THE STRONG
OPPORTUNITY FUND II
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SEMI-ANNUAL REPORT o JUNE 30, 1999
[PICTURE OF STRONG FUNDS BUILDING]
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Opportunity Fund II ................................2
FINANCIAL INFORMATION
Schedule of Investments in Securities .........................4
Statement of Assets and Liabilities ...........................6
Statement of Operations .......................................6
Statements of Changes in Net Assets ...........................7
Notes to Financial Statements .................................8
FINANCIAL HIGHLIGHTS ............................................10
[STRONG LOGO]
STRONG INVESTMENTS, INC.
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds are offered by prospectus only. 12428H99
<PAGE>
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THE STRONG OPPORTUNITY FUND II
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FUND
HIGHLIGHTS
o For the six months ended June 30, 1999, the Strong Opportunity Fund II
returned 19.70%.(1)
o The Fund's outperformance was driven mostly by positions in cable/media,
energy and cyclical stocks.
o Energy stocks experienced a dramatic turnaround from their mediocre
performance in 1998.
o The Fund benefited from an underweighted position in financials vs. the
benchmark, as these stocks performed poorly given fears that the Federal
Reserve Board would raise interest rates.
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AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 6-30-99
1-year 19.83%
3-year 23.38%
5-year 21.09%
Since Inception 20.62%
(on 5-8-92)
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FIVE LARGEST
STOCK HOLDINGS
As of 6-30-99
SECURITY % OF NET ASSETS
MediaOne Group, Inc. 2.2%
Enron Corporation 2.0%
BJ Services Company 1.9%
Corning, Inc. 1.9%
AT&T Corporation--
Liberty Media Group Class A 1.9%
Please see the Schedule of Investments
in Securities for a complete listing of
the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGER
/s/Richard Trent Weiss
Richard Trent Weiss
Portfolio Manager
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The Fund's performance was most influenced during this period by our positions
in cable/media, energy, and increased exposure to cyclical stocks. Specifically,
the Fund's strongest performers included Omnipoint, Weatherford International,
and MediaOne. Cable/media stocks continued to be solid performers, although we
reduced our overweighted exposure to the sector, as valuations reflected some of
the good news. Energy stocks and cyclicals also benefited from the recovering
world economic picture. We remain bullish on both groups and have added names
where opportunities have presented themselves.
Two areas in which returns were positive but not as strong as other groups were
financial stocks and healthcare. Investors appeared skeptical that earnings on
financial stocks could continue to get stronger as interest rates rose.
Healthcare stocks remained under a cloud, due to reimbursement cuts for
hospitals and long-term care companies initiated by the Balanced Budget
Amendment of 1997. However, we added select healthcare services stocks as they
now represent good value going forward.
Looking out over the next six months, we are optimistic that we have reached a
turning point where smaller-cap stocks will perform well versus
larger-capitalization stocks. In the second quarter, the Russell 2000 Index of
small-cap stocks gained 15.55% versus 7.05% on the S&P 500 Stock Index.*
-------------------------
We believe the
improving world
economic picture will
help the continued
strong
performance
of small- and mid-cap
stocks going forward.
-------------------------
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1 The Fund's returns include the effect of deducting the Fund's expenses, but
do not include charges and expenses attributable to any particular
insurance product. Including such insurance fees and expenses in the Fund's
return quotations has the effect of decreasing the performance quoted.
Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change while
total return reflects aggregate change, and is not annualized.
2
<PAGE>
This outperformance came as welcome relief after an extended period during which
larger-cap stocks had outperformed small and mid caps. We believe the improving
world economic picture will help sustain strong performance of small- and
mid-cap stocks going forward.
We believe that energy and cyclical stocks should remain strong as the world
economies strengthen, resulting in improved profitability due to stronger
demand. Two areas we are warming up to are financials and technology. We
underweighted financials over the past 18 months--as valuations reflected a
negative interest-rate backdrop--but believe that valuations are beginning to
reflect the concerns over interest rates, enabling us to add names selectively.
In the technology area, we are somewhat cautious overall but have added software
and service stocks as Year 2000 fears peak and opportunities present themselves.
We thank you for investing in the Strong Opportunity Fund II, and look forward
to continuing to help you achieve your financial goals.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 5-8-92 to 6-30-99
[GRAPH]
THE STRONG S&P MidCap 400 Lipper Growth
OPPORTUNITY FUND II Stock Index* Funds Index*
4-92 10,000 10,000 10,000
12-92 11,617 11,267 10,922
12-93 14,541 12,839 12,230
12-94 15,064 12,378 12,038
12-95 18,953 16,209 15,969
12-96 22,393 19,322 18,768
12-97 28,093 25,554 24,030
12-98 31,898 30,438 30,203
6-99 38,181 32,530 33,795
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the S&P
MidCap 400 Stock Index, and the Lipper Growth 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. To
equalize time periods, the indexes' performance was prorated for the month of
May 1992.
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* The S&P MidCap 400 Stock Index is an unmanaged index generally
representative of the U.S. market for medium capitalization stocks. The
Lipper Growth Funds Index is an equally-weighted performance index of the
largest qualifying funds in this Lipper category. The Russell 2000(R) Index
is an unmanaged index generally representative of the U.S. market for small
capitalization stocks. The S&P 500 Stock Index is an unmanaged index
generally representative of the U.S. stock market. Source of the S&P and
Russell index data is Standard & Poor's Micropal. Source of the Lipper
index data is Lipper Inc.
YOUR FUND'S
APPROACH
The Strong Opportunity Fund II focuses on stocks of medium-size companies that
offer strong growth potential, but are underpriced. Rather than rely on
traditional Wall Street research, we apply our proprietary private market value
approach to find stocks for the Fund. We first consider companies (and
industries) that are out of favor. Then we determine the price we believe an
investor would be willing to pay for an entire company--its private market
value. A company whose stock price is lower than its private market value may be
added to the portfolio.
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MARKET
HIGHLIGHTS
o The S&P MidCap 400 Stock Index* returned 6.87% for the six-months ended
June 30, 1999.
o The U.S. economy remained very healthy during the first half of the year as
inflation remained low and an increase in bond market interest rates failed
to upset the stock market.
o Signs of a world economic recovery re-accelerated corporate profits and
caused investors to shift to more cyclical companies, a move that favors
small- and mid-cap stocks.
o The U.S. Federal Reserve Bank raised short-term interest rates by a quarter
of one percentage point in June to prevent the economy from overheating and
inflation from accelerating.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES June 30, 1999 (Unaudited)
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================================================================================
STRONG OPPORTUNITY FUND II
================================================================================
Shares or
Principal Value
Amount (Note 2)
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COMMON STOCKS 86.5%
Aerospace & Defense 1.2%
Northrop Grumman Corporation 178,000 $11,803,625
Airline 0.6%
AMR Corporation (b) 47,400 3,235,050
Air New Zealand, Ltd. Class B 1,286,200 2,677,135
------------
5,912,185
Auto & Truck Parts 1.1%
Magna International, Inc. Class A 199,000 11,293,250
Bank - Money Center 1.7%
Bank of America Corporation 180,300 13,218,244
The Bank of Tokyo - Mitsubishi 75,000 1,066,212
ING Groep NV 23,000 1,249,038
Standard Chartered PLC 79,000 1,290,516
------------
16,824,010
Bank - Super Regional 3.9%
Bank One Corporation 220,000 13,103,750
Mellon Bank Corporation 299,400 10,890,675
Wells Fargo Company 355,000 15,176,250
------------
39,170,675
Beverage - Soft Drink 2.8%
The Pepsi Bottling Group, Inc. 584,000 13,468,500
Whitman Corporation 829,600 14,932,800
------------
28,401,300
Chemical 0.7%
Rohm and Haas Company 168,751 7,235,199
Chemical - Specialty 2.4%
Praxair, Inc. 240,000 11,745,000
Solutia, Inc. 572,000 12,190,750
------------
23,935,750
Computer - Mainframe 1.3%
Sun Microsystems, Inc. (b) 184,800 12,728,100
Computer - Peripheral Equipment 2.7%
American Power Conversion Corporation (b) 753,000 15,154,125
Quantum Corporation (b) 252,000 6,079,500
Seagate Technology, Inc. (b) 210,500 5,394,063
------------
26,627,688
Computer Service 0.1%
Getronics NV 32,000 1,234,660
Computer Software 3.0%
Cadence Design Systems, Inc. (b) 841,000 10,722,750
Keane, Inc. (b) 496,500 11,233,313
Oracle Systems Corporation (b) 224,900 8,349,413
------------
30,305,476
Consumer - Miscellaneous 0.1%
Canon, Inc. 47,000 1,349,504
Container 0.0%
Sonoco Products Company 16,900 287,300
Diversified Operations 0.3%
Invensys PLC 544,000 2,575,482
Electric Power 1.2%
NiSource, Inc. 464,500 11,989,906
Electrical Equipment 2.4%
Emerson Electric Company 174,500 10,971,688
W. W. Grainger, Inc. 248,000 13,345,500
------------
24,317,188
Electronic Parts Distribution 1.6%
Avnet, Inc. 302,700 14,075,550
Marshall Industries (b) 65,500 2,353,906
------------
16,429,456
Electronic Products - Miscellaneous 3.0%
AVX Corporation 653,000 15,916,875
General Motors Corporation Class H (b) 245,000 13,781,250
------------
29,698,125
Electronics - Semiconductor/Component 2.9%
Micron Technology, Inc. (b) 344,200 13,875,563
Texas Instruments, Inc. 101,000 14,645,000
-----------
28,520,563
Food 2.3%
ConAgra, Inc. 403,000 10,729,875
H.J. Heinz Company 238,500 11,954,813
-----------
22,684,688
Healthcare - Medical Supply 1.3%
Sybron International Corporation (b) 489,900 13,502,869
Healthcare - Patient Care 2.6%
HEALTHSOUTH Corporation (b) 1,015,000 15,161,563
United Healthcare Corporation 178,000 11,147,250
------------
26,308,813
Household Appliances & Furnishings 1.3%
Leggett & Platt, Inc. 460,900 12,818,781
Insurance - Diversified 1.6%
CIGNA Corporation 177,200 15,770,800
Insurance - Property & Casualty 4.1%
ACE, Ltd. 441,600 12,475,200
American International Group, Inc. 136,500 15,979,031
Hartford Financial Services Group, Inc. 211,000 12,303,938
-----------
40,758,169
Leisure Product 1.1%
The Seagram Company, Ltd. 226,000 11,384,750
Media - Publishing 2.5%
The E.W. Scripps Company Class A 284,500 13,531,531
Tribune Company 136,000 11,849,000
------------
25,380,531
Media - Radio/TV 4.5%
AT&T Corporation - Liberty Media Group Class A (b) 505,000 18,558,750
Comcast Corporation Class A 346,400 13,314,750
Cox Communications, Inc. Class A (b) 352,000 12,958,000
------------
44,831,500
Natural Gas Distribution 2.0%
Enron Corporation 239,600 19,587,300
Oil - North American Exploration & Production 3.2%
Barrett Resources Corporation (b) 450,000 17,268,750
Devon Energy Corporation 402,200 14,378,650
------------
31,647,400
Oil - North American Integrated 1.3%
Unocal Corporation 325,000 12,878,125
Oil Well Equipment & Service 5.2%
BJ Services Company (b) 650,000 19,134,375
Cooper Cameron Corporation (b) 393,000 14,565,563
Weatherford International, Inc. (b) 492,000 18,019,500
------------
51,719,438
Paper & Forest Products 1.1%
The Mead Corporation 260,000 10,855,000
4
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================================================================================
STRONG OPPORTUNITY FUND II (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
Real Estate 1.4%
Archstone Communities Trust 287,400 $ 6,304,838
Ayala Land, Inc. 1,184,600 375,071
Post Properties, Inc. 174,700 7,162,700
Shortland Properties, Ltd. 1,041,000 322,237
------------
14,164,846
Retail - Department Store 1.3%
May Department Stores Company 308,000 12,589,500
Retail - Major Chain 1.6%
The Daiei, Inc. (b) 395,100 1,349,599
Kmart Corporation (b) 795,000 13,067,813
Sears Canada, Inc. 65,300 1,402,188
------------
15,819,600
Retail - Specialty 1.4%
Office Depot, Inc. (b) 645,000 14,230,313
Telecommunication Equipment 1.1%
Alcatel SA ADR 383,800 10,890,325
Telecommunication Service 9.8%
AT&T Corporation 216,500 12,083,406
Cable & Wireless Communications PLC
Sponsored ADR (b) 95,400 4,626,900
Corning, Inc. 265,000 18,583,125
Global TeleSystems Group, Inc. (b) 70,200 5,686,200
MediaOne Group, Inc. (b) 302,000 22,461,250
Nippon Telegraph & Telephone Corporation 220 2,559,405
NTT Mobile Communication Network, Inc. 175 2,367,986
Omnipoint Corporation (b) 410,000 11,864,375
Paging Network, Inc. (b) 1,128,600 5,431,388
Vodafone Group PLC Sponsored ADR 65,000 12,805,000
------------
98,469,035
Telephone 1.7%
Telephone & Data Systems, Inc. 237,200 17,330,425
Trucking 1.1%
CNF Transportation, Inc. 290,000 11,128,750
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Total Common Stocks (Cost $656,623,110) 865,390,400
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SHORT-TERM INVESTMENTS (a) 13.3%
COMMERCIAL PAPER 0.5%
INTEREST BEARING, DUE UPON DEMAND
General Mills, Inc., 4.82% $ 3,439,200 3,439,200
Pitney Bowes Credit Corporation, 4.82% 446,500 446,500
Warner Lambert Company, 4.91% 604,500 604,500
Wisconsin Electric Power Company, 4.91% 335,000 335,000
-----------
4,825,200
REPURCHASE AGREEMENTS 12.8%
ABN-AMRO Inc. (Dated 6/30/99), 4.78%, Due
7/01/99 (Repurchase proceeds $128,217,022);
Collateralized by: SLMA Notes, FNMA Notes,
FHLMC Notes, Federal Home Loan Bank Bonds,
Federal Farm Credit Bank Notes, Tennessee
Valley Authority Bonds, and Resolution
Funding Corporation Bonds (d) 128,200,000 128,200,000
United States Government Issues 0.0%
United States Treasury Bills:
Due 9/02/99 (c) 125,000 124,027
Due 9/16/99 (c) 200,000 198,049
-----------
322,076
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TOTAL SHORT-TERM INVESTMENTS (Cost $133,347,295) 133,347,276
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TOTAL INVESTMENTS IN SECURITIES (Cost $789,970,405) 99.8% 998,737,676
Other Assets and Liabilities, Net 0.2% 1,838,693
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NET ASSETS 100.0% $1,000,576,369
================================================================================
FUTURES
Underlying
Expiration Face Amount Unrealized
Date at Value Appreciation
- --------------------------------------------------------------------------------
Purchased:
46 Nikkei Index Futures 9/99 $4,083,650 $326,025
LEGEND
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(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.
(c) All or a portion of security pledged to cover margin requirements for
futures contracts.
(d) See Note 2(I) of Notes to Financial Statements.
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
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June 30, 1999 (Unaudited)
Strong
Opportunity Fund II
--------------------
ASSETS:
Investments in Securities, at Value
(Cost of $789,970,405) $ 998,737,676
Receivable for Securities Sold 3,968,592
Dividends and Interest Receivable 733,800
Other Assets 49,560
--------------
Total Assets 1,003,489,628
LIABILITIES:
Payable for Securities Purchased 2,661,046
Accrued Operating Expenses and Other Liabilities 252,213
--------------
Total Liabilities 2,913,259
--------------
NET ASSETS $1,000,576,369
==============
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $684,260,967
Undistributed Net Investment Income 1,098,940
Undistributed Net Realized Gain 106,122,922
Net Unrealized Appreciation 209,093,540
--------------
Net Assets $1,000,576,369
==============
Capital Shares Outstanding (Unlimited Number Authorized) 43,393,078
NET ASSET VALUE PER SHARE $23.06
======
STATEMENT OF OPERATIONS
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For the Six Months Ended June 30, 1999 (Unaudited)
Strong
Opportunity Fund II
-------------------
INCOME:
Dividends (Net of withholding taxes of $4,804) $ 3,874,118
Interest 2,509,471
------------
Total Income 6,383,589
EXPENSES:
Investment Advisory Fees 4,551,948
Custodian Fees 31,629
Shareholder Servicing Costs 664,730
Other 36,342
------------
Total Expenses 5,284,649
------------
NET INVESTMENT INCOME 1,098,940
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain on:
Investments 110,908,690
Futures Contracts 263,415
Foreign Currencies 23
------------
Net Realized Gain 111,172,128
Net Change in Unrealized Appreciation/Depreciation on:
Investments 55,350,550
Futures Contracts 326,025
Foreign Currencies (1,604)
------------
Net Change in Unrealized Appreciation/Depreciation 55,674,971
------------
NET GAIN ON INVESTMENTS 166,847,099
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $167,946,039
============
See Notes to Financial Statements.
6
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<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
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<CAPTION>
Strong Opportunity Fund II
---------------------------------
Six Months Ended Year Ended
June 30,1999 Dec. 31, 1998
---------------- ---------------
(Unaudited)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 1,098,940 $ 1,954,217
Net Realized Gain 111,172,128 96,669,139
Net Change in Unrealized Appreciation/Depreciation 55,674,971 8,580,610
-------------- ------------
Net Increase in Net Assets Resulting from Operations 167,946,039 107,203,966
DISTRIBUTIONS:
From Net Investment Income -- (2,125,999)
From Net Realized Gains (99,944,225) (111,831,141)
-------------- ------------
Total Distributions (99,944,225) (113,957,140)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 86,436,946 190,708,336
Proceeds from Reinvestment of Distributions 99,931,457 113,942,474
Payment for Shares Redeemed (165,534,613) (221,365,593)
-------------- ------------
Net Increase in Net Assets from Capital Share Transactions 20,833,790 83,285,217
-------------- ------------
TOTAL INCREASE IN NET ASSETS 88,835,604 76,532,043
NET ASSETS:
Beginning of Period 911,740,765 835,208,722
-------------- ------------
End of Period $1,000,576,369 $911,740,765
============== ============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 3,921,308 8,920,807
Issued in Reinvestment of Distributions 4,986,600 5,209,676
Redeemed (7,495,171) (10,630,641)
--------- ----------
Net Increase in Shares of the Fund 1,412,737 3,499,842
========= ==========
See Notes to Financial Statements.
7
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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June 30, 1999 (Unaudited)
1. ORGANIZATION
Strong Opportunity Fund II, Inc. is a diversified, open-end management
investment company registered under the Investment Company Act of 1940. The
Fund offers and sells its shares only to separate accounts of insurance
companies for the purpose of funding variable annuity and variable life
insurance contracts. At June 30, 1999, approximately 94% of the Fund's
shares were owned by the separate accounts of one insurance company.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation -- Portfolio securities traded primarily on a
principal securities exchange are valued at the last reported sales
price or the mean of the latest bid and asked prices where no last
sales price is available. Securities traded over-the-counter are
valued at the mean of the latest bid and asked prices or the last
reported sales price. Debt securities not traded on a principal
securities exchange are valued through valuations obtained from a
commercial pricing service, otherwise last 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 Fund may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration
to pertinent factors, including recent private sales, market
conditions and the issuer's financial performance. The Fund generally
bears the costs, if any, associated with the disposition of restricted
securities. The Fund held no restricted securities at June 30, 1999.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders
in a manner which results in no tax cost to the Fund. 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 for financial statement
purposes 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.
The Fund generally pays dividends from net investment income and
distributes any net capital gains that it realizes annually.
(C) Realized Gains and Losses on Investment Transactions -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined on a
first-in, first-out basis.
(D) Certain Investment Risks -- The Fund 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 Fund intends 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.
Investments in foreign denominated assets or forward currency
contracts may involve greater risks than domestic investments, due to
currency, political and economic, regulatory and market risks.
(E) Futures -- Upon entering into a futures contract, the Fund pledges to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Fund may be designated as collateral on open futures contracts.
The Fund also receives from or pays 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 Fund may write put or call options (none were written
during the period). Premiums received by the Fund 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 Fund
realizes a gain or loss, and the liability is eliminated. The Fund
continues 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.
8
<PAGE>
(G) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies and income
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 Fund records
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 Fund may enter into repurchase agreements
with institutions that the Fund's investment advisor, Strong Capital
Management, Inc. ("the Advisor"), has determined are creditworthy
pursuant to criteria adopted by the Board of Directors. Each
repurchase agreement is recorded at cost. The Fund requires that the
collateral, represented by securities (primarily U.S. Government
securities), in a repurchase transaction be maintained in a segregated
account with a custodian in a manner sufficient to enable the Fund to
obtain those securities in the event of a default of the issuer of the
repurchase agreement. On a daily basis, the Advisor monitors each
repurchase agreement to ensure the value of the collateral, including
accrued interest, is at least equal to the amount owed to the Fund
under each repurchase agreement.
(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 -- 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 premium and discounts.
3. RELATED PARTY TRANSACTIONS
The Advisor, with whom certain officers and directors of the Fund are
affiliated, provides investment advisory services and shareholder
recordkeeping and related services to the Fund. Investment advisory fees,
which are established by terms of the Advisory Agreement, are based on an
annualized rate of 1.00% of the average daily net assets of the Fund. Based
on the terms of the Advisory Agreement, 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 or absorb certain expenses at their discretion.
Shareholder recordkeeping and related service fees are based on the lesser
of various agreed-upon contractual percentages of the average daily net
assets of the Fund or a contractually established rate for each participant
account. The Advisor is compensated for certain other services related to
costs incurred for reports to shareholders.
The Fund may invest cash 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 the Fund are reduced by an
amount equal to advisory fees paid to the Advisor under its investment
advisory agreement with the money market funds.
The amount payable to the Advisor at June 30, 1999, shareholder servicing
and other expenses paid to the Advisor, and unaffiliated directors' fees
for the year then ended were $218,426, $790,907 and $4,481, respectively.
4. LINE OF CREDIT
The Strong 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 Fund's 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 June 30, 1999, there were no borrowings by the Fund outstanding under
the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the year
ended June 30, 1999 were $344,451,889 and $415,317,709, respectively.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
6. INCOME TAX INFORMATION
At June 30, 1999, the cost of investments in securities for federal income
tax purposes was $794,333,361. Net unrealized appreciation of securities
was $204,404,315, consisting of gross unrealized appreciation and
depreciation of $234,824,536 and $30,420,221, respectively.
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the year ended December 31, 1998 which is designated as
qualifying for the dividends-received deduction is 100% (unaudited).
<TABLE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
STRONG OPPORTUNITY FUND II
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Period Ended
----------------------------------------------------------------------
June 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.72 $21.70 $19.24 $17.04 $14.23 $14.12
Income From Investment Operations
Net Investment Income 0.03 0.05 0.07 0.13 0.12 0.11
Net Realized and Unrealized Gains on Investments 3.86 2.90 4.35 2.87 3.42 0.41
- -----------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 3.89 2.95 4.42 3.00 3.54 0.52
Less Distributions
From Net Investment Income -- (0.05) (0.07) (0.13) (0.12) (0.11)
In Excess of Net Investment Income -- -- (0.01) -- (0.03) --
From Net Realized Gains (2.55) (2.88) (1.88) (0.67) (0.58) (0.30)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.55) (2.93) (1.96) (0.80) (0.73) (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $23.06 $21.72 $21.70 $19.24 $17.04 $14.23
===================================================================================================================================
Ratios and Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return +19.7% +13.5% +25.5% +18.2% +25.8% +3.6%
Net Assets, End of Period (In Millions) $1,001 $912 $835 $632 $452 $300
Ratio of Expenses to Average Net Assets 1.2%* 1.2% 1.1% 1.2% 1.2% 1.1%
Ratio of Net Investment Income to Average Net Assets 0.2%* 0.2% 0.4% 0.7% 0.8% 0.9%
Portfolio Turnover Rate 42.3% 88.5% 101.1% 89.8% 91.1% 74.8%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the six months ended June 30, 1999 (unaudited).
See Notes to Financial Statements.
10
<PAGE>
NOTES
- --------------------------------------------------------------------------------
11
<PAGE>
