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[PHOTO OF WOMEN WITH 3 KIDS]
[LOGO]
THE STRONG
AGGRESSIVE GROWTH
FUNDS
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The Strong Enterprise Fund
The Strong Growth 20 Fund
The Strong Small Cap Value Fund
The Strong U.S. Emerging Growth Fund
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
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THE STRONG
AGGRESSIVE GROWTH
FUNDS
----------------
ANNUAL REPORT - DECEMBER 31, 1999
TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong Enterprise Fund .......................................... 2
The Strong Growth 20 Fund ........................................... 4
The Strong Small Cap Value Fund ..................................... 6
The Strong U.S. Emerging Growth Fund ................................ 8
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Enterprise Fund ......................................10
The Strong Growth 20 Fund .......................................11
The Strong Small Cap Value Fund .................................11
The Strong U.S. Emerging Growth Fund ............................13
Statements of Assets and Liabilities ................................15
Statements of Operations ............................................16
Statements of Changes in Net Assets .................................17
Notes to Financial Statements .......................................19
FINANCIAL HIGHLIGHTS .....................................................22
REPORT OF INDEPENDENT ACCOUNTANTS ........................................24
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THE STRONG ENTERPRISE FUND
--------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ Drew Cupps
Drew Cupps
Portfolio Manager
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The world economy is at an incredible inflection point in the pace at which
products, ideas, and services evolve. We firmly believe that CHANGE EQUALS
OPPORTUNITY, and we are therefore very excited about the pace of change and the
resulting investment opportunities we believe will result over the next few
years. It is important to realize, however, that even as the growth of the
companies themselves continues, the investment environment may be volatile. We
encourage our investors to maintain a long-term perspective in the face of this
inevitable market volatility.
Our team is committed to understanding how the world is changing and which
companies will lead their industries. We seek evidence of new opportunities by
pursuing new technologies and new business concepts, talking to management
teams, visiting companies, and routinely asking ourselves, "How is the world
changing?" As we accumulate information, we construct an investment theme
targeting the opportunity.
During 1999, perhaps the most important investment theme for the Strong
Enterprise Fund was INTERNET APPLICATION SOFTWARE. Broadvision and Vignette are
among the handful of companies we identified as the best positioned to meet the
needs of corporations wishing to establish industrial-strength,
revenue-producing web sites on the Internet. Both Broadvision and Vignette are
market leaders, have very capable management teams, and hold leading positions
in an explosive market.
One of the most exciting investment themes over 1999 was the field of genomics.
Genomics is the
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WE FIRMLY BELIEVE THAT CHANGE EQUALS OPPORTUNITY.
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[SIDENOTE]
FUND
HIGHLIGHTS
- - The Strong Enterprise Fund posted a return of 187.83% for the year ended
December 31, 1999.
- - The Fund outperformed its benchmarks. The Russell 2500-TM- Growth Index
returned 55.48% for the year, and the S&P MidCap 400 Stock Index returned
14.72%.*
- - The Strong Enterprise Fund generally bought significant positions in
Information Age segments of the economy, including technology, Internet, and
communication companies.
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[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 12-31-99
1-year 187.83%
Since Inception 217.83%
(on 9-30-98)
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[SIDENOTE]
FIVE LARGEST STOCK
HOLDINGS
AS OF 12-31-99
SECURITY % OF NET ASSETS
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SanDisk Corp. 4.0%
USinternetworking, Inc. 3.8%
DoubleClick, Inc. 3.7%
National Semiconductor Corp. 3.2%
Vignette Corp. 3.2%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
2
<PAGE>
study of the genes that help determine a person's physical traits and medical
condition. By understanding which genes are responsible for conditions such as
asthma, obesity, and diabetes, scientists are able to design more effective drug
treatment measures more rapidly. In 1999, we invested in several companies in
different segments of the genomics field including PE Biosystems, Affymetrics,
Human Genome Sciences, and Millennium Pharmaceuticals, all of which performed
very well.
While we certainly cannot guarantee that technology stocks will consistently
show such strong performance as they did in 1999, we believe we will continue to
be impressed with dramatic innovations in communications, computers, software,
and new ways to use the Internet. But we also look forward to investment
opportunities in innovative medical companies, retailers, manufacturers, and
financial companies. The environment has never been better for innovators and
entrepreneurs, and our investment team will continue to work hard on your behalf
to identify these opportunities--whether they be technologically complex or
everyday products and services.
Although our results over the past year have been exciting, we do again
encourage you to maintain a long-term investment perspective as we continue our
search for the most attractive companies in rapidly growing industries.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 9-30-98 TO 12-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG S&P MIdcap 400 Lipper Mid-Cap Growth
ENTERPRISE FUND Stock Index* Funds Index*
--------------- -------------- ---------------------
<S> <C> <C> <C>
9/98 10,000 10,000 10,000
12/98 14,743 12,819 12,595
3/99 17,255 12,001 13,062
6/99 20,732 13,700 14,633
9/99 24,777 12,550 14,779
12/99 42,436 14,707 21,879
</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 MidCap 400 Stock Index ("S&P MidCap 400") and the Lipper
Mid-Cap Growth Funds Index. Results include the reinvestment of all dividends
and capital gains distributions. We are replacing the Nasdaq Composite Index
with the S&P MidCap 400 Stock Index as we believe the S&P MidCap 400 Stock
Index more accurately reflects the Fund`s investment program. Performance is
historical and does not represent future results. Investment returns and
principal value will vary, and you may have a gain or loss when you sell
shares.
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[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG ENTERPRISE FUND SEEKS CAPITAL GROWTH. THE FUND ATTEMPTS TO CAPTURE
THE GROWTH OF LEADING COMPANIES IN RAPIDLY GROWING INDUSTRIES. THE MANAGER WORKS
TO RESEARCH AND UNDERSTAND THE DIRECTIONS THAT THE WORLD AND THE ECONOMY ARE
MOVING IN AND TO DEVELOP INVESTMENT THEMES TO CAPITALIZE ON THE OPPORTUNITIES
THOSE CHANGES CREATE. HE SEARCHES AMONG COMPANIES OF ALL SIZES FOR THOSE THAT
ARE POSITIONED FOR RAPID GROWTH OF REVENUE AND EARNINGS.
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[SIDENOTE]
MARKET
HIGHLIGHTS
- - Leading Information Age companies drove the stock market in 1999. This group
of companies is experiencing very strong product demand as corporations buy
the products they need to compete in the information-based economy.
- - The worldwide economy strengthened significantly in the spring as the Asian
economies began to recover from their two-year financial crisis.
- - Strong domestic and international economic conditions are creating
substantial revenue and earnings growth for many Information Age and
traditional companies. This economic strength makes higher inflation and
interest rates a possibility, but the competitive forces of the Internet may
offset that inflationary pressure.
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*The S&P MidCap 400 Stock Index is an unmanaged index generally
representative of the U.S. market for medium-capitalization stocks. The
Lipper Mid-Cap Growth Funds Index is an equally-weighted performance index
of the largest qualifying funds in this Lipper category. The Russell
2500-TM- Growth Index is an unmanaged index generally representative of the
U.S. market for small to medium-small capitalization stocks. It contains
securities that growth managers typically select from the Russell 2500-TM-
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
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THE STRONG GROWTH 20 FUND
-------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ Ronald C. Ognar
Ronald C. Ognar
Portfolio Manager
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Over the past year, technology played a bigger role in the portfolio than it has
in previous years. This is largely a result of our concentrating the Strong
Growth 20 Fund's portfolio in companies exhibiting superior revenue growth led
by high-quality management teams in industries with dynamic growth potential.
Within the technology area, we focused our investments on the direct
beneficiaries of the networked economy. The companies with the fastest growth
rates are leading this technological revolution, with its drive to enhance
productivity and communications around the globe. The growth of the Internet and
its ever-widening acceptance should continue to drive growth in
business-to-business commerce, wireless connectivity, Internet content,
bandwidth expansion, the building of new brands, and a host of other
applications. The successful implementation of technology remains a key source
of global competitiveness. Although the technology sector's returns may not
always be sustainable, superior returns on capital and market share gains have
so far been the principal results of our purchasing decisions.
Over the next several months, we anticipate that the U.S. economy will continue
to grow, but at a somewhat more moderate pace than it has experienced recently.
We expect the Federal Reserve to remain vigilant, ready to raise interest rates
in a preemptive move should inflationary forces come into view. Given this
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THE SUCCESSFUL IMPLEMENTATION OF TECHNOLOGY REMAINS A KEY SOURCE OF GLOBAL
COMPETITIVENESS.
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[SIDENOTE]
FUND
HIGHLIGHTS
- - The Fund returned 109.48% for the year ended December 31, 1999, as opposed to
a 21.04% return for the S&P 500 Stock Index.*
- - Networking, telecommunications, and software holdings provided strong
performance for the Fund. Stocks that we held that contributed to our
performance were JDS Uniphase, Vignette, Cisco Systems, Verisign, and Exodus.
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[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 12-31-99
1-year 109.48%
Since Inception 60.36%
(on 6-30-97)
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[SIDENOTE]
FIVE LARGEST STOCK
HOLDINGS
AS OF 12-31-99
SECURITY % OF NET ASSETS
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JDS Uniphase Corp. 9.0%
VeriSign, Inc. 7.2%
Cisco Systems, Inc. 7.1%
Vignette Corp. 6.3%
The Home Depot, Inc. 6.1%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
4
<PAGE>
environment, we believe companies that are able to generate unit growth--that
is, those that can increase their revenues without raising their prices--will
continue to be the big winners. It's for this reason that we believe growth
stocks continue to offer attractive return potential.
Our preference is for companies exhibiting strength in dynamic niche markets,
entering new product cycles, or offering innovative new services. We're
constantly on the lookout for companies that are experiencing sustainable
fundamental improvement, regardless of market capitalization or industry, in our
efforts to aggressively outperform the broader market averages.
We thank you for your interest in the Strong Growth 20 Fund and look forward to
continuing to help you meet your financial goals.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 6-30-97 TO 12-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG GROWTH S&P 500 Lipper Large-Cap
20 FUND Stock Index* Growth Funds Index*
----------------- ------------ -------------------
<S> <C> <C> <C>
6/97 10,000 10,000 10,000
12/97 11,387 11,058 10,933
6/98 13,129 13,016 13,171
12/98 15,545 14,218 14,920
6/99 18,891 15,978 16,708
12/99 32,563 17,210 20,115
</TABLE>
This graph, prepared 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 Growth
Funds Index. Results include the reinvestment of all dividends and capital
gains distributions. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you may have a gain
or loss when you sell shares.
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[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG GROWTH 20 FUND SEEKS CAPITAL GROWTH AND INVESTS IN A CONCENTRATED
PORTFOLIO OF 20 TO 30 GROWTH STOCKS OF ALL SIZES. THE MANAGER CHOOSES
INVESTMENTS BY CAREFULLY RESEARCHING COMPANIES ONE AT A TIME, PAYING CLOSE
ATTENTION TO THEIR VALUATIONS AND THE LONG-TERM THEMES OF THEIR BUSINESSES.
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[SIDENOTE]
MARKET
HIGHLIGHTS
- - Although the stock market's advance was very narrow, companies generating
superior revenue growth performed extremely well throughout the year.
- - Market volatility was driven by the Federal Reserve's decision to raise
short-term interest rates given the strong domestic economy and resurgent
economic strength overseas. Further rate hikes are likely if inflationary
pressures persist or foreign economies continue their recovery.
- - Corporate earnings growth has begun to reaccelerate. Earlier fears of a
significant slowdown in corporate profits proved unfounded, and prospects for
a broad-based global economic recovery continue to improve. As a result,
analysts have raised their earnings estimates for technology and other more
cyclical sectors.
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*The S&P 500 is an unmanaged index generally representative of the U.S. stock
market. The Lipper Large-Cap Growth Funds Index is an equally-weighted
performance index of the largest qualifying funds in this Lipper category.
Source of the S&P index data is Standard & Poor's Micropal. Source of the
Lipper index data is Lipper Inc.
5
<PAGE>
THE STRONG SMALL CAP VALUE FUND
-------------------------------
PERSPECTIVES
FROM THE MANAGER
/s/ I. Charles Rinaldi
I. Charles Rinaldi
Portfolio Manager
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By normal measures, returning 28.09% and outperforming all relative benchmarks
is a very good year. We achieved these results by being very careful in our
stock selection and avoiding some of the pitfalls of value investing--namely,
the value stocks that stay cheap. We benefited in three major areas:
overweighting energy, overweighting technology, and underweighting financial
services.
We continued to maintain a strong energy weighting for several reasons. First,
after a negative year, earnings expectations are strongly positive. Second, OPEC
finally appears to understand the benefit of maintaining production discipline.
Also, Asia's economic recovery and continued growth in developed countries will
likely increase demand.
The technology sector was a bright spot. After finding a number of stocks that
were temporarily depressed and met our specific valuation criteria, we were
amazed at how quickly some of them turned around. Positive performance was also
seen in our initial public offering holdings. While these sectors can be
volatile, the securities we held in 1999 produced attractive results. As for
financial services, we were inclined to review our underweighting in light of
the legislative repeal of the Glass-Steagall Act. This should create
opportunities for mergers and acquisitions in the financial sector.
We were disappointed in the stock returns of some of our major holdings.
However, we're confident that investors will eventually renew their interest in
companies that can generate bottom-line results, versus those with top-line
growth and no profits.
- -------------------------------------------------------------------------------
WE ARE PREDICTING... THE REAWAKENING OF VALUATION CONCERNS AND THE RECOGNITION
THAT THERE IS A WHOLE CLASS OF GOOD-PERFORMING COMPANIES SELLING AT BARGAIN
BASEMENT PRICES.
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[SIDENOTE]
FUND
HIGHLIGHTS
- - The Fund returned 28.09% for the year ended December 31, 1999, versus 21.26%
for its benchmark, the Russell 2000-Registered Trademark- Index.*
- - Within the Russell 2000-Registered Trademark- Index, there was a huge
disparity between its two style components. The Russell 2000-Registered
Trademark- Value Index declined for a second consecutive year by 1.49%.
However, the Russell 2000-Registered Trademark- Growth Index was up again
in 1999 by 43.09%.
- - The best-performing sectors were technology and energy. These two sectors
were the most heavily weighted in the Fund and contributed greatly to our
excellent results.
- -------------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 12-31-99
1-year 28.09%
Since Inception 16.58%
(on 12-31-97)
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[SIDENOTE]
FIVE LARGEST
STOCK HOLDINGS
AS OF 12-31-99
SECURITY % OF NET ASSETS
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Optika, Inc. 8.8%
Barbeques Galore, Ltd.
Sponsored ADR 4.5%
Patina Oil & Gas Corp. 3.7%
World Acceptance Corp. 2.9%
Coherent, Inc. 2.7%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
6
<PAGE>
Because we're about to enter a new millennium, it's appropriate to discuss our
views on technology and the Internet. The Internet has been referred to as the
great democratizer. The Internet enables you to get what you want, when you want
it, and at the best price. That's a powerful force.
But there is a force more powerful than the Internet in influencing stock
prices. It is the time value of money--the fact that the value of something
today can be determined by discounting its estimated future earnings stream by
an anticipated interest rate. Given the lofty prices of technology and Internet
companies with little or no projected near-term earnings, the question everyone
should be asking is, "What will happen to interest rates?" Liquidity decreases
during uncertain times and especially when interest rates rise. And yes, there
will be uncertain times ahead.
We're not predicting the end of what Mr. Alan Greenspan, Chairman of the Federal
Reserve Board, has called "irrational exuberance." What we are predicting is the
reawakening of valuation concerns and the recognition that there is a whole
class of good-performing companies selling at bargain basement prices. We
believe that when this overdue time comes, our style will benefit accordingly.
Thank you for choosing the Strong Small Cap Value Fund to help you achieve your
financial goals.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 12-31-97 TO 12-31-99
[GRAPH]
<TABLE>
<CAPTION>
Russell
THE STRONG SMALL 2000-Registered Trademark- Lipper Small-Cap
CAP VALUE FUND Index* Value Funds Index*
---------------- -------------------------- ------------------
<S> <C> <C> <C>
12/97 10,000 10,000 10,000
6/98 11,730 10,493 10,419
12/98 10,610 9,745 9,329
6/99 12,230 10,650 9,873
12/99 13,590 11,817 9,505
</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
Russell 2000-Registered Trademark- Index and the Lipper Small-Cap Value Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares.
- -------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG SMALL CAP VALUE FUND SEEKS CAPITAL GROWTH BY INVESTING PRIMARILY
IN STOCKS OF SMALL-CAPITALIZATION COMPANIES THAT THE MANAGER BELIEVES ARE
UNDERVALUED RELATIVE TO THE MARKET BASED ON EARNINGS, CASH FLOW, OR ASSET
VALUE. "SMALL-CAPITALIZATION COMPANIES" ARE THOSE WITH A MARKET
CAPITALIZATION SUBSTANTIALLY SIMILAR TO THAT OF COMPANIES IN THE RUSSELL
2500-TM- INDEX AT THE TIME OF INVESTMENT. THE MANAGER LOOKS FOR COMPANIES
WHOSE STOCK PRICES MAY BENEFIT FROM A CATALYST EVENT, SUCH AS A CORPORATE
RESTRUCTURING; A NEW PRODUCT OR SERVICE; OR A CHANGE IN THE POLITICAL,
ECONOMIC, OR SOCIAL ENVIRONMENT.
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[SIDENOTE]
MARKET
HIGHLIGHTS
- - Despite rising oil prices, overall inflation remained under control and
increased only modestly. This, coupled with relatively low interest rates,
continued to power the domestic equity markets.
- - Small-cap stocks finally began to show signs of life and edged out large-cap
stocks for the year. Performance was also concentrated in two sectors:
technology and energy.
- - The bond market was under pressure. The 30-year Treasury bond yield rose from
a low of 5.09% in January 1999 to 6.48% at the end of 1999.
- - Speculative trading was considerable toward the end of the year, as evidenced
by record price increases in first-day IPO trading and record high Nasdaq
volume.
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*The Russell 2000-Registered Trademark- Index is an unmanaged index generally
representative of the U.S. market for small-capitalization stocks. The Lipper
Small-Cap Value Funds Index is an equally-weighted performance index of the
largest qualifying funds in this Lipper category. Source of the Russell index
data is Standard & Poor's Micropal. Source of the Lipper index data is Lipper
Inc.
7
<PAGE>
THE STRONG U.S. EMERGING GROWTH FUND
------------------------------------
PERSPECTIVES
FROM THE MANAGERS
/s/ Thomas L. Press /s/ Donald Longlet
Thomas L. Press Donald Longlet
Portfolio Co-Manager Portfolio Co-Manager
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As we complete the Fund's first year, we are happy to report such strong
absolute and relative outperformance. A number of factors combined to produce
these results. First, our philosophy and approach of owning companies that
appear to have strong long-term growth potential in revenues and profitability
paid off this year. Purchases within the initial public offering market also
contributed to the Fund's returns during the year. The performance of
growth-oriented indexes relative to indexes focused on value clearly showed that
growth stocks, both large and small, substantially outperformed value-oriented
stocks.
Second, our reliance on direct research gave us confidence to add to sectors on
weakness during the year. For example, we were able to identify opportunities in
such sectors as technology and business services while they were
downtrodden--and before they experienced a dramatic rebound later in the year.
While we recognize that technology stocks may not always consistently outperform
other market sectors as is also the case with the initial public offering
market, our performance during the year was strongly influenced by our
overweight and general representation in the technology sector. It added
tremendously to our returns.
Recently, we have followed a similar approach in the retailing and financial
sectors, which have been relatively weak of late. We use independent research to
find companies best positioned for a rebound as these sectors recover.
- -------------------------------------------------------------------------------
...WE CONTINUE TO BE POSITIVE WITH REGARD TO THE SMALL-CAP GROWTH SECTOR OF THE
STOCK MARKET.
- -------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - The Fund's performance for the year ended December 31, 1999 was very strong,
with a return of 98.86%, compared with the Russell 2000-Registered Trademark-
Growth Index's return of 43.09%.*
- - Our overweightings in both the technology and telecommunications industries
helped spur the Fund's outperformance. The Fund's stocks in the business
services and specialty retail sectors also performed well.
- - Our direct research approach paid off during the year as information we
developed independently allowed us to effectively add to lower-priced
positions and trim higher-priced positions.
- -------------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURN
AS OF 12-31-99
Since Inception 98.86%
(on 12-31-98)
- -------------------------------------------------------------------------------
[SIDENOTE]
FIVE LARGEST
STOCK HOLDINGS
AS OF 12-31-99
SECURITY % OF NET ASSETS
- -------------------------------------------------------------------------------
Cumulus Media, Inc. Class A 3.3%
Digital Lightwave, Inc. 2.9%
NOVA Corp. 2.7%
Corporate Executive Board Co. 2.5%
Cytyc Corp. 2.4%
Please see the Schedule of Investments in Securities for a complete listing of
the Fund's portfolio.
8
<PAGE>
Looking forward, we continue to be positive with regard to the small-cap growth
sector of the stock market. We feel that in the past year small-cap stocks hit
the bottom of their underperformance relative to large-cap stocks, so we
anticipate better relative performance in the future. Mutual fund flows that
were very negative for small-cap growth funds in the first half of 1999 have
turned very positive. We believe this is a further precursor to future
outperformance.
The portfolio is diversified across several sectors, as we are focusing our
research efforts on non-technology companies. One reason for moving in this
direction is that we wouldn't be surprised to see technology have a short-term
correction from its current levels, though we also believe the sector could then
resume its long-term outperformance. We continue to hold approximately 5% of the
portfolio in companies directly tied to the Internet. This area of the market
continues to hold massive growth potential, yet its excessive valuations make it
most vulnerable, in our estimation, to a correction. So we are watching it
closely.
We thank you for investing in the Strong U.S. Emerging Growth Fund. We
appreciate the confidence you've shown us so far and look forward to working
with you in the years to come.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 12-31-98 TO 12-31-99
[GRAPH]
<TABLE>
<CAPTION>
Russell
THE STRONG U.S. 2000-Registered Trademark- Lipper Small-Cap
EMERGING GROWTH FUND Index* Growth Funds Index*
-------------------- -------------------------- -------------------
<S> <C> <C> <C>
12/98 10,000 10,000 10,000
2/99 10,670 9,312 9,256
4/99 11,590 10,305 10,053
6/99 12,330 10,928 11,053
8/99 12,180 10,235 10,860
10/99 14,430 10,278 11,910
12/99 19,886 12,126 16,117
</TABLE>
This graph, prepared in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Russsell 2000-Registered Trademark- Index and the Lipper Small-Cap Growth Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares.
- -------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG U.S. EMERGING GROWTH FUND SEEKS CAPITAL GROWTH BY INVESTING PRIMARILY
IN STOCKS OF U.S. COMPANIES THAT THE FUND'S MANAGERS BELIEVE OFFER STRONG
POTENTIAL FOR LONG-TERM GROWTH. ALTHOUGH THE FUND FOCUSES ON THE STOCKS OF
SMALLER COMPANIES, IT MAY INVEST IN FIRMS OF ANY SIZE. THE FUND'S GOAL IS TO
ACHIEVE SIGNIFICANT CAPITAL APPRECIATION OVER TIME BY INVESTING IN RAPIDLY
GROWING, EMERGING COMPANIES THAT ARE POSITIONED TO BECOME LEADERS IN THEIR
RESPECTIVE MARKETS.
- -------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - The market in 1999 continued to be very narrow, with relatively few stocks
performing strongly. Areas that did well included the broad technology
sector, particularly among Internet-related and telecommunications equipment
stocks.
- - Areas of underperformance included financials and consumer staples.
- - In spite of rising interest rates, markets continued to pull ahead,
especially the Nasdaq. Additionally, growth investing substantially
outperformed value investing across all capitalizations.
- - Y2K issues, and the fears related to them, abated over the course of the
year.
- -------------------------------------------------------------------------------
*The Russell 2000-Registered Trademark- Growth Index is an unmanaged index
generally representative of the U.S. market for small capitalization stocks. It
contains securities that growth managers typically select from the Russell
2000-Registered Trademark- Index. The Russell 2000-Registered Trademark- Index
is an unmanaged index generally representative of the U.S. market for
small-capitalization stocks. The Lipper Small-Cap Growth Funds Index is an
equally-weighted performance index of the largest qualifying funds in this
Lipper category. Source of the Russell index data is Standard & Poor's
Micropal. Source of the Lipper index data is Lipper Inc.
9
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES December 31,1999
- -------------------------------------------------------------------------------
STRONG ENTERPRISE FUND
- -------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 97.5%
BANK - MONEY CENTER 0.8%
Bank of America Corporation 31,000 $ 1,555,812
Citigroup, Inc. 54,700 3,039,269
-----------
4,595,081
BROKERAGE & INVESTMENT MANAGEMENT 1.9%
The Charles Schwab Corporation 289,100 11,094,213
CHEMICAL - SPECIALTY 2.8%
Medical Manager Corporation (b) 192,500 16,218,125
COMPUTER - PERIPHERAL EQUIPMENT 4.7%
Microchip Technology, Inc. (b) 57,700 3,948,844
SanDisk Corporation (b) 237,400 22,849,750
-----------
26,798,594
COMPUTER SOFTWARE 15.2%
Check Point Software Technologies, Ltd. (b) 41,400 8,228,250
Citrix Systems, Inc. (b) 72,800 8,954,400
I2 Technologies, Inc. (b) 55,900 10,900,500
Intuit, Inc. (b) 38,300 2,295,606
New Era of Networks, Inc. (b) 243,400 11,591,925
Oracle Systems Corporation (b) 134,600 15,083,613
Parametric Technology Corporation (b) 317,700 8,597,756
Rational Software Corporation (b) 292,700 14,378,888
Synopsys, Inc. (b) 99,200 6,621,600
-----------
86,652,538
ELECTRONIC INSTRUMENTATION 0.6%
PE Corporation-PE Biosystems Group 29,050 3,495,078
ELECTRONICS - SEMICONDUCTOR EQUIPMENT 6.4%
ASM Lithography Holding NV (b) 72,600 8,258,250
Applied Materials, Inc. (b) 97,100 12,301,356
Credence Systems Corporation (b) 40,500 3,503,250
PRI Automation, Inc. (b) 113,000 7,585,125
Teradyne, Inc. (b) 75,800 5,002,800
-----------
36,650,781
ELECTRONICS - SEMICONDUCTOR MANUFACTURING 8.3%
Atmel Corporation (b) 602,600 17,814,363
LSI Logic Corporation (b) 163,500 11,036,250
National Semiconductor Corporation (b) 430,900 18,447,906
-----------
47,298,519
HEALTHCARE - BIOMEDICAL/GENETIC 3.7%
Cephalon, Inc. (b) 190,400 6,580,700
Human Genome Sciences, Inc. (b) 48,800 7,448,100
Millennium Pharmaceuticals, Inc. (b) 55,400 6,758,800
-----------
20,787,600
HEALTHCARE - INSTRUMENTATION 1.8%
Affymetrix, Inc. (b) 60,200 10,215,187
HEALTHCARE - PATIENT CARE 2.7%
Columbia/HCA Healthcare Corporation 234,900 6,885,506
Tenet Healthcare Corporation (b) 355,500 8,354,250
-----------
15,239,756
HEALTHCARE - PRODUCT 1.4%
Sepracor, Inc. (b) 81,800 8,113,538
INTERNET - E*COMMERCE 9.2%
Amazon.com, Inc. (b) 68,500 5,214,562
Critical Path, Inc. (b) 66,300 6,257,062
DoubleClick, Inc. (b) 82,400 20,852,350
eBay, Inc. (b) 22,900 2,866,794
Ticketmaster Online-CitySearch, Inc. Class B (b) 386,100 14,840,719
Webvan Group, Inc. (b) 146,500 2,417,250
-----------
52,448,737
INTERNET - INTERNET SERVICE PROVIDER/CONTENT 9.1%
CNET, Inc. (b) 144,600 8,206,050
USinternetworking, Inc. (b) 313,650 21,916,294
Verio, Inc. (b) 184,700 8,530,831
VerticalNet, Inc. (b) 81,300 13,333,200
-----------
51,986,375
INTERNET - NETWORK SECURITY/SOLUTIONS 4.6%
Digital Island, Inc. (b) 68,900 $ 6,554,112
RSA Security, Inc. (b) 100,500 7,788,750
USWeb Corporation (b) 263,000 11,687,063
-----------
26,029,925
INTERNET - SOFTWARE 9.9%
BEA Systems, Inc. (b) 86,400 6,042,600
BroadVision, Inc. (b) 33,300 5,663,081
FreeMarkets, Inc. (b) 32,000 10,922,000
Healtheon Corporation (b) 231,200 8,670,000
Phone.com, Inc. (b) 59,700 6,921,469
Vignette Corporation (b) 111,400 18,158,200
-----------
56,377,350
OIL WELL EQUIPMENT & SERVICE 1.8%
Cooper Cameron Corporation (b) 98,800 4,835,025
Noble Drilling Corporation (b) 171,300 5,610,075
-----------
10,445,100
TELECOMMUNICATION EQUIPMENT 8.7%
CIENA Corporation (b) 230,600 13,259,500
Comverse Technology, Inc. (b) 23,350 3,379,912
Corning, Inc. 49,200 6,343,725
Digital Microwave Corporation (b) 401,400 9,407,813
Ericsson (LM) Telephone Company ADR Class B 78,000 5,123,625
Nortel Networks Corporation 78,400 7,918,400
Polycom, Inc. (b) 66,500 4,235,219
-----------
49,668,194
TELECOMMUNICATIONS - SERVICES 3.9%
AT&T Corporation 146,000 7,409,500
Global Crossing, Ltd. (b) 145,700 7,285,000
Qwest Communications International, Inc. (b) 179,000 7,697,000
-----------
22,391,500
- -------------------------------------------------------------------------------
Total Common Stocks (Cost $363,855,943) 556,506,191
- -------------------------------------------------------------------------------
OPTIONS 0.0%
TELECOMMUNICATION SERVICE
AT&T Corporation Call Options
(Strike price is $50. Expiration date is 1/21/00) 94,000 232,062
- -------------------------------------------------------------------------------
Total Options (Cost $905,743) 232,062
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 4.0%
COMMERCIAL PAPER 0.4%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 6.10% $ 1,924,500 1,924,500
Warner Lambert Company, 6.08% 100 100
-----------
1,924,600
REPURCHASE AGREEMENTS 3.6%
ABN-AMRO Inc. (Dated 12/31/99), 2.75%,
Due 1/03/00 (Repurchase proceeds
$20,704,744); Collateralized by:
U.S. Government Agency Issues (c) 20,700,000 20,700,000
- -------------------------------------------------------------------------------
Total Short-Term Investments (Cost $22,624,600) 22,624,600
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Investments in Securities (Cost $387,386,286) 101.5% 579,362,853
Other Assets and Liabilities, Net (1.5%) (8,700,466)
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $570,662,387
===============================================================================
<CAPTION>
WRITTEN OPTIONS ACTIVITY
- --------------------------------------------------------------------------------
Contracts Premiums
- --------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of year -- $ --
Options written during the year 30 57,096
Options closed (30) (57,096)
Options expired -- --
Options exercised -- --
---- --------
Options outstanding at end of year -- $ --
==== ========
</TABLE>
Closed options resulted in a capital gain of $20,256.
10
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
STRONG GROWTH 20 FUND
- -------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 94.4%
BANK - REGIONAL 2.9%
Silicon Valley Bancshares (b) 275,000 $ 13,612,500
COMPUTER SOFTWARE 14.2%
Cisco Systems, Inc. (b) 310,000 33,208,750
Parametric Technology Corporation (b) 270,000 7,306,875
Veritas Software Corporation (b) 180,000 25,762,500
------------
66,278,125
ELECTRONIC INSTRUMENTATION 2.8%
PE Corporation-PE Biosystems Group 110,000 13,234,375
ELECTRONICS - SEMICONDUCTOR MANUFACTURING 3.0%
Applied Micro Circuits Corporation (b) 110,000 13,997,500
HEALTHCARE - BIOMEDICAL/GENETIC 4.3%
Medimmune, Inc. (b) 120,000 19,905,000
INTERNET - E*COMMERCE 2.7%
DoubleClick, Inc. (b) 50,000 12,653,125
INTERNET - NETWORK SECURITY/SOLUTIONS 10.8%
Juniper Networks, Inc. (b) 50,000 17,000,000
VeriSign, Inc. (b) (f) 175,000 33,414,063
------------
50,414,063
INTERNET - SOFTWARE 15.3%
BroadVision, Inc. (b) 85,900 14,608,369
FreeMarkets, Inc. (b) 65,200 22,253,575
Portal Software, Inc. (b) 50,000 5,143,750
Vignette Corporation (b) 180,000 29,340,000
------------
71,345,694
OIL WELL EQUIPMENT & SERVICE 2.4%
BJ Services Company (b) 270,000 11,289,375
RETAIL - DEPARTMENT STORE 2.5%
Kohl's Corporation (b) 160,000 11,550,000
RETAIL - SPECIALTY 6.1%
The Home Depot, Inc. 412,500 28,282,031
TELECOMMUNICATION EQUIPMENT 24.2%
E-Tek Dynamics, Inc. (b) 160,000 21,540,000
JDS Uniphase Corporation (b) 260,000 41,941,250
Nokia Corporation Sponsored ADR 70,000 13,300,000
Qualcomm, Inc. (b) 100,000 17,625,000
Sycamore Networks, Inc. (b) 60,000 18,480,000
------------
112,886,250
TELEPHONE 3.2%
Broadwing, Inc. 400,000 14,750,000
- -------------------------------------------------------------------------------
Total Common Stocks (Cost $250,708,914) 440,198,038
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 5.8%
COMMERCIAL PAPER 0.2%
INTEREST BEARING, DUE UPON DEMAND
Warner Lambert Company, 6.08% $ 840,500 840,500
REPURCHASE AGREEMENTS 5.6%
Barclays Capital, Inc. (Dated 12/31/99), 2.85%,
Due 1/03/00 (Repurchase proceeds $26,106,199);
Collateralized by: United States
Treasury Bonds (c) (f) 26,100,000 26,100,000
- -------------------------------------------------------------------------------
Total Short-Term Investments (Cost $26,940,500) 26,940,500
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Investments in Securities (Cost $277,649,414) 100.2% 467,138,538
Other Assets and Liabilities, Net (0.2%) (693,161)
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $466,445,377
===============================================================================
<CAPTION>
FUTURES
- -------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Appreciation
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold:
85 NASDAQ 100 Index 3/00 $31,910,700 $27,319
<CAPTION>
WRITTEN OPTIONS ACTIVITY
- --------------------------------------------------------------------------------
Contracts Premiums
- --------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of year -- $ --
Options written during the year 6,040 12,809,287
Options closed (6,040) (12,809,287)
Options expired -- --
Options exercised -- --
------ -----------
Options outstanding at end of year -- $ --
====== ===========
</TABLE>
Closed options resulted in a capital loss of $6,532,367.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
STRONG SMALL CAP VALUE FUND
- -------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 97.2%
AIRLINE 1.0%
Linea Aerea Nacional Chile SA Sponsored ADR 60,000 $ 453,750
AUTO & TRUCK PARTS 4.5%
Dura Automotive Systems, Inc. (b) 28,000 488,250
Jason, Inc. (b) 147,000 1,065,750
Tower Automotive, Inc. (b) 30,000 463,125
---------
2,017,125
CHEMICAL - SPECIALTY 1.0%
Minerals Technologies, Inc. 11,000 440,687
COMMERCIAL SERVICE 3.3%
ABM Industries, Inc. 11,100 226,163
R.H. Donnelley Corporation 36,000 679,500
SCB Computer Technology, Inc. (b) 25,000 78,125
Wackenhut Corrections Corporation (b) 43,500 508,406
---------
1,492,194
COMPUTER - PERIPHERAL EQUIPMENT 2.0%
Iomega Corporation (b) 195,000 658,125
Splash Technology Holdings, Inc. (b) (e) 29,000 255,563
---------
913,688
COMPUTER SERVICE 0.5%
Computer Outsourcing Services, Inc. (b) 8,500 214,625
COMPUTER SOFTWARE 15.8%
Epicor Software Corporation (b) 120,000 607,500
Evans & Sutherland Computer Corporation (b) 38,000 434,625
Inprise Corporation (b) (e) 100,000 1,106,250
JDA Software Group, Inc. (b) (e) 35,000 573,125
Optika, Inc. (b) 284,000 3,958,250
Ross Systems, Inc. (b) 144,000 477,000
---------
7,156,750
COMPUTER SYSTEMS 1.0%
Corsair Communications, Inc. (b) 57,000 463,125
DIVERSIFIED OPERATIONS 0.5%
Tenneco Automotive, Inc. 21,000 195,562
ELECTRICAL EQUIPMENT 0.5%
Encore Wire Corporation (b) 30,000 228,750
11
<PAGE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) December 31,1999
- -------------------------------------------------------------------------------
STRONG SMALL CAP VALUE FUND (continued)
- -------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
ELECTRONIC INSTRUMENTATION 2.3%
IFR Systems, Inc. (b) 30,000 $ 301,875
Varian Medical Systems, Inc. (b) (e) 25,000 745,313
-----------
1,047,188
ELECTRONIC PRODUCTS - MISCELLANEOUS 3.5%
Coherent, Inc. (b) 45,000 1,203,750
Rofin-Sinar Technologies, Inc. (b) 55,000 391,875
-----------
1,595,625
ELECTRONICS - SEMICONDUCTOR EQUIPMENT 1.8%
Silicon Valley Group, Inc. (b) 45,200 802,300
ENGINEERING & CONSTRUCTION 2.0%
Chicago Bridge & Iron Company NV 67,500 928,125
FINANCE - MISCELLANEOUS 1.4%
Creditrust Corporation (b) 85,000 653,437
HEALTHCARE - DRUG/DIVERSIFIED 2.5%
Biovail Corporation International (b) (e) 12,000 1,125,000
HEALTHCARE - INSTRUMENTATION 0.5%
Protocol Systems, Inc. (b) 24,600 221,400
HEALTHCARE - PATIENT CARE 1.3%
Kendle International, Inc. (b) 17,500 172,813
Total Renal Care Holdings, Inc. (b) 60,000 401,250
-----------
574,063
HEALTHCARE - PRODUCT 2.6%
Allied Healthcare Products, Inc. (b) 3,300 7,837
Pall Corporation 55,000 1,185,938
-----------
1,193,775
HOUSEHOLD APPLIANCES & FURNISHINGS 0.1%
Sensory Science Corporation (b) 20,000 35,000
HOUSING 2.5%
Newmark Homes Corporation (b) 187,200 1,123,200
MACHINERY - MISCELLANEOUS 2.0%
Global Industrial Technologies, Inc. (b) 40,000 515,000
Tennant Company 12,000 393,000
-----------
908,000
MACHINERY - TRANSPORTATION EQUIPMENT & PARTS 0.6%
Detroit Diesel Corporation 15,000 287,812
METAL PRODUCTS & FABRICATION 0.4%
Webco Industries, Inc. (b) 56,600 198,100
METALS & MINING 0.4%
U.S. Concrete, Inc. (b) 30,600 183,600
OFFICE AUTOMATION 1.3%
In Focus Systems, Inc. (b) 25,000 579,687
OIL - NORTH AMERICAN EXPLORATION & PRODUCTION 7.1%
Greka Energy Corporation (b) 17,100 158,175
The Meridian Resource Corporation (b) 135,000 413,438
Patina Oil & Gas Corporation 195,000 1,681,875
Range Resources Corporation 120,000 382,500
Stone Energy Corporation (b) 9,000 320,625
Titan Exploration, Inc. (b) 50,000 271,875
-----------
3,228,488
OIL WELL EQUIPMENT & SERVICE 9.1%
ENSCO International, Inc. 10,000 228,750
Global Industries, Ltd. (b) 11,000 94,875
Key Energy Services, Inc. (b) 110,000 570,625
Marine Drilling Companies, Inc. (b) (e) 20,000 448,750
Matrix Service Company (b) 228,500 1,042,531
Oceaneering International, Inc. (b) (e) 25,000 373,438
Petroleum Helicopters, Inc. 25,600 249,600
Pride International, Inc. (b) 50,000 $ 731,250
R&B Falcon Corporation (b) 30,000 397,500
-----------
4,137,319
PERSONAL & COMMERCIAL LENDING 2.9%
World Acceptance Corporation (b) 268,500 1,292,155
POLLUTION CONTROL 1.5%
Newpark Resources, Inc. (b) 11,000 67,375
Strategic Diagnostics, Inc. (b) 92,000 603,750
-----------
671,125
PRECIOUS METAL/GEM/STONE 2.1%
Apex Siver Mines, Ltd. (b) 35,000 417,813
Glamis Gold, Ltd. (b) 286,400 519,100
-----------
936,913
RETAIL - DEPARTMENT STORE 2.2%
Shopko Stores, Inc. (b) 44,000 1,012,000
RETAIL - RESTAURANT 0.5%
Sizzler International, Inc. (b) 89,500 223,750
RETAIL - SPECIALTY 9.0%
Barbeques Galore, Ltd. Sponsored ADR (b) (d) 263,000 2,038,250
Barnett, Inc. (b) 40,000 415,000
Boise Cascade Office Products Corporation (b) 25,000 375,000
First Cash Financial Services, Inc. (b) 25,000 206,250
Heilig-Meyers Company 25,000 68,750
Rush Enterprises, Inc. (b) 15,000 217,500
Sharper Image Corporation (b) 27,000 342,563
TBC Corporation (b) 68,400 427,500
-----------
4,090,813
STEEL 4.2%
Bethlehem Steel Corporation (b) 87,000 728,625
LTV Corporation 125,000 515,625
Roanoke Electric Steel Corporation 15,000 243,750
WHX Corporation (b) (e) 45,000 405,000
-----------
1,893,000
TELECOMMUNICATION EQUIPMENT 1.0%
Glenayre Technologies, Inc. (b) 39,000 441,187
TELEPHONE 1.3%
Citizens Utilities Company Class B (b) 41,000 581,688
TRUCKING 1.0%
Covenant Transport, Inc. Class A (b) 25,000 434,375
- -------------------------------------------------------------------------------
Total Common Stocks (Cost $37,269,577) 43,975,381
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 5.1%
COMMERCIAL PAPER 2.9%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 6.10% $ 867,800 867,800
Warner Lambert Company, 6.08% 440,700 440,700
-----------
1,308,500
REPURCHASE AGREEMENTS 2.2%
Barclays Capital, Inc. (Dated 12/31/99), 2.85%,
Due 1/03/00 (Repurchase proceeds $1,000,238);
Collateralized by: United States
Treasury Bonds (c) 1,000,000 1,000,000
- -------------------------------------------------------------------------------
Total Short-Term Investments (Cost $2,308,500) 2,308,500
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Investments in Securities (Cost $39,578,077) 102.3% 46,283,881
Other Assets and Liabilities, Net (2.3%) (1,050,396)
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $45,233,485
===============================================================================
12
<PAGE>
<CAPTION>
- -------------------------------------------------------------------------------
STRONG SMALL CAP VALUE FUND (continued)
- -------------------------------------------------------------------------------
WRITTEN OPTIONS ACTIVITY
- -------------------------------------------------------------------------------
Contracts Premiums
- -------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of year 1,355 $ 168,822
Options written during the year 9,275 2,001,479
Options closed (8,269) (1,625,404)
Options expired (925) (143,532)
Options exercised (111) (14,979)
----- -----------
Options outstanding at end of year 1,325 $ 386,386
===== ===========
Closed, exercised, and expired options resulted in a capital loss of $40,068.
<CAPTION>
WRITTEN OPTIONS DETAIL
- -------------------------------------------------------------------------------
Contracts
(100 shares Value
per contract) (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
Biovail Corporation International
Calls: (Strike Price is $85.00. Expiration
date is 2/18/00. Premium Received $46,378.) 40 ($ 46,500)
Calls: (Strike Price is $90.00. Expiration
date is 2/18/00. Premium Received $16,439.) 20 (16,500)
Inprise Corporation
Puts: (Strike Price is $10.00. Expiration
date is 2/18/00. Premium Received $39,398.) 200 (37,500)
Puts: (Strike Price is $12.50. Expiration
date is 2/18/00. Premium Received $14,224.) 50 (17,188)
JDA Software Group, Inc.
Calls: (Strike Price is $12.50. Expiration
date is 4/21/00. Premium Received $60,948.) 100 (52,500)
Calls: (Strike Price is $15.00. Expiration
date is 4/21/00. Premium Received $70,798.) 150 (58,125)
Calls: (Strike Price is $17.50. Expiration
date is 4/21/00. Premium Received $33,449.) 100 (26,875)
Marine Drilling Companies, Inc.
Calls: (Strike Price is $22.50. Expiration
date is 2/18/00. Premium Received $8,600.) 50 (9,219)
Oceaneering International, Inc.
Calls: (Strike Price is $17.50. Expiration
date is 1/21/00. Premium Received $7,037.) 50 (937)
Calls: (Strike Price is $20.00. Expiration
date is 1/21/00. Premium Received $23,212.) 75 (937)
Splash Technology Holdings, Inc.
Calls: (Strike Price is $10.00. Expiration
date is 1/21/00. Premium Received $31,806.) 210 (13,125)
Calls: (Strike Price is $12.50. Expiration
date is 1/21/00. Premium Received $8,760.) 80 (2,000)
Varian Medical Systems, Inc.
Calls: (Strike Price is $30.00. Expiration
date is 2/18/00. Premium Received $7,975.) 50 (8,438)
WHX Corporation
Calls: (Strike Price is $10.00. Expiration
date is 1/21/00. Premium Received $17,362.) 150 (3,750)
----- --------
1,325 ($293,594)
===== ========
<CAPTION>
- -------------------------------------------------------------------------------
STRONG U.S. EMERGING GROWTH FUND
- -------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 93.4%
COMMERCIAL SERVICE 12.9%
Copart, Inc. (b) 16,600 $ 722,100
Corporate Executive Board Company (b) 16,300 910,763
Diamond Technology Partners, Inc. (b) 8,700 747,656
FactSet Research Systems, Inc. 10,350 824,119
Hall, Kinion & Associates, Inc. (b) 30,500 655,750
Macrovision Corporation (b) 6,100 451,400
NCO Group, Inc. (b) 12,000 361,500
----------
4,673,288
COMPUTER - MANUFACTURERS 2.9%
Digital Lightwave, Inc. (b) 16,600 1,062,400
COMPUTER SERVICE 1.6%
Zamba Corporation (b) 33,200 576,850
COMPUTER SOFTWARE 21.9%
Advent Software, Inc. (b) 7,800 502,612
Ancor Communications, Inc. (b) 4,700 319,013
Aspect Development, Inc. (b) 11,300 774,050
BindView Development Corporation (b) 15,100 750,281
Clarus Corporation (b) 9,100 600,600
Documentum, Inc. (b) 13,700 820,287
Emulex Corporation (b) 3,600 405,000
Exchange Applications, Inc. (b) 9,200 514,050
Extreme Networks, Inc. (b) 4,900 409,150
HNC Software, Inc. (b) 3,900 412,425
Immersion Corporation (b) 9,500 364,563
IntraNet Solutions, Inc. (b) 19,900 736,300
Mercury Interactive Corporation (b) 3,200 345,400
Peregrine Systems, Inc. (b) 4,200 347,025
Project Software & Development, Inc. (b) 11,600 643,800
----------
7,944,556
ELECTRONIC INSTRUMENTATION 2.0%
Newport Corporation 15,900 727,425
ELECTRONIC PRODUCTS - MISCELLANEOUS 1.2%
Proxim, Inc. (b) 4,000 440,000
ELECTRONICS - SEMICONDUCTOR MANUFACTURING 4.3%
Anadigics, Inc. (b) 8,700 410,531
Semtech Corporation (b) 7,700 401,363
Transwitch Corporation (b) 10,000 725,625
----------
1,537,519
FINANCE - MISCELLANEOUS 2.8%
NOVA Corporation (b) 31,400 991,063
HEALTHCARE - BIOMEDICAL/GENETIC 0.9%
Neurocrine Biosciences, Inc. (b) 13,500 334,125
HEALTHCARE - DRUG/DIVERSIFIED 3.4%
CIMA Labs, Inc. (b) 25,800 337,012
DUSA Pharmaceuticals, Inc. (b) 12,500 356,250
Pharmacyclics, Inc. (b) 13,300 548,625
----------
1,241,887
HEALTHCARE - INSTRUMENTATION 2.0%
ArthroCare Corporation (b) 6,700 408,700
Novoste Corporation (b) 20,100 331,650
----------
740,350
HEALTHCARE - PRODUCT 2.4%
Cytyc Corporation (b) 14,400 879,300
INTERNET - INTERNET SERVICE PROVIDER/CONTENT 3.7%
Alloy Online, Inc. (b) 32,000 504,000
Network Access Solutions Corporation (b) 25,200 831,600
----------
1,335,600
13
<PAGE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) December 31,1999
- --------------------------------------------------------------------------------
STRONG U.S. EMERGING GROWTH FUND (continued)
- --------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
<S> <C> <C>
INTERNET - NETWORK SECURITY/SOLUTIONS 3.9%
Digex, Inc. (b) 5,000 $ 343,750
Keynote Systems, Inc. (b) 4,900 361,375
Viant Corporation (b) 7,100 702,900
-----------
1,408,025
INTERNET - SOFTWARE 5.0%
Art Technology Group, Inc. (b) 5,100 653,438
Proxicom, Inc. (b) 6,300 783,169
Telemate.Net Software, Inc. (b) 21,900 355,875
-----------
1,792,482
MEDIA - RADIO/TV 3.3%
Cumulus Media, Inc. Class A (b) 23,400 1,187,550
OIL WELL EQUIPMENT & SERVICE 2.4%
Dril-Quip, Inc. (b) 17,200 522,450
Hanover Compressor Company (b) 9,400 354,850
-----------
877,300
RETAIL - FOOD CHAIN 1.4%
Wild Oats Markets, Inc. (b) 22,700 503,656
RETAIL - RESTAURANT 2.8%
Buca, Inc. (b) 52,300 536,075
P.F. Chang's China Bistro, Inc. (b) 18,500 460,188
-----------
996,263
RETAIL - SPECIALTY 5.4%
Cost Plus, Inc. (b) 20,700 737,437
Hibbett Sporting Goods, Inc. (b) 23,900 406,300
Pacific Sunwear of California (b) 24,350 783,766
Tweeter Home Entertainment Group, Inc. (b) 1,000 35,500
-----------
1,963,003
TELECOMMUNICATION EQUIPMENT 3.9%
Advanced Fibre Communications, Inc. (b) 16,900 755,219
Carrier Access Corporation (b) 5,000 336,562
Harmonic, Inc. (b) 3,500 332,281
-----------
1,424,062
TRANSPORTATION SERVICE 1.5%
C.H. Robinson Worldwide, Inc. 13,600 540,600
TRUCKING 1.8%
Forward Air Corporation (b) 15,100 654,962
- -------------------------------------------------------------------------------
Total Common Stocks (Cost $23,693,099) 33,832,266
- -------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 7.8%
COMMERCIAL PAPER 2.3%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 6.10% $ 463,000 463,000
Warner Lambert Company, 6.08% 369,500 369,500
Wisconsin Electric Power Company, 6.04% 100 100
-----------
832,600
REPURCHASE AGREEMENTS 5.5%
ABN-AMRO Inc. (Dated 12/31/99), 2.75%,
Due 1/03/00 (Repurchase proceeds
$2,000,458); Collateralized by:
U.S. Government & Agency Issues (c) 2,000,000 2,000,000
- -------------------------------------------------------------------------------
Total Short-Term Investments (Cost $2,832,600) 2,832,600
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Total Investments in Securities (Cost $26,525,699) 101.2% 36,664,866
Other Assets and Liabilities, Net (1.2%) (434,270)
- -------------------------------------------------------------------------------
NET ASSETS 100.0% $36,230,596
===============================================================================
</TABLE>
- -------------------------------------------------------------------------------
LEGEND
- -------------------------------------------------------------------------------
(a)Short-term investments include any security which has a remaining maturity
of less than one year.
(b)Non-income producing security.
(c)See Note 2(I) of Notes to Financial Statements.
(d)Affiliated Issuer. (See Note 7 of Notes to Financial Statements.)
(e)All or a portion of these securities are held in conjunction with open
written option contracts.
(f)All or a portion of security pledged to cover margin requirements for
futures contracts.
Percentages are stated as a percent of net assets.
14
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1999
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
STRONG STRONG STRONG SMALL STRONG U.S.
ENTERPRISE GROWTH 20 CAP VALUE EMERGING
FUND FUND FUND GROWTH FUND
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Securities, at Value
Unaffiliated Issuers (Cost of $387,386, $277,649,
$38,175 and $26,526, respectively) $579,363 $467,139 $44,246 $36,665
Affiliated Issuers (Cost of $0, $0, $1,403 and $0,
respectively) -- -- 2,038 --
Receivable for Securities Sold -- -- 349 850
Receivable for Fund Shares Sold 1,911 567 50 523
Dividends and Interest Receivable 50 73 10 4
Other Assets 1 33 12 4
-------- -------- ------- -------
Total Assets 581,325 467,812 46,705 38,046
LIABILITIES:
Payable for Securities Purchased 9,900 1,182 1,155 1,803
Written Options, at Value (Premiums Received
of $0, $0, $386 and $0, respectively) -- -- 294 --
Payable for Fund Shares Redeemed 664 105 -- --
Accrued Operating Expenses and Other Liabilities 99 80 23 12
-------- -------- ------- -------
Total Liabilities 10,663 1,367 1,472 1,815
-------- -------- ------- -------
NET ASSETS $570,662 $466,445 $45,233 $36,231
======== ======== ======= =======
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $370,659 $266,554 $38,806 $23,833
Accumulated Net Realized Gain (Loss) 8,026 10,374 (371) 2,259
Net Unrealized Appreciation 191,977 189,517 6,798 10,139
-------- -------- ------- -------
Net Assets $570,662 $466,445 $45,233 $36,231
======== ======== ======= =======
Capital Shares Outstanding (Unlimited Number Authorized) 13,836 15,230 3,329 1,849
NET ASSET VALUE PER SHARE $41.24 $30.63 $13.59 $19.59
====== ====== ====== ======
</TABLE>
15
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
(In Thousands)
STRONG STRONG STRONG SMALL STRONG U.S.
ENTERPRISE GROWTH 20 CAP VALUE EMERGING
FUND FUND FUND GROWTH FUND
---------- --------- ------------ -----------
<S> <C> <C> <C> <C>
INCOME:
Dividends (net of foreign withholding taxes of $0, $0, $4 and
$0, respectively) $ 110 $ 309 $ 130 $ 4
Interest 435 1,156 66 38
-------- -------- ------- -------
Total Income 545 1,465 196 42
EXPENSES:
Investment Advisory Fees 1,292 1,999 282 138
Custodian Fees 16 16 20 17
Shareholder Servicing Costs 283 496 112 35
Reports to Shareholders 51 100 20 16
Federal and State Registration Fees 122 86 20 40
Other 17 26 13 14
-------- -------- ------- -------
Total Expenses before Waivers and Absorptions 1,781 2,723 467 260
Involuntary Expense Waivers and Absorptions by Advisor -- -- -- (13)
-------- -------- ------- -------
Expenses, Net 1,781 2,723 467 247
-------- -------- ------- -------
NET INVESTMENT LOSS (1,236) (1,258) (271) (205)
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 17,819 31,552 (149) 2,978
Futures Contracts and Options (269) (6,627) (40) (25)
-------- -------- ------- -------
Net Realized Gain (Loss) 17,550 24,925 (189) 2,953
Net Change in Unrealized Appreciation/Depreciation on:
Investments 191,007 172,702 7,952 10,139
Futures Contracts and Options (674) 27 143 --
-------- -------- ------- -------
Net Change in Unrealized Appreciation/Depreciation 190,333 172,729 8,095 10,139
-------- -------- ------- -------
NET GAIN ON INVESTMENTS 207,883 197,654 7,906 13,092
-------- -------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $206,647 $196,396 $7,635 $12,887
======== ======== ====== =======
</TABLE>
16
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
STRONG ENTERPRISE FUND STRONG GROWTH 20 FUND
-------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998
------------- ------------- ------------- -------------
(Note 1)
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Loss ($ 1,236) ($ 10) ($ 1,258) ($ 355)
Net Realized Gain 17,550 336 24,925 6,240
Net Change in Unrealized Appreciation/Depreciation 190,333 1,643 172,729 13,211
-------- ------- -------- -------
Net Increase in Net Assets Resulting from Operations 206,647 1,969 196,396 19,096
DISTRIBUTIONS:
In Excess of Net Investment Income -- -- -- (1)
From Net Realized Gains (8,611) (2) (15,912) --
-------- ------- -------- -------
Total Distributions (8,611) (2) (15,912) (1)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 514,395 10,984 300,227 39,531
Proceeds from Reinvestment of Distributions 8,328 2 15,379 1
Payment for Shares Redeemed (161,241) (1,809) (100,850) (47,100)
-------- ------- -------- -------
Net Increase (Decrease) in Net Assets from Capital
Share Transactions 361,482 9,177 214,756 (7,568)
-------- ------- -------- -------
TOTAL INCREASE IN NET ASSETS 559,518 11,144 395,240 11,527
NET ASSETS:
Beginning of Year 11,144 -- 71,205 59,678
-------- ------- -------- -------
End of Year $570,662 $11,144 $466,445 $71,205
======== ======= ======== =======
TRANSACTIONS IN SHARES OF THE FUND:
Sold 18,672 897 15,079 3,204
Issued in Reinvestment of Distributions 216 -- 585 --
Redeemed (5,807) (141) (5,047) (3,869)
------ ---- ------ ------
Net Increase (Decrease) in Shares of the Fund 13,081 756 10,617 (665)
====== ==== ====== ======
</TABLE>
17
See Notes to Financial Statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
STRONG SMALL CAP VALUE FUND STRONG U.S. EMERGING GROWTH FUND
------------------------------ --------------------------------
Year Ended Year Ended Year Ended
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999
------------- ------------- -------------
<S> <C> <C> <C>
OPERATIONS:
Net Investment Loss ($ 271) ($ 169) ($ 205)
Net Realized Gain (Loss) (189) (188) 2,953
Net Change in Unrealized Appreciation/Depreciation 8,095 (1,297) 10,139
------- ------- -------
Net Increase (Decrease) in Net Assets Resulting from
Operations 7,635 (1,654) 12,887
DISTRIBUTIONS FROM NET REALIZED GAINS -- -- (489)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 42,855 60,317 35,397
Proceeds from Reinvestment of Distributions -- -- 479
Payment for Shares Redeemed (29,395) (34,525) (12,043)
------- ------- -------
Net Increase in Net Assets from Capital Share Transactions 13,460 25,792 23,833
------- ------- -------
TOTAL INCREASE IN NET ASSETS 21,095 24,138 36,231
NET ASSETS:
Beginning of Year 24,138 -- --
------- ------- -------
End of Year $45,233 $24,138 $36,231
======= ======= =======
TRANSACTIONS IN SHARES OF THE FUND:
Sold 3,682 5,453 2,765
Issued in Reinvestment of Distributions -- -- 25
Redeemed (2,629) (3,177) (941)
----- ----- -----
Net Increase in Shares of the Fund 1,053 2,276 1,849
===== ===== =====
</TABLE>
18
See Notes to Financial Statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1999
1. ORGANIZATION
The accompanying financial statements represent the Strong Aggressive
Growth Funds (the "Funds"), which include the following funds, each with
its own investment objectives and policies:
- Strong Enterprise Fund
- Strong Growth 20 Fund
- Strong Small Cap Value Fund
- Strong U.S. Emerging Growth Fund
Each of the above funds is a series of Strong Equity Funds, Inc., a
diversified, open-end management investment company registered under the
Investment Company Act of 1940, as amended. The inception date for Strong
Enterprise Fund is September 30, 1998. Strong U.S. Emerging Growth Fund
commenced operations on January 4, 1999.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) SECURITY VALUATION -- Securities of the Funds 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 Funds 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 Funds
generally bear the costs, if any, associated with the disposition of
restricted securities. The Funds held no restricted securities at
December 31, 1999.
(B) FEDERAL INCOME AND EXCISE TAXES AND DISTRIBUTIONS TO SHAREHOLDERS --
The Funds intend to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
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.
Each Fund generally pays dividends from net investment income and
distributes any net capital gains that it realizes annually.
(C) REALIZED GAINS AND LOSSES ON INVESTMENT TRANSACTIONS -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) CERTAIN INVESTMENT RISKS -- The Funds may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with
the Funds' investment objectives and limitations. The Funds intend 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 Funds pledge to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Funds may be designated as collateral on open futures contracts.
The Funds also receive from or pay 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.
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
December 31, 1999
(F) OPTIONS -- The Funds may write put or call options. Premiums received
by the Funds 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 Funds realize a gain or loss, and the
liability is eliminated. The Funds continue to bear the risk of
adverse movements in the price of the underlying asset during the
period of the option, although any potential loss during the period
would be reduced by the amount of the option premium received.
Securities held by the Funds 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.
(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 Funds record
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 Funds may enter into repurchase
agreements with institutions that the Funds' 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 Funds require 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
Funds 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 amounts owed to the Funds 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 premiums and discounts.
3. RELATED PARTY TRANSACTIONS
The Advisor, with whom certain officers and directors of the Funds are
affiliated, provides investment advisory services and shareholder
recordkeeping and related services to the Funds. Investment advisory fees,
which are established by terms of the Advisory Agreements, are based on
annualized rates of 1.00% of the average daily net assets of the Funds.
Based on the terms of the Advisory Agreements, 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 each Fund certain
charges or credits resulting from transfer agency banking activities based
on each Fund's level of subscription and redemption activity. Charges
allocated to the Funds by the Advisor are included in Other Expenses in the
Funds' Statement of Operations. The Advisor is also compensated for certain
other services related to costs incurred for reports to shareholders.
The Funds 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 each Fund are reduced
by an amount equal to advisory fees paid to the Advisor under its
investment advisory agreement with the money market funds.
Certain information regarding related party transactions, excluding the
effects of waivers and absorptions, for the year ended December 31, 1999,
is as follows:
<TABLE>
<CAPTION>
Shareholder
Payable to Servicing and Unaffiliated
Advisor at Other Expenses Transfer Agency Directors'
December 31, 1999 Paid to Advisor Banking charges Fees
------------------- ----------------- ----------------- --------------
<S> <C> <C> <C> <C>
STRONG ENTERPRISE FUND $15,658 $283,523 $4,349 $1,500
STRONG GROWTH 20 FUND 15,926 498,109 4,279 1,500
STRONG SMALL CAP VALUE FUND 12,342 112,837 346 1,500
STRONG U.S. EMERGING GROWTH FUND 1,390 34,827 2,303 1,500
</TABLE>
20
<PAGE>
- --------------------------------------------------------------------------------
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 Funds' 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 Funds outstanding under the LOC.
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities, other than
government securities, during the year ended December 31, 1999, were as
follows:
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
STRONG ENTERPRISE FUND $567,457,789 $230,329,462
STRONG GROWTH 20 FUND 964,512,491 791,125,739
STRONG SMALL CAP VALUE FUND 38,750,063 26,548,182
STRONG U.S. EMERGING GROWTH FUND 61,212,817 40,498,020
</TABLE>
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 investment cost, gross unrealized appreciation
and depreciation on investments and capital loss carryovers (expiring in
varying amounts through 2006) for federal income tax purposes were as
follows:
<TABLE>
<CAPTION>
Federal Tax Unrealized Unrealized Net Capital Loss
Cost Appreciation Depreciation Net Appreciation Carryovers
------------- ------------ ------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
STRONG ENTERPRISE FUND $390,610,478 $199,394,507 $10,642,132 $188,752,375 $ --
STRONG GROWTH 20 FUND 281,669,900 187,058,965 1,590,327 185,468,638 --
STRONG SMALL CAP VALUE FUND 39,776,078 10,084,894 3,577,091 6,507,803 54,321
STRONG U.S. EMERGING GROWTH FUND 26,768,804 10,368,886 472,824 9,896,062 --
</TABLE>
During the year ended December 31, 1999, the Funds paid capital gains
distributions (taxable as long term capital gains at 20%) to shareholders
as follows (unaudited): Strong Enterprise Fund $222,717, Strong Growth 20
Fund $621,489, Strong Small Cap Value Fund $0, and Strong U.S. Emerging
Growth Fund $0. The Strong Small Cap Value Fund utilized $77,183 of its
capital loss carryovers during the year ended December 31, 1999.
For corporate shareholders in the Funds, the percentages of dividend income
distributed for the year ended December 31, 1999 which is designated as
qualifying for the dividends-received deduction are as follows (unaudited):
Strong Enterprise Fund 0.0%, Strong Growth 20 Fund 0.0%, Strong Small Cap
Value Fund 0.0%, and Strong U.S. Emerging Growth Fund 0.0%.
7. INVESTMENTS IN AFFILIATES
Affiliated issuers, as defined under the Investment Company Act of 1940,
include those in which the Fund's holdings of an issuer represent 5% or
more of the outstanding voting securities of the issuer, and any other
Strong Fund. A summary of transactions in the securities of these issuers
during the year ended December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Balance of Balance of Dividend/Interest
Shares Gross Gross Sales Shares Value Income Realized
Held Purchases and Held Dec. 31, Jan. 1 - Dec. 31, Loss
Jan. 1, 1999 and Additions Reductions Dec. 31, 1999 1999 1999 on Sale
-------------- ------------- ---------- --------------- --------- ---------------- ---------
STRONG SMALL CAP VALUE FUND
---------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Barbeques Galore, Ltd. 193,000 95,000 (25,000) 263,000 $2,038,250 -- $41,754
</TABLE>
21
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STRONG ENTERPRISE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
---------------------
Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998(b)
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $14.74 $10.00
Income From Investment Operations:
Net Investment Loss (0.09) (0.01)
Net Realized and Unrealized Gains on Investments 27.43 4.75
- ---------------------------------------------------------------------------------
Total from Investment Operations 27.34 4.74
Less Distributions:
From Net Investment Income -- --
From Net Realized Gains (0.84) (0.00) (c)
- ---------------------------------------------------------------------------------
Total Distributions (0.84) (0.00) (c)
- ---------------------------------------------------------------------------------
Net Asset Value, End of Period $41.24 $14.74
=================================================================================
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------
Total Return +187.8% +47.4%
Net Assets, End of Period (In Millions) $571 $11
Ratio of Expenses to Average Net Assets 1.4% 2.0%*
Ratio of Net Investment Loss to Average Net Assets (1.0%) (0.9%)*
Portfolio Turnover Rate 178.1% 95.7%
<CAPTION>
STRONG GROWTH 20 FUND
- ---------------------------------------------------------------------------------------------
Year Ended
--------------------------------------
Dec. 31, Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998 1997(d)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $15.44 $11.31 $10.00
Income From Investment Operations:
Net Investment Loss (0.08) (0.08) (0.01)
Net Realized and Unrealized Gains on Investments 16.60 4.21 1.40
- ---------------------------------------------------------------------------------------------
Total from Investment Operations 16.52 4.13 1.39
Less Distributions:
In Excess of Net Investment Income -- (0.00)(c) (0.08)
From Net Realized Gains (1.33) -- --
- ---------------------------------------------------------------------------------------------
Total Distributions (1.33) (0.00)(c) (0.08)
- ---------------------------------------------------------------------------------------------
Net Asset Value, End of Period $30.63 $15.44 $11.31
=============================================================================================
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------------------
Total Return +109.5% +36.5% +13.9%
Net Assets, End of Period (In Millions) $466 $71 $60
Ratio of Expenses to Average Net Assets 1.4% 1.5% 1.4%*
Ratio of Net Investment Loss to Average Net Assets (0.6%) (0.6%) (0.3%)*
Portfolio Turnover Rate 432.3% 541.2% 250.1%
</TABLE>
* 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 period from September 30, 1998 (inception) to December 31, 1998.
(c) Amount calculated is less than $0.01.
(d) For the period from June 30, 1997 (inception) to December 31, 1997.
22
See Notes to Financial Statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STRONG SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
---------------------
Dec. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998
- ---------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.61 $10.00
Income From Investment Operations:
Net Investment Loss (0.08) (0.07)
Net Realized and Unrealized Gains on Investments 3.06 0.68
- ---------------------------------------------------------------------------------
Total from Investment Operations 2.98 0.61
Less Distributions:
From Net Realized Gains -- --
- ---------------------------------------------------------------------------------
Total Distributions -- --
- ---------------------------------------------------------------------------------
Net Asset Value, End of Period $13.59 $10.61
=================================================================================
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------
Total Return +28.1% +6.1%
Net Assets, End of Period (In Millions) $45 $24
Ratio of Expenses to Average Net Assets 1.7% 1.9%
Ratio of Net Investment Loss to Average Net Assets (1.0%) (1.0%)
Portfolio Turnover Rate 95.5% 121.5%
<CAPTION>
STRONG U.S. EMERGING GROWTH FUND
- ---------------------------------------------------------------------------------
Year Ended
----------
Dec. 31,
Selected Per-Share Data(a) 1999
- ---------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.00
Income From Investment Operations:
Net Investment Loss (0.11)
Net Realized and Unrealized Gains on Investments 9.99
- ---------------------------------------------------------------------------------
Total from Investment Operations 9.88
Less Distributions:
From Net Realized Gains (0.29)
- ---------------------------------------------------------------------------------
Total Distributions (0.29)
- ---------------------------------------------------------------------------------
Net Asset Value, End of Period $19.59
=================================================================================
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------
Total Return +98.9%
Net Assets, End of Period (In Millions) $36
Ratio of Expenses to Average Net Assets without
Waivers and Absorptions 1.9%
Ratio of Expenses to Average Net Assets 1.8%
Ratio of Net Investment Loss to Average Net Assets (1.5%)
Portfolio Turnover Rate 281.1%
</TABLE>
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
23
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 Aggressive Growth Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules 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 Enterprise
Fund, Strong Growth 20 Fund, Strong Small Cap Value Fund and Strong U.S.
Emerging Growth Fund (four of the portfolios constituting the Strong Equity
Funds, Inc.), (herein referred to as the "Strong Aggressive Growth Funds") at
December 31, 1999, the results of each of their operations, the changes in each
of their net assets and the financial highlights for 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 Strong Aggressive Growth
Funds' 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 7, 2000
24
<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.
RT0622-0100
-----------------------------------
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
