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[PHOTO OF WOMAN WITH 3 KIDS]
[LOGO]
THE STRONG VALUE FUND
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Annual Report - December 31, 1999
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LETTER FROM THE CHAIRMAN
Dear Strong Investor,
As an apprentice investment analyst in the 1960s, I observed and experienced
powerful economic and stock market growth. The explosive stock market was very
profitable for investors, and I always planned for the time when I'd be able to
position our investors to take advantage of that kind of growth again. The
dramatic market move of the late 1990s reminded me of those days in the 1960s
and provided an excellent opportunity.
In our strategic planning effort, what Strong saw coming in the 1990s was a
powerful wave of innovation and technological change that was going to affect
the way we all lived our daily lives. We knew the successful companies of the
future would be those that moved quickly to embrace this new way of thinking. It
was Strong's responsibility to ensure that our shareholders benefited from this
change and capitalized on the opportunity.
How did Strong position our investors to take advantage of the coming growth?
First, we expanded our fund lineup to offer quality choices in every asset
class. We then put technology to work in a number of ways--all intended to
provide our customers and portfolio managers with state-of-the-art tools for
better decision making, and to enhance the customer experience in every
interaction with Strong. And as we made these improvements, we always stayed
true to our commitment to developing a one-on-one relationship with each of our
investors.
When it comes right down to it, it's our job to make you money. And many of you
benefited in 1999, the most exceptional performance year in Strong's history.
Many major financial publications have also recently recognized Strong.
What can you expect from Strong in the future? We'll continue working to improve
our investment management expertise to try to deliver market-beating results
year after year. And we'll continue to innovate and develop practical technology
solutions aimed at helping you make better investment decisions. And you can be
assured that we will continue to work to deliver the "across-the-kitchen-table"
customer experience you've come to expect from STRONG.
/s/ DICK
<PAGE>
THE STRONG
VALUE
FUND
----
ANNUAL REPORT - DECEMBER 31, 1999
Table of Contents
INVESTMENT REVIEW
The Strong Value Fund ................................................2
FINANCIAL INFORMATION
Schedule of Investments in Securities ................................4
Statement of Assets and Liabilities ..................................6
Statement of Operations ..............................................7
Statements of Changes in Net Assets ..................................8
Notes to Financial Statements ........................................9
FINANCIAL HIGHLIGHTS .....................................................11
REPORT OF INDEPENDENT ACCOUNTANTS ........................................12
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THE STRONG VALUE FUND
---------------------
PERSPECTIVES
FROM THE MANAGERS
/s/ Laura J. Sloate /s/ Jeff B. Cohen
Laura J. Sloate Jeff B. Cohen
Portfolio Co-manager Portfolio Co-manager
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For most of the 1990s, mergers and corporate restructurings were the catalysts
that generated good stock performance. In 1999, such activity failed to serve as
a catalyst to performance, and these companies dramatically underperformed. As a
result, the Fund lowered its exposure to companies created via mergers.
Rising stock volatility had a significant effect on value stocks. Before 1999,
the stock impact of a slight earnings or sales miss by a value company was
minimal as patient value investors focused on the longer term. This year, no
miss was too small to ignore. Stocks declined 20% to 50% in one day as a result
of shortfalls. No doubt, the stellar returns of the Internet and wireless
communications companies, which have not yet been held accountable for
profitability targets, exacerbated the trend against value stocks by greatly
increasing the opportunity cost of patient capital.
We increased the Fund's exposure to companies selling at a discount to the
market or to their peers that generate earnings growth internally (i.e., without
significant mergers). We purchased several newspaper stocks (New York Times,
Gannett, and Knight Ridder) as strong advertising gains led to higher earnings
and cash flow. We intitiated a position in Convergys, a leading billing
outsourcing company to the cable and wireless industry. Unit and volume growth
in these industries should drive earnings growth at Convergys.
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THE STELLAR RETURNS OF THE INTERNET AND WIRELESS COMPANIES... EXACERBATED THE
TREND AGAINST VALUE STOCKS BY GREATLY INCREASING THE OPPORTUNITY COST OF PATIENT
CAPITAL.
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[SIDENOTE]
FUND
HIGHLIGHTS
- - The Strong Value Fund returned -1.96% for the year ended December 31,
1999, while the S&P 500 Stock Index returned 21.04%.*
- - The Fund was hurt by holdings in companies created from merger activity.
These stocks experienced significant declines when the mergers fell short
of the financial goals that management had projected and investors had
expected.
- - The Fund's performance was also penalized by an underweighting in
technology stocks, the market's best performing sector.
- - Strong positive contributions came from several financial,
telecommunications, and media stocks.
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[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
As of 12-31-99
1-year -1.96%
3-year 12.45%
Since Inception 13.53%
(on 12-29-95)
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[SIDENOTE]
FIVE LARGEST
STOCK HOLDINGS
As of 12-31-99
SECURITY % OF NET ASSETS
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CBS Corporation 5.7%
Federated Department
Stores, Inc. 4.6%
McDonald's Corporation 4.1%
American International
Group, Inc. 3.9%
Associates First
Capital Corporation 3.5%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
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2
<PAGE>
Tax selling at year-end affected a number of the Fund's holdings. Many are
priced below their perceived value and their future growth prospects.
Going forward, as the effects of rising interest rates slowly take hold,
consumer spending should moderate from its current torrid pace by the second
half of the year. In this likely scenario, U.S. economic growth will slow.
Technology-driven productivity gains should dampen the effect of higher wages.
As the 2000 presidential campaign gets underway, we expect that political
rhetoric (e.g., the recent healthcare proposals) will have a dampening effect on
the market.
Internet and wireless stocks currently have no valuation limits because of
perceived high growth potentials. While the underlying technology benefits are
real, at current valuations, some as high as several hundred times revenues,
these stocks do not represent attractively priced investment opportunities.
As always, we will seek out investments in sound companies where a catalyst for
positive change is in place and where there is value relative to assets,
earnings power, or cash generating ability. We believe that this analytical
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 thank you for your patience in the Strong
Value Fund.
<TABLE>
<CAPTION>
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-29-95 to 12-31-99
THE STRONG S&P 500 Lipper Large-Cap
VALUE FUND Stock Index* Value Funds Index*
---------- ----------- -----------------
<S> <C> <C> <C>
12/95 $10,000 $10,000 $10,000
6/96 $11,073 $11,010 $10,884
12/96 $11,682 $12,296 $12,107
6/97 $13,140 $14,830 $14,189
12/97 $14,710 $16,398 $15,554
6/98 $16,453 $19,303 $17,539
12/98 $16,941 $21,085 $18,391
6/99 $17,742 $23,696 $20,456
12/99 $16,610 $25,522 $20,373
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Standard & Poor's 500 Stock Index ("S&P 500") and the Lipper Large-Cap Value
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.
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[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG VALUE FUND SEEKS CAPITAL GROWTH BY USING A FOUR-STEP INVESTMENT
APPROACH. FIRST, THE MANAGERS IDENTIFY TRENDS OR EVENTS THAT MAY INCREASE A
STOCK'S VALUE. SECOND, THEY LOOK FOR LARGE- AND MEDIUM-CAPITALIZATION COMPANIES
WITH COMPETITIVE ADVANTAGES. THIRD, THEY LOOK FOR COMPANIES THEY BELIEVE ARE
INEXPENSIVELY PRICED. FINALLY, THEY EMPLOY A STRICT STOCK-SELLING APPROACH.
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[SIDENOTE]
MARKET
HIGHLIGHTS
- - The stock market completed another strong year in the face of a
140-basis-point increase in long-term interest rates. Technology stocks drove
the market higher as investors paid tremendous premiums for companies with
internally generated sales growth.
- - The U.S. economy continued to grow as consumer spending rose to record
levels. Inflation, while still minimal, is creeping upward as total employee
compensation increases in a low unemployment environment.
- - For the year ended December 31, 1999, the Russell 3000-Registered Trademark-
Value Index* increased 6.65%. Although large caps still outperformed small-
to mid-cap stocks, the performance gap diminished.
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* The S&P 500 is an unmanaged index generally representative of the U.S. stock
market. The Lipper Large-Cap Value Funds Index is an equally-weighted
performance index of the largest qualifying funds in this Lipper category.
The Russel 3000-Registered Trademark- Value Index is an unmanaged index
generally representative of the U.S. stock market. It contains securities
that value managers typically select from the Russel 3000-Registered
Trademark- Index. Source of the S&P and Russell index data is Standard &
Poor's Micropal. Source of the Lipper index data is Lipper Inc.
3
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF INVESTMENTS IN SECURITIES December 31, 1999
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STRONG VALUE FUND
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Shares or
Principal Value
Amount (Note 2)
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<S> <C> <C>
COMMON STOCKS 97.0%
AEROSPACE & DEFENSE 0.7%
United Technologies Corporation 6,500 $ 422,500
AIRLINE 1.0%
Delta Air Lines, Inc. 12,100 602,731
AUTOMOBILE 2.8%
Ford Motor Company 31,000 1,656,563
BANK - MONEY CENTER 2.6%
Citigroup, Inc. 27,300 1,516,856
BEVERAGE - SOFT DRINK 0.5%
PepsiCo, Inc. 9,000 317,250
BROKERAGE & INVESTMENT MANAGEMENT 5.0%
The Bear Stearns Companies, Inc. 23,900 1,021,725
Berkshire Hathaway, Inc. Class B (b) 1,036 1,895,880
----------
2,917,605
CHEMICAL - SPECIALTY 1.0%
Praxair, Inc. 12,100 608,781
COMMERCIAL SERVICE 4.3%
Avery Dennison Corporation 22,300 1,625,113
Equifax, Inc. 19,100 450,044
R.R. Donnelley & Sons Company (b) 16,700 414,369
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2,489,526
COMPUTER - MANUFACTURERS 0.7%
Compaq Computer Corporation 15,000 405,938
COMPUTER SERVICE 2.1%
Convergys Corporation (b) 40,000 1,230,000
CONTAINER 0.1%
Sealed Air Corporation (b) 1,500 77,719
ELECTRICAL EQUIPMENT 1.5%
General Electric Company 5,500 851,125
FINANCE - MISCELLANEOUS 3.2%
American Express Company 6,300 1,047,375
First Data Corporation 16,400 808,725
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1,856,100
HEALTHCARE - BIOMEDICAL/GENETIC 3.7%
Gilead Sciences, Inc. (b) 10,000 541,250
Maxygen, Inc. (b) 500 35,500
The PE Corporation - Celera Genomics Group (b) 10,500 1,564,500
----------
2,141,250
HEALTHCARE - DRUG/DIVERSIFIED 3.4%
American Home Products Corporation 49,700 1,960,044
HEALTHCARE - INSTRUMENTATION 0.3%
Affymetrix, Inc. (b) 1,000 169,688
HEALTHCARE - PRODUCT 0.2%
Sepracor, Inc. (b) 1,000 99,188
INSURANCE - ACCIDENT & HEALTH 3.5%
UnumProvident Corporation 63,797 2,045,491
INSURANCE - LIFE 1.2%
Lincoln National Corporation 17,000 680,000
INSURANCE - PROPERTY & CASUALTY 6.6%
American International Group, Inc. 21,033 $2,274,193
MBIA, Inc. 17,400 918,938
Travelers Property Casualty Corporation Class A 19,200 657,600
----------
3,850,731
LEISURE PRODUCT 1.0%
Mattel, Inc. 45,800 601,125
LEISURE SERVICE 2.1%
The Walt Disney Company 42,000 1,228,500
MEDIA - CABLE TV 2.1%
Charter Communications, Inc. Class A (b) 33,100 724,062
Cox Communications, Inc. Class A (b) 9,400 484,100
----------
1,208,162
MEDIA - PUBLISHING 4.7%
Harcourt General, Inc. 21,300 857,325
Knight-Ridder, Inc. 7,700 458,150
New York Times Company Class A 13,100 643,537
PRIMEDIA, Inc. (b) 10,000 165,000
Readers Digest Association, Inc. Class A 22,200 649,350
----------
2,773,362
MEDIA - RADIO/TV 5.6%
CBS Corporation (b) 51,900 3,318,356
NATURAL GAS DISTRIBUTION 3.2%
Kinder Morgan, Inc. 91,200 1,841,100
OIL - INTERNATIONAL INTEGRATED 4.1%
Chevron Corporation 11,000 952,875
Exxon Mobil Corporation 10,945 881,757
Texaco, Inc. 10,800 586,575
----------
2,421,207
OIL WELL EQUIPMENT & SERVICE 2.5%
Schlumberger, Ltd. 22,900 1,288,125
Transocean Sedco Forex, Inc. 4,433 149,337
----------
1,437,462
PERSONAL & COMMERCIAL LENDING 3.5%
Associates First Capital Corporation 74,648 2,048,154
PRECIOUS METAL/GEM/STONE 1.5%
Barrick Gold Corporation 49,600 877,300
RAILROAD 1.3%
CSX Corporation 23,300 731,037
REAL ESTATE 4.5%
Plum Creek Timber Company, Inc. 25,700 642,500
Vornado Operating, Inc. (b) 4,020 24,120
Vornado Realty Trust 60,300 1,959,750
----------
2,626,370
RETAIL - DEPARTMENT STORE 4.6%
Federated Department Stores, Inc. (b) 52,600 2,659,587
RETAIL - RESTAURANT 4.8%
Brinker International, Inc. (b) 17,000 408,000
McDonald's Corporation 59,300 2,390,531
----------
2,798,531
RETAIL - SPECIALTY 2.3%
Barnes & Noble, Inc. (b) 27,400 565,125
Heilig-Meyers Company 50,000 137,500
Sotheby's Holdings, Inc. Class A 20,800 624,000
----------
1,326,625
SHOE & APPAREL MANUFACTURING 1.3%
NIKE, Inc. Class B 15,300 758,306
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STRONG VALUE FUND (CONTINUED)
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Shares or
Principal Value
Amount (Note 2)
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<S> <C> <C>
TELECOMMUNICATION EQUIPMENT 1.4%
Corning, Inc. 4,000 $ 515,750
Plantronics, Inc. (b) 4,400 314,875
----------
830,625
TELECOMMUNICATIONS - SERVICES 2.1%
AT&T Corporation 7,850 398,387
Montana Power Company 23,600 851,075
----------
1,249,462
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Total Common Stocks (Cost $46,694,541) 56,634,357
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PREFERRED STOCKS 0.0%
Healthcare - Patient Care
Fresenius National Medical Care
Holdings, Inc. Class D (b) 8,500 85
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Total Preferred Stocks (Cost $0) 85
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SHORT-TERM INVESTMENTS (a) 4.0%
COMMERCIAL PAPER
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 6.10% $ 946,200 946,200
Warner Lambert Company, 6.08% 1,386,000 1,386,000
Wisconsin Electric Power Company, 6.04% 24,500 24,500
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Total Short-Term Investments (Cost $2,356,700) 2,356,700
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Total Investments in Securities (Cost $49,051,241) 101.0% 58,991,142
Other Assets and Liabilities, Net (1.0%) (584,898)
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NET ASSETS 100.0% $58,406,244
================================================================================
</TABLE>
LEGEND
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(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Non-income producing security.
Percentages are stated as a percent of net assets.
5
See Notes to Financial Statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
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December 31, 1999
<TABLE>
<CAPTION>
Strong
Value Fund
------------
<S> <C>
ASSETS:
Investments in Securities, at Value (Cost of $49,051,241) $58,991,142
Receivable for Fund Shares Sold 7,207
Dividends and Interest Receivable 38,678
Other Assets 21,193
-----------
Total Assets 59,058,220
LIABILITIES:
Payable for Securities Purchased 623,687
Payable for Fund Shares Redeemed 6,392
Accrued Operating Expenses and Other Liabilities 21,897
-----------
Total Liabilities 651,976
-----------
NET ASSETS $58,406,244
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NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $45,886,434
Undistributed Net Investment Income 7,977
Undistributed Net Realized Gain 2,571,932
Net Unrealized Appreciation 9,939,901
-----------
Net Assets $58,406,244
-----------
Capital Shares Outstanding (Unlimited Number Authorized) 4,745,116
NET ASSET VALUE PER SHARE $12.31
------
</TABLE>
6
See Notes to Financial Statements.
<PAGE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
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For the Year Ended December 31, 1999
Strong
Value Fund
------------
<S> <C>
INCOME:
Dividends $ 997,182
Interest 327,227
-----------
Total Income 1,324,409
EXPENSES:
Investment Advisory Fees 772,670
Custodian Fees 5,300
Shareholder Servicing Costs 169,773
Other 106,755
-----------
Total Expenses before Fees Paid Indirectly by Advisor 1,054,498
Fees Paid Indirectly by Advisor (Note 3) (923)
-----------
Expenses, Net 1,053,575
-----------
NET INVESTMENT INCOME 270,834
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain on Investments 11,763,304
Net Change in Unrealized Appreciation/Depreciation on Investments (13,605,810)
-----------
NET LOSS ON INVESTMENTS (1,842,506)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($ 1,571,672)
-----------
</TABLE>
7
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Strong Value Fund
-------------------------------
Year Ended Year Ended
Dec. 31, 1999 Dec. 31, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 270,834 $ 497,380
Net Realized Gain 11,763,304 3,779,680
Net Change in Unrealized Appreciation/Depreciation (13,605,810) 9,933,445
----------- -----------
Net Increase/Decrease in Net Assets Resulting from Operations (1,571,672) 14,210,505
DISTRIBUTIONS:
From Net Investment Income (277,238) (446,330)
From Net Realized Gains (9,665,364) (5,167,200)
----------- -----------
Total Distributions (9,942,602) (5,613,530)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 16,389,128 45,279,469
Proceeds from Reinvestment of Distributions 9,624,954 5,500,744
Payment for Shares Redeemed (47,444,095) (61,562,894)
----------- -----------
Net Decrease in Net Assets from Capital Share Transactions (21,430,013) (10,782,681)
----------- -----------
TOTAL DECREASE IN NET ASSETS (32,944,287) (2,185,706)
NET ASSETS:
Beginning of Year 91,350,531 93,536,237
----------- -----------
End of Year $58,406,244 $91,350,531
----------- -----------
TRANSACTIONS IN SHARES OF THE FUND:
Sold 1,105,116 3,192,624
Issued in Reinvestment of Distributions 772,501 380,493
Redeemed (3,241,916) (4,257,839)
--------- ---------
Net Decrease in Shares of the Fund (1,364,299) (684,722)
--------- -------
</TABLE>
8
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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December 31, 1999
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, as amended.
2. Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements.
(A) Security Valuation -- Securities of the fund are valued at fair value
through valuations obtained by a commercial pricing service or the
mean of the bid and asked prices when no last sales price is
available. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith under
consistently applied procedures established by and under the general
supervision of the Board of Directors. Securities which are purchased
within 60 days of their stated maturity are valued at amortized cost,
which approximates fair value.
The Fund may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration
to pertinent factors, including recent private sales, market
conditions and the issuer's financial performance. The Fund generally
bears the costs, if any, associated with the disposition of restricted
securities. The Fund held no restricted securities at December 31,
1999.
(B) Federal Income and Excise Taxes and Distributions to Shareholders--
The Fund intends to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of its taxable income to its shareholders
in a manner which results in no tax cost to the Fund. Therefore, no
federal income or excise tax provision is required.
Net investment income or net realized gains for financial statement
purposes may differ from the characterization for federal income tax
purposes due to differences in the recognition of income and expense
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
The Fund generally pays dividends from net investment income 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, economic, regulatory and market risks.
(E) Futures-- Upon entering into a futures contract, the Fund pledges to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Fund may be designated as collateral on open futures contracts.
The Fund also receives from or pays to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin" and are recorded
as unrealized gains or losses. When the futures contract is closed, a
realized gain or loss is recorded equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
(F) Options-- The Fund may write put or call options (none were written
during the period). Premiums received by the Fund upon writing put or
call options are recorded as an asset with a corresponding liability
which is subsequently adjusted to the current market value of the
option. Changes between the initial premiums received and the current
market value of the options are recorded as unrealized gains or
losses. When an option expires, is exercised, or is closed, the Fund
realizes a gain or loss, and the liability is eliminated. The Fund
continues to bear the risk of adverse movements in the price of the
underlying asset during the period of the option, although any
potential loss during the period would be reduced by the amount of the
option premium received. Additional securities held by the Fund may be
designated as collateral on written options.
(G) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted daily 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.
9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
December 31, 1999
(H) Forward Foreign Currency Exchange Contracts -- Forward foreign
currency exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the Fund records
an exchange gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(I) Repurchase Agreements-- The Fund may enter into repurchase agreements
with institutions that the Fund's investment advisor, Strong Capital
Management, Inc. ("the Advisor"), has determined are creditworthy
pursuant to criteria adopted by the Board of Directors. Each
repurchase agreement is recorded at cost. The Fund requires that the
collateral, represented by securities (primarily U.S. Government
securities), in a repurchase transaction be maintained in a segregated
account with a custodian bank in a manner sufficient to enable the
Fund to obtain those securities in the event of a default of the
repurchase agreement. On a daily basis, the Advisor monitors the value
of the collateral, including accrued interest, to ensure it is at
least equal to the amount owed to the Fund under each repurchase
agreement.
(J) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts in these financial statements. Actual results could differ
from those estimates.
(K) Other -- Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premium and discounts.
3. Related Party Transactions
The Advisor, with whom certain officers and directors of the Fund are
affiliated, provides investment advisory services and shareholder
recordkeeping and related services to the Fund. Investment advisory fees,
which are established by terms of the Advisory Agreement, are based on an
annualized rate of 1.00% of the average daily net assets of the Fund. Based
on the terms of the Advisory Agreement, advisory fees and other expenses
will be waived or absorbed by the Advisor if the Fund's operating expenses
exceed 2% of the average daily net assets of the Fund. In addition, the
Fund's Advisor may voluntarily waive or absorb certain expenses at its
discretion. Shareholder recordkeeping and related service fees are based on
contractually established rates for each open and closed shareholder
account. The Advisor also allocates to the Fund certain charges or credits
resulting from transfer agency banking activities based on the Fund's level
of subscription and redemption activity. Credits allocated by the Advisor
serve to reduce the shareholder servicing expenses incurred by the Fund and
are reported as Fees Paid Indirectly by Advisor in the Fund's Statement of
Operations. The Advisor is also compensated for certain other services
related to costs incurred for reports to shareholders.
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 December 31, 1999, shareholder
servicing and other expenses paid to the Advisor, and unaffiliated
directors' fees for the year then ended, were $9,427, $170,836 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 LOC. For an individual Fund, borrowings under the LOC are limited
to either the lesser of 15% of the market value of the Fund's total assets
or any explicit borrowing limits in the Fund's prospectus. Principal and
interest of each borrowing on the LOC are due not more than 60 days after
the date of the borrowing. Borrowings under the LOC bear interest based on
prevailing market rates as defined in the LOC. A commitment fee of .08% per
annum is incurred on the unused portion of the LOC and is allocated to all
participating Strong Funds. At December 31, 1999, there were no borrowings
by the Fund outstanding under the LOC.
5. Investment Transactions
The aggregate purchases and sales of long-term securities, other than
government securities, for the year ended December 31, 1999 were
$73,978,434 and $102,675,493, respectively. There were no purchases or
sales of long-term government securities during the year-ended December 31,
1999.
6. Income Tax Information
At December 31, 1999, the cost of investments in securities for federal
income tax purposes was $49,077,497. Net unrealized appreciation of
securities was $9,913,645 consisting of gross unrealized appreciation and
depreciation of $11,780,954 and $1,867,309, respectively.
During the year ended December 31, 1999, the Fund paid capital gains
distributions (taxable as long-term capital gains at 20%) to shareholders
of $7,958,213 (unaudited).
For corporate shareholders in the Fund, the percentage of dividend income
distributed for the year ended December 31, 1999 which is designated as
qualifying for the dividends-received deduction is 100.0%
(unaudited).
10
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STRONG VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
------------------------------------------
Dec. 31, Dec. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 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 0.06 0.08 0.10 0.13
Net Realized and Unrealized Gains (Losses) on Investments (0.36) 1.97 2.86 1.55
- -----------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.30) 2.05 2.96 1.68
Less Distributions
From Net Investment Income (0.06) (0.07) (0.10) (0.13)
From Net Realized Gains (2.28) (0.80) (0.64) --
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.34) (0.87) (0.74) (0.13)
- -----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $12.31 $14.95 $13.77 $11.55
- -----------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- -----------------------------------------------------------------------------------------------------------------------------
Total Return -2.0% +15.2% +25.9% +16.8%
Net Assets, End of Period (In Millions) $58 $91 $94 $55
Ratio of Expenses to Average Net Assets without Fees Paid Indirectly by Advisor 1.4% 1.3% 1.3% 1.5%
Ratio of Expenses to Average Net Assets 1.4% 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 103.8% 92.6% 103.0% 89.5%
</TABLE>
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
11
See Notes to Financial Statements.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors of Strong Equity Funds, Inc.
and the Shareholders of Strong Value Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments in securities, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Strong Value Fund
(one of the portfolios constituting the Strong Equity Funds, Inc.) at December
31, 1999, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended and the
financial highlights for each of the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where broker confirmations were
not received, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
February 2, 2000
12
<PAGE>
DIRECTORS
Richard S. Strong
Marvin E. Nevins
William F. Vogt
Willie D. Davis
Stanley Kritzik
Neal Malicky
OFFICERS
Richard S. Strong, CHAIRMAN OF THE BOARD
Thomas M. Zoeller, VICE PRESIDENT
Dennis A. Wallestad, VICE PRESIDENT
Stephen J. Shenkenberg, VICE PRESIDENT AND SECRETARY
John S. Weitzer, VICE PRESIDENT
John W. Widmer, TREASURER
Rhonda K. Haight, ASSISTANT 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
<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. To reduce the
volume of mail you receive, only one copy of financial reports,
prospectuses, and other regulatory materials is mailed to your
household. You can call us at 1-800-368-1030, or write to us at
the address listed below, to request (1) additional copies free
of charge, or (2) that we discontinue our practice of
householding regulatory materials. Strong Investments, Inc.
RT0952-0200
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
Visit our web site at
www.eStrong.com
[LOGO] STRONG FUNDS-Registered Trademark-
P.O. Box 2936
Milwaukee, Wisconsin 53201
