation 4,800 174
------
638
BROKERAGE & INVESTMENT MANAGEMENT 5.4%
Arden Realty Group, Inc. (b) 2,700 61
Equity Residential Properties Trust 3,300 121
Felcor Suite Hotels, Inc. 4,300 141
First Industrial Realty Trust, Inc. 6,500 168
Prentiss Properties Trust (b) 8,300 171
Standard & Poors Depositary Receipt Trust Unit
Series 1 1,700 120
Starwood Lodging Trust 4,200 189
------
971
CHEMICAL 1.5%
Monsanto Company 4,000 158
Potash Corporation of Saskatchewan, Inc. 1,500 106
------
264
CHEMICAL - SPECIALTY 1.3%
Praxair, Inc. 3,800 168
W.R. Grace & Company (b) 1,400 74
------
242
COMMERCIAL SERVICE 2.2%
Avery Dennison Corporation 2,100 138
Equifax, Inc. 5,000 149
Pittston Company Brinks Group 3,600 103
------
390
COMPUTER - MAINFRAME 1.0%
International Business Machines Corporation 1,350 174
COMPUTER SOFTWARE 3.3%
Cisco Systems, Inc. (b) 2,300 142
Computer Associates International, Inc. 2,700 160
Microsoft Corporation (b) 1,100 151
3Com Corporation (b) 2,000 135
------
588
COMPUTER SYSTEMS 0.8%
Oracle Systems Corporation (b) 3,600 152
COSMETIC & PERSONAL CARE 2.0%
Alberto Culver Company Class A 4,100 163
Avon Products, Inc. 3,500 190
------
353
DIVERSIFIED OPERATIONS 5.6%
Allied Signal, Inc. 2,500 164
Dial Corporation 10,100 139
E.I. du Pont de Nemours & Company 1,650 153
Lockheed Martin Corporation 1,400 125
Minnesota Mining & Manufacturing Company 2,200 169
Textron, Inc. 1,950 173
Viad Corporation 6,300 91
------
1,014
ELECTRIC POWER 0.8%
Allegheny Power Systems, Inc. 4,700 140
See notes to financial statements.
21
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1996
- --------------------------------------------------------------------------------
STRONG GROWTH & INCOME FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT 3.3%
Emerson Electric Company 1,850 $ 165
General Electric Company 1,700 164
Honeywell, Inc. 2,300 143
Westinghouse Electric Corporation 6,700 115
-------
587
ELECTRONIC INSTRUMENTATION 1.7%
Fisher Scientific International, Inc. 3,400 153
Perkin Elmer Corporation 2,800 150
-------
303
ELECTRONIC PRODUCTS - MISCELLANEOUS 1.0%
Raychem Corporation 2,350 184
ELECTRONICS - SEMICONDUCTOR/COMPONENT 0.9%
Intel Corporation 1,500 165
ENGINEERING & CONSTRUCTION 0.9%
Fluor Corporation 2,500 164
FINANCE - MISCELLANEOUS 0.6%
American Express Company 2,150 101
FOOD 2.9%
Dole Food Company, Inc. 2,000 78
Interstate Bakeries Corporation 3,700 157
Ralston Purina Company - Ralston Purina Group 2,300 152
Unilever NV 900 138
-------
525
HEALTHCARE - DRUG/DIVERSIFIED 4.3%
American Home Products Corporation 1,450 89
Johnson & Johnson 2,000 99
Eli Lilly and Company 2,350 166
Merck & Company, Inc. 2,200 163
Pfizer, Inc. 2,200 182
Warner-Lambert Company 1,150 73
-------
772
HEALTHCARE - PATIENT CARE 0.7%
HEALTHSOUTH Corporation (b) 3,500 131
HEALTHCARE - PRODUCT 0.4%
Fresenius Medical Care Aktiengesellschaft
Sponsored ADR (b) 1 0
Pall Corporation 2,900 74
-------
74
HOUSEHOLD APPLIANCE & FURNISHINGS 1.7%
Harman International Industries, Inc. 2,500 128
Tupperware Corporation 3,600 185
-------
313
HOUSING RELATED 0.7%
Sherwin Williams Company 2,400 120
INSURANCE - DIVERSIFIED 1.0%
Travelers Corporation 3,200 174
INSURANCE - LIFE 0.9%
Reliastar Financial Corporation 2,900 154
INSURANCE - PROPERTY & CASUALTY 0.4%
American Bankers Insurance Group, Inc. 1,500 72
LEISURE PRODUCT 0.4%
Hasbro, Inc. 1,900 74
MACHINERY - AGRICULTURE 0.8%
Deere & Company 3,600 150
MEDIA - PUBLISHING 1.5%
Houghton Mifflin Company 3,500 174
McGraw-Hill, Inc. 1,900 89
-------
263
MORTGAGE & RELATED SERVICE 0.8%
Green Tree Financial Corporation 3,500 139
NATURAL GAS DISTRIBUTION 4.6%
El Paso Natural Gas Company 3,900 189
Enron Corporation 3,500 163
NGC Corporation 8,800 158
PanEnergy Corporation 2,900 112
Sonat, Inc. 4,000 197
-------
819
OIL - INTERNATIONAL INTEGRATED 2.0%
Mobil Corporation 1,600 187
Royal Dutch Petroleum Company 1,005 166
-------
353
OIL - NORTH AMERICAN INTEGRATED 0.6%
Tosco Corporation 1,900 107
OIL WELL EQUIPMENT & SERVICE 4.6%
Diamond Offshore Drilling, Inc. (b) 2,100 128
Halliburton Company 2,900 164
Schlumberger, Ltd. 1,800 178
Transocean Offshore, Inc. 3,000 190
Western Atlas, Inc. (b) 2,500 173
-------
833
PAPER & FOREST PRODUCTS 1.1%
Kimberly-Clark Corporation 2,200 205
PERSONAL & COMMERCIAL LENDING 1.5%
Associates First Capital Corporation 3,300 143
Household International, Inc. 1,450 128
-------
271
RETAIL - DEPARTMENT STORE 0.8%
J.C. Penney Company, Inc. 2,900 152
RETAIL - FOOD CHAIN 0.9%
Safeway, Inc. (b) 3,800 163
RETAIL - SPECIALTY 1.3%
Footstar, Inc. (b) 777 17
Intimate Brands, Inc. 6,100 111
Melville Corporation 2,700 101
-------
229
SOAP & CLEANING PREPARATION 1.9%
Clorox Company 1,600 175
Colgate Palmolive Company 1,800 166
-------
341
TELECOMMUNICATION EQUIPMENT 2.4%
Harris Corporation 2,350 147
Nokia Corporation Sponsored ADR 3,900 181
Tellabs, Inc. (b) 1,300 111
-------
439
TELEPHONE 0.6%
Frontier Corporation 3,800 110
TOBACCO 0.6%
Philip Morris Companies, Inc. 1,300 120
-------
TOTAL COMMON STOCKS (COST $13,739) 14,733
PREFERRED STOCKS 0.0%
Fresenius National Medical Care, Inc. Preferred
Class D (b) (COST $0) 1,400 0
CONVERTIBLE PREFERRED STOCKS 3.5%
MFS Communications, Inc. Depositary Shares
Representing 1/100 Share 8.00% 1,300 113
Merrill Lynch & Company, Inc. Structured Yield
Product:
6.50%, Due 8/15/98 2,400 148
7.25%, Due 6/15/99 1,900 118
See notes to financial statements.
22
<PAGE>
- --------------------------------------------------------------------------------
STRONG GROWTH & INCOME FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
SCI Financial LLC Terminal Convertible Shares
Series A $3.125 500 $ 47
Vanstar Financing Trust Convertible Preferred
Trust Securities 6.75% (Acquired 9/27/96 -
10/04/96; Cost $99) (d) 1,900 99
Wendy's Financing I Guaranteed Terminal
Convertible Preferred Trust Securities,
Series A 5.00% 2,200 112
-------
TOTAL CONVERTIBLE PREFERRED STOCKS
(COST $608) 637
CONVERTIBLE BONDS 8.1%
Altera Corporation Subordinated Notes, 5.75%,
Due 6/15/02 (Acquired 8/02/96 - 10/01/96;
Cost $125) (d) $110 151
Apple Computer, Inc. Subordinated Notes, 6.00%,
Due 6/01/01 (Acquired 9/26/96 - 10/10/96;
Cost $150) (d) 150 154
Danka Business Systems PLC Subordinated Notes,
6.75%, Due 4/01/02 50 73
Hexcel Corporation Subordinated Notes, 7.00%,
Due 8/01/03 115 152
Home Depot, Inc. Subordinated Notes, 3.25%,
Due 10/01/01 130 130
Nabors Industries, Inc. Subordinated Notes, 5.00%,
Due 5/15/06 85 96
Saks Holdings, Inc. Subordinated Notes, 5.50%,
Due 9/15/06 90 95
Sanifill, Inc. Subordinated Debentures, 5.00%,
Due 3/01/06 90 116
Scholastic Corporation Subordinated Debentures,
5.00%, Due 8/15/05 (Acquired 7/12/96 - 9/27/96;
Cost $115) (d) 105 119
Staples, Inc. Subordinated Debentures, 4.50%,
Due 10/01/00 (Acquired 4/22/96 - 10/11/96;
Cost $139) (d) 130 134
United States Filter Corporation Subordinated
Notes, 6.00%, Due 9/15/05 66 127
Vivra, Inc. Subordinated Notes, 5.00%, Due 7/01/01
(Acquired 7/24/96 - 10/01/96; Cost $118) (d) 115 121
-------
TOTAL CONVERTIBLE BONDS (COST $1,341) 1,468
UNITED STATES GOVERNMENT ISSUES 0.2%
United States Treasury Bonds, 6.875%,
Due 8/15/25 (COST $35) 31 32
SHORT-TERM INVESTMENTS (a) 8.5%
COMMERCIAL PAPER 8.5%
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.02% 401 401
Johnson Controls, Inc., 5.04% 726 726
Sara Lee Corporation, 5.00% 131 131
Wisconsin Electric Power Company, 5.06% 264 264
-------
TOTAL SHORT-TERM INVESTMENTS (COST $1,522) 1,522
-------
TOTAL INVESTMENTS IN SECURITIES
(COST $17,245) 102.2% 18,392
Other Assets and Liabilities, Net (2.2%) (402)
-------
NET ASSETS 100.0% $17,990
=======
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- --------------------------------------------------------------------------------
United States ....................................... 98.5%
Netherlands ......................................... 1.7%
Finland ............................................. 1.0%
Canada .............................................. 0.6%
United Kingdom ...................................... 0.4%
Other Assets and Liabilities, Net ................... (2.2%)
------
Total 100.0%
======
LEGEND
- ------
(a) Short-term investments includes any security which has a maturity of less
than one year.
(b) Non-income producing security.
(c) All or a portion of security pledged to cover margin requirements for
futures contracts.
(d) Restricted security.
(e) All or a portion of security is When-Issued
All principal amounts and costs are stated in thousands.
Percentages are stated as a percent of net assets.
CURRENCY ABBREVIATIONS
- ----------------------
FRF French Franc
See notes to financial statements.
23
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
For the Period Ended October 31, 1996 (Note 1)
(In Thousands)
<CAPTION>
STRONG ASSET STRONG EQUITY STRONG AMERICAN
ALLOCATION FUND INCOME FUND UTILITIES FUND
--------------- ----------- --------------
INCOME:
<S> <C> <C> <C>
Dividends $ 2,223 $ 263 $ 4,974
Interest 11,148 140 549
------- ------ -------
Total Income 13,371 403 5,523
EXPENSES:
Investment Advisory Fees 2,138 110 947
Custodian Fees 145 13 34
Shareholder Servicing Costs 540 20 327
Reports to Shareholders 124 18 51
Federal and State Registration Fees 36 13 55
Other 44 9 39
------- ------ -------
Total Expenses 3,027 183 1,453
------- ------ -------
NET INVESTMENT INCOME 10,344 220 4,070
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 19,739 (184) 8,401
Futures Contracts, Options and Forward Foreign Currency Contracts (754) (42) --
Change in Unrealized Appreciation/Depreciation on:
Investments (6,009) 2,365 (1,982)
Futures Contracts, Options and Forward Foreign Currency Contracts 471 -- --
------- ------ -------
NET GAIN 13,447 2,139 6,419
------- ------ -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $23,791 $2,359 $10,489
======= ====== =======
<CAPTION>
STRONG TOTAL STRONG GROWTH
RETURN FUND & INCOME FUND
----------- ------------
INCOME:
<S> <C> <C>
Dividends $ 10,005 $ 76
Interest 3,665 54
-------- ------
Total Income 13,670 130
EXPENSES:
Investment Advisory Fees 5,761 41
Custodian Fees 97 14
Shareholder Servicing Costs 1,536 17
Reports to Shareholders 307 11
Federal and State Registration Fees 39 11
Other 114 6
-------- ------
Total Expenses 7,854 100
-------- ------
NET INVESTMENT INCOME 5,816 30
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 116,710 34
Futures Contracts, Options and Forward Foreign Currency Contracts (281) (7)
Change in Unrealized Appreciation/Depreciation on:
Investments (4,493) 1,147
Futures Contracts, Options and Forward Foreign Currency Contracts (85) --
-------- ------
NET GAIN 111,851 1,174
-------- ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $117,667 $1,204
======== ======
See notes to financial statements.
</TABLE>
24
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------------
October 31, 1996 (In Thousands, Except Per Share Amounts)
<CAPTION>
STRONG ASSET STRONG EQUITY STRONG AMERICAN
ALLOCATION FUND INCOME FUND UTILITIES FUND
--------------- ----------- --------------
ASSETS:
Investments in Securities, at Value
<S> <C> <C> <C>
(Cost of $251,936, $27,284 and $114,256, respectively) $258,220 $ 29,649 $122,874
Receivable from Brokers for Securities Sold 8,016 167 159
Receivable for Fund Shares Sold 1 -- 5
Dividends and Interest Receivable 1,967 46 636
Other Assets 37 28 36
-------- -------- --------
Total Assets 268,241 29,890 123,710
LIABILITIES:
Payable to Brokers for Securities Purchased 4,801 1,112 1,040
Payable for Fund Shares Redeemed 6 -- 50
Accrued Operating Expenses and Other Liabilities 264 55 134
-------- -------- --------
Total Liabilities 5,071 1,167 1,224
-------- -------- --------
NET ASSETS $263,170 $ 28,723 $122,486
======== ======== ========
Capital Shares Outstanding (Unlimited Number Authorized) 13,081 2,388 9,691
NET ASSET VALUE PER SHARE $20.12 $12.03 $12.64
====== ====== ======
STRONG TOTAL STRONG GROWTH
RETURN FUND & INCOME FUND
----------- -------------
ASSETS:
Investments in Securities, at Value (Cost of $693,481
and $17,245, respectively) $768,038 $ 18,392
Receivable from Brokers for Securities Sold 67,212 161
Receivable for Fund Shares Sold -- 4
Dividends and Interest Receivable 2,521 31
Other Assets 252 34
-------- --------
Total Assets 838,023 18,622
LIABILITIES:
Payable to Brokers for Securities Purchased 77,127 589
Accrued Operating Expenses and Other Liabilities 676 43
-------- --------
Total Liabilities 77,803 632
-------- --------
NET ASSETS $760,220 $ 17,990
======== ========
Capital Shares Outstanding (Unlimited Number Authorized) 24,239 1,453
NET ASSET VALUE PER SHARE $31.36 $12.38
====== ======
See notes to financial statements.
25
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
STRONG ASSET STRONG EQUITY STRONG AMERICAN
ALLOCATION FUND INCOME FUND UTILITIES FUND
--------------- ----------- --------------
<CAPTION>
YEAR ENDED PERIOD ENDED PERIOD ENDED YEAR ENDED PERIOD ENDED
OCT. 31, 1996 OCT. 31, 1995 OCT. 31, 1996 OCT. 31, 1996 OCT. 31, 1995
------------- ------------- ------------- -------------- -------------
(NOTE 1) (NOTE 1) (NOTE 1)
OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net Investment Income $ 10,344 $ 8,611 $ 220 $ 4,070 $ 1,724
Net Realized Gain (Loss) 18,985 17,629 (226) 8,401 222
Change in Unrealized Appreciation/Depreciation (5,538) 12,749 2,365 (1,982) 12,628
-------- -------- ------- -------- -------
Increase in Net Assets Resulting from Operations 23,791 38,989 2,359 10,489 14,574
CAPITAL SHARE TRANSACTIONS 4,776 (19,395) 26,576 24,205 40,693
DISTRIBUTIONS:
From Net Investment Income (11,071) (7,519) (212) (3,904) (1,515)
From Net Realized Gains (15,048) -- -- -- --
-------- -------- ------- -------- -------
TOTAL INCREASE IN NET ASSETS 2,448 12,075 28,723 30,790 53,752
NET ASSETS:
Beginning of Period 260,722 248,647 -- 91,696 37,944
-------- -------- ------- -------- -------
End of Period $263,170 $260,722 $28,723 $122,486 $91,696
======== ======== ======= ======== =======
<CAPTION>
STRONG TOTAL STRONG GROWTH
RETURN FUND & INCOME FUND
----------- -------------
YEAR ENDED PERIOD ENDED PERIOD ENDED
OCT. 31, 1996 OCT. 31, 1995 OCT. 31, 1996
------------- ------------- -------------
(NOTE 1) (NOTE 1)
OPERATIONS:
<S> <C> <C> <C>
Net Investment Income $ 5,816 $ 6,162 $ 30
Net Realized Gain 116,429 72,510 27
Change in Unrealized Appreciation/Depreciation (4,578) 33,837 1,147
-------- -------- -------
Increase in Net Assets Resulting from Operations 117,667 112,509 1,204
CAPITAL SHARE TRANSACTIONS 8,676 (41,908) 16,807
DISTRIBUTIONS:
From Net Investment Income (5,816) (6,162) (21)
In Excess of Net Investment Income (1,467) (295) --
From Net Realized Gains (29,798) -- --
-------- -------- -------
TOTAL INCREASE IN NET ASSETS 89,262 64,144 17,990
NET ASSETS:
Beginning of Period 670,958 606,814 --
-------- -------- -------
End of Period $760,220 $670,958 $17,990
======== ======== =======
See notes to financial statements.
</TABLE>
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
October 31, 1996
1. ORGANIZATION
The accompanying financial statements represent the Strong Conservative
Equity Funds, which include the following diversified and non-diversified,
open-end management investment companies registered under the Investment
Company Act of 1940:
Strong Asset Allocation Fund, Inc.
Strong Equity Income Fund (a series of Strong Conservative Equity
Funds, Inc.)
Strong American Utilities Fund (a series of Strong Conservative Equity
Funds, Inc.)
Strong Total Return Fund, Inc.
Strong Growth & Income Fund (a series of Strong Conservative Equity
Funds, Inc.)
The Board of Directors of the Funds approved changing the Strong Asset
Allocation Fund, Inc., Strong American Utilities Fund, and the Strong Total
Return Fund, Inc. fiscal year-ends from December 31 to October 31 in 1995.
The inception date for the Strong Equity Income Fund and the Strong Growth
& Income Fund was December 29, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) Security Valuation-- Portfolio securities traded primarily on a
principal securities exchange are valued at the last reported sales
price or the mean between the latest bid and asked prices where no
last sales price is available. Securities traded over-the-counter are
valued at the mean of the latest bid and asked prices or the last
reported sales price. Debt securities not traded on a principal
securities exchange are valued through valuations obtained from a
commercial pricing service, otherwise sale or bid prices are used.
Securities for which market quotations are not readily available are
valued at fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of
the Board of Directors. Securities which are purchased within 60 days
of their stated maturity are valued at amortized cost, which
approximates current value.
The Funds 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 Funds
generally bear the costs, if any, associated with the disposition of
restricted securities. Aggregate cost and fair value of these
restricted securities held at October 31, 1996 were as follows (in
thousands):
<TABLE>
<CAPTION>
STRONG ASSET STRONG EQUITY STRONG TOTAL STRONG GROWTH
ALLOCATION FUND INCOME FUND RETURN FUND & INCOME FUND
--------------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Aggregate Cost $40,951 $636 $20,217 $746
Aggregate Fair Value 41,473 697 22,254 778
Percent of Net Assets 15.8%* 2.4% 2.9% 4.3%
</TABLE>
*Of these securities, which are restricted from resale, 93% 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 Funds' policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and
to distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no Federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for Federal income tax purposes due to differences in
the recognition of income and expense items for financial statement
and tax purposes. Where appropriate, reclassifications between net
asset accounts are made for such differences that are permanent in
nature.
(C) Realized Gains and Losses on Investment Transactions -- Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) Futures -- Upon entering into a futures contract, the Funds pledge to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. The Funds also receive from or
pay to the broker an amount of cash equal to the daily fluctuation in
the value of the contract. Such receipts or payments are known as
"variation margin," and are recorded as unrealized gains or losses.
When the futures contract is closed, a realized gain or loss is
recorded equal to the difference between the value of the contract at
the time it was opened and the value at the time it was closed.
(E) Options -- Premiums received by the Funds upon writing put or call
options are recorded as an asset with a corresponding liability which
is subsequently adjusted to the current market value of the option.
When an option expires, is exercised, or is closed, the Funds realize
a gain or loss, and the liability is eliminated. The Funds continue to
bear the risk of adverse movements in the price of the underlying
asset during the period of the option, although any potential loss
during the period would be reduced by the amount of the option premium
received.
(F) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted to U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income are converted to
U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
October 31, 1996
(G) Forward Foreign Currency Exchange Contracts -- Forward foreign
currency exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the Funds record
an exchange gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(H) Additional Investment Risk -- The use of futures contracts, options,
foreign denominated assets and forward foreign currency exchange
contracts for purposes of hedging the Funds' investment portfolios
involves, to varying degrees, elements of market risk in excess of the
amount recognized in the statement of assets and liabilities. The
predominant risk with futures contracts is an imperfect correlation
between the value of the contracts and the underlying securities.
Foreign denominated assets and forward foreign currency exchange
contracts may involve greater risks than domestic transactions,
including currency, political and economic, regulatory and market
risks.
(I) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and 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. NET ASSETS
Net assets as of October 31, 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
STRONG ASSET STRONG EQUITY STRONG AMERICAN STRONG TOTAL STRONG GROWTH
ALLOCATION FUND INCOME FUND UTILITIES FUND RETURN FUND & INCOME FUND
--------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Capital Stock $237,668 $26,576 $106,996 $573,979 $16,807
Undistributed Net Investment Income 1,693 28 375 4,339 9
Undistributed Net Realized Gain (Loss) 17,496 (246) 6,497 107,345 27
Net Unrealized Appreciation 6,313 2,365 8,618 74,557 1,147
-------- ------- -------- -------- -------
$263,170 $28,723 $122,486 $760,220 $17,990
======== ======= ======== ======== =======
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the periods ended October 31, 1996
and 1995, respectively, were as follows (in thousands):
<TABLE>
1996 1995
---- ----
<CAPTION>
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
STRONG ASSET ALLOCATION FUND
<S> <C> <C> <C> <C>
Shares Sold 2,141 $ 42,832 1,503 $ 28,706
Dividends Reinvested 1,274 25,146 374 7,226
Shares Redeemed (3,168) (63,202) (2,922) (55,327)
------ -------- ------ ---------
247 $ 4,776 (1,045) ($ 19,395)
====== ======== ====== =========
STRONG EQUITY INCOME FUND
Shares Sold 2,756 $ 30,697
Dividends Reinvested 18 207
Shares Redeemed (386) (4,328)
----- --------
2,388 $ 26,576
===== ========
STRONG AMERICAN UTILITIES FUND
Shares Sold 12,627 $158,043 7,396 $ 78,125
Dividends Reinvested 293 3,644 130 1,385
Shares Redeemed (11,043) (137,482) (3,722) (38,817)
------- -------- ------ --------
1,877 $ 24,205 3,804 $ 40,693
======= ======== ====== ========
STRONG TOTAL RETURN FUND
Shares Sold 6,135 $181,834 4,004 $105,937
Dividends Reinvested 1,272 36,262 234 6,277
Shares Redeemed (7,115) (209,420) (5,976) (154,122)
------ -------- ------ ---------
292 $ 8,676 (1,738) ($ 41,908)
====== ======== ====== =========
STRONG GROWTH & INCOME FUND
Shares Sold 1,816 $ 20,948
Dividends Reinvested 2 19
Shares Redeemed (365) (4,160)
----- --------
1,453 $ 16,807
===== ========
</TABLE>
28
<PAGE>
- --------------------------------------------------------------------------------
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Funds are affiliated, provides investment advisory
services and shareholder recordkeeping and related services to the Funds.
Investment advisory fees, which are established by terms of the Advisory
Agreements, are based on the following annualized rates of the average
daily net assets: Strong American Utilities Fund .75%, Strong Equity Income
Fund and Strong Growth &Income Fund .80%, Strong Asset Allocation Fund and
Strong Total Return Fund .85% of the first $35 million and .80% thereafter.
Advisory fees are subject to reimbursement by the Advisor if the Funds'
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.
W. H. Reaves & Co., Inc. (the "Subadvisor") manages the investments of the
Strong American Utilities Fund under an agreement with the Advisor. The
Subadvisor is compensated by the Advisor (not the Fund) and bears all of
its own expenses in providing subadvisory services. In addition, the
Subadvisor directly effects purchases and sales of securities for the Fund.
In conjunction therewith, brokerage commissions paid by the Fund for the
year ended October 31, 1996 totaled (in thousands) $357.
Certain information regarding related party transactions for the period
ended October 31, 1996 is as follows (in thousands):
<TABLE>
<CAPTION>
STRONG ASSET STRONG EQUITY STRONG AMERICAN STRONG TOTAL STRONG GROWTH
ALLOCATION FUND INCOME FUND UTILITIES FUND RETURN FUND & INCOME FUND
--------------- ------------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Payable to Advisor at October 31, 1996 $182 $44 $112 $531 $37
Other Shareholder Servicing Expenses Paid to Advisor 11 __ 5 30 __
Unaffiliated Directors' Fees 4 __ 3 10 __
</TABLE>
6. INVESTMENT TRANSACTIONS
<TABLE>
The aggregate purchases and sales of long-term securities for the period ended October 31, 1996 were as follows (in
thousands):
<CAPTION>
STRONG ASSET STRONG EQUITY STRONG AMERICAN STRONG TOTAL STRONG GROWTH
ALLOCATION FUND INCOME FUND UTILITIES FUND RETURN FUND & INCOME FUND
--------------- ------------- --------------- ------------ -------------
Purchases:
<S> <C> <C> <C> <C> <C>
U.S. Government and Agency $221,464 $ 67 $ -- $ 27,311 $ 147
Other 914,560 49,279 122,518 3,324,730 26,300
Sales:
U.S. Government and Agency 245,366 56 -- 37,031 112
Other 906,324 24,301 96,185 3,303,164 10,639
</TABLE>
7. INCOME TAX INFORMATION
<TABLE>
At October 31, 1996, the investment cost, gross unrealized appreciation and depreciation on investments, and capital loss
carryovers (expiring in varying amounts through 2004) for Federal income tax purposes were as follows (in thousands):
<CAPTION>
STRONG ASSET STRONG EQUITY STRONG AMERICAN STRONG TOTAL STRONG GROWTH
ALLOCATION FUND INCOME FUND UTILITIES FUND RETURN FUND &INCOME FUND
--------------- ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Aggregate Investment Cost $254,290 $27,318 $114,569 $696,689 $17,274
======== ======= ======== ======== =======
Aggregate Unrealized:
Appreciation $ 11,639 $ 2,438 $ 11,037 $ 75,100 $ 1,220
Depreciation (7,709) (107) (2,732) (3,751) (102)
-------- ------- -------- -------- -------
$ 3,930 $ 2,331 $ 8,305 $ 71,349 $ 1,118
======== ======= ======== ======== =======
Capital Loss Carryovers $ __ $ 211 $ __ $ __ $ __
======== ======= ======== ======== =======
</TABLE>
For corporate shareholders in the Funds, the percentages of dividend income
distributed for the period ended October 31, 1996, which are designated as
qualifying for the dividends-received deduction are: Strong Asset Allocation
Fund 5.5%, Strong Equity Income Fund 100.0%, Strong American Utilities Fund
100.0%, Strong Total Return Fund 22.2%, and Strong Growth & Income Fund
100.0%.
29
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
STRONG ASSET ALLOCATION FUND 10-31-96 10-31-95(a) 12-31-94 12-31-93 12-31-92 12-31-91
-------- ----------- -------- -------- -------- --------
(NOTE 1)
SELECTED PER-SHARE DATA(d)
- --------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 20.31 $ 17.91 $ 19.06 $ 18.49 $ 19.68 $ 17.50
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.78 0.66 0.70 0.82 0.87 0.94
Net Realized and Unrealized Gains
(Losses) on Investments 1.05 2.32 (0.99) 1.81 (0.25) 2.41
-------- -------- -------- -------- -------- --------
Total from Investment Operations 1.83 2.98 (0.29) 2.63 0.62 3.35
LESS DISTRIBUTIONS:
From Net Investment Income (0.84) (0.58) (0.70) (0.82) (0.87) (0.97)
From Net Realized Gains (1.18) -- -- (1.24) (0.94) (0.20)
In Excess of Net Realized Gains -- -- (0.16) -- -- --
Return of Capital -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions (2.02) (0.58) (0.86) (2.06) (1.81) (1.17)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 20.12 $ 20.31 $ 17.91 $ 19.06 $ 18.49 $ 19.68
======== ======== ======== ======== ======== ========
TOTAL RETURN +9.5% +16.8% - 1.5% +14.5% +3.2% +19.6%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $263,170 $260,722 $248,647 $254,439 $208,368 $214,951
Ratio of Expenses to Average Net Assets 1.1% 1.2%* 1.2% 1.2% 1.2% 1.3%
Ratio of Net Investment Income to Average Net Assets 3.9% 4.1%* 3.8% 4.2% 4.4% 5.1%
Portfolio Turnover Rate 446.7% 326.8% 359.7% 348.3% 320.4% 418.4%
Average Commission Rate Paid (c) $ 0.0469
<CAPTION>
STRONG ASSET ALLOCATION FUND (continued) 12-31-90 12-31-89 12-31-88 12-31-87
-------- -------- -------- --------
SELECTED PER-SHARE DATA(d)
- --------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 18.41 $ 17.57 $ 17.60 $ 22.18
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 1.12 1.22 1.39 0.85
Net Realized and Unrealized Gains
(Losses) on Investments (0.65) 0.73 0.19 (0.70)
-------- -------- -------- --------
Total from Investment Operations 0.47 1.95 1.58 0.15
LESS DISTRIBUTIONS:
From Net Investment Income (1.38) (0.97) (1.38) (1.78)
From Net Realized Gains -- (0.14) -- (2.95)
In Excess of Net Realized Gains -- -- -- --
Return of Capital -- -- (0.23) --
-------- -------- -------- --------
Total Distributions (1.38) (1.11) (1.61) (4.73)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 17.50 $ 18.41 $ 17.57 $ 17.60
======== ======== ======== ========
TOTAL RETURN +2.8% +11.2% +9.2% - 0.3%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $203,562 $240,549 $256,089 $272,899
Ratio of Expenses to Average Net Assets 1.3% 1.3% 1.2% 1.1%
Ratio of Net Investment Income to Average Net Assets 6.1% 6.6% 7.5% 4.2%
Portfolio Turnover Rate 319.6% 206.5% 426.2% 336.5%
Average Commission Rate Paid (c)
</TABLE>
STRONG EQUITY INCOME FUND 10-31-96(b)
----------
SELECTED PER-SHARE DATA(d)
- --------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.12
Net Realized and Unrealized Gains
on Investments 2.02
--------
Total from Investment Operations 2.14
LESS DISTRIBUTIONS:
From Net Investment Income (0.11)
--------
Total Distributions (0.11)
--------
NET ASSET VALUE, END OF PERIOD $ 12.03
========
TOTAL RETURN +21.5%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $ 28,723
Ratio of Expenses to Average Net Assets 1.3%*
Ratio of Net Investment Income to Average Net Assets 1.6%*
Portfolio Turnover Rate 158.3%
Average Commission Rate Paid (c) $ 0.0633
* Calculated on an annualized basis.
(a) Total return and portfolio turnover rate are not annualized.
(b) Inception date is December 29, 1995. Total return and portfolio
turnover rate are not annualized.
(c) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
(d) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
30
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
- ------------------------------------------------------------------------------------------------------
<CAPTION>
STRONG AMERICAN UTILITIES FUND 10-31-96 10-31-95(a) 12-31-94 12-31-93(b)
-------- ----------- -------- -----------
(Note 1)
SELECTED PER SHARE DATA(d)
- --------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.73 $ 9.46 $ 10.19 $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.40 0.27 0.46 0.18
Net Realized and Unrealized Gains
(Losses) on Investments 0.90 2.25 (0.73) 0.27
-------- ------- ------- -------
Total from Investment Operations 1.30 2.52 (0.27) 0.45
LESS DISTRIBUTIONS:
From Net Investment Income (0.39) (0.25) (0.46) (0.18)
From Net Realized Gains -- -- -- (0.05)
In Excess of Net Realized Gains -- -- -- (0.03)
-------- ------- ------- -------
Total Distributions (0.39) (0.25) (0.46) (0.26)
-------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.64 $ 11.73 $ 9.46 $ 10.19
======== ======= ======= =======
TOTAL RETURN +11.2% +26.9% - 2.6% + 4.5%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $122,486 $91,696 $37,944 $32,457
Ratio of Expenses to Average Net Assets 1.2% 1.2%* 0.5% 0.0%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.2% 1.2%* 1.6% 1.4%*
Ratio of Net Investment Income to Average Net Assets 3.2% 3.4%* 4.8% 5.6%*
Portfolio Turnover Rate 84.0% 56.4% 105.4% 89.3%
Average Commission Rate Paid (c) $ 0.0599
</TABLE>
* Calculated on an annualized basis.
(a) Total return and portfolio turnover rate are not annualized
(b) Inception date is July 1, 1993. Total return and portfolio turnover
rate are not annualized.
(c) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
(d) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
31
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
STRONG TOTAL RETURN FUND 10-31-96 10-31-95(a) 12-31-94 12-31-93 12-31-92 12-31-91
-------- ----------- -------- -------- -------- --------
(NOTE 1)
SELECTED PER-SHARE DATA(d)
- --------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 28.02 $ 23.62 $ 24.30 $ 20.17 $ 20.24 $ 15.34
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.24 0.26 0.25 0.33 0.18 0.22
Net Realized and Unrealized Gains
(Losses) on Investments 4.65 4.41 (0.59) 4.18 (0.08) 4.90
-------- -------- -------- -------- -------- --------
Total from Investment Operations 4.89 4.67 (0.34) 4.51 0.10 5.12
LESS DISTRIBUTIONS:
From Net Investment Income (0.24) (0.26) (0.26) (0.33) (0.17) (0.22)
In Excess of Net Investment Income (0.06) (0.01) (0.08) -- -- --
From Net Realized Gains (1.25) -- -- -- -- --
In Excess of Net Realized Gains -- -- -- (0.05) -- --
Return of Capital -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Total Distributions (1.55) (0.27) (0.34) (0.38) (0.17) (0.22)
-------- -------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 31.36 $ 28.02 $ 23.62 $ 24.30 $ 20.17 $ 20.24
======== ======== ======== ======== ======== ========
TOTAL RETURN +18.0% +19.8% - 1.4% +22.5% +0.6% +33.6%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $760,220 $670,958 $606,814 $630,349 $587,873 $691,327
Ratio of Expenses to Average Net Assets 1.1% 1.1%* 1.2% 1.2% 1.3% 1.4%
Ratio of Net Investment Income to Average Net Assets 0.8% 1.2%* 1.1% 1.4% 0.9% 1.3%
Portfolio Turnover Rate 502.4% 298.8% 290.4% 271.3% 371.8% 426.4%
Average Commission Rate Paid (c) $ 0.0584
<CAPTION>
STRONG TOTAL RETURN FUND (continued) 12-31-90 12-31-89 12-31-88 12-31-87
-------- -------- -------- --------
SELECTED PER-SHARE DATA(d)
- --------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 17.72 $ 18.96 $ 18.37 $ 21.61
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.95 1.55 1.95 0.97
Net Realized and Unrealized Gains
(Losses) on Investments (2.19) (0.97) 0.85 0.61
-------- --------- --------- --------
Total from Investment Operations (1.24) 0.58 2.80 1.58
LESS DISTRIBUTIONS:
From Net Investment Income (1.14) (1.31) (1.96) (1.65)
In Excess of Net Investment Income -- -- -- --
From Net Realized Gains -- (0.51) -- (3.17)
In Excess of Net Realized Gains -- -- -- --
Return of Capital -- -- (0.25) --
-------- --------- --------- --------
Total Distributions (1.14) (1.82) (2.21) (4.82)
-------- --------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 15.34 $ 17.72 $ 18.96 $ 18.37
======== ========= ========= ========
TOTAL RETURN - 7.1% +2.6% +15.6% + 6.0%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $646,579 $1,065,278 $1,005,192 $802,442
Ratio of Expenses to Average Net Assets 1.4% 1.2% 1.2% 1.1%
Ratio of Net Investment Income to Average Net Assets 5.4% 7.7% 10.1% 5.2%
Portfolio Turnover Rate 312.3% 305.3% 281.1% 224.4%
Average Commission Rate Paid (c)
</TABLE>
STRONG GROWTH & INCOME FUND 10-31-96(b)
------------
SELECTED PER-SHARE DATA(d)
- --------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income 0.04
Net Realized and Unrealized Gains on Investments 2.38
-------
Total from Investment Operations 2.42
LESS DISTRIBUTIONS:
From Net Investment Income (0.04)
-------
Total Distributions (0.04)
-------
NET ASSET VALUE, END OF PERIOD $ 12.38
=======
TOTAL RETURN +24.2%
RATIOS AND SUPPLEMENTAL DATA
- ----------------------------
Net Assets, End of Period (In Thousands) $17,990
Ratio of Expenses to Average Net Assets 1.9%*
Ratio of Net Investment Income to Average Net Assets 0.6%*
Portfolio Turnover Rate 174.1%
Average Commission Rate Paid (c) $0.0667
* Calculated on an annualized basis.
(a) Total return and portfolio turnover rate are not annualized.
(b) Inception date is December 29, 1995. Total return and portfolio
turnover rate are not annualized.
(c) Disclosure required, effective for reporting periods beginning after
September 1, 1995.
(d) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Conservative Equity Funds
We have audited the accompanying statements of assets and liabilities of Strong
Asset Allocation Fund, Inc., Strong American Utilities Fund (one of the
portfolios constituting Strong Conservative Equity Funds, Inc.), and Strong
Total Return Fund, Inc., including the schedules of investments in securities,
as of October 31, 1996, and the related statements of operations for the year
then ended, the statements of changes in net assets for the year ended October
31, 1996 and the period January 1, 1995 to October 31, 1995, and the financial
highlights for each of the periods indicated. We have also audited the
accompanying statements of assets and liabilities of Strong Growth & Income Fund
and Strong Equity Income Fund (two of the portfolios constituting Strong
Conservative Equity Funds, Inc.), including the schedules of investments in
securities, as of October 31, 1996, and related statements of operations,
statements of changes in net assets and the financial highlights for the period
December 29, 1995 (inception) to October 31, 1996. These Funds are collectively
referred to herein as the "Strong Conservative Equity Funds." These financial
statements and financial highlights are the responsibility of the Funds'
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. These 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
October 31, 1996 by correspondence with the custodians and brokers. 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 each
of the Strong Conservative Equity Funds as of October 31, 1996, the results of
their operations, the changes in their net assets, and the financial highlights
for each of the periods indicated, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
December 4, 1996
- --------------------------------------------------------------------------------
SHAREHOLDER PRIVILEGES*
STRONG FUNDS
[PICTURE OF TELEPHONE]
24-HOUR SERVICE
TELEPHONE PURCHASE
Make additional investments into any Strong Fund by calling us toll-free at
1-800-368-3863.
TELEPHONE EXCHANGE
If your financial goals change, you can exchange your investments between any of
the Strong Funds.
TELEPHONE REDEMPTION
You can call toll-free to redeem your mutual fund shares at any time. Your
shares will be redeemed no later than the close of the next business day.
STRONG FUNDS
[PICTURE OF DOLLAR SIGN]
AUTOMATIC EXCHANGE
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your bank checking or
NOW account to your Strong Funds account.
PAYROLL DIRECT DEPOSIT PLAN
You can automatically transfer all or a portion of your net pay at each pay
period. This eliminates the delay of depositing paychecks to your bank and then
sending a check through the mail to Strong Funds.
AUTOMATIC EXCHANGE PLAN
This plan allows you to exchange money from one Strong Fund to another. For
example, you may want to set up automatic exchanges from a money market fund to
an equity fund.
FOR MORE INFORMATION ABOUT THESE PRIVILEGES, CALL US AT 1-800-368-3863.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household.
Please call 1-800-368-3863 if you wish to receive additional copies, free of
charge.
*Each Fund reserves the right to terminate or modify any of these privileges.
33
<PAGE>
Bulk Rate
U.S. Postage
PAID
Milwaukee, WI
Permit No. 2652
FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030.
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-368-3863.
For a prospectus containing more complete information, including
management fees and expenses, please call 1-800-368-1030. Please read
it carefully before investing or sending money. This annual report
does not constitute an offer for the sale of securities. Strong Funds
are offered for sale by prospectus only.
[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
http://www.strong-funds.com
4020J96P
