<PAGE>
THE STRONG
----------
CONSERVATIVE
EQUITY FUNDS
================================
ANNUAL REPORT o OCTOBER 31, 1998
================================
[PHOTO OF STRONG FUNDS BUILDING]
The Strong American Utilities Fund
The Strong Asset Allocation Fund
The Strong Blue Chip 100 Fund
The Strong Equity Income Fund
The Strong Growth and Income Fund
The Strong Limited Resources Fund
The Strong Total Return Fund
[STRONG LOGO]
STRONG FUNDS
<PAGE>
Letter from the Chairman
Dear Strong Investor,
The financial markets were moving along smoothly last summer when they
suddenly struck an air pocket. After three straight years of 20%-plus returns,
people had grown accustomed to their investments moving steadily upward. The
collapse of the Asian and Russian economies brought us back to earth in a hurry.
Fortunately, our financial markets have been resilient. The turbulence we
encountered last summer, while upsetting, turned out to be short-lived. As of
Thanksgiving week, both the Dow and the S&P indexes had hit all-time highs.
The rebound in financial markets came because the American economy is
fundamentally strong. The U.S. accounts for roughly 25% of the world's GDP.
Inflation is negligible, interest rates are falling, and unemployment is low. If
you still harbor any doubt about how well the American economy stacks up against
the rest of the world, take a trip to Asia (as I did in August) or, better yet,
Russia. America, you'll soon conclude, is sitting in the economic catbird seat.
Meanwhile, it also helps to remember that Asia was occupying the economic
high ground not too many months ago. When bust follows boom, it arrives swiftly,
without warning, and absolutely without mercy.
It is at times like these--good times--when it makes sense to step back and
assess your financial affairs. It's important to do so when things are good
because, when things are bad, fear has a way of overpowering common sense. So,
as you review your holdings, consider:
o Since 1926, the stock market has averaged an 11% return annually. The last
three years--maybe four if 1998 finishes strong--have been a historical
aberration.
o Lately, most of us have loaded up on common stocks, giving inadequate
attention to bonds and cash. We can help you bring "balance" to your
portfolio with our new Guide to Building a Strong Portfolio.
o In recent years, big Blue Chip stocks have dominated. It might be smart to
take a long look at small- and mid-cap company stocks. Relative to large
caps, they are cheap. Strong has a depth of expertise in small- and mid-cap
stocks.
o Inflation is low and interest rates may be headed lower yet. That creates
an attractive climate for bonds. I suggest you take a good look at
intermediate- and long-term, high quality bonds, both corporate and
government.
So, let last summer's "air pocket" serve as a reminder that nothing goes
up--uninterrupted --forever. The market's recent run defies history. There have
been turbulent times before and there will be disruption again. But now, while
things are good, review your investments. If you need help, call the Strong
Portfolio Specialists.
At your convenience, of course.
/s/ Dick
<PAGE>
THE STRONG
----------
CONSERVATIVE
EQUITY FUNDS
================================
ANNUAL REPORT o OCTOBER 31, 1998
================================
TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong American Utilities Fund.......................................2
The Strong Asset Allocation Fund.........................................4
The Strong Blue Chip 100 Fund............................................6
The Strong Equity Income Fund............................................8
The Strong Growth and Income Fund.......................................10
The Strong Limited Resources Fund.......................................12
The Strong Total Return Fund............................................14
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong American Utilities Fund...................................16
The Strong Asset Allocation Fund.....................................16
The Strong Blue Chip 100 Fund........................................19
The Strong Equity Income Fund........................................21
The Strong Growth and Income Fund....................................23
The Strong Limited Resources Fund....................................25
The Strong Total Return Fund.........................................25
Statements of Assets and Liabilities....................................28
Statements of Operations................................................29
Statements of Changes in Net Assets.....................................30
Notes to Financial Statements...........................................34
FINANCIAL HIGHLIGHTS.........................................................38
REPORT OF INDEPENDENT ACCOUNTANTS............................................40
<PAGE>
==================================
THE STRONG AMERICAN UTILITIES FUND
- ----------------------==================================-----------------------
FUND
HIGHLIGHTS
o For the fiscal year ended October 31, 1998, the Strong American Utilities
Fund(1) returned 25.69%, compared to 22.73% for the Lipper Utility Funds
Index and 26.65% for the S&P Utilities Index--the Fund's benchmark.*
o The Fund benefited from Bell Atlantic's merger with NYNEX and the announcement
of additional mergers, including SBC Communications, Inc. and Ameritech
Corporation.
- ----------------------------------------
YIELD SUMMARY(2)
As of 10-30-98
30-day annualized
yield 2.43%
- ----------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-98
1-year 25.69%
3-year 18.70%
5-year 14.82%
Since Inception 15.53%
(on 7-1-93)
- ----------------------------------------
FIVE LARGEST STOCK
HOLDINGS
Based on net assets as of 10-31-98
SECURITY % OF NET ASSETS
- ----------------------------------------
Ameritech Corporation 8.3%
Bell Atlantic Corporation 7.7%
Ameren Corporation 6.5%
SBC Communications, Inc. 6.4%
Alltel Corporation 6.2%
Please see the Schedule of Investments in
Securities for a complete listing of the
Fund's portfolio.
- -----------------------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ William H. Reaves
William H. Reaves
Portfolio Manager
- --------------------------------------------------------------------------------
The yield on 30-year Treasuries has been trending downward for more than a year
and stands at about 5.16% at the end of the reporting period. Although the trend
of interest rates remained favorable as the yield on the 30-year Treasury bond
declined from 6.15% at the start of the year to 5.16% at year-end, low interest
rates weren't the only reason that investors chose utility shares. The value of
utilities to an overall portfolio is most evident when there is a degree of
caution in the stock market.
Over the past year, the Asian financial crisis, accompanied by currency
devaluations, bankruptcies, and the Russian debt default, increased economic
uncertainty. This activity made the relatively predictable earnings and
dividends of utility companies, without material exposure to foreign currency
risk, attractive. Much of the former complacency is gone, and there is more
widespread awareness that the growth of U.S. corporate earnings over the next
several years may decline substantially below the rate of recent years.
In large part, the eight-year bull market we've just experienced can be
attributed to the positive earnings posted by large industrial companies that
took advantage of restructuring and stock buybacks. Many electric utilities have
not yet begun serious restructuring, and still look forward to benefiting from
this process. Rules for full or partial deregulation have been set in a few
states, and are in the process of being legislated on a state-by-state basis. In
the interim, certain well-focused electric and gas utilities are moving into
-----------------
INDUSTRY
CONSOLIDATION
CONTINUES TO PLAY
AN IMPORTANT
ROLE IN
OUR STRATEGY.
-----------------
- --------------------------------------------------------------------------------
*The S&P 500 is an unmanaged index generally representative of the U.S. stock
market. The Lipper Utility Funds Index is an equally-weighted performance index
of the largest qualifying funds in this Lipper category. The S&P Utilities
Index is an unmanaged index generally representative of the U.S. Market for
utility stocks. Source of the S&P Utilities Index and S&P 500 index data is
Standard & Poor's Micropal. Source of the Lipper index data is Lipper
Analytical Services, Inc.
2
<PAGE>
areas where they can provide services without regulatory limitation on earnings.
Industry consolidation continues to play an important role in our strategy.
Prior to the announced merger between SBC Communications, Inc. and Ameritech, we
held substantial positions in both firms. The Fund benefited significantly from
the announcement. We've since reduced our combined holdings by 6%, to avoid an
overweight position in the event the merger is completed. The portfolio
benefited from a similar investment and merger scenario with Bell Atlantic and
NYNEX.
As pointed out in previous letters, our portfolio is concentrated in companies
from which we anticipate the best long-term growth, allowing for risk. If, as we
expect, the trend of U.S. corporate earnings is slowing to a single-digit rate,
our telephone holdings with 12% or more growth potential--plus above-market
yields on rising dividend streams--and selected electric and gas companies, may
offer compelling value.
The recent market downturn once again demonstrated that during periods of
volatility, utilities have the potential to offer solid returns when the broader
stock market is struggling.
Thank you for your continued confidence in the Strong American Utilities Fund.
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
================================================================================
From 7-1-93 to 10-31-98
[GRAPH]
THE STRONG S&P 500 Lipper S&P
AMERICAN UTILITIES Stock Utility Utilities
FUND Index* Funds Index* Index*
6-93 10,000 10,000 10,000 10,000
12-93 10,450 10,496 10,167 10,090
12-94 10,178 10,635 9,223 9,289
12-95 13,939 14,631 11,724 13,193
12-96 15,106 17,991 12,817 13,605
12-97 19,270 23,993 16,113 16,958
10-98 21,600 27,502 17,664 18,634
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Standard & Poor's 500 Stock Index ("S&P 500") and the Lipper Utility Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Previous performance comparisons have shown the Fund compared to
an equivalent investment in the S&P Utilities Index. We have replaced this
index with the S&P 500 Stock Index because it is a broad-based index.
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.
================================================================================
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 Yields are historical and do not represent future yields, which will
fluctuate.
YOUR FUND'S
APPROACH
THE STRONG AMERICAN UTILITIES FUND INVESTS PRIMARILY IN PUBLIC UTILITY COMPANIES
HEADQUARTERED IN THE UNITED STATES. STOCKS ARE PICKED THAT WILL BENEFIT FROM
ECONOMIC, REGULATORY, POLITICAL, OR COMPANY-SPECIFIC CHANGES THAT WE HAVE
IDENTIFIED. THE GOAL IS TO ACHIEVE LONG-TERM GROWTH OF YOUR INVESTMENT WITH A
LEVEL OF RISK BELOW THAT OF THE MARKET AS A WHOLE. DIVIDEND INCOME PLAYS AN
IMPORTANT ROLE IN GROWING VALUE AND LESSENING RISK. CONSEQUENTLY, BOTH DIVIDEND
YIELD AND THE POTENTIAL FOR GROWTH IN DIVIDENDS ARE IMPORTANT CRITERIA WE USE
WHEN SELECTING STOCKS.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o The broad market represented by the S&P 500 Stock Index (S&P 500)
experienced extreme volatility. For example, it declined 9.95% in the July-to-
September period then rebounded sharply, increasing 8.13% in October. During
the Fund's fiscal year, the S&P 500 gained 21.99%.*
o This summer's market decline alerted investors that the growth rate of
U.S. corporate earnings over the next few years may decline substantially
below that of recent years.
o The Federal Reserve surprised the financial markets with an inter-
meeting interest rate cut in response to concerns arising from the global
financial crisis.
3
<PAGE>
================================
THE STRONG ASSET ALLOCATION FUND
- -----------------------================================-------------------------
FUND
HIGHLIGHTS
o For the year ending October 31, 1998, the Strong Asset Allocation Fund
returned 11.75%.
o A nearly maximum weighting in stocks benefited the Fund, as did a bias toward
large-capitalization stocks and companies focused on the strong domestic
economy. The bond allocation benefited performance due to the decline in
interest rates.
o The capital markets suffered from the effects of the Asian crises as the year
closed with yield spreads spiking to abnormally high levels, leading to a
sharp shrinkage in liquidity. This negatively impacted our investments in
bank and financial services stocks.
- --------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-98
1-year 11.75%
3-year 13.44%
5-year 11.03%
10-year 10.65%
Since Inception 13.80%
(on 12-30-81)
- --------------------------------------
ASSET ALLOCATIONS
4-30-98 10-31-98
- --------------------------------------
Stocks 70.0% 68.4%
Bonds 24.3% 28.9%
Short-Term
Investments 5.7% 2.7%
The Fund's asset allocation does not
reflect any futures positions held by
the Fund.
- --------------------------------------
PERSPECTIVES
FROM THE MANAGERS
/s/ Rimas Milaitis
Rimas Milaitis
Portfolio Co-manager
/s/ Jeffrey A. Koch
Jeffrey A. Koch
Portfolio Co-manager
/s/ Bradley C. Tank
Bradley C. Tank
Portfolio Co-manager
- --------------------------------------------------------------------------------
Our top-down analytical framework provided us with discipline during the
volatile markets of this period. We paid close attention to individual sectors,
positioning the portfolio to take advantage of opportunities as they arose. By
being aware of the economic events unfolding on the national and international
horizons, we were able to position the portfolio to benefit from strength in the
U.S. economy--especially the U.S. consumer--while avoiding those sectors with
the most exposure to the problems in Asia.
We focused on those areas being driven by low unemployment, strong real-income
growth, and declining interest rates. For most of the year we had overweighted
positions in financials, retail, consumer cyclicals, and healthcare. Moreover,
this top-down frame-work led us to recognize that Asia would put pressure on the
basic material, industrial, and energy sectors, which we underweighted.
As the year progressed and the problems of Asia deepened and became more evident
to the markets, we witnessed an extraordinary buildup of risk aversion. This
led to a drying up of liquidity within the financial markets. These events
culminated in Russia's devaluation and large losses at highly leveraged hedge
funds.
Our exposure to financial stocks, which had benefited throughout the year from
- --------------------------------------------------------------------------------
*The 60/35/5 Balanced Index is comprised of 60% S&P 500 Stock Index, 35%
Lehman Brothers Intermediate Government/Corporate Bond Index, and 5% Salomon
Brothers 3-Month Treasury Bill Index. The S&P 500 Stock Index is an unmanaged
index generally representative of the U.S. stock market. The Lehman Brothers
Intermediate Government/Corporate Bond Index is an unmanaged index generally
representative of government and investment-grade corporate securities with
maturities of 1-10 years. The Salomon Brothers 3-Month Treasury Bill Index is
an unmanaged index generally representative of the average yield of Three-Month
Treasury Bills. The Lipper Flexible Portfolio Average represents funds that
allocate their investments across various asset classes, including domestic
common stocks, bonds and money market instruments with a focus on total return.
Source of the 60/35/5 Balanced Index and the S&P index data is Standard &
Poor's Micropal. Source of the Lipper index data is Lipper Analytical Services,
Inc.
----------------------
OUR TOP-DOWN
ANALYTICAL FRAMEWORK
PROVIDED US
WITH DISCIPLINE
DURING THE
VOLATILE MARKETS
OF THIS PERIOD.
----------------------
4
<PAGE>
declining interest rates, a strong consumer and industry consolidation, began to
underperform as the market began to worry about the developing world's effect on
the U.S. economy. During this time we ensured that our financial exposure was
weighted toward the U.S., which we continued to view as healthy.
The U.S. Federal Reserve and the central banks throughout the developed world
have responded promptly and proactively to the Asian crises' affects on the
world's financial markets. These central banks have decisively provided
liquidity and support to Western economies and markets through interest rate
cuts. This gives us cautious optimism about the future. We continue to believe a
combination of low unemployment, low inflation, and relatively strong
real-income growth should result in strong U.S. consumer spending. Add to this a
Federal Reserve which we believe will continue to lower interest rates, and the
U.S. economy and financial markets should remain relatively healthy.
Thank you very much for your confidence and investment in the Fund. We will
endeavor to meet your financial goals for the future.
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
================================================================================
From 12-30-81 to 10-31-98
[GRAPH]
THE STRONG S&P 500 Lipper Flexible
ASSET ALLOCATION Stock Portfolio
FUND Index* Average*
12-81 10,000 10,000 10,000
12-83 19,344 14,896 15,282
12-85 25,346 20,853 20,150
12-87 29,734 26,044 24,988
12-89 36,104 39,993 32,285
12-91 44,393 50,557 40,246
12-93 52,469 59,892 48,420
12-95 63,028 83,487 59,568
12-97 81,219 136,906 80,343
10-98 88,140 156,927 84,867
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception, with the performance of
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.
- --------------------------------------------------------------------------------
YOUR FUND'S
APPROACH
THE STRONG ASSET ALLOCATION FUND INVESTS IN THE THREE MAJOR ASSET CLASSES:
STOCKS, BONDS AND CASH. THIS ALLOCATION IS BASED ON AN EVALUATION OF THE ECONOMY
AND MARKET CONDITIONS. IN AN AVERAGE ENVIRONMENT, THE FUND CONSISTS OF 60%
STOCKS, 35% BONDS AND 5% CASH. THE MANAGERS CHOOSE INDIVIDUAL STOCKS, MOSTLY
LARGE-CAPITALIZATION, THAT STAND TO BENEFIT FROM PROJECTED ECONOMIC AND MARKET
TRENDS. THE FUND'S INTERMEDIATE-TERM BOND INVESTMENTS HELP TEMPER THE
VOLATILITY OF THE FUND'S STOCKS, WHILE CORPORATE AND HIGH-YIELD BOND
INVESTMENTS, WITH YIELDS TYPICALLY HIGHER THAN TREASURIES, GENERATE DIVIDEND
INCOME.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o The 60/35/5 Balanced Index--the benchmark for our Fund--returned 17.00% for
the year ending October 31, 1998*.
o The last 12 months of stock and bond market performance were greatly
influenced by the Asian crises and the fallout that followed. Global stock
and bond markets were impacted negatively as investors became extremely
risk averse and liquidity was scarce.
o Because of the fear of deterioration in global economic conditions investors
migrated their assets to areas of the financial markets with minimal
exposure to events overseas--such as large-capitalization stocks and
government bonds--and shunned smaller stocks and corporate and
high-yield bonds.
5
<PAGE>
=============================
THE STRONG BLUE CHIP 100 FUND
- -------------------------=============================--------------------------
FUND
HIGHLIGHTS
o The Strong Blue Chip 100 Fund returned 28.55% for the 12 months ended October
31, 1998. The Fund ranked number 4 of 726 funds in the Lipper Growth and
Income category for the same period.
o Being a blue-chip fund, we benefited this year as investors bought large,
well-known companies to serve as safe havens from the financial and
economic turmoil that spread from Asia.
o The actively managed portion of the Fund emphasized stocks that further
capitalized on this trend.
- --------------------------------------------
AVERAGE ANNUAL
TOTAL RETURN
As of 10-31-98
1-year 28.55%
Since Inception 24.24%
(on 6-30-97)
- --------------------------------------------
FIVE LARGEST STOCK HOLDINGS
Based on net assets as of 10-31-98
SECURITY % OF NET ASSETS
- --------------------------------------------
Dell Computer Corporation 4.6%
Philip Morris Companies, Inc. 4.2%
MCI WorldCom, Inc. 4.2%
Wal-Mart Stores, Inc. 3.8%
General Electric Company 3.8%
Please see the Schedule of Investments in
Securities for a complete listing of the
Fund's portfolio.
PERSPECTIVES
FROM THE MANAGER
/s/ Karen E. McGrath
Karen E. McGrath
Portfolio Manager
- --------------------------------------------------------------------------------
The past 12 months can best be described as a time of uncertainty. Strange as it
may seem, the uncertainty created a good environment for this Fund's
investments. Investors sought comfort in large, well-known companies that tend
to produce consistent earnings: the very companies that make up the universe in
which this Fund invests.
In the actively managed portion of the Fund, we capitalized on uncertainty,
investing in stocks well suited to worried investors. We emphasized companies
with high returns on equity, strong and improving profit margins, and dependable
earnings growth. Using this strategy, the Fund succeeded in outperforming the
S&P 500 by more than 6%.
While the overall performance of the 100 largest stocks was quite strong, there
were pockets of weakness. The most significant was the financial sector. Many
large banks and other financial institutions made loans and leveraged
investments tied to Asian economies. As those economies tumbled, loans went bad
and leveraged investments rapidly decreased in value. Last summer, one by one,
financial companies announced large losses associated with these problems.
Investors indiscriminately sold both high- and low-quality financial stocks
throughout the summer.
While this hampered performance, it also created some exciting values in select
financial stocks. In the actively managed half of the portfolio, we sold the
- --------------------------------------------------------------------------------
*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 500 index data is Standard & Poor's Micropal. Source of the
Lipper index data is Lipper Analytical Services, Inc.
-----------------------
IN THE ACTIVELY
MANAGED PORTION
OF THE FUND, WE
CAPITALIZED ON
UNCERTAINTY, INVESTING
IN STOCKS WELL SUITED
TO WORRIED INVESTORS.
-----------------------
6
<PAGE>
stocks of large consumer companies such as Coca-Cola, Procter & Gamble and
Gillette as they went up in the first half of the year. Those stocks then went
down over the summer as investors began to worry more about the strength of
consumer spending around the world. We purchased Phillip Morris because we
believe its share price did not reflect the strength of the company's
businesses, a rare trait in the large-stock universe.
While we think U.S. economic growth is slowing, low interest rates, coupled with
low commodity prices, should keep consumer spending strong. The Federal Reserve
has also cut rates twice recently, a trend we think they will continue. Given
these factors, we believe it is unlikely that the U.S. will enter a recession in
the next six months. Instead, we think economic growth will be sustained in a
range near 2% per year.
There are enough uncertainties to warrant some caution, but we think that the
overall investment outlook remains positive. We believe your Fund will continue
to benefit from investor preference for large companies with a demonstrated
ability to perform in tough environments.
Thank you for choosing the Strong Blue Chip 100 Fund to help you achieve your
financial goals.
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
================================================================================
From 6-30-97 to 10-31-98
[GRAPH]
THE STRONG S&P 500 Lipper Growth
BLUE CHIP Stock and Income
100 FUND Index* Funds Index*
6-97 10,000 10,000 10,000
9-97 10,750 10,749 10,837
12-97 10,872 11,058 10,943
3-98 12,406 12,600 12,190
6-98 13,233 13,016 12,214
10-98 13,356 12,675 11,467
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at the Fund's inception, with the performance of
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.
- --------------------------------------------------------------------------------
YOUR FUND'S
APPROACH
THE STRONG BLUE CHIP 100 FUND INVESTS SOLELY IN THE 100 LARGEST COMPANIES
PUBLICLY TRADED IN THE UNITED STATES. WITH HALF THE FUND'S ASSETS, THE MANAGER
SELECTS THE 25 TO 30 STOCKS CONSIDERED MOST ATTRACTIVE. THIS CONCENTRATION IS
DESIGNED TO INCREASE RETURNS ABOVE THOSE OF THE 100 COMPANIES AS A GROUP. IN THE
OTHER HALF OF THE PORTFOLIO, THE FUND STAYS ANCHORED IN AN INDEX OF ALL 100 OF
THE LARGEST STOCKS. THIS CAN HELP REDUCE VOLATILITY IN DIFFICULT MARKETS. THE
FUND INVESTS FOR BOTH CAPITAL GROWTH AND INCOME.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o The S&P 500 Stock Index returned 21.99% as investors reacted to uncertain
economic times by buying the large-capitalization stocks that dominate the
performance of that index.
o Investors' outlook on overseas developments, the U.S. economy, profit growth
and inflation changed regularly throughout the year, leading to sizeable
stock price swings in both directions.
o The U.S. economy remained strong, but its growth rate did slow over the past
12 months while inflation remained benign.
7
<PAGE>
=============================
THE STRONG EQUITY INCOME FUND
- -------------------------=============================--------------------------
FUND
HIGHLIGHTS
o The Strong Equity Income Fund returned 14.16% for the fiscal year ended
October 31, 1998. The S&P 500 returned 21.99% in the same period.*
o Our bias toward large-capitalization stocks benefited the Fund. Our goal was
to capture the benefits of the strong U.S. economy and avoid the
collateral damage from the Asian crises by over-weighting the consumer
cyclical, retail, and healthcare sectors.
o Early in the year, the Fund benefited from its exposure to the financial
sector. This positive contribution was fleeting in that, as the year
progressed, negative effects of the fallout from the Asian crises
negatively affected this area.
- --------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-98
1-year 14.16%
Since Inception 24.09%
(on 12-29-95)
- --------------------------------------
TOP FIVE SECTORS
Based on net assets as of 10-31-98
SECTOR % OF NET ASSETS
- -------------------------------------
Financial 17.5%
Healthcare 14.9%
Capital Equipment 12.5%
Technology 11.7%
Retail 10.4%
Please see the Schedule of Investments
in Securities for a complete listing
of the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGER
/s/ Rimas Milaitis
Rimas Milaitis
Portfolio Manager
- --------------------------------------------------------------------------------
This year's performance by the financial markets ebbed and flowed according to
prevailing investor psychology with respect to the Asian crises. The fallout or
collateral damage from these crises spread slowly to our shores. Fear began to
overtake common sense as investors around the world became abnormally risk
averse, and began responding to headlines of pending financial doom. Numerous
events defined this period, including the Asian financial crises, Russian debt
default, the Long-Term Capital hedge fund bailout, the stock market decline,
declining interest rates, and the Federal Reserve's easing of interest rates.
Our macroeconomic approach guided us out of the most troubled spots of the stock
market. We biased our investments away from companies with large exposure to the
afflicted areas of the world, and focused our energies on more domestically
oriented investments. Despite the negative effect of the fallout on other
countries, the U.S. remained fairly strong during this period as measured by the
quarterly release of the Gross Domestic Product figures.
With the economy at full employment, rising wages, strong consumer confidence,
and declining interest rates, we benefited by overweighting sectors such as
healthcare, retail, and consumer cyclicals. In contrast to these overweighted
sectors, we had intentionally underweighted others such as basic materials and
energy. This benefited relative performance since these areas grossly
- --------------------------------------------------------------------------------
*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 Standard & Poor's Micropal. Source of the Lipper index
data is Lipper Analytical Services, Inc.
-----------------
OUR MACRO-
ECONOMIC APPROACH
GUIDED US OUT
OF THE MOST
TROUBLED SPOTS
OF THE
STOCK MARKET.
-----------------
8
<PAGE>
underperformed during the year.
The Fund's performance, though, was negatively impacted by its overweight
position in the financial sector. The logic behind this bias was to capture the
positive influence of declining interest rates on financial sector share prices.
This logic paid off greatly early in the year as the sector benefited from lower
interest rates, as well as the consolidation wave that swept the industry. As
the year progressed, however, the fallout worked its way into our financial
system. Fears of loan losses from distressed hedge funds, foreign debt default,
and concerns of recession spread through the market. Many of these stocks saw
their prices cut in half.
Going forward, we remain cautiously optimistic as global monetary authorities
have begun to ease rates in a coordinated attempt at restoring confidence and
stimulating growth. This recovery phase will take time and will be subject to
various shocks, as prescribed medicines typically cure but rarely taste good.
We look forward to successfully serving your financial needs in the future.
Thank you for your support.
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 12-29-95 to 10-31-98
[GRAPH]
THE STRONG S&P 500 Lipper Equity
EQUITY INCOME Stock Income Funds
FUND Index* Index*
12-95 10,000 10,000 10,000
6-96 11,296 11,010 10,700
12-96 12,810 12,296 11,797
6-97 15,126 14,830 13,558
12-97 16,822 16,398 15,001
6-98 19,327 19,303 16,440
10-98 18,433 18,797 15,685
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of 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.
- --------------------------------------------------------------------------------
YOUR FUND'S
APPROACH
THE STRONG EQUITY INCOME FUND USES A TOP-DOWN ANALYSIS OF THE ECONOMY TO
DETERMINE WHICH SECTORS ARE LIKELY TO ALLOW COMPANIES TO GROW THEIR EARNINGS AND
WHICH ARE NOT. BASED ON THAT ANALYSIS, WE INVEST LARGER OR SMALLER PORTIONS OF
THE FUND'S ASSETS IN EACH OF THE SEVEN MAJOR ECONOMIC SECTORS OF THE S&P 500
STOCK INDEX (S&P 500). WE CHOOSE INDIVIDUAL COMPANIES IN EACH SECTOR THAT WE
BELIEVE WILL BENEFIT MOST FROM THE ECONOMIC ENVIRONMENT WE FORESEE. THE FUND
INVESTS PRIMARILY IN LARGE, DIVIDEND-PAYING COMPANIES.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o The last 12 months of stock market behavior were generally driven by the Asian
crises and the fallout that followed. Global stock and bond markets
suffered as investors' heightened levels of risk aversion played havoc with
corporate, junk, and government bond markets, temporarily impairing the
liquidity of our financial system.
o Late in the Fund's fiscal year, the Federal Reserve used its authority to
lower interest rates twice to help rebuild investor confidence.
o In response to deteriorating global economic conditions, investors began to
shift their assets to areas with minimal overseas exposure, and to
large-capitalization stocks that provided liquidity.
9
<PAGE>
=================================
THE STRONG GROWTH AND INCOME FUND
- -----------------------=================================------------------------
FUND
HIGHLIGHTS
o The Strong Growth and Income Fund returned 19.73% for the fiscal year ended
October 31, 1998. The S&P 500 returned 21.99% in the same period.*
o The Fund benefited from the market's favorable bias toward
large-capitalization stocks, as well as our macroeconomic analysis. We
overweighted consumer cyclical, retail, and healthcare sectors where we
could benefit from the strong U.S. economy, and avoided the negative
aftershocks of the Asian financial crises.
o During the year, the Fund's holdings in the financial sector were overwhelmed
by the negative effects of the fallout from the Asian crises.
- -------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-98
1-year 19.73%
Since Inception 27.18%
(on 12-29-95)
- -------------------------------------
TOP FIVE SECTORS
Based on net assets as of 10-31-98
SECTOR % OF NET ASSETS
- ------------------------------------
Technology 22.7%
Financial 15.0%
Healthcare 14.8%
Capital Equipment 11.3%
Retail 10.5%
Please see the Schedule of Investments
in Securities for a complete listing
of the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGER
/s/ Rimas Milaitis
Rimas Milaitis
Portfolio Manager
- --------------------------------------------------------------------------------
Numerous events defined the past 12-month period, including the Asian financial
crises, Russian loan defaults, hedge fund losses, stock market declines,
declining interest rates and the Federal Reserve's easing of interest rates. Our
macroeconomic approach guided us out of the most troubled spots of the stock
market. We biased our investments away from companies with large exposure to the
afflicted areas of the world, and focused our energies on more domestically
oriented investments.
Despite the negative effect on other countries, the U.S. remained fairly strong
during this period as measured by the quarterly release of the Gross Domestic
Product figures. With high employment, low interest rates, and job creation, we
tried to benefit by overweighting sectors such as healthcare, retail, and
consumer cyclicals. In contrast to these overweighted sectors, the Fund
benefited by our intentional underweight of areas that underperformed, such as
basic materials and energy.
The Fund's performance, though, was negatively impacted by its overweight
position in the financial sector. The logic behind this bias was to capture the
positive correlation between declining interest rates and financial-sector share
prices. This logic greatly benefited the Fund early in the year as rates
- --------------------------------------------------------------------------------
*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 500 index data is Standard & Poor's Micropal. Source of the
Lipper index data is Lipper Analytical Services, Inc.
-----------------------
WE WERE ABLE TO
SIDE STEP MANY OF THE
PROBLEM AREAS OF THE
STOCK MARKET, AND
BENEFIT FROM THE FLOW
OF CAPITAL TO THE SAFE
AREAS OF THE ECONOMY.
-----------------------
10
<PAGE>
declined and industry consolidation accelerated. As the fallout spread,
however, it began to negatively impact this sector as fears of loan losses from
hedge fund collapse, foreign debt default, and concerns of recession spread
through the market. Many of these stocks saw their prices cut in half.
Going forward, we remain cautiously optimistic. As global monetary authorities
have begun to ease rates in a coordinated attempt at restoring confidence and
stimulating growth, we believe that the economy ahead looks positive and is
pointing toward a recovery. This recovery phase will take time and will be
subject to various shocks, as prescribed medicines typically cure but rarely
taste good.
In the end, sticking to our discipline of staying within our benchmark and
following our top-down analysis, we were able to side step many of the problem
areas of the stock market and benefit from the flow of capital to the safe
areas of the economy.
We hope that our hard work and determination to succeed will assist you in your
future financial endeavors. Thank you for your support.
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
================================================================================
From 12-29-95 to 10-31-98
[GRAPH]
THE STRONG S&P 500 Lipper Growth
GROWTH AND Stock and Income
INCOME FUND Index* Funds Index*
12-95 10,000 10,000 10,000
6-96 11,556 11,010 10,846
12-96 13,191 12,296 12,067
6-97 15,469 14,830 13,992
12-97 17,199 16,398 15,311
6-98 20,447 19,303 17,089
10-98 19,762 18,797 16,045
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of 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.
- --------------------------------------------------------------------------------
YOUR FUND'S
APPROACH
THE STRONG GROWTH AND INCOME FUND USES A TOP-DOWN ANALYSIS OF THE ECONOMY TO
DETERMINE WHETHER TO INVEST EITHER LARGE OR SMALL PORTIONS OF THE FUND'S ASSETS
IN EACH OF THE SEVEN MAJOR ECONOMIC SECTORS OF THE S&P 500 STOCK INDEX (S&P
500). FROM EACH SECTOR, WE THEN CHOOSE THE INDIVIDUAL COMPANIES WE BELIEVE WILL
BENEFIT MOST FROM THE ECONOMIC ENVIRONMENT WE FORESEE. THE FUND INVESTS
PRIMARILY IN LARGE, DIVIDEND-PAYING COMPANIES, BUT MAY INVEST IN SOME SMALLER
COMPANIES UNDER CERTAIN MARKET CONDITIONS.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o The past year's market performance was greatly influenced by the Asian crises
and the fallout that followed. Global stock and bond markets suffered as
investors became extremely risk averse and liquidity became scarce.
o As the Fund's fiscal year came to a close, the Federal Reserve reduced
interest rates twice, helping to rebuild investor confidence and spurring
stocks to recover from their lows.
o The fear of deteriorating global economic conditions caused investors to shun
less-liquid smaller issues. Investor focus turned to areas of the stock
market that had minimal exposure to events overseas, and to the
large-capitalization stocks that provided liquidity.
11
<PAGE>
=================================
THE STRONG LIMITED RESOURCES FUND
- -----------------------=================================------------------------
FUND
HIGHLIGHTS
o The Strong Limited Resources Fund declined 18.03% for the fiscal year ended
October 31, 1998. Your Fund placed 11th of 53 funds in the Lipper Natural
Resources category.* The average resource fund declined 27.26% during this
time period.
o The resources area was heavily impacted by reduced demand from Asian
countries, a warm winter, excess OPEC oil production, and increased Iraqi
oil exports.
o During the summer, the Fund took the defensive measure of increasing its
holdings in the areas of utility stocks and higher-yielding international
oils, as well as increasing cash reserves. Holdings were reduced in the
volatile oil service and oil exploration sectors.
- -------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-98
1-year -18.03%
Since Inception -20.54%
(on 9-30-97)
- -------------------------------------
FIVE LARGEST STOCK
HOLDINGS
Based on net assets as of 10-31-98
SECURITY % OF NET ASSETS
- -------------------------------------
Chevron Corporation 5.6%
KN Energy, Inc. 4.5%
Questar Corporation 4.3%
Transmontaigne, Inc. 4.2%
Coastal Corporation 4.1%
Please see the Schedule of Investments
in Securities for a complete listing
of the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGER
/s/ Mark A. Baskir
Mark A. Baskir
Portfolio Manager
- --------------------------------------------------------------------------------
The Strong Limited Resources Fund was created 13 months ago to participate in a
renewed investment cycle for oil, gas, and other consumable resources. Since the
Asian crisis hit in late 1997, resources stocks have suffered as difficult a
bear market as I have ever seen in my 30 years in the investment industry.
Investors tended to overlook long-term positive fundamentals during a short-term
period of excess supplies of resources. Many commodity prices dropped sharply.
More leveraged investment sectors such as oil service, oil and gas exploration,
and certain chemical, metal and forest products stocks declined by 50 to 75%. It
appeared at times that the market totally abandoned objective economic and
financial rationale for these sectors.
A late-year rally in resources stocks, particularly energy, as well as in the
overall stock market, seems to have corrected to some degree the severe
undervaluation of the resource sector. At this point, the broad market appears
to reflect the expectation of a moderate earnings growth environment in 1999.
In the energy sector, we experienced four major negatives in the past 12 months:
o the Asian economic crisis
o the OPEC quota increase in late 1997
o an El Nino winter
o the UN-approved Iraqi oil-for-food program.
- --------------------------------------------------------------------------------
*The S&P 500 is an unmanaged index generally representative of the U.S. stock
market. The Lipper Natural Resources Average represents funds that invest more
than 65% of its equity commitment in natural resource stocks. Source of the S&P
500 index data is Standard & Poor's Micropal. Source of the Lipper Natural
Resources Average is Lipper Analytical Services, Inc.
---------------------
THE RESOURCES
SECTOR WAS
PARTICULARLY IMPACTED
BY LOWER AND SLOWER
WORLD ECONOMIC
GROWTH AND REDUCED
COMMODITY PRICES.
---------------------
12
<PAGE>
These four negatives have all been accounted for by the market decline. Asia is
already suffering a recession but could begin to recover later in 1999. OPEC
has cut production by a net two million barrels per day. Last winter was 8%
warmer than normal. This year we anticipate more normal weather and, hence,
higher demand for oil and gas leading to a reduction in inventories. Finally,
Iraq has reached its maximum production level and thus cannot add further to the
supply of oil.
All of these events interrupted a positive secular investment cycle for the
resources sector. We believe that upcycle will resume in 1999, after the hiatus
of 1998, as world economies begin to recover, oil inventories decline, natural
gas supply/demand remains tight, and companies and countries begin to once again
invest for future growth. For these reasons, energy will remain the dominant
investment area for the Fund.
Thank you for your patience and continued interest in the Strong Limited
Resources Fund. I trust that your support will be rewarded in the future.
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
================================================================================
From 9-30-97 to 10-31-98
[GRAPH]
THE STRONG S&P 500 Lipper Natural
LIMITED Stock Resources
RESOURCES FUND Index* Average*
9-97 10,000 10,000 10,000
12-97 9,306 10,287 8,475
3-98 9,516 11,722 8,778
6-98 8,626 12,109 7,880
9-98 7,475 10,905 6,597
10-98 7,795 11,792 6,848
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Standard & Poor's 500 Stock Index ("S&P 500") and the Lipper Natural Resources
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.
- --------------------------------------------------------------------------------
YOUR FUND'S
APPROACH
THE STRONG LIMITED RESOURCES FUND INVESTS IN ENERGY AND NATURAL RESOURCE
COMPANIES THAT PROVIDE OPPORTUNITIES FOR CAPITAL APPRECIATION AND CONSISTENT
DIVIDEND GROWTH. WHEN ASSESSING INVESTMENTS, WE STRESS EACH COMPANY'S
VALUATION, MANAGEMENT'S TRACK RECORD AND COMMITMENT, AND ANY UNIQUE
CIRCUMSTANCES THAT COULD GENERATE ABOVE-AVERAGE LONG-TERM RETURNS. WE ALLOCATE
THE FUND'S ASSETS TO INDIVIDUAL RESOURCE SECTORS BASED ON THE ECONOMIC CYCLE AND
EACH SECTOR'S ATTRACTIVENESS RELATIVE TO THE OTHERS. STOCKS ARE SOLD IF A
SIGNIFICANT NEGATIVE CHANGE OCCURS IN THE COMPANY'S OUTLOOK OR IF THE STOCK
SURPASSES OUR INVESTMENT TARGETS.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o The resources sector was particularly impacted by lower and slower world
economic growth and reduced commodity prices. In addition to the problems
caused by global financial turmoil, these stocks were hurt by the relative
underperformance of small-cap and value stocks.
o Over this one-year period, the overall market was extremely volatile as it
reacted to economic and financial events that emanated from Asia to Russia
to Latin America and, ultimately, to the United States.
o Political uncertainty in Washington added to the pressure on the market
created by declining corporate profit growth and the first signs of a
credit crunch.
13
<PAGE>
============================
THE STRONG TOTAL RETURN FUND
- -------------------------============================---------------------------
FUND
HIGHLIGHTS
o The Strong Total Return Fund returned 13.63% for the fiscal year ended October
31, 1998. The S&P 500 Stock Index--the Fund's benchmark--returned 21.99%
for the same period.
o Throughout the reporting period, the Fund held an overweight position in
technology. We added further to these holdings toward the end of the fiscal
year.
o As Asian economic concerns continued, we reduced our investments in
multinationals with big exposure to that region, while increasing our
exposure to companies with predominantly domestic exposure.
- ------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-98
1-year 13.63%
3-year 18.28%
5-year 14.31%
10-year 11.93%
Since Inception 15.74%
(on 12-30-81)
- ------------------------------------
TOP FIVE SECTORS
Based on net assets as of 10-31-98
SECTOR % OF NET ASSETS
-----------------------------------
Technology 21.1%
Healthcare 14.9%
Retail 14.0%
Financial 12.7%
Energy 7.2%
Please see the Schedule of Investments
in Securities for a complete listing
of the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGERS
/s/ Ronald C. Ognar
Ronald C. Ognar
Portfolio Co-manager
/s/ Ian J. Rogers
Ian J. Rogers
Portfolio Co-manager
- --------------------------------------------------------------------------------
Asian economic problems caused the stock market and economy over the past 12
months to be very different from what we experienced during the preceding three
years. With a slowing economy and a volatile stock market, our emphasis has been
on high-quality, well-known companies showing predictable, growing profits.
U.S. and foreign investors, driven to find a safe haven for their money, bought
the so-called "Nifty Fifty," the stocks of the largest publicly traded U.S.
companies. While we did hold some of these stocks, we also owned the stocks of
larger-sized mid-cap companies, both for diversification and because they
currently offer better value. This diversification hurt our return this year.
However, we believe it is important to limit the Fund's exposure to any one
group of stocks in order to manage risk.
With an eye toward protecting shareholders' investments in an uncertain time, we
raised our cash position as the market fell in late summer and early fall. When
stocks subsequently rallied, this cautious posture reduced our upward move vs.
the market's.
Throughout this year, we sold stocks as they reached higher valuations, and
replaced them with stocks that do business predominantly in the U.S. and have
clear sources of earnings growth. We paid strict attention this year to keeping
taxable capital gains to a minimum while maintaining proper investment focus.
Yield was achieved by purchasing high-quality convertible issues and stocks with
potential for increasing dividends.
- --------------------------------------------------------------------------------
*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 500 index data is Standard & Poor's Micropal. Source of the
Lipper index data is Lipper Analytical Services, Inc.
----------------------
WITH A SLOWING
ECONOMY AND A
VOLATILE STOCK MARKET,
OUR EMPHASIS HAS
BEEN ON HIGH-QUALITY,
WELL-KNOWN COMPANIES
SHOWING PREDICTABLE,
GROWING PROFITS.
----------------------
14
<PAGE>
We sold some of our holdings in large U.S. banks as they rallied early in 1998.
This helped significantly as financial stocks plummeted this summer when Asian
trading and loan losses were announced. After the worst of the decline, we
bought regional banks such as Northern Trust, Wachovia, Fannie Mae and Freddie
Mac. These companies have almost no international exposure, but may benefit from
decreasing interest rates. We also added to our positions in IBM, Intel, EMC,
Walgreen's and Safeway--companies that have dominant positions in businesses
that are improving. We believe in most industries, the strongest companies will
thrive at the expense of weaker competitors. We will continue to seek out these
dominant companies, many of which still trade at reasonable valuations.
Despite Asia's troubles, the U.S. economy is still strong. Consumers here are
financially well situated. Additionally, we now have the help of the Federal
Reserve lowering rates. It is worth noting that the Fed historically has tended
to either raise or lower rates several times in a row. There are economic
problems around the world, but we believe that they are reflected in the market
and that now is a time full of opportunities to purchase low-priced stocks with
promising outlooks.
Thank you for your investment in the Strong Total Return Fund.
================================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
================================================================================
From 12-30-81 to 10-31-98
[GRAPH]
THE STRONG S&P 500 Lipper Growth
TOTAL RETURN Stock and Income
FUND Index* Funds Index*
12-81 10,000 10,000 10,000
12-83 18,720 14,896 15,243
12-85 25,936 20,853 20,436
12-87 33,002 26,044 24,673
12-89 39,140 39,993 36,132
12-91 48,578 50,557 43,393
12-93 59,851 59,892 54,528
12-95 74,963 83,487 71,211
12-97 106,181 136,906 109,030
10-98 117,038 156,927 114,258
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of 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.
- --------------------------------------------------------------------------------
YOUR FUND'S
APPROACH
THE STRONG TOTAL RETURN FUND SEEKS HIGH TOTAL RETURN BY INVESTING FOR BOTH
CAPITAL GROWTH AND DIVIDEND INCOME. THE FUND INVESTS PRIMARILY IN LARGE- AND
MEDIUM-SIZED COMPANIES WITH STEADY OR GROWING DIVIDENDS. WE FOCUS ON FINDING
HIGH-QUALITY COMPANIES THAT WE BELIEVE ARE IN A STRONG PHASE OF PROFIT AND SALES
GROWTH. A STOCK MUST ALSO HAVE A PRICE-TO-EARNINGS RATIO THAT INDICATES IT IS
A GOOD VALUE. ONCE A STOCK IS IN THE PORTFOLIO, IT IS SYSTEMATICALLY MONITORED
TO MAKE SURE IT CONTINUES TO MEET YOUR FUND'S CRITERIA.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o Corporate profit growth slowed in the past year as the weakening global
economy hurt companies' volumes and further eroded their ability to raise
prices.
o Global slowing helped subdue inflationary pressure in the U.S. economy. As
long as inflation remains dormant, the Federal Reserve has room to lower
interest rates to stimulate the economy.
o The market saw rapid changes in preference for one industry over another as
investors tried to identify which sector would lead next. Called "sector
rotation," these changes spur sudden outperformance or underperformance by the
stocks of one industry for brief periods of time.
15
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES October 31, 1998
- -------------------------------------------------------------------------------
===============================================================================
STRONG AMERICAN UTILITIES FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 93.8%
ELECTRIC UTILITY 38.5%
Allegheny Energy, Inc. 82,100 $ 2,524,575
Ameren Corporation 349,000 13,938,187
American Electric Power Company, Inc. 43,500 2,128,781
CMS Energy Corporation 195,000 8,592,188
Commonwealth Energy System 8,000 298,500
Duke Energy Company 147,000 9,509,063
FirstEnergy Corporation 318,600 9,558,000
NIPSCO Industries, Inc. 427,000 12,783,313
Pinnacle West Capital Corporation 2,000 87,625
SCANA Corporation 80,000 2,705,000
The Southern Company 185,000 5,214,688
TECO Energy 291,000 8,038,875
TNP Enterprises, Inc. 51,000 1,721,250
Wisconsin Energy Corporation 179,000 5,481,875
------------
82,581,920
ENERGY RELATED 12.5%
Amoco Corporation 64,000 3,592,000
Apache Corporation 28,100 795,581
Atlantic Richfield Company 48,200 3,319,775
British Petroleum PLC ADR 10,300 910,906
Burlington Resources, Inc. 13,200 543,675
Chevron Corporation 3,000 244,500
Elf Aquitaine SA Sponsored ADR 7,000 406,000
Exxon Corporation 102,200 7,281,750
FMC Corporation (b) 3,000 153,187
Imperial Oil, Ltd. 49,300 776,475
Mobil Corporation 2,500 189,219
Murphy Oil Corporation 8,700 359,419
Ocean Energy, Inc. (b) 28,300 353,750
Pennzoil Company 5,400 193,725
Royal Dutch Petroleum Company - New York
Registry Shares 123,700 6,092,225
USX-Marathon Group 51,400 1,680,138
------------
26,892,325
GAS UTILITY 9.0%
Connecticut Energy Corporation 7,500 210,000
Consolidated Natural Gas Company 8,700 459,469
Enron Corporation 210,500 11,103,875
Equitable Resources, Inc. 2,500 69,531
Indiana Energy, Inc. 38,000 850,250
KeySpan Energy Corporation 102,000 3,047,250
Oneok, Inc. 30,600 1,048,050
Providence Energy Corporation 7,800 159,900
Questar Corporation 95,400 1,878,187
Washington Gas Light Company 12,000 317,250
WICOR, Inc. 6,000 146,250
------------
19,290,012
OTHER UTILITY 0.4%
American Water Works Company, Inc. 26,100 833,569
TELECOMMUNICATION 33.4%
Alltel Corporation 282,000 13,201,125
Ameritech Corporation 328,500 17,718,469
Bell Atlantic Corporation 310,000 16,468,750
BellSouth Corporation 62,000 4,948,375
GTE Corporation 73,000 4,284,187
MCI WorldCom, Inc. (b) 22,000 1,215,500
SBC Communications, Inc. 295,000 13,662,187
------------
71,498,593
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $156,076,037) 201,096,419
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 6.0%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 4.75% $1,875,600 $ 1,875,600
General Mills, Inc., 4.83% 2,026,300 2,026,300
Pitney Bowes Credit Corporation, 4.83% 2,282,800 2,282,800
Sara Lee Corporation, 4.82% 2,299,900 2,299,900
Warner Lambert Company, 4.75% 2,064,000 2,064,000
Wisconsin Electric Power Company, 4.75% 2,205,000 2,205,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $12,753,600) 12,753,600
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $168,829,637) 99.8% 213,850,019
Other Assets and Liabilities, Net 0.2% 415,477
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $214,265,496
==============================================================================
===============================================================================
STRONG ASSET ALLOCATION FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 67.5%
AEROSPACE & DEFENSE 0.9%
The Boeing Company 8,100 $ 303,750
Northrop Grumman Corporation 11,400 909,150
United Technologies Corporation 13,300 1,266,825
----------
2,479,725
AUTOMOBILE 0.4%
Ford Motor Company 22,200 1,204,350
BANK - MONEY CENTER 2.8%
BankAmerica Corporation 46,000 2,642,125
The Chase Manhattan Corporation 30,000 1,704,375
Citigroup, Inc. 56,750 2,670,797
First Union Corporation 19,900 1,154,200
----------
8,171,497
BANK - SUPER REGIONAL 2.8%
The Bank of New York Company, Inc. 34,400 1,085,750
Bank One Corporation 10,000 488,750
Comerica, Inc. 26,550 1,712,475
Fleet Financial Group, Inc. 25,600 1,022,400
Mellon Bank Corporation 36,500 2,194,562
Norwest Corporation 26,200 974,313
US Bancorp 13,940 508,810
----------
7,987,060
BEVERAGE - ALCOHOLIC 0.3%
Anheuser-Busch Companies, Inc. 12,000 713,250
BEVERAGE - SOFT DRINK 1.3%
The Coca-Cola Company 44,200 2,989,025
PepsiCo, Inc. 23,200 783,000
----------
3,772,025
BROKERAGE & INVESTMENT MANAGEMENT 0.1%
Morgan Stanley, Dean Witter & Company 5,200 336,700
COMPUTER - MAINFRAME 1.2%
International Business Machines Corporation 22,500 3,339,844
COMPUTER - PERIPHERAL EQUIPMENT 0.2%
EMC Communications Corporation (b) 9,000 579,375
16
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG ASSET ALLOCATION FUND(continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMPUTER - PERSONAL & WORKSTATION 0.8%
Dell Computer Corporation (b) 34,600 $ 2,270,625
COMPUTER SOFTWARE 4.2%
America Online, Inc. (b) 14,800 1,880,525
BMC Software, Inc. (b) 20,200 970,862
Cisco Systems, Inc. (b) 50,175 3,161,025
Microsoft Corporation (b) 57,900 6,130,163
-----------
12,142,575
COSMETIC & PERSONAL CARE 0.6%
The Gillette Company 30,600 1,375,087
Estee Lauder Companies, Inc. Class A 6,700 439,269
-----------
1,814,356
DIVERSIFIED OPERATIONS 2.6%
Allied Signal, Inc. 12,200 475,038
E.I. Du Pont de Nemours & Company 21,700 1,247,750
Textron, Inc. 24,500 1,822,187
Tyco International, Ltd. 65,966 4,085,769
-----------
7,630,744
ELECTRIC POWER 0.8%
Duke Energy Company 15,100 976,781
PECO Energy Company 14,000 541,625
UNICOM Corporation 23,500 885,656
-----------
2,404,062
ELECTRICAL EQUIPMENT 3.2%
Emerson Electric Company 14,000 924,000
General Electric Company 94,500 8,268,750
-----------
9,192,750
ELECTRONICS - SEMICONDUCTOR/COMPONENT 0.9%
Intel Corporation 25,800 2,301,038
Motorola, Inc. 8,000 416,000
-----------
2,717,038
FINANCE - MISCELLANEOUS 1.0%
American Express Company 14,600 1,290,275
SunAmerica, Inc. 22,400 1,579,200
-----------
2,869,475
FOOD 1.1%
Bestfoods 21,800 1,188,100
Sara Lee Corporation 12,000 716,250
Unilever NV 18,300 1,377,075
-----------
3,281,425
HEALTHCARE - DRUG/DIVERSIFIED 6.8%
Abbott Laboratories 12,500 586,719
American Home Products Corporation 36,100 1,759,875
Bristol-Myers Squibb Company 22,200 2,454,487
Johnson & Johnson 24,500 1,996,750
Merck & Company, Inc. 24,000 3,246,000
Pfizer, Inc. 36,200 3,884,712
Schering-Plough Corporation 14,800 1,522,550
SmithKline Beecham PLC Sponsored ADR 15,600 994,500
Warner-Lambert Company 40,500 3,174,188
-----------
19,619,781
HEALTHCARE - MEDICAL SUPPLY 2.2%
Becton, Dickinson & Company 52,600 2,215,775
Cardinal Health, Inc. 11,500 1,087,469
McKesson Corporation 38,500 2,964,500
-----------
6,267,744
HOUSING RELATED 0.7%
Masco Corporation 71,000 2,001,313
INSURANCE - DIVERSIFIED 0.3%
Marsh & McLennan Companies, Inc. 18,000 999,000
INSURANCE - PROPERTY & CASUALTY 1.6%
The Allstate Corporation 34,600 1,489,963
American International Group, Inc. 24,950 2,126,987
Chubb Corporation 14,000 861,000
-----------
4,477,950
LEISURE PRODUCT 0.2%
Eastman Kodak Company 6,000 465,000
LEISURE SERVICE 0.3%
The Walt Disney Company 28,000 754,250
MACHINERY - MISCELLANEOUS 0.3%
Ingersoll-Rand Company 17,350 876,175
MEDIA - PUBLISHING 2.2%
Gannett Company, Inc. 16,200 1,002,375
McGraw-Hill, Inc. 20,900 1,879,694
Time Warner, Inc. 38,500 3,573,281
-----------
6,455,350
MEDIA - RADIO/TV 1.8%
CBS Corporation 32,600 910,762
Clear Channel Communications, Inc. (b) 46,700 2,127,769
Cox Communications, Inc. Class A (b) 22,000 1,207,250
Tele-Communications, Inc. Liberty Media Group
Series A (b) 28,350 1,079,072
-----------
5,324,853
MORTGAGE & RELATED SERVICE 2.0%
Federal Home Loan Mortgage Corporation 53,200 3,059,000
Federal National Mortgage Association 37,000 2,620,062
-----------
5,679,062
OFFICE AUTOMATION 1.2%
Pitney Bowes, Inc. 34,000 1,872,125
Xerox Corporation 17,700 1,714,688
-----------
3,586,813
OIL - INTERNATIONAL INTEGRATED 3.3%
British Petroleum PLC ADR 10,800 955,125
Chevron Corporation 18,200 1,483,300
Conoco, Inc. Class A (b) 20,600 512,425
Exxon Corporation 39,900 2,842,875
Mobil Corporation 19,500 1,475,906
Royal Dutch Petroleum Company - New York
Registry Shares 29,400 1,447,950
Texaco, Inc. 15,700 931,206
-----------
9,648,787
OIL - NORTH AMERICAN INTEGRATED 0.1%
Valero Energy Corporation 8,600 215,000
PERSONAL & COMMERCIAL LENDING 1.0%
Associates First Capital Corporation 24,452 1,723,866
Household International, Inc. 33,552 1,226,745
-----------
2,950,611
RETAIL - DRUG STORE 2.2%
CVS Corporation 45,000 2,055,937
Rite Aid Corporation 59,200 2,349,500
Walgreen Company 38,900 1,893,944
-----------
6,299,381
RETAIL - FOOD CHAIN 1.5%
The Kroger Company (b) 40,600 2,253,300
Safeway, Inc. (b) 41,500 1,984,219
-----------
4,237,519
RETAIL - MAJOR CHAIN 2.0%
Dayton Hudson Corporation 44,200 1,872,975
Wal-Mart Stores, Inc. 54,500 3,760,500
-----------
5,633,475
RETAIL - RESTAURANT 0.3%
McDonald's Corporation 12,000 802,500
17
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1998
- -------------------------------------------------------------------------------
===============================================================================
STRONG ASSET ALLOCATION FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
RETAIL - SPECIALTY 2.0%
Gap, Inc. 13,700 $ 823,712
The Home Depot, Inc. 57,600 2,505,600
Lowe's Companies, Inc. 41,800 1,408,138
Tandy Corporation 22,500 1,115,156
------------
5,852,606
SOAP & CLEANING PREPARATION 2.1%
Clorox Company 24,900 2,720,325
The Procter & Gamble Company 38,600 3,430,575
------------
6,150,900
STEEL 0.1%
USX-US Steel Group 12,000 279,000
TELECOMMUNICATION EQUIPMENT 0.9%
Lucent Technologies, Inc. 30,800 2,469,775
TELECOMMUNICATION SERVICE 4.8%
AT&T Corporation 48,200 3,000,450
Bell Atlantic Corporation 37,600 1,997,500
MCI WorldCom, Inc. (b) 86,887 4,800,507
MediaOne Group, Inc. 35,300 1,493,631
Sprint Corporation 33,500 2,571,125
------------
13,863,213
TELEPHONE 1.7%
Ameritech Corporation 11,200 604,100
BellSouth Corporation 18,000 1,436,625
SBC Communications, Inc. 51,800 2,398,988
US WEST, Inc. 6,800 390,150
------------
4,829,863
TOBACCO 0.7%
Philip Morris Companies, Inc. 40,200 2,055,225
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $149,758,294) 194,702,022
- ------------------------------------------------------------------------------
WARRANTS 0.3%
American Telecasting, Inc. Warrants, Expire 8/10/00 350 0
Concentric Network Warrants, Expire 12/15/07
(Acquired 12/15/97; Cost $6,980) (d) 2,000 20,444
e. spire Communications, Inc. Warrants, Expire
11/01/05 (Acquired 3/22/96; Cost $107,188) (d) 1,750 52,500
News Corporation Exchange Trust Warrants, Expire
11/12/16 (Acquired 11/04/96; Cost $1,831,250) (d) 50,000 837,500
- ------------------------------------------------------------------------------
TOTAL WARRANTS (COST $1,954,167) 910,444
- ------------------------------------------------------------------------------
PREFERRED STOCKS 0.6%
Nextlink Communications, Inc. 14.00% Senior
Exchangeable 34,608 1,626,569
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $1,598,069) 1,626,569
- ------------------------------------------------------------------------------
CONVERTIBLE BONDS 0.2%
Metamor Worldwide, Inc. Subordinated Notes,
2.94%, Due 8/15/04 $ 725,000 586,344
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (COST $625,881) 586,344
- ------------------------------------------------------------------------------
CORPORATE BONDS 26.5%
APCOA/Standard Parking, Inc. Senior
Subordinated Notes, 9.25%, Due 3/15/08 1,750,000 1,540,000
Atlas Air, Inc. Senior Notes, 9.25%, Due 4/15/08
(Acquired 4/07/98; Cost $1,997,340) (d) 2,000,000 1,885,000
Bay View Capital Corporation Subordinated Notes,
9.125%, Due 8/15/07 1,500,000 1,327,500
BF Saul Real Estate Investment Trust Senior
Secured Notes, 9.75%, Due 4/01/08 3,000,000 2,415,000
Capstar Radio Broadcasting Partners, Inc. Senior
Subordinated Notes, 9.25%, Due 7/01/07 2,500,000 2,487,500
Convergent Communications, Inc. Units, 13.00%,
Due 4/01/08 (Acquired 3/26/98; Cost $2,000,000) (d) 2,000,000 1,350,000
Dawson Production Services Senior Notes, 9.375%,
Due 2/01/07 1,674,000 1,682,370
e. spire Communications, Inc. Senior Discount
Notes, Zero %, Due 7/01/08 (Rate Reset Effective
7/01/03) (Acquired 7/21/98; Cost $1,799,670) (d) 3,000,000 1,485,000
Empress Entertainment, Inc. Senior Subordinated
Notes, 8.125%, Due 7/01/06 (Acquired 6/16/98;
Cost $3,003,750) (d) 3,000,000 2,977,500
Fresenius Medical Care Capital Trust II Guaranteed
Preferred Securities, 7.875%, Due 2/01/08 2,500,000 2,337,500
Global Crossing Holding, Ltd. Senior Notes, 9.625%,
Due 5/15/08 (Acquired 9/14/98; Cost $2,462,500) (d) 2,500,000 2,431,250
Goss Graphic System, Inc. Senior Subordinated
Notes, 12.00%, Due 10/15/06 1,500,000 1,335,000
GS Escrow Corporation Senior Notes, 7.00%, Due
8/01/03 (Acquired 8/04/98; Cost $8,201,435) (d) 8,220,000 8,055,600
Hudson Respiratory Care, Inc. Senior Subordinated
Notes, 9.125%, Due 4/15/08 1,150,000 810,750
Intermedia Communications, Inc. Senior Notes,
Series B, 13.50%, Due 6/01/05 241,000 275,945
Lenfest Communications, Inc. Senior Subordinated
Notes, 8.25%, Due 2/15/08 2,150,000 2,171,500
Loews Cineplex Entertainment Corporation Senior
Subordinated Notes, 8.875%, Due 8/01/08
(Acquired 9/18/98; Cost $2,437,500) (d) 2,500,000 2,437,500
Mediq, Inc. Units, Zero %, Due 6/01/09 (Rate Reset
Effective 6/01/03) (Acquired 5/21/98; Cost
$1,996,312) (d) 3,750,000 1,781,250
Mobile Telecommunication Technologies
Corporation Senior Notes, 13.50%, Due 12/15/02 2,250,000 2,458,125
NTL, Inc. Senior Notes, Series B, 10.00%,
Due 2/15/07 2,500,000 2,412,500
Nextlink Communications, Inc. Senior Notes,
9.625%, Due 10/01/07 800,000 744,000
Niagara Mohawk Power Corporation Senior Notes,
Series C, 7.125%, Due 7/01/01 12,000,000 12,219,852
North Fork Capital Trust I Capital Trust
Pass-Thru Securities, 8.70%, Due 12/15/26 4,000,000 4,150,224
Pacific Aerospace & Electronics, Inc. Senior
Subordinated Notes, 11.25%, Due 8/01/05
(Acquired 7/23/98; Cost $2,000,000) (d) 2,000,000 1,590,000
Pinnacle Holdings, Inc. Senior Discount Notes,
Zero %, Due 3/15/08 (Rate Reset Effective
3/15/03) 3,000,000 1,395,000
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Notes, Series B, 10.00%, Due 3/15/05 3,000,000 3,255,000
Sabreliner Corporation Senior Notes, 11.00%, Due
6/15/08 (Acquired 6/19/98; Cost $3,000,000) (d) 3,000,000 2,512,500
Star Markets Company Senior Subordinated Notes,
13.00%, Due 11/01/04 500,000 532,500
Telemundo Holdings, Inc. Senior Discount Notes,
Zero %, Due 8/15/08 (Rate Reset Effective 8/15/03)
(Acquired 8/07/98; Cost $1,285,200) (d) 2,250,000 1,113,750
Transwestern Publishing Company LP/TWP
Capital Corporation Senior Subordinated
Notes, 9.625%, Due 11/15/07 500,000 488,750
United Rentals, Inc. Senior Subordinated Notes,
9.50%, Due 6/01/08 (Acquired 5/19/98; Cost
$496,000) (d) 500,000 487,500
Universal Compression, Inc. Senior Discount Notes,
Zero %, Due 2/15/08 (Rate Reset Effective 2/15/03) 675,000 384,750
US Air 1993-A Pass-Thru Trust Certificates,
Series 1993-A2, 9.625%, Due 9/01/03 1,675,000 1,885,175
US Air, Inc. Senior Notes, 9.625%, Due 2/01/01 540,000 543,670
18
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG ASSET ALLOCATION FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Winstar Communications, Inc. Senior Discount
Notes, Zero %, Due 10/15/05 (Rate Reset
Effective 10/15/00) $1,960,000 $ 1,381,800
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $79,840,642) 76,341,261
- ------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES 0.2%
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 1990-G, Class A-Z1,
9.50%, Due 12/25/21 488,266 503,675
First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates, Series 1993-2,
Class A-3, 7.50%, Due 3/25/33 947 957
Ryland Mortgage Securities Corporation III Variable
Rate Collateralized Mortgage Bonds, Series 1992-C,
Class 3-A, 11.7047%, Due 11/25/30 167,680 175,697
- ------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES (COST $657,181) 680,329
- ------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY ISSUES 1.6%
FHLMC Adjustable Rate Mortgage Participation
Certificates, 8.165%, Due 8/01/25 2,075,466 2,188,330
FHLMC Guaranteed Pass-Thru Certificates:
9.50%, Due 1/01/06 77,011 79,331
10.25%, Due 3/01/15 91,057 95,440
10.50%, Due 1/01/16 18,404 19,510
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates, 11.00%, Due
10/01/00 thru 11/01/00 66,298 68,143
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Variable Rate Pass-Thru Certificates,
Series G92-61, Class FJ, 5.999%, Due 10/25/22 549,867 553,032
GNMA Guaranteed Pass-Thru Certificates, 7.50%,
Due 12/15/07 1,556,254 1,615,051
- ------------------------------------------------------------------------------
TOTAL UNITED STATES GOVERNMENT & AGENCY ISSUES (COST $4,506,084) 4,618,837
- ------------------------------------------------------------------------------
OPTIONS 0.4%
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.) 9,500,000 1,222,650
- ------------------------------------------------------------------------------
TOTAL OPTIONS (COST $439,881) 1,222,650
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 2.1%
COMMERCIAL PAPER 2.1%
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 4.75% $1,554,800 1,554,800
General Mills, Inc., 4.83% 447,300 447,300
Pitney Bowes Credit Corporation, 4.83% 543,900 543,900
Sara Lee Corporation, 4.82% 572,300 572,300
Warner Lambert Company, 4.75% 964,200 964,200
Wisconsin Electric Power Company, 4.75% 1,823,900 1,823,900
------------
5,906,400
UNITED STATES GOVERNMENT & AGENCY ISSUES 0.0%
United States Treasury Bills, Due 7/16/98 (c) 35,000 34,712
- ------------------------------------------------------------------------------
Total Short-Term Investments (Cost $5,941,118) 5,941,112
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Total Investments in Securities (Cost $245,321,317) 99.4% 286,629,568
Other Assets and Liabilities, Net 0.6% 1,762,670
- ------------------------------------------------------------------------------
Net Assets 100.0% $288,392,238
==============================================================================
FUTURES
- ------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------
Purchased:
20 Two-Year U.S. Treasury Notes 12/98 $4,253,125 $ 48,693
30 Five-Year U.S. Treasury Notes 12/98 3,439,219 102,665
Sold:
20 Ten-Year U.S. Treasury Notes 12/98 2,407,500 (74,056)
===============================================================================
STRONG BLUE CHIP 100 FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 99.1%
AEROSPACE & DEFENSE 0.3%
The Boeing Company 7,300 $ 273,750
AUTOMOBILE 1.1%
Chrysler Corporation 4,700 226,188
Ford Motor Company 8,700 471,975
General Motors Corporation 4,700 296,394
----------
994,557
BANK - MONEY CENTER 6.3%
BankAmerica Corporation 20,018 1,149,784
The Chase Manhattan Corporation 41,000 2,329,313
Citigroup, Inc. 37,060 1,744,136
First Union Corporation 7,000 406,000
----------
5,629,233
BANK - SUPER REGIONAL 3.8%
The Bank of New York Company, Inc. 66,900 2,111,531
Bank One Corporation 8,440 412,505
Fleet Financial Group, Inc. 4,100 163,744
National City Corporation 2,400 154,350
Norwest Corporation 5,500 204,531
US Bancorp 5,300 193,450
Wells Fargo & Company 600 222,000
----------
3,462,111
BEVERAGE - ALCOHOLIC 0.2%
Anheuser-Busch Companies, Inc. 3,500 208,031
BEVERAGE - SOFT DRINK 1.7%
The Coca-Cola Company 17,700 1,196,963
PepsiCo, Inc. 10,600 357,750
----------
1,554,713
BROKERAGE & INVESTMENT MANAGEMENT 1.7%
Merrill Lynch & Company, Inc. 2,500 148,125
Morgan Stanley, Dean Witter & Company 21,200 1,372,700
----------
1,520,825
COMPUTER - MAINFRAME 1.1%
International Business Machines Corporation 6,700 994,531
COMPUTER - PERIPHERAL EQUIPMENT 3.6%
EMC Communications Corporation (b) 49,600 3,193,000
COMPUTER - PERSONAL & WORKSTATION 5.6%
Compaq Computer Corporation 12,000 379,500
Dell Computer Corporation (b) 63,460 4,164,563
Hewlett-Packard Company 7,500 451,406
----------
4,995,469
19
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1998
- -------------------------------------------------------------------------------
===============================================================================
STRONG BLUE CHIP 100 FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMPUTER SERVICE 0.2%
Automatic Data Processing, Inc. 2,200 $ 171,188
COMPUTER SOFTWARE 4.8%
Cisco Systems, Inc. (b) 11,200 705,600
Microsoft Corporation (b) 32,300 3,419,762
Oracle Systems Corporation (b) 7,000 206,938
-----------
4,332,300
COSMETIC & PERSONAL CARE 0.4%
The Gillette Company 8,100 363,994
DIVERSIFIED OPERATIONS 1.5%
Allied Signal, Inc. 4,000 155,750
E.I. Du Pont de Nemours & Company 8,100 465,750
Minnesota Mining & Manufacturing Company 2,900 232,000
Monsanto Company 4,300 174,688
Tyco International, Ltd. 4,600 284,912
-----------
1,313,100
ELECTRIC POWER 0.4%
Duke Energy Company 2,600 168,188
The Southern Company 5,000 140,938
-----------
309,126
ELECTRICAL EQUIPMENT 4.1%
Emerson Electric Company 3,200 211,200
General Electric Company 39,425 3,449,687
-----------
3,660,887
ELECTRONICS - SEMICONDUCTOR/COMPONENT 3.0%
Intel Corporation 26,100 2,327,794
Motorola, Inc. 4,300 223,600
Texas Instruments, Inc. 2,800 179,025
-----------
2,730,419
FINANCE - MISCELLANEOUS 0.3%
American Express Company 3,300 291,637
FOOD 1.0%
Campbell Soup Company 3,200 170,600
H.J. Heinz Company 2,600 151,125
Sara Lee Corporation 3,400 202,938
Unilever NV 4,600 346,150
-----------
870,813
HEALTHCARE - DRUG/DIVERSIFIED 13.2%
Abbott Laboratories 11,100 521,006
American Home Products Corporation 9,500 463,125
Bristol-Myers Squibb Company 7,200 796,050
Johnson & Johnson 9,700 790,550
Eli Lilly & Company 7,900 639,406
Merck & Company, Inc. 8,600 1,163,150
Pfizer, Inc. 22,290 2,391,996
Pharmacia & Upjohn, Inc. 3,700 195,869
Schering-Plough Corporation 23,500 2,417,562
Warner-Lambert Company 31,800 2,492,325
-----------
11,871,039
HEALTHCARE - INSTRUMENTATION 0.2%
Medtronic, Inc. 3,400 221,000
INSURANCE - PROPERTY & CASUALTY 2.6%
The Allstate Corporation 5,900 254,069
American International Group, Inc. 24,652 2,101,583
-----------
2,355,652
LEISURE PRODUCT 0.2%
Eastman Kodak Company 2,300 178,250
LEISURE SERVICE 0.4%
The Walt Disney Company 14,700 395,981
MEDIA - PUBLISHING 3.5%
Time Warner, Inc. 34,300 3,183,469
MEDIA - RADIO/TV 1.5%
CBS Corporation 42,300 1,181,756
Viacom International, Inc. 2,600 155,675
-----------
1,337,431
MORTGAGE & RELATED SERVICE 2.8%
Federal Home Loan Mortgage Corporation 33,900 1,949,250
Federal National Mortgage Association 7,500 531,094
-----------
2,480,344
OFFICE AUTOMATION 0.3%
Xerox Corporation 2,400 232,500
OIL - INTERNATIONAL INTEGRATED 3.4%
Chevron Corporation 4,700 383,050
Exxon Corporation 17,500 1,246,875
Mobil Corporation 5,600 423,850
Royal Dutch Petroleum Company - New York
Registry Shares 15,500 763,375
Texaco, Inc. 3,900 231,319
-----------
3,048,469
OIL - NORTH AMERICAN INTEGRATED 0.6%
Amoco Corporation 6,900 387,262
Atlantic Richfield Company 2,300 158,413
-----------
545,675
OIL WELL EQUIPMENT & SERVICE 0.2%
Schlumberger, Ltd. 3,900 204,750
PAPER & FOREST PRODUCTS 0.2%
Kimberly-Clark Corporation 3,900 188,175
PERSONAL & COMMERCIAL LENDING 1.5%
Associates First Capital Corporation 19,460 1,371,930
POLLUTION CONTROL 0.2%
Waste Management, Inc. 4,100 185,012
RETAIL - DRUG STORE 1.2%
Walgreen Company 22,600 1,100,337
RETAIL - MAJOR CHAIN 3.8%
Wal-Mart Stores, Inc. 50,020 3,451,380
RETAIL - RESTAURANT 0.4%
McDonald's Corporation 4,900 327,687
RETAIL - SPECIALTY 4.7%
Gap, Inc. 32,500 1,954,062
The Home Depot, Inc. 51,610 2,245,035
-----------
4,199,097
SOAP & CLEANING PREPARATION 1.2%
Colgate Palmolive Company 2,100 185,587
The Procter & Gamble Company 9,600 853,200
-----------
1,038,787
TELECOMMUNICATION EQUIPMENT 1.8%
Lucent Technologies, Inc. 18,200 1,459,412
Northern Telecom, Ltd. 4,700 201,219
-----------
1,660,631
TELECOMMUNICATION SERVICE 7.4%
AT&T Corporation 13,000 809,250
AirTouch Communications, Inc. (b) 4,100 229,600
Bell Atlantic Corporation 11,200 595,000
MCI WorldCom, Inc. (b) 67,770 3,744,293
MediaOne Group, Inc. 24,400 1,032,425
Sprint Corporation 3,100 237,925
-----------
6,648,493
TELEPHONE 2.5%
Ameritech Corporation 7,900 426,106
BellSouth Corporation 7,100 566,669
20
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG BLUE CHIP 100 FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
GTE Corporation 6,900 $ 404,944
SBC Communications, Inc. 14,100 653,006
US WEST, Inc. 3,600 206,550
-----------
2,257,275
TOBACCO 4.2%
Philip Morris Companies, Inc. 74,000 3,783,250
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $81,939,624) 89,136,298
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 1.0%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 4.75% $ 100 100
General Mills, Inc., 4.83% 900 900
Pitney Bowes Credit Corporation, 4.83% 493,500 493,500
Sara Lee Corporation, 4.82% 148,900 148,900
Warner Lambert Company, 4.75% 117,100 117,100
Wisconsin Electric Power Company, 4.75% 147,100 147,100
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $907,600) 907,600
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $82,847,224) 100.1% 90,043,898
Other Assets and Liabilities, Net (0.1%) (135,600)
- ------------------------------------------------------------------------------
Net Assets 100.0% $89,908,298
==============================================================================
===============================================================================
STRONG EQUITY INCOME FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 94.5%
AEROSPACE & DEFENSE 1.3%
The Boeing Company 6,900 $ 258,750
Northrop Grumman Corporation 9,700 773,575
United Technologies Corporation 11,500 1,095,375
-----------
2,127,700
AUTOMOBILE 0.9%
Ford Motor Company 28,700 1,556,975
BANK - MONEY CENTER 4.1%
BankAmerica Corporation 39,500 2,268,781
The Chase Manhattan Corporation 25,900 1,471,444
Citigroup, Inc. 48,999 2,306,015
First Union Corporation 17,100 991,800
-----------
7,038,040
BANK - SUPER REGIONAL 4.0%
The Bank of New York Company, Inc. 29,600 934,250
Bank One Corporation 8,600 420,325
Comerica, Inc. 24,300 1,567,350
Mellon Bank Corporation 34,500 2,074,313
Norwest Corporation 20,300 754,906
US Bancorp 10,500 383,250
Wells Fargo & Company 2,000 740,000
-----------
6,874,394
BEVERAGE - ALCOHOLIC 0.4%
Anheuser-Busch Companies, Inc. 10,500 624,094
BEVERAGE - SOFT DRINK 1.1%
The Coca-Cola Company 18,200 1,230,775
PepsiCo, Inc. 20,200 681,750
-----------
1,912,525
BROKERAGE & INVESTMENT MANAGEMENT 0.2%
Morgan Stanley, Dean Witter & Company 4,500 291,375
COMMERCIAL SERVICE 1.5%
Avery Dennison Corporation 16,800 696,150
The Interpublic Group of Companies, Inc. 30,900 1,807,650
-----------
2,503,800
COMPUTER - MAINFRAME 2.6%
International Business Machines Corporation 29,500 4,378,906
COSMETIC & PERSONAL CARE 0.8%
The Gillette Company 23,000 1,033,562
Estee Lauder Companies, Inc. Class A 5,700 373,706
-----------
1,407,268
DIVERSIFIED OPERATIONS 3.5%
Allied Signal, Inc. 16,900 658,044
E.I. Du Pont de Nemours & Company 18,300 1,052,250
Textron, Inc. 21,900 1,628,812
Tyco International, Ltd. 41,700 2,582,794
-----------
5,921,900
ELECTRIC POWER 1.9%
Duke Energy Company 17,200 1,112,625
PECO Energy Company 12,000 464,250
The Southern Company 31,200 879,450
UNICOM Corporation 20,200 761,287
-----------
3,217,612
ELECTRICAL EQUIPMENT 4.9%
Emerson Electric Company 17,000 1,122,000
General Electric Company 82,200 7,192,500
-----------
8,314,500
ELECTRONICS - SEMICONDUCTOR/COMPONENT 0.2%
Motorola, Inc. 6,800 353,600
FINANCE - MISCELLANEOUS 1.4%
American Express Company 12,100 1,069,338
SunAmerica, Inc. 17,500 1,233,750
-----------
2,303,088
FOOD 2.0%
Bestfoods 16,000 872,000
Dean Foods Company 21,400 1,003,125
Sara Lee Corporation 10,300 614,781
Unilever NV 12,800 963,200
-----------
3,453,106
HEALTHCARE - DRUG/DIVERSIFIED 12.3%
Abbott Laboratories 10,500 492,844
American Home Products Corporation 31,100 1,516,125
Bristol-Myers Squibb Company 24,500 2,708,781
Johnson & Johnson 21,100 1,719,650
Eli Lilly & Company 26,900 2,177,219
Merck & Company, Inc. 23,000 3,110,750
Pfizer, Inc. 33,100 3,552,044
Schering-Plough Corporation 27,500 2,829,062
SmithKline Beecham PLC Sponsored ADR 13,300 847,875
Warner-Lambert Company 25,200 1,975,050
-----------
20,929,400
HEALTHCARE - MEDICAL SUPPLY 2.6%
Becton, Dickinson & Company 45,800 1,929,325
McKesson Corporation 33,600 2,587,200
-----------
4,516,525
HOUSING RELATED 1.0%
Masco Corporation 62,200 1,753,262
INSURANCE - DIVERSIFIED 0.5%
Marsh & McLennan Companies, Inc. 14,850 824,175
21
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1998
- -------------------------------------------------------------------------------
===============================================================================
STRONG EQUITY INCOME FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
INSURANCE - PROPERTY & CASUALTY 2.4%
The Allstate Corporation 29,400 $ 1,266,038
American International Group, Inc. 22,375 1,907,469
Chubb Corporation 15,800 971,700
------------
4,145,207
LEISURE PRODUCT 0.2%
Eastman Kodak Company 5,000 387,500
LEISURE SERVICE 0.4%
The Walt Disney Company 23,900 643,806
MACHINERY - MISCELLANEOUS 1.0%
Cooper Industries, Inc. 7,800 344,175
Ingersoll-Rand Company 25,200 1,272,600
------------
1,616,775
MEDIA - PUBLISHING 3.4%
Gannett Company, Inc. 17,000 1,051,875
McGraw-Hill, Inc. 18,300 1,645,856
Time Warner, Inc. 33,700 3,127,781
------------
5,825,512
MEDIA - RADIO/TV 0.8%
CBS Corporation 19,200 536,400
Tele-Communications, Inc. Liberty Media Group
Series A (b) 22,800 867,825
------------
1,404,225
METAL PRODUCTS & FABRICATION 0.5%
Illinois Tool Works, Inc. 12,600 807,975
MORTGAGE & RELATED SERVICE 2.8%
Federal Home Loan Mortgage Corporation 46,000 2,645,000
Federal National Mortgage Association 30,000 2,124,375
------------
4,769,375
OFFICE AUTOMATION 2.1%
Pitney Bowes, Inc. 38,000 2,092,375
Xerox Corporation 15,300 1,482,188
------------
3,574,563
OIL - INTERNATIONAL INTEGRATED 5.9%
British Petroleum PLC ADR 9,000 795,938
Chevron Corporation 18,900 1,540,350
Conoco, Inc. Class A (b) 17,800 442,775
Exxon Corporation 34,300 2,443,875
Mobil Corporation 18,100 1,369,944
Royal Dutch Petroleum Company - New York
Registry Shares 55,400 2,728,450
Texaco, Inc. 12,100 717,681
------------
10,039,013
OIL - NORTH AMERICAN INTEGRATED 0.7%
USX-Marathon Group 28,900 944,669
Valero Energy Corporation 7,300 182,500
------------
1,127,169
PAPER & FOREST PRODUCTS 0.5%
The Mead Corporation 26,800 847,550
PERSONAL & COMMERCIAL LENDING 1.6%
Associates First Capital Corporation 23,761 1,675,151
Household International, Inc. 29,332 1,072,451
------------
2,747,602
PRECIOUS METAL/GEM/STONE 0.2%
Barrick Gold Corporation 16,300 348,412
REAL ESTATE 0.5%
Bradley Real Estate, Inc. 28,100 590,100
Duke Realty Investments, Inc. 13,400 319,925
------------
910,025
RETAIL - DRUG STORE 2.3%
Rite Aid Corporation 54,200 2,151,062
Walgreen Company 36,000 1,752,750
------------
3,903,812
RETAIL - FOOD CHAIN 1.1%
The Kroger Company (b) 35,100 1,948,050
RETAIL - MAJOR CHAIN 3.0%
Dayton Hudson Corporation 38,800 1,644,150
Wal-Mart Stores, Inc. 51,200 3,532,800
------------
5,176,950
RETAIL - RESTAURANT 0.5%
McDonald's Corporation 13,500 902,813
RETAIL - SPECIALTY 3.4%
Gap, Inc. 11,700 703,462
The Home Depot, Inc. 51,100 2,222,850
Lowe's Companies, Inc. 45,300 1,526,044
Tandy Corporation 28,700 1,422,444
------------
5,874,800
SOAP & CLEANING PREPARATION 3.0%
Clorox Company 21,100 2,305,175
The Procter & Gamble Company 32,300 2,870,662
------------
5,175,837
STEEL 0.1%
USX-US Steel Group 10,300 239,475
TELECOMMUNICATION SERVICE 6.8%
AT&T Corporation 42,500 2,645,625
AirTouch Communications, Inc. (b) 10,800 604,800
Bell Atlantic Corporation 36,500 1,939,063
MCI WorldCom, Inc. (b) 76,448 4,223,752
Sprint Corporation 28,900 2,218,075
------------
11,631,315
TELEPHONE 2.8%
Ameritech Corporation 10,600 571,738
BellSouth Corporation 27,000 2,154,938
SBC Communications, Inc. 38,500 1,783,031
US WEST, Inc. 5,900 338,512
------------
4,848,219
TOBACCO 1.3%
Philip Morris Companies, Inc. 45,000 2,300,625
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $126,822,625) 161,498,850
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 2.0%
Corning LP 6.00% Monthly Income Securities 9,300 535,331
Houston Industries, Inc. 7.00% Automatic Common
Exchange Securities 30,000 2,431,875
Ralston Purina Company 7.00% Stock Appreciation
Income-Linked Securities 10,000 495,625
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $2,544,001) 3,462,831
- ------------------------------------------------------------------------------
CONVERTIBLE BONDS 1.1%
Hexcel Corporation Subordinated Notes, 7.00%,
Due 8/01/03 $ 410,000 378,738
Loews Corporation Exchangeable Subordinated
Notes, 3.125%, Due 9/15/07 (Exchangeable into
Diamond Offshore Drilling, Inc. Common Stock) 500,000 415,000
World Color Press, Inc. Senior Subordinated Notes,
6.00%, Due 10/10/07 1,000,000 1,000,000
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (COST $1,937,522) 1,793,738
- ------------------------------------------------------------------------------
22
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG EQUITY INCOME FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 2.6%
COMMERCIAL PAPER
INTEREST-BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 4.75% $ 867,000 $ 867,000
General Mills, Inc., 4.83% 1,228,300 1,228,300
Pitney Bowes Credit Corporation, 4.83% 817,000 817,000
Warner Lambert Company, 4.75% 856,100 856,100
Wisconsin Electric Power Company, 4.75% 601,500 601,500
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $4,369,900) 4,369,900
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $135,674,048) 100.2% 171,125,319
Other Assets and Liabilities, Net (0.2%) (369,418)
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $170,755,901
==============================================================================
===============================================================================
STRONG GROWTH AND INCOME FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 99.8%
AEROSPACE & DEFENSE 1.2%
The Boeing Company 16,100 $ 603,750
Northrop Grumman Corporation 22,700 1,810,325
United Technologies Corporation 26,500 2,524,125
-----------
4,938,200
AUTOMOBILE 0.7%
Ford Motor Company 52,200 2,831,850
BANK - MONEY CENTER 3.8%
BankAmerica Corporation 90,500 5,198,094
The Chase Manhattan Corporation 57,000 3,238,313
Citigroup, Inc. 92,950 4,374,459
First Union Corporation 39,100 2,267,800
-----------
15,078,666
BANK - SUPER REGIONAL 3.3%
The Bank of New York Company, Inc. 57,100 1,802,219
Bank One Corporation 20,000 977,500
Comerica, Inc. 39,450 2,544,525
Fleet Financial Group, Inc. 40,000 1,597,500
Mellon Bank Corporation 60,000 3,607,500
Norwest Corporation 54,000 2,008,125
US Bancorp 24,400 890,600
-----------
13,427,969
BEVERAGE - ALCOHOLIC 0.4%
Anheuser-Busch Companies, Inc. 24,000 1,426,500
BEVERAGE - SOFT DRINK 2.0%
The Coca-Cola Company 85,800 5,802,225
PepsiCo, Inc. 58,000 1,957,500
-----------
7,759,725
BROKERAGE & INVESTMENT MANAGEMENT 0.2%
Morgan Stanley, Dean Witter & Company 10,300 666,925
COMMERCIAL SERVICE 0.5%
The Interpublic Group of Companies, Inc. 36,950 2,161,575
COMPUTER - MAINFRAME 2.8%
International Business Machines Corporation 75,000 11,132,813
COMPUTER - PERIPHERAL EQUIPMENT 0.3%
EMC Communications Corporation (b) 18,000 1,158,750
COMPUTER - PERSONAL & WORKSTATION 2.1%
Compaq Computer Corporation 52,500 1,660,313
Dell Computer Corporation (b) 66,400 4,357,500
Sun Microsystems, Inc. (b) 38,500 2,242,625
-----------
8,260,438
COMPUTER SOFTWARE 5.7%
America Online, Inc. (b) 23,400 2,973,263
BMC Software, Inc. (b) 20,000 961,250
Cisco Systems, Inc. (b) 103,800 6,539,400
Microsoft Corporation (b) 114,300 12,101,513
-----------
22,575,426
COSMETIC & PERSONAL CARE 0.9%
The Gillette Company 60,600 2,723,212
Estee Lauder Companies, Inc. Class A 13,200 865,425
-----------
3,588,637
DIVERSIFIED OPERATIONS 3.7%
Allied Signal, Inc. 26,500 1,031,844
E.I. Du Pont de Nemours & Company 31,200 1,794,000
Textron, Inc. 37,200 2,766,750
Tyco International, Ltd. 146,052 9,046,095
-----------
14,638,689
ELECTRIC POWER 1.2%
Duke Energy Company 30,000 1,940,625
PECO Energy Company 28,000 1,083,250
UNICOM Corporation 46,300 1,744,931
-----------
4,768,806
ELECTRICAL EQUIPMENT 4.7%
Emerson Electric Company 28,000 1,848,000
General Electric Company 191,500 16,756,250
-----------
18,604,250
ELECTRONICS - SEMICONDUCTOR/COMPONENT 2.1%
Intel Corporation 85,400 7,616,612
Motorola, Inc. 16,000 832,000
-----------
8,448,612
FINANCE - MISCELLANEOUS 1.2%
American Express Company 30,800 2,721,950
SunAmerica, Inc. 29,300 2,065,650
-----------
4,787,600
FOOD 1.2%
Bestfoods 27,200 1,482,400
Sara Lee Corporation 14,000 835,625
Unilever NV 31,300 2,355,325
-----------
4,673,350
HEALTHCARE - DRUG/DIVERSIFIED 11.7%
Abbott Laboratories 26,000 1,220,375
American Home Products Corporation 71,500 3,485,625
Bristol-Myers Squibb Company 47,100 5,207,494
Johnson & Johnson 63,600 5,183,400
Eli Lilly & Company 48,600 3,933,562
Merck & Company, Inc. 43,000 5,815,750
Pfizer, Inc. 64,000 6,868,000
Schering-Plough Corporation 62,400 6,419,400
SmithKline Beecham PLC Sponsored ADR 31,000 1,976,250
Warner-Lambert Company 85,500 6,701,063
-----------
46,810,919
HEALTHCARE - MEDICAL SUPPLY 3.1%
Becton, Dickinson & Company 98,600 4,153,525
Cardinal Health, Inc. 31,500 2,978,719
McKesson Corporation 68,300 5,259,100
-----------
12,391,344
HOUSING RELATED 0.8%
Masco Corporation 120,000 3,382,500
INSURANCE - DIVERSIFIED 0.3%
Marsh & McLennan Companies, Inc. 24,900 1,381,950
23
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1998
- -------------------------------------------------------------------------------
===============================================================================
STRONG GROWTH AND INCOME FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
INSURANCE - PROPERTY & CASUALTY 1.9%
The Allstate Corporation 50,000 $ 2,153,125
American International Group, Inc. 43,100 3,674,275
Chubb Corporation 27,200 1,672,800
------------
7,500,200
LEISURE PRODUCT 0.2%
Eastman Kodak Company 12,000 930,000
LEISURE SERVICE 0.4%
The Walt Disney Company 55,900 1,505,806
MACHINERY - MISCELLANEOUS 0.5%
Ingersoll-Rand Company 39,900 2,014,950
MEDIA - PUBLISHING 2.8%
Gannett Company, Inc. 21,300 1,317,937
McGraw-Hill, Inc. 37,300 3,354,669
Time Warner, Inc. 71,400 6,626,813
------------
11,299,419
MEDIA - RADIO/TV 2.8%
CBS Corporation 62,600 1,748,887
Clear Channel Communications, Inc. (b) 90,000 4,100,625
Cox Communications, Inc. Class A (b) 50,000 2,743,750
Tele-Communications, Inc. Liberty Media Group
Series A (b) 38,400 1,461,600
Viacom International, Inc. 21,000 1,257,375
------------
11,312,237
METAL PRODUCTS & FABRICATION 0.4%
Illinois Tool Works, Inc. 25,600 1,641,600
METALS & MINING 0.5%
Aluminum Company of America 25,000 1,981,250
MORTGAGE & RELATED SERVICE 2.7%
Federal Home Loan Mortgage Corporation 93,300 5,364,750
Federal National Mortgage Association 75,900 5,374,669
------------
10,739,419
OFFICE AUTOMATION 1.7%
Pitney Bowes, Inc. 65,500 3,606,594
Xerox Corporation 32,300 3,129,063
------------
6,735,657
OIL - INTERNATIONAL INTEGRATED 5.3%
British Petroleum PLC ADR 21,500 1,901,406
Chevron Corporation 35,700 2,909,550
Conoco, Inc. Class A (b) 40,800 1,014,900
Exxon Corporation 79,000 5,628,750
Mobil Corporation 38,400 2,906,400
Royal Dutch Petroleum Company - New York
Registry Shares 103,720 5,108,210
Texaco, Inc. 27,000 1,601,437
------------
21,070,653
OIL - NORTH AMERICAN INTEGRATED 0.1%
Valero Energy Corporation 17,000 425,000
PAPER & FOREST PRODUCTS 0.3%
Georgia-Pacific Corporation 24,500 1,267,875
PERSONAL & COMMERCIAL LENDING 1.5%
Associates First Capital Corporation 52,205 3,680,453
Household International, Inc. 66,798 2,442,302
------------
6,122,755
POLLUTION CONTROL 0.3%
Waste Management, Inc. 22,265 1,004,708
RETAIL - DEPARTMENT STORE 0.7%
Fred Meyer, Inc. (b) 51,000 2,718,937
RETAIL - DRUG STORE 2.3%
CVS Corporation 61,000 2,786,937
Rite Aid Corporation 93,200 3,698,875
Walgreen Company 51,400 2,502,537
------------
8,988,349
RETAIL - FOOD CHAIN 1.6%
The Kroger Company (b) 33,300 1,848,150
Safeway, Inc. (b) 93,500 4,470,469
------------
6,318,619
RETAIL - MAJOR CHAIN 2.4%
Dayton Hudson Corporation 76,000 3,220,500
Wal-Mart Stores, Inc. 89,500 6,175,500
------------
9,396,000
RETAIL - RESTAURANT 0.5%
McDonald's Corporation 31,000 2,073,125
RETAIL - SPECIALTY 3.1%
Gap, Inc. 20,000 1,202,500
The Home Depot, Inc. 106,500 4,632,750
Lowe's Companies, Inc. 108,300 3,648,356
Tandy Corporation 58,500 2,899,406
------------
12,383,012
SOAP & CLEANING PREPARATION 2.5%
Clorox Company 40,000 4,370,000
The Procter & Gamble Company 64,200 5,705,775
------------
10,075,775
STEEL 0.1%
USX-US Steel Group 23,500 546,375
TELECOMMUNICATION EQUIPMENT 1.4%
Lucent Technologies, Inc. 67,300 5,396,619
TELECOMMUNICATION SERVICE 6.7%
AT&T Corporation 84,000 5,229,000
AirTouch Communications, Inc. (b) 18,500 1,036,000
Bell Atlantic Corporation 78,500 4,170,312
MCI WorldCom, Inc. (b) 169,153 9,345,703
MediaOne Group, Inc. 60,500 2,559,906
Sprint Corporation 57,500 4,413,125
------------
26,754,046
TELEPHONE 1.9%
Ameritech Corporation 18,200 981,663
BellSouth Corporation 25,500 2,035,219
SBC Communications, Inc. 82,100 3,802,256
US WEST, Inc. 13,500 774,563
------------
7,593,701
TOBACCO 1.3%
Philip Morris Companies, Inc. 103,100 5,270,987
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $322,187,371) 397,962,568
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 0.0%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
General Mills, Inc., 4.83% $ 100 100
Pitney Bowes Credit Corporation, 4.83% 2,000 2,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $2,100) 2,100
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $322,189,471) 99.8% 397,964,668
Other Assets and Liabilities, Net 0.2% 923,193
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $398,887,861
==============================================================================
24
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG LIMITED RESOURCES FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 92.5%
CHEMICAL - SPECIALTY 4.9%
Cabot Corporation 5,000 $ 140,312
Praxair, Inc. 2,500 100,625
----------
240,937
DIVERSIFIED OPERATIONS 3.5%
E.I. Du Pont de Nemours & Company 3,000 172,500
ELECTRIC POWER 2.6%
Duke Energy Company 2,000 129,375
METALS & MINING 2.1%
Aluminum Company of America 1,300 103,025
NATURAL GAS DISTRIBUTION 16.7%
Coastal Corporation 5,800 204,450
Enron Corporation 3,500 184,625
KN Energy, Inc. 4,500 223,594
Questar Corporation 10,800 212,625
----------
825,294
OIL - INTERNATIONAL INTEGRATED 12.9%
Chevron Corporation 3,400 277,100
Mobil Corporation 2,300 174,081
YPF Sociedad Anonima ADR 6,400 185,200
----------
636,381
OIL - NORTH AMERICAN EXPLORATION & PRODUCTION 21.1%
Anadarko Petroleum Corporation 3,500 118,562
Burlington Resources, Inc. 3,500 144,156
Devon Energy Corporation 3,500 118,563
Enron Oil & Gas Company 4,500 75,094
Gulf Canada Resources, Ltd. ADR (b) 40,000 150,000
Noble Affiliates, Inc. 5,500 180,125
Ocean Energy, Inc. (b) 8,000 100,000
Snyder Oil Corporation 10,000 159,375
----------
1,045,875
OIL - NORTH AMERICAN INTEGRATED 7.4%
Amerada Hess Corporation 2,800 154,700
Transmontaigne, Inc. (b) 13,500 210,094
----------
364,794
OIL WELL EQUIPMENT & SERVICE 13.9%
Cooper Cameron Corporation (b) 4,000 139,000
Halliburton Company 3,000 107,812
Nabors Industries, Inc. (b) 7,500 138,750
Schlumberger, Ltd. 2,300 120,750
Smith International, Inc. (b) 5,000 179,688
----------
686,000
PAPER & FOREST PRODUCTS 7.4%
Kimberly-Clark Corporation 3,600 173,700
Willamette Industries, Inc. 6,200 192,200
----------
365,900
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $5,218,407) 4,570,081
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 7.3%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 4.75% $ 65,100 65,100
General Mills, Inc., 4.83% 71,900 71,900
Pitney Bowes Credit Corporation, 4.83% 92,700 92,700
Warner Lambert Company, 4.75% 105,300 105,300
Wisconsin Electric Power Company, 4.75% 28,300 28,300
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $363,300) 363,300
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $5,581,707) 99.8% 4,933,381
Other Assets and Liabilities, Net 0.2% 12,362
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $4,945,743
==============================================================================
===============================================================================
STRONG TOTAL RETURN FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 87.9%
BANK - MONEY CENTER 2.1%
The Chase Manhattan Corporation 160,000 $ 9,090,000
Citigroup, Inc. 185,000 8,706,562
-----------
17,796,562
BANK - REGIONAL 2.8%
Fifth Third Bancorp 185,000 12,256,250
Northern Trust Company 160,000 11,800,000
-----------
24,056,250
BANK - SUPER REGIONAL 2.9%
The Bank of New York Company, Inc. 50,000 1,578,125
Norwest Corporation 210,000 7,809,375
US Bancorp 95,000 3,467,500
Wachovia Corporation 135,000 12,268,125
-----------
25,123,125
BEVERAGE - ALCOHOLIC 1.0%
Anheuser-Busch Companies, Inc. 140,000 8,321,250
BEVERAGE - SOFT DRINK 0.7%
The Coca-Cola Company 95,000 6,424,375
BROKERAGE & INVESTMENT MANAGEMENT 0.8%
The Charles Schwab Corporation 50,000 2,396,875
Morgan Stanley, Dean Witter & Company 75,000 4,856,250
-----------
7,253,125
COMPUTER - MAINFRAME 2.7%
International Business Machines Corporation 140,000 20,781,250
Unisys Corporation (b) 100,000 2,662,500
-----------
23,443,750
COMPUTER - PERIPHERAL EQUIPMENT 1.2%
EMC Communications Corporation (b) 165,000 10,621,875
COMPUTER - PERSONAL & WORKSTATION 2.4%
Apple Computer, Inc. (b) 40,000 1,485,000
Dell Computer Corporation (b) 230,000 15,093,750
Sun Microsystems, Inc. (b) 75,000 4,368,750
-----------
20,947,500
COMPUTER SOFTWARE 6.4%
America Online, Inc. (b) 75,000 9,529,687
Ascend Communications, Inc. (b) 55,000 2,653,750
Cisco Systems, Inc. (b) 230,000 14,490,000
Microsoft Corporation (b) 240,000 25,410,000
Oracle Systems Corporation (b) 90,000 2,660,625
-----------
54,744,062
COSMETIC & PERSONAL CARE 0.1%
The Gillette Company 20,000 898,750
DIVERSIFIED OPERATIONS 2.6%
E.I. Du Pont de Nemours & Company 130,000 7,475,000
Monsanto Company 275,000 11,171,875
Tyco International, Ltd. 65,000 4,025,938
-----------
22,672,813
ELECTRIC POWER 0.9%
DQE, Inc. 100,000 3,943,750
Duke Energy Company 40,000 2,587,500
PECO Energy Company 40,000 1,547,500
-----------
8,078,750
ELECTRICAL EQUIPMENT 3.0%
General Electric Company 300,000 26,250,000
ELECTRONICS - SEMICONDUCTOR/COMPONENT 2.3%
Intel Corporation 171,000 15,251,063
Micron Technology, Inc. (b) 130,000 4,940,000
-----------
20,191,063
25
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1998
- -------------------------------------------------------------------------------
===============================================================================
STRONG TOTAL RETURN FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
FINANCE - MISCELLANEOUS 1.3%
American Express Company 125,000 $ 11,046,875
FOOD 0.7%
Campbell Soup Company 40,000 2,132,500
H.J. Heinz Company 35,000 2,034,375
Sara Lee Corporation 35,000 2,089,062
------------
6,255,937
HEALTHCARE - BIOMEDICAL/GENETIC 0.7%
Amgen, Inc. (b) 80,000 6,285,000
HEALTHCARE - DRUG/DIVERSIFIED 9.0%
Abbott Laboratories 110,000 5,163,125
Johnson & Johnson 110,000 8,965,000
Eli Lilly & Company 135,000 10,926,562
Merck & Company, Inc. 70,000 9,467,500
Pfizer, Inc. 90,000 9,658,125
Schering-Plough Corporation 180,000 18,517,500
Warner-Lambert Company 190,000 14,891,250
------------
77,589,062
HEALTHCARE - INSTRUMENTATION 1.0%
Medtronic, Inc. 130,000 8,450,000
HEALTHCARE - MEDICAL SUPPLY 3.7%
Becton, Dickinson & Company 250,000 10,531,250
Cardinal Health, Inc. 90,000 8,510,625
McKesson Corporation 170,000 13,090,000
------------
32,131,875
HEALTHCARE - PATIENT CARE 0.1%
Columbia/HCA Healthcare Corporation 25,000 525,000
HEALTHCARE - PRODUCT 0.4%
Allergan, Inc. 60,000 3,746,250
MEDIA - PUBLISHING 1.4%
Time Warner, Inc. 130,000 12,065,625
MEDIA - RADIO/TV 0.7%
CBS Corporation 75,000 2,095,312
Viacom International, Inc. 60,000 3,592,500
------------
5,687,812
METALS & MINING 0.9%
Aluminum Company of America 95,000 7,528,750
MORTGAGE & RELATED SERVICE 2.7%
Federal Home Loan Mortgage Corporation 250,000 14,375,000
Federal National Mortgage Association 130,000 9,205,625
------------
23,580,625
NATURAL GAS DISTRIBUTION 0.6%
Coastal Corporation 65,500 2,308,875
Enron Corporation 50,000 2,637,500
------------
4,946,375
OFFICE AUTOMATION 0.5%
Xerox Corporation 40,000 3,875,000
OIL - INTERNATIONAL INTEGRATED 4.5%
Chevron Corporation 100,000 8,150,000
Exxon Corporation 180,000 12,825,000
Mobil Corporation 110,000 8,325,625
Texaco, Inc. 155,000 9,193,437
------------
38,494,062
OIL - NORTH AMERICAN EXPLORATION & PRODUCTION 0.2%
Anadarko Petroleum Corporation 20,000 677,500
Apache Corporation 30,000 849,375
------------
1,526,875
OIL - NORTH AMERICAN INTEGRATED 0.8%
Tosco Corporation 245,000 6,875,313
OIL WELL EQUIPMENT & SERVICE 1.7%
Cooper Cameron Corporation (b) 40,000 1,390,000
Halliburton Company 130,000 4,671,875
Schlumberger, Ltd. 170,000 8,925,000
------------
14,986,875
PAPER & FOREST PRODUCTS 0.6%
Kimberly-Clark Corporation 60,000 2,895,000
The Mead Corporation 70,000 2,213,750
------------
5,108,750
PRECIOUS METAL/GEM/STONE 0.3%
Barrick Gold Corporation 85,000 1,816,875
Homestake Mining Company 30,000 356,250
Newmont Mining Company 30,000 637,500
------------
2,810,625
REAL ESTATE 0.1%
Patriot American Hospitality, Inc. 51,900 460,613
RETAIL - DEPARTMENT STORE 2.9%
Kohl's Corporation (b) 370,000 17,690,625
Fred Meyer, Inc. (b) 135,000 7,197,188
------------
24,887,813
RETAIL - DRUG STORE 3.1%
CVS Corporation 310,000 14,163,125
Walgreen Company 255,000 12,415,313
------------
26,578,438
RETAIL - FOOD CHAIN 3.9%
Albertson's, Inc. 100,000 5,556,250
The Kroger Company (b) 160,000 8,880,000
Safeway, Inc. (b) 409,000 19,555,312
------------
33,991,562
RETAIL - MAJOR CHAIN 2.6%
Dayton Hudson Corporation 75,000 3,178,125
Wal-Mart Stores, Inc. 275,000 18,975,000
------------
22,153,125
RETAIL - RESTAURANT 0.7%
McDonald's Corporation 85,000 5,684,375
RETAIL - SPECIALTY 0.9%
The Home Depot, Inc. 175,000 7,612,500
TELECOMMUNICATION 0.6%
GTE Corporation 80,000 4,695,000
TELECOMMUNICATION EQUIPMENT 1.7%
Lucent Technologies, Inc. 150,000 12,028,125
Nokia Corporation Sponsored ADR 30,000 2,791,875
------------
14,820,000
TELECOMMUNICATION SERVICE 3.9%
Bell Atlantic Corporation 30,000 1,593,750
MCI WorldCom, Inc. (b) 440,000 24,310,000
Sprint Corporation 100,000 7,675,000
------------
33,578,750
TELEPHONE 2.3%
Ameritech Corporation 120,000 6,472,500
BellSouth Corporation 140,000 11,173,750
SBC Communications, Inc. 50,000 2,315,625
------------
19,961,875
TOBACCO 1.5%
Philip Morris Companies, Inc. 255,000 13,036,875
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $613,313,574) 757,800,862
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 3.9%
CVS Automatic Common Exchange Securities Trust
(Exchangeable into CVS Corporation Common Stock)
6.00% Automatic Common Exchange Securities 60,000 5,160,000
Chancellor Media Corporation 6.00% (Acquired
6/11/97; Cost $3,000,000) (d) 60,000 4,560,000
26
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG TOTAL RETURN FUND (continued)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Houston Industries, Inc. 7.00% Automatic
Common Exchange Securities 150,000 $ 12,159,375
McKesson Financing Trust 5.00% 10,000 1,065,000
McKesson Financing Trust 5.00% (Acquired
2/13/97; Cost $2,500,000) (d) 50,000 5,325,000
Merrill Lynch & Company, Inc. Structured Yield
Product (Exchangeable for Cox Communications,
Inc. Common Stock), 6.00%, Due 6/01/99 125,000 5,640,625
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $22,781,243) 33,910,000
- ------------------------------------------------------------------------------
CONVERTIBLE BONDS 1.8%
The Home Depot, Inc. Subordinated Notes, 3.25%,
Due 10/01/01 $ 2,000,000 3,752,500
Rite Aid Corporation Subordinated Notes, 5.25%,
Due 9/15/02 1,000,000 1,267,500
Rite Aid Corporation Subordinated Notes, 5.25%,
Due 9/15/02 (Acquired 10/29/97;
Cost $2,122,500) (d) 2,000,000 2,535,000
Staples, Inc. Subordinated Debentures, 4.50%,
Due 10/01/00 (Acquired 9/12/95 - 10/07/97;
Cost $3,814,375) (d) 3,500,000 7,778,750
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (COST $9,056,376) 15,333,750
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 5.8%
COMMERCIAL PAPER 0.6%
INTEREST BEARING, DUE UPON DEMAND
General Mills, Inc., 4.83% 2,023,100 2,023,100
Pitney Bowes Credit Corporation, 4.83% 1,644,100 1,644,100
Sara Lee Corporation, 4.82% 1,313,900 1,313,900
Warner Lambert Company, 4.75% 578,200 578,200
------------
5,559,300
REPURCHASE AGREEMENTS 5.2%
ABN-AMRO Chicago Corporation (Dated 10/30/98),
5.40%, Due 11/02/98 (Repurchase proceeds
$44,620,070); Collateralized by: $50,475,000 FNMA
Medium Term Notes, Zero % - 5.91%, Due
6/29/01 - 2/04/13 (Market Value $35,569,651);
$405,000 Federal Home Loan Bank Bonds, 5.16%,
Due 4/22/02 (Market Value $404,631); and
$9,140,000 Federal Farm Credit Banks
Consolidated Systemwide Medium Term Notes,
6.19%, Due 12/29/00 (Market Value $9,154,807) (e) 44,600,000 44,600,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $50,159,300) 50,159,300
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $695,310,493) 99.4% 857,203,912
Other Assets and Liabilities, Net 0.6% 5,443,645
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $862,647,557
==============================================================================
WRITTEN OPTIONS ACTIVITY
- ------------------------------------------------------------------------------
Contracts Premiums
- ------------------------------------------------------------------------------
Options outstanding at beginning of period -- $ --
Options written during the period 10,000 6,614,369
Options closed (9,800) (6,359,403)
Options expired -- --
Options exercised -- --
------ ----------
Options outstanding at end of period 200 $ 254,966
====== ==========
Closed options resulted in a capital loss of $608,894.
WRITTEN OPTIONS DETAIL
- ------------------------------------------------------------------------------
Contracts
(100 Shares Value
per Contract) (Note 2)
- ------------------------------------------------------------------------------
Microsoft Corporation
(Strike Price is $95.00. Expiration date is 11/20/98.
Premium Received $254,966). 200 ($237,500)
LEGEND
- ------------------------------------------------------------------------------
(a) Short-term investments include any security which has a remaining
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) See Note 2(I) of Notes to Financial Statements.
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
27
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------------------
October 31, 1998
(In Thousands, Except Per Share Amounts)
<CAPTION>
STRONG AMERICAN STRONG ASSET STRONG BLUE STRONG EQUITY
UTILITIES FUND ALLOCATION FUND CHIP 100 FUND INCOME FUND
--------------- --------------- ------------- -------------
ASSETS:
<S> <C> <C> <C> <C>
Investments in Securities, at Value (Cost of $168,830,
$245,321, $82,847 and $135,674, respectively) $213,850 $286,630 $90,044 $171,125
Receivable for Securities Sold 52 1,081 7 440
Receivable for Fund Shares Sold 52 13 101 --
Dividends and Interest Receivable 743 1,983 75 226
Other Assets 10 12 2 30
-------- -------- ------- --------
Total Assets 214,707 289,719 90,229 171,821
LIABILITIES:
Payable for Securities Purchased 403 1,290 290 985
Payable for Fund Shares Redeemed 15 4 17 31
Accrued Operating Expenses and Other Liabilities 24 33 14 49
-------- -------- ------- --------
Total Liabilities 442 1,327 321 1,065
-------- -------- ------- --------
NET ASSETS $214,265 $288,392 $89,908 $170,756
======== ======== ======= ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $160,717 $246,380 $84,543 $136,132
Accumulated Net Investment Income (Loss) 539 856 (1) 70
Accumulated Net Realized Gain (Loss) 7,989 (230) (1,831) (897)
Net Unrealized Appreciation 45,020 41,386 7,197 35,451
-------- -------- ------- --------
Net Assets $214,265 $288,392 $89,908 $170,756
======== ======== ======= ========
Capital Shares Outstanding (Unlimited Number Authorized) 13,137 13,639 6,792 9,926
NET ASSET VALUE PER SHARE $16.31 $21.14 $13.24 $17.20
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
STRONG GROWTH STRONG LIMITED STRONG TOTAL
AND INCOME FUND RESOURCES FUND RETURN FUND
--------------- -------------- ------------
ASSETS:
<S> <C> <C> <C>
Investments in Securities, at Value
(Cost of $322,189, $5,582 and $695,310, respectively) $397,965 $4,933 $857,204
Receivable for Securities Sold 1,971 -- 23,681
Receivable for Fund Shares Sold 1 -- --
Dividends and Interest Receivable 349 2 455
Other Assets 222 25 58
-------- ------ --------
Total Assets 400,508 4,960 881,398
LIABILITIES:
Payable for Securities Purchased 1,532 -- 18,435
Written Options, at Value (Premiums Received of $0,
$0 and $255, respectively) -- -- 237
Payable for Fund Shares Redeemed 2 -- --
Accrued Operating Expenses and Other Liabilities 86 14 78
-------- ------ --------
Total Liabilities 1,620 14 18,750
-------- ------ --------
NET ASSETS $398,888 $4,946 $862,648
======== ====== ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $330,939 $6,285 $703,316
Accumulated Net Investment Income (Loss) 19 (24) (30)
Accumulated Net Realized Loss (7,845) (667) (2,549)
Net Unrealized Appreciation (Depreciation) 75,775 (648) 161,911
-------- ------ --------
Net Assets $398,888 $4,946 $862,648
======== ====== ========
Capital Shares Outstanding (Unlimited Number Authorized) 21,295 635 29,645
NET ASSET VALUE PER SHARE $18.73 $7.79 $29.10
====== ===== ======
See Notes to Financial Statements.
</TABLE>
28
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
For the Year Ended October 31, 1998
(In Thousands)
<CAPTION>
STRONG STRONG STRONG STRONG STRONG STRONG STRONG
AMERICAN ASSET BLUE CHIP EQUITY GROWTH LIMITED TOTAL
UTILITIES ALLOCATION 100 INCOME AND INCOME RESOURCES RETURN
FUND FUND FUND FUND FUND FUND FUND
--------- ---------- --------- ------ ---------- --------- ------
INCOME:
<S> <C> <C> <C> <C> <C> <C> <C>
Dividends (net of withholding taxes
of $48, $19, $4, $18, $47, $0 and $47,
respectively) $ 5,972 $ 2,955 $ 464 $ 2,592 $ 3,830 $ 71 $ 9,840
Interest 502 7,391 57 274 172 12 2,580
------- ------- ------ ------- ------- ------ --------
Total Income 6,474 10,346 521 2,866 4,002 83 12,420
EXPENSES:
Investment Advisory Fees 1,414 2,330 308 1,322 2,556 54 7,026
Custodian Fees 20 14 53 11 20 2 54
Shareholder Servicing Costs 361 549 89 312 726 9 1,538
Professional Fees 18 25 13 17 22 11 37
Federal and State Registration Fees 43 29 54 32 71 40 38
Other 72 44 29 77 160 8 191
------- ------- ------ ------- ------- ------ --------
Total Expenses before Waivers 1,928 2,991 546 1,771 3,555 124 8,884
Expense Waivers by Advisor -- -- (313) -- -- (18) --
------- ------- ------ ------- ------- ------ --------
Expenses, Net 1,928 2,991 233 1,771 3,555 106 8,884
------- ------- ------ ------- ------- ------ --------
NET INVESTMENT INCOME (LOSS) 4,546 7,355 288 1,095 447 (23) 3,536
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 8,595 745 (1,799) (473) (7,055) (668) 4,403
Futures Contracts and Options -- 53 -- -- -- -- (1,194)
------- ------- ------ ------- ------- ------ --------
Net Realized Gain (Loss) 8,595 798 (1,799) (473) (7,055) (668) 3,209
Change in Unrealized Appreciation/
Depreciation on:
Investments 26,422 22,820 7,230 19,078 53,134 (373) 99,370
Futures Contracts and Options -- 235 -- -- -- -- 17
------- ------- ------ ------- ------- ------ --------
Net Change in Unrealized
Appreciation/Depreciation 26,422 23,055 7,230 19,078 53,134 (373) 99,387
------- ------- ------ ------- ------- ------ --------
NET GAIN (LOSS) ON INVESTMENTS 35,017 23,853 5,431 18,605 46,079 (1,041) 102,596
------- ------- ------ ------- ------- ------ --------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $39,563 $31,208 $5,719 $19,700 $46,526 ($1,064) $106,132
======= ======= ====== ======= ======= ====== ========
See Notes to Financial Statements.
29
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------------
(In Thousands)
STRONG AMERICAN STRONG ASSET
UTILITIES FUND ALLOCATION FUND
---------------------------- ----------------------------
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1997
------------- ------------- ------------- -------------
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 4,546 $ 3,898 $ 7,355 $ 8,891
Net Realized Gain 8,595 8,697 798 27,725
Net Change in Unrealized Appreciation/Depreciation 26,422 9,980 23,055 12,017
-------- -------- -------- --------
Net Increase in Net Assets Resulting from Operations 39,563 22,575 31,208 48,633
DISTRIBUTIONS:
From Net Investment Income (4,541) (3,740) (7,231) (8,891)
In Excess of Net Investment Income -- -- -- (1,239)
From Net Realized Gains (8,984) (6,816) (25,895) (19,794)
In Excess of Net Realized Gains -- -- (281) --
-------- -------- -------- --------
Total Distributions (13,525) (10,556) (33,407) (29,924)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 167,228 65,936 39,754 30,437
Proceeds from Reinvestment of Distributions 12,867 9,984 32,136 28,934
Payment for Shares Redeemed (126,663) (75,630) (58,057) (64,492)
-------- -------- -------- --------
Increase (Decrease) in Net Assets from Capital
Share Transactions 53,432 290 13,833 (5,121)
-------- -------- -------- --------
TOTAL INCREASE IN NET ASSETS 79,470 12,309 11,634 13,588
NET ASSETS:
Beginning of Year 134,795 122,486 276,758 263,170
-------- -------- -------- --------
End of Year $214,265 $134,795 $288,392 $276,758
======== ======== ======== ========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 10,931 5,000 1,850 1,500
Issued in Reinvestment of Distributions 859 776 1,623 1,472
Redeemed (8,303) (5,817) (2,743) (3,143)
------ ----- ----- -----
Net Increase (Decrease) in Shares of the Fund 3,487 (41) 730 (171)
====== ===== ===== =====
See Notes to Financial Statements.
</TABLE>
30
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- ------------------------------------------------------------------------------------------------------------------------
(In Thousands)
STRONG BLUE STRONG EQUITY
CHIP 100 FUND INCOME FUND
---------------------------- ----------------------------
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1997
------------- ------------- ------------- -------------
(Note 1)
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 288 $ 6 $ 1,095 $ 786
Net Realized Gain (Loss) (1,799) (31) (473) 5,862
Net Change in Unrealized Appreciation/Depreciation 7,230 (33) 19,078 14,009
------- ------ -------- --------
Net Increase (Decrease) in Net Assets Resulting
from Operations 5,719 (58) 19,700 20,657
DISTRIBUTIONS:
From Net Investment Income (296) -- (1,075) (742)
From Net Realized Gains -- -- (5,636) --
In Excess of Net Realized Gains -- -- (416) --
------- ------ -------- --------
Total Distributions (296) -- (7,127) (742)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 112,429 7,694 88,635 134,486
Proceeds from Reinvestment of Distributions 278 -- 6,807 709
Payment for Shares Redeemed (33,375) (2,483) (71,745) (49,347)
------- ------ -------- --------
Increase in Net Assets from Capital Share Transactions 79,332 5,211 23,697 85,848
------- ------ -------- --------
TOTAL INCREASE IN NET ASSETS 84,755 5,153 36,270 105,763
NET ASSETS:
Beginning of Year 5,153 -- 134,486 28,723
------- ------ -------- --------
End of Year $89,908 $5,153 $170,756 $134,486
======= ====== ======== ========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 8,949 730 5,275 9,463
Issued in Reinvestment of Distributions 22 -- 436 48
Redeemed (2,674) (234) (4,278) (3,407)
----- --- ----- -----
Net Increase in Shares of the Fund 6,297 496 1,433 6,104
===== === ===== =====
See Notes to Financial Statements.
31
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- -----------------------------------------------------------------------------------------------------------------------
(In Thousands)
STRONG GROWTH STRONG LIMITED
AND INCOME FUND RESOURCES FUND
---------------------------- ----------------------------
<CAPTION>
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1998 Oct. 31, 1997 Oct. 31, 1998 Oct. 31, 1997
------------- ------------- ------------- -------------
(Note 1)
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 447 $ 675 ($ 23) $ --
Net Realized Gain (Loss) (7,055) 9,170 (668) 3
Net Change in Unrealized Appreciation/Depreciation 53,134 21,494 (373) (276)
-------- -------- ------ ------
Net Increase (Decrease) in Net Assets Resulting
from Operations 46,526 31,339 (1,064) (273)
DISTRIBUTIONS:
From Net Investment Income (478) (627) (1) --
From Net Realized Gains (9,141) (56) (2) --
In Excess of Net Realized Gains (797) -- -- --
-------- -------- ------ ------
Total Distributions (10,416) (683) (3) --
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 266,590 240,930 4,984 5,885
Proceeds from Reinvestment of Distributions 10,114 663 3 --
Payment for Shares Redeemed (140,926) (63,239) (4,319) (267)
-------- -------- ------ ------
Increase in Net Assets from Capital Share Transactions 135,778 178,354 668 5,618
-------- -------- ------ ------
TOTAL INCREASE (DECREASE) IN NET ASSETS 171,888 209,010 (399) 5,345
NET ASSETS:
Beginning of Year 227,000 17,990 5,345 --
-------- -------- ------ ------
End of Year $398,888 $227,000 $4,946 $5,345
======== ======== ====== ======
TRANSACTIONS IN SHARES OF THE FUND:
Sold 14,701 16,654 570 590
Issued in Reinvestment of Distributions 632 44 -- --
Redeemed (7,921) (4,267) (497) (28)
------ ------ --- ---
Net Increase in Shares of the Fund 7,412 12,431 73 562
====== ====== === ===
See Notes to Financial Statements.
</TABLE>
32
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- -------------------------------------------------------------------------------
(In Thousands)
STRONG TOTAL
RETURN FUND
----------------------------
Year Ended Year Ended
Oct. 31, 1998 Oct. 31, 1997
------------- -------------
OPERATIONS:
Net Investment Income $ 3,536 $ 4,704
Net Realized Gain 3,209 173,269
Net Change in Unrealized Appreciation/Depreciation 99,387 (12,034)
-------- --------
Net Increase in Net Assets Resulting
from Operations 106,132 165,939
DISTRIBUTIONS:
From Net Investment Income (3,788) (4,704)
In Excess of Net Investment Income -- (4,072)
From Net Realized Gains (172,676) (111,146)
In Excess of Net Realized Gains (2,593) --
-------- --------
Total Distributions (179,057) (119,922)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 220,335 199,390
Proceeds from Reinvestment of Distributions 174,336 117,046
Payment for Shares Redeemed (290,682) (291,089)
-------- --------
Increase in Net Assets from Capital
Share Transactions 103,989 25,347
-------- --------
TOTAL INCREASE IN NET ASSETS 31,064 71,364
NET ASSETS:
Beginning of Year 831,584 760,220
-------- --------
End of Year $862,648 $831,584
======== ========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 7,400 6,598
Issued in Reinvestment of Distributions 6,717 4,226
Redeemed (9,929) (9,605)
----- -----
Net Increase in Shares of the Fund 4,188 1,219
===== =====
See Notes to Financial Statements.
33
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
October 31, 1998
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 American Utilities Fund (a series of Strong Conservative Equity
Funds, Inc.)**
- Strong Asset Allocation Fund, Inc.*
- Strong Blue Chip 100 Fund (a series of Strong Conservative Equity Funds,
Inc.)*
- Strong Equity Income Fund (a series of Strong Conservative Equity Funds,
Inc.)*
- Strong Growth and Income Fund (a series of Strong Conservative Equity
Funds, Inc.)*
- Strong Limited Resources Fund (a series of Strong Conservative Equity
Funds, Inc.)*
- Strong Total Return Fund, Inc.*
* Diversified fund
** Non-diversified fund
Strong Blue Chip 100 Fund commenced operations on July 1, 1997. Strong
Limited Resources Fund commenced operations on October 1, 1997.
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 when 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 fair 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 acquisition cost and fair value of these restricted securities
held at October 31, 1998 were as follows:
Aggregate Aggregate Percent of
Cost Fair Value Net Assets Liquid*
----------- ----------- ---------- -------
STRONG ASSET ALLOCATION FUND $32,625,125 $29,017,294 10.1% 99.8%
STRONG TOTAL RETURN FUND 11,436,875 20,198,750 2.3% 100.0%
*Percentage of aggregate fair value of restricted securities is either
Section 4(2) commercial paper or is eligible for resale pursuant to Rule
144A under the Securities Act of 1933 and also has 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 -- The
Funds intend 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) Certain Investment Risks -- The Funds may utilize derivative instruments
including options, futures and other instruments with similar
characteristics to the extent that they are consistent with the Fund's
investment objectives and limitations. The Funds intend to use such
derivative instruments primarily to hedge or protect from adverse
movements in securities prices or interest rates. The use of these
instruments may involve risks such as the possibility of illiquid markets
or imperfect correlation between the value of the instruments and the
underlying securities, or that the counterparty will fail to perform its
obligations.
34
<PAGE>
- --------------------------------------------------------------------------------
Foreign denominated assets and forward currency contracts may involve
greater risks than domestic transactions, including currency, political
and economic, regulatory and market risks.
(E) 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. Additional securities held by the Funds may
be designated as collateral on open futures contracts. 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.
(F) Options -- The Funds may write put or call 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.
(G) 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.
(H) 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.
(I) Repurchase Agreements -- The Funds may enter into repurchase agreements
with institutions that the Funds' investment advisor, Strong Capital
Management, Inc. ("the Advisor"), has determined are creditworthy pursuant
to criteria adopted by the Board of Directors. Each repurchase agreement
is recorded at cost. The Funds require that the collateral, represented
by securities (primarily U.S. Government securities), purchased in a
repurchase transaction be maintained in a segregated account with a
custodian bank in a manner sufficient to enable the Funds to obtain those
securities in the event of a default of the repurchase agreement. On a
daily basis, the Advisor monitors the value of the collateral transferred
under each repurchase agreement to ensure the value of the collateral,
including accrued interest, exceeds the amounts owed to the Funds under
each repurchase agreement by at least 2%.
(J) Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts in these
financial statements. Actual results could differ from those estimates.
(K) 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. RELATED PARTY TRANSACTIONS
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 of the respective
Fund: Strong American Utilities Fund and Strong Blue Chip 100 Fund 0.75%,
Strong Equity Income Fund and Strong Growth and Income Fund 0.80%, Strong
Asset Allocation Fund and Strong Total Return Fund 0.85% of the first $35
million and 0.80% thereafter, and Strong Limited Resources Fund 1.00%. Based
on the terms of the Advisory Agreements, advisory fees and other expenses
will be waived by the Advisor if the Fund's operating expenses exceed 2% of
the average daily net assets of the Fund. In addition, the Fund's Advisor
may voluntarily waive certain expenses at their discretion. During 1998, the
Advisor voluntarily waived expenses of $313,485 and $550 for the Strong Blue
Chip 100 Fund and Strong Limited Resources Fund, respectively. Shareholder
recordkeeping and related service fees are based on contractually established
rates for each open and closed shareholder account. The Advisor is
compensated for certain other services related to costs incurred for reports
to shareholders.
W. H. Reaves & Co., Inc. ("Reaves") manages the investments of Strong
American Utilities Fund under an agreement with the Advisor. Reaves is
compensated by the Advisor (not the Fund) and bears all of its own expenses
in providing subadvisory services. In addition, Reaves 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, 1998
totaled $410,867.
35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
October 31, 1998
Scarborough Investment Advisors LLC manages the investments of Strong Limited
Resources Fund under an agreement with the Advisor. Scarborough is
compensated by the Advisor (not the Fund) and bears all of its own expenses
in providing subadvisory services.
The Funds may invest cash reserves in money market funds sponsored and
managed by the Advisor, subject to certain limitations. The terms of such
transactions are identical to those of non-related entities except that, to
avoid duplicate investment advisory fees, advisory fees of each Fund invested
in such money market funds are reduced by an amount equal to advisory fees
paid to the Advisor under its investment advisory agreements with the money
market funds.
Certain information regarding related party transactions, excluding the
effects of waivers and reimbursements, for the year ended October 31, 1998 is
as follows:
Other Shareholder
Payable to Servicing Unaffiliated
Advisor at Expenses Paid Directors'
October 31, 1998 to Advisor Fees
---------------- ----------------- ------------
STRONG AMERICAN UTILITIES FUND $ 9,849 $ 2,816 $ 3,247
STRONG ASSET ALLOCATION FUND 11,968 5,796 4,299
STRONG BLUE CHIP 100 FUND 2,186 1,230 1,525
STRONG EQUITY INCOME FUND 31,472 3,153 2,561
STRONG GROWTH AND INCOME FUND 34,675 9,198 3,292
STRONG LIMITED RESOURCES FUND 5,943 98 1,125
STRONG TOTAL RETURN FUND 30,084 33,226 9,823
4. LINE OF CREDIT
The Funds have established a line of credit agreement ("LOC") with certain
financial institutions to be used for temporary or emergency purposes,
primarily for financing redemption payments. Combined borrowings among all
participating Strong Funds are subject to a $350 million cap on the total
line of credit. For individual Funds, borrowings under the LOC are limited
to either the lesser of 15% of the market value of total assets or any
explicit borrowing limits in the Funds' prospectus. Borrowings under the LOC
bear interest based on prevailing market rates as defined in the LOC. A
commitment fee of .07% per annum is incurred on the unused portion of the
line of credit and is allocated to all participating Strong Funds. At
October 31, 1998, there were no borrowings by the Funds outstanding under the
LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the year ended
October 31, 1998 were as follows:
<TABLE>
Purchases Sales
------------------------------ ------------------------------
<CAPTION>
U.S. Government U.S. Government
and Agency Other and Agency Other
--------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
STRONG AMERICAN UTILITIES FUND $ -- $ 163,463,450 $ -- $ 122,731,950
STRONG ASSET ALLOCATION FUND 21,130,350 494,227,675 25,252,989 494,406,489
STRONG BLUE CHIP 100 FUND -- 97,453,962 -- 18,807,784
STRONG EQUITY INCOME FUND -- 154,213,006 -- 133,332,526
STRONG GROWTH AND INCOME FUND -- 468,138,945 -- 338,396,447
STRONG LIMITED RESOURCES FUND -- 3,906,429 -- 3,127,504
STRONG TOTAL RETURN FUND -- 2,193,220,244 -- 2,225,876,016
</TABLE>
36
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------------------------
6. INCOME TAX INFORMATION
At October 31, 1998, the investment cost, gross unrealized appreciation and
depreciation on investments and capital loss carryovers (expiring in varying
amounts through 2006) for federal income tax purposes were as follows:
<CAPTION>
Net
Federal Tax Unrealized Unrealized Appreciation/ Net Capital Loss
Cost Appreciation Depreciation (Depreciation) Carryovers
------------- ------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C>
STRONG AMERICAN UTILITIES FUND $169,352,013 $ 45,819,827 $1,321,821 $ 44,498,006 --
STRONG ASSET ALLOCATION FUND 246,145,312 47,716,511 7,232,255 40,484,256 $ 176,328
STRONG BLUE CHIP 100 FUND 83,599,939 10,148,092 3,704,133 6,443,959 1,077,525
STRONG EQUITY INCOME FUND 136,379,837 36,645,373 1,899,891 34,745,482 191,385
STRONG GROWTH AND INCOME FUND 324,605,636 78,331,805 4,972,773 73,359,032 5,428,554
STRONG LIMITED RESOURCES FUND 5,581,707 153,934 802,260 (648,326) 677,226
STRONG TOTAL RETURN FUND 708,890,711 153,274,991 4,961,790 148,313,201 --
</TABLE>
During the year ended October 31, 1998, the Funds paid capital gains
distributions (taxable as long-term capital gains at 20%) to shareholders as
follows (unaudited): Strong American Utilities Fund $7,781,214, Strong Asset
Allocation Fund $5,016,579, Strong Blue Chip 100 Fund $0, Strong Equity
Income Fund $728,790, Strong Growth and Income Fund $259,144, Strong Limited
Resources Fund $0, and Strong Total Return Fund $41,141,627.
For corporate shareholders in the Funds, the percentages of dividend income
distributed for the year ended October 31, 1998 which is designated as
qualifying for the dividends-received deduction are as follows (unaudited):
Strong American Utilities Fund 98.8%, Strong Asset Allocation Fund 9.6%,
Strong Blue Chip 100 Fund 100%, Strong Equity Income Fund 39.6%, Strong
Growth and Income Fund 35.5%, Strong Limited Resources Fund 100%, and Strong
Total Return Fund 6.4%.
37
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------
STRONG AMERICAN UTILITIES FUND
- -----------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA (a)
-------------------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions
-------------------------------------- -----------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total Net Asset
Value, Net Gains from From Net From Net Value,
Beginning Investment (Losses) on Investment Investment Realized Total End of
Year Ended of Period Income Investments Operations Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 $13.97 $0.35 $3.12 $3.47 ($0.37) ($0.76) ($1.13) $16.31
Oct. 31, 1997 12.64 0.40 1.98 2.38 (0.38) (0.67) (1.05) 13.97
Oct. 31, 1996 11.73 0.40 0.90 1.30 (0.39) -- (0.39) 12.64
Oct. 31, 1995(b) 9.46 0.27 2.25 2.52 (0.25) -- (0.25) 11.73
Dec. 31, 1994 10.19 0.46 (0.73) (0.27) (0.46) -- (0.46) 9.46
</TABLE>
<TABLE>
Ratios and Supplemental Data
-----------------------------------------------------------------------
<CAPTION>
Net Ratio of Ratio of Net
Assets, Ratio of Expenses to Investment
End of Expenses Average Net Income Portfolio
Total Period (In to Average Assets Without to Average Turnover
Year Ended Return Millions) Net Assets Waivers Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 +25.7% $214 1.0% 1.0% 2.4% 69.0%
Oct. 31, 1997 +19.7% 135 1.1% 1.1% 3.0% 61.9%
Oct. 31, 1996 +11.2% 122 1.2% 1.2% 3.2% 84.0%
Oct. 31, 1995(b) +26.9% 92 1.2%* 1.2%* 3.4%* 56.4%
Dec. 31, 1994 -2.6% 38 0.5% 1.6% 4.8% 105.4%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) In 1995, the Fund changed its fiscal year end from December to October. Total return and portfolio
turnover rate are not annualized.
</TABLE>
<TABLE>
STRONG ASSET ALLOCATION FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
----------------------------------------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions
-------------------------------------- ---------------------------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total In Excess In Excess Net Asset
Value, Net Gains from From Net of Net From Net of Net Value,
Beginning Investment (Losses) on Investment Investment Investment Realized Realized Total End of
Year Ended of Period Income Investments Operations Income Income Gains Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 $21.44 $0.55 $1.75 $2.30 ($0.54) -- ($2.04) ($0.02) ($2.60) $21.14
Oct. 31, 1997 20.12 0.67 2.96 3.63 (0.67) ($0.10) (1.54) -- (2.31) 21.44
Oct. 31, 1996 20.31 0.78 1.05 1.83 (0.84) -- (1.18) -- (2.02) 20.12
Oct. 31, 1995(b) 17.91 0.66 2.32 2.98 (0.58) -- -- -- (0.58) 20.31
Dec. 31, 1994 19.06 0.70 (0.99) (0.29) (0.70) -- -- (0.16) (0.86) 17.91
</TABLE>
Ratios and Supplemental Data
-------------------------------------------------------
Net Ratio of Net
Assets, Ratio of Investment
End of Expenses Income Portfolio
Total Period (In to Average to Average Turnover
Year Ended Return Millions) Net Assets Net Assets Rate
Oct. 31, 1998 +11.8% $288 1.0% 2.5% 185.9%
Oct. 31, 1997 +19.3% 277 1.1% 3.2% 276.5%
Oct. 31, 1996 +9.5% 263 1.1% 3.9% 446.7%
Oct. 31, 1995(b) +16.8% 261 1.2%* 4.1%* 326.8%
Dec. 31, 1994 -1.5% 249 1.2% 3.8% 359.7%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) In 1995, the Fund changed its fiscal year end from December to October.
Total return and portfolio turnover rate are not annualized.
<TABLE>
STRONG BLUE CHIP 100 FUND
- -------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
--------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions
-------------------------------------- -------------------------
<CAPTION>
Net Asset Net Realized Total Net Asset
Value, Net and Unrealized from From Net Value,
Beginning Investment Gains on Investment Investment Total End of
Year Ended of Period Income Investments Operations Income Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 $10.39 $0.10 $2.86 $2.96 ($0.11) ($0.11) $13.24
Oct. 31, 1997(b) 10.00 0.01 0.38 0.39 -- -- 10.39
</TABLE>
<TABLE>
Ratios and Supplemental Data
-----------------------------------------------------------------------
<CAPTION>
Net Ratio of Ratio of Net
Assets, Ratio of Expenses to Investment
End of Expenses Average Net Income Portfolio
Total Period (In to Average Assets Without to Average Turnover
Year Ended Return Millions) Net Assets Waivers Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 +28.6% $90 0.6% 1.3% 0.7% 46.5%
Oct. 31, 1997(b) +3.9% 5 1.0%* 2.0%* 0.6%* 21.5%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the period from July 1, 1997 (commencement of operations) to October 31, 1997. Total return
and portfolio turnover rate are not annualized.
</TABLE>
<TABLE>
STRONG EQUITY INCOME FUND
- ----------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
------------------------------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions
-------------------------------------- ----------------------------------------------
<CAPTION>
Net Asset Net Realized Total In Excess Net Asset
Value, Net and Unrealized from From Net From Net of Net Value,
Beginning Investment Gains on Investment Investment Realized Realized Total End of
Year Ended of Period Income Investments Operations Income Gains Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 $15.84 $0.11 $2.05 $2.16 ($0.11) ($0.64) ($0.05) ($0.80) $17.20
Oct. 31, 1997 12.03 0.13 3.81 3.94 (0.13) -- -- (0.13) 15.84
Oct. 31, 1996(b) 10.00 0.12 2.02 2.14 (0.11) -- -- (0.11) 12.03
</TABLE>
Ratios and Supplemental Data
-------------------------------------------------------
Net Ratio of Net
Assets, Ratio of Investment
End of Expenses Income Portfolio
Total Period (In to Average to Average Turnover
Year Ended Return Millions) Net Assets Net Assets Rate
Oct. 31, 1998 +14.2% $171 1.1% 0.7% 83.2%
Oct. 31, 1997 +32.9% 134 1.1% 0.9% 152.6%
Oct. 31, 1996(b) +21.5% 29 1.3%* 1.6%* 158.3%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from January 1, 1996 (commencement of operations) to October
31, 1996. Total return and portfolio turnover rate are not annualized.
See Notes to Financial Statements.
38
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS (continued)
- ----------------------------------------------------------------------------------------------------------------------------
STRONG GROWTH AND INCOME FUND
- ----------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
------------------------------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions
-------------------------------------- ----------------------------------------------
<CAPTION>
Net Asset Net Realized Total In Excess Net Asset
Value, Net and Unrealized from From Net From Net of Net Value,
Beginning Investment Gains on Investment Investment Realized Realized Total End of
Year Ended of Period Income Investments Operations Income Gains Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 $16.35 $0.03 $3.07 $3.10 ($0.03) ($0.62) ($0.07) ($0.72) $18.73
Oct. 31, 1997 12.38 0.07 3.99 4.06 (0.07) (0.02) -- (0.09) 16.35
Oct. 31, 1996(b) 10.00 0.04 2.38 2.42 (0.04) -- -- (0.04) 12.38
</TABLE>
Ratios and Supplemental Data
-------------------------------------------------------
Net Ratio of Net
Assets, Ratio of Investment
End of Expenses Income Portfolio
Total Period (In to Average to Average Turnover
Year Ended Return Millions) Net Assets Net Assets Rate
Oct. 31, 1998 +19.7% $399 1.1% 0.1% 107.5%
Oct. 31, 1997 +32.9% 227 1.2% 0.5% 237.8%
Oct. 31, 1996(b) +24.2% 18 1.9%* 0.6%* 174.1%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from January 1, 1996 (commencement of operations) to October
31, 1996. Total return and portfolio turnover rate are not annualized.
<TABLE>
STRONG LIMITED RESOURCES FUND
- -------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
--------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions
-------------------------------------- -------------------------
<CAPTION>
Net Asset Net Realized Total Net Asset
Value, Net and Unrealized from From Net Value,
Beginning Investment Losses on Investment Investment Total End of
Year Ended of Period Loss Investments Operations Income Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 $ 9.51 ($0.04) ($1.68) ($1.72) ($0.00)(c) ($0.00)(c) $7.79
Oct. 31, 1997(b) 10.00 -- (0.49) (0.49) -- -- 9.51
</TABLE>
Ratios and Supplemental Data
--------------------------------------------------------
Net Ratio of Net
Assets, Ratio of Investment
End of Expenses Income (Loss) Portfolio
Total Period (In to Average to Average Turnover
Year Ended Return Millions) Net Assets Net Assets Rate
Oct. 31, 1998 -18.0% $5 2.0% -0.4% 61.2%
Oct. 31, 1997(b) -4.9% 5 2.0%* 0.0%*(c) 1.2%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from October 1, 1997 (commencement of operations) to October
31, 1997. Total return and portfolio turnover rate are not annualized.
(c) Amount calculated is less than $0.01 or 0.1%.
<TABLE>
STRONG TOTAL RETURN FUND
- ------------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA(a)
----------------------------------------------------------------------------------------------------------------------
Income From Investment Operations Less Distributions
-------------------------------------- ---------------------------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total In Excess In Excess Net Asset
Value, Net Gains from From Net of Net From Net of Net Value,
Beginning Investment (Losses) on Investment Investment Investment Realized Realized Total End of
Year Ended of Period Income Investments Operations Income Income Gains Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Oct. 31, 1998 $32.66 $0.13 $3.44 $3.57 ($0.14) -- ($6.89) ($0.10) ($7.13) $29.10
Oct. 31, 1997 31.36 0.19 6.21 6.40 (0.19) ($0.17) (4.74) -- (5.10) 32.66
Oct. 31, 1996 28.02 0.24 4.65 4.89 (0.24) (0.06) (1.25) -- (1.55) 31.36
Oct. 31, 1995(b) 23.62 0.26 4.41 4.67 (0.26) (0.01) -- -- (0.27) 28.02
Dec. 31, 1994 24.30 0.25 (0.59) (0.34) (0.26) (0.08) -- -- (0.34) 23.62
</TABLE>
Ratios and Supplemental Data
-------------------------------------------------------
Net Ratio of Net
Assets, Ratio of Investment
End of Expenses Income Portfolio
Total Period (In to Average to Average Turnover
Year Ended Return Millions) Net Assets Net Assets Rate
Oct. 31, 1998 +13.6% $863 1.0% 0.4% 267.8%
Oct. 31, 1997 +23.4% 832 1.1% 0.6% 404.6%
Oct. 31, 1996 +18.0% 760 1.1% 0.8% 502.4%
Oct. 31, 1995(b) +19.8% 671 1.1%* 1.2%* 298.8%
Dec. 31, 1994 -1.4% 607 1.2% 1.1% 290.4%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) In 1995, the Fund changed its fiscal year end from December to October.
Total return and portfolio turnover rate are not annualized.
See Notes to Financial Statements.
39
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Conservative Equity Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Strong American Utilities Fund,
Strong Blue Chip 100 Fund, Strong Equity Income Fund, Strong Growth and Income
Fund, Strong Limited Resources Fund (five of the portfolios constituting Strong
Conservative Equity Funds, Inc.), Strong Asset Allocation Fund, Inc., and Strong
Total Return Fund, Inc. at October 31, 1998, the results of each of their
operations, the changes in each of their net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Funds'
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 4, 1998
<PAGE>
40
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Mary F. Hoppa, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
Dana J. Russart, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
DISTRIBUTOR
Strong Funds Distributors, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
PriceWaterhouse Coopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management fees
and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030.
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863.
--------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE ON COMPUTER]
Strong On-line
www.strong-funds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds Distributors, Inc. 9780K98 ACEQ
