<PAGE>
[PHOTO OF WOMAN WITH 3 KIDS]
[LOGO]
ANNUAL REPORT
THE STRONG
OPPORTUNITY
FUND II
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
REPORT OF INDEPENDENT ACCOUNTANTS ........................11
ANNUAL REPORT - DECEMBER 31, 1999
<PAGE>
THE STRONG OPPORTUNITY FUND II
PERSPECTIVES
FROM THE MANAGER
/s/ Richard Trent Weiss
Richard Trent Weiss
Portfolio Manager
- --------------------------------------------------------------------------------
The Fund's performance was most influenced during this period by our positions
in technology and media stocks. The strongest performers included technology
companies strategically positioned to take advantage of the increase in
technology spending related to the growth of the Internet. Specifically, Sun
Microsystems and Parametric Technology were some of the Fund's biggest
contributors. Communications stocks also continued to help the Fund, including
Corning, Omnipoint, Telephone & Data Systems, Hughes Electronics, and Liberty
Media.
In light of the rate increases from the Federal Reserve, stocks exposed to
consumer spending retreated. Cyclical stocks, for example, weakened in the third
and fourth quarter as investors waited for more signs of the economy's growth
prospects. We selectively added to these positions at their lower valuations. In
energy, the market took a wait-and-see attitude following the huge rise in oil
prices in the first half of the year. We therefore held our energy positions at
that time. We continue to believe that the supply and demand characteristics for
energy stocks remain positive for 2000 and are looking for companies that can
take advantage of that environment. Stocks in the financial services sector were
also weak in the face of rising interest rates and continued weakness in pricing
in industries such as property-casualty insurance. However, we continue to look
for names to add selectively as valuations have continued to become more
attractive.
- --------------------------------------------------------------------------------
WE BELIEVE A CONTINUED RECOVERY OF THE GLOBAL ECONOMY WILL HELP SUSTAIN STRONG
PERFORMANCE FOR SMALL- AND MID-CAP STOCKS GOING FORWARD.
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - For the year ended December 31, 1999, the Strong Opportunity Fund II
returned 34.91% while the S&P MidCap 400 Stock Index returned 14.72%.*
- - The Fund's performance was driven mostly by positions in cable/media and
technology stocks. Companies in the software, enterprise server, and
technology infrastructure sectors were strong performers in the third and
fourth quarter.
- - The Fund benefited from an underweighting in financials, as these stocks
performed poorly in response to fears that the Federal Reserve Board
would continue to raise interest rates.
- --------------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS(1)
AS OF 12-31-99
1-year 34.91%
3-year 24.33%
5-year 23.36%
Since Inception 21.03%
(on 5-8-92)
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[SIDENOTE]
FIVE LARGEST STOCK
HOLDINGS
AS OF 12-31-99
SECURITY % OF NET ASSETS
- --------------------------------------------------------------------------------
Omnipoint Corporation 2.9%
AT&T Corporation--
Liberty Media Group Class A 2.4%
Corning, Inc. 2.4%
Seagate Technology, Inc. 2.0%
MediaOne Group, Inc. 1.9%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
(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.
2
<PAGE>
Looking out over the next several months, we are optimistic that we
have reached a turning point where smaller-capitalization stocks will
perform well versus larger-cap stocks. In the fourth quarter, the Russell
2000-Registered Trademark- Index of small-cap stocks gained 21.26% versus
21.04% for the S&P 500 Stock Index. This outperformance came as welcome
relief after an extended period during which larger-cap stocks outperformed
small- and mid-caps. We believe a continued recovery of the global economy
will help sustain strong performance for small-and mid-cap stocks going
forward.
Even though energy and cyclical stocks had mixed results in the second half of
the year, we believe those sectors should benefit as the world economies
strengthen. Additionally, after the recent massive outperformance among a small,
select group of technology stocks, we believe that the market will begin to
broaden out. This should benefit other forgotten sectors with improving
fundamentals. In technology, we continue to look for select stocks that are
positioned to take advantage of continued strong demand, though the run-up of
many of these stocks over the past year severely limits opportunities in this
area.
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 12-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG S&P MidCap Lipper Multi-Cap
OPPORTUNITY 400 Stock Value Funds
FUND II Index* Index*
----------- ---------- ----------------
<S> <C> <C> <C>
4-92 $10,000 $10,000 $10,000
12-92 $11,617 $11,267 $10,900
12-93 $14,541 $12,839 $12,397
12-94 $15,064 $12,379 $12,410
12-95 $18,954 $16,210 $16,259
12-96 $22,393 $19,322 $19,672
12-97 $28,093 $25,554 $24,965
12-98 $31,898 $30,438 $26,594
12-99 $43,032 $34,919 $28,174
</TABLE>
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 Multi-Cap Value 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.
- --------------------------------------------------------------------------------
[SIDENOTE]
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, THE MANAGER SELECTS STOCKS USING THE FUND'S
PROPRIETARY PRIVATE MARKET VALUE APPROACH. HE FIRST CONSIDERS COMPANIES (AND
INDUSTRIES) THAT ARE OUT OF FAVOR. THEN HE DETERMINES THE PRICE HE BELIEVES 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.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - The U.S. economy remained healthy throughout the year, but fears of
rising inflation helped increase interest rates as the year wore on.
Investors remained cautious on the outlook for continued economic growth
and stayed out of areas extremely sensitive to slowing growth.
- - The tremendous growth opportunities afforded technology companies from
the growth of the Internet and diminishing fears over Y2K problems fueled
a massive rise in technology stocks. The market bought a small number of
companies in specific sectors that could benefit from the evolving new
economy almost without regard to valuation.
- --------------------------------------------------------------------------------
* The S&P MidCap 400 Stock Index is an unmanaged index generally
representative of the U.S. market for medium-capitalization stocks. The
Lipper Multi-Cap Value Funds Index is an equally-weighted performance
index of the largest qualifying funds in this Lipper category. Source of
the S&P index data is Standard & Poor's Micropal. Source of the Lipper
index data is Lipper Inc.
3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS IN SECURITIES December 31, 1999
- ----------------------------------------------------------------------------------------
STRONG OPPORTUNITY FUND II
- ----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 90.5%
AEROSPACE & DEFENSE 0.8%
Northrop Grumman Corporation 161,000 $ 8,704,063
AIRLINE 0.2%
Air New Zealand, Ltd. Class B 1,286,200 1,884,232
AUTOMOBILE 1.2%
Ford Motor Company 242,700 12,969,281
BANK - MONEY CENTER 1.5%
Bank of America Corporation 263,000 13,199,313
The Bank of Tokyo - Mitsubishi 83,000 1,156,364
Sakura Bank, Ltd. 190,000 1,100,479
Sanwa Bank, Ltd. 95,000 1,155,317
-------------
16,611,473
BANK - SUPER REGIONAL 2.4%
Mellon Financial Corporation 351,000 11,955,938
Wells Fargo Company 380,000 15,366,250
-------------
27,322,188
BEVERAGE - SOFT DRINK 2.2%
The Pepsi Bottling Group, Inc. 749,200 12,408,625
Whitman Corporation 920,600 12,370,563
-------------
24,779,188
CHEMICAL - SPECIALTY 2.2%
Air Products & Chemicals, Inc. 48,300 1,621,069
Praxair, Inc. 200,000 10,062,500
Solutia, Inc. 830,000 12,813,125
-------------
24,496,694
COMPUTER - MANUFACTURERS 2.6%
Compaq Computer Corporation 430,600 11,653,112
Sun Microsystems, Inc. (b) 225,000 17,423,437
-------------
29,076,549
COMPUTER - PERIPHERAL EQUIPMENT 4.4%
American Power Conversion Corporation (b) 793,500 20,928,563
Quantum Corporation - DLT & Storage
Systems (b) 450,000 6,806,250
Seagate Technology, Inc. (b) 472,000 21,977,500
-------------
49,712,313
COMPUTER SOFTWARE 5.7%
Cadence Design Systems, Inc. (b) 657,000 15,768,000
Keane, Inc. (b) 547,000 17,367,250
Oracle Systems Corporation (b) 160,000 17,930,000
Parametric Technology Corporation (b) 489,700 13,252,506
-------------
64,317,756
CONGLOMERATE 0.1%
Marubeni Corporation 290,000 1,217,200
CONSUMER - MISCELLANEOUS 0.2%
Canon, Inc. 47,000 1,866,941
CONTAINER 1.3%
Sonoco Products Company 625,000 14,218,750
DIVERSIFIED OPERATIONS 0.6%
Invensys PLC 994,000 5,418,604
Itochu Corporation (b) 320,000 1,593,582
-------------
7,012,186
ELECTRIC POWER 1.1%
NiSource, Inc. 675,000 12,065,625
ELECTRICAL EQUIPMENT 2.7%
Parker-Hannifin Corporation 290,000 14,880,625
W.W. Grainger, Inc. 320,000 15,300,000
-------------
30,180,625
ELECTRONIC PARTS DISTRIBUTION 1.6%
Avnet, Inc. 305,000 $ 18,452,500
ELECTRONIC PRODUCTS - MISCELLANEOUS 3.6%
AVX Corporation 355,000 17,727,813
General Motors Corporation Class H (b) 208,000 19,968,000
Hitachi, Ltd. 155,000 2,487,036
-------------
40,182,849
ELECTRONICS - SEMICONDUCTOR MANUFACTURING 2.5%
Micron Technology, Inc. (b)(d) 205,000 15,938,750
Texas Instruments, Inc. 130,000 12,593,750
-------------
28,532,500
FOOD 1.2%
H.J. Heinz Company 345,000 13,735,313
HEALTHCARE - DRUG/DIVERSIFIED 1.1%
Alza Corporation (b) 364,200 12,610,425
Watson Pharmaceuticals, Inc. (b) 7,100 254,269
-------------
12,864,694
HEALTHCARE - MEDICAL SUPPLY 1.2%
Sybron International Corporation (b) 535,000 13,207,813
HEALTHCARE - PATIENT CARE 1.9%
HEALTHSOUTH Corporation (b) 1,518,700 8,163,013
United Healthcare Corporation 240,000 12,750,000
-------------
20,913,013
HOUSEHOLD APPLIANCES & FURNISHINGS 1.0%
Leggett & Platt, Inc. 498,900 10,695,169
INSURANCE - ACCIDENT & HEALTH 1.3%
CIGNA Corporation 177,200 14,275,675
INSURANCE - PROPERTY & CASUALTY 3.5%
Ace, Ltd. 500,000 8,343,750
The Allstate Corporation 510,000 12,240,000
American International Group, Inc. 170,625 18,448,828
-------------
39,032,578
INTERNET - INTERNET SERVICE PROVIDER/CONTENT 2.6%
CNET, Inc. (b) 90,000 5,107,500
GO.com (b) 571,000 13,596,938
Lycos, Inc. (b) 83,600 6,651,425
NBC Internet, Inc. (b) 56,000 4,326,000
-------------
29,681,863
LEISURE SERVICE 1.4%
The Walt Disney Company 517,000 15,122,250
MEDIA - CABLE TV 3.1%
Comcast Corporation Class A 326,800 16,421,700
Cox Communications, Inc. Class A (b) 352,000 18,128,000
-------------
34,549,700
MEDIA - PUBLISHING 1.2%
The E.W. Scripps Company Class A 291,700 13,071,806
MEDIA - RADIO/TV 2.4%
AT&T Corporation - Liberty Media Group
Class A (b) 480,000 27,240,000
METAL PRODUCTS & FABRICATION 1.5%
Illinois Tool Works, Inc. 255,000 17,228,438
NATURAL GAS DISTRIBUTION 1.5%
Enron Corporation 380,000 16,862,500
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
STRONG OPPORTUNITY FUND II (CONTINUED)
- ----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
OIL - NORTH AMERICAN EXPLORATION & PRODUCTION 2.0%
Barrett Resources Corporation (b) 345,000 $ 10,155,937
Devon Energy Corporation 382,000 12,558,250
-------------
22,714,187
OIL - NORTH AMERICAN INTEGRATED 1.2%
Unocal Corporation 414,000 13,894,875
OIL WELL EQUIPMENT & SERVICE 4.4%
BJ Services Company (b) 383,000 16,014,187
Cooper Cameron Corporation (b) 310,000 15,170,625
Weatherford International, Inc. (b) 453,400 18,107,662
-------------
49,292,474
PAPER & FOREST PRODUCTS 1.4%
The Mead Corporation 355,000 15,420,312
REAL ESTATE 1.2%
Archstone Communities Trust 287,400 5,891,700
Equity Office Properties Trust 315,000 7,756,875
-------------
13,648,575
RETAIL - FOOD CHAIN 1.3%
Albertson's, Inc. 445,000 14,351,250
RETAIL - MAJOR CHAIN 0.9%
The Daiei, Inc. (b) 265,000 1,050,044
Kmart Corporation (b) 755,000 7,597,187
Sears Canada, Inc. 65,300 1,808,238
-------------
10,455,469
RETAIL - SPECIALTY 1.8%
Nordstrom, Inc. 627,400 16,430,037
Office Depot, Inc. (b) 323,900 3,542,656
-------------
19,972,693
TELECOMMUNICATION EQUIPMENT 2.4%
Corning, Inc. 205,000 26,432,187
TELECOMMUNICATIONS - CELLULAR 4.9%
NTT Mobile Communication Network, Inc. 175 6,728,794
Omnipoint Corporation (b) 265,000 31,965,625
Vodafone AirTouch PLC Sponsored ADR 325,000 16,087,500
-------------
54,781,919
TELECOMMUNICATIONS - SERVICES 4.6%
AT&T Corporation 108,300 5,496,225
Cable & Wireless Communications
PLC Sponsored ADR (b) 85,000 5,950,000
Global TeleSystems Group, Inc. (b) 372,900 12,911,662
Infonet Services Corporation (b) 54,300 1,425,375
MediaOne Group, Inc. (b) 279,900 21,499,819
Nippon Telegraph & Telephone Corporation 230 3,937,971
-------------
51,221,052
TELEPHONE 1.2%
Telephone & Data Systems, Inc. 105,000 13,230,000
TRUCKING 1.4%
CNF Transportation, Inc. 445,000 15,352,500
- ----------------------------------------------------------------------------------------
Total Common Stocks (Cost $725,630,205) 1,012,851,218
- ----------------------------------------------------------------------------------------
CORPORATE BONDS 0.0%
Capital Properities New Zealand, Ltd. Convertible
Capital Notes, 8.50%, Due 4/15/05 $334,740 $ 159,374
- ----------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $302,841) 159,374
- ----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (A) 9.8%
COMMERCIAL PAPER 0.6%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 6.10% $ 3,598,700 $ 3,598,700
Warner Lambert Company, 6.08% 2,722,700 2,722,700
Wisconsin Electric Power Company, 6.04% 1,500 1,500
-------------
6,322,900
REPURCHASE AGREEMENTS 9.2%
ABN-AMRO Inc. (Dated 12/31/99), 2.75%,
Due 1/03/00 (Repurchase proceeds $103,323,673);
Collateralized by: U.S. Government
& Agency Issues (c) 103,300,000 103,300,000
UNITED STATES GOVERNMENT ISSUES 0.0%
United States Treasury Bills,
Due 1/13/00 25,000 24,965
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Total Short-Term Investments (Cost $109,647,867) 109,647,865
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Total Investments in Securities (Cost $835,580,913) 100.3% 1,122,658,457
Other Assets and Liabilities, Net (0.3%) (3,423,324)
- ----------------------------------------------------------------------------------------
NET ASSETS 100.0% $1,119,235,133
========================================================================================
WRITTEN OPTIONS ACTIVITY
- ----------------------------------------------------------------------------------------
Contracts Premiums
- ----------------------------------------------------------------------------------------
Options outstanding at beginning of year -- $ --
Options written during the year 230 237,978
Options closed -- --
Options expired -- --
Options exercised (70) (15,539)
--- --------
Options outstanding at end of year 160 $222,439
=== ========
Exercised options resulted in a capital loss of $0.
WRITTEN OPTIONS DETAIL
- ----------------------------------------------------------------------------------------
CONTRACTS (100 VALUE
SHARES PER CONTRACT) (NOTE 2)
- ----------------------------------------------------------------------------------------
Micron Technology
Calls: (Strike Price is $75.00. Expiration date
is 1/21/00. Premium Received is $222,439.) 160 ($102,000)
LEGEND
- ----------------------------------------------------------------------------------------
(a) Short-term investments include any security which has a maturity
of less than one year.
(b) Non-income producing security.
(c) See Note 2(I) of Notes to Financial Statements.
(d) All or a portion of these securities are held in conjunction with open written
call option contracts.
</TABLE>
Percentages are stated as a percent of net assets.
5
See Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
STRONG
OPPORTUNITY
FUND II
---------------
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost of $835,580,913) $ 1,122,658,457
Receivable for Securities Sold 2,561,867
Dividends and Interest Receivable 766,497
Other Assets 34,980
---------------
Total Assets 1,126,021,801
LIABILITIES:
Payable for Securities Purchased 6,530,568
Written Options, at Value (Premiums Received of $222,439) 102,000
Accrued Operating Expenses and Other Liabilities 154,100
---------------
Total Liabilities 6,786,668
---------------
NET ASSETS $ 1,119,235,133
===============
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $ 675,703,325
Undistributed Net Investment Income 2,653,589
Undistributed Net Realized Gain 153,679,263
Net Unrealized Appreciation 287,198,956
---------------
Net Assets $ 1,119,235,133
===============
Capital Shares Outstanding (Unlimited Number Authorized) 43,065,970
NET ASSET VALUE PER SHARE $25.99
======
</TABLE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
STRONG
OPPORTUNITY
FUND II
---------------
<S> <C>
INCOME:
Dividends (net of foreign withholding taxes of $12,634) $ 8,347,879
Interest 5,493,498
---------------
Total Income 13,841,377
EXPENSES:
Investment Advisory Fees 9,732,876
Custodian Fees 68,842
Shareholder Servicing Costs 1,457,999
Other 60,451
---------------
Total Expenses before Fees Paid Indirectly by Advisor 11,320,168
Fees Paid Indirectly by Advisor (Note 3) (212,411)
---------------
Expenses, Net 11,107,757
---------------
NET INVESTMENT INCOME 2,733,620
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain on:
Investments 157,770,002
Futures Contracts 827,065
Foreign Currencies 1,644
---------------
Net Realized Gain 158,598,711
Net Change in Unrealized Appreciation/Depreciation on:
Investments 133,660,824
Futures Contracts and Options 120,439
Foreign Currencies (876)
---------------
Net Change in Unrealized Appreciation/Depreciation 133,780,387
---------------
NET GAIN ON INVESTMENTS 292,379,098
---------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 295,112,718
===============
</TABLE>
6
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STRONG OPPORTUNITY FUND II
------------------------------------
Year Ended Year Ended
Dec. 31, 1999 Dec. 31, 1998
--------------- ---------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 2,733,620 $ 1,954,217
Net Realized Gain 158,598,711 96,669,139
Net Change in Unrealized Appreciation/Depreciation 133,780,387 8,580,610
--------------- ---------------
Net Increase in Net Assets Resulting from Operations 295,112,718 107,203,966
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 199,519,637 190,708,336
Proceeds from Reinvestment of Distributions 99,931,457 113,942,474
Payment for Shares Redeemed (287,125,219) (221,365,593)
--------------- ---------------
Net Increase in Net Assets from Capital Share Transactions 12,325,875 83,285,217
--------------- ---------------
TOTAL INCREASE IN NET ASSETS 207,494,368 76,532,043
NET ASSETS:
Beginning of Year 911,740,765 835,208,722
--------------- ---------------
End of Year $ 1,119,235,133 $ 911,740,765
=============== ===============
TRANSACTIONS IN SHARES OF THE FUND:
Sold 8,794,424 8,920,807
Issued in Reinvestment of Distributions 4,986,600 5,209,676
Redeemed (12,695,396) (10,630,641)
--------------- ---------------
Net Increase in Shares of the Fund 1,085,628 3,499,842
=============== ===============
</TABLE>
7
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1999
1. ORGANIZATION
Strong Opportunity Fund II, Inc. is a diversified, open-end management
investment company registered under the Investment Company Act of 1940,
as amended. 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 December 31, 1999,
approximately 93% 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 -- Securities of the Fund are valued at fair
value through valuations obtained by a commercial pricing service
or the mean of the bid and asked prices when no last sales price
is available. 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 December 31, 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.
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, 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. 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 changes between
the initial premiums received and the current market value of the
options are recorded as unrealized gains or losses. 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. Securities held by the Fund may be designated as
collateral on written options.
(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 daily 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.
8
<PAGE>
(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 bank in a
manner sufficient to enable the Fund 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, including
accrued interest, to ensure it 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 or absorbed 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 its 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
also allocates to the Fund certain charges or credits resulting from
transfer agency banking activities based on the Fund's level of
subscription and redemption activity. Credits allocated by the Advisor
serve to reduce the shareholder servicing expenses incurred by the Fund
and are reported as Fees Paid Indirectly by the Advisor in the Fund's
Statement of Operations. The Advisor is also 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 December 31, 1999, shareholder
servicing and other expenses paid to the Advisor, and unaffiliated
directors' fees for the year then ended, were $130,454, $1,458,033 and
$8,962, 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 LOC. For an individual Fund, borrowings under
the LOC are limited to either the lesser of 15% of the market value of
the Fund's total net assets or any explicit borrowing limits in the
Fund's prospectus. Principal and interest of each borrowing on the LOC
are due not more than 60 days after the date of the borrowing. Borrowings
under the LOC bear interest based on prevailing market rates as defined
in the LOC. A commitment fee of .08% per annum is incurred on the unused
portion of the LOC and is allocated to all participating Strong Funds. At
December 31, 1999, there were no borrowings by the Fund outstanding under
the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities, other than
government securities, for the year ended December 31, 1999 were
$733,268,279 and $781,685,475, respectively. There were no purchases or
sales of long-term government securities during the year ended December
31, 1999.
6. INCOME TAX INFORMATION
At December 31, 1999, the cost of investments in securities for federal
income tax purposes was $839,788,813. Net unrealized appreciation of
securities was $282,869,644, consisting of gross unrealized appreciation
and depreciation of $340,969,311 and $58,099,667, respectively.
During the year ended December 31, 1999, the Fund paid a capital gain
distribution (taxable as long-term capital gains at 20%) to shareholders
of $84,272,013 (unaudited).
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the year ended December 31, 1999 which is designated as
qualifying for the dividends-received deduction is 0.0% (unaudited).
9
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STRONG OPPORTUNITY FUND II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 21.72 $ 21.70 $ 19.24 $ 17.04 $ 14.23
Income From Investment Operations:
Net Investment Income 0.06 0.05 0.07 0.13 0.12
Net Realized and Unrealized Gains on Investments 6.76 2.90 4.35 2.87 3.42
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 6.82 2.95 4.42 3.00 3.54
Less Distributions:
From Net Investment Income -- (0.05) (0.07) (0.13) (0.12)
In Excess of Net Investment Income -- -- (0.01) -- (0.03)
From Net Realized Gains (2.55) (2.88) (1.88) (0.67) (0.58)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.55) (2.93) (1.96) (0.80) (0.73)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 25.99 $ 21.72 $ 21.70 $ 19.24 $ 17.04
=============================================================================================================================
Ratios and Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------
Total Return +34.9% +13.5% +25.5% +18.2% +25.8%
Net Assets, End of Period (In Millions) $ 1,119 $ 912 $ 835 $ 632 $ 452
Ratio of Expenses to Average Net Assets
without Fees Paid Indirectly by Advisor 1.2% 1.2% 1.1% 1.2% 1.2%
Ratio of Expenses to Average Net Assets 1.1% 1.2% 1.1% 1.2% 1.2%
Ratio of Net Investment Income to Average Net Assets 0.3% 0.2% 0.4% 0.7% 0.8%
Portfolio Turnover Rate 85.4% 88.5% 101.1% 89.8% 91.1%
</TABLE>
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
10
See Notes to Financial Statements.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Strong Opportunity Fund II, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments in securities, 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 Opportunity
Fund II, Inc. (the "Fund") at December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's 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 auditing standards
generally accepted in the United States 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 December
31, 1999 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where broker confirmations were not received,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 2, 2000
11
