<PAGE> 1
THE STRONG INCOME FUNDS
ANNUAL REPORT - OCTOBER 31, 1995
THE STRONG MONEY MARKET FUND
THE STRONG SHORT-TERM BOND FUND
THE STRONG GOVERNMENT SECURITIES FUND
THE STRONG CORPORATE BOND FUND
[STRONG FUNDS LOGO]
<PAGE> 2
THE STRONG INCOME FUNDS
ANNUAL REPORT - OCTOBER 31, 1995
Dear shareholder: As the Strong Family of Funds continues to grow, so too have
our reporting responsibilities to you. To help ensure that we can continue to
produce shareholder reports and other information on a timely basis, we have
changed the fiscal year-end of the Strong Income Funds from December 31 to
October 31, beginning with this annual report. By staggering the Funds'
fiscal-year periods, and thereby their reporting schedules, we avoid a
potential "log-jam" at year-end. Please note that this change has no effect on
how the Funds are managed. It simply alters the reporting period of your
shareholder reports. If you have a question regarding the new schedule, please
don't hesitate to call us at 1-800-368-3863.
Table of Contents
<TABLE>
<S> <C>
INVESTMENT REVIEWS
The Strong Money Market Fund . . . . . . . . . . . . . . . . 2
The Strong Short-Term Bond Fund . . . . . . . . . . . . . . . 4
The Strong Government Securities Fund . . . . . . . . . . . . 6
The Strong Corporate Bond Fund . . . . . . . . . . . . . . . 8
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Money Market Fund . . . . . . . . . . . . . 10
The Strong Short-Term Bond Fund . . . . . . . . . . . . 13
The Strong Government Securities Fund . . . . . . . . . 16
The Strong Corporate Bond Fund . . . . . . . . . . . . 17
Statements of Operations . . . . . . . . . . . . . . . . . . 20
Statements of Assets and Liabilities . . . . . . . . . . . . 21
Statements of Changes in Net Assets . . . . . . . . . . . . . 22
Notes to Financial Statements . . . . . . . . . . . . . . . . 23
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . 26
REPORT OF INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . 28
</TABLE>
<PAGE> 3
The Strong MONEY MARKET Fund
The Strong Money Market Fund seeks current income, a stable share price, and
daily liquidity. The Fund invests in corporate, bank, and government
instruments that present minimal credit risk.
THE FUND PROVIDED OUTSTANDING PERFORMANCE IN 1995
Year-to-date, the Strong Money Market Fund was the best performing general
purpose money fund tracked by lipper, based on total return. This performance
was achieved through a combination of prudent management and a temporary waiver
of fees and expenses.
SHORT RATES STABLE SO FAR IN 1995
Short-term interest rates remained relatively stable through October 1995,
fluctuating in a narrow range, generally around 5.5%. The "stuck in neutral"
environment was reflected in the actions of the Federal Reserve, which in
February voted to raise the federal funds rate - a critical determining factor
of short-term lending rates - by 0.25% to 6%. However, soon after the February
tightening, evidence of a significant slowdown in economic activity began to
emerge. While the U.S. economy grew at a fairly strong pace in the first
quarter of 1995, data from April and May suggested that the second quarter's
growth rate would be low or possibly negative.
The abrupt slowdown surprised financial markets and compelled the Fed to cut
the federal funds rate back to 5.75% in early July, where it remained through
October.
[PHOTO OF 2 WOMEN, A MAN AND A DOG]
Short-term rates have traded in a
narrow range in 1995
3-MONTH T-BILL YIELDS THROUGH OCTOBER
<TABLE>
<CAPTION>
<S> <C> <C>
12-94 5.68%
1-95 5.99%
2-95 5.93%
3-95 5.87%
4-95 5.86%
5-95 5.80%
6-95 5.56%
7-95 5.57%
8-95 5.44%
9-95 5.41%
10-95 5.50%
</TABLE>
As of 10-31-95
7-DAY CURRENT YIELD 1 5.82%
7-DAY EFFECTIVE YIELD 5.99%
AVERAGE MATURITY 71 DAYS
FUND STRATEGY: GO LONG
Following the Federal Reserve's February rate hike, we believed that short-term
rates had reached their peak, at least for the near term. Accordingly, we
gradually lengthened the Fund's average maturity target to a fairly bullish
60-70 days in anticipation of a possible interest- rate cut by the Fed.
Extending the Fund's maturity helped us lock in higher yields for a longer
period of time - and gave the Fund the potential to maintain an attractive
level of income in case short-term interest rates began to fall.
In addition, we tended to emphasize fixed-rate securities, which offered a
slight yield advantage over floating-rate paper. This strategy also enhanced
the portfolio's ability to sustain its yield had rates moved significantly
lower. At the end of October, the Fund's average maturity was 71 days.
WE EXPECT RATES TO DRIFT LOWER
Our current economic view remains largely unchanged from the beginning of the
year. With the economy on a modest growth track and inflation apparently
stifled, we look for short-term interest
The Strong Funds Annual Report - October 31, 1995
2
<PAGE> 4
rates to gradually drift lower, impelled by further federal funds rate
reductions by the Fed, possibly beginning as soon as the last quarter of 1995.
Variables that may alter this outlook include a disappointment on the budget
front. Right now, the market appears to expect a meaningful budget agreement,
an expectation partially reflected in current prices. Should progress not be
achieved on the budget, we could see a temporary bump up in yields.
Investors should also note that 2.5% annual GDP growth won't be smooth and
steady, but is more likely to be a bit bumpy, with indications of strong growth
one quarter and signs of recession the next. Taken as a whole, however, we
expect slow growth with modest inflation - a favorable environment for income
investors.
We began to gradually phase in the Strong Money Market Fund's fees and expenses
on August 2, 1995. While the fee and expense waivers were in part responsible
for the Fund's top ranking in 1995, we will strive to continue providing you
with the kind of superior investment value that has helped the Fund produce
consistently outstanding long-term performance since its inception ten years
ago.
As always, we thank you for your confidence and remain committed to meeting
your investment needs in the future.
[PHOTO OF JAY N. MUELLER]
Cordially,
/s/ Jay N. Mueller
Jay N. Mueller
Portfolio Manager
[PHOTO OF MAN AND GIRL]
Lipper Rankings as of 10-31-95(2) (based on total return)
<TABLE>
<CAPTION>
Time Period Rank among Money Market Instrument Funds Percentage
<S> <C> <C>
Year-to-date #1 of 258 Top Fund
1-year #1 of 250 Top 1%
5-year #5 of 171 Top 3%
Since inception (10-22-85) #3 of 106 Top 3%
</TABLE>
Rankings are historical and do not represent future performance.
(1) Yields are annualized for the 7-day period ended October 31, 1995.
Effective yield reflects the compounding of income. An investment in the
Fund is neither insured nor guaranteed by the U.S. government. There can be
no assurance that the Fund will be able to maintain a stable net asset
value of $1.00 per share. Yields are historical and do not represent future
yields, which will fluctuate. The Fund's advisor temporarily waived fees of
.31% and absorbed expenses of .22% during the 7-day period ended 10-31-95.
Otherwise, the Fund's current yield would have been 5.29%, and its
effective yield would have been 5.46%.
(2) Lipper Analytical Services, Inc., rankings are based on total return with
dividends reinvested. All performance rankings are historical and do not
represent future results. From time to time, the Fund's Advisor has waived
its management fee and absorbed Fund expenses, resulting in higher returns.
The Strong Income Funds Annual Report - October 31, 1995
3
<PAGE> 5
The Strong SHORT-TERM BOND Fund
The Strong Short-Term Bond Fund seeks total return by investing for a high
level of current income with a low degree of share-price fluctuation. The Fund
invests primarily in short- and intermediate-term, investment- grade debt
obligations, and its average portfolio maturity will normally be between one
and three years.
BONDS: A BEAST IN 1994, A BEAUTY IN 1995
After enduring an arduous 1994, bond investors have enjoyed an outstanding year
so far in 1995. Those with the patience to remain in the market from 1994 have
been rewarded with substantial price appreciation as yields declined throughout
the year.
The primary catalyst behind bonds' strong performance this year was a stream of
unexpectedly weak economic numbers, particularly in April and May. Many
investors had been cautious of the bond market early in the year, anticipating
continued economic strength and higher inflation. When that scenario failed to
materialize, investors became more confident that interest rates had reached a
peak, and money poured from the short end of the market into longer maturity
bonds, forcing yields lower and driving prices higher.
For the year-to-date period ended October 31, 1995, the Strong Short-Term Bond
Fund achieved an outstanding total return of 9.92%.
FUND STRATEGY: STAY THE COURSE
We did not think it necessary to significantly alter the Fund's asset
allocation or duration through most of 1995. Essentially, we believed the
portfolio featured a solid array of bonds able to offer an attractive
combination of income generation and relative share-price stability.
Our usual strategy remained intact: adding value through active management by
trading issues for similar ones offering an incrementally better yield or
better price-appreciation potential. We also maintained a slightly
longer-than-neutral duration, which benefited the Fund as interest rates fell.
The Fund's asset allocation has remained relatively unchanged.
As bond yields fell, bond prices
rose. The result: capital
appreciation for bond holders.
PRICE AND YIELD ON A 2-YEAR TREASURY NOTE (12-30-94 - 10-31-95)
<TABLE>
<CAPTION>
Price Yield
--------------- ---------------
<S> <C>
12-94 371.65 12-94 7.69%
1-95 376.97 1-95 7.24%
2-95 382.34 2-95 6.77%
3-95 384.39 3-95 6.78%
4-95 387.89 4-95 6.59%
5-95 395.01 5-95 5.84%
6-95 397.03 6-95 5.80%
7-95 398.49 7-95 5.87%
8-95 400.68 8-95 5.85%
9-95 402.47 9-95 5.86%
10-95 406.01 10-95 5.61%
</TABLE>
THE PRICE OF A 2-YEAR TREASURY NOTE APPRECIATED 9.25%
FROM JANUARY 1, 1995 THROUGH OCTOBER 31, 1995.
As OF 10-31-95
30-DAY ANNUALIZED YIELD 7.18%
AVERAGE MATURITY 1 2.3 YEARS
AVERAGE QUALITY RATING AA
Asset Allocation
<TABLE>
<CAPTION>
<S> <C>
Preferred Stocks 2.2%
Corporate Bonds (Including
Convertibles) 39.2%
U.S. Gov't & Agency Issues 34.6%
Non-Agency Mortgage-Backed
Securities 24.0%
</TABLE>
The Fund's allocation includes the effect of when-issued securities and does
not reflect any futures position held by the Fund. The asset allocation
depicts market exposure and is not given as a percentage of net assets. Please
see the Schedule of Investments in Securities for a complete listing of the
Fund's portfolio.
A POSITIVE OUTLOOK WITH OCCASIONAL POTHOLES
Our outlook for the bond market over the next few quarters is positive. We
expect the economy to continue to grow at around a 3% annual rate, with
inflation remaining subdued. Against this backdrop, we look for interest rates
to stay in their current range with a downward bias, and we anticipate a
possible easing by the Fed late in 1995 or early in 1996 - overall, a very
favorable environment for bond investors.
In such an environment, it's important for shareholders to be patient and
maintain a longer-term outlook. To some extent, investors have gotten used to
bond market dramatics, with prices up strongly in 1993, down sharply in 1994,
and up strongly again in 1995. While the market appears to have settled down in
anticipation of a slow-growth economy, that doesn't mean a smooth, steady
trend. Instead, the market is likely to be buffeted occasionally by
contradictory economic data, international currency concerns (particularly in
Japan), and political haggling in Washington as the budget is debated and
election campaigns kick into high gear.
The Strong Income Funds Annual Report - October 31, 1995
4
<PAGE> 6
Such factors are why, at Strong, we believe that successful bond investing
stems from time in the market rather than timing the market. It's been our
experience that investors who establish an investment timeline, select the
investment that matches this horizon, and then stay the course are the
investors who have the greatest chance of reaching their goals.
We appreciate your investment in the Strong Short-Term Bond Fund, and we will
do our best to earn your continued confidence.
[PHOTO OF BRADLEY C. TANK]
Sincerely,
/s/ Bradley C. Tank
Bradley C. Tank
Portfolio Manager
Lipper Rankings as of 10-31-952 (based on total return)
<TABLE>
<CAPTION>
Time Period Rank among Short-Term Investment-Grade Debt Funds
<S> <C>
Year-to-date #44 of 149
1-year #66 of 144
5-year #7 of 32
Since inception (8-31-87) #4 of 16
</TABLE>
Growth of an assumed $10,000
invested at the Fund's inception
<TABLE>
<CAPTION>
The Strong Corporate Short-Term
Bond Fund Bond Index
<S> <C> <C>
8/87 10000 10000
12/87 10318 10299
12/88 11362 10957
12/89 12295 12154
12/90 12945 13332
12/91 14837 14914
12/92 15827 15877
12/93 17302 16773
12/94 17023 16872
10/95 18711 18409
</TABLE>
Average Annual Total Returns
through 10/31/95
Since inception 7.97%
on 8/31/87
5-year 8.02%
3-year 6.20%
1-year 9.09%
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Salomon Brothers 1-3 year Treasury/Government-Sponsored/Corporate Bond Index
("Salomon Brothers Short-Term Bond Index"), an unmanaged,
market-capitalization-weighted index generally representative of the
performance of investment-grade, short-term bonds. 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 will vary, and you may have a gain or loss when you sell
shares.
1 The Fund's average maturity includes the effect of when-issued securities,
futures contracts, and option contracts.
2 Rankings are historical and do not represent future results.
The Strong Income Funds Annual Report - October 31, 1995
5
<PAGE> 7
The Strong GOVERNMENT SECURITIES Fund
The Strong Government Securities Fund seeks total return by investing for a
high level of current income with a moderate degree of share-price fluctuation.
The Fund normally invests at least 80% of its total assets in U.S. government
securities.
THE FUND CONTINUED TO SERVE INVESTORS WELL
The Fund continued to perform well versus its benchmark and its competition.
For the year-to-date period ended 10-31-95, the Fund's total return was 16.24%,
versus 15.14% for the Salomon Brothers Broad Investment-Grade Bond Index. Since
its inception, the Fund also remains the #1 ranked general U.S. government
fund, according to Lipper Analytical Services, Inc.
PATIENT BOND INVESTORS REWARDED IN 1995
After being buffeted by a turbulent bond market in 1994, investors with the
savvy and patience to stay the course were rewarded in 1995 with a powerful
rally. U.S. government bonds essentially regained all of 1994's losses in the
first quarter of 1995, and prices continued to rise nearly unabated through
October. As the chart at the right shows, U.S. government bond funds in general
- - and the Strong Government Securities Fund in particular - have more than made
up 1994's negative return.
The primary catalyst behind bonds' strong performance this year was a stream of
unexpectedly weak economic numbers, particularly in April and May. Many
investors had been cautious of the bond market early in the year, anticipating
continued economic strength and higher inflation. When that scenario failed to
materialize, investors became more confident that interest rates had reached a
peak, and money poured from the short end of the market into longer maturity
bonds, forcing yields lower and driving prices higher.
The Fund has more
than recaptured last year's decline
<TABLE>
<CAPTION>
Average U.S
Government Government Fund
Securities Fund Lipper
- --------------------------- ----------------------------
<S> <C>
Y-T-D Y-T-D
1994 -3.39% 1994 -4.74%
1995 through 10/31 16.24% 1995 through 10/31 13.43%
</TABLE>
Total return of the Lipper General U.S. government bond index.
As of 10-31-95
30-DAY ANNUALIZED YIELD 6.11%
AVERAGE MATURITY(1) 7.3 YEARS
AVERAGE QUALITY RATING AAA
Asset Allocation
<TABLE>
<CAPTION>
<S> <C>
Preferred Stock 2.4%
Corporate Bonds 13.3%
U.S. Gov't & Agency Issues 83.6%
Short-Term Investments 0.7%
</TABLE>
The Fund's asset allocation is presented as a percentage of net assets and does
not reflect any futures positions held by the Fund. The Government Issues
include short-term government securities. Please see the Schedule of
Investments in Securities for a complete listing of the Fund's portfolio.
FUND STRATEGY: ADJUST DURATION TO MAXIMIZE OPPORTUNITY
While the Fund's asset allocation has varied only slightly during the year, we
actively adjusted the duration of our mortgage and Treasury holdings to
maximize the opportunity presented by falling rates. Through most of 1995, we
kept the Fund's overall duration slightly longer than neutral to make it more
sensitive to interest-rate changes and help us lock in higher yields for longer
periods of time.
At the beginning of the year, we maintained our long duration by lengthening
maturities in the mortgage portion of the portfolio. As rates continued to
fall, however, we began to reduce the duration of our mortgage position, since
lower rates make it more likely that mortgages will be called as homeowners
take advantage of the opportunity to refinance. By October, our mortgage
holdings were of fairly short maturity, and we had increased the duration of
our Treasury position in order to maintain a slightly longer-than-neutral
posture for the portfolio overall.
THE VALUE OF KEEPING A LONGER-TERM PERSPECTIVE
Our outlook over the next few quarters is positive. We expect the economy to
continue to grow at around a 3% annual rate, with inflation remaining subdued.
Against this backdrop, we look for interest rates to stay in their current
range with a downward bias-overall, a very favorable environment for bond
investors.
Even in such a beneficial environment, shareholders must be patient and
maintain a longer-term outlook. While the market appears to have settled down
in anticipation of a slow-growth economy, that doesn't mean a smooth, steady
trend. Instead, the market is likely to be battered occasionally by
contradictory economic
The Strong Income Funds Annual Report - October 31, 1995
6
<PAGE> 8
data, international events (particularly in Japan), and political haggling in
Washington as the budget debate and election campaigns kick into high gear.
Such factors are why, at Strong, we believe it's important that investors
establish an investment timeline, select the investment that matches this
horizon and then stay the course. In our experience, investors who have the
discipline to look past short-term turbulence have the greatest chance of
reaching their goals.
We appreciate your investment in the Strong Government Securities Fund, and we
look forward to earning your continued confidence.
[PHOTO OF BRADLEY C. TANK]
Sincerely,
/s/ Bradley C. Tank
Bradley C. Tank
Portfolio Manager
Lipper Rankings as of 10-31-95(2) (based on total return)
<TABLE>
<CAPTION>
Time Period Rank among General U.S. Government Funds Percentage
<S> <C> <C>
Year-to-date #26 of 176 Top 15%
1-year #26 of 163 Top 16%
5-year #5 of 74 Top 7%
Since inception (10-29-86) #1 of 45 Top Fund
</TABLE>
Growth of an assumed $10,000 invested at the Fund's inception
<TABLE>
<CAPTION>
Salomon Brothers
The Strong Government Investment-Grade
Securities Fund Bond Index
<S> <C> <C>
10/86 10000 10000
12/86 10218 10195
12/87 10572 10459
12/88 11683 11295
12/89 12836 12926
12/90 13953 14101
12/91 16278 16352
12/92 17781 17593
12/93 20044 19337
12/94 19364 18787
10/95 22509 21632
</TABLE>
- - The Strong Government Securities Fund
- - Salomon Brothers Broad Bond Index
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Salomon Brothers Broad Investment-Grade Bond Index ("Salomon Brothers Broad
Bond Index"), an unmanaged index generally representative of the performance of
government, mortgage, and investment-grade corporate securities. To equalize
the time periods, the index's performance was prorated for the month of
October,1986. 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.
(1) The Fund's average maturity includes the effect of futures and options
contracts.
(2) Rankings are historical and do not represent future results. From time to
time, the Fund's advisor has waived its management fee and/or absorbed
expenses, which has resulted in higher returns.
Average annual total returns
through 10-31-95
Since inception on 10-29-86 9.43%
5-year 10.52%
3-year 9.09%
1-year 16.86%
The Strong Income Funds Annual Report - October 31, 1995
7
<PAGE> 9
The Strong CORPORATE BOND Fund
The Strong Corporate Bond Fund seeks total return by investing for a high level
of current income with a moderate degree of share-price fluctuation. The Fund
invests primarily in investment-grade corporate debt obligations.
STRONG PERFORMANCE IN 1995
The Strong Corporate Bond Fund has performed well in 1995 through October,
producing a ten-month total return of 20.29%. The Fund handily outperformed
its benchmark, the Salomon Brothers BBB-rated Corporate Bond Index, which was
up 18.66%. Additionally, based on total return, the Fund ranked in the top 9%
of its Lipper category. (2)
BONDS ROAR BACK IN 1995
Fueled by falling long-term rates and spurred by strong corporate profits,
corporate bond prices have rebounded strongly in 1995. Few investors
anticipated such a rally as the year began, amid continued strength in the
economy and fears of re-emerging inflation. However, unexpectedly weak economic
numbers, particularly in April and May, indicated that the economy was slowing
rather than accelerating, and longer-term bond prices staged a powerful rally.
This rally continued nearly unabated through the month of October.
OUR MARKET-BEATING BLUEPRINT
As the performance of our benchmark index suggests, the corporate bond market
as a whole appreciated strongly in 1995 through October. Our aim, therefore,
was not just to achieve positive returns, but to beat the overall market's
return. We accomplished this in three ways:
/ / Duration: During the majority of the year, we ran the Fund with a
longer-than-average duration. This served to make the portfolio more sensitive
to interest-rate movements, a definite positive as rates fell throughout the
year.
/ / Tactical shifts: During the early part of the year, we reduced the
portfolio's corporate bond weighting, reaching a low of about 75% of net assets
in mid-May. We also increased the portfolio's average credit quality slightly
from BBB to A at the beginning of the third quarter. These shifts were designed
to guard the portfolio against an increase in supply as rates fell, and to
protect against pockets of weakness in case the slowing economy raised concerns
about corporate cash flow.
/ / Issue selection: In May and June, we began to move back into the corporate
bond market, targeting issues that we believed offered particularly good value.
Our research helped us identify some solid performers, primarily in the media
sector, such as Time Warner, Tele-Communications, and Viacom.
As of 10-31-95
30-DAY ANNUALIZED YIELD 6.95%
AVERAGE MATURITY (1) 10.6 YEARS
AVERAGE QUALITY RATING A
Asset Allocation
U.S. Gov't & Agency Issues 13.5%
Short-Term Investments 5.7%
Non-Agency Mortgage &
Asset-Backed Securities 3.4%
Corporate Bonds 76.4%
Preferred Stock 1.0%
This allocation is presented as a percentage of net assets. It does not reflect
any futures positions held by the Fund. Please see the Schedule of Investments
in Securities for a complete listing of the Fund's portfolio.
[PHOTO OF MAN AND WOMAN]
OUTLOOK: TEMPERED OPTIMISM
Currently, we are slightly overweighted in corporate bonds, and, on average,
that should continue to be the case. In coming months, the budget debate in
Congress and turbulence in the Japanese financial markets may generate
volatility in long- term interest rates. However, we would tend to view a
significant jump in yields as an opportunity to buy bonds and thereby boost the
Fund's income-earning power.
Another source of near-term concern may be the recent increase in merger and
acquisition activity. In general, we believe American companies, having learned
their lesson from the excesses of the late 1980s, will avoid over-leveraging.
Nevertheless, we intend to closely monitor our corporate holdings and the
market, using our disciplined credit research to help control potential risk.
The Strong Income Funds Annual Report - October 31, 1995
8
<PAGE> 10
Longer term, our outlook for the fixed-income market is positive. We anticipate
slow economic growth and an inflation rate in the 2.5% to 3.0% range. With long
bond yields hovering near 6.5%, that's a real return (yield minus the inflation
rate) of near 4%. Historically, that's very attractive. Provided inflation
remains at the subdued level we expect, we believe there's room for interest
rates to trend down, and for bonds to provide both capital appreciation and
income.
Thank you for your investment in the Strong Corporate Bond Fund.
We look forward to serving your investment needs in the future.
[PHOTO OF JEFFREY A. KOCH]
Sincerely,
/s/ Jeffrey A. Koch
Jeffrey A. Koch
Portfolio Manager
Lipper Rankings as of 10-31-95 (2) (based on total return)
<TABLE>
<CAPTION>
Time Period Rank among Corporate Debt BBB-Rated Funds Percentage
<S> <C> <C>
Year-to-date #7 of 79 Top 9%
1-year #4 of 78 Top 6%
5-year #4 of 25 Top 16%
Since inception (12-12-85) #4 of 14 Top 29%
</TABLE>
Growth of an assumed $10,000 investment
from 12/12/85 to 10/31/95
<TABLE>
<CAPTION>
Salomon Brothers
The Strong Corporate BBB-rated Corporate
Bond Fund Bond Index
<S> <C> <C>
12/85 10000 10000
12/86 13399 11827
12/87 13997 12278
12/88 15745 13593
12/89 15800 15361
12/90 14816 16220
12/91 17013 19412
12/92 18612 21310
12/93 21732 24149
12/94 21447 23353
10/95 25799 27711
</TABLE>
Average annual total returns
through 10-31-95
Since inception on 12-12-85 10.06%
5-year 11.82%
3-year 12.33%
1-year 22.20%
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund made at its inception, with a similar investment in the
Salomon Brothers BBB-Corporate Bond Index, an unmanaged, market
capitalization-weighted index generally representative of the performance of
BBB-rated corporate bonds. To equalize the time periods, the index's
performance was prorated for the month of December, 1985. 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.
(1) The Fund's average maturity includes the effect of futures and options
contracts.
(2) Rankings are historical and do not represent future results.
The Strong Income Funds Annual Report - October 31, 1995
9
<PAGE> 11
SCHEDULES OF INVESTMENTS IN SECURITIES October 31, 1995
<TABLE>
<CAPTION>
STRONG MONEY MARKET FUND
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (e) COST (d)
Security (In Thousands) (In Thousands)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BANKER'S ACCEPTANCES 1.1%
Fuji Bank, Ltd. Chicago
5.85% $ 5,000 5.85% 12/05/95 $ 4,972
5.83% 6,000 5.83 01/08/96 5,934
5.83% 10,000 5.83 02/07/96 9,841
---------
Total Banker's Acceptances 20,747
CERTIFICATES OF DEPOSIT 8.4%
Canadian Imperial Bank Yankee Dollar Certificate of Deposit 48,000 6.10 08/02/96 48,000
Dai-Ichi Kangyo Bank, Ltd. Yankee Dollar
Certificates of Deposit:
5.98% 16,000 5.98 01/16/96 16,002
5.93% 25,000 5.93 01/25/96 24,999
Fuji Bank, Ltd. New York Yankee Dollar Certificate of Deposit 35,000 6.01 01/12/96 35,001
Sumitomo Bank, Ltd. Yankee Dollar Certificate of Deposit 38,200 6.00 01/12/96 38,202
---------
Total Certificates of Deposit 162,204
CORPORATE COMMERCIAL PAPER 57.0%
Albion Capital Corporation (Acquired 8/15/95; Cost $49,762) (b) 50,475 5.85 11/10/95 50,401
American Honda Finance Corporation 25,000 5.72 11/27/95 24,897
11,500 5.67 02/05/96 11,326
Anaheim, California Electric System 28,000 5.90 02/01/96 27,999
Aristar, Inc. 11,200 5.75 11/07/95 11,189
4,700 5.80 01/18/96 4,641
Astro Capital Corporation 33,750 5.85 12/08/95 33,547
6,725 5.85 12/29/95 6,662
Brazos River Authority, Texas Pollution Control Revenue 11,000 5.90 12/20/95 11,000
9,500 5.90 12/27/95 9,500
Brownsville, Texas Utility Systems 5,595 5.78 12/13/95 5,557
CSC Enterprises 14,000 5.74 12/12/95 13,909
Chrysler Financial Corporation 14,000 5.79 12/19/95 13,892
Coca-Cola Enterprises, Inc. 10,000 5.73 11/29/95 9,955
DIC Americas, Inc. 25,000 5.87 12/12/95 24,833
Dayton Hudson Corporation 4,340 5.82 01/11/96 4,290
Dynamic Funding Corporation 7,475 5.87 11/06/95 7,469
Equitable of Iowa Companies 9,000 5.85 12/05/95 8,950
Finova Capital Corporation 10,000 5.85 11/03/95 9,997
2,000 5.85 11/08/95 1,998
20,000 5.80 11/14/95 19,958
3,400 5.87 11/15/95 3,392
5,000 5.80 11/16/95 4,988
3,350 5.80 11/20/95 3,340
10,000 5.80 11/21/95 9,968
18,500 5.85 11/28/95 18,419
6,650 5.75 11/30/95 6,619
10,300 5.95 01/29/96 10,148
9,000 5.85 01/31/96 8,867
Fleet Mortgage Group, Inc. 9,300 5.80 12/06/95 9,247
Franklin Resources, Inc. 21,350 5.75 11/09/95 21,323
Frontier Corporation 2,131 5.80 11/29/95 2,121
27,225 5.83 12/04/95 27,079
15,465 5.88 01/26/96 15,248
General Mills, Inc. 20 5.46 Upon Demand 20
Great Western Financial Corporation 24,300 5.73 11/13/95 24,254
16,530 5.74 11/17/95 16,488
Heller Financial, Inc. 7,000 5.95 01/23/96 6,904
5,375 6.05 02/02/96 5,291
ITT Corporation:
(Acquired 10/23/95; Cost $12,781) (b) 12,800 5.82 11/01/95 12,800
(Acquired 10/02/95; Cost $22,485) (b) 22,600 5.90 11/02/95 22,596
International Securitization 10,850 5.80 12/22/95 10,761
Iris Partners L.P. 3,695 5.87 11/08/95 3,691
18,640 5.86 11/30/95 18,552
Leathers L.P. 7,520 5.90 02/06/96 7,400
Eli Lilly & Company 14 5.30 Upon Demand 14
</TABLE>
See notes to financial statements.
10
<PAGE> 12
<TABLE>
<CAPTION>
STRONG MONEY MARKET FUND (continued)
PRINCIPAL YIELD TO MATURITY AMORITIZED
AMOUNT MATURITY DATE (e) COST (d)
SECURITY (in Thousands) (In Thousands)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Mercury Finance Corporation $ 2,700 5.88% 11/01/95 $ 2,700
1,000 5.87 11/03/95 1,000
3,500 5.90 11/07/95 3,497
2,250 5.90 11/27/95 2,240
5,000 5.90 11/28/95 4,978
6,500 5.88 11/29/95 6,470
10,300 5.87 12/14/95 10,228
2,850 5.88 01/17/96 2,814
13,300 5.87 01/22/96 13,122
20,000 5.87 01/24/96 19,726
7,400 5.91 01/26/96 7,295
2,500 5.93 01/29/96 2,463
7,000 5.87 01/30/96 6,897
13,500 5.87 02/09/96 13,280
New Hampshire Business Finance Authority 18,000 5.90 11/15/95 18,000
New York State Job Development Authority 7,700 5.80 11/08/95 7,700
13,300 5.80 11/15/95 13,300
35,000 5.97 12/22/95 35,000
7,000 5.94 12/27/95 7,000
19,870 5.97 12/28/95 19,870
5,000 5.97 12/29/95 5,000
Nynex Corporation 19,065 5.83 11/09/95 19,040
Orix America, Inc. 2,095 5.85 12/01/95 2,085
370 5.85 12/15/95 367
Pitney Bowes Credit Corporation 17 5.47 Upon Demand 17
Salomon, Inc. 2,000 5.95 11/03/95 1,999
16,400 5.95 11/06/95 16,386
21,000 5.98 11/20/95 20,934
11,820 5.95 11/24/95 11,775
20,000 5.95 11/29/95 19,907
San Diego, California Industrial Development Revenue - San Diego Gas &
Electric Company (Acquired 10/06/95; Cost $9,805) (b) 9,805 5.95 12/18/95 9,805
Sara Lee Corporation 1,428 5.45 Upon Demand 1,428
Seiko Corporation of America 5,000 5.80 01/19/95 4,936
Society of the New York Hospital Fund, Inc. 8,820 5.85 11/15/96 8,800
6,500 5.85 12/29/95 6,439
Sothebys, Inc. 5,900 5.80 11/10/95 5,891
10,000 5.80 11/13/95 9,981
10,000 5.80 11/28/95 9,957
Southwestern Bell Telephone Company 60 5.45 Upon Demand 60
Strait Capital Corporation 3,550 5.91 11/30/95 3,533
Strategic Asset Funding Corporation 2,000 6.00 01/31/96 1,970
Sunshine State Government Finance 11,419 5.90 12/13/95 11,340
9,000 5.90 12/19/95 8,929
5,378 5.85 12/29/95 5,328
Torchmark Corporation 8,000 5.76 11/02/95 7,999
1,000 5.75 11/06/95 999
6,400 5.79 11/09/95 6,392
15,000 5.76 11/14/95 14,969
8,200 5.75 11/16/95 8,181
15,725 5.78 12/07/95 15,634
10,000 5.74 12/15/95 9,930
15,000 5.79 12/18/95 14,887
6,000 5.85 01/08/96 5,934
Tri-Lateral Capital, Inc. 15,130 5.82 12/01/95 15,057
Warner Lambert Company 242 5.44 Upon Demand 242
Washington Square Mortgage Company 8,087 5.78 11/03/95 8,084
4,500 5.78 11/13/95 4,491
3,250 5.78 11/15/95 3,243
5,800 5.80 12/13/95 5,761
1,000 5.80 12/20/95 992
Wisconsin Electric Power Company 1 5.51 Upon Demand 1
Working Capital Management Company, Limited Partnership 3,028 5.82 11/02/95 3,028
12,625 5.80 12/21/95 12,523
---------
Total Corporate Commercial Paper 1,103,334
</TABLE>
See notes to financial statements.
11
<PAGE> 13
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1995
STRONG MONEY MARKET FUND (continued)
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (e) COST (d)
SECURITY (in Thousands) (in Thousands)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE FLOATING RATE NOTES 7.6%
CS First Boston, Inc. Medium Term Notes (Acquired 6/30/95; Cost $25,000) (b) $25,000 5.94% 01/08/96 $ 25,000
Caterpillar Financial Services Corporation Medium Term Notes, Tranche #267 10,000 6.09 11/15/95 10,000
Fleet Mortgage Group, Inc. Floating Rate Notes:
Tranche #19 2,000 6.16 12/20/95 2,004
Tranche #20 6,885 6.16 12/20/95 6,897
General Motors Acceptance Corporation Medium Term Notes 10,000 6.35 04/21/96 10,000
Lehman Brothers Holdings, Inc. Medium Term Notes:
6.26% 12,600 6.08 12/01/95 12,600
Tranche #101 20,000 6.18 11/21/95 20,000
Shawmut Bank Connecticut Medium Term Notes, Tranche #10 60,000 5.90 11/10/95 60,000
----------
Total Corporate Floating Rate Notes 146,501
CORPORATE OBLIGATIONS 16.0%
Bankers Trust NY Corporation, 4.70% 12,000 5.95 07/01/96 11,903
Beta Finance, Inc. Medium Term Notes, 6.00% 43,000 6.12 07/29/96 42,964
Chrysler Financial Corporation Medium Term Notes, Tranche #99, 4.82% 5,000 6.07 12/18/95 4,992
Chrysler Financial Corporation Notes:
6.00% 15,050 6.15 04/15/96 15,040
10.34% 64,358 6.21 05/15/96 65,751
First Interstate Bancorp Debentures, 10.50% 2,015 6.03 03/01/96 2,044
First National Bank Akron, Ohio Medium Term Notes, Tranche 1, 5.95% 20,000 5.91 08/01/96 20,005
General Motors Acceptance Corporation Medium Term Notes:
Tranche #853, 4.75% 14,000 5.89 12/01/95 13,987
8.75% 33,515 6.70 02/01/96 33,685
Huntington Bankshares, Inc. Medium Term Notes, Tranche #5, 6.55% 18,500 6.55 03/29/96 18,500
Huntington National Bank Medium Term Notes, Tranche #30, 6.05% 55,000 6.14 08/01/96 54,965
Lehman Brothers, Inc. Notes:
9.75% 13,595 6.19 04/01/96 13,792
10.75% 3,500 6.19 04/29/96 3,577
Waste Management, Inc. 22,950 6.28 06/30/96 8,663
----------
Total Corporate Obligations 309,868
TAXABLE MUNICIPAL VARIABLE RATE PUT BONDS 7.7%
Alabama State Industrial Development Authority - S - Tool Project 8,000 6.00 11/01/95 8,000
Aurora, Kane & Dupage Counties, Illinois Industrial Development Revenue 1,700 6.13 11/01/95 1,700
Chattanooga, Tennesee Industrial Development Board Revenue - Radisson Read
Project 3,660 6.29 11/02/95 3,660
Community Health Systems, Inc. 4,100 6.45 11/01/95 4,100
Health Midwest Ventures Group, Inc. 8,600 6.05 11/01/95 8,600
Illinois Housing Development Authority 14,345 6.03 11/01/95 14,345
Ivex of Delaware, Inc. 6,400 6.35 11/01/95 6,400
J.H. Siroonian, Inc. 7,900 5.94 11/01/95 7,900
Kinder-Care Learning Centers, Inc. Industrial Refunding -
Kinder-Care Learning Centers, Inc. Projects 4,000 6.04 11/01/95 4,000
McQueen Village, Ltd. 3,200 6.00 11/01/95 3,200
Mississippi Business Finance Corporation Industrial Development - Morton
International, Inc. 14,500 5.98 11/01/95 14,500
Missouri Economic Development, Export & Infrastructure Board - Heilig
Meyers Company Project 4,100 6.00 11/01/95 4,100
Montgomery County, Pennsylvania Industrial Development Authority Revenue 5,000 6.15 11/01/95 5,000
New Jersey Sports & Exposition Authority Sports Complex Subordinated Refunding
Revenue 21,275 6.03 11/01/95 21,275
Passaic County, New Jersey 13,800 5.90 11/01/95 13,800
Presbyterian Homes, Inc. 5,000 5.94 11/02/95 5,000
South Carolina Jobs - Economic Development Authority Industrial Development
Revenue - Roller Bearing Company of America, Inc. Project 3,000 6.09 11/02/95 3,000
Southeast Atlantic Properties, L.L.C. 7,450 6.00 11/01/95 7,450
Stanislaus County, California Pension Obligation 10,000 5.98 11/01/95 10,000
Thayer Properties, LLC 3,600 6.00 11/01/95 3,600
----------
Total Taxable Municipal Variable Rate Put Bonds 149,630
UNITED STATES GOVERNMENT AND AGENCY ISSUES 2.1%
Federal National Mortgage Association Medium Term Notes 15,000 6.12 01/26/96 14,994
Student Loan Marketing Association Floating Rate Notes: 5,000 5.64 11/07/95 5,000
10,000 5.66 11/07/95 10,000
United States Treasury Bills 10,000 5.09 06/27/96 9,662
----------
Total United States Government and Agency Issues 39,656
----------
TOTAL INVESTMENTS IN SECURITIES 99.9% 1,931,940
Other Assets and Liabilities, Net 0.1% 2,131
----------
NET ASSETS 100.0% $1,934,071
==========
</TABLE>
See notes to financial statements.
<PAGE> 14
STRONG MONEY MARKET FUND (continued)
<TABLE>
<CAPTION>
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- -----------------------------------------------------------------------------
<S> <C>
Finance - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 14.6%
Brokerage & Investment Management. . . . . . . . . . . . . . . . . . 9.3
General Obligation . . . . . . . . . . . . . . . . . . . . . . . . . 8.5
Yankee Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4
Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.0
Industrial Development Revenue . . . . . . . . . . . . . . . . . . . 5.9
Personal & Commercial Lending. . . . . . . . . . . . . . . . . . . . 5.1
Insurance - Life. . . . . . . . . . . . . . . . . . . . . . . . . . 4.9
Bank - Regional. . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2
Telecommunication Service. . . . . . . . . . . . . . . . . . . . . . 3.3
Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Automotive Related . . . . . . . . . . . . . . . . . . . . . . . . . 3.0
Bank - Money Center. . . . . . . . . . . . . . . . . . . . . . . . . 3.0
Financial Services . . . . . . . . . . . . . . . . . . . . . . . . . 2.2
Mortgage & Related Service . . . . . . . . . . . . . . . . . . . . . 2.1
Non-Agency Mortgage & Asset Backed . . . . . . . . . . . . . . . . . 2.1
Diversified Operations . . . . . . . . . . . . . . . . . . . . . . . 1.8
Consumer Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 1.6
Hospital Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Leisure Service. . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Pollution Control Revenue. . . . . . . . . . . . . . . . . . . . . . 1.1
Sallie Mae . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8
FNMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.8
Computer Software. . . . . . . . . . . . . . . . . . . . . . . . . . 0.7
Beverage - Soft Drink. . . . . . . . . . . . . . . . . . . . . . . . 0.5
U.S. Government. . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5
Water & Sewer Revenue. . . . . . . . . . . . . . . . . . . . . . . . 0.5
Engineering & Construction . . . . . . . . . . . . . . . . . . . . . 0.4
Retail - Department Store. . . . . . . . . . . . . . . . . . . . . . 0.2
Commercial Service . . . . . . . . . . . . . . . . . . . . . . . . . 0.2
Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1
Other Revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3
Other Assets & Liabilities . . . . . . . . . . . . . . . . . . . . . 0.1
------
Total 100.0%
======
</TABLE>
STRONG SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- -----------------------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE BONDS 1.8%
Time Warner, Inc. Convertible Liquid Yield
Option Notes, Zero %, Due 12/17/12
(Putable at 39.727 on 12/17/97) (Cost $19,184) $58,000 $19,793
CORPORATE BONDS 38.1%
APP International Finance Company B.V.
Guaranteed Secured Notes, 10.25%,
Due 10/01/00 3,000 3,075
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 2,000 2,270
Abbey National Treasury Services PLC
Subordinated Notes, 6.69%, Due 10/17/05 2,925 2,933
American Reinsurance Corporation Senior
Subordinated Debentures, 10.875%, Due 9/15/04 14,110 15,699
Bank of Boston Corporation Subordinated Floating
Rate Notes, 6.00%, Due 2/28/01 8,850 8,808
Cablevision Industries Corporation Senior Notes,
10.75%, Due 1/30/02 5,000 5,456
Citicorp Floating Rate Notes, 6.75%, Due 5/01/04 21,357 21,450
Deere & Company Medium Term Notes, 8.38%,
Due 5/12/97 17,000 17,531
Dr. Pepper/Seven-Up Companies, Inc. Senior
Subordinated Notes, Zero %, Due 11/01/02
(Rate Reset Effective 11/01/97) 3,500 3,237
Federated Department Stores, Inc. Senior Notes,
10.00%, Due 2/15/01 13,105 14,121
Figgie International, Inc. Senior Notes, 9.875%,
Due 10/01/99 3,000 3,007
First Bank System, Inc. Floating Rate Subordinated
Notes, 6.0625%, Due 11/30/10 (Putable at 100 on
11/30/00) 4,000 4,003
Ford Motor Credit Debt Unit with Premium Call
(Structured Enhanced Return Trusts 1995,
Series R-20), 9.75%, Due 2/03/98 (Acquired
2/08/95; Cost $9,995) (b) 10,000 10,600
Harrahs Operating, Inc. Guaranteed Senior
Subordinated Notes:
8.75%, Due 3/15/00 6,675 6,859
10.875%, Due 4/15/02 2,700 2,963
Health & Retirement Properties Trust Senior
Floating Rate Notes, Series B, 6.6575%,
Due 7/13/99 10,000 10,021
Hong Kong & Shanghai Bank Corporation Floating
Rate Subordinated Notes, 6.125%, Due 12/29/49 10,000 7,925
Hook-SupeRx, Inc. Senior Notes, 10.125%,
Due 6/01/02 8,180 8,957
Lehman Brothers Holdings, Inc. Senior Notes,
8.80%, Due 3/01/15 3,750 4,183
Magma Copper Company Senior Subordinated
Notes, 8.70%, Due 5/15/05 13,310 13,377
Marine Midland Banks, Inc. Floating Rate
Subordinated Notes:
6.00%, Due 12/20/00 5,000 4,968
6.00%, Due 12/31/09 4,400 4,246
Meditrust Notes, 7.60%, Due 7/15/01 3,850 3,899
NBD Bancorp, Inc. Subordinated Floating Rate
Notes, 6.00%, Due 12/18/05 5,000 4,998
NWCG Holdings Corporation Senior Secured
Discount Notes, Series B, Zero %, Due 6/15/99 6,000 4,050
News America Holdings Debt Unit with Premium
Call (Medium Term Structured Enhanced Return
Trusts 1995, Series R-26), 7.26%, Due 5/11/98
(Acquired 5/15/95; Cost $20,000) (b) 20,000 20,220
Novacor Chemicals, Ltd. Notes, 6.50%,
Due 9/22/00 (Acquired 9/14/95; Cost $3,736) (b) 3,750 3,748
Okobank Subordinated Step-Up Perpetual Floating
Rate Notes, 7.3875%, Due 10/29/49 11,200 11,390
</TABLE>
See notes to financial statements.
13
<PAGE> 15
SCHEDULES OF INVESTMENTS IN SECURITIES (continued)
STRONG SHORT-TERM BOND FUND (continued)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (in Thousands)
- --------------------------------------------------------------------------------
<S> <C> <C>
Petroleos Mexicanos Guaranteed Floating Rate
Notes, 6.875%, Due 3/08/99 $ 19,600 $ 17,395
Public Service Company of New Hampshire
Debentures, 15.23%, Due 7/01/00 2,200 2,528
Reliance Industries, Ltd. Notes, 8.125%, Due
9/27/05 (Acquired 9/22/95; Cost $2,995) (b) 3,000 3,019
Republic of Poland Notes, 7.75%, Due 7/13/00 12,000 12,210
Revco D.S., Inc. Senior Notes, 9.125%, Due 1/15/00 10,800 11,313
Santa Fe Pacific Gold Corporation Senior
Debentures, 8.375%, Due 7/01/05 12,000 12,120
TCI Communications, Inc. Reset Notes, 6.82%,
Due 9/15/10 (Rate Reset Effective 9/15/98) 52,500 53,678
Time Warner, Inc. Debentures, 9.125%, Due 1/15/13 10,000 10,977
Time Warner, Inc. Debt Unit with Premium Call
(Medium Term Structured Enhanced Return
Trusts 1994 Series R-21), 8.58%, Due 6/22/98
(Acquired 2/24/95; Cost $9,966) (b) 10,000 10,410
Time Warner, Inc. Floating Rate Debt Unit with
Premium Call (Medium Term Structured
Enhanced Return Trusts 1995, Series R-29),
6.8125%, Due 12/17/97 (Acquired 9/12/95;
Cost $10,000) (b) 10,000 10,010
Time Warner, Inc. Floating Rate Notes, 6.835%,
Due 8/15/00 2,000 2,010
USG Corporation Senior Notes, Series B, 9.25%,
Due 9/15/01 400 426
Viacom, Inc. Senior Notes, 7.75%, Due 6/01/05 41,000 42,179
-------
TOTAL CORPORATE BONDS (COST $401,237) 412,269
NON-AGENCY MORTGAGE &
ASSET-BACKED SECURITIES 24.6%
American Housing Trust XI Mortgage Pass-Thru
Certificates, Class 3-1, Interest Only, 0.654%
Due 1/25/22 279,760 4,722
Banco Nacional de Mexico Trust Certificates,
Zero %, Due 10/01/02 (Acquired 8/01/95;
Cost $1,682) (b) 2,260 1,717
Central Life Assurance Company Mortgage
Pass-Thru Certificates, Series 1988-1, Class A-4,
9.00%, Due 5/01/97 10,195 10,413
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 1990-G, Class A-Z1,
9.50%, Due 12/25/21 4,291 4,377
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1988-3, Class A-2, 9.00%,
Due 4/01/18 2,736 2,833
Collateralized Mortgage Obligation Inverse Floating
Rate Trust, Series 13, Class Q, 14.8704%,
Due 1/20/03 2,288 2,447
Collateralized Mortgage Obligation Trust 47,
Class E, Principal Only, Due 9/01/18 1,558 792
First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates:
Series 1993-2, Class A-3, 7.50%, Due 3/25/33 5,500 5,570
Series 1994-MHC1, Class A-1X, Interest Only,
1.8621%, Due 4/25/11 84,354 7,421
First Boston Mortgage Securities Corporation
Variable Rate Mortgage Pass-Thru Certificates,
Series 1994-MHC1, Class D, 7.6375%,
Due 4/25/11 5,000 4,988
GMBS, Inc. Countrywide Funding Certificates,
Series 1990-1, Class Z, 9.25%, Due 1/28/20 7,922 8,138
Green Tree Financial Corporation Certificates,
Series 1994-BII, Class A-1, 7.85%, Due 7/15/09 10,168 10,196
Green Tree Financial Corporation Home
Improvement Loan Certificates, Series 1995-E,
Class A, 6.80%, Due 8/15/20 $11,603 $11,612
Green Tree Securitized Net Interest Margin Trust
Certificates:
Series 1994-A, 6.90%, Due 2/15/04 7,231 7,229
Series 1994-B, 7.85%, Due 7/15/04 3,467 3,494
Series 1995-A, 7.25%, Due 7/15/05 5,414 5,444
Greenwich Capital Acceptance, Inc. Mortgage
Securities, Series 1993-P01, Class E, Principal
Only, Due 11/26/17 12,738 8,749
Greenwich Capital Acceptance, Inc. Subordinated
Mortgage Securities Trust Pass-Thru Certificates,
Series 1994-1, Class A, 6.7119%, Due 2/28/19
(Acquired 4/12/94; Cost $4,200) (b) 4,296 4,143
Home Equity Loan Real Estate Mortgage Investment
Conduit Trust, Closed-End Asset-Backed
Certificates, Series 1992-1, Class B, 5.85%,
Due 11/17/14 1,722 1,671
ML TR X Collateralized Mortgage Obligation,
Class C, Principal Only, Due 7/25/17 15,907 12,725
Merrill Lynch Credit Corporation Senior
Subordinated Variable Rate Mortgage Pass-Thru
Certificates, Series 1994-A, Class M1, 6.675%,
Due 7/15/19 13,423 12,313
Merrill Lynch Home Equity Acceptance, Inc.
Subordinated Variable Rate Mortgage-Backed
Certificates, Series 1994-A, Class A-1, 6.875%,
8/17/23 13,405 12,613
Merrill Lynch Mortgage Investors, Inc. Mortgage
Pass-Thru Certificates, Series 1994-C1, Interest
Only, 0.644%, Due 11/25/20 172,597 3,797
Merrill Lynch Mortgage Investors, Inc. Senior
Subordinated Variable Rate Pass-Thru
Certificates, Series 1994-H, Class M, 6.875%,
Due 6/15/19 11,543 10,621
Mortgage Obligation Structured Trust Pass-Thru
Certificates, Series 1993-1, Class A-1, 6.35%,
Due 10/25/18 33,485 33,140
RTC Variable Rate Mortgage Pass-Thru
Securities, Inc.:
Series 1991-6, Class A, 6.9254%, Due 5/25/19 8,475 8,375
Series 1995-1, Class B-11, 7.5375%, Due 10/25/28 7,530 7,558
Series 1995-1, Class M-5, 7.2199%, Due 10/25/28 9,403 9,480
RTC Variable Rate Mortgage Pass-Thru Securities,
Inc. Manufactured Housing Certificates, Series
1992-MH1, Class B, 6.3375%, Due 8/15/19
(Acquired 4/21/95; Cost $6,761) (b) 6,867 6,777
Ryland Acceptance Corporation IV Collateralized
Mortgage Bonds, Series 53, Class 53-E, 10.00%,
Due 10/25/18 1,992 2,101
Ryland Mortgage Securities Corporation III Variable
Rate Collateralized Mortgage Bonds, Series 1992-C,
Class 3-A, 11.8055%, Due 11/25/30 5,706 5,941
Ryland Mortgage Securities Corporation IV Variable
Rate Collateralized Mortgage Bonds, Series 2,
Class 3-A, 11.9262%, Due 6/25/23 4,068 4,196
Salomon Brothers Mortgage Securities VI, Inc.
Stripped Coupon Mortgage Pass-Thru Certificates,
Series 1987-3, Class A, Principal Only,
Due 10/23/17 2,569 2,013
Santa Barbara Savings & Loan Association
California Real Estate Mortgage Investment
Conduit Participation Certificates, Series 1988-A,
Class 2, Principal Only, Due 9/01/18 2,447 1,921
</TABLE>
See notes to financial statements
14
<PAGE> 16
STRONG SHORT-TERM BOND FUND (continued)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
--------- --------------
<S> <C> <C>
Structured Asset Securities Corporation
Collateralized Mortgage Obligation, Series
1991-2, Class SC, 15.84%, Due 1/20/20 $19,400 $ 20,661
Structured Mortgage Asset Residential Trust
Multiclass Pass-Thru Certificates, Series 1992-5,
Class BO, Principal Only, Due 6/25/23 2,180 1,698
U-Haul Self-Storage Corporation Commercial
Mortgage Asset Trust Pass-Thru Certificates,
Series 1993-1, Class A1, 7.3375%, Due 12/01/20
(Acquired 12/02/93; Cost $4,615) (b) 4,615 4,645
----------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES (COST $264,750) 266,531
UNITED STATES GOVERNMENT AND AGENCY
ISSUES 35.4%
FHLMC Participation Certificates:
8.50%, Due 4/01/01 thru 1/01/05 1,619 1,672
8.75%, Due 10/01/01 1,893 1,949
9.00%, Due 5/01/06 thru 6/01/16 2,746 2,894
9.50%, Due 3/01/11 976 1,031
9.75%, Due 8/01/02 6,699 6,977
10.25%, Due 7/01/09 thru 10/01/14 1,067 1,158
10.50%, Due 1/01/10 thru 7/01/19 2,324 2,544
10.75%, Due 9/01/09 thru 10/01/17 1,169 1,278
11.25%, Due 11/01/09 628 692
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
6.50%, Due 9/01/08 4,089 4,078
8.00%, Due 10/01/25 (g) 50,000 51,234
9.50%, Due 5/01/14 thru 2/01/17 33,814 35,996
10.00%, Due 7/01/04 3,135 3,284
12.00%, Due 3/01/17 12,323 14,028
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates,
Series 1992-41, Class J, Accretion Directed
Interest Only, 1005.049%, Due 12/25/02 31 325
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Pass-Thru
Certificates:
7.545%, Due 1/01/22 6,534 6,770
7.717%, Due 6/01/19 7,795 8,062
8.727%, Due 4/01/02 35,135 35,936
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Pass-Thru
Certificates:
Series 1991-01, Class 1L, Interest Only, 1088.308%,
Due 1/25/21 61 1,699
Series 1992-187, Class SA, 8.40%, Due 10/25/07 3,211 2,965
Series 1992-G64, Class SE, 7.8563%, Due 3/25/22 7,107 5,816
Series 1993-93, Class S, 8.50%, Due 5/25/08 1,959 1,671
FNMA Stripped Mortgage-Backed Securities:
Series G-4, Class C, Principal Only, Due 5/25/16 4,082 3,962
Series 1993-M1, Class N, Interest Only, 0.84%,
Due 4/25/20 188,318 4,049
Series 1993-12, Class C, Principal Only,
Due 2/25/23 23,200 18,080
Series 1995-G2, Class IO, Interest Only, 2.796%,
Due 5/25/20 23,280 1,677
GNMA Guaranteed Pass-Thru Certificates:
9.75%, Due 9/15/05 thru 11/15/05 3,000 3,150
10.00%, Due 2/20/18 1,356 1,468
11.50%, Due 4/15/13 453 518
GNMA Guaranteed Platinum Pool Pass-Thru
Certificates:
11.00%, Due 6/15/20 15,178 17,125
12.50%, Due 4/15/19 55,658 64,563
Riely FHA Insured Project Loan #123, 7.43%,
Due 8/15/18 18,818 18,654
Riely FHA Insured Project Loan #125, 7.43%,
Due 1/01/14 34,460 34,460
Small Business Administration Guaranteed Loan
Group #0191, Variable Rate Interest Only
Certificates, 3.111%, Due 7/30/18 28,632 3,358
Small Business Administration Guaranteed Loan
Pool #440019, Interest Only Custodial Receipts,
Series 1993-1A, 2.531%, Due 2/15/18 17,726 2,210
United States Treasury Notes, 5.875%, Due 8/15/98 9,760 9,809
USGI FHA Insured Project Pool Banco 85, 7.2717%,
Due 11/24/19 5,245 5,202
USGI FHA Insured Project Pool #846, 6.93%,
Due 10/01/13 26 26
USGI FHA Insured Project Pool #2047, 6.90%,
Due 8/01/14 2,909 2,818
TOTAL UNITED STATES GOVERNMENT AND AGENCY ----------
ISSUES (COST $383,346) 383,188
OPTIONS 0.2%
United States Treasury Bond Call Option
(Strike Price is 100.281. Expiration date is 11/10/95.) (278) (174)
United States Treasury Bond Put Option
(Strike Price is 100.281. Expiration date is 11/10/95.) 278 33
Merrill Lynch Swaption (The option to receive a fixed
interest rate of 7.75%; exercisable at a strike price
of 100 beginning 4/09/04 and expiring 4/09/25.
Putable on 11/16/95) 39,583 2,751
----------
TOTAL OPTIONS (COST $1,833) 2,610
PREFERRED STOCK 2.3%
Norwest Corporation Series A, Cumulative Tracking
Preferred Stock/Residential Home Mortgage L.L.C.
(Acquired 12/16/94; Cost $23,000) (b) 115,000 24,719
CASH EQUIVALENTS (a) 1.8%
COMMERCIAL PAPER 1.4%
DISCOUNTED 1.3%
Champion International Corporation,
Due 11/01/95 $ 2,875 2,875
Cooper Industries, Inc., Due 11/01/95 3,650 3,650
Mallinckrodt Group, Due 11/01/95 7,775 7,775
----------
14,300
INTEREST BEARING, DUE UPON DEMAND 0.1%
General Mills, Inc., 5.46% 7 7
Eli Lilly & Company, 5.30% 93 93
Pitney Bowes Credit Corporation, 5.47% 12 12
Sara Lee Corporation, 5.45% 374 374
Southwestern Bell Telephone Company, 5.45% 19 19
Warner Lambert Company, 5.44% 290 290
----------
795
----------
Total Commercial Paper 15,095
UNITED STATES GOVERNMENT ISSUES 0.4%
United States Treasury Bills:
Due 11/09/95 (c) 430 430
Due 11/16/95 2,375 2,370
Due 12/07/95 (c) 1,420 1,413
Due 1/11/96 (c) 365 361
----------
4,574
----------
Total Cash Equivalents (Cost $19,667) 19,669
----------
TOTAL INVESTMENTS IN SECURITIES
(COST $1,113,017) 104.2% 1,128,779
Other Assets and Liabilities, Net (4.2%) (45,706)
----------
NET ASSETS 100.0% $1,083,073
==========
</TABLE>
See notes to financial statements
15
<PAGE> 17
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) October 31, 1995
STRONG SHORT-TERM BOND FUND (continued)
<TABLE>
<CAPTION>
FUTURES
UNDERLYING UNREALIZED
FACE AMOUNT APPRECIATION
EXPIRATION AT VALUE (DEPRECIATION)
DATE (In Thousands) (In Thousands)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
185 Two-Year U.S. Treasury Notes 12/95 $ 38,494 $ 200
Sold:
59 Five-Year U.S. Treasury Notes 12/95 (6,391) (22)
835 Ten-Year U.S. Treasury Notes 12/95 (93,129) (1,554)
71 U.S. Treasury Bonds 12/95 (8,311) 31
</TABLE>
<TABLE>
<CAPTION>
OPTIONS
NOTIONAL PAR
VALUE PREMIUMS
(In Thousands) (In Thousands)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at December 31, 1994 $ -- $ --
Options written during the period 202,800 517
Options expired (25,000) (33)
Options exercised (150,000) (328)
--------- ------
Options outstanding at October 31, 1995 $ 27,800 $ 156
========= ======
</TABLE>
Exercised and expired options resulted in a capital loss (in thousands) of $564.
<TABLE>
<CAPTION>
Percentage of
INDUSTRY DIVERSIFICATION Net Assets
- -----------------------------------------------------------------------
<S> <C>
US Government and Agency . . . . . . . . . . . . . . . . . 35.8%
Non-Agency Mortgage & Asset-Backed . . . . . . . . . . . . 24.6
Media - Radio/TV . . . . . . . . . . . . . . . . . . . . . 9.8
Media - Publishing . . . . . . . . . . . . . . . . . . . . 6.8
Bank - Super Regional. . . . . . . . . . . . . . . . . . . 3.6
Yankee Corporate . . . . . . . . . . . . . . . . . . . . . 2.9
Bank - Money Center. . . . . . . . . . . . . . . . . . . . 2.0
Retail - Drug Store. . . . . . . . . . . . . . . . . . . . 1.9
Machinery - Agriculture. . . . . . . . . . . . . . . . . . 1.6
Oil - International Integrated . . . . . . . . . . . . . . 1.6
Insurance - Property & Casualty. . . . . . . . . . . . . . 1.5
Retail - Department Store. . . . . . . . . . . . . . . . . 1.3
Metal & Mining . . . . . . . . . . . . . . . . . . . . . . 1.2
Foreign Government . . . . . . . . . . . . . . . . . . . . 1.1
Precious Metal/Gem/Stone . . . . . . . . . . . . . . . . . 1.1
Leisure Service . . . . . . . . . . . . . . . . . . . . . 1.1
Automobiles. . . . . . . . . . . . . . . . . . . . . . . . 1.0
Real Estate. . . . . . . . . . . . . . . . . . . . . . . . 0.9
Brokerage & Investment Management. . . . . . . . . . . . . 0.7
Medical Services . . . . . . . . . . . . . . . . . . . . . 0.7
Chemical . . . . . . . . . . . . . . . . . . . . . . . . . 0.6
Bank - Regional. . . . . . . . . . . . . . . . . . . . . . 0.4
Machinery - Miscellaneous. . . . . . . . . . . . . . . . . 0.3
Beverage - Soft Drink. . . . . . . . . . . . . . . . . . . 0.3
Paper & Forest Product . . . . . . . . . . . . . . . . . . 0.3
Diversified Operations . . . . . . . . . . . . . . . . . . 0.3
Forest & Paper Products. . . . . . . . . . . . . . . . . . 0.3
Finance - Miscellaneous. . . . . . . . . . . . . . . . . . 0.3
Electric Power . . . . . . . . . . . . . . . . . . . . . . 0.2
Other Assets and Liabilities . . . . . . . . . . . . . . . (4.2)
-----
Total 100.0%
=====
<CAPTION>
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- -----------------------------------------------------------------------
<S> <C>
United States. . . . . . . . . . . . . . . . . . . . . . . 97.4%
United Kingdom . . . . . . . . . . . . . . . . . . . . . . 1.9
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Poland . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Finland . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Canada . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3
Netherlands. . . . . . . . . . . . . . . . . . . . . . . . 0.3
India . . . . . . . . . . . . . . . . . . . . . . . . . . 0.3
Other Assets and Liabilities . . . . . . . . . . . . . . . (4.2)
-----
Total 100.0%
=====
</TABLE>
<TABLE>
<CAPTION>
STRONG GOVERNMENT SECURITIES FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 10.5%
Coca-Cola Enterprises, Inc. Notes, Zero %,
Due 6/20/20 $ 41,475 $ 7,368
NationsBank Corporation Subordinated Notes,
7.25%, Due 10/15/25 5,000 4,957
News America Holdings, Inc. Senior Debentures,
7.75%, Due 2/01/24 1,500 1,506
9.50%, Due 7/15/24 2,100 2,527
Snap-On, Inc. Notes, 6.625%, Due 10/01/05 7,000 7,084
Tele-Communications, Inc. Non-Redeemable Senior
Debentures, 9.80%, Due 2/01/12 12,375 14,368
Viacom, Inc. Senior Notes, 7.75%, Due 6/01/05 10,000 10,288
-------
TOTAL CORPORATE BONDS (COST $47,155) 48,098
MUNICIPAL BONDS 0.8%
Arkansas Development Finance Authority GNMA
Guaranteed Bonds, 9.75%, Due 11/15/14
(Cost $3,859) 3,100 3,987
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITY 2.6%
Community Program Loan Trust Bonds, Series 1987,
Class A-4, 4.50%, Due 10/01/18 (Cost $11,918) 14,025 12,078
UNITED STATES GOVERNMENT AND AGENCY
ISSUES 76.2%
FHA Insured Project Loan #956-55054, 2.93%,
Due 11/01/12 4,308 3,439
FHLMC Guaranteed Multiclass Mortgage
Participation Certificates, Series 1679, Class
1679-N, Principal Only, Due 2/15/09 2,605 1,335
FHLMC Guaranteed Multiclass Variable Rate
Mortgage Participation Certificates, Series 1324,
Class 1324-B, 7.00%, Due 4/15/18 2,312 2,318
FHLMC Participation Certificates:
7.25%, Due 7/01/08 2,969 2,990
8.00%, Due 7/01/08 thru 12/01/10 10,216 10,500
8.50%, Due 5/01/16 3,395 3,513
9.00%, Due 12/01/01 thru 6/01/16 10,230 10,689
9.75%, Due 8/01/02 3,761 3,917
10.00%, Due 6/01/20 772 835
10.50%, Due 8/01/20 1,777 1,958
11.00%, Due 1/01/01 165 174
11.25%, Due 1/01/01 181 192
11.75%, Due 10/01/15 235 264
12.00%, Due 11/01/15 98 110
12.25%, Due 7/01/15 thru 12/01/15 694 783
12.50%, Due 10/01/09 thru 1/01/15 461 525
13.00%, Due 7/01/14 109 124
13.75%, Due 5/01/02 thru 5/01/12 135 152
14.00%, Due 9/01/10 thru 4/01/16 1,369 1,576
14.50%, Due 12/01/02 thru 12/01/11 56 64
14.75%, Due 8/01/11 thru 4/01/13 11 13
15.00%, Due 8/01/11 66 77
16.00%, Due 6/01/12 7 9
-------
42,118
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
6.50%, Due 9/01/08 3,759 3,749
8.50%, Due 7/01/10 thru 9/01/25 13,733 14,374
10.00%, Due 4/01/20 5,134 5,625
11.75%, Due 12/01/10 259 293
12.00%, Due 1/01/16 thru 2/01/19 4,656 5,296
12.25%, Due 7/01/14 35 40
12.50%, Due 2/01/11 thru 5/01/15 8,606 9,865
13.00%, Due 10/01/15 3,481 4,028
13.25%, Due 4/01/12 4 4
13.50%, Due 1/01/11 thru 1/01/12 64 73
13.75%, Due 10/01/10 12 14
</TABLE>
See notes to financial statments.
16
<PAGE> 18
STRONG GOVERNMENT SECURITIES FUND (continued)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
14.00%, Due 1/01/12 thru 11/01/14 $ 156 $ 184
14.25%, Due 12/01/14 34 40
14.50%, Due 1/01/12 8 10
14.75%, Due 11/01/10 thru 3/01/12 257 301
15.00%, Due 10/01/12 11 13
15.50%, Due 10/01/12 23 28
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates,
Series 1989-1, Class 1-D, 10.30%, Due 1/25/19 9,205 10,535
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Pass-Thru
Certificates:
Series 1991-57, Class S, 7.339%, Due 5/25/20 8,432 8,166
Series 1991-141, Class SC, 9.804%, Due 10/25/21 519 520
FNMA Stripped Mortgage-Backed Securities:
Series 1989-11, Class 11-C, Principal Only,
Due 1/25/14 851 832
Series 1992-74, Class IO, Interest Only, 8.50%
Due 5/25/22 5,115 1,154
Series 1992-154, Class A, Principal Only,
Due 8/25/22 5,423 4,274
-------
69,418
GMAC #12 FHA Project Loan, 7.43%, Due 5/01/21 16,243 17,010
GNMA Guaranteed Pass-Thru Certificates:
9.00%, Due 1/15/08 thru 12/15/09 17,954 18,954
12.50%, Due 4/15/19 7,966 9,241
13.00%, Due 11/15/10 thru 11/15/14 1,108 1,290
13.50%, Due 7/15/10 thru 10/15/12 359 420
14.00%, Due 6/15/11 thru 12/20/14 324 377
14.50%, Due 6/15/11 thru 11/15/12 436 515
15.00%, Due 1/15/12 thru 9/15/12 201 239
16.00%, Due 4/15/12 20 24
-------
31,060
Riely FHA Insured Project Loan #5, 7.43%,
Due 10/01/22 3,190 3,244
Small Business Administration Guaranteed Loan
Pool #440019, Interest Only Custodial Receipts,
Series 1993-1A, 2.531%, Due 2/15/18 23,690 2,954
Tennessee Valley Authority Power Bond,
Series 1995A, 6.375%, Due 6/15/05 6,200 6,228
United States Treasury Bonds:
6.875%, Due 8/15/25 20,000 21,475
7.625%, Due 2/15/25 12,150 14,117
11.625%, Due 11/15/04 10,400 14,385
United States Treasury Notes:
6.125%, Due 5/31/97 25,570 25,754
6.25%, Due 5/31/00 20,000 20,344
6.375%, Due 8/15/02 30,625 31,400
6.50%, Due 8/15/05 10,570 10,950
7.50%, Due 2/15/05 2,200 2,427
7.75%, Due 1/31/00 21,640 23,202
-------
164,054
USGI FHA Insured Project Pool #2040, 3.025%,
Due 11/01/06 9,030 7,929
-------
TOTAL UNITED STATES GOVERNMENT AND AGENCY
ISSUES (COST $342,528) 347,454
OPTION 0.2%
Merrill Lynch Swaption (The option to receive a
fixed interest rate of 7.75%; exercisable at a
strike price of 100 beginning 4/09/04 and
expiring 4/09/25. Putable on 11/16/95)
(Cost $563) 12,167 845
PREFERRED STOCK 2.4%
Norwest Corporation Series A, Cumulative Tracking
Preferred Stock/Residential Home Mortgage L.L.C.
(Acquired 12/16/94; Cost $10,000) (b) 50,000 10,748
CASH EQUIVALENTS (a) 6.7%
COMMERCIAL PAPER 0.1%
INTEREST BEARING, DUE UPON DEMAND
Sara Lee Corporation, 5.45% $ 26 $ 26
Southwestern Bell Telephone Company, 5.45% 259 259
-------
285
REPURCHASE AGREEMENT 6.4%
Cantor Fitzgerald & Co., Inc. (Collateralized by
$27,265 United States Treasury Notes, 7.75%,
Due 12/31/99), 5.87%, Due 11/01/95 (f) 29,300 29,300
UNITED STATES GOVERNMENT ISSUES 0.2%
United States Treasury Bills:
Due 11/09/95 (c) 75 75
Due 11/16/95 (c) 730 728
-------
803
-------
Total Cash Equivalents (Cost $30,388) 30,388
-------
TOTAL INVESTMENTS IN SECURITIES
(COST $446,411) 99.4% 453,598
Other Assets and Liabilities, Net 0.6% 2,634
-------
NET ASSETS 100.0% $456,232
=======
</TABLE>
<TABLE>
<CAPTION>
Percentage of
INDUSTRY DIVERSIFICATION Net Assets
- ---------------------------------------------------------------------------------
<S> <C>
United States Government and Agency Issues . . . . . . . . . . . . . 83.6%
Media-Radio/TV . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3
Non-Agency Mortgage & Asset-Backed Securities. . . . . . . . . . . . 2.6
Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
Beverage & Soft Drink. . . . . . . . . . . . . . . . . . . . . . . . 1.6
Machine Tool . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Bank-Money Center. . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Media-Publishing . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9
Finance-Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 0.2
Telecommunication Service. . . . . . . . . . . . . . . . . . . . . . 0.1
Other Assets and Liabilities . . . . . . . . . . . . . . . . . . . . 0.6
-----
Total 100.0%
=====
</TABLE>
<TABLE>
<CAPTION>
STRONG CORPORATE BOND FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 76.2%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 $ 5,415 $ 6,146
Asarco, Inc. Debentures, 8.50%, Due 5/01/25 2,000 2,210
Bankers Life Holding Corporation Senior
Subordinated Notes, Series B, 13.00%,
Due 11/01/02 3,445 3,876
Bell Cablemedia PLC Senior Discount Notes,
Zero %, Due 9/15/05 (Acquired 9/22/95;
Cost $2,008) (b) 3,500 2,100
Coca Cola Enterprises, Inc. Notes, Zero %,
Due 6/20/20 26,610 4,727
Dr. Pepper/Seven - Up Companies, Inc. Senior
Subordinated Notes, Zero %, Due 11/01/02 (Rate
Reset Effective 11/01/97) 3,600 3,330
Exide Corporation Senior Notes, 10.00%,
Due 4/15/05 4,000 4,310
Figgie International, Inc. Senior Notes, 9.875%,
Due 10/01/99 3,000 3,008
GNS Finance Corporation Senior Subordinated
Notes, Series B, 9.25%, Due 3/15/03 4,785 5,168
Giddings & Lewis, Inc. Notes, 7.50%, Due 10/01/05 3,740 3,795
</TABLE>
See notes to financial statements
17
<PAGE> 19
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1995
STRONG CORPORATE BOND FUND (continued)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- -------------------------------------------------------------------------------------
<S> <C> <C>
John Hancock Mutual Life Insurance Company
Surplus Notes, 7.375%, Due 2/15/24 (Acquired
9/25/95; Cost $6,431) (b) $ 7,000 $ 6,785
Hanson Overseas B.V. Guaranteed Senior Notes,
6.75%, Due 9/15/05 5,000 5,035
Harrahs Operating, Inc. Guaranteed Senior
Subordinated Notes, 8.75%, Due 3/15/00 3,000 3,083
Jet Equipment Trust Certificates, Series 1995-B,
10.91%, Due 8/15/14 (Acquired 7/19/95;
Cost $2,000) (b) 2,000 2,046
Jet Equipment Trust Subordinated Notes,
Series 1995-B, Class C, 9.71%, Due 2/15/15
(Acquired 7/19/95; Cost $2,500) (b) 2,500 2,561
Kansallis-Osake-Pankki Subordinated Notes, 8.65%,
Due 12/29/49 (Rate Reset Effective 8/15/99)
(Acquired 9/19/95; Cost $3,158) (b) 3,000 3,161
Lehman Brothers Holdings, Inc. Notes, 7.125%,
Due 9/15/03 2,500 2,531
Lehman Brothers Holdings, Inc. Senior Notes,
8.80%, Due 3/01/15 2,000 2,231
Magma Copper Company Senior Subordinated
Notes, 8.70%, Due 5/15/05 3,600 3,618
Meditrust Notes, 7.60%, Due 7/15/01 1,000 1,013
NWCG Holdings Corporation Senior Secured
Discount Notes, Series B, Zero %, Due 6/15/99 2,600 1,755
Nationsbank Corporation Subordinated Notes,
7.25%, Due 10/15/25 5,000 4,956
Owens-Illinois, Inc. Senior Debentures, 11.00%,
Due 12/01/03 3,500 3,889
Panamsat L.P./ Panamsat Capital Corporation
Senior Secured Notes, 9.75%, Due 8/01/00 1,500 1,579
Panamsat L.P./ Panamsat Capital Corporation
Senior Subordinated Discount Notes, Zero %,
Due 8/01/03 6,000 4,815
Principal Mutual Life Insurance Company Surplus
Notes, 8.00%, Due 3/01/44 (Acquired 10/17/95;
Cost $1,682) (b) 1,700 1,677
Ralston Purina Company Debentures, 7.875%,
Due 6/15/25 2,895 3,037
Reliance Industries, Ltd. Notes, 8.125%, Due 9/27/05
(Acquired 9/22/95; Cost $2,496) (b) 2,500 2,515
Revco D.S., Inc. Senior Notes, 9.125%, Due 1/15/00 3,700 3,876
Riggs National Corporation Subordinated Notes,
8.50%, Due 2/01/06 4,000 4,100
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Notes, Series B, 10.00%, Due 3/15/05 4,000 4,180
SCI Television, Inc. Senior Secured Notes, 11.00%,
Due 6/30/05 1,000 1,062
Santa Fe Pacific Gold Corporation Senior
Debentures, 8.375%, Due 7/01/05 4,000 4,040
Southern Pacific Rail Corporation Senior Notes,
9.375%, Due 8/15/05 4,000 4,340
Southern Pacific Transportation Company 1994-A
Trusts Pass-Thru Certificates, Series 1994-A6,
8.66%, Due 7/02/11 4,100 4,641
System Energy Resources, Inc. First Mortgage
Bonds, 11.375%, Due 9/01/16 3,500 3,851
TCI Communications, Inc. Senior Debentures,
8.75%, Due 8/01/15 1,825 1,938
Tele-Communications, Inc. Non-Redeemable
Senior Debentures:
9.80%, Due 2/01/12 1,620 1,881
10.125%, Due 4/15/22 4,000 4,873
Telewest Communications Senior Discounted
Debentures, Zero %, Due 10/01/07 7,000 4,130
Tenet Healthcare Corporation Senior Notes, 8.625%,
Due 12/01/03 4,300 4,418
Time Warner, Inc. Debentures:
8.11%, Due 8/15/06 $ 1,705 $ 1,750
9.15%, Due 2/01/23 4,120 4,526
Tosco Corporation Guaranteed First Mortgage
Bonds, 8.25%, Due 5/15/03 1,880 2,043
USG Corporation Senior Notes, Series B, 9.25%,
Due 9/15/01 4,000 4,260
United Meridian Corporation Senior Subordinated
Notes, 10.375%, Due 10/15/05 2,500 2,569
Viacom, Inc. Senior Notes, 7.75%, Due 6/01/05 8,500 8,744
-------
TOTAL CORPORATE BONDS (COST $162,295) 166,179
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 3.4%
Bear Stearns Mortgage Securities, Inc. Mortgage
Pass-Thru Certificates, Series 1995-1, Class 2-P,
Principal Only, Due 7/25/10 1,248 941
First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates,
Series 1994-MHC1, Class A-1X, Interest Only,
1.8621%, Due 4/25/11 8,676 763
Green Tree Financial Corporation Manufactured
Housing Senior Subordinated Pass-Thru
Certificates, Series 1995-4, Class B1, 7.30%,
Due 6/15/25 300 302
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage Bonds,
Series 1992-C, Class 3-A, 11.8055%, Due 11/25/30 836 871
Westam Mortgage Financial Corporation
Collateralized Mortgage Bonds, Series 10,
Class 10-D, Principal Only, Due 7/26/18 7,810 4,457
-------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES (COST $7,138) 7,334
UNITED STATES GOVERNMENT AND AGENCY
ISSUES 13.5%
FHLMC Participation Certificates:
14.00%, Due 9/01/12 46 53
14.75%, Due 3/01/10 26 30
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates, 13.50%,
Due 4/01/11 (c) 211 247
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Variable Rate Pass-Thru Certificates,
Series 1992-29, Class S, 15.978%, Due 4/25/16 1,500 1,600
GNMA Guaranteed Pass-Thru Certificates, 15.00%,
Due 8/15/11 thru 10/15/12 156 186
Small Business Administration Guaranteed Loan
Pool #40013, Interest Only Strips, 2.419%,
Due 9/30/17 16,932 2,037
United States Treasury Bonds, 7.625%, Due 2/15/25 1,800 2,091
United States Treasury Notes:
6.375%, Due 8/15/02 4,500 4,614
6.50%, Due 4/30/99 500 512
6.50%, Due 8/15/05 17,585 18,217
-------
TOTAL UNITED STATES GOVERNMENT AND AGENCY
ISSUES (COST $29,282) 29,587
OPTION 0.2%
Merrill Lynch Swaption (The option to receive a fixed
interest rate of 7.75%; exercisable at a strike price
of 100 beginning 4/09/04 and expiring 4/09/25.
Putable on 11/16/95) (Cost $282) 6,083 423
PREFERRED STOCK 1.0%
Norwest Corporation Series A, Cumulative
Tracking Preferred Stock/Residential Home
Mortgage L.L.C. (Acquired 12/16/94;
Cost $2,000) (b) 10,000 2,150
</TABLE>
See notes to financial statements
18
<PAGE> 20
STRONG CORPORATE BOND FUND (continued)
<TABLE>
<CAPTION>
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENTS (a) 7.2%
COMMERCIAL PAPER 7.0%
DISCOUNTED 6.7%
Baxter International, Inc., Due 11/01/95 $10,800 $ 10,800
Champion International Corporation, Due 11/01/95 3,800 3,800
--------
14,600
INTEREST BEARING, DUE UPON DEMAND 0.3%
Sara Lee Corporation, 5.45% 349 349
Wisconsin Electric Power Company, 5.51% 320 320
--------
669
--------
Total Commercial Paper 15,269
UNITED STATES GOVERNMENT ISSUES 0.2%
United States Treasury Bills:
Due 11/09/95 (c) 70 70
Due 11/16/95 (c) 365 364
Due 1/18/96 35 35
--------
469
--------
Total Cash Equivalents (Cost $15,738) 15,738
--------
TOTAL INVESTMENTS IN SECURITIES
(COST $216,735) 101.5% 221,411
Other Assets and Liabilities, Net (1.5%) (3,350)
--------
NET ASSETS 100.0% $218,061
========
</TABLE>
<TABLE>
<CAPTION>
FUTURES
UNDERLYING UNREALIZED
FACE AMOUNT APPRECIATION
EXPIRATION AT VALUE (DEPRECIATION)
DATE (In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
50 Ten-Year U.S. Treasury Notes 12/95 $5,577 $28
37 U.S. Treasury Bonds 12/95 4,331 53
Sold:
16 Five-Year U.S. Treasury Notes 12/95 1,733 (28)
25 Ten-Year U.S. Treasury Notes 12/95 2,788 (49)
25 U.S. Treasury Bonds 3/96 2,918 (17)
</TABLE>
<TABLE>
<CAPTION>
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
United States . . . . . . . . . . . . . . . . . . . . . . . . . . 91.8%
Canada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9
India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
United Kingdom. . . . . . . . . . . . . . . . . . . . . . . . . . 5.2
Other Assets & Liabilities. . . . . . . . . . . . . . . . . . . . (1.5)
------
Total 100.0%
======
<CAPTION>
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- --------------------------------------------------------------------------------
<S> <C>
U.S. Government . . . . . . . . . . . . . . . . . . . . . . . . . . 13.8%
Media - Radio/TV. . . . . . . . . . . . . . . . . . . . . . . . . . 12.2
Leisure Service . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6
Healthcare - Medical Supply . . . . . . . . . . . . . . . . . . . . 4.9
Railroad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1
Beverage - Soft Drink . . . . . . . . . . . . . . . . . . . . . . . 3.7
Non-Agency Mortgage & Asset-Backed Securities . . . . . . . . . . . 3.4
Finance - Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 3.3
Telecommunication Service . . . . . . . . . . . . . . . . . . . . . 2.9
Media - Publishing . . . . . . . . . . . . . . . . . . . . . . . . 2.9
Metal & Mining . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7
Brokerage & Investment Management . . . . . . . . . . . . . . . . . 2.6
Yankee Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Bank - Money Center . . . . . . . . . . . . . . . . . . . . . . . . 2.3
Airline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.1
Healthcare - Patient Care . . . . . . . . . . . . . . . . . . . . . 2.0
Electrical Equipment. . . . . . . . . . . . . . . . . . . . . . . . 2.0
Engineering & Construction. . . . . . . . . . . . . . . . . . . . . 2.0
Telephone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9
Bank - Regional . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9
Precious Metal/Gem/Stone. . . . . . . . . . . . . . . . . . . . . . 1.8
Container . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Retail - Drug Store . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Insurance - Accident & Health . . . . . . . . . . . . . . . . . . . 1.8
Electric Utility. . . . . . . . . . . . . . . . . . . . . . . . . . 1.8
Forest & Paper Products . . . . . . . . . . . . . . . . . . . . . . 1.7
Machine Tool. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7
Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6
Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.4
Diversified Operations. . . . . . . . . . . . . . . . . . . . . . . 1.4
Oil - North American Exploration & Product. . . . . . . . . . . . . 1.2
Chemical. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0
Oil - North American Integrated . . . . . . . . . . . . . . . . . . 0.9
Insurance - Life. . . . . . . . . . . . . . . . . . . . . . . . . . 0.8
Electric Power . . . . . . . . . . . . . . . . . . . . . . . . . . 0.1
Other Assets & Liabilities. . . . . . . . . . . . . . . . . . . . . (1.5)
------
Total 100.0%
======
</TABLE>
LEGEND
(a) Cash equivalents include any security which has a maturity of less than
one year.
(b) Restricted security.
(c) Security pledged to cover margin requirements for futures contracts.
(d) Amortized cost for Federal income tax and financial reporting purposes is
the same.
(e) Maturity date represents actual maturity, earliest put date, or for U.S.
Government Agency Securities, the next interest adjustment date.
(f) The Funds may engage in repurchase agreements where the underlying
collateral consists of U.S. government securities which are maintained in a
segregated account with a custodian. The market value of the collateral
must exceed the principal amount by at least two percent on a daily basis.
(g) When-Issued Security.
All principal amounts and costs are stated in thousands.
Percentages are stated as a percent of net assets.
See notes to financial statements
19
<PAGE> 21
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------
For the Period Ended October 31, 1995 (Note 1)
<TABLE>
<CAPTION>
(In Thousands)
STRONG MONEY STRONG SHORT-TERM
MARKET FUND BOND FUND
----------------- -----------------
<S> <C> <C>
INTEREST INCOME $89,048 $69,211
EXPENSES:
Investment Advisory Fees 7,242 5,395
Custodian Fees 118 132
Shareholder Servicing Costs 2,043 1,833
Reports to Shareholders 1,047 416
Federal and State Registration Fees 144 109
Other 50 208
------- -------
Total Expenses before Waivers and Absorptions 10,644 8,093
Voluntary Expense Waivers and Absorptions by Advisor (10,056) --
------- -------
Expenses, Net 588 8,093
------- -------
NET INVESTMENT INCOME 88,460 61,118
REALIZED AND UNREALIZED LOSS:
Net Realized Gain (Loss) on:
Investments -- (17,791)
Futures Contracts, Options
and Forward Currency Contracts -- (12,191)
Change in Unrealized Appreciation/Depreciation on:
Investments -- 67,708
Futures Contracts, Options
and Forward Currency Contracts -- (436)
------- -------
NET GAIN -- 37,290
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $88,460 $98,408
======= =======
<CAPTION>
STRONG GOVERNMENT STRONG CORPORATE
SECURITIES FUND BOND FUND
----------------- ----------------
<S> <C> <C>
INTEREST INCOME $20,418 $11,727
EXPENSES:
Investment Advisory Fees 1,710 859
Custodian Fees 57 43
Shareholder Servicing Costs 541 367
Reports to Shareholders 98 90
Federal and State Registration Fees 59 42
Other 51 32
------- -------
Total Expenses 2,516 1,433
------- -------
NET INVESTMENT INCOME 17,902 10,294
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 15,207 13,034
Futures Contracts, Options and Forward Currency Contracts 2,757 837
Change in Unrealized Appreciation/Depreciation on:
Investments 13,919 5,584
Futures Contracts, Options and Forward Currency Contracts 282 159
------- -------
NET GAIN 32,165 19,614
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $50,067 $29,908
======= =======
</TABLE>
20
See notes to financial statements.
<PAGE> 22
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<CAPTION>
(In Thousands, Except Per Share Amounts)
STRONG MONEY STRONG SHORT-TERM
MARKET FUND BOND FUND
--------------- ------------------
<S> <C> <C>
ASSETS:
Investments in Securities, at Value (Cost of
$1,931,940 and $1,113,017, respectively) $ 1,931,940 $1,128,779
Receivable from Brokers for Securities Sold 38 35,403
Dividends and Interest Receivable 12,710 12,439
----------- ----------
Total Assets 1,944,688 1,176,621
LIABILITIES:
Payable to Brokers for Securities Purchased -- 86,325
Dividends Payable 9,248 6,221
Accrued Operating Expenses and Other Liabilities 1,369 1,002
----------- ----------
Total Liabilities 10,617 93,548
----------- ----------
NET ASSETS $ 1,934,071 $1,083,073
=========== ==========
Capital Shares
Authorized 10,000,000 1,000,000
Outstanding 1,934,071 110,896
NET ASSET VALUE PER SHARE $ 1.00 $ 9.77
=========== ==========
<CAPTION>
STRONG GOVERNMENT STRONG CORPORATE
SECURITIES FUND BOND FUND
------------------ ----------------
<S> <C> <C>
ASSETS:
Investments in Securities, at Value (Cost of
$446,411 and $216,735, respectively) $ 453,598 $ 221,411
Receivable from Brokers for Securities Sold 13,584 11,751
Dividends and Interest Receivable 6,178 3,457
Other 108 --
----------- ----------
Total Assets 473,468 236,619
LIABILITIES:
Payable to Brokers for Securities Purchased 14,555 16,975
Dividends Payable 2,330 1,366
Accrued Operating Expenses and Other Liabilities 351 217
----------- ----------
Total Liabilities 17,236 18,558
----------- ----------
NET ASSETS $ 456,232 $ 218,061
=========== ==========
Capital Shares
Authorized 100,000 300,000
Outstanding 43,021 20,656
NET ASSET VALUE PER SHARE $ 10.60 $ 10.56
=========== ==========
</TABLE>
21
See notes to financial statements.
<PAGE> 23
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
(In Thousands)
STRONG MONEY STRONG SHORT-TERM
MARKET FUND BOND FUND
----------------------------- -----------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
OCT. 31, 1995 DEC. 31, 1994 OCT. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 88,460 $ 17,481 $ 61,118 $ 90,851
Net Realized Gain (Loss) -- -- (29,982) (50,796)
Change in Unrealized Appreciation/Depreciation -- -- 67,272 (66,022)
---------- ---------- ---------- ----------
Increase (Decrease) in Net Assets Resulting from Operations 88,460 17,481 98,408 (25,967)
CAPITAL SHARE TRANSACTIONS 1,393,088 210,995 4,450 (373,029)
DISTRIBUTIONS:
From Net Investment Income (88,460) (17,481) (60,866) (90,851)
In Excess of Net Investment Income -- -- -- (699)
---------- ---------- ---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,393,088 210,995 41,992 (490,546)
NET ASSETS:
Beginning of Period 540,983 329,988 1,041,081 1,531,627
---------- ---------- ---------- ----------
End of Period $1,934,071 $ 540,983 $1,083,073 $1,041,081
========== ========== ========== ==========
<CAPTION>
STRONG GOVERNMENT STRONG CORPORATE
SECURITIES FUND BOND FUND
----------------------------- -----------------------------
PERIOD ENDED YEAR ENDED PERIOD ENDED YEAR ENDED
OCT. 31, 1995 DEC. 31, 1994 OCT. 31, 1995 DEC. 31, 1994
------------- ------------- ------------- -------------
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 17,902 $ 16,009 $ 10,294 $ 9,401
Net Realized Gain (Loss) 17,964 (16,921) 13,871 (7,208)
Change in Unrealized Appreciation/Depreciation 14,201 (8,007) 5,743 (4,027)
-------- -------- -------- --------
Increase (Decrease) in Net Assets Resulting from Operations 50,067 (8,919) 29,908 (1,834)
CAPITAL SHARE TRANSACTIONS 148,275 79,799 75,563 11,225
DISTRIBUTIONS:
From Net Investment Income (17,902) (16,009) (10,294) (9,401)
In Excess of Net Investment Income (1,040) -- (421) (85)
-------- -------- -------- --------
TOTAL INCREASE (DECREASE) IN NET ASSETS 179,400 54,871 94,756 (95)
NET ASSETS:
Beginning of Period 276,832 221,961 123,305 123,400
-------- -------- -------- --------
End of Period $ 456,232 $ 276,832 $ 218,061 $ 123,305
========== ========== ========== ==========
</TABLE>
22
See notes to financial statements.
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
1. ORGANIZATION
The Strong Income Funds consist of Strong Money Market Fund, Inc.,
Strong Short-Term Bond Fund, Inc., Strong Government Securities Fund,
Inc., and Strong Corporate Bond Fund, Inc. (formerly Strong Income Fund,
Inc.). The Funds are separately incorporated, diversified, open-end
management investment companies registered under the Investment Company
Act of 1940. The Board of Directors of the Funds approved changing the
Funds' fiscal year-ends from December 31 to October 31; therefore, this
report encompasses financial information for the ten months ended October
31, 1995.
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 except the Strong
Money Market Fund are valued 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 and all investments in the Strong Money Market Fund
are valued at amortized cost, which approximates current 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. Aggregate cost and fair value of these
restricted securities held at October 31, 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
STRONG MONEY STRONG SHORT-TERM STRONG GOVERNMENT STRONG CORPORATE
MARKET FUND BOND FUND SECURITIES FUND BOND FUND
------------ ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Aggregate Cost $119,832 $ 96,950 $10,000 $22,275
Aggregate Fair Value 120,602 100,008 10,748 22,995
Percent of Net Assets 6.2% 9.2% 2.4% 10.5%*
</TABLE>
*Of these securities, which are restricted from resale, 68% are
eligible for resale pursuant to rule 144A under the Securities Act
of 1933 and also have been determined to be liquid by the Advisor
based upon guidelines established by the Fund's Board of Directors.
(B) Federal Income and Excise Taxes and Distributions to
Shareholders -- It is the Funds' policy 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.
The character of distributions made during the year from net
investment income or net realized gains may differ from the
characterization for Federal income tax purposes due to differences
in the recognition of income and expense items for financial statement
and tax purposes. Where appropriate, reclassifications between net
asset accounts are made for such differences that are permanent in
nature.
(C) Realized Gains and Losses on Investment Transactions -- Gain
or loss realized on investment transactions is determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) Futures -- Upon entering into a futures contract, the Funds
pledge to the broker cash, U.S. Government securities or other liquid,
high-grade debt obligations equal to the minimum "initial margin"
requirements of the exchange. 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.
(E) 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. 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.
(F) Foreign Currency Translation -- Investment securities and
other assets and liabilities initially expressed in foreign currencies
are converted to U.S. dollars based upon current exchange rates.
Purchases and sales of foreign investment securities and income are
converted to U.S. dollars based upon currency exchange rates
prevailing on the respective dates of such transactions. The effect
of changes in foreign exchange rates on realized and unrealized
security gains or losses is reflected as a component of such gains or
losses.
23
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 1995
(G) Forward Foreign Currency Exchange Contracts -- Forward foreign
currency exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the 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.
(H) Additional Investment Risk -- The use of futures contracts, options,
foreign denominated assets and forward currency contracts for purposes of
hedging the Funds' investment portfolios involves, to varying degrees,
elements of market risk in excess of the amount recognized in the statement
of assets and liabilities. The predominant risk with futures contracts is
an imperfect correlation between the value of the contracts and the
underlying securities. Foreign denominated assets and forward currency
contracts may involve greater risks than domestic transactions, including
currency, political and economic, regulatory and market risks.
(I) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recorded on the accrual basis and
includes amortization of premium and discounts.
3. NET ASSETS
Net assets as of October 31, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
STRONG MONEY STRONG SHORT-TERM STRONG GOVERNMENT STRONG CORPORATE
MARKET FUND BOND FUND SECURITIES FUND BOND FUND
------------ ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Capital Stock $1,934,071 $1,155,190 $450,817 $257,820
Undistributed Net Investment Income (Loss) -- 2 -- --
Undistributed Net Realized
Gain (Loss) -- (86,536) (1,772) (44,423)
Net Unrealized Appreciation (Depreciation) -- 14,417 7,187 4,664
---------- ---------- -------- --------
$1,934,071 $1,083,073 $456,232 $218,061
========== ========== ======== ========
</TABLE>
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the period ended October 31, 1995
and the year ended December 31, 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
----------------------- -----------------------
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
<S> <C> <C> <C> <C>
STRONG MONEY MARKET FUND
Shares Sold 4,636,534 $4,636,534 1,084,908 $1,084,908
Dividends Reinvested 73,780 73,780 14,688 14,688
Shares Redeemed (3,317,226) (3,317,226) (888,601) (888,601)
---------- ---------- --------- ----------
1,393,088 $1,393,088 210,995 $ 210,995
========== ========== ========= ==========
STRONG SHORT-TERM BOND FUND
Shares Sold 35,782 $ 344,472 85,039 $ 852,010
Dividends Reinvested 5,258 50,403 7,807 77,038
Shares Redeemed (40,704) (390,425) (132,054) (1,302,077)
---------- ---------- --------- ----------
336 $ 4,450 (39,208) ($ 373,029)
========== ========== ========= ==========
STRONG GOVERNMENT SECURITIES FUND
Shares Sold 25,489 $ 262,132 22,577 $ 227,816
Dividends Reinvested 1,493 15,239 1,285 12,889
Shares Redeemed (12,720) (129,096) (16,028) (160,906)
---------- ---------- --------- ----------
14,262 $ 148,275 7,834 $ 79,799
========== ========== ========= ==========
STRONG CORPORATE BOND FUND
Shares Sold 13,929 $ 140,983 6,978 $ 67,971
Dividends Reinvested 808 8,099 727 7,032
Shares Redeemed (7,261) (73,519) (6,570) (63,778)
---------- ---------- --------- ----------
7,476 $ 75,563 1,135 $ 11,225
========== ========== ========= ==========
</TABLE>
24
<PAGE> 26
October 31, 1995
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (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 the following annualized rates of the average
daily net assets: Strong Money Market Fund .50%, Strong Government
Securities Fund .60%, Strong Short-Term Bond Fund and Strong Corporate Bond
Fund .625%. Advisory fees are subject to reimbursement by the Advisor if
the Funds' operating expenses exceed certain levels. Shareholder
recordkeeping and related service fees are based on contractually
established rates for each open and closed shareholder account. In
addition, the Advisor is compensated for certain other services related to
costs incurred for reports to shareholders.
Certain information regarding related party transactions, excluding the
effects of waivers and reimbursements, for the period ended October 31,
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
STRONG MONEY STRONG SHORT-TERM STRONG GOVERNMENT STRONG CORPORATE
MARKET FUND BOND FUND SECURITIES FUND BOND FUND
------------ ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Payable to Advisor at
October 31, 1995 $390 $642 $273 $124
Other Shareholder Servicing
Expenses Paid to Advisor 54 32 7 7
Unaffiliated Directors' Fees 13 23 7 4
</TABLE>
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities during the period
ended October 31, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG GOVERNMENT STRONG CORPORATE
BOND FUND SECURITIES FUND BOND FUND
----------------- ----------------- ----------------
<S> <C> <C> <C>
Purchases:
U.S. Government and Agency $1,458,465 $1,029,223 $375,317
Other 1,802,767 437,359 681,312
Sales:
U.S. Government and Agency 1,303,040 900,112 353,758
Other 1,904,099 418,540 634,576
</TABLE>
7.INCOME TAX INFORMATION
At October 31, 1995, the investment cost, gross unrealized appreciation and
depreciation on investments and capital loss carryovers (expiring in varying
amounts through 2003) for Federal income tax purposes were as follows (in
thousands):
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG GOVERNMENT STRONG CORPORATE
BOND FUND SECURITIES FUND BOND FUND
----------------- ----------------- ----------------
<S> <C> <C> <C>
Aggregate Investment Cost $1,121,653 $446,511 $216,797
========== ======== ========
Aggregate Unrealized:
Appreciation $ 20,986 $ 8,172 $ 4,691
Depreciation (13,860) (1,085) (77)
---------- -------- --------
$ 7,126 $ 7,087 $ 4,614
========== ======== ========
Capital Loss Carryovers $ 79,382 $ 1,689 $ 44,363
========== ======== ========
</TABLE>
25
<PAGE> 27
FINANCIAL HIGHLIGHTS
The following presents information relating to a share of capital stock of each
of the Funds, outstanding for the entire period.
STRONG MONEY MARKET FUND
<TABLE>
<CAPTION>
1995(c) 1994 1993 1992 1991
------- ---- ---- ---- ----
(NOTE 1)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.05 0.04 0.03 0.04 0.06
Dividends From Net Investment Income (0.05) (0.04) (0.03) (0.04) (0.06)
---------- --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========= ========= ========= =========
Total Return +5.2% +4.0% +2.9% +3.7% +6.1%
Net Assets, End of Period (In Thousands) $1,934,071 $ 540,983 $ 329,988 $ 390,003 $ 533,869
Ratio of Expenses to Average Net Assets 0.0%* 0.6% 0.7% 0.8% 0.7%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.7%* 0.9% 1.0% 1.1% 1.0%
Ratio of Net Investment Income to
Average Net Assets 6.1%* 4.0% 2.9% 3.7% 6.0%
<CAPTION>
1990 1989 1988 1987 1986
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.08 0.09 0.07 0.06 0.06
Dividends From Net Investment Income (0.08) (0.09) (0.07) (0.06) (0.06)
--------- --------- -------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ======== ========= =========
Total Return +8.1% +9.2% +7.5% +6.4% +6.5%
Net Assets, End of Period (In Thousands) $ 768,870 $ 829,332 $464,459 $ 194,963 $ 26,363
Ratio of Expenses to Average Net Assets 0.7% 0.7% 1.1% 0.8% 0.8%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.9% 1.0% 1.1% 1.1% 1.3%
Ratio of Net Investment Income to
Average Net Assets 7.8% 8.8% 7.4% 6.6% 5.8%
</TABLE>
STRONG SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
1995(c) 1994 1993 1992 1991
------- ---- ---- ---- ----
(NOTE 1)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.42 $ 10.23 $ 9.99 $ 10.12 $ 9.53
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.56 0.64 0.66 0.76 0.75
Net Realized and Unrealized Gains
(Losses) on Investments 0.35 (0.80) 0.25 (0.11) 0.59
---------- ---------- ---------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS 0.91 (0.16) 0.91 0.65 1.34
LESS DISTRIBUTIONS
From Net Investment Income (0.56) (0.65) (0.66) (0.76) (0.75)
In Excess of Net Investment Income -- -- (0.01) -- --
From Net Realized Gains -- -- -- (0.02)(a) --
---------- ---------- ---------- --------- ---------
TOTAL DISTRIBUTIONS (0.56) (0.65) (0.67) (0.78) (0.75)
---------- ---------- ---------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 9.77 $ 9.42 $ 10.23 $ 9.99 $ 10.12
========== ========== ========== ========= =========
Total Return +9.9% -1.6% +9.3% +6.7% +14.6%
Net Assets, End of Period (In Thousands) $1,083,073 $1,041,081 $1,531,627 $ 756,867 $ 164,954
Ratio of Expenses to Average Net Assets 0.9%* 0.9% 0.8% 0.6% 1.0%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.9%* 0.9% 0.9% 0.9% 1.2%
Ratio of Net Investment Income to
Average Net Assets 7.0%* 6.5% 6.3% 7.3% 7.8%
Portfolio Turnover Rate 317.1% 249.7% 444.9% 353.3% 398.1%
<CAPTION>
1990 1989 1988 1987(b)
---- ---- ---- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.86 $ 10.09 $ 10.03 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.81 0.99 0.86 0.27
Net Realized and Unrealized Gains
(Losses) on Investments (0.33) (0.18) 0.13 0.04
--------- -------- --------- ----------
TOTAL FROM INVESTMENT OPERATIONS 0.48 0.81 0.99 0.31
LESS DISTRIBUTIONS
From Net Investment Income (0.81) (0.99) (0.86) (0.27)
In Excess of Net Investment Income -- -- -- --
From Net Realized Gains -- (0.05) (0.07) (0.01)
--------- -------- --------- ----------
TOTAL DISTRIBUTIONS (0.81) (1.04) (0.93) (0.28)
--------- -------- --------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.53 $ 9.86 $ 10.09 $ 10.03
========= ======== ========= ==========
Total Return +5.3% +8.2% +10.1% +3.2%
Net Assets, End of Period (In Thousands) $ 80,070 $130,001 $ 102,175 $ 17,128
Ratio of Expenses to Average Net Assets 1.3% 1.1% 1.0% 0.1%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.3% 1.2% 1.2% 0.8%*
Ratio of Net Investment Income to
Average Net Assets 8.6% 9.7% 8.5% 8.8%*
Portfolio Turnover Rate 313.8% 177.0% 461.3% 45.2%
</TABLE>
* Calculated on an annualized basis.
(a) Ordinary income distribution for tax purposes.
(b) Inception date is August 31, 1987 for Strong Short-Term Bond Fund.
Total return and portfolio turnover rate are not annualized.
(c) For the period ended October 31, 1995. Total return and portfolio
turnover rate are not annualized.
26
<PAGE> 28
FINANCIAL HIGHLIGHTS (continued)
STRONG GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
1995 (b) 1994 1993 1992 1991
-------- -------- -------- -------- --------
(Note 1)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.63 $ 10.61 $ 10.39 $ 10.77 $ 10.10
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.54 0.62 0.66 0.80 0.77
Net Realized and Unrealized Gains
(Losses) on Investments 0.99 (0.98) 0.63 0.11 0.84
-------- -------- --------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.53 (0.36) 1.29 0.91 1.61
LESS DISTRIBUTIONS
From Net Investment Income (0.54) (0.62) (0.66) (0.80) (0.77)
Net Investment Income (0.02) -- -- -- --
From Net Realized Gains -- -- (0.32) (0.49) (0.17)
In Excess of Net Realized Gains -- -- (0.09) -- --
-------- -------- --------- -------- --------
TOTAL DISTRIBUTIONS (0.56) (0.62) (1.07) (1.29) (0.94)
-------- -------- --------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.60 $ 9.63 $ 10.61 $ 10.39 $ 10.77
======== ======== ========= ======== ========
Total Return +16.2% -3.4% +12.7% +9.2% +16.7%
Net Assets, End of Period (In Thousands) $456,232 $276,832 $ 221,961 $ 82,169 $ 51,934
Ratio of Expenses to Average Net Assets 0.9%* 0.9% 0.8% 0.7% 0.8%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.9%* 0.9% 1.0% 1.2% 1.4%
Ratio of Net Investment Income to
Average Net Assets 6.2%* 6.2% 6.0% 7.7% 7.5%
Portfolio Turnover Rate 409.2% 479.0% 520.9% 628.8% 292.9%
<CAPTION>
1990 1989 1988 1987 1986 (a)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 9.98 $ 9.75 $ 10.09 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.72 0.78 0.68 0.65 0.13
Net Realized and Unrealized Gains
(Losses) on Investments 0.12 0.17 0.32 (0.34) 0.09
-------- -------- --------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.84 0.95 1.00 0.31 0.22
LESS DISTRIBUTIONS
From Net Investment Income (0.72) (0.78) (0.68) (0.65) (0.13)
In Excess of Net Investment Income -- -- -- -- --
From Net Realized Gains (0.10) (0.07) (0.09) -- --
In Excess of Net Realized Gains -- -- -- -- --
-------- -------- --------- -------- --------
TOTAL DISTRIBUTIONS (0.82) (0.85) (0.77) (0.65) (0.13)
-------- -------- --------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 10.08 $ 9.98 $ 9.75 $ 10.09
======== ======== ========= ======== ========
Total Return +8.7% +9.9% +10.5% +3.4% +2.2%
Net Assets, End of Period (In Thousands) $41,099 $ 35,119 $ 25,408 $ 11,380 $ 880
Ratio of Expenses to Average Net Assets 1.3% 1.3% 0.4% 1.0% 0.6%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.5% 1.6% 1.6% 1.6% 1.2%*
Ratio of Net Investment Income to
Average Net Assets 7.2% 7.6% 6.9% 6.6% 7.2%*
Portfolio Turnover Rate 254.2% 421.6% 1,727.8% 715.0% 0.0%
</TABLE>
STRONG CORPORATE BOND FUND
<TABLE>
<CAPTION>
1995 (b) 1994 1993 1992 1991
-------- -------- ---------- --------- ----------
(Note 1)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.36 $ 10.24 $ 9.40 $ 9.37 $ 8.87
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.63 0.73 0.70 0.82 0.76
Net Realized and Unrealized Gains
(Losses) on Investments 1.22 (0.87) 0.84 0.03 0.50
-------- -------- --------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 1.85 (0.14) 1.54 0.85 1.26
LESS DISTRIBUTIONS
From Net Investment Income (0.63) (0.73) (0.70) (0.82) (0.76)
In Excess of Net Investment Income (0.02) (0.01) -- -- --
From Net Realized Gains -- -- -- -- --
-------- -------- --------- -------- --------
TOTAL DISTRIBUTIONS (0.65) (0.74) (0.70) (0.82) (0.76)
-------- -------- --------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.56 $ 9.36 $ 10.24 $ 9.40 $ 9.37
======== ======== ========= ======== ========
Total Return +20.3% -1.3% +16.8% +9.4% +14.8%
Net Assets, End of Period (In Thousands) $218,061 $123,305 $ 123,400 $102,783 $ 92,364
Ratio of Expenses to Average Net Assets 1.0%* 1.1% 1.1% 1.3% 1.5%
Ratio of Net Investment Income to
Average Net Assets 7.5%* 7.6% 7.0% 8.7% 8.4%
Portfolio Turnover Rate 621.4% 603.0% 665.8% 557.0% 392.4%
<CAPTION>
1990 1989 1988 1987 1986
-------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.57 $ 11.88 $ 11.64 $ 12.65 $ 10.30
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 1.06 1.40 1.17 1.23 0.98
Net Realized and Unrealized Gains
(Losses) on Investments (1.70) (1.31) 0.24 (0.67) 2.08
-------- -------- ---------- --------- ----------
TOTAL FROM INVESTMENT OPERATIONS (0.64) 0.09 1.41 0.56 3.06
LESS DISTRIBUTIONS
From Net Investment Income (1.06) (1.40) (1.17) (1.53) (0.71)
In Excess of Net Investment Income -- -- -- -- --
From Net Realized Gains -- -- -- (0.04) --
-------- -------- --------- -------- --------
TOTAL DISTRIBUTIONS (1.06) (1.40) (1.17) (1.57) (0.71)
NET ASSET VALUE, END OF PERIOD $ 8.87 $ 10.57 $ 11.88 $ 11.64 $ 12.65
======== ======== ========= ======== ========
Total Return -6.2% +0.4% +12.5% +4.5% +30.0%
Net Assets, End of Period (In Thousands) $ 92,201 $195,350 $ 202,623 $137,898 $118,727
Ratio of Expenses to Average Net Assets 1.4% 1.2% 1.2% 1.1% 1.0%
Ratio of Net Investment Income to
Average Net Assets 11.2% 12.1% 9.8% 10.6% 11.3%
Portfolio Turnover Rate 293.5% 207.2% 400.2% 245.4% 204.9%
</TABLE>
*Calculated on an annualized basis.
(a)The inception date is October 29, 1986 for Strong Government Securities
Fund. Total return and portfolio turnover rate are not annualized.
(b)For the period ended October 31, 1995. Total return and portfolio turnover
rate are not annualized.
27
<PAGE> 29
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of the
Strong Income Funds
We have audited the accompanying statements of assets and liabilities of Strong
Money Market Fund, Inc., Strong Short-Term Bond Fund, Inc., Strong Government
Securities Fund, Inc., and Strong Corporate Bond Fund, Inc., (collectively
referred to herein as the "Strong Income Funds"), including the schedules of
investments in securities, as of October 31, 1995, and the related statements
of operations for the period from January 1, 1995 to October 31, 1995, the
statements of changes in net assets for the period January 1, 1995 to October
31, 1995 and for the year ended December 31, 1994, and the financial highlights
for each of the periods indicated. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. These standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of October 31, 1995 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Strong Income Funds as of October 31, 1995, the results of their
operations for the period from January 1, 1995 to October 31, 1995, the changes
in their net assets for the period from January 1, 1995 to October 31, 1995 and
for the year ended December 31, 1994, and the financial highlights for each of
the periods indicated, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
December 8, 1995
28
<PAGE> 30
FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-368-3863
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 annual report does not constitute an offer for
the sale of securities. Strong Funds are offered for sale by prospectus only.
[STRONG FUNDS LOGO]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
