[STRONG LOGO]
THE STRONG
VALUE FUND
- ---------------------------------------------------------
SEMI-ANNUAL REPORT o JUNE 30, 1999
[PICTURE OF STRONG FUNDS BUILDING]
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Strong Investor,
Having just returned from a business trip to Indianapolis, I was telling a
friend that almost everywhere I went--every freeway traveled, every side street
ventured down--bulldozers, cranes and backhoes were hard at work.
Indianapolis, like most American cities we visit these days, is in the midst of
a spectacular building boom. A sea of yellow construction equipment is washing
over the nation's landscape. It is the latest chapter in the unbelievable
economic expansion that has blessed this country--almost without pause--since
1982. The signs of prosperity are everywhere:
o Highways jammed with people on their way to do business.
o "Help Wanted" signs in more store windows than most of us have ever
seen at one time.
o Consumer confidence is at an all-time high. Shopping carts are stuffed
with personal computers, printers, software and all sorts of related
high-tech equipment transforming the lives of Americans.
o Restaurants are packed almost every night of the week with people who
have money to spend.
We are fortunate to be living in one of the greatest economic booms in recorded
history. Likewise, we should be grateful for the opportunity to live in this
incredibly prosperous time. We should also remember that nothing lasts forever.
The nation's economic engine is running near full capacity. After eight years of
continuous growth, the American economy is beginning to overheat. It's that
strain on the system that has Mr. Greenspan's Federal Reserve, which is
responsible for managing the economy and keeping inflation at reasonable levels,
obviously concerned.
The Fed's most powerful inflation-fighting tool is its ability to manage
interest rates. Although it is a blunt instrument, raising interest rates is
very effective in rapidly slowing the rate of growth in the economy. For
example, when rates go up, it doesn't take long to see a drop in both the
construction of new homes and the refinancing of mortgage loans. Likewise, it
wouldn't be long before some of those bulldozers and backhoes in Indianapolis
were sidelined.
The Federal Reserve has an awesome responsibility. While they want the economy
to move ahead, they can't let their hopes override common sense. The Fed has
become increasingly worried about excessive valuations in the stock market and
the possibility that, left unchecked, a financial bubble could occur.
Make no mistake about it: Here at Strong, we are bullish on the long-term
prospects for America. But, in the short term, expectations of what the stock
market and the U.S. economy can continue to deliver seem inflated. For that
reason, this could be a good time to complement your portfolio's stock holdings
with more conservative money market and short-term bond funds.
/s/ Dick
<PAGE>
THE STRONG
VALUE FUND
--------------------------
SEMI-ANNUAL REPORT o JUNE 30, 1999
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
- ---------------------------------------=======----------------------------------
FUND
HIGHLIGHTS
o The Strong Value Fund was up 4.72% for the six months ended June 30,
1999.(1)
o Two healthcare-service holdings substantially contributed to the
Fund's underperformance. Both stocks experienced significant one-day
declines after each announced surprising negative news.
o The Fund benefited from a select group of stocks in industries ranging
from broadcasting to retailing, to financials, to telecommunications.
- ---------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS(1)
As of 6-30-99
1-year 7.83%
3-year 17.02%
Since Inception 17.80%
(on 12-29-95)
- ---------------------------------------
FIVE LARGEST
STOCK HOLDINGS
As of 6-30-99
SECURITY % OF NET ASSETS
CBS Corporation 5.5%
Tyco International, Ltd. 5.1%
CIGNA Corporation 4.7%
McDonald's Corporation 4.5%
Associates First
Capital Corporation 4.0%
Please see the Schedule of Investments
in Securities for a complete listing
of the Fund's portfolio.
- ---------------------------------------
PERSPECTIVES
FROM THE MANAGERS
/s/ Laura J. Sloate /s/ Jeff B. Cohen
Laura J. Sloate Jeff B. Cohen
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
We are looking for stocks where catalysts are present to bring out value in the
near term, regardless of the performance of the broader markets. For example, we
added several new positions in food retailing and food processing. We purchased
Kroger, which merged with Fred Meyer to create the largest food retailer in the
U.S. New leadership at Heinz seems determined to bring out the long-dormant
value of its strong brands. Meanwhile, unexpected negative announcements from
two of our healthcare-service holdings led to sharp declines in price--a
significant reason for the Fund's underperformance.
The Internet is a major vehicle for change. In many cases, Internet-related
equities trade at unfathomable valuation metrics. However, we are investing in
stocks of those companies that are employing the Internet in order to enhance
earnings and create new markets. We added to our position in Federated
Department Stores after its recent purchase of Fingerhut. This acquisition gives
the company three businesses in direct retailing--catalogs, web sites, and
order-fulfillment services for Internet retailers.
We purchased Bank One, a pioneer in Internet banking. The company has three
separate Internet banking sites and it is the largest credit card issuer on the
Internet, with exclusive arrangements with numerous Internet companies. Since
credit cards are the primary vehicle for e-commerce payments, Bank One should
benefit as e-commerce and related credit card usage increases.
-------------------------------------
We are investing
in stocks of those
companies that are
employing the
Internet in order to
enhance earnings and
create new markets.
-------------------------------------
- --------------------------------------------------------------------------------
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, and is not annualized.
2
<PAGE>
We initiated a position in Sotheby's because of its development of Internet
auction sites. Its web sites will auction products authenticated by a network of
Sotheby's-associated dealers--a unique, competitive advantage in this arena.
As the 2000 presidential campaign gets underway, we expect that political
rhetoric (e.g., the recent healthcare proposals) will have a rippling effect on
the market. The biggest factor that the market will focus on in Washington will
be Federal Reserve Chairman Alan Greenspan's potential retirement at the
expiration of his term in June 2000.
Strong growth, technology-driven productivity gains and low inflation have
created one of the most powerful economies and markets in the last 100 years.
While the bull market has increased the wealth of millions of people, it has
also increased household exposure to the stock market and has heightened
investor greed. Margin debt is up, bank lending is easing and credit card debt
is soaring. The combination of these factors makes it more likely that a market
decline could cause an economic contraction or that an economic slowdown could
have severe and compounded negative consequences to the market. We believe that
our analytical investment approach makes us poised to capitalize on the
opportunities presented by the continuing volatility in equity markets in the
months ahead.
We appreciate your trust and look forward to a successful year.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-29-95 to 6-30-99
[GRAPH]
THE STRONG S & P 500 Lipper Growth and
VALUE FUND Index* Income 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
12-98 16,941 21,085 17,390
6-99 17,741 23,695 19,406
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
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.
- --------------------------------------------------------------------------------
* The S&P 500 is an unmanaged index generally representative of the U.S.
stock market. The Lipper Growth and Income Funds Index is an
equally-weighted performance index of the largest qualifying funds in this
Lipper category. The Russell 3000(R) Index is an unmanaged index generally
representative of the U.S. stock market. The Russell 3000(R) Value Index is
an unmanaged index generally representative of the U.S. stock market. It
contains securities that value managers typically select from the Russell
3000(R) Index. Source of the S&P and Russell index data is Standard &
Poor's Micropal. Source of the Lipper index data is Lipper Inc.
YOUR FUND'S
APPROACH
THE STRONG VALUE FUND SEEKS TO ACHIEVE CONSISTENTLY SUPERIOR LONG-TERM RATES OF
RETURN RELATIVE TO THE MARKET BY INVESTING IN SECURITIES THAT REPRESENT VALUE
RELATIVE TO THE UNDERLYING COMPANY'S ASSETS, EARNINGS POWER AND/OR
CASH-GENERATING ABILITY. USING FUNDAMENTAL ANALYSIS, THE FUND INVESTS PRIMARILY
IN STOCKS IN WHICH A CATALYST FOR POSITIVE CHANGE IS APPARENT. THE CATALYST
COULD BE MANAGEMENT CHANGE, CORPORATE RESTRUCTURING, A CYCLICAL UPTURN IN AN
INDUSTRY OR A NEW INDUSTRY TREND. THE FUND AVOIDS INVESTING IN TECHNOLOGY AND
FOREIGN STOCKS. WHILE THE FUND MAY INVEST IN COMPANIES OF ANY SIZE, IT CURRENTLY
EMPHASIZES MEDIUM- TO LARGE-CAPITALIZATION COMPANIES.
- --------------------------------------------------------------------------------
MARKET
HIGHLIGHTS
o The stock market moved higher in the first half of the year despite
interest rates rising approximately 100 basis points. Surprisingly, strong
growth in the U.S. economy and a slight upturn in the Asian economies were
the main factors propelling both the broad-based increase in equities and
higher interest rates.
o For the six months ended June 30, 1999, the S&P 500 Index was up 12.38%,
the Russell 3000(R) Value Index increased 12.27%, while the Russell 3000(R)
Index was up 11.36%.* Although large caps still outperformed small to
mid-cap stocks, the performance gap diminished during this period.
3
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES JUNE 30, 1999 (UNAUDITED)
- --------------------------------------------------------------------------------
================================================================================
STRONG VALUE FUND
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
COMMON STOCKS 97.2%
AEROSPACE & DEFENSE 2.7%
Raytheon Company Class A 32,700 $2,252,212
AUTOMOBILE 4.5%
Ford Motor Company 48,800 2,754,150
General Motors Corporation 14,100 930,600
----------
3,684,750
BANK - MONEY CENTER 2.5%
Citigroup, Inc. 42,900 2,037,750
BANK - SUPER REGIONAL 3.1%
Bank One Corporation 42,900 2,555,231
BEVERAGE - SOFT DRINK 0.6%
PepsiCo, Inc. 12,000 464,250
BROKERAGE & INVESTMENT MANAGEMENT 0.9%
Berkshire Hathaway, Inc. Class B (b) 345 772,800
CHEMICAL 0.8%
The Dow Chemical Company 5,000 634,375
CHEMICAL - SPECIALTY 0.4%
Engelhard Corporation 15,000 339,375
COMMERCIAL SERVICE 1.3%
Avery Dennison Corporation 18,200 1,098,825
DIVERSIFIED OPERATIONS 5.1%
Tyco International, Ltd. 44,166 4,184,728
ELECTRIC POWER 0.9%
UtiliCorp United, Inc. 31,300 760,981
ELECTRICAL EQUIPMENT 1.1%
Emerson Electric Company 14,800 930,550
FINANCE - MISCELLANEOUS 2.3%
American Express Company 9,500 1,236,187
First Data Corporation 10,000 489,375
Providian Financial Corporation 2,000 187,000
----------
1,912,562
FOOD 3.0%
H.J. Heinz Company 32,800 1,644,100
Sara Lee Corporation 34,900 791,794
----------
2,435,894
HEALTHCARE - DRUG/DIVERSIFIED 4.0%
American Home Products Corporation 30,000 1,725,000
Bristol-Myers Squibb Company 21,800 1,535,537
----------
3,260,537
HOUSEHOLD APPLIANCES & FURNISHINGS 2.2%
Newell Rubbermaid, Inc. 39,707 1,846,375
INSURANCE - ACCIDENT & HEALTH 3.8%
Provident Companies, Inc. 78,900 3,156,000
INSURANCE - DIVERSIFIED 4.7%
CIGNA Corporation 43,800 3,898,200
INSURANCE - PROPERTY & CASUALTY 2.6%
American International Group, Inc. 10,267 1,201,881
MBIA, Inc. 14,000 906,500
----------
2,108,381
LEISURE PRODUCT 3.1%
Mattel, Inc. 96,500 2,551,219
LEISURE SERVICE 2.8%
The Walt Disney Company 26,800 825,775
Fox Entertainment Group, Inc. Class A (b) 53,900 1,451,931
----------
2,277,706
MACHINERY - TRANSPORTATION EQUIPMENT & PARTS 1.1%
Dana Corporation 19,800 912,037
MEDIA - PUBLISHING 1.1%
Knight-Ridder, Inc. 7,700 423,019
New York Times Company Class A 13,100 482,244
----------
905,263
MEDIA - RADIO/TV 6.0%
CBS Corporation (b) 104,400 4,534,875
Cox Communications, Inc. Class A (b) 9,400 346,037
----------
4,880,912
OFFICE AUTOMATION 1.4%
Xerox Corporation 19,800 1,169,437
OIL - INTERNATIONAL INTEGRATED 4.0%
Chevron Corporation 11,000 1,047,063
Conoco, Inc. Class A 3,000 83,625
Texaco, Inc. 34,100 2,131,250
----------
3,261,938
PERSONAL & COMMERCIAL LENDING 4.0%
Associates First Capital Corporation 74,648 3,307,840
POLLUTION CONTROL 2.9%
Waste Management, Inc. 44,667 2,400,852
REAL ESTATE 2.6%
Vornado Operating, Inc. (b) 4,020 32,160
Vornado Realty Trust 60,300 2,129,344
----------
2,161,504
RETAIL - DEPARTMENT STORE 3.4%
Federated Department Stores, Inc. (b) 52,100 2,758,044
RETAIL - DRUG STORE 1.4%
Rite Aid Corporation 47,000 1,157,375
RETAIL - FOOD CHAIN 4.7%
Albertson's, Inc. 33,200 1,711,875
The Great Atlantic & Pacific Tea Company, Inc. 12,100 409,131
The Kroger Company (b) 61,800 1,726,538
----------
3,847,544
RETAIL - RESTAURANT 4.5%
McDonald's Corporation 89,000 3,676,813
RETAIL - SPECIALTY 1.9%
Sotheby's Holdings, Inc. Class A 20,800 793,000
Tandy Corporation 10,000 488,750
Tiffany & Company 2,500 241,250
----------
1,523,000
STEEL 0.4%
Nucor Corporation 6,200 294,113
TELECOMMUNICATION SERVICE 5.4%
AT&T Corporation 37,650 2,101,341
MCI WorldCom, Inc. (b) 26,800 2,311,500
----------
4,412,841
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $58,602,668) 79,832,214
- --------------------------------------------------------------------------------
PREFERRED STOCKS 0.0%
Fresenius National Medical Care, Inc. Class D (b) 8,500 127
- --------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (Cost $0) 127
- --------------------------------------------------------------------------------
4
<PAGE>
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================================================================================
STRONG VALUE FUND (continued)
================================================================================
Shares or
Principal Value
Amount (Note 2)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 3.2%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
General Mills, Inc., 4.82% $1,722,200 $ 1,722,200
Pitney Bowes Credit Corporation, 4.82% 5,500 5,500
Warner Lambert Company, 4.91% 245,600 245,600
Wisconsin Electric Power Company, 4.91% 669,200 669,200
-----------
2,642,500
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost $2,642,500) 2,642,500
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (Cost $61,245,168) 100.4% 82,474,841
Other Assets and Liabilities, Net (0.4%) (345,852)
- --------------------------------------------------------------------------------
NET ASSETS 100.0% $82,128,989
================================================================================
- --------------------------------------------------------------------------------
LEGEND
- --------------------------------------------------------------------------------
(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.
Percentages are stated as a percent of net assets.
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
STRONG VALUE
FUND
------------
ASSETS:
Investments in Securities, at Value
(Cost of $61,245,168) $82,474,841
Receivable for Securities Sold 304,682
Receivable for Fund Shares Sold 494
Dividends and Interest Receivable 96,477
Other Assets 28,400
-----------
Total Assets 82,904,894
LIABILITIES:
Payable for Securities Purchased 706,518
Payable for Fund Shares Redeemed 43,988
Accrued Operating Expenses and Other Liabilities 25,399
-----------
Total Liabilities 775,905
-----------
NET ASSETS $82,128,989
===========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $55,143,162
Undistributed Net Investment Income 47,222
Undistributed Net Realized Gain 5,708,932
Net Unrealized Appreciation 21,229,673
-----------
Net Assets $82,128,989
===========
Capital Shares Outstanding (Unlimited Number Authorized) 5,304,266
NET ASSET VALUE PER SHARE $15.48
======
See Notes to Financial Statements.
5
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Six Months Ended June 30, 1999 (Unaudited)
STRONG VALUE
FUND
------------
INCOME:
Dividends $ 604,152
Interest 89,072
----------
Total Income 693,224
EXPENSES:
Investment Advisory Fees 412,354
Custodian Fees 3,083
Shareholder Servicing Costs 87,743
Other 59,279
----------
Total Expenses 562,459
----------
NET INVESTMENT INCOME 130,765
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain on Investments 6,061,887
Net Change in Unrealized Appreciation/Depreciation on Investments (2,316,039)
----------
NET GAIN ON INVESTMENTS 3,745,848
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,876,613
==========
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------
<CAPTION>
STRONG VALUE FUND
--------------------------------
Six Months Ended Year Ended
June 30, 1999 Dec. 31, 1998
---------------- -------------
(Unaudited)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 130,765 $ 497,380
Net Realized Gain 6,061,887 3,779,680
Net Change in Unrealized Appreciation/Depreciation (2,316,039) 9,933,445
----------- -----------
Net Increase in Net Assets Resulting from Operations 3,876,613 14,210,505
DISTRIBUTIONS:
From Net Investment Income (97,924) (446,330)
From Net Realized Gains (826,947) (5,167,200)
----------- -----------
Total Distributions (924,871) (5,613,530)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 10,063,896 45,279,469
Proceeds from Reinvestment of Distributions 902,182 5,500,744
Payment for Shares Redeemed (23,139,362) (61,562,894)
----------- -----------
Net Decrease in Net Assets from Capital Share Transactions (12,173,284) (10,782,681)
----------- -----------
TOTAL DECREASE IN NET ASSETS (9,221,542) (2,185,706)
NET ASSETS:
Beginning of Period 91,350,531 93,536,237
----------- -----------
End of Period $82,128,989 $91,350,531
=========== ===========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 664,290 3,192,624
Issued in Reinvestment of Distributions 61,415 380,493
Redeemed (1,530,853) (4,257,839)
----------- -----------
Net Decrease in Shares of the Fund (805,148) (684,722)
=========== ===========
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited) (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 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 sale or bid prices are used.
Securities for which market quotations are not readily available are
valued at fair value as determined in good faith under consistently
applied procedures established by and under the general supervision of
the Board of Directors. Securities which are purchased within 60 days
of their stated maturity are valued at amortized cost, which
approximates fair value.
The Fund may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration
to pertinent factors including recent private sales, market conditions
and the issuer's financial performance. The Fund generally bears the
costs, if any, associated with the disposition of restricted
securities. The Fund held no restricted securities at June 30, 1999.
(B) Federal Income and Excise Taxes and Distributions to Shareholders --
The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders
in a manner which results in no tax cost to the Fund. Therefore, no
federal income or excise tax provision is required.
The character of distributions made during the year from net
investment income or net realized gains for financial statement
purposes may differ from the characterization for federal income tax
purposes due to differences in the recognition of income and expense
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
The Fund generally pays dividends from net investment income quarterly
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 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.
Investments in foreign denominated assets or forward currency
contracts may involve greater risks than domestic investments, due to
currency, political and economic, regulatory and market risks.
(E) 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.
(F) 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.
(G) 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
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. Based on the terms of the Advisory Agreement,
advisory fees and other expenses will be waived by the Advisor if the
7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
Fund's operating expenses exceed 2% of the average daily net assets of the
Fund. In addition, the Fund's Advisor may voluntarily waive or absorb
certain expenses at their discretion. Shareholder recordkeeping and related
service fees are based on contractually established rates for each open and
closed shareholder account. The Advisor is compensated for certain other
services related to costs incurred for reports to shareholders.
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 in money market funds sponsored and managed by the
Advisor, subject to certain limitations. The terms of such transactions are
identical to those of non-related entities except that, to avoid duplicate
investment advisory fees, advisory fees of the Fund are reduced by an
amount equal to advisory fees paid to the Advisor under its investment
advisory agreement with the money market funds.
The amount payable to the Advisor at June 30, 1999, shareholder servicing
and other expenses paid to the Advisor, and unaffiliated directors' fees
for the six months then ended, were $11,141, $88,278 and $750,
respectively.
4. LINE OF CREDIT
The Strong Funds have established a line of credit agreement ("LOC") with
certain financial institutions to be used for temporary or emergency
purposes, primarily for financing redemption payments. Combined borrowings
among all participating Strong Funds are subject to a $350 million cap on
the total line of credit. For individual Funds, borrowings under the LOC
are limited to either the lesser of 15% of the market value of total assets
or any explicit borrowing limits in the Fund's prospectus. Borrowings under
the LOC bear interest based on prevailing market rates as defined in the
LOC. A commitment fee of .07% per annum is incurred on the unused portion
of the line of credit and is allocated to all participating Strong Funds.
At June 30, 1999, there were no borrowings by the Fund outstanding under
the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the six
months ended June 30, 1999 were $33,429,386 and $44,516,901, respectively.
6. INCOME TAX INFORMATION
At June 30, 1999, the cost of investments in securities for federal income
tax purposes was $61,296,797. Net unrealized appreciation of securities was
$21,178,044 consisting of gross unrealized appreciation and depreciation of
$21,315,594 and $137,550 respectively.
<TABLE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------
STRONG VALUE FUND
- --------------------------------------------------------------------------------------------------------
Period Ended
-------------------------------------------
<CAPTION>
June 30, Dec. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999(b) 1998 1997 1996
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $14.95 $13.77 $11.55 $10.00
Income From Investment Operations
Net Investment Income 0.03 0.08 0.10 0.13
Net Realized and Unrealized Gains on Investments 0.67 1.97 2.86 1.55
- --------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.70 2.05 2.96 1.68
Less Distributions
From Net Investment Income (0.02) (0.07) (0.10) (0.13)
From Net Realized Gains (0.15) (0.80) (0.64) --
- --------------------------------------------------------------------------------------------------------
Total Distributions (0.17) (0.87) (0.74) (0.13)
- --------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $15.48 $14.95 $13.77 $11.55
========================================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------------------------
Total Return +4.7% +15.2% +25.9% +16.8%
Net Assets, End of Period (In Millions) $82 $91 $94 $55
Ratio of Expenses to Average Net Assets 1.3%* 1.3% 1.3% 1.5%
Ratio of Net Investment Income to Average Net Assets 0.3%* 0.5% 0.8% 1.5%
Portfolio Turnover Rate 41.3% 92.6% 103.0% 89.5%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the
entire period.
(b) For the six months ended June 30, 1999 (unaudited).
See Notes to Financial Statements.
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8
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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
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
John W. Widmer, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
DISTRIBUTOR
Strong Funds Distributors, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management fees
and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030.
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863.
--------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE ON COMPUTER]
Strong On-line
www.strongfunds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Investments, Inc. 12422H99 SVAL
<PAGE>
