<PAGE>
THE STRONG
----------
VALUE
FUND
==================================
SEMI-ANNUAL REPORT o JUNE 30, 1998
==================================
[PHOTO OF STRONG FUNDS BUILDING]
[STRONG LOGO]
STRONG FUNDS
<PAGE>
8
EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING
These common-sense rules are followed by many successful investors. They make
sense for beginners, too. If you have a question on these principles, or would
like to discuss them with us, please contact us at 1-800-368-3863. We're here
24 hours a day, seven days a week to take your call.
- -------------------------------------------------------------------------------
[PICTURE OF FOLDER LABELED INVESTMENTS]
1. HAVE A PLAN. Even a simple plan can help you take control of your financial
future. Review your plan once a year, or if your circumstances change.
- -------------------------------------------------------------------------------
[PICTURE OF CLOCK]
2. START INVESTING AS SOON AS POSSIBLE. Make time a valuable ally. Let it put
the power of compounding to work for you, while helping to reduce your
potential investment risk.
- -------------------------------------------------------------------------------
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION]
3. DIVERSIFY YOUR PORTFOLIO. By investing in different asset classes - stocks,
bonds, and cash - you help protect against poor performance in one type of
investment while including investments most likely to help you achieve your
important goals.
- -------------------------------------------------------------------------------
[PICTURE OF MEMO REMINDER TO INVEST]
4. INVEST REGULARLY. Investing is a process, not a one-time event. By
investing regularly over the long term, you reduce the impact of short-term
market gyrations, and you attend to your long-term plan before you're tempted
to spend those assets on short-term needs.
- -------------------------------------------------------------------------------
[PICTURE OF GRAPH SLOPING UPWARD]
5. MAINTAIN A LONG-TERM PERSPECTIVE. For most individuals, the best discipline
is staying invested as market conditions change. Reactive, emotional investment
decisions are all too often a source of regret - and of principal loss.
- -------------------------------------------------------------------------------
[PICTURE OF PIE CHART OF ASSET DIVERSIFICATION EMPHASIZING STOCKS]
6. CONSIDER STOCKS TO HELP ACHIEVE MAJOR LONG-TERM GOALS. Over time, stocks
have provided the more powerful returns needed to help the value of your
investments stay well ahead of inflation.
- -------------------------------------------------------------------------------
[PICTURE OF DOLLAR SIGN]
7. KEEP A COMFORTABLE AMOUNT OF CASH IN YOUR PORTFOLIO. To meet current needs,
including emergencies, use a money market fund or a bank account - not your
long-term investment assets.
- -------------------------------------------------------------------------------
[PICTURE OF MAGNIFYING GLASS]
8. KNOW WHAT YOU'RE BUYING. Make sure you understand the potential risks and
rewards associated with each of your investments. Ask questions...request
information...make up your own mind. And choose a fund company that helps you
make informed investment decisions.
<PAGE>
THE STRONG
----------
VALUE
FUND
==================================
SEMI-ANNUAL REPORT o JUNE 30, 1998
==================================
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Value Fund....................................................2
FINANCIAL INFORMATION
Schedule of Investments in Securities....................................4
Statement of Assets and Liabilities......................................5
Statement of Operations..................................................6
Statements of Changes in Net Assets......................................6
Notes to Financial Statements............................................7
FINANCIAL HIGHLIGHTS..........................................................8
<PAGE>
=====================
THE STRONG VALUE FUND
=====================
IN BOTH RISING AND DECLINING MARKET ENVIRONMENTS, THE STRONG VALUE FUND
MAINTAINS THE SAME INVESTMENT DISCIPLINE.
Thank you for your investment in the Strong Value Fund. We appreciate your trust
and confidence.
=================================
ASSET ALLOCATION
=================================
Based on net assets as of 6-30-98
[PIE CHART]
Stocks 96.1%
Short-Term Investments 3.9%
=================================
MARKET REVIEW
During the first half of 1998, the broad-based equity markets continued their 14
consecutive-quarter ascent, reaching new highs as of the end of June. Technology
and health care stocks led the market in this period while energy and cyclical
manufacturing stocks were among the weakest performers. The markets were witness
to pronounced volatility, with swings of 1% or more on over 60 percent of the
trading days in the half-year. The accelerated pace of mergers and acquisitions,
the significant number of both preannounced and reported earnings shortfalls,
and the rebalancing of the Russell and S&P indices (which together comprise a
majority of the $2 trillion of index-related assets) each contributed to the
market's gyrations.
==============================================
TOP FIVE INDUSTRIES
==============================================
As of 6-30-98
INDUSTRY % OF NET ASSETS
----------------------------------------------
Food 6.0%
..............................................
Telecommunication Service 5.1%
..............................................
Insurance - Diversified 5.0%
..............................................
Healthcare - Patient Care 4.6%
..............................................
Diversified Operations 4.3%
..............................................
Please see the Schedule of Investments in
Securities for a complete listing of the Fund's
portfolio.
===============================================
SOLID PERFORMANCE IN A VOLATILE MARKET
The Fund's investment discipline makes it well positioned to take advantage of
rising equity markets while capitalizing on the opportunities offered by a
volatile trading environment. For the six-month period ended June 30, 1998, the
Strong Value Fund was up 11.85%. This compared with the Lipper Growth and Income
Funds Index up 11.62% and the Russell 3000(reg.tm) Index up 15.11%.*(1)
The Fund benefited from holdings in telecommunications and utilities (AirTouch
and WorldCom), autos (Ford and Echlin), retail (RiteAid and McDonald's) and
financials (Chase Manhattan and Providian Financial). Our practice of not
investing in technology stocks (the top-performing sector for the period) had a
negative effect on the Fund's performance during this period. Holdings in energy
and REITs also reduced returns. However, our performance relative to the Russell
3000, as well as the Lipper Growth and Income Funds Index, improved in the
second quarter (2.09% vs. 1.82% and 0.19% respectively) compared to the first
quarter (9.55% vs. 13.05% and 11.40% respectively). In May, the only month that
the market was down this year, the Russell 3000 was down 2.47%, or more than
twice the Fund's 1.14% decline.
In both rising and declining market environments, the Strong Value Fund
maintains the same investment discipline. The Fund seeks capital appreciation by
investing primarily in equity securities using a value approach in stock
selection. On a stock-by-stock basis, the Fund seeks companies that are selling
at a discount to their historical range, peer group or asset value. Our
experienced research team relies on fundamental analysis of each individual
stock to help us identify catalysts such as management changes, corporate
restructurings, or underlying shifts in a particular industry that may drive a
company's valuation significantly higher. We monitor our investments
continuously and sell when the stock reaches our price objective or company
fundamentals deteriorate. We automatically review an investment for sale if the
stock falls 15% below the purchase price.
OUTLOOK
As we look to the months ahead, we believe that several factors could make the
investment environment more difficult than it has been in the recent past.
We expect slower earnings growth in the second half of 1998 from the combination
of Asian financial weakness, unsustainable strong first-half Gross Domestic
Product growth and the effects of the GM strike.
===========================================================================
FIVE LARGEST STOCK HOLDINGS
===========================================================================
As of 6-30-98
% OF NET
SECURITY INDUSTRY ASSETS
---------------------------------------------------------------------------
Eastman Kodak Company Leisure Product 4.0%
...........................................................................
McDonald's Corporation Retail - Restaurant 4.0%
...........................................................................
Harcourt General, Inc. Media - Publishing 3.8%
...........................................................................
Waste Management, Inc. Pollution Control 3.7%
...........................................................................
Rite Aid Corporation Retail - Drug Store 3.5%
...........................................................................
Please see the Schedule of Investments in Securities for a complete listing
of the Fund's portfolio.
===========================================================================
2
<PAGE>
Declining commodity prices are also a potential concern. On the one hand, low
commodity prices are a check on inflation in the U.S. However, in countries
whose economies are dependent on the price of raw materials (e.g. oil, gold,
copper), lower commodity prices mean less revenue; a sustained decline in
revenue could lead to political unrest in these countries.
Additionally, it is troublesome that new market highs do not reflect broad-based
appreciation; rather gains are attributable to fewer and fewer large-cap stocks.
The rally in large-capitalization stocks, which started in 1995, continued
through the first half of 1998, with the performance gap between the largest
("mega") caps and the medium-to-large and smaller caps widening even further
from 1997's levels. In the first six months, the Russell Top 200(TM) Index (the
largest 200 stocks in the Russell 3000) rose 19.14%, the Russell Midcap(TM)
Index (the next 800 stocks) increased 9.13%, while the Russell 2000(reg.tm)
Index was up only 4.93%*.
Although we expect the market environment to be more difficult, our investment
disciplines remain unchanged: we continue to invest in sound companies where a
catalyst for positive change is in place and where the stock represents value in
relation to the company's or its industry's assets, earnings power, or
cash-generating ability. We believe that this analytical approach, combined with
our sell/review policy, makes the Strong Value Fund poised to capitalize on the
opportunities presented by the equity markets in the second half of 1998.
Thank you for your continued confidence in the Strong Value Fund.
[PHOTO OF LAURA J. SLOATE AND JEFFREY B. COHEN]
Sincerely,
/s/ Laura J. Sloate
Laura J. Sloate
/s/ Jeffrey B. Cohen
Jeffrey B. Cohen
Portfolio Co-managers
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 12-29-95 to 6-30-98
[GRAPH]
Lipper Growth
THE STRONG S&P 500 and Income
VALUE FUND Index* Funds Index*
12-95 10,000 10,000 10,000
6-96 11,073 11,010 10,846
12-96 11,682 12,296 12,067
6-97 13,140 14,830 13,992
12-97 14,710 16,398 15,311
6-98 16,453 19,303 17,089
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Standard & Poor's 500 Stock Index ("S&P 500") and the Lipper Growth and Income
Funds Index. Results include the reinvestment of dividends and capital gains
distributions. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you may have a gain
or loss when you sell shares.
=================================
AVERAGE ANNUAL
TOTAL RETURNS(1)
=================================
As of 6-30-98
1-YEAR 25.21%
SINCE INCEPTION 22.04%
(on 12-29-95)
=================================
- -------------------------------------------------------------------------------
* The S&P 500 is an unmanaged index generally representative of the U.S. stock
market, without regard to company size. The Lipper Growth and Income Funds
Index is an equally-weighted performance index of the largest qualifying
funds in this Lipper category. The Russell 3000(reg.tm) Index is an unmanaged
index generally representative of the U.S. stock market. The Russell Top
200(TM) Index measures the performance of the 200 largest companies in the
Russsell 1000(reg.tm) Index, which represents approximately 65% of the total
market capitalization of the Russell 1000 Index. The Russell Midcap(TM)Index
measures the performance of the 800 smallest companies in the Russell 1000
Index, which represents approximately 35% of the total market capitalization
of the Russell 1000 Index. Source of the S&P and the Russell index data is
Standard & Poor's Micropal. Source of the Lipper index data is Lipper
Analytical Services, Inc.
1 Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and capital
gains. Average annual total return reflects annualized change, while total
return reflects aggregate change.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES JUNE 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
COMMON STOCKS 95.6%
AEROSPACE & DEFENSE 2.5%
Raytheon Company Class A 41,700 $ 2,402,962
AUTO & TRUCK PARTS 1.9%
Echlin, Inc. 36,700 1,800,594
AUTOMOBILE 3.5%
Ford Motor Company 55,800 3,292,200
BANK - MONEY CENTER 2.4%
The Chase Manhattan Corporation 30,000 2,265,000
BANK - SUPER REGIONAL 1.4%
Banc One Corporation 24,860 1,387,499
CONTAINER 2.5%
W. R. Grace & Company (b) 140,100 2,390,456
DIVERSIFIED OPERATIONS 4.3%
E.I. Du Pont de Nemours & Company 25,100 1,873,088
Tyco International, Ltd. 35,666 2,246,958
-----------
4,120,046
ELECTRIC POWER 1.2%
Duke Energy Company 18,835 1,115,974
ELECTRICAL EQUIPMENT 0.5%
General Electric Company 5,000 455,000
FINANCE - MISCELLANEOUS 4.9%
American Express Company 9,500 1,083,000
First Data Corporation 42,000 1,399,125
Morgan Stanley, Dean Witter & Company 9,400 858,925
Providian Financial Corporation 17,000 1,335,563
-----------
4,676,613
FOOD 6.0%
ConAgra, Inc. 72,000 2,281,500
Corn Products International, Inc. (b) 35,725 1,210,184
General Mills, Inc. 31,800 2,174,325
-----------
5,666,009
HEALTHCARE - DRUG/DIVERSIFIED 3.4%
Eli Lilly & Company 31,200 2,061,150
Merck & Company, Inc. 8,900 1,190,375
-----------
3,251,525
HEALTHCARE - PATIENT CARE 4.6%
Columbia/HCA Healthcare Corporation 65,100 1,896,038
Pacificare Health Systems, Inc. Class B (b) 28,000 2,474,500
-----------
4,370,538
HOUSEHOLD APPLIANCES & FURNISHINGS 2.1%
Rubbermaid, Inc. 59,800 1,984,612
INSURANCE - ACCIDENT & HEALTH 2.2%
Provident Companies, Inc. 62,300 2,149,350
INSURANCE - DIVERSIFIED 5.0%
American General Corporation 23,800 1,694,263
CIGNA Corporation 43,800 3,022,200
-----------
4,716,463
INSURANCE - PROPERTY & CASUALTY 0.3%
American International Group, Inc. 2,000 292,000
LEISURE PRODUCT 4.0%
Eastman Kodak Company 52,700 3,850,394
LEISURE SERVICE 2.0%
International Game Technology 79,800 1,935,150
MEDIA - PUBLISHING 3.8%
Harcourt General, Inc. 61,500 3,659,250
MEDIA - RADIO/TV 1.8%
Cox Communications, Inc. Class A (b) 35,800 1,734,062
NATURAL GAS DISTRIBUTION 3.4%
Enron Corporation 41,900 2,265,219
Kinder Morgan Energy Partners LP 27,900 1,007,887
-----------
3,273,106
OFFICE AUTOMATION 2.1%
Xerox Corporation 19,300 1,961,362
OIL - INTERNATIONAL INTEGRATED 0.6%
Texaco, Inc. 9,000 537,187
OIL - NORTH AMERICAN EXPLORATION & PRODUCTION 0.5%
Union Pacific Resources Group, Inc. 28,458 499,794
OIL WELL EQUIPMENT & SERVICE 3.9%
Camco International, Inc. 12,600 981,225
Schlumberger, Ltd. 40,000 2,732,500
-----------
3,713,725
PAPER & FOREST PRODUCTS 0.9%
Kimberly-Clark Corporation 18,100 830,337
PERSONAL & COMMERCIAL LENDING 3.0%
Associates First Capital Corporation 37,324 2,869,282
POLLUTION CONTROL 3.7%
Waste Management, Inc. 101,000 3,535,000
REAL ESTATE 2.9%
The Mills Corporation 37,000 888,000
Vornado Realty Trust 47,300 1,877,219
-----------
2,765,219
RETAIL - DEPARTMENT STORE 1.7%
Federated Department Stores, Inc. (b) 30,800 1,657,425
RETAIL - DRUG STORE 3.5%
Rite Aid Corporation 88,400 3,320,525
RETAIL - RESTAURANT 4.0%
McDonald's Corporation 54,700 3,774,300
TELECOMMUNICATION SERVICE 5.1%
AT&T Corporation 15,900 908,287
AirTouch Communications, Inc. (b) 47,000 2,746,563
WorldCom, Inc. (b) 24,600 1,191,563
-----------
4,846,413
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $68,644,078) 91,099,372
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 0.5%
Vornado Realty Trust 6.50% Series A 8,600 493,425
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $431,438) 493,425
- ------------------------------------------------------------------------------
4
<PAGE>
- ------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- ------------------------------------------------------------------------------
PREFERRED STOCKS 0.0%
Fresenius National Medical Care, Inc. Class D (b) 8,500 $ 553
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $0) 553
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 4.2%
COMMERCIAL PAPER 1.0%
INTEREST BEARING, DUE UPON DEMAND
General Mills, Inc., 5.26% $ 448,100 448,100
Johnson Controls, Inc., 5.26% 517,000 517,000
Pitney Bowes Credit Corporation, 5.26% 34,300 34,300
-----------
999,400
REPURCHASE AGREEMENT 3.2%
Cantor Fitzgerald & Company, Inc. (Dated 6/30/98),
5.68%, Due 7/01/98 (Repurchase proceeds
$3,000,473); Collateralized by: $3,111,000 United
States Treasury Bonds, 3.375%, Due 1/15/07
(Market Value $3,060,446) (c) 3,000,000 3,000,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,999,400) 3,999,400
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $73,074,916) 100.3% 95,592,750
Other Assets and Liabilities, Net (0.3%) (329,370)
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $95,263,380
==============================================================================
LEGEND
- -------------------------------------------------------------------------------
(a) Short-term investments include any security which has a maturity of
less than one year.
(b) Non-income producing security.
(c) The Fund may engage in repurchase agreements where the underlying
collateral consists of U.S. Government securities which are maintained in a
segregated account with a custodian. The market value of the collateral
must exceed the principal amount by at least two percent on a daily basis.
Percentages are stated as a percent of net assets.
See notes to financial statements.
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
June 30, 1998 (Unaudited)
ASSETS:
Investments in Securities, at Value (Cost of $73,074,916) $95,592,750
Receivable for Fund Shares Sold 35,352
Dividends and Interest Receivable 115,846
Other Assets 37,623
-----------
Total Assets 95,781,571
LIABILITIES:
Payable for Securities Purchased 490,836
Payable for Fund Shares Redeemed 1,600
Accrued Operating Expenses and Other Liabilities 25,755
-----------
Total Liabilities 518,191
-----------
NET ASSETS $95,263,380
===========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $70,010,728
Accumulated Net Investment Loss (472)
Undistributed Net Realized Gain 2,735,290
Net Unrealized Appreciation 22,517,834
-----------
Net Assets $95,263,380
===========
Capital Shares Outstanding (Unlimited Number Authorized) 6,304,257
NET ASSET VALUE PER SHARE $15.11
======
5
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the Six Months Ended June 30, 1998 (Unaudited)
INCOME:
Dividends $ 761,766
Interest 177,116
-----------
Total Income 938,882
EXPENSES:
Investment Advisory Fees 499,053
Custodian Fees 3,978
Shareholder Servicing Costs 97,247
Reports to Shareholders 31,744
Other 17,924
-----------
Total Expenses 649,946
-----------
NET INVESTMENT INCOME 288,936
REALIZED AND UNREALIZED GAIN:
Net Realized Gain on Investments 2,777,374
Net Change in Unrealized Appreciation/Depreciation on Investments 8,905,568
-----------
NET GAIN 11,682,942
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $11,971,878
===========
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DEC. 31, 1997
---------------- -------------
(UNAUDITED)
OPERATIONS:
Net Investment Income $ 288,936 $ 615,006
Net Realized Gain 2,777,374 5,877,880
Net Change in Unrealized Appreciation/
Depreciation 8,905,568 10,590,377
----------- -----------
Net Increase in Net Assets Resulting from
Operations 11,971,878 17,083,263
DISTRIBUTIONS:
From Net Investment Income (289,789) (615,576)
From Net Realized Gains (1,866,545) (4,122,458)
----------- -----------
Total Distributions (2,156,334) (4,738,034)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 34,298,830 56,387,272
Proceeds from Reinvestment of Distributions 2,121,415 4,652,803
Payment for Shares Redeemed (44,508,646) (35,344,567)
----------- -----------
Increase (Decrease) in Net Assets from
Capital Share Transactions (8,088,401) 25,695,508
----------- -----------
TOTAL INCREASE IN NET ASSETS 1,727,143 38,040,737
NET ASSETS:
Beginning of Period 93,536,237 55,495,500
----------- -----------
End of Period $95,263,380 $93,536,237
=========== ===========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 2,413,427 4,408,449
Issued in Reinvestment of Distributions 143,540 347,857
Redeemed (3,046,846) (2,768,939)
--------- ---------
Net Increase (Decrease) in Shares of the Fund (489,879) 1,987,367
========= =========
6
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1998 (Unaudited)
1. ORGANIZATION
The Strong Value Fund is a diversified series of Strong Equity Funds, Inc.,
an open-end management investment company registered under the Investment
Company Act of 1940.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
(A) Security Valuation -- 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 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
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 current 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, 1998.
(B) Federal Income and Excise Taxes and Distributions to Shareholders -- It
is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders in
a manner which results in no tax cost to the Fund. Therefore, no federal
income or excise tax provision is required.
The character of distributions made during the year from net investment
income or net realized gains may differ from the characterization for
federal income tax purposes due to differences in the recognition of
income and expense items for financial statement and tax purposes. Where
appropriate, reclassifications between net asset accounts are made for
such differences that are permanent in nature.
(C) Realized Gains and Losses on Investment Transactions -- Gains or losses
realized on investment transactions are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
(D) Futures -- Upon entering into a futures contract, the Fund pledges to the
broker cash or other investments equal to the minimum "initial margin"
requirements of the exchange. 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.
(E) 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.
(F) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are converted
to U.S. dollars based upon current exchange rates. Purchases and sales
of foreign investment securities and income are converted to U.S. dollars
based upon currency exchange rates prevailing on the respective dates of
such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a
component of such gains or losses.
(G) Forward Foreign Currency Exchange Contracts -- Forward foreign currency
exchange contracts are valued at the forward rate and are marked-to-
market daily. The change in market value is recorded as an unrealized
gain or loss. When the contract is closed, the 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.
(H) Additional 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.
Foreign denominated assets and forward currency contracts may involve
greater risks than domestic transactions, including currency, political
and economic, regulatory and market risks.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
June 30, 1998 (Unaudited)
(I) Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of increases
and decreases in net assets from operations during the reporting period.
Actual results could differ from those estimates.
(J) 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 premium and discounts.
3. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (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. Advisory fees are subject to reimbursement by the
Advisor if the Fund's operating expenses exceed certain levels. Shareholder
recordkeeping and related service fees are based on contractually established
rates for each open and closed shareholder account. In addition, the Advisor
is compensated for certain other services related to costs incurred for
reports to shareholders.
Sloate, Weisman, Murray & Company, Inc. ("Sloate") manages the investments of
Strong Value Fund under an agreement with the Advisor. Sloate is compensated
by the Advisor (not the Fund) and bears all of its own expenses in providing
subadvisory services.
The Fund 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 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, 1998, other shareholder
servicing expenses paid to the Advisor, and unaffiliated directors' fees for
the six months then ended, were $20,054, $8,392, and $750, respectively.
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the six months
ended June 30, 1998 were $47,045,608 and $54,889,442, respectively.
5. INCOME TAX INFORMATION
At June 30, 1998, the cost of investments in securities for federal income
tax purposes was $73,074,916. Net unrealized appreciation of securities was
$22,517,834, consisting of gross unrealized appreciation and depreciation of
$23,818,617 and $1,300,783, respectively.
<TABLE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
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 From Net Value,
Beginning Investment Gains on Investment Investment Realized Total End of
Period Ended of Period Income Investments Operations Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
June 30, 1998 (b) $13.77 $0.04 $1.58 $1.62 ($0.04) ($0.24) ($0.28) $15.11
Dec. 31, 1997 11.55 0.10 2.86 2.96 (0.10) (0.64) (0.74) 13.77
Dec. 31, 1996 10.00 0.13 1.55 1.68 (0.13) -- (0.13) 11.55
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
------------------------------------------------------------------
<CAPTION>
Net Ratio of Net
Assets, Ratio of Investment Average
End of Expenses Income Portfolio Commission
Total Period (In to Average to Average Turnover Rate
Period Ended Return Millions) Net Assets Net Assets Rate Paid
<S> <C> <C> <C> <C> <C> <C>
June 30, 1998 (b) +11.9% $95 1.3%* 0.6%* 49.5% $0.0513
Dec. 31, 1997 +25.9% 94 1.3% 0.8% 103.0% 0.0509
Dec. 31, 1996 +16.8% 55 1.5% 1.5% 89.5% 0.0513
* 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, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
</TABLE>
8
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Mary F. Hoppa, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
John A. Flanagan, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
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
AUDITOR
PricewaterhouseCoopers
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030. 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. 8502H98 98SVAL
