<PAGE>
THE STRONG
----------
DOW 30
VALUE FUND
=================================
ANNUAL REPORT o DECEMBER 31, 1998
=================================
[PICTURE OF STRONG FUNDS BUILDING]
[STRONG LOGO]
STRONG FUNDS
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Strong Investor,
It was a rainy Friday night in Owings Mills, Md., in October 1996. I was
sitting on the set of "Wall Street Week," being interviewed by Louis Rukeyser.
We had been talking about the incredible bull market that was heading for
another year of double-digit returns. Lou asked--with tongue in cheek--if I
thought it could last forever.
My response was that I didn't know how long the bull would run, but that I
was pretty sure of one thing: We ought to enjoy it. We live in remarkable times,
the kind of times we only dreamt about when I was in school. I told Lou that
inflation was almost nonexistent, interest rates appeared to be heading lower,
and American technology had made a lot of companies unbelievably efficient and
productive.
"It's the best I've seen things in the 30 years since I got out of school,"
I said.
"Then you'd say the future probably lies ahead of us," observed Lou.
"Yes," I replied, "I'd say the future is ahead of us."
Here we are more than two years later, fast approaching the end of the
millennium, and the story line is pretty much unchanged. Inflation is low,
interest rates are still moving down--(and we believe they will move lower in
the months and years ahead)--and one technological miracle after another arrives
regularly.
Beyond that, we've just come off the fourth successive year in which the
S&P 500 returned more than 20%. Mind you, not every common stock finished 1998
so strong. Once again the investment gods smiled mainly on the bigger blue
chips. But generally speaking, after encountering some "air pockets" over Asia
last summer, the US and European markets rebounded when the Federal Reserve
reduced interest rates three times.
If there was one lesson that the markets taught us last year, it was the
importance of creating a balanced portfolio. That means splitting your
investments between stocks, bonds and cash. Common stocks today are the darling
of American investors, particularly the technology stocks. Bonds are not nearly
as romantic, and are also a little tougher to get your arms around. But there is
no disputing their importance in a sound, balanced investment portfolio. They
generate a consistent stream of income and provide protection when inflation is
low.
You ought to remember that in 1999. As long as interest rates fall, bonds
will continue to provide very attractive returns. If you find the world of bonds
a little tough to figure at times--as a number of our shareholders have reminded
us--call for a better explanation. We'll be happy to walk you through the math.
You should also make sure to spread out your stock investments among
small-, medium-, and large-cap stocks. While the blue chips, Internet and other
tech stocks received the spotlight in 1998, they are not the only game in town.
There are an awful lot of smart, solid, mid-sized and smaller companies out in
the common stock universe that have not shared in the run-up. You can find some
great bargains and, sooner or later, these companies are going to get their due.
/s/ Dick
<PAGE>
THE STRONG
----------
DOW 30
VALUE FUND
=================================
ANNUAL REPORT o DECEMBER 31, 1998
=================================
TABLE OF CONTENTS
INVESTMENT REVIEW
The Strong Dow 30 Value Fund ............................. 2
FINANCIAL INFORMATION
Schedule of Investments in Securities .................... 4
Statement of Assets and Liabilities ...................... 5
Statement of Operations .................................. 6
Statement of Changes in Net Assets ....................... 7
Notes to Financial Statements ............................ 8
FINANCIAL HIGHLIGHTS ..............................................10
REPORT OF INDEPENDENT ACCOUNTANTS .................................11
<PAGE>
==============
THE STRONG DOW 30 VALUE FUND
- ------------------------------------==============------------------------------
FUND HIGHLIGHTS
o The Strong Dow 30 Value Fund returned 16.11% for the year ended December
31, 1998.
o The Dow Jones Industrial AverageSM lagged behind other large-company market
indexes in 1998, largely because of its greater exposure to multinational
companies that could be hurt by economic weakness in Asia and Latin
America.
o In the DJIA and in the broad market, value stocks lagged behind growth
stocks.
o The Fund continues to adhere to its value-oriented approach. During the
fourth quarter, the Fund took advantage of weakness in financial stocks,
accumulating bigger positions in Citigroup, J.P. Morgan, and American
Express.
- ---------------------------------------
AVERAGE ANNUAL
TOTAL RETURN
As of 12-31-98
Since Inception 16.11%
(on 12-31-97)
- ---------------------------------------
FIVE LARGEST
STOCK HOLDINGS
As of 12-31-98
SECURITY % OF NET ASSETS
International Business
Machines Corporation 8.6%
Merck & Company, Inc. 7.1%
United Technologies
Corporation 5.4%
J.P. Morgan & Company, Inc. 5.3%
American Express Company 5.0%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
PERSPECTIVES
FROM THE MANAGERS
/s/ Charles B. Carlson /s/ Richard T. Moroney
Charles B. Carlson Richard T. Moroney
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
For 1998, the Strong Dow 30 Value Fund returned 16.11%, a figure that falls
slightly below the Dow Jones Industrial Average'sSM total return for 1998, but
places ahead of the Dow Jones' 50-year average annual return. Given this Fund's
value orientation and the fact that the markets strongly favored growth stocks
over value stocks, it's no small feat that this Fund tracked its bench-mark so
closely.
With the actively managed portion of the portfolio, we overweight stocks that we
believe offer good value. Our criteria include dividend yields, price/earnings
ratios, price/cash flow ratios, and price/earnings ratios relative to earnings
growth. Over time, we believe a value orientation is the best way to make money
in the stock market.
In 1998, however, the market did not reward value stocks. Instead, investors
were most interested in large, well-known stocks, pushing their prices to
unprecedented levels. Examples of these stocks in the Dow include Procter &
Gamble, McDonald's, and Wal-Mart Stores. Although many investors were willing to
chase after these ever-escalating stocks, in keeping with our value orientation,
we weren't. That approach hurt the Fund's relative performance in 1998, but we
believe it will serve our shareholders well if these stocks' prices move closer
to historical norms--as we believe they will.
---------------------
EVEN THOUGH
SOME OF THE
DOW'S STOCKS ARE
NOW VERY EXPENSIVE,
WE CONTINUE TO FIND
GOOD VALUES.
---------------------
- --------------------------------------------------------------------------------
2
<PAGE>
Even though some of the Dow's stocks are now very expensive, we continue to find
good values. In our view, such high-quality franchises as AT&T, Hewlett-Packard,
and Philip Morris have bright growth prospects and reasonably priced stocks.
During the fourth quarter, a selloff among financial stocks presented a buying
opportunity. When American Express, Citigroup, and J.P. Morgan began to score
higher in our value models, we boosted the Fund's exposure to these high-quality
stocks.
In the year ahead, we expect more buying opportunities, for several reasons.
First, it's difficult to believe that the stock market will be able to continue
the strong performance it has posted over the past four years. Further,
corporate profitability will likely be under pressure in 1999, thanks in part to
turmoil in global markets. As long as interest rates and inflation stay under
control, however, we believe the Fund is positioned well for 1999. In what is
likely to be a more challenging investment climate going forward, we anticipate
that investors will focus more on value stocks than they have recently. This
would be likely to improve the Fund's performance relative to other large-cap
indexes.
Thank you for choosing the Strong Dow 30 Value Fund to help you achieve your
financial goals.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-31-97 to 12-31-98
[GRAPH]
THE STRONG Dow Jones Lipper Growth &
DOW 30 VALUE Industrial Income Funds
FUND Average SM* Index*
12-97 10,000 10,000 10,000
3-98 11,126 11,171 11,140
6-98 11,272 11,411 11,161
9-98 10,064 10,047 9,769
12-98 11,611 11,812 11,358
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 Dow
Jones Industrial AverageSM (DJIA) and the Lipper Growth & 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.
- --------------------------------------------------------------------------------
* The DJIA is an unmanaged index generally representative of the U.S. stock
market. The Lipper Growth & Income Funds Index is an equally-weighted
performance index of the largest qualifying funds in this Lipper category.
Source of the DJIA index data is Standard & Poor's Micropal. Source of the
Lipper index data is Lipper, Inc.
YOUR FUND'S
APPROACH
THE STRONG DOW 30 VALUE FUND INVESTS SOLELY IN THE 30 STOCKS THAT COMPRISE THE
DOW JONES INDUSTRIAL AVERAGE (DJIA). WITH ONE HALF OF THE FUND'S ASSETS, THE
MANAGERS ATTEMPT TO REPLICATE THE DJIA AND EQUAL ITS RETURN. IN THE OTHER HALF
OF THE PORTFOLIO, THE MANAGERS ATTEMPT TO BETTER THE DJIA'S RETURN BY
EMPHASIZING DJIA STOCKS SELLING AT ATTRACTIVE VALUATIONS. IN ASSESSING VALUE,
THE MANAGERS CONSIDER DIVIDEND YIELD, PRICE/EARNINGS RATIOS, PRICE/CASH FLOW
RATIOS, AND COMPANY GROWTH RATES. STOCKS THAT APPEAR TO BE INEXPENSIVE COMPARED
WITH HISTORICAL NORMS OR WITH OTHER DJIA STOCKS ARE OVERWEIGHTED, AND STOCKS
THAT APPEAR TO BE EXPENSIVE ARE UNDERWEIGHTED.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o For 1998, the Dow Jones Industrial AverageSM, rose 18.13%. In the fourth
quarter alone, it rose 17.57%.
o Low interest rates were the primary force driving the market higher.
o The year 1998 marked a continuation of investors' love affair with
large-capitalization stocks, especially those in such glamour areas as
technology and health care. For the first time in history, the Dow
Industrials registered double-digit percentage gains four years running.
o While international developments fueled a substantial correction in late
summer and early fall, the market was able to overcome bad news and move
higher.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES DECEMBER 31, 1998
- --------------------------------------------------------------------------------
================================================================================
STRONG DOW 30 VALUE FUND
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS 99.7%
AEROSPACE & DEFENSE 7.1%
The Boeing Company 14,000 $ 456,750
United Technologies Corporation 14,100 1,533,375
---------
1,990,125
AUTO & TRUCK PARTS 2.3%
The Goodyear Tire & Rubber Company 13,100 660,731
AUTOMOBILE 3.8%
General Motors Corporation 15,000 1,073,438
BANK - MONEY CENTER 8.4%
Citigroup, Inc. 17,700 876,150
J.P. Morgan & Company, Inc. 14,300 1,502,394
---------
2,378,544
BEVERAGE - SOFT DRINK 1.5%
The Coca-Cola Company 6,300 421,312
CHEMICAL 1.8%
Union Carbide Corporation 11,700 497,250
COMPUTER - MAINFRAME 8.6%
International Business Machines Corporation 13,100 2,420,225
COMPUTER - PERSONAL & WORKSTATION 3.6%
Hewlett-Packard Company 14,700 1,004,194
DIVERSIFIED OPERATIONS 7.8%
Allied Signal, Inc. 14,700 651,394
E.I. Du Pont de Nemours & Company 12,500 663,281
Minnesota Mining & Manufacturing Company 12,600 896,175
---------
2,210,850
ELECTRICAL EQUIPMENT 4.6%
General Electric Company 12,800 1,306,400
FINANCE - MISCELLANEOUS 5.0%
American Express Company 13,900 1,421,275
HEALTHCARE - DRUG/DIVERSIFIED 10.4%
Johnson & Johnson 11,400 956,175
Merck & Company, Inc. 13,500 1,993,781
---------
2,949,956
LEISURE PRODUCT 3.0%
Eastman Kodak Company 11,700 842,400
LEISURE SERVICE 1.5%
The Walt Disney Company 14,200 426,000
MACHINERY - CONSTRUCTION & MINING 2.2%
Caterpillar, Inc. 13,600 625,600
METALS & MINING 3.7%
Aluminum Company of America 14,100 1,051,331
OIL - INTERNATIONAL INTEGRATED 6.3%
Chevron Corporation 12,400 1,028,425
Exxon Corporation 10,400 760,500
---------
1,788,925
PAPER & FOREST PRODUCTS 1.0%
International Paper Company 6,300 282,319
RETAIL - DEPARTMENT STORE 2.3%
Sears, Roebuck & Company 15,400 654,500
RETAIL - MAJOR CHAIN 3.6%
Wal-Mart Stores, Inc. 12,400 1,009,825
RETAIL - RESTAURANT 1.7%
McDonald's Corporation 6,300 482,737
SOAP & CLEANING PREPARATION 2.1%
The Procter & Gamble Company 6,400 584,400
TELECOMMUNICATION SERVICE 4.4%
AT&T Corporation 16,600 1,249,150
TOBACCO 3.0%
Philip Morris Companies, Inc. 15,800 845,300
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $25,780,075) 28,176,787
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 0.3%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.17% $78,300 78,300
Warner Lambert Company, 5.18% 100 100
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $78,400) 78,400
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $25,858,475) 100.0% 28,255,187
Other Assets and Liabilities, Net (0.0%) (7,639)
- --------------------------------------------------------------------------------
NET ASSETS 100.0% $28,247,548
================================================================================
WRITTEN OPTIONS ACTIVITY
- --------------------------------------------------------------------------------
Contracts Premiums
- --------------------------------------------------------------------------------
Options outstanding at beginning of period -- --
Options written during the period 1,810 $125,340
Options closed (1,120) (62,634)
Options expired -- --
Options exercised (690) (62,706)
----- -------
Options outstanding at end of period -- $ --
===== ========
Closed and exercised options resulted in a capital loss of $230,291.
LEGEND
- --------------------------------------------------------------------------------
(a) Short-term investments include any security which has a maturity of
less than one year.
Percentages are stated as a percent of net assets.
See Notes to Financial Statements.
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1998
STRONG DOW 30
VALUE FUND
-------------
ASSETS:
Investments in Securities, at Value (Cost of $25,858,475) $28,255,187
Receivable for Fund Shares Sold 1,000
Dividends and Interest Receivable 50,343
Other Assets 27,030
-----------
Total Assets 28,333,560
LIABILITIES:
Payable for Securities Purchased 65,057
Accrued Operating Expenses and Other Liabilities 20,955
-----------
Total Liabilities 86,012
-----------
NET ASSETS $28,247,548
===========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $26,606,323
Accumulated Net Investment Income 31
Accumulated Net Realized Loss (755,518)
Net Unrealized Appreciation 2,396,712
-----------
Net Assets $28,247,548
===========
Capital Shares Outstanding (Unlimited Number Authorized) 2,470,913
NET ASSET VALUE PER SHARE $11.43
======
See Notes to Financial Statements.
5
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1998
STRONG DOW 30
VALUE FUND
-------------
INCOME:
Dividends $ 338,657
Interest 53,098
----------
Total Income 391,755
EXPENSES:
Investment Advisory Fees 149,451
Custodian Fees 69,127
Shareholder Servicing Costs 101,492
Reports to Shareholders 23,714
Federal and State Registration Fees 46,793
Other 16,673
----------
Total Expenses before Waivers and Absorptions 407,250
Expense Waivers and Absorptions by Advisor 397,261
----------
Expenses, Net 9,989
----------
NET INVESTMENT INCOME 381,766
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Loss on:
Investments (525,227)
Options (230,291)
----------
Net Realized Loss (755,518)
Change in Unrealized Appreciation/Depreciation on Investments 2,396,712
----------
NET GAIN ON INVESTMENTS 1,641,194
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,022,960
==========
See Notes to Financial Statements.
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1998 (Note 1)
STRONG DOW 30
VALUE FUND
-------------
OPERATIONS:
Net Investment Income $ 381,766
Net Realized Loss (755,518)
Net Change in Unrealized Appreciation/Depreciation 2,396,712
-----------
Net Increase in Net Assets Resulting from Operations 2,022,960
DISTRIBUTIONS:
From Net Investment Income (381,735)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 36,153,107
Proceeds from Reinvestment of Distributions 370,392
Payment for Shares Redeemed (9,917,176)
-----------
Net Increase in Net Assets from Capital Share Transactions 26,606,323
-----------
Total Increase in Net Assets 28,247,548
NET ASSETS:
Beginning of Year --
-----------
End of Year $28,247,548
===========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 3,359,816
Issued in Reinvestment of Distributions 32,316
Redeemed (921,219)
---------
Net Increase in Shares of the Fund 2,470,913
=========
See Notes to Financial Statements.
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DECEMBER 31, 1998
1. ORGANIZATION
Strong Dow 30 Value Fund is a non-diversified series of Strong Equity
Funds, Inc., an open-end management investment company registered under the
Investment Company Act of 1940. The Fund commenced operations on January 2,
1998.
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 December 31,
1998.
(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 may differ from the
characterization for federal income tax purposes due to differences in
the recognition of income and expense items for financial statement
and tax purposes. Where appropriate, reclassifications between net
asset accounts are made for such differences that are permanent in
nature.
(C) Realized Gains and Losses on Investment Transactions -- Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) Certain Investment Risks -- The 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.
(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. 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.
(G) 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), purchased 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
8
<PAGE>
- --------------------------------------------------------------------------------
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.
(H) 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.
(I) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and distributions to shareholders are recorded
on the ex-dividend date. Interest income is recorded on the accrual
basis and includes amortization of premium and discounts.
3. RELATED PARTY TRANSACTIONS
The Advisor, with whom certain officers and directors of the Fund are
affiliated, provides investment advisory 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 0.80% 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 certain expenses at their discretion. During 1998, the
Fund's advisor voluntarily waived expenses of $360,173. 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.
Horizon Investment Services, LLC ("Horizon") manages the investments of
Strong Dow 30 Value Fund under an agreement with the Advisor. Horizon 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 December 31, 1998, shareholder
servicing and other expenses paid to the Advisor, and unaffiliated
directors' fees for the year then ended, were $20,540, $94,866 and $1,500,
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 December 31, 1998, there were no borrowings by the Funds outstanding
under the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the year
ended December 31, 1998 were $34,884,180 and $8,578,878, respectively.
6. INCOME TAX INFORMATION
At December 31, 1998, the cost of investments in securities for federal
income tax purposes was $26,329,882. Net unrealized appreciation of
securities was $1,925,305, consisting of gross unrealized appreciation and
depreciation of $3,046,399 and $1,121,094, respectively. The Fund had a
capital loss carryover of $287,516 which expires in 2006.
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 85.8%(unaudited).
9
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STRONG DOW 30 VALUE FUND
- --------------------------------------------------------------------------------
Year Ended
----------
SELECTED PER-SHARE DATA(a) 1998
- ---------------------------------------------------------------------
Net Asset Value, Beginning of Period $10.00
Income From Investment Operations
Net Investment Income 0.18
Net Realized and Unrealized Gains on Investments 1.43
- ---------------------------------------------------------------------
Total from Investment Operations 1.61
Less Distributions
From Net Investment Income (0.18)
- ---------------------------------------------------------------------
Total Distributions (0.18)
- ---------------------------------------------------------------------
Net Asset Value, End of Period $11.43
=====================================================================
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------
Total Return +16.1%
Net Assets, End of Period (In Thousands) $28,248
Ratio of Expenses to Average Net Assets 0.1%
Ratio of Expenses to Average Net
Assets Without Voluntary Waivers and Absorptions 2.0%
Ratio of Net Investment Income to Average Net Assets 2.1%
Portfolio Turnover Rate 45.7%
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
See Notes to Financial Statements.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of the Strong Equity Funds, Inc.
and the Shareholders of Strong Dow 30 Value Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Strong Dow 30 Value Fund (the
"Fund") (one of the portfolios constituting Strong Equity Funds, Inc.) at
December 31, 1998, the results of its operations, the changes in its net assets
and the financial highlights for the period from January 2, 1998 (commencement
of operations) to December 31, 1998, in conformity with generally accepted
accounting principles. 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 generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at December 31, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 9, 1999
11
<PAGE>
NOTES
- --------------------------------------------------------------------------------
12
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Mary F. Hoppa, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
Dana J. Russart, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
DISTRIBUTOR
Strong Investments, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Bank Milwaukee, N.A.
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
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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 Investments, Inc. 10378A99Y ADOW
