STRONG MONEY MARKET FUND INC, 497, 1996-01-03

STRONG MONEY MARKET FUND INC
497, 1996-01-03

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<PAGE> 1

STRONG INCOME FUNDS

<TABLE>
<S> <C>
STRONG MONEY MARKET FUND STRONG FUNDS
STRONG SHORT-TERM BOND FUND P.O. Box 2936
STRONG GOVERNMENT SECURITIES FUND Milwaukee, Wisconsin 53201
STRONG CORPORATE BOND FUND Telephone: (414) 359-1400
STRONG HIGH-YIELD BOND FUND Toll-Free: (800) 368-3863
Device for the
Hearing-Impaired:
(800) 999-2780
</TABLE>

The Strong Family of Funds ("Strong Funds") is a family of more than
twenty-five diversified and non-diversified mutual funds. All of the Strong
Funds are no-load funds, meaning that you may purchase, redeem, or exchange
shares without paying a sales charge. Strong Funds include growth funds,
conservative equity funds, income funds, municipal income funds, international
funds, and cash management funds. The five Strong Income Funds are described in
this Prospectus.

This Prospectus contains information you should consider before you invest.
Please read it carefully and keep it for future reference. A Statement of
Additional Information for the Funds, dated December 28, 1995, contains further
information, is incorporated by reference into this Prospectus, and has been
filed with the Securities and Exchange Commission ("SEC"). This Statement, which
may be revised from time to time, is available without charge upon request to
the above-noted address or telephone number.

- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- ----------------------------------------------------------------------------

AN INVESTMENT IN THE STRONG MONEY MARKET FUND IS NOT INSURED OR GUARANTEED BY
THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. THE STRONG HIGH-YIELD BOND
FUND MAY INVEST UP TO 100% OF ITS NET ASSETS IN LOWER-RATED BONDS, COMMONLY
KNOWN AS "JUNK BONDS."

Dated December 28, 1995

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PROSPECTUS PAGE I-1
<PAGE> 2

BONDS OF THIS TYPE ARE SUBJECT TO GREATER RISKS WITH REGARD TO PAYMENT OF
INTEREST AND RETURN OF PRINCIPAL, INCLUDING DEFAULT RISKS, THAN ARE HIGHER-RATED
BONDS. INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS ASSOCIATED WITH AN
INVESTMENT IN THE FUND. (SEE THE PROSPECTUS SECTION ENTITLED "FUNDAMENTALS OF
FIXED INCOME INVESTING - CREDIT QUALITY - HIGH-YIELD (HIGH-RISK) SECURITIES.")

STRONG INCOME FUNDS

The Strong Money Market Fund, Inc., Strong Short-Term Bond Fund, Inc., Strong
Government Securities Fund, Inc., and Strong Corporate Bond Fund, Inc. are
separately incorporated, diversified, open-end management investment companies.
The Strong High-Yield Bond Fund is a diversified series of Strong Income Funds,
Inc., which is an open-end management investment company.

STRONG MONEY MARKET FUND (the "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.

STRONG SHORT-TERM BOND FUND (the "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.

STRONG GOVERNMENT SECURITIES FUND (the "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.

STRONG CORPORATE BOND FUND (the "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 HIGH-YIELD BOND FUND (the "High-Yield Fund") seeks total return by
investing for a high level of current income and capital growth. The Fund
invests primarily in medium- and lower-quality corporate debt obligations.

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PROSPECTUS PAGE I-2
<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<S><C>
EXPENSES..................................... I-4
FINANCIAL HIGHLIGHTS......................... I-6
HIGHLIGHTS................................... I-11
INVESTMENT OBJECTIVES AND POLICIES........... I-12
Comparing the Funds................. I-13
Strong Money Market Fund............ I-13
Strong Short-Term Bond Fund......... I-14
Strong Government Securities Fund... I-15
Strong Corporate Bond Fund.......... I-15
Strong High-Yield Bond Fund......... I-16
FUNDAMENTALS OF FIXED INCOME INVESTING....... I-17
IMPLEMENTATION OF POLICIES AND RISKS......... I-20
ABOUT THE FUNDS.............................. I-28
SHAREHOLDER MANUAL........................... II-1
APPENDIX A................................... A-1
APPENDIX B................................... B-1
</TABLE>

No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and the Statement
of Additional Information, and if given or made, such information or
representations may not be relied upon as having been authorized by the Strong
Income Funds. This Prospectus does not constitute an offer to sell securities in
any state or jurisdiction in which such offering may not lawfully be made.

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PROSPECTUS PAGE I-3
<PAGE> 4

EXPENSES

The following information is provided in order to help you understand the
various costs and expenses that you, as an investor in the Funds, will bear
directly or indirectly.

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales Load Imposed on Purchases............. NONE
Sales Load Imposed on Reinvested
Dividends................................. NONE
Deferred Sales Load......................... NONE
Redemption Fees............................. NONE
Exchange Fees............................... NONE
</TABLE>

There are certain charges associated with retirement accounts and with
certain other special shareholder services offered by the Funds. Additionally,
purchases and redemptions may also be made through broker-dealers or others who
may charge a commission or other transaction fee for their services. (See
"Shareholder Manual - How to Buy Shares" and "- How to Sell Shares.")

ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
- ----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Management Other 12b-1 Total Operating
Fund Fees Expenses Fees Expenses
<S> <C> <C> <C> <C>
Money Market .50 % .42 % NONE .92%
Short-Term Bond .625 .285 NONE .91
Government Securities .60 .34 NONE .94
Corporate Bond .625 .505 NONE 1.13
High-Yield .625 .475 NONE 1.10
</TABLE>

- ----------------------------------------------------------------------------

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PROSPECTUS PAGE I-4
<PAGE> 5

From time to time, the Funds' investment advisor, Strong Capital Management,
Inc. (the "Advisor"), may voluntarily waive its management fee and/or absorb
certain expenses for a Fund. The expenses specified in the table above for the
Short-Term Bond and Corporate Bond Funds are based on actual expenses incurred
during the year ended December 31, 1994. During 1994, the Advisor waived a
portion of its management fee for the Government Securities Fund and waived a
portion of its management fee and absorbed certain expenses for the Money Market
Fund. (See "Financial Highlights.") Therefore, the expenses specified in the
table above for these Funds have been restated for the fiscal year ended
December 31, 1994 to include such management fees and/or expenses. The actual
total operating expenses incurred for the fiscal year ended December 31, 1994
for the Money Market and Government Securities Funds after waivers and
absorptions were 0.64% and 0.88%, respectively. Since the High-Yield Fund is new
and did not begin operations until December 28, 1995, the Other Expenses have
been estimated. For additional information concerning fees and expenses, see
"About the Funds - Management."

EXAMPLE. You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time period:
- ----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Period (in years)
-----------------------------------
Fund 1 3 5 10
<S> <C> <C> <C> <C>
Money Market $ 9 $29 $51 $113
Short-Term Bond 9 29 50 112
Government Securities 10 30 52 115
Corporate Bond 12 36 62 137
High-Yield 11 35 -- --
</TABLE>

- ----------------------------------------------------------------------------

The Example is based on each Fund's "Total Operating Expenses" before any
waivers and absorptions, as described above. PLEASE REMEMBER THAT THE EXAMPLE
SHOULD NOT BE CONSIDERED AS REPRESENTATIVE OF PAST OR FUTURE EXPENSES AND THAT
ACTUAL EXPENSES MAY BE HIGHER OR LOWER THAN THOSE SHOWN. The assumption in the
Example of a 5% annual return is required by regulations of the SEC applicable
to all mutual funds. The assumed 5% annual return is not a prediction of, and
does not represent, the projected or actual performance of a Fund's shares.

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PROSPECTUS PAGE I-5
<PAGE> 6

FINANCIAL HIGHLIGHTS

The following annual Financial Highlights for each of the Funds that has
completed a fiscal year has been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants. Their report for the fiscal year
ended December 31, 1994 is included in the Annual Report of the Income
Funds that is contained in the Funds' Statement of Additional Information.
The Financial Highlights for the Funds for the semi-annual period ended
June 30, 1995 are unaudited. The Financial Highlights for the High-Yield
Fund are not provided because it did not commence operations until December
28, 1995. The Financial Highlights for the Funds should be read in
conjunction with the Financial Statements and related notes included in the
Funds' Annual and Semi-Annual Reports. Additional information about each
Fund's performance is contained in the Funds' Annual and Semi-Annual
Reports, which may be obtained without charge by calling or writing Strong
Funds. The following presents information relating to a share of capital
stock of each of the Funds, outstanding for the entire period.

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PROSPECTUS PAGE I-6
<PAGE> 7

<TABLE>
<CAPTION>
---------------------------------------------------------------------
STRONG MONEY MARKET FUND
1995*** 1994 1993 1992 1991 1990
---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.03 0.04 0.03 0.03 0.06 0.08
Dividends From Net
Investment Income (0.03) (0.04) (0.03) (0.03) (0.06) (0.08)
---------- ---------- ---------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ======== ======== ========
Total Return +3.1% +4.0% +2.9% +3.7% +6.1% +8.1%
Net Assets, End of Period
(In Thousands) $2,065,059 $540,983 $329,988 $390,003 $533,869 $768,870
Ratio of Expenses to Average
Net Assets 0.0%* 0.6% 0.7% 0.8% 0.7% 0.7%
Ratio of Expenses to Average
Net Assets Without Waivers
and Absorptions 0.6%* 0.9% 1.0% 1.1% 1.0% 0.9%
Ratio of Net Investment Income
to Average Net Assets 6.3%* 4.0% 2.9% 3.7% 6.0% 7.8%

<CAPTION>
-------------------------------------------------
STRONG MONEY MARKET FUND
1989 1988 1987 1986 1985**
-------- -------- -------- ------- ------
<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 0.09 0.07 0.06 0.06 0.02
Dividends From Net
Investment Income (0.09) (0.07) (0.06) (0.06) (0.02)
-------- -------- -------- ------- ------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
======== ======== ======== ======= ======
Total Return +9.2% +7.5% +6.4% +6.5% +1.5%
Net Assets, End of Period
(In Thousands) $829,332 $464,459 $194,963 $26,363 $ 944
Ratio of Expenses to Average
Net Assets 0.7% 1.1% 0.8% 0.8% 0.4%*
Ratio of Expenses to Average
Net Assets Without Waivers
and Absorptions 1.0% 1.1% 1.1% 1.3% 0.9%*
Ratio of Net Investment Income
to Average Net Assets 8.8% 7.4% 6.6% 5.8% 7.8%*

</TABLE>

*Calculated on an annualized basis.
**Inception date is October 22, 1985. Total return is not annualized.
***For the six months ended June 30, 1995 (Unaudited). Total return is not
annualized.

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PROSPECTUS PAGE I-7
<PAGE> 8

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND
1995*** 1994 1993 1992 1991 1990 1989 1988 1987**
---------- ---------- ---------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.42 $ 10.23 $ 9.99 $ 10.12 $ 9.53 $ 9.86 $ 10.09 $ 10.03 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.34 0.64 0.66 0.76 0.75 0.81 0.99 0.86 0.27
Net Realized and
Unrealized Gains
(Losses)
on Investments 0.29 (0.80) 0.25 (0.11) 0.59 (0.33) (0.18) 0.13 0.04
---------- ---------- ---------- -------- -------- ------- -------- -------- --------
TOTAL FROM INVESTMENT
OPERATIONS 0.63 (0.16) 0.91 0.65 1.34 0.48 0.81 0.99 0.31
LESS DISTRIBUTIONS
From Net Investment
Income (0.27) (0.65) (0.66) (0.76) (0.75) (0.81) (0.99) (0.86) (0.27)
In Excess of Net
Investment Income (0.07) -- (0.01) -- -- -- -- -- --
From Net Realized Gains -- -- -- (0.02)(1) -- -- (0.05) (0.07) (0.01)
---------- ---------- ---------- -------- -------- ------- -------- -------- --------
TOTAL DISTRIBUTIONS (0.34) (0.65) (0.67) (0.78) (0.75) (0.81) (1.04) (0.93) (0.28)
---------- ---------- ---------- -------- -------- ------- -------- -------- --------
NET ASSET VALUE, END OF
PERIOD $ 9.71 $ 9.42 $ 10.23 $ 9.99 $ 10.12 $ 9.53 $ 9.86 $ 10.09 $ 10.03
========== ========== ========== ======== ======== ======= ======== ======== ========
Total Return +6.8% -1.6% +9.3% +6.7% +14.6% +5.3% +8.2% +10.1% +3.2%
Net Assets, End of Period
(In Thousands) $1,053,353 $1,041,081 $1,531,627 $756,867 $164,954 $80,070 $130,001 $102,175 $ 17,128
Ratio of Expenses to
Average Net Assets 1.0%* 0.9% 0.8% 0.6% 1.0% 1.3% 1.1% 1.0% 0.1%*
Ratio of Expenses to
Average Net Assets
Without Waivers and
Absorptions 1.0%* 0.9% 0.9% 0.9% 1.2% 1.3% 1.2% 1.2% 0.8%*
Ratio of Net Investment
Income to Average
Net Assets 7.2%* 6.5% 6.3% 7.3% 7.8% 8.6% 9.7% 8.5% 8.8%*
Portfolio Turnover Rate 239.2% 249.7% 444.9% 353.3% 398.1% 313.8% 177.0% 461.3% 135.5%*
</TABLE>

*Calculated on an annualized basis.
**Inception date is August 31, 1987. Total return is not annualized.
***For the six months ended June 30, 1995 (Unaudited). Total return and
portfolio turnover rate are not annualized.
(1)Ordinary income distribution is for tax purposes.

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PROSPECTUS PAGE I-8
<PAGE> 9

<TABLE>
<CAPTION>
STRONG GOVERNMENT SECURITIES FUND
1995*** 1994 1993 1992 1991 1990 1989 1988 1987 1986**
-------- -------- -------- -------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.63 $ 10.61 $ 10.39 $ 10.77 $ 10.10 $ 10.08 $ 9.98 $ 9.75 $ 10.09 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.33 0.62 0.66 0.80 0.77 0.72 0.78 0.68 0.65 0.13
Net Realized and
Unrealized Gains
(Losses)
on Investments 0.84 (0.98) 0.63 0.11 0.84 0.12 0.17 0.32 (0.34) 0.09
-------- -------- -------- -------- -------- -------- -------- ------- ------- --------
TOTAL FROM INVESTMENT
OPERATIONS 1.17 (0.36) 1.29 0.91 1.61 0.84 0.95 1.00 0.31 0.22
LESS DISTRIBUTIONS
From Net Investment
Income (0.33) (0.62) (0.66) (0.80) (0.77) (0.72) (0.78) (0.68) (0.65) (0.13)
From Net Realized
Gains -- -- (0.32) (0.49) (0.17) (0.10) (0.07) (0.09) -- --
In Excess of Net
Realized Gains -- -- (0.09) -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- ------- ------- --------
TOTAL DISTRIBUTIONS (0.33) (0.62) (1.07) (1.29) (0.94) (0.82) (0.85) (0.77) (0.65) (0.13)
-------- -------- -------- -------- -------- -------- -------- ------- ------- --------
NET ASSET VALUE, END OF
PERIOD $ 10.47 $ 9.63 $ 10.61 $ 10.39 $ 10.77 $ 10.10 $ 10.08 $ 9.98 $ 9.75 $ 10.09
======== ======== ======== ======== ======== ======== ======== ======= ======= ========
Total Return +12.3% -3.4% +12.7% +9.2% +16.7% +8.7% +9.9% +10.5% +3.4% +2.2%
Net Assets, End of
Period (In Thousands) $352,994 $276,832 $221,961 $ 82,169 $ 51,934 $ 41,099 $ 35,119 $25,408 $11,380 $ 880
Ratio of Expenses to
Average Net Assets 0.9%* 0.9% 0.8% 0.7% 0.8% 1.3% 1.3% 0.4% 1.0% 0.6%*
Ratio of Expenses to
Average Net Assets
Without Waivers and
Absorptions 0.9%* 0.9% 1.0% 1.2% 1.4% 1.5% 1.6% 1.6% 1.6% 1.2%*
Ratio of Net Investment
Income to Average Net
Assets 6.5%* 6.2% 6.0% 7.7% 7.5% 7.2% 7.6% 6.9% 6.6% 7.2%*
Portfolio Turnover Rate 306.0% 479.0% 520.9% 628.8% 292.9% 254.2% 421.6% 1,727.8% 715.0% 0.0%*
</TABLE>

*Calculated on an annualized basis.
**Inception date is October 29, 1986. Total return is not annualized.
***For the six months ended June 30, 1995 (Unaudited). Total return and
portfolio turnover rate are not annualized.

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PROSPECTUS PAGE I-9
<PAGE> 10

<TABLE>
<CAPTION>
-------------------------------------------------------------
STRONG CORPORATE BOND FUND
1995*** 1994 1993 1992 1991 1990
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 9.36 $ 10.24 $ 9.40 $ 9.37 $ 8.87 $ 10.57
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.38 0.73 0.70 0.82 0.76 1.06
Net Realized and Unrealized Gains
(Losses) on Investments 0.99 (0.87) 0.84 0.03 0.50 (1.70)
-------- -------- -------- -------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 1.37 (0.14) 1.54 0.85 1.26 (0.64)
LESS DISTRIBUTIONS
From Net Investment Income (0.38) (0.73) (0.70) (0.82) (0.76) (1.06)
In Excess of Net Investment
Income -- (0.01) -- -- -- --
From Net Realized Gains -- -- -- -- -- --
-------- -------- -------- -------- ------- -------
TOTAL DISTRIBUTIONS (0.38) (0.74) (0.70) (0.82) (0.76) (1.06)
-------- -------- -------- -------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 10.35 $ 9.36 $ 10.24 $ 9.40 $ 9.37 $ 8.87
======== ======== ======== ======== ======= =======
Total Return +14.9% -1.3% +16.8% +9.4% +14.8% -6.2%
Net Assets, End of Period
(In Thousands) $175,922 $123,305 $123,400 $102,783 $92,364 $92,201
Ratio of Expenses to Average
Net Assets 1.1%* 1.1% 1.1% 1.3% 1.5% 1.4%
Ratio of Net Investment Income
to Average Net Assets 7.8%* 7.6% 7.0% 8.7% 8.4% 11.2%
Portfolio Turnover Rate 415.7% 603.0% 665.8% 557.0% 392.4% 293.5%

<CAPTION>
----------------------------------------------------
STRONG CORPORATE BOND FUND
1989 1988 1987 1986 1985**
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 11.88 $ 11.64 $ 12.65 $ 10.30 $ 10.00
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 1.40 1.17 1.23 0.98 0.03
Net Realized and Unrealized Gains
(Losses) on Investments (1.31) 0.24 (0.67) 2.08 0.27
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.09 1.41 0.56 3.06 0.30
LESS DISTRIBUTIONS
From Net Investment Income (1.40) (1.17) (1.53) (0.71) --
In Excess of Net Investment
Income -- -- -- -- --
From Net Realized Gains -- -- (0.04) -- --
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (1.40) (1.17) (1.57) (0.71) --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 10.57 $ 11.88 $ 11.64 $ 12.65 $ 10.30
======== ======== ======== ======== ========
Total Return +0.4% +12.5% +4.5% +30.0% +3.0%
Net Assets, End of Period
(In Thousands) $195,350 $202,623 $137,898 $118,727 $ 2,452
Ratio of Expenses to Average
Net Assets 1.2% 1.2% 1.1% 1.0% 1.1%*
Ratio of Net Investment Income
to Average Net Assets 12.1% 9.8% 10.6% 11.3% 23.5%*
Portfolio Turnover Rate 207.2% 400.2% 245.4% 204.9% 7.3%*
</TABLE>

*Calculated on an annualized basis.
**Inception date is December 12, 1985. Total return is not annualized.
***For the six months ended June 30, 1995 (Unaudited). Total return and
portfolio turnover rate are not annualized.

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PROSPECTUS PAGE I-10
<PAGE> 11

HIGHLIGHTS

INVESTMENT OBJECTIVES AND POLICIES

Each Fund has distinct investment objectives and policies. Each Fund seeks to
provide income consistent with its maturity, quality, and other standards as set
forth under "Investment Objectives and Policies."

IMPLEMENTATION OF POLICIES AND RISKS

With the exception of the Money Market Fund, the Funds may engage in
derivative transactions, including options, futures, and options on futures
transactions within specified limits. Each Fund may invest in when-issued
securities, illiquid securities, and repurchase agreements. Each Fund, except
for the Government Securities Fund, may also invest in foreign securities. Each
Fund, except the Money Market Fund, may engage in reverse repurchase agreements
and mortgage dollar roll transactions. The Short-Term Bond and Corporate Bond
Funds may invest a portion of their assets, and the High-Yield Fund may invest
without limitation in junk bonds. These investment practices involve risks that
are different in some respects from those associated with similar funds that do
not use them. (See "Implementation of Policies and Risks" and "Fundamentals of
Fixed Income Investing - Credit Quality.")

MANAGEMENT

The Advisor, Strong Capital Management, Inc., serves as investment advisor to
the Funds. The Advisor provides investment management services for mutual funds
and other investment portfolios representing assets of over $15 billion. (See
"About the Funds - Management.")

PURCHASE AND REDEMPTION OF SHARES

You may purchase or redeem shares of a Fund at net asset value. There are no
redemption or 12b-1 charges. The Money Market Fund seeks to maintain a stable
net asset value of $1.00 per share. The net asset values of the Short-Term Bond,
Government Securities, Corporate Bond, and High-Yield Funds change daily with
the value of each Fund's portfolio. You can locate the net asset value for a
Fund in newspaper listings of mutual fund prices under the "Strong Funds"
heading. (See "Shareholder Manual - How to Buy Shares" and "- How to Sell
Shares.")

----------------------

PROSPECTUS PAGE I-11
<PAGE> 12

SHAREHOLDER SERVICES

Strong shareholder benefits include: telephone purchase, exchange, and
redemption privileges; professional representatives available 24 hours a day;
automatic investment, automatic dividend reinvestment, payroll direct deposit,
automatic exchange and systematic withdrawal plans; free check writing; and a
no-minimum investment program. (See "Shareholder Manual - Shareholder
Services.")

DIVIDENDS AND OTHER DISTRIBUTIONS

The policy of each Fund is to pay dividends from net investment income
monthly and to distribute substantially all net realized capital gains annually.
(See "About the Funds - Distributions and Taxes.")

INVESTMENT OBJECTIVES AND POLICIES

The descriptions that follow are designed to help you choose the Fund that
best fits your investment objective. You may want to pursue more than one
objective by investing in more than one of the Funds or by investing in one of
the other Strong Funds, which are described in separate prospectuses. Each
Income Fund's investment objective is discussed below in connection with the
Fund's investment policies. Because of the risks inherent in all investments,
there can be no assurance that the Funds will meet their objectives.
Each Fund's return and risk potential depends in part on the maturity and
credit-quality characteristics of the underlying investments in its portfolio.
In general, longer-maturity fixed income securities carry higher yields and
greater price volatility than shorter-term fixed income securities. Similarly,
fixed income securities issued by less creditworthy entities tend to carry
higher yields than those with higher credit ratings. (See "Fundamentals of Fixed
Income Investing" for a more detailed discussion of the principles and risks
associated with fixed income securities.)

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PROSPECTUS PAGE I-12
<PAGE> 13

COMPARING THE FUNDS

The following chart is intended to help distinguish the Funds and help you
determine their suitability for your investments.

<TABLE>
<CAPTION>
AVERAGE CREDIT INCOME DEGREE OF SHARE-
FUND MATURITY QUALITY POTENTIAL PRICE FLUCTUATION
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MONEY 90 days or Two highest Low Stable, but not
MARKET less guaranteed
- ----------------------------------------------------------------------------
SHORT-TERM 1 to 3 years Primarily Moderate Low
BOND investment
grade
- ----------------------------------------------------------------------------
GOVERNMENT Intermediate* Investment Moderate Moderate
SECURITIES grade to high
- ----------------------------------------------------------------------------
CORPORATE Intermediate* Primarily Moderate Moderate
BOND investment to high
grade
- ----------------------------------------------------------------------------
HIGH-YIELD Intermediate* Primarily High Moderate to high
non-investment
grade
- ----------------------------------------------------------------------------
</TABLE>

*Expected range

Each Fund has adopted certain fundamental investment restrictions that are
set forth in the Funds' Statement of Additional Information ("SAI"). Those
restrictions, each Fund's investment objective, and any other investment
policies identified as "fundamental" cannot be changed without shareholder
approval. To further guide investment activities, each Fund has also instituted
a number of non-fundamental operating policies, which are described throughout
this Prospectus and in the SAI. Although operating policies may be changed by a
Fund's Board of Directors without shareholder approval, a Fund will promptly
notify shareholders of any material change in operating policies.
When the Advisor determines market conditions warrant a temporary defensive
position, the Short-Term Bond, Government Securities, Corporate Bond, and
High-Yield Funds may each invest without limitation in cash and short-term fixed
income securities.

STRONG MONEY MARKET FUND

The Money Market Fund seeks current income, a stable share price, and daily
liquidity. The Fund's investments include corporate, bank, and government
instruments that present minimal credit risk.

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PROSPECTUS PAGE I-13
<PAGE> 14

The Fund is designed for investors who seek money-market yields with no
anticipated fluctuations in principal. Because the Fund seeks to maintain a
constant net asset value of $1.00 per share, capital appreciation is not
expected to play a role in the Fund's returns, and dividend income alone will
provide its entire investment return. All money market instruments can change in
value when interest rates or an issuer's creditworthiness changes dramatically.
Although the Fund's share price has remained constant in the past, THE FUND
CANNOT GUARANTEE THAT IT WILL ALWAYS BE ABLE TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE. An investment in the Fund is neither insured nor
guaranteed by the U.S. government.
The Money Market Fund invests in a combination of bank, corporate, and
government obligations that present minimal credit risks. The Fund restricts its
investments to instruments that meet certain maturity and quality standards
required or permitted by Rule 2a-7 under the Investment Company Act of 1940 (the
"1940 Act") for money market funds. Accordingly, the Fund:
(i) limits its average portfolio maturity to ninety days or less;
(ii) buys only securities with remaining maturities of thirteen months or
less; and
(iii) buys only U.S. dollar-denominated securities that represent minimal
credit risks and are "high quality," as described below.
The Fund invests only in high-quality securities. Accordingly, the Fund will
invest at least 95% of its total assets in "first-tier" securities, generally
defined as those securities that, at the time of acquisition, are rated in the
highest rating category by at least two nationally recognized statistical rating
organizations ("NRSROs") or, if unrated, are determined by the Advisor to be of
comparable quality. The balance of the Fund, up to 5% of its total assets, may
be invested in securities that are considered "second-tier" securities,
generally defined as those securities that, at the time of acquisition, are
rated in the second-highest rating category or are determined by the Advisor to
be of comparable quality. (See "Fundamentals of Fixed Income Investing - Credit
Quality" and the SAI.)

STRONG SHORT-TERM BOND FUND

The 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 is designed for investors who are willing to accept some fluctuation
in principal in order to pursue a higher level of income than is generally
available from money market securities. BECAUSE ITS SHARE PRICE WILL VARY, THE
FUND IS NOT AN APPROPRIATE INVESTMENT FOR THOSE WHOSE PRIMARY OBJECTIVE IS
ABSOLUTE PRINCIPAL STABILITY.
The Fund invests primarily in short- and intermediate-term, investment-grade
debt obligations. Under normal market conditions at least 65% of the Fund's
total assets will be invested in debt obligations, such as corporate and

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PROSPECTUS PAGE I-14
<PAGE> 15

U.S. government debt obligations. The Fund's average portfolio maturity will
be between one and three years under normal market conditions.
Under normal market conditions, at least 75% of the Fund's net assets will be
invested in investment-grade debt obligations, which generally include a range
of obligations from those in the highest rating category to those in the fourth
highest rating category (e.g., BBB or higher by Standard & Poor's Ratings Group
or "S&P"). The Fund may also invest up to 25% of its net assets in
non-investment-grade debt obligations that are rated in the fifth-highest rating
category (e.g., BB by S&P) or unrated securities of comparable quality. (See
"Fundamentals of Fixed Income Investing - Credit Quality.")

STRONG GOVERNMENT SECURITIES FUND

The 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 is designed for long-term investors who want to pursue higher income
than shorter-term securities generally provide, who are willing to accept the
fluctuation in principal associated with longer-term securities, and who seek
the low credit risk that U.S. government securities generally carry.
Under normal market conditions, at least 80% of the Fund's total assets will
be invested in U.S. government securities. The balance of the Fund's assets may
be invested in other investment-grade debt obligations. While there are no
maturity restrictions on the portfolio, it is anticipated that the Fund's
average portfolio maturity will normally be between 5 and 10 years.
Under federal law, the interest income earned from U.S. Treasury securities
is exempt from state and local taxes. All states allow mutual funds to "pass
through" that exemption to their shareholders, although there are conditions to
this treatment in some states. Because the requirements vary by state, you
should consult the instructions to your state's income tax return or a qualified
tax adviser to determine whether you may be able to exclude the Fund's
distributions from your state and local taxable income. (See "About the Funds -
Distributions and Taxes.")

STRONG CORPORATE BOND FUND

The 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 is designed for long-term investors who want to pursue higher income
than shorter-term securities generally provide and who are willing to accept the
fluctuation in principal associated with longer-term debt obligations. While
there are no maturity restrictions on the portfolio, it is anticipated that the
Fund's average portfolio maturity will normally be between 7 and 12 years.
Under normal market conditions at least 65% of the Fund's total assets will
be invested in the bonds of corporate issuers, which includes any corporate debt
obligation. The Fund may invest up to 35% of its total assets in any other

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PROSPECTUS PAGE I-15
<PAGE> 16

type of fixed income security, such as U.S. government securities and
mortgage-backed issues. Under normal market conditions, at least 75% of the
Fund's total assets will be invested in investment-grade debt obligations, which
include a range of securities from those in the highest rating category to those
rated medium-quality (e.g., BBB or higher by S&P). The Fund may also invest up
to 25% of its total assets in non-investment-grade debt obligations and other
high-yield (high-risk) securities (e.g., those rated C or better by S&P). (See
"Fundamentals of Fixed Income Investing - Credit Quality.")

STRONG HIGH-YIELD BOND FUND

The High-Yield Bond Fund seeks total return by investing for a high level of
current income and capital growth.
The Fund is designed for investors who want to pursue higher income than
higher-quality debt obligations generally provide and who are willing to accept
the risk of principal fluctuation associated with medium- and lower-quality debt
obligations. While there are no maturity restrictions for the Fund's debt
obligations, it is anticipated that the Fund will maintain an average portfolio
maturity of between 5 and 10 years.
The Fund invests primarily in medium- and lower-quality debt obligations.
Under normal market conditions the Fund invests at least 65% of its total assets
in medium- and lower-quality debt obligations of corporate issuers. Medium-
quality debt obligations are those rated in the fourth highest category (e.g.,
bonds rated BBB by S&P) or obligations determined by the Advisor to be of
comparable quality. Medium-quality debt obligations, although considered
investment-grade, have some speculative characteristics. Lower-quality bonds,
also commonly referred to as "non-investment-grade" bonds or "junk" bonds, are
those rated below the fourth highest category (e.g., bonds rated as low as C by
S&P) or bonds of comparable quality. The Fund also may invest in debt
obligations that are in default, but such obligations are not expected to exceed
10% of the Fund's net assets. The Fund may also invest without limitation in
higher-quality debt obligations. Under normal market conditions, however, the
Fund is unlikely to emphasize higher-quality debt obligations, since generally
they offer lower yields than medium and lower-quality bonds with similar
maturities. (See "Fundamentals of Fixed Income Investing - High Yield (High-
Risk) Securities" for further information on the risks associated with investing
in medium- and lower-quality debt obligations.) The Fund may also invest up to
20% of its net assets in common stocks and securities that are convertible into
common stocks, such as warrants.

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PROSPECTUS PAGE I-16
<PAGE> 17

FUNDAMENTALS OF
FIXED INCOME INVESTING

The Funds may invest in a wide variety of debt obligations and other
securities. See "Implementation of Policies and Risks - Debt Obligations."
Issuers of debt obligations have a contractual obligation to pay interest at
a specified rate ("coupon rate") on specified dates and to repay principal
("face value" or "par value") on a specified maturity date. Certain debt
obligations (usually intermediate- and long-term obligations) have provisions
that allow the issuer to redeem or "call" the obligation before its maturity.
Issuers are most likely to call such debt obligations during periods of falling
interest rates. As a result, a Fund may be required to invest the unanticipated
proceeds of the called obligations at lower interest rates, which may cause the
Fund's income to decline.
Although the net asset values of the Short-Term Bond, Government Securities,
Corporate Bond, and High-Yield Funds are expected to fluctuate, the Advisor
actively manages each Fund's portfolio and adjusts its average portfolio
maturity according to the Advisor's interest rate outlook while seeking to avoid
or reduce, to the extent possible, any negative changes in net asset value. The
Money Market Fund seeks to maintain a stable net asset value of $1.00 per share.

PRICE VOLATILITY

The market value of debt obligations is affected by changes in prevailing
interest rates. The market value of a debt obligation generally reacts inversely
to interest-rate changes, meaning, when prevailing interest rates decline, an
obligation's price usually rises, and when prevailing interest rates rise, an
obligation's price usually declines. A fund portfolio consisting primarily of
debt obligations will react similarly to changes in interest rates.

MATURITY

In general, the longer the maturity of a debt obligation, the higher its
yield and the greater its sensitivity to changes in interest rates. Conversely,
the shorter the maturity, the lower the yield but the greater the price
stability. Commercial paper is generally considered the shortest form of debt
obligation. Notes, whose original maturities are two years or less, are
considered short-term obligations. The term "bond" generally refers to
securities with maturities longer than two years. Bonds with maturities of three
years or less are considered short-term, bonds with maturities between three and
seven years are considered intermediate-term, and bonds with maturities greater
than seven years are considered long-term.
A Fund's average portfolio maturity represents an average based on the actual
stated maturity dates of the debt securities in the Fund's portfolio,

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PROSPECTUS PAGE I-17
<PAGE> 18

except that (i) variable-rate securities are deemed to mature at the next
interest-rate adjustment date, (ii) debt securities with put features are deemed
to mature at the next put-exercise date, (iii) the maturity of mortgage-backed
securities is determined on an "expected life" basis, and (iv) securities being
hedged with futures contracts may be deemed to have a longer maturity, in the
case of purchases of futures contracts, and a shorter maturity, in the case of
sales of futures contracts, than they would otherwise be deemed to have. The
Money Market Fund will calculate average portfolio maturity in accordance with
Rule 2a-7 under the 1940 Act.

CREDIT QUALITY

The values of debt obligations may also be affected by changes in the credit
rating or financial condition of their issuers. Generally, the lower the quality
rating of an obligation, the higher the degree of risk as to the payment of
interest and return of principal. To compensate investors for taking on such
increased risk, those issuers deemed to be less creditworthy generally must
offer their investors higher interest rates than do issuers with better credit
ratings.
In conducting its credit research and analysis, the Advisor considers both
qualitative and quantitative factors to evaluate the creditworthiness of
individual issuers. The Advisor also relies, in part, on credit ratings compiled
by a number of NRSROs. "Appendix A - Ratings of Debt Obligations" presents a
summary of the ratings of three well-known such organizations: S&P, Moody's
Investors Service, Inc., and Fitch Investors Service, Inc. Please refer to the
Appendix in the Funds' SAI for a more detailed description of these ratings.

INVESTMENT-GRADE DEBT OBLIGATIONS. Debt obligations rated in the highest-
through the medium-quality categories are commonly referred to as
"investment-grade" debt obligations and include the following:

- - U.S. government securities (See "Implementation of Policies and Risks - Debt
Obligations" below);
- - bonds or bank obligations rated in one of the four highest rating categories
(e.g., BBB or higher by S&P);
- - short-term notes rated in one of the two highest rating categories (e.g., SP-2
or higher by S&P);
- - short-term bank obligations rated in one of the three highest rating
categories (e.g., A-3 or higher by S&P), with respect to obligations maturing
in one year or less;
- - commercial paper rated in one of the three highest rating categories (e.g.,
A-3 or higher by S&P);
- - unrated debt obligations determined by the Advisor to be of comparable
quality; and
- - repurchase agreements involving investment-grade debt obligations.

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PROSPECTUS PAGE I-18
<PAGE> 19

Investment-grade debt obligations are generally believed to have relatively
low degrees of credit risk. However, medium-quality debt obligations, while
considered investment-grade, may have some speculative characteristics, since
their issuers' capacity for repayment may be more vulnerable to adverse economic
conditions or changing circumstances than that of higher-rated issuers.
All ratings are determined at the time of investment. Any subsequent rating
downgrade of a debt obligation will be monitored by the Advisor to consider what
action, if any, a Fund should take consistent with its investment objective, and
with respect to the Money Market Fund, Rule 2a-7 under the 1940 Act.

HIGH-YIELD (HIGH-RISK) SECURITIES. High-yield (high-risk) securities, also
referred to as "junk bonds," are those securities that are rated lower than
investment-grade and unrated securities of comparable quality. Although these
securities generally offer higher yields than investment-grade securities with
similar maturities, lower-quality securities involve greater risks, including
the possibility of default or bankruptcy. In general, they are regarded to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. Other potential risks associated with investing in high-
yield securities include:

- - substantial market-price volatility resulting from changes in interest rates,
changes in or uncertainty about economic conditions, and changes in the actual
or perceived ability of the issuer to meet its obligations;
- - greater sensitivity of highly leveraged issuers to adverse economic changes
and individual-issuer developments;
- - subordination to the prior claims of other creditors;
- - additional Congressional attempts to restrict the use or limit the tax and
other advantages of these securities; and
- - adverse publicity and changing investor perceptions about these securities.

As with any other asset in a Fund's portfolio, any reduction in the value of
such securities as a result of the factors listed above would be reflected in
the net asset value of the Fund. In addition, a Fund that invests in
lower-quality securities may incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal and
interest on its holdings. As a result of the associated risks, successful
investments in high-yield, high-risk securities will be more dependent on the
Advisor's credit analysis than generally would be the case with investments in
investment-grade securities.
It is uncertain how the high-yield market will perform during a prolonged
period of rising interest rates. A prolonged economic downturn or a prolonged
period of rising interest rates could adversely affect the market for these
securities, increase their volatility, and reduce their value and liquidity. In
addition, lower-quality securities tend to be less liquid than higher-quality
debt securities because the market for them is not as broad or active. If market
quotations are not available, these securities will be valued in accordance with
procedures established by a Fund's Board of Directors. Judgment may, therefore,
play a greater role in valuing these securities. The lack of a liquid

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PROSPECTUS PAGE I-19
<PAGE> 20

secondary market may have an adverse effect on market price and a Fund's ability
to sell particular securities.
See Appendix B for information concerning the credit quality of the Short-
Term Bond and Corporate Bond Funds' investments in 1994.

IMPLEMENTATION OF POLICIES AND RISKS

In addition to the investment policies described above (and subject to
certain restrictions described below), the Funds may invest in some or all of
the following securities and may employ some or all of the following investment
techniques, some of which may present special risks as described below. A more
complete discussion of certain of these securities and investment techniques and
the associated risks is contained in the Funds' SAI.

DEBT OBLIGATIONS

The Short-Term Bond, Government Securities, Corporate Bond, and High-Yield
Funds may invest in any debt obligations. A Fund's authority to invest in
certain types of debt obligations may be restricted or subject to objective
investment criteria. For additional information on these restrictions, see
"Investment Objectives and Policies."

TYPES OF OBLIGATIONS. Debt obligations include (i) corporate debt securities,
including bonds, debentures, and notes; (ii) bank obligations, such as
certificates of deposit, banker's acceptances, and time deposits of domestic and
foreign banks and their subsidiaries and branches, and domestic savings and loan
associations (in amounts in excess of the insurance coverage (currently $100,000
per account) provided by the Federal Deposit Insurance Corporation); (iii)
commercial paper (including variable-amount master demand notes); (iv)
repurchase agreements; (v) loan interests; (vi) foreign debt obligations issued
by foreign issuers traded either in foreign markets or in domestic markets
through depositary receipts; (vii) convertible securities - debt obligations of
corporations convertible into or exchangeable for equity securities or debt
obligations that carry with them the right to acquire equity securities, as
evidenced by warrants attached to such securities, or acquired as part of units
of the securities; (viii) preferred stocks - securities that represent an
ownership interest in a corporation and that give the owner a prior claim over
common stock on the company's earnings or assets; (ix) U.S. government
securities; (x) mortgage-backed securities, collateralized mortgage obligations,
and similar securities; and (xi) municipal obligations.

GOVERNMENT SECURITIES. U.S. government securities are issued or guaranteed by
the U.S. government or its agencies or instrumentalities. Securities issued by
the government include U.S. Treasury obligations, such as Treasury

----------------------

PROSPECTUS PAGE I-20
<PAGE> 21

bills, notes, and bonds. Securities issued or guaranteed by government agencies
or instrumentalities include the following:

- - the Federal Housing Administration, Farmers Home Administration, Export-Import
Bank of the United States, Small Business Administration, and the Government
National Mortgage Association, including GNMA pass-through certificates, whose
securities are supported by the full faith and credit of the United States;
- - the Federal Home Loan Banks, Federal Intermediate Credit Banks, and the
Tennessee Valley Authority, whose securities are supported by the right of the
agency to borrow from the U.S. Treasury;
- - the Federal National Mortgage Association, whose securities are supported by
the discretionary authority of the U.S. government to purchase certain
obligations of the agency or instrumentality; and
- - the Student Loan Marketing Association, the Interamerican Development Bank,
and International Bank for Reconstruction and Development, whose securities
are supported only by the credit of such agencies.

Although the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so. The U.S. government and its agencies and
instrumentalities do not guarantee the market value of their securities;
consequently, the value of such securities will fluctuate.

MORTGAGE- AND ASSET-BACKED SECURITIES. Mortgage-backed securities represent
direct or indirect participation in, or are secured by and payable from,
mortgage loans secured by real property, and include single- and multi-class
pass-through securities and collateralized mortgage obligations. Such securities
may be issued or guaranteed by U.S. government agencies or instrumentalities or
by private issuers, generally originators in mortgage loans, including savings
associations, mortgage bankers, commercial banks, investment bankers, and
special purpose entities (collectively, "private lenders"). Mortgage-backed
securities issued by private lenders may be supported by pools of mortgage loans
or other mortgage-backed securities that are guaranteed, directly or indirectly,
by the U.S. government or one of its agencies or instrumentalities, or they may
be issued without any governmental guarantee of the underlying mortgage assets
but with some form of non-governmental credit enhancement.
Asset-backed securities have structural characteristics similar to mortgage-
backed securities. However, the underlying assets are not first-lien mortgage
loans or interests therein; rather they include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal and
interest on asset-backed securities may be supported by non-governmental

----------------------

PROSPECTUS PAGE I-21
<PAGE> 22

credit enhancements similar to those utilized in connection with mortgage-backed
securities.
The yield characteristics of mortgage- and asset-backed securities differ
from those of traditional debt obligations. Among the principal differences are
that interest and principal payments are made more frequently on mortgage-and
asset-backed securities, usually monthly, and that principal may be prepaid at
any time because the underlying mortgage loans or other assets generally may be
prepaid at any time. As a result, if a Fund purchases these securities at a
premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing the yield to maturity. Conversely, if a Fund
purchases these securities at a discount, a prepayment rate that is faster than
expected will increase yield to maturity, while a prepayment rate that is slower
than expected will reduce yield to maturity. Accelerated prepayments on
securities purchased by a Fund at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is prepaid in full. The market for privately issued mortgage- and
asset-backed securities is smaller and less liquid than the market for
government sponsored mortgage-backed securities.
The Funds may invest in stripped mortgage- or asset-backed securities, which
receive differing proportions of the interest and principal payments from the
underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases the market
value may be extremely volatile. With respect to certain stripped securities,
such as interest-only ("IO") and principal-only ("PO") classes, a rate of
prepayment that is faster or slower than anticipated may result in a Fund
failing to recover all or a portion of its investment, even though the
securities are rated investment-grade.

LOAN INTERESTS. The Short-Term Bond, Corporate Bond, and High-Yield Funds may
each invest a portion of their assets in loan interests, which are interests in
amounts owed by a corporate, governmental or other borrower to lenders or
lending syndicates. Loan interests purchased by a Fund may have a maturity of
any number of days or years, and may be secured or unsecured. Loan interests,
which may take the form of participation interests in, assignments of, or
novations of a loan, may be acquired from U.S. and foreign banks, insurance
companies, finance companies or other financial institutions that have made
loans or are members of a lending syndicate or from the holders of loan
interests. Loan interests involve the risk of loss in case of default or
bankruptcy of the borrower and, in the case of participation interests, involve
a risk of insolvency of the agent lending bank or other financial intermediary.
Loan interests are not rated by any NRSROs and are, at present, not readily
marketable and may be subject to contractual restrictions on resale.

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<PAGE> 23

FOREIGN SECURITIES AND CURRENCIES

The Money Market, Short-Term Bond, Corporate Bond, and High-Yield Funds each
may invest up to 25% of their net assets directly in foreign securities. The
Short-Term Bond, Corporate Bond, and High-Yield Funds may also invest in foreign
securities through depositary receipts without regard to this limitation.
However, the Advisor currently intends to invest not more than 25% of a Fund's
net assets in foreign securities, including both direct investments and
investments made through depositary receipts. Depositary receipts are generally
issued by banks or trust companies and evidence ownership of underlying foreign
securities. In accordance with Rule 2a-7 under the 1940 Act, the Money Market
Fund will limit its investments in foreign securities to those denominated in
U.S. dollars.

Foreign investments involve special risks, including:

- - expropriation, confiscatory taxation, and withholding taxes on dividends and
interest;
- - less extensive regulation of foreign brokers, securities markets, and issuers;
- - less publicly available information and different accounting standards;
- - costs incurred in conversions between currencies, possible delays in
settlement in foreign securities markets, limitations on the use or transfer
of assets (including suspension of the ability to transfer currency from a
given country), and difficulty of enforcing obligations in other countries;
and
- - diplomatic developments and political or social instability.

Foreign economies may differ favorably or unfavorably from the U.S. economy
in various respects, including growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency, and balance of payments positions. Many foreign securities are
less liquid and their prices more volatile than comparable U.S. securities.
Although the Funds generally invest only in securities that are regularly traded
on recognized exchanges or in over-the-counter markets, from time to time
foreign securities may be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign investing, such as custody
charges and brokerage costs, are higher than those attributable to domestic
investing.
Because most foreign securities are denominated in non-U.S. currencies, the
investment performance of the Short-Term Bond, Corporate Bond, and High-Yield
Funds could be affected by changes in foreign currency exchange rates to some
extent. The value of a Fund's assets denominated in foreign currencies will
increase or decrease in response to fluctuations in the value of those foreign
currencies relative to the U.S. dollar. Currency exchange rates can be volatile
at times in response to supply and demand in the currency exchange markets,
international balances of payments, governmental intervention, speculation, and
other political and economic conditions.

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<PAGE> 24

The Short-Term Bond, Corporate Bond, and High-Yield Funds may purchase and
sell foreign currency on a spot basis and may engage in forward currency
contracts, currency options, and futures transactions for hedging or any other
lawful purpose. (See "Derivative Instruments.")

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements with certain banks and
non-bank dealers. In a repurchase agreement, a Fund buys a security at one
price, and at the time of sale, the seller agrees to repurchase the obligation
at a mutually agreed upon time and price (usually within seven days). The
repurchase agreement determines the yield during the purchaser's holding period,
while the seller's obligation to repurchase is secured by the value of the
underlying security. A Fund may enter into repurchase agreements with respect to
any security in which it may invest. The Advisor will monitor, on an ongoing
basis, the value of the underlying securities to ensure that the value always
equals or exceeds the repurchase price plus accrued interest. Repurchase
agreements could involve certain risks in the event of a default or insolvency
of the other party to the agreement, including possible delays or restrictions
upon a Fund's ability to dispose of the underlying securities. Although no
definitive creditworthiness criteria are used, the Advisor reviews the
creditworthiness of the banks and non-bank dealers with which the Funds enter
into repurchase agreements to evaluate those risks. A Fund may, under certain
circumstances, deem repurchase agreements collateralized by U.S. government
securities to be investments in U.S. government securities.

DERIVATIVE INSTRUMENTS

The Short-Term Bond, Government Securities, Corporate Bond, and High-Yield
Funds may use derivative instruments for any lawful purpose consistent with each
Fund's investment objective, including hedging or managing risk but not for
speculation. Derivative instruments are securities or agreements whose value is
derived from the value of some underlying asset, for example, securities,
reference indexes, or commodities. Options, futures, and options on futures
transactions are considered derivative transactions. Derivatives generally have
investment characteristics that are based upon either forward contracts (under
which one party is obligated to buy and the other party is obligated to sell an
underlying asset at a specific price on a specified date) or option contracts
(under which the holder of the option has the right but not the obligation to
buy or sell an underlying asset at a specified price on or before a specified
date). Consequently, the change in value of a forward-based derivative generally
is roughly proportional to the change in value of the underlying asset. In
contrast, the buyer of an option-based derivative generally will benefit from
favorable movements in the price of the underlying asset but is not exposed to
corresponding losses due to adverse movements in the value of the

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<PAGE> 25

underlying asset. The seller of an option-based derivative generally will
receive fees or premiums but generally is exposed to losses due to changes in
the value of the underlying asset. Derivative transactions may include elements
of leverage and, accordingly, the fluctuation of the value of the derivative
transaction in relation to the underlying asset may be magnified. In addition to
options, futures, and options on futures transactions, derivative transactions
may include short sales against the box, in which a Fund sells a security it
owns for delivery at a future date; swaps, in which the two parties agree to
exchange a series of cash flows in the future, such as interest-rate payments;
interest-rate caps, under which, in return for a premium, one party agrees to
make payments to the other to the extent that interest rates exceed a specified
rate, or "cap"; and interest-rate floors, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates
fall below a specified level, or "floor." Derivative transactions may also
include forward currency contracts and foreign currency exchange-related
securities.
Derivative instruments may be exchange-traded or traded in over-the-counter
transactions between private parties. Over-the-counter transactions are subject
to the credit risk of the counterparty to the instrument and are less liquid
than exchange-traded derivatives since they often can only be closed out with
the other party to the transaction. When required by SEC guidelines, a Fund will
set aside permissible liquid assets or securities positions that substantially
correlate to the market movements of the derivatives transaction in a segregated
account to secure its obligations under derivative transactions. In order to
maintain its required cover for a derivative transaction, a Fund may need to
sell portfolio securities at disadvantageous prices or times since it may not be
possible to liquidate a derivative position.
The successful use of derivative transactions by a Fund is dependent upon the
Advisor's ability to correctly anticipate trends in the underlying asset. To the
extent that a Fund is engaging in derivative transactions other than for hedging
purposes, the Fund's successful use of such transactions is more dependent upon
the Advisor's ability to correctly anticipate such trends, since losses in these
transactions may not be offset by gains in the Fund's portfolio or by lower
purchase prices for assets it intends to acquire. The Advisor's prediction of
trends in underlying assets may prove to be inaccurate, which could result in
substantial losses to a Fund. Hedging transactions are also subject to risks. If
the Advisor incorrectly anticipates trends in the underlying asset, a Fund may
be in a worse position than if no hedging had occurred. In addition, there may
be an imperfect correlation between a Fund's derivative transactions and the
instruments being hedged.

WHEN-ISSUED SECURITIES

Each Fund may invest without limitation in securities purchased on a when-
issued or delayed delivery basis. Although the payment and interest terms of
these securities are established at the time the purchaser enters into the

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PROSPECTUS PAGE I-25
<PAGE> 26

commitment, these securities may be delivered and paid for at a future date,
generally within 45 days. Purchasing when-issued securities allows a Fund to
lock in a fixed price or yield on a security it intends to purchase. However,
when a Fund purchases a when-issued security, it immediately assumes the risk of
ownership, including the risk of price fluctuation.
The greater a Fund's outstanding commitments for these securities, the
greater the exposure to potential fluctuations in the net asset value of a Fund.
Purchasing when-issued securities may involve the additional risk that the yield
available in the market when the delivery occurs may be higher or the market
price lower than that obtained at the time of commitment. Although a Fund may be
able to sell these securities prior to the delivery date, it will purchase
when-issued securities for the purpose of actually acquiring the securities,
unless, after entering into the commitment, a sale appears desirable for
investment reasons. When required by SEC guidelines, a Fund will set aside
permissible liquid assets in a segregated account to secure its outstanding
commitments for when-issued securities.

ILLIQUID SECURITIES

The Short-Term Bond, Government Securities, Corporate Bond, and High-Yield
Funds may each invest up to 15% of their net assets in illiquid securities. The
Money Market Fund may invest up to 10% of its Fund's net assets in illiquid
securities. Illiquid securities are those securities that are not readily
marketable, including restricted securities and repurchase obligations maturing
in more than seven days. Certain restricted securities which may be resold to
institutional investors under Rule 144A under the Securities Act of 1933 and
Section 4(2) commercial paper may be determined to be liquid under guidelines
adopted by each Fund's Board of Directors.

ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES

The Short-Term Bond, Government Securities, Corporate Bond, and High-Yield
Funds may invest without limitation in zero-coupon, step-coupon, and pay-in-kind
securities. These securities are debt securities that do not make regular cash
interest payments. Zero-coupon and step-coupon securities are sold at a deep
discount to their face value. Pay-in-kind securities pay interest through the
issuance of additional securities. Because such securities do not pay current
cash income, the price of these securities can be volatile when interest rates
fluctuate. While these securities do not pay current cash income, federal income
tax law requires the holders of zero-coupon, step-coupon, and pay-in-kind
securities to include in income each year the portion of the original issue
discount (or deemed discount) and other non-cash income on such securities
accrued during that year. In order to continue to qualify for treatment as a
"regulated investment company" under the Internal Revenue Code and avoid a
certain excise tax, each Fund may be required to distribute a

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PROSPECTUS PAGE I-26
<PAGE> 27

portion of such discount and income and may be required to dispose of other
portfolio securities, which may occur in periods of adverse market prices, in
order to generate cash to meet these distribution requirements.

MORTGAGE DOLLAR ROLLS AND
REVERSE REPURCHASE AGREEMENTS

The Short-Term Bond, Government Securities, Corporate Bond, and High-Yield
Funds may engage in reverse repurchase agreements to facilitate portfolio
liquidity, a practice common in the mutual fund industry, or for arbitrage
transactions discussed below. In a reverse repurchase agreement, the Fund would
sell a security and enter into an agreement to repurchase the security at a
specified future date and price. The Fund generally retains the right to
interest and principal payments on the security. Since the Fund receives cash
upon entering into a reverse repurchase agreement, it may be considered a
borrowing. When required by SEC guidelines, a Fund will set aside permissible
liquid assets in a segregated account to secure its obligation to repurchase the
security.
Each Fund may also enter into mortgage dollar rolls, in which the Fund would
sell mortgage-backed securities for delivery in the current month and
simultaneously contract to purchase substantially similar securities on a
specified future date. While a Fund would forego principal and interest paid on
the mortgage-backed securities during the roll period, the Fund would be
compensated by the difference between the current sale price and the lower price
for the future purchase as well as by any interest earned on the proceeds of the
initial sale. The Fund also could be compensated through the receipt of fee
income equivalent to a lower forward price. When required by SEC guidelines, a
Fund would set aside permissible liquid assets in a segregated account to secure
its obligation for the forward commitment to buy mortgage-backed securities.
Mortgage dollar roll transactions may be considered a borrowing by the Funds.
The mortgage dollar rolls and reverse repurchase agreements entered into by
the Funds may be used as arbitrage transactions in which a Fund will maintain an
offsetting position in investment-grade debt obligations or repurchase
agreements that mature on or before the settlement date of the related mortgage
dollar roll or reverse repurchase agreement. Since a Fund will receive interest
on the securities or repurchase agreements in which it invests the transaction
proceeds, such transactions may involve leverage. However, since such securities
or repurchase agreements will be high quality and will mature on or before the
settlement date of the mortgage dollar roll or reverse repurchase agreement, the
Advisor believes that such arbitrage transactions do not present the risks to
the Funds that are associated with other types of leverage. The Money Market
Fund only engages in transactions permissible under Rule 2a-7.

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PROSPECTUS PAGE I-27
<PAGE> 28

PORTFOLIO TURNOVER

Historical portfolio turnover rates for the Short-Term Bond, Government
Securities, and Corporate Bond Funds are listed under "Financial Highlights."
The annual portfolio turnover rate indicates changes in a Fund's portfolio. It
may also be affected by sales of portfolio securities necessary to meet cash
requirements for redemptions of shares. The turnover rate may vary from year to
year, as well as within a year. High turnover in any year will result in the
payment by a Fund of above-average amounts of transaction costs and could result
in the payment by shareholders of above-average amounts of taxes on realized
investment gains. The annual portfolio turnover rates for the Short-Term Bond,
Government Securities, Corporate Bond, and High-Yield Funds are expected to be
between 200% and 300%. However, each Fund's portfolio turnover rate may exceed
300% when the Advisor believes the anticipated benefits of short-term
investments outweigh any increase in transaction costs or increase in capital
gains. These rates should not be considered as limiting factors.

ABOUT THE FUNDS

MANAGEMENT

The Board of Directors of each Fund is responsible for managing its business
and affairs. Each of the Funds has entered into an investment advisory agreement
(collectively the "Advisory Agreements") with Strong Capital Management, Inc.
(the "Advisor"). Except for the management fee arrangements, the Advisory
Agreements are substantially identical. Under the terms of these agreements, the
Advisor manages each Fund's investments and business affairs subject to the
supervision of each Fund's Board of Directors.

ADVISOR. The Advisor began conducting business in 1974. Since then, its
principal business has been providing continuous investment supervision for
individuals and institutional accounts, such as pension funds and profit-sharing
plans as well as mutual funds, several of which are funding vehicles for
variable insurance products. As of November 30, 1995, the Advisor had over $15
billion under management. The Advisor's principal mailing address is P.O. Box
2936, Milwaukee, Wisconsin 53201. Mr. Richard S. Strong, the Chairman of the
Board of each Fund, is the controlling shareholder of the Advisor.

As compensation for its services, each Fund pays the Advisor a monthly
management fee based on a percentage of each Fund's average daily net asset
value. The annual rates are as follows: Money Market Fund, .50%; Government
Securities Fund, .60%; and Short-Term Bond, Corporate Bond, and High-Yield
Funds, .625%. From time to time, the Advisor may voluntarily waive all or a
portion of its management fee and/or absorb certain Fund expenses without

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PROSPECTUS PAGE I-28
<PAGE> 29

further notification of the commencement or termination of such waiver or
absorption. Any such waiver or absorption will temporarily lower a Fund's
overall expense ratio and increase a Fund's overall return to investors.
Except for expenses assumed by the Advisor or Strong Funds Distributors,
Inc., each Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions, and similar
expenses; expenses of issue, sale, repurchase, or redemption of shares; expenses
of registering or qualifying shares for sale with the states and the SEC;
expenses of printing and distribution of prospectuses to existing shareholders;
charges of custodians (including fees as custodian for keeping books and similar
services for a Fund), transfer agents (including the printing and mailing of
reports and notices to shareholders), registrars, auditing and legal services,
and clerical services related to recordkeeping and shareholder relations;
printing of stock certificates; fees for directors who are not "interested
persons" of the Advisor; expenses of indemnification; extraordinary expenses;
and costs of shareholder and director meetings.

PORTFOLIO MANAGERS. The following individuals serve as portfolio managers for
the five Strong Income Funds.

STRONG MONEY MARKET FUND

JAY N. MUELLER. Mr. Mueller joined the Advisor in September 1991 as a
securities analyst and portfolio manager. For four years prior to that, he was a
securities analyst and portfolio manager with R. Meeder & Associates of Dublin,
Ohio. Mr. Mueller received his bachelor's degree in economics in 1982 from the
University of Chicago. Mr. Mueller is also a Chartered Financial Analyst. He has
managed the Strong Money Market since September 1991. Mr. Mueller also manages
the Strong U.S. Treasury Money Fund, Strong Heritage Money Fund, and Strong
Institutional Money Fund.

STRONG SHORT-TERM BOND FUND

BRADLEY C. TANK. Before joining the Advisor in June 1990, Mr. Tank spent
eight years at Salomon Brothers, Inc., where he was a vice president and fixed
income specialist. He has managed or co-managed the Strong Short-Term Bond and
Government Securities Funds since he joined the Advisor. In addition, Mr. Tank
leads the Strong Asset Allocation Fund investment team and chairs the Fixed
Income Investment Committee.

LYLE J. FITTERER. Mr. Fitterer joined the Advisor in 1989 after receiving his
bachelor's degree in accounting from the University of North Dakota. Previously,
he served the Advisor as a fixed-income research analyst and trader. Mr.
Fitterer has also served as a trader for the Advisor's equity products and as
manager of the Strong Funds' fixed-income accounting department. He is a

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PROSPECTUS PAGE I-29
<PAGE> 30

Certified Public Accountant. Mr. Fitterer has co-managed the Fund since January
1996.

STRONG GOVERNMENT SECURITIES FUND

BRADLEY C. TANK. Information concerning Mr. Tank is set forth above under
"Strong Short-Term Bond Fund."

STRONG CORPORATE BOND FUND

JEFFREY A. KOCH. Mr. Koch joined the Advisor as a portfolio manager and
securities analyst in June 1989. For a brief period prior to that, he was a
market-maker clerk at Fossett Corporation, a clearing firm. Mr. Koch earned his
M.B.A. in Finance at Washington University in St. Louis, Missouri in 1989. His
undergraduate degree, awarded in 1987, is from the University of
Minnesota-Morris. Mr. Koch is also a Chartered Financial Analyst. He has co-
managed or managed the Fund since 1991. He has managed the Strong High-Yield
Bond Fund since its inception in December 1995. Mr. Koch also manages the Strong
Advantage Fund.

JOHN T. BENDER. Mr. Bender began his career with the Advisor in 1987 as an
intern in the mutual fund accounting department. After receiving his bachelor's
degree from Marquette University in 1988, he became an accountant in Strong's
shareholder and accounting compliance department. He subsequently joined the
investment team as an equity trader, and later became a fixed-income research
analyst and trader. He is both a Chartered Financial Analyst and a Certified
Public Accountant. Mr. Bender has co-managed the Fund since January 1996.

STRONG HIGH-YIELD BOND FUND

JEFFREY A. KOCH. Information concerning Mr. Koch is set forth above under
"Strong Corporate Bond Fund."

TRANSFER AND DIVIDEND-DISBURSING AGENT

The Advisor, P.O. Box 2936, Milwaukee, Wisconsin 53201, also acts as
dividend-disbursing agent and transfer agent for the Funds. The Advisor is
compensated for its services based on an annual fee per account plus certain
out-of-pocket expenses. The fees received and the services provided as transfer
agent and dividend-disbursing agent are in addition to those received and
provided under the Advisory Agreements between the Advisor and the Funds.

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PROSPECTUS PAGE I-30
<PAGE> 31

DISTRIBUTOR

Strong Funds Distributors, Inc., P.O. Box 2936, Milwaukee, Wisconsin 53201,
an indirect subsidiary of the Advisor, acts as distributor of the shares of the
Funds.

ORGANIZATION

SHAREHOLDER RIGHTS. Each Fund (except for the High-Yield Fund) is a Wisconsin
corporation that is authorized to issue shares of common stock and series and
classes of series of shares of common stock. The High-Yield Fund is a series of
common stock of Strong Income Funds, Inc., a Wisconsin corporation that is
authorized to issue shares of common stock and series and classes of series of
shares of common stock. Each share of the Funds has one vote, and all shares
participate equally in dividends and other capital gains distributions by the
respective Fund and in the residual assets of the respective Fund in the event
of liquidation. Certificates will be issued for shares held in your account only
upon your written request. You will, however, have full shareholder rights
whether or not you request certificates. Generally, the Funds will not hold an
annual meeting of shareholders unless required by the 1940 Act.

SHAREHOLDER PRIVILEGES. The shareholders of each Fund may benefit from the
privileges described in the "Shareholder Manual" (see page II-1). However, each
Fund reserves the right, at any time and without prior notice, to suspend,
limit, modify, or terminate any of these privileges or their use in any manner
by any person or class.

PRINCIPAL SHAREHOLDER. As of November 30, 1995, Charles Schwab & Co., Inc.
("Schwab") owned of record approximately 36% of the Government Securities Fund.
Schwab's record ownership of greater than 25% of the Fund's shares may result in
it being deemed a controlling entity of the Fund.

DISTRIBUTIONS AND TAXES

PAYMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. You may elect to have all your
dividends and capital gain distributions from a Fund automatically reinvested in
additional shares of that Fund or in shares of another Strong Fund at the net
asset value determined on the payment date. If you request in writing that your
dividends and other distributions be paid in cash, a Fund will credit your bank
account by Electronic Funds Transfer ("EFT") or issue a check to you within five
business days of the payment date. You may change your election at any time by
calling or writing Strong Funds. Strong Funds must receive any such change 7
days (15 days for EFT) prior to a dividend or capital gain distribution payment
date in order for the change to be effective for that payment.

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PROSPECTUS PAGE I-31
<PAGE> 32

The policy of each Fund is to pay dividends from net investment income
monthly and to distribute substantially all net realized capital gains, and
gains from foreign currency transactions, if any, annually. Each Fund may make
additional distributions if necessary to avoid imposition of a 4% excise tax on
undistributed income and gains. Each Fund declares dividends on each day its net
asset value is calculated, except the Money Market Fund does not declare
dividends on bank holidays. Income earned on weekends, holidays (including bank
holidays for the Money Market Fund), and days on which net asset value is not
calculated is declared as a dividend on the day on which a Fund's net asset
value was most recently calculated.

TAX STATUS OF DIVIDENDS AND OTHER DISTRIBUTIONS. You will be subject to
federal income tax at ordinary income tax rates on any dividends you receive
that are derived from investment company taxable income (consisting generally of
net investment income, net short-term capital gain, and net gains from certain
foreign currency transactions, if any). Distributions by the Short-Term Bond,
Government Securities, Corporate Bond, and High-Yield Funds of net capital gain
(the excess of net long-term capital gain over net short-term capital loss),
when designated as such, are taxable to you as long-term capital gains,
regardless of how long you have held your Fund shares.
The Funds' distributions are taxable in the year they are paid, whether they
are taken in cash or reinvested in additional shares, except that certain
distributions declared in the last three months of the year and paid in January
are taxable as if paid on December 31. All state laws provide a pass-through to
mutual fund shareholders of the state and local income tax exemption afforded
owners of direct U.S. government obligations, although there are conditions to
this treatment in some states. You will be notified annually of the percentage
of a Fund's income that is derived from U.S. government securities.
If a Fund's distributions exceed its investment company taxable income and
net capital gain in any year, as a result of currency-related losses or
otherwise, all or a portion of those distributions may be treated as a return of
capital to shareholders for tax purposes.

YEAR-END TAX REPORTING. After the end of each calendar year, you will receive
a statement (Form 1099) of the federal income tax status of all dividends and
other distributions paid (or deemed paid) during the year.

SHARES SOLD OR EXCHANGED. Your redemption of shares of the Short-Term Bond,
Government Securities, Corporate Bond, or High-Yield Funds may result in taxable
gain or loss to you, depending upon whether the redemption proceeds payable to
you are more or less than your adjusted cost basis for the redeemed shares.
Similar tax consequences generally will result from an exchange of shares of a
Fund for shares of another Strong Fund. If you purchase shares of a Fund within
thirty days before or after redeeming shares of the same Fund at a loss, a
portion or all of that loss will not be deductible

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PROSPECTUS PAGE I-32
<PAGE> 33

and will increase the cost basis of the newly purchased shares. If you redeem
shares out of a retirement account, you will be subject to withholding for
federal income tax purposes unless you transfer the distribution directly to an
"eligible retirement plan." In addition, if you redeem all shares in an account
at any time during a month, dividends credited to the account since the
beginning of the month through the day of redemption will be paid with the
redemption proceeds.

BACKUP WITHHOLDING. If you are an individual or certain other noncorporate
shareholder and do not furnish a Fund with a correct taxpayer identification
number, the Fund is required to withhold federal income tax at a rate of 31%
(backup withholding) from all dividends (in the case of the Money Market Fund),
and from all dividends, capital gain distributions, and redemption proceeds (in
the case of all the other Funds), payable to you. Withholding at that rate from
dividends and capital gain distributions payable to you also is required if you
otherwise are subject to backup withholding. To avoid backup withholding, you
must provide a taxpayer identification number and state that you are not subject
to backup withholding due to the underreporting of your income. This
certification is included as part of your application. Please complete it when
you open your account.

TAX STATUS OF THE FUNDS. Each Fund intends to continue to qualify for
treatment as a regulated investment company under Subchapter M of the Internal
Revenue Code and, if so qualified, will not be liable for federal income tax on
earnings and gains distributed to its shareholders in a timely manner.
This section is not intended to be a full discussion of present or proposed
federal income tax law and its effects on the Funds and investors therein. See
the SAI for a further discussion. There may be other federal, state, or local
tax considerations applicable to a particular investor. You are therefore urged
to consult your own tax adviser.

PERFORMANCE INFORMATION

Each Fund may advertise "yield," "average annual total return," "total
return," and "cumulative total return." The Money Market Fund may also advertise
"effective yield." Each of these figures is based upon historical results and
does not represent the future performance of a Fund.
Yield is an annualized figure, which means that it is assumed that a Fund
generates the same level of net investment income over a one-year period. The
Money Market Fund's yield and effective yield are measures of the net investment
income per share earned by the Fund over a specific seven-day period and are
shown as a percentage of the investment. However, effective yield will be
slightly higher than the yield because effective yield assumes that the net
investment income earned by the Fund will be reinvested. The Short-Term Bond,
Government Securities, Corporate Bond, and High-Yield Funds' yield is

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PROSPECTUS PAGE I-33
<PAGE> 34

a measure of the net investment income per share earned by a Fund over a
specific one-month period and is shown as a percentage of the net asset value of
the Fund's shares at the end of the period.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund assuming
the reinvestment of all dividends and distributions. Total return figures are
not annualized and simply represent the aggregate change of a Fund's investments
over a specified period of time.

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PROSPECTUS PAGE I-34
<PAGE> 35

SHAREHOLDER MANUAL

<TABLE>
<S> <C>
HOW TO BUY SHARES...................... II-1
DETERMINING YOUR SHARE PRICE........... II-5
HOW TO SELL SHARES..................... II-6
SHAREHOLDER SERVICES................... II-9
REGULAR INVESTMENT PLANS............... II-11
SPECIAL SITUATIONS..................... II-12
</TABLE>

HOW TO BUY SHARES

All the Strong Funds are 100% no-load, meaning you may purchase, redeem, or
exchange shares directly at net asset value without paying a sales charge.
Because the Short-Term Bond, Government Securities, Corporate Bond, and
High-Yield Funds' net asset values change daily, your purchase price will be the
next net asset value determined after Strong receives and accepts your purchase
order. Your money will begin earning dividends the day after your purchase order
is accepted in proper form.
Whether you are opening a new account or adding to an existing one, Strong
provides you with several methods to buy Fund shares.

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PROSPECTUS PAGE II-1
<PAGE> 36

<TABLE>
<S> <C>
TO OPEN A NEW ACCOUNT
- ------------------------------------------------------------------------------
MAIL BY CHECK
- Complete and sign the application. Make your check
or money order payable to "Strong Funds."
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express
delivery service, send to Strong Funds, 100
Heritage Reserve, Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- Call 1-800-368-3863 for instructions on
establishing an account with an exchange by mail.
- ------------------------------------------------------------------------------
TELEPHONE BY EXCHANGE
- Call 1-800-368-3863 to establish a new account by
1-800-368-3863 exchanging funds from an existing Strong Funds
24 HOURS A DAY, account.
7 DAYS A WEEK - Sign up for telephone exchange services when you
open your account. To add the telephone exchange
option to your account, call 1-800-368-3863 for a
Telephone Exchange Form.
- Please note that your accounts must be identically
registered and that you must exchange enough into
the new account to meet the minimum initial
investment.
- ------------------------------------------------------------------------------
IN PERSON - Stop by our Investor Center in Menomonee Falls,
Wisconsin.
Call 1-800-368-3863 for hours and directions.
- The Investor Center can only accept checks or money
orders.
- ------------------------------------------------------------------------------
WIRE Call 1-800-368-3863 for instructions on opening an
account by wire.
- ------------------------------------------------------------------------------
AUTOMATICALLY USE STRONG'S "NO-MINIMUM INVESTMENT PROGRAM."
- If you sign up for Strong's Automatic Investment
Plan when you open your account, Strong Funds will
waive the Fund's minimum initial investment (see
chart on page II-4).
- Complete the Automatic Investment Plan Section on
the new account application.
- Mail to the address indicated on the application.
- ------------------------------------------------------------------------------
BROKER-DEALER - You may purchase shares in a Fund through a
broker-dealer or other institution that may charge
a transaction fee.
- Strong Funds may only accept requests to purchase
shares into a broker-dealer street name account
from the broker-dealer.
</TABLE>

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PROSPECTUS PAGE II-2
<PAGE> 37

- --------------------------------------------------------------------------------
TO ADD TO AN EXISTING ACCOUNT
- --------------------------------------------------------------------------------
BY CHECK
- - Complete an Additional Investment Form provided at the bottom of your account
statement, or write a note indicating your fund account number and
registration. Make your check or money order payable to "Strong Funds."
- - Mail to Strong Funds, P.O. Box 2936, Milwaukee, Wisconsin 53201. If you're
using an express delivery service, send to Strong Funds, 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
BY EXCHANGE
- - Call 1-800-368-3863 for instructions on exchanging by mail.
- --------------------------------------------------------------------------------

BY EXCHANGE
- - Add to an account by exchanging funds from another Strong Funds account.
- - Sign up for telephone exchange services when you open your account. To add the
telephone exchange option to your account, call 1-800-368-3863 for a Telephone
Exchange Form.
- - Please note that the accounts must be identically registered and that the
minimum exchange is $50 or the balance of your account, whichever is less.
BY TELEPHONE PURCHASE
- - Sign up for telephone purchase when you open your account to make additional
investments from $50 to $25,000 into your Strong Funds account by telephone.
To add this option to your account, call 1-800-368-3863 for a Telephone
Purchase Form.
Or use Strong Direct(SM), Strong Funds' automated telephone response system.
Call 1-800-368-3863 for details.
- --------------------------------------------------------------------------------

- - Stop by our Investor Center in Menomonee Falls, Wisconsin. Call 1-800-368-3863
for hours and directions.
- - The Investor Center can only accept checks or money orders.
- --------------------------------------------------------------------------------

Call 1-800-368-3863 for instructions on adding to an account by wire.
- --------------------------------------------------------------------------------

USE ONE OF STRONG'S AUTOMATIC INVESTMENT PROGRAMS. Sign up for these services
when you open your account, or call 1-800-368-3863 for instructions on how to
add them to your existing account.
- - AUTOMATIC INVESTMENT PLAN. Make regular, systematic investments (minimum $50)
into your Strong Funds account from your bank checking or NOW account.
Complete the Automatic Investment Plan section on the account application.
- - AUTOMATIC EXCHANGE PLAN. Make regular, systematic exchanges (minimum $50) from
one Strong Funds account to another. Call 1-800-368-3863 for an application.
- - PAYROLL DIRECT DEPOSIT. Have a specified amount (minimum $50) regularly
deducted from your paycheck, social security check, military allotment, or
annuity payment invested directly into your Strong Funds account. Call
1-800-368-3863 for an application.
- - AUTOMATIC DIVIDEND REINVESTMENT. Unless you choose otherwise, all your
dividends and capital gain distributions will be automatically reinvested in
additional Fund shares. Or, you may elect to have your dividends and capital
gain distributions automatically invested in shares of another Strong Fund.
- --------------------------------------------------------------------------------

- - You may purchase additional shares in a Fund through a broker-dealer or other
institution that may charge a transaction fee.
- - Strong Funds may only accept requests to purchase additional shares into a
broker-dealer street name account from the broker-dealer.

----------------------

PROSPECTUS PAGE II-3
<PAGE> 38

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES

- - Please make all checks or money orders payable to "Strong Funds."
- - We cannot accept third-party checks or checks drawn on banks outside the U.S.
- - You will be charged a $20 service fee for each check, wire, or Electronic
Funds Transfer ("EFT") purchase that is returned unpaid, and you will be
responsible for any resulting losses suffered by a Fund.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.
- - A Fund may decline to accept your purchase order upon receipt when, in the
judgment of the Advisor, it would not be in the best interests of the existing
shareholders.
- - The exchange privileges are available in all 50 states because all the Strong
Funds intend to continue to qualify their shares for sale in all 50 states.
- - Minimum Investment Requirements:
----------------------------------------------------------------------------

To open a regular account
Money Market Fund...............................................$1,000
Short-Term Bond, Government Securities,
Corporate Bond, and High-Yield Funds..........................$2,500

To open an IRA or Defined Contribution account......................$1,000

To open an UGMA/UTMA account..........................................$250

To open a 401(k) or 403(b) retirement account...................No Minimum

To add to an existing account..........................................$50

The Funds offer a No-Minimum Investment Program that waives the minimum
initial investment requirements for investors who participate in the Strong
Automatic Investment Plan (described on page II-11). Unless you participate in
the Strong No-Minimum Investment Program, please ensure that your purchases meet
the minimum investment requirements.
Under certain circumstances (for example, if you discontinue a No-Minimum
Investment Program before you reach a Fund's minimum initial investment), each
Fund reserves the right to close your account. Before taking such action, a Fund
will provide you with written notice and at least 60 days in which to reinstate
an investment program or otherwise reach the minimum initial investment
required.

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PROSPECTUS PAGE II-4
<PAGE> 39

WHAT YOU SHOULD KNOW ABOUT BUYING SHARES
THROUGH A BROKER-DEALER

- - If you purchase shares through a program of services offered or administered
by a broker-dealer, financial institution, or other service provider, you
should read the program's materials, including information relating to fees,
in connection with a Fund's Prospectus. Certain features of a Fund may not be
available or may be modified in connection with the program of services
provided.
- - Certain broker-dealers, financial institutions, or other service providers
that have entered into an agreement with the Distributor may enter purchase
orders on behalf of their customers by phone, with payment to follow within
several days as specified in the agreement. The Funds may effect such purchase
orders at the net asset value next determined after receipt of the telephone
purchase order. It is the responsibility of the broker-dealer, financial
institution, or other service provider to place the order with the Funds on a
timely basis. If payment is not received within the time specified in the
agreement, the broker-dealer, financial institution, or other service provider
could be held liable for any resulting fees or losses.

DETERMINING YOUR SHARE PRICE

Generally, when you make any purchases, sales, or exchanges, the price of
your shares will be the net asset value ("NAV") next determined after Strong
Funds receives your request in proper form. If Strong Funds receives such
request prior to the close of the New York Stock Exchange (the "Exchange") on a
day on which the Exchange is open, your share price will be the NAV determined
that day. The NAV for each Fund is normally determined as of 3:00 p.m. Central
Time ("CT") each day the Exchange is open. The Funds reserve the right to change
the time at which purchases, redemptions, and exchanges are priced if the
Exchange closes at a time other than 3:00 p.m. CT or if an emergency exists.
Each Fund's NAV is calculated by taking the fair value of a Fund's total assets,
subtracting all its liabilities, and dividing by the total number of shares
outstanding. Expenses are accrued and applied daily when determining the NAV.
With respect to the Short-Term Bond, Government Securities, Corporate Bond,
and High-Yield Funds, debt securities are valued by a pricing service that
utilizes electronic data processing techniques to determine values for normal
institutional size trading units of debt securities without regard to the
existence of sale or bid prices when such techniques are believed to more
accurately reflect the fair market value of such securities. Otherwise, sale or
bid prices are used. Any securities or other assets for which market quotations
are not readily available are valued at fair value as determined in good faith
by the Board of Directors. Debt securities having remaining maturities of 60
days or less when purchased are valued by the amortized cost method when the

----------------------

PROSPECTUS PAGE II-5
<PAGE> 40

Board of Directors determines that the fair value of such securities is their
amortized cost.
The securities in the portfolios of the Money Market Fund are valued on an
amortized-cost basis. Under this method of valuation, a security is initially
valued at its acquisition cost, and thereafter, amortization of any discount or
premium is assumed each day, regardless of the impact of fluctuating interest
rates on the market value of the instrument. Under most conditions, management
believes it will be possible to maintain the NAV of the Fund at $1.00 per share.
Calculations are periodically made to compare the value of the Fund's portfolio
valued at amortized cost with market values. If a deviation of 1/2 of 1% or more
were to occur between the net asset value calculated by reference to market
values and the Fund's $1.00 per share NAV, or if there were any other deviation
that the Board of Directors believed would result in a material dilution to
shareholders or purchasers, the Board of Directors would promptly consider what
action, if any, should be initiated.

HOW TO SELL SHARES

You can access the money in your account at any time by selling (redeeming)
some or all of your shares back to the Fund. Once your redemption request is
received in proper form, Strong will normally mail you the proceeds the next
business day and, in any event, no later than seven days thereafter.
To redeem shares, you may use any of the methods described in the following
chart. However, if you are selling shares in a retirement account, please call
1-800-368-3863 for instructions. Please note that there is a $10.00 fee for
closing an IRA or other retirement account or for transferring assets to another
custodian. For your protection, certain requests may require a signature
guarantee.

----------------------

PROSPECTUS PAGE II-6
<PAGE> 41

-----------------------------------------------------------------------------

<TABLE>
<S> <C>
TO SELL SHARES
- ------------------------------------------------------------------------------
MAIL FOR INDIVIDUAL, JOINT TENANT, AND UGMA/UTMA ACCOUNTS
- Write a "letter of instruction" that includes the
following information: your account number, the
dollar amount or number of shares you wish to
redeem, each owner's name, your street address, and
the signature of each owner as it appears on the
account.
- Mail to Strong Funds, P.O. Box 2936, Milwaukee,
Wisconsin 53201. If you're using an express
delivery service, send to 100 Heritage Reserve,
Menomonee Falls, Wisconsin 53051.
FOR TRUST ACCOUNTS
- Same as above. Please ensure that all trustees sign
the letter of instruction.
FOR OTHER REGISTRATIONS
- Call 1-800-368-3863 for instructions.
- ------------------------------------------------------------------------------
TELEPHONE Sign up for telephone redemption services when you
open your account by checking the "Yes" box in the
1-800-368-3863 appropriate section of the account application. To
24 HOURS A DAY, add the telephone redemption option to your account,
7 DAYS A WEEK call 1-800-368-3863 for a Telephone Redemption Form.
Once the telephone redemption option is in place, you
may sell shares ($500 minimum) by phone and arrange
to receive the proceeds in one of three ways:
TO RECEIVE A CHECK BY MAIL
- At no charge, we will mail a check to the address
to which your account is registered.
TO DEPOSIT BY EFT
- At no charge, we will transmit the proceeds by
Electronic Funds Transfer (EFT) to a pre-authorized
bank account. Usually, the funds will arrive at
your bank two banking days after we process your
redemption.
TO DEPOSIT BY WIRE
- For a $10 fee, we will transmit the proceeds by
wire to a pre-authorized bank account. Usually, the
funds will arrive at your bank the next banking day
after we process your redemption.
You may also use Strong Direct SM, Strong Funds'
automated telephone response system. Call
1-800-368-3863 for details.
- ------------------------------------------------------------------------------
CHECK WRITING Sign up for the free check-writing privilege when you
open your account. To add check writing to an existing
account or to order additional checks, call
1-800-368-3863.
- Please keep in mind that all check redemptions must
be for a minimum of $500 and that you cannot write a
check to close an account.
- ------------------------------------------------------------------------------
AUTOMATICALLY You can set up automatic withdrawals from your
account at regular intervals. To establish the
Systematic Withdrawal Plan, request a form by calling
1-800-368-3863.
- ------------------------------------------------------------------------------
BROKER-DEALER You may also redeem shares through broker-dealers or
others who may charge a commission or other
transaction fee.
</TABLE>

----------------------

PROSPECTUS PAGE II-7
<PAGE> 42

WHAT YOU SHOULD KNOW ABOUT SELLING SHARES

- - If you have recently purchased shares, please be aware that your redemption
request may not be honored until the purchase check has cleared your bank,
which generally occurs within ten calendar days.
- - The right of redemption may be suspended during any period in which (i)
trading on the Exchange is restricted, as determined by the SEC, or the
Exchange is closed for other than weekends and holidays; (ii) the SEC has
permitted such suspension by order; or (iii) an emergency as determined by the
SEC exists, making disposal of portfolio securities or valuation of net assets
of a Fund not reasonably practicable.
- - If you are selling shares you hold in certificate form, you must submit the
certificates with your redemption request. Each registered owner must endorse
the certificates and all signatures must be guaranteed.
- - Further documentation may be requested from corporations, executors,
administrators, trustees, guardians, agents, or attorneys-in-fact.

REDEMPTIONS IN KIND

The Funds have elected to be governed by Rule 18f-1 under the 1940 Act, which
obligates each Fund to redeem shares in cash, with respect to any one
shareholder during any 90-day period, up to the lesser of $250,000 or 1% of the
assets of the Fund. If the Advisor determines that existing conditions make cash
payments undesirable, redemption payments may be made in whole or in part in
securities or other financial assets, valued for this purpose as they are valued
in computing the NAV for the Fund's shares (a "redemption-in-kind").
Shareholders receiving securities or other financial assets in a redemption-in-
kind may realize a gain or loss for tax purposes, and will incur any costs of
sale, as well as the associated inconveniences. If you expect to make a
redemption in excess of the lesser of $250,000 or 1% of the Fund's assets during
any 90-day period and would like to avoid any possibility of being paid with
securities in-kind, you may do so by providing Strong Funds with an
unconditional instruction to redeem at least 15 calendar days prior to the date
on which the redemption transaction is to occur, specifying the dollar amount or
number of shares to be redeemed and the date of the transaction (please call
1-800-368-3863). This will provide the Fund with sufficient time to raise the
cash in an orderly manner to pay the redemption and thereby minimize the effect
of the redemption on the interests of the Fund's remaining shareholders.
Redemption checks in excess of the lesser of $250,000 or 1% of a Fund's assets
during any 90-day period may not be honored by the Fund if the Advisor
determines that existing conditions make cash payments undesirable.

WHAT YOU SHOULD KNOW ABOUT TELEPHONE REDEMPTIONS

- - The Funds reserve the right to refuse a telephone redemption if they believe
it advisable to do so.
- - Once you place your telephone redemption request, it cannot be canceled or
modified.

----------------------

PROSPECTUS PAGE II-8
<PAGE> 43

- - Investors will bear the risk of loss from fraudulent or unauthorized
instructions received over the telephone provided that the Fund reasonably
believes that such instructions are genuine. The Funds and their transfer
agent employ reasonable procedures to confirm that instructions communicated
by telephone are genuine. The Funds may incur liability if they do not follow
these procedures.
- - Because of increased telephone volume, you may experience difficulty in
implementing a telephone redemption during periods of dramatic economic or
market changes.

SHAREHOLDER SERVICES

INFORMATION SERVICES

24-HOUR ASSISTANCE. Strong Funds has registered representatives available to
help you 24 hours a day, 7 days a week. Call 1-414-359-1400 or toll-free
1-800-368-3863. You may also write to Strong Funds at the address on the cover
of this Prospectus.

STRONG DIRECT(SM) AUTOMATED TELEPHONE SYSTEM. Also available 24 hours a day,
the Strong Direct(SM) automated response system enables you to use a touch-tone
phone to hear fund quotes and returns on any Strong Fund. You may also confirm
account balances, hear records of recent transactions and dividend activity, and
perform purchases, exchanges or redemptions among your existing Strong accounts.
Your account information is protected by a personal code that you establish. For
more information on this service, call 1-800-368-3863.

STATEMENTS AND REPORTS. At a minimum, each Fund will confirm all transactions
for your account on a quarterly basis. We recommend that you file each quarterly
statement - and, especially, each calendar year-end statement - with your other
important financial papers, since you may need to refer to them at a later date
for tax purposes. Should you need additional copies of previous statements, you
may order confirmation statements for the current and preceding year at no
charge. Statements for earlier years are available for $10 each. Call
1-800-368-3863 to order past statements.
Each year, you will also receive a statement confirming the tax status of any
distributions paid to you, as well as a semiannual report and an annual report
containing audited financial statements.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your house hold. Call
1-800-368-3863 if you wish to receive additional copies, free of charge.
More complete information regarding each Fund's investment policies and
services is contained in its SAI, which you may request by calling or writing

----------------------

PROSPECTUS PAGE II-9
<PAGE> 44

Strong Funds at the phone number and address on the cover of this Prospectus.

CHANGING YOUR ACCOUNT INFORMATION. So that you continue receiving your Strong
correspondence, including any dividend checks and statements, please notify us
in writing as soon as possible if your address changes. You may use the
Additional Investment Form at the bottom of your confirmation
statement, or simply write us a letter of instruction that contains the
following information:
1. a written request to change the address,
2. the account number(s) for which the address is to be changed,
3. the new address, and
4. the signatures of all owners of the accounts.
Please send your request to the address on the cover of this Prospectus.
Changes to an account's registration - such as adding or removing a joint
owner, changing an owner's name, or changing the type of your account - must
also be submitted in writing. Please call 1-800-368-3863 for instructions. For
your protection, some requests may require a signature guarantee.

TRANSACTION SERVICES

FREE EXCHANGE PRIVILEGE. You may exchange shares between identically
registered Strong Funds accounts, either in writing or by telephone. By
establishing the telephone exchange services, you authorize the Fund and its
agents to act upon your instruction by telephone to exchange shares from any
account you specify. For tax purposes, an exchange is considered a sale and a
purchase. Please obtain and read the appropriate prospectus before investing in
any of the Strong Funds. Since an excessive number of exchanges may be
detrimental to the Funds, each Fund reserves the right to discontinue the
exchange privilege of any shareholder who makes more than five exchanges in a
year or three exchanges in a calendar quarter.

FREE CHECK-WRITING PRIVILEGES. You may also redeem shares by check in amounts
of $500 or more. There is no charge for check-writing privileges. Redemption by
check cannot be honored if share certificates are outstanding and would need to
be liquidated to honor the check. In addition, a check may not be honored if the
check results in you redeeming more than the lesser of $250,000 or 1% of the
Fund's assets during any 90-day period and the Advisor determines that existing
conditions make cash payments undesirable. Checks are supplied free of charge,
and additional checks will be sent to you upon request. The Funds do not return
the checks you write, although copies are available upon request.
You may place stop-payment requests on checks by calling Strong Funds at
1-800-368-3863. A $10 fee will be charged for each stop-payment request. A stop
payment will remain in effect for two weeks following receipt of oral
instructions (six months following written instructions) by Strong Funds.
If there are insufficient cleared shares in your account to cover the amount
of your redemption by check, the check will be returned, marked "insufficient
funds," and a fee of $10 will be charged to the account.

-----------------------

PROSPECTUS PAGE II-10
<PAGE> 45

REGULAR INVESTMENT PLANS

Strong Funds' Automatic Investment Plan, Payroll Direct Deposit Plan, and
Automatic Exchange Plan, all discussed below, are methods of implementing DOLLAR
COST AVERAGING. Dollar cost averaging is an investment strategy that involves
investing a fixed amount of money at regular time intervals. By always investing
the same set amount, you will be purchasing more shares when the price is low
and fewer shares when the price is high. Ultimately, by using this principle in
conjunction with fluctuations in share price, your average cost per share may be
less than your average transaction price. A program of regular investment cannot
ensure a profit or protect against a loss during declining markets. Since such a
program involves continuous investment regardless of fluctuating share values,
you should consider your ability to continue the program through periods of both
low and high share-price levels.

AUTOMATIC INVESTMENT PLAN. The Automatic Investment Plan allows you to make
regular, systematic investments in a Fund from your bank checking or NOW
account. You may choose to make investments on any day of the month in amounts
of $50 or more. You can set up the Automatic Investment Plan with any financial
institution that is a member of the Automated Clearing House. Because each Fund
has the right to close an investor's account for failure to reach the minimum
initial investment, please consider your ability to continue this Plan until you
reach the minimum initial investment. Such closing may occur in periods of
declining share prices. To establish the Plan, complete the Automatic Investment
Plan section on the account application, or call 1-800-368-3863 for an
application.

PAYROLL DIRECT DEPOSIT PLAN. Once you meet a Fund's minimum initial
investment requirement, you may purchase additional Fund shares through the
Payroll Direct Deposit Plan. Through this Plan, periodic investments (minimum
$50) are made automatically from your payroll check into your existing Fund
account. By enrolling in the Plan, you authorize your employer or its agents to
deposit a specified amount from your payroll check into the Fund's bank account.
In most cases, your Fund account will be credited the day after the amount is
received by the Fund's bank. In order to participate in the Plan, your employer
must have direct deposit capabilities through Automated Clearing House available
to its employees. The Plan may be used for other direct deposits, such as social
security checks, military allotments, and annuity payments.
To establish a Direct Deposit for your account, call 1-800-368-3863 to obtain
an Authorization for Payroll Direct Deposit to a Strong Funds Account form. Once
the Plan is established, you may alter the amount of the deposit, alter the
frequency of the deposit, or terminate your participation in the program by
notifying your employer.

-----------------------

PROSPECTUS PAGE II-11
<PAGE> 46

AUTOMATIC EXCHANGE PLAN. The Automatic Exchange Plan allows you to make
regular, systematic exchanges (minimum $50) from one Strong Funds account into
another Strong Funds account. By setting up the Plan, you authorize the Fund and
its agents to redeem a set dollar amount or number of shares from the first
account and purchase shares of a second Strong Fund. In addition, you authorize
a Fund and its agents to accept telephone instructions to change the dollar
amount and frequency of the exchange. An exchange transaction is a sale and
purchase of shares for federal income tax purposes and may result in a capital
gain or loss. To establish the Plan, request a form by calling 1-800-368-3863.
To participate in the Automatic Exchange Plan, you must have an initial
account balance of $2,500 in the first account and at least the minimum initial
investment in the second account. Exchanges may be made on any day or days of
your choice. If the amount remaining in the first account is less than the
exchange amount you requested, then the remaining amount will be exchanged. At
such time as the first account has a zero balance, your participation in the
Plan will be terminated. You may also terminate the Plan at any time by calling
or writing to the Fund. Once participation in the Plan has been terminated for
any reason, to reinstate the Plan you must do so in writing; simply investing
additional funds will not reinstate the Plan.

SYSTEMATIC WITHDRAWAL PLAN. You can set up automatic withdrawals from your
account at regular intervals. To begin distributions, you must have an initial
balance of $5,000 in your account and withdraw at least $50 per payment. To
establish the Systematic Withdrawal Plan, request a form by calling
1-800-368-3863. Depending upon the size of the account and the withdrawals
requested (and fluctuations in net asset value of the shares redeemed),
redemptions for the purpose of satisfying such withdrawals may reduce or even
exhaust the account. If the amount remaining in the account is not sufficient to
meet a Plan payment, the remaining amount will be redeemed and the Plan will be
terminated.

SPECIAL SITUATIONS

POWER OF ATTORNEY. If you are investing as attorney-in-fact for another
person, please complete the account application in the name of such person and
sign the back of the application in the following form: "[applicant's name] by
[your name], attorney-in-fact." To avoid having to file an affidavit prior to
each transaction, please complete the Power of Attorney form available from
Strong Funds at 1-800-368-3863. However, if you would like to use your own power
of attorney form, please call the same number for instructions.

CORPORATIONS AND TRUSTS. If you are investing for a corporation, please
include with your account application a certified copy of your corporate
resolution indicating which officers are authorized to act on behalf of the
corporation.

-----------------------

PROSPECTUS PAGE II-12
<PAGE> 47

As an alternative, you may complete a Certification of Authorized Individuals
form, which can be obtained from the Funds. Until a valid corporate resolution
or Certification of Authorized Individuals is received by the Fund, services
such as telephone redemption, wire redemption, and check writing will not be
established.
If you are investing as a trustee, please include the date of the trust. All
trustees must sign the application. If they do not, services such as telephone
redemption, wire redemption, and check writing will not be established. All
trustees must sign redemption requests unless proper documentation to the
contrary is provided to the Fund. Failure to provide these documents or
signatures as required when you invest may result in delays in processing
redemption requests.

SIGNATURE GUARANTEES. A signature guarantee is designed to protect you and
the Funds against fraudulent transactions by unauthorized persons. In the
following instances, the Funds will require a signature guarantee for all
authorized owners of an account:

- - when you add the telephone redemption or check-writing options to your
existing account;
- - if you transfer the ownership of your account to another individual or
organization;
- - when you submit a written redemption request for more than $25,000;
- - when you request to redeem or redeposit shares that have been issued in
certificate form;
- - if you open an account and later decide that you want certificates;
- - when you request that redemption proceeds be sent to a different name or
address than is registered on your account;
- - if you add/change your name or add/remove an owner on your account; and
- - if you add/change the beneficiary on your transfer-on-death account.

A signature guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions include banks, savings
associations, credit unions, brokerage firms, and others. PLEASE NOTE THAT A
NOTARY PUBLIC STAMP OR SEAL IS NOT ACCEPTABLE.

-----------------------

PROSPECTUS PAGE II-13
<PAGE> 48

APPENDIX A

RATINGS OF DEBT OBLIGATIONS:

<TABLE>
<CAPTION>
Moody's Standard & Fitch
Investors Poor's Ratings Investors
Service, Inc. Group Service, Inc. Definition
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LONG-TERM Aaa AAA AAA Highest quality
Aa AA AA High quality
A A A Upper medium grade
Baa BBB BBB Medium grade
Ba BB BB Low grade
B B B Speculative
Caa, Ca, C CCC, CC, C CCC, CC, C Submarginal
D D DDD, DD, D Probably in default
- ----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Moody's S&P Fitch
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHORT-TERM MIG1/VMIG1 Best quality SP-1+ Very strong quality F-1+ Exceptionally strong
quality
------------------------------------------------------------------------------------------
MIG2/VMIG2 High quality SP-1 Strong quality F-1 Very strong quality
------------------------------------------------------------------------------------------
MIG3/VMIG3 Favorable SP-2 Satisfactory grade F-2 Good credit quality
quality
------------------------------------------------------------------------------------------
MIG4/VMIG4 Adequate F-3 Fair credit quality
quality
------------------------------------------------------------------------------------------
SG Speculative SP-3 Speculative grade F-S Weak credit quality
grade
- ----------------------------------------------------------------------------------------------------------
COMMERCIAL P-1 Superior A-1+ Extremely strong F-1+ Exceptionally strong
PAPER quality quality quality
------------------------------------------------------------------------------------------
A-1 Strong quality F-1 Very strong quality
------------------------------------------------------------------------------------------
P-2 Strong A-2 Satisfactory quality F-2 Good credit quality
quality
------------------------------------------------------------------------------------------
P-3 Acceptable A-3 Adequate quality F-3 Fair credit quality
quality
------------------------------------------------------------------------------------------
B Speculative quality F-S Weak credit quality
------------------------------------------------------------------------------------------
Not Prime C Doubtful quality D Default
- --------------
</TABLE>

----------------------

PROSPECTUS PAGE A-1
<PAGE> 49
APPENDIX B

WEIGHTED AVERAGE RATINGS OF DEBT OBLIGATIONS(1)

<TABLE>
<CAPTION>
Average Percentage of Assets Held During 1994(2)
- -------------------------------------------------------------------
Short-Term Bond Corporate Bond
--------------------- ---------------------
Equivalent Equivalent
S&P Moody's Rated Unrated(3) Rated Unrated(3)
<S> <C> <C> <C> <C> <C>
AAA Aaa(4) 34.8% - 12.2% -
AA Aa 5.9 - 5.1 -
A A 11.1 - 4.2 -
BBB Baa 37.8 1.4% 54.4 -
BB Ba 3.0 0.9 17.6 0.4%
B B 0.8 0.2 2.4 1.0
CCC Caa - - - -
CC Ca - - - -
C C - - - -
Totals 93.4% 2.5% 95.9% 1.4%
</TABLE>

<TABLE>
<CAPTION>
Percentage of Assets Held on December 31, 1994
- -------------------------------------------------------------------
Short-Term Bond Corporate Bond
--------------------- ---------------------
Equivalent Equivalent
S&P Moody's Rated Unrated(3) Rated Unrated(3)
<S> <C> <C> <C> <C> <C>
AAA Aaa(4) 35.1% - 12.1% -
AA Aa 4.1 - 2.4 -
A A 12.5 - 6.1 -
BBB Baa 34.7 3.9% 51.2 -
BB Ba 4.3 0.6 16.3 2.3%
B B - 0.6 4.6 0.8
CCC Caa - - - -
CC Ca - - - -
C C - - - -
Totals 90.7% 5.1% 92.7% 3.1%
</TABLE>

WEIGHTED AVERAGE RATINGS OF CORPORATE COMMERCIAL PAPER1

<TABLE>
<CAPTION>
Average Percentage of Assets Held During 1994(2)
- -------------------------------------------------------
Rated(3)
- ----------------
S&P Moody's Short-Term Bond Corporate Bond
<S> <C> <C> <C>
A1 P1(5) 1.8% 2.2%
A2 P2(5) 1.3 0.3
A3 P3 - -
Totals 3.2% 2.5%
</TABLE>

<TABLE>
<CAPTION>
Percentage of Assets Held on December 31, 1994
- -------------------------------------------------------
Rated(3)
- ----------------
S&P Moody's Short-Term Bond Corporate Bond
<S> <C> <C> <C>
A1 P1(5) 0.5% 0.5%
A2 P2(5) 0.1 1.9
A3 P3 - -
Totals 0.6% 2.4%
</TABLE>

(1) A security rated differently by two or more rating services is included in
the category representing the higher of the ratings assigned to the
security.
(2) Based on a weighted average of the securities held at the end of each month.
Investment-grade debt obligations are those rated in one of the four highest
categories by an NRSRO, and investment-grade commercial paper is commercial
paper rated in one of the top three categories by such organizations. See
"Fundamentals of Fixed Income Investing" in this Prospectus for a
discussion of the risks associated with non-investment-grade debt
obligations and Appendix A and the SAI for a description of credit ratings.
The Appendix does not contain information on the Money Market and
Government Securities Funds because these Funds may not invest in
non-investment-grade debt obligations.
(3) This category represents the comparable quality of unrated securities, as
determined by the Advisor.
(4) Includes all U.S. government obligations.
(5) Includes commercial paper rated in an equivalent category by either S&P or
Fitch.

----------------------

PROSPECTUS PAGE B-1
<PAGE> 50

NOTES
<PAGE> 51

NOTES
<PAGE> 52

NOTES
<PAGE> 53
STATEMENT OF ADDITIONAL INFORMATION

STRONG MONEY MARKET FUND
STRONG SHORT-TERM BOND FUND
STRONG GOVERNMENT SECURITIES FUND
STRONG CORPORATE BOND FUND
STRONG HIGH-YIELD BOND FUND

P.O. Box 2936
Milwaukee, Wisconsin 53201
Telephone: (414) 359-1400
Toll-Free: (800) 368-3863

This Statement of Additional Information is not a Prospectus and
should be read in conjunction with the Prospectus of Strong Money Market Fund,
Inc. (the "Money Fund"); Strong Short-Term Bond Fund, Inc. (the "Short-Term
Bond Fund"); Strong Government Securities Fund, Inc. (the "Government Fund");
Strong Corporate Bond Fund, Inc. (the "Corporate Bond Fund"); and Strong
High-Yield Bond Fund (the "High-Yield Fund"), which is a series of Strong
Income Funds, Inc. (hereinafter collectively referred to as the "Funds"), dated
December 28, 1995. Requests for copies of the Prospectus should be made by
calling one of the numbers listed above. The financial statements appearing in
the Money, Short-Term Bond, Government, and Corporate Bond Funds' Annual
Report, which accompanies this Statement of Additional Information, are
incorporated herein by reference. The Financial Highlights for the High-Yield
Fund are not provided because it did not commence operations until December 28,
1995.

This Statement of Additional Information is dated December 28, 1995.

<PAGE> 54

STRONG INCOME FUNDS

<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
COMMON INVESTMENT POLICIES AND TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Illiquid Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
When-Issued Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Lending of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Variable- or Floating-Rate Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Mortgage- and Asset-Backed Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
INVESTMENT POLICIES AND TECHNIQUES--MONEY FUND . . . . . . . . . . . . . . . . . . . . . . . . . 9
Rule 2a-7: Maturity, Quality, and Diversification Restrictions . . . . . . . . . . . . . . . . 9
INVESTMENT POLICIES AND TECHNIQUES -
SHORT-TERM BOND, GOVERNMENT, CORPORATE BOND, AND HIGH-YIELD FUNDS . . . . . . . . . . . . . . . . 10
Cash Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Derivative Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
High-Yield (High-Risk) Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Short Sales Against the Box . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Temporary Defensive Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
INVESTMENT POLICIES AND TECHNIQUES -
SHORT-TERM BOND, CORPORATE BOND, AND HIGH-YIELD FUNDS . . . . . . . . . . . . . . . . . . . . . . 19
Depositary Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Loan Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Foreign Investment Companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
DIRECTORS AND OFFICERS OF THE FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PRINCIPAL SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
INVESTMENT ADVISOR AND DISTRIBUTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
PORTFOLIO TRANSACTIONS AND BROKERAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
CUSTODIAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . 30
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ADDITIONAL SHAREHOLDER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
FUND ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SHAREHOLDER MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
PORTFOLIO MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
LEGAL COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1
</TABLE>

No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated December 28, 1995 and, if given or made,
such information or representations may not be relied upon as having been
authorized by the Funds.

This Statement of Additional Information does not constitute an offer to sell
securities.

<PAGE> 55

INVESTMENT RESTRICTIONS

The investment objective of the Money Fund is to seek current
income, a stable share price and daily liquidity. The investment objective
of the Short-Term Bond Fund is to seek total return by investing for a high
level of current income with a low degree of share-price fluctuation. The
investment objective of the Government Fund is to seek total return by
investing for a high level of current income with a moderate degree of
share-price fluctuation. The investment objective of the Corporate Bond Fund
is to seek total return by investing for a high level of current income
with a moderate degree of share-price fluctuation. The investment objective
of the High-Yield Fund is to seek total return by investing for a high level
of current income and capital growth. The Funds' investment objectives and
policies are described in detail in the Prospectus under the caption
"Investment Objectives and Policies." The following are the Funds'
fundamental investment limitations which cannot be changed without shareholder
approval.

Each Fund:

1. May not with respect to 75% of its total assets, purchase the
securities of any issuer (except securities issued or guaranteed by
the U.S. government or its agencies or instrumentalities) if, as a
result, (i) more than 5% of the Fund's total assets would be invested
in the securities of that issuer, or (ii) the Fund would hold more
than 10% of the outstanding voting securities of that issuer.

2. May (i) borrow money from banks and (ii) make other investments
or engage in other transactions permissible under the Investment
Company Act of 1940 (the "1940 Act") which may involve a borrowing,
provided that the combination of (i) and (ii) shall not exceed 33
1/3% of the value of the Fund's total assets (including the amount
borrowed), less the Fund's liabilities (other than borrowings),
except that the Fund may borrow up to an additional 5% of its
total assets (not including the amount borrowed) from a bank for
temporary or emergency purposes (but not for leverage or the purchase
of investments). The Fund may also borrow money from the other
Strong Funds or other persons to the extent permitted by applicable
law.

3. May not issue senior securities, except as permitted under the 1940
Act.

4. May not act as an underwriter of another issuer's securities, except
to the extent that the Fund may be deemed to be an underwriter
within the meaning of the Securities Act of 1933 in connection with
the purchase and sale of portfolio securities.

5. May not purchase or sell physical commodities unless acquired as a
result of ownership of securities or other instruments (but this
shall not prevent the Fund from purchasing or selling options, futures
contracts, or other derivative instruments, or from investing in
securities or other instruments backed by physical commodities).

6. May not make loans if, as a result, more than 33 1/3% of the Fund's
total assets would be lent to other persons, except through (i)
purchases of debt securities or other debt instruments, or (ii)
engaging in repurchase agreements.

7. May not purchase the securities of any issuer if, as a result,
more than 25% of the Fund's total assets would be invested in the
securities of issuers, the principal business activities of which
are in the same industry. With respect to the Money Market Funds
only, this limitation shall not limit the Funds' purchases of
obligations issued by domestic banks.

8. May not purchase or sell real estate unless acquired as a result of
ownership of securities or other instruments (but this shall not
prohibit the Fund from purchasing or selling securities or other
instruments backed by real estate or of issuers engaged in real
estate activities).

9. May, notwithstanding any other fundamental investment policy or
restriction, invest all of its assets in the securities of a single
open-end management investment company with substantially the same
fundamental investment objective, policies, and restrictions as the
Fund.

- 3 -
<PAGE> 56

The following are the Funds' non-fundamental operating policies
which may be changed by the Board of Directors of each Fund without
shareholder approval.

Each Fund may not:

1. Sell securities short, unless the Fund owns or has the right to
obtain securities equivalent in kind and amount to the securities
sold short, or unless it covers such short sale as required by the
current rules and positions of the Securities and Exchange Commission
or its staff, and provided that transactions in options, futures
contracts, options on futures contracts, or other derivative
instruments are not deemed to constitute selling securities short.

2. Purchase securities on margin, except that the Fund may obtain
such short-term credits as are necessary for the clearance of
transactions; and provided that margin deposits in connection with
futures contracts, options on futures contracts, or other derivative
instruments shall not constitute purchasing securities on margin.

3. Invest in illiquid securities if, as a result of such investment,
more than 15% (10% with respect to the Money Fund) of its net assets
would be invested in illiquid securities, or such other amounts as may
be permitted under the 1940 Act.

4. Purchase securities of other investment companies except in compliance
with the 1940 Act and applicable state law.

5. Invest all of its assets in the securities of a single open-end
investment management company with substantially the same fundamental
investment objective, restrictions and policies as the Fund.

6. Purchase the securities of any issuer (other than securities issued
or guaranteed by domestic or foreign governments or political
subdivisions thereof) if, as a result, more than 5% of its total
assets would be invested in the securities of issuers that, including
predecessor or unconditional guarantors, have a record of less than
three years of continuous operation. This policy does not apply to
securities of pooled investment vehicles or mortgage or asset-backed
securities.

7. Invest in direct interests in oil, gas, or other mineral exploration
programs or leases; however, the Fund may invest in the securities of
issuers that engage in these activities.

8. Engage in futures or options on futures transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act
and, in accordance with Rule 4.5, will use futures or options on
futures transactions solely for bona fide hedging transactions
(within the meaning of the Commodity Exchange Act), provided,
however, that the Fund may, in addition to bona fide hedging
transactions, use futures and options on futures transactions if the
aggregate initial margin and premiums required to establish such
positions, less the amount by which any such options positions are in
the money (within the meaning of the Commodity Exchange Act), do not
exceed 5% of the Fund's net assets.

In addition, (i) the aggregate value of securities underlying call
options on securities written by the Fund or obligations underlying
put options on securities written by the Fund determined as of the
date the options are written will not exceed 50% of the Fund's net
assets; (ii) the aggregate premiums paid on all options purchased
by the Fund and which are being held will not exceed 20% of the
Fund's net assets; (iii) the Fund will not purchase put or call
options, other than hedging positions, if, as a result thereof, more
than 5% of its total assets would be so invested; and (iv) the
aggregate margin deposits required on all futures and options on
futures transactions being held will not exceed 5% of the Fund's total
assets.

9. Pledge, mortgage or hypothecate any assets owned by the Fund except
as may be necessary in connection with permissible borrowings or
investments and then such pledging, mortgaging, or hypothecating may
not exceed 33 1/3% of the Fund's total assets at the time of the
borrowing or investment.

10. Purchase or retain the securities of any issuer if any officer or
director of the Fund or its investment advisor beneficially owns
more than 1/2 of 1% of the securities of such issuer and such
officers and directors together own beneficially more than 5% of
the securities of such issuer.

- 4 -
<PAGE> 57

11. Purchase warrants, valued at the lower of cost or market value, in
excess of 5% of the Fund's net assets. Included in that amount, but
not to exceed 2% of the Fund's net assets, may be warrants that are
not listed on any stock exchange. Warrants acquired by the Fund in
units or attached to securities are not subject to these restrictions.

12. Borrow money except (i) from banks or (ii) through reverse
repurchase agreements or mortgage dollar rolls, and will not
purchase securities when bank borrowings exceed 5% of its total
assets.

13. Make any loans other than loans of portfolio securities, except
through (i) purchases of debt securities or other debt instruments,
or (ii) engaging in repurchase agreements.

Money Fund. In addition to the common non-fundamental restrictions
described above, the Money Fund may not engage in any transaction or
practice which is not permissible under Rule 2a-7 of the 1940 Act,
notwithstanding any other fundamental investment limitation or
non-fundamental operating policy.

Corporate Bond Fund. Under normal market conditions, the Corporate Bond Fund
will invest at least 65% of its total assets in bonds. The Fund may invest
up to 5% of its total assets in warrants. In addition, the Advisor has
adopted an internal policy that the Fund will not invest more than 10% of
its total assets in debt obligations rated lower than BB or its equivalent.
For the purposes of this internal policy, convertible securities will not be
considered debt obligations.

Except for the fundamental investment limitations listed above and
each Fund's investment objective, the other investment policies described in
the Prospectus and this Statement of Additional Information are not
fundamental and may be changed with approval of a Fund's Board of Directors.

COMMON INVESTMENT POLICIES AND TECHNIQUES

The following information supplements the discussion of the Funds'
investment objectives, policies and techniques that are described in detail in
the Prospectus under the captions "Investment Objectives and Policies" and
"Implementation of Policies and Risks." Investment policies and techniques
that are unique to the Short-Term Bond, Government, Corporate Bond, or
High-Yield Funds are discussed below.

ILLIQUID SECURITIES

The Funds may invest in illiquid securities (i.e., securities that are
not readily marketable). However, a Fund will not acquire illiquid securities
if, as a result, they would comprise more than 15%, or with respect to the
Money Fund, 10%, of the value of the Fund's net assets (or such other amounts
as may be permitted under the 1940 Act). The Board of Directors of each Fund,
or its delegate, has the ultimate authority to determine, to the extent
permissible under the federal securities laws, which securities are illiquid
for purposes of this limitation. Certain securities exempt from registration
or issued in transactions exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), including securities that may be
resold pursuant to Rule 144A under the Securities Act, may be considered
liquid. The Board of Directors of each Fund has delegated to Strong Capital
Management, Inc. (the "Advisor") the day-to-day determination of the liquidity
of a security, although it has retained oversight and ultimate responsibility
for such determinations. Although no definitive liquidity criteria are used,
the Board of Directors has directed the Advisor to look to such factors as (i)
the nature of the market for a security (including the institutional private
resale market), (ii) the terms of certain securities or other instruments
allowing for the disposition to a third party or the issuer thereof (e.g.,
certain repurchase obligations and demand instruments), (iii) the availability
of market quotations (e.g., for securities quoted in PORTAL system), and (iv)
other permissible relevant factors.

Restricted securities may be sold only in privately negotiated
transactions or in a public offering with respect to which a registration
statement is in effect under the Securities Act. Where registration is
required, a Fund may be obligated to pay all or part of the registration
expenses and a considerable period may elapse between the time of the decision
to sell and the time the Fund may be permitted to sell a security under an
effective registration statement. If, during such a period, adverse market
conditions were to develop, a Fund might obtain a less favorable price than
prevailed when it decided to sell. Restricted securities will be priced at
fair value as determined in good faith by the Board of Directors of each Fund.
If through the appreciation of restricted securities or the depreciation of
unrestricted securities, a Fund should be in a position where more than 15%, or
with

- 5 -
<PAGE> 58

respect to the Money Fund, 10%, of the value of its net assets are invested in
illiquid securities, including restricted securities which are not readily
marketable, the Fund will take such steps as is deemed advisable, if any, to
protect liquidity.

A Fund may sell over-the-counter ("OTC") options and, in connection
therewith, segregate assets or cover its obligations with respect to OTC
options written by the Fund. The assets used as cover for OTC options written
by a Fund will be considered illiquid unless the OTC options are sold to
qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.

Notwithstanding the above, the Advisor intends, as a matter of
internal policy, to limit each Fund's investments in illiquid securities to 10%
of its net assets.

WHEN-ISSUED SECURITIES

The Funds may from time to time purchase securities on a
"when-issued" basis. The price of debt securities purchased on a when-issued
basis, which may be expressed in yield terms, is fixed at the time the
commitment to purchase is made, but delivery and payment for the securities
take place at a later date. Normally, the settlement date occurs within one
month of the purchase. During the period between the purchase and
settlement, no payment is made by the Fund to the issuer and no interest
on debt securities accrues to the Fund. Forward commitments involve a
risk of loss if the value of the security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of decline in
value of the Fund's other assets. While when-issued securities may be sold
prior to the settlement date, the Funds intend to purchase such securities
with the purpose of actually acquiring them unless a sale appears
desirable for investment reasons. At the time a Fund makes the commitment to
purchase a security on a when-issued basis, it will record the transaction and
reflect the value of the security in determining its net asset value. The
Funds do not believe that their respective net asset values or income will be
adversely affected by purchases of securities on a when-issued basis.

The Funds will maintain cash and marketable securities equal in
value to commitments for when-issued securities. Such segregated securities
either will mature or, if necessary, be sold on or before the settlement
date. When the time comes to pay for when-issued securities, the Funds
will meet their respective obligations from then-available cash flow, sale
of the securities held in the separate account, sale of other securities
or, although it would not normally expect to do so, from the sale of the
when-issued securities themselves (which may have a market value greater or
less than the respective Fund's payment obligation).

LENDING OF PORTFOLIO SECURITIES

Each Fund is authorized to lend up to 33 1/3% of the total value of
its portfolio securities to broker-dealers or institutional investors that the
Advisor deems qualified, but only when the borrower maintains with the Fund's
custodian bank collateral either in cash or money market instruments in an
amount at least equal to the market value of the securities loaned, plus
accrued interest and dividends, determined on a daily basis and adjusted
accordingly. However, the Funds do not presently intend to engage in such
lending. In determining whether to lend securities to a particular
broker-dealer or institutional investor, the Advisor will consider, and during
the period of the loan will monitor, all relevant facts and circumstances,
including the creditworthiness of the borrower. The Funds will retain
authority to terminate any loans at any time. The Funds may pay reasonable
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash or money market
instruments held as collateral to the borrower or placing broker. The Funds
will receive reasonable interest on the loan or a flat fee from the borrower
and amounts equivalent to any dividends, interest or other distributions on the
securities loaned. The Funds will retain record ownership of loaned securities
to exercise beneficial rights, such as voting and subscription rights and
rights to dividends, interest or other distributions, when retaining such
rights is considered to be in a Fund's interest.

VARIABLE- OR FLOATING-RATE SECURITIES

The Funds may invest in securities which offer a variable- or
floating-rate of interest. Variable-rate securities provide for automatic
establishment of a new interest rate at fixed intervals (e.g., daily, monthly,
semi-annually, etc.). Floating-rate securities provide for automatic
adjustment of the interest rate whenever some specified interest rate index
changes. The interest rate on

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<PAGE> 59

variable- or floating-rate securities is ordinarily determined by reference to
or is a percentage of a bank's prime rate, the 90-day U.S. Treasury bill rate,
the rate of return on commercial paper or bank certificates of deposit, an
index of short-term interest rates, or some other objective measure.

Variable- or floating-rate securities frequently include a demand
feature entitling the holder to sell the securities to the issuer at par. In
many cases, the demand feature can be exercised at any time on 7 days notice;
in other cases, the demand feature is exercisable at any time on 30 days notice
or on similar notice at intervals of not more than one year. Some securities
which do not have variable or floating interest rates may be accompanied by
puts producing similar results and price characteristics. When considering the
maturity of any instrument which may be sold or put to the issuer or a third
party, each Fund may consider that instrument's maturity to be shorter than its
stated maturity. Any such determination by the Money Fund will be made in
accordance with Rule 2a-7.

Variable-rate demand notes include master demand notes which are
obligations that permit a Fund to invest fluctuating amounts, which may change
daily without penalty, pursuant to direct arrangements between a Fund, as
lender, and the borrower. The interest rates on these notes fluctuate from
time to time. The issuer of such obligations normally has a corresponding
right, after a given period, to prepay in its discretion the outstanding
principal amount of the obligations plus accrued interest upon a specified
number of days' notice to the holders of such obligations. The interest rate
on a floating-rate demand obligation is based on a known lending rate, such as
a bank's prime rate, and is adjusted automatically each time such rate is
adjusted. The interest rate on a variable-rate demand obligation is adjusted
automatically at specified intervals. Frequently, such obligations are secured
by letters of credit or other credit support arrangements provided by banks.
Because these obligations are direct lending arrangements between the lender
and borrower, it is not contemplated that such instruments will generally be
traded. There generally is not an established secondary market for these
obligations, although they are redeemable at face value. Accordingly, where
these obligations are not secured by letters of credit or other credit support
arrangements, a Fund's right to redeem is dependent on the ability of the
borrower to pay principal and interest on demand. Such obligations frequently
are not rated by credit rating agencies and, if not so rated, the Funds may
invest in them only if the Funds' Advisor determines that at the time of
investment the obligations are of comparable quality to the other obligations
in which the Funds may invest. The Advisor, on behalf of the Funds, will
consider on an ongoing basis the creditworthiness of the issuers of the
floating- and variable-rate demand obligations in the Funds' portfolio.

Each Fund will not invest more than 15%, or with respect to the Money
Fund, 10%, of its net assets in variable- and floating-rate demand obligations
that are not readily marketable (a variable- or floating-rate demand obligation
that may be disposed of on not more than seven days notice will be deemed
readily marketable and will not be subject to this limitation). (See "Illiquid
Securities" and "Investment Restrictions.") In addition, each variable- or
floating-rate obligation must meet the credit quality requirements applicable
to all the Fund's investments at the time of purchase. When determining
whether such an obligation meets a Fund's credit quality requirements, the Fund
may look to the credit quality of the financial guarantor providing a letter of
credit or other credit support arrangement.

In determining a Fund's weighted average portfolio maturity, a Fund
will consider a floating or variable rate security to have a maturity equal to
its stated maturity (or redemption date if it has been called for redemption),
except that it may consider (i) variable rate securities to have a maturity
equal to the period remaining until the next readjustment in the interest rate,
unless subject to a demand feature, (ii) variable rate securities subject to a
demand feature to have a remaining maturity equal to the longer of (a) the next
readjustment in the interest rate or (b) the period remaining until the
principal can be recovered through demand, and (iii) floating rate securities
subject to a demand feature to have a maturity equal to the period remaining
until the principal can be recovered through demand. Variable and floating
rate securities generally are subject to less principal fluctuation than
securities without these attributes since the securities usually trade at par
following the readjustment in the interest rate.

MORTGAGE- AND ASSET-BACKED SECURITIES

Mortgage-backed securities represent direct or indirect participations
in, or are secured by and payable from, mortgage loans secured by real
property, and include single- and multi-class pass-through securities and
collateralized mortgage obligations. Such securities may be issued or
guaranteed by U.S. government agencies or instrumentalities, such as the
Government National Mortgage Association and the Federal National Mortgage
Association, or by private issuers, generally originators and investors in
mortgage loans, including savings associations, mortgage bankers, commercial
banks, investment bankers, and special purpose entities (collectively, "private
lenders"). Mortgage-backed securities issued by private lenders may be
supported by pools of

- 7 -
<PAGE> 60

mortgage loans or other mortgage-backed securities that are guaranteed,
directly or indirectly, by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any governmental guarantee of
the underlying mortgage assets but with some form of non-governmental credit
enhancement.

Asset-backed securities have structural characteristics similar to
mortgage-backed securities. However, the underlying assets are not first lien
mortgage loans or interests therein, but include assets such as motor vehicle
installment sales contracts, other installment loan contracts, home equity
loans, leases of various types of property, and receivables from credit card or
other revolving credit arrangements. Payments or distributions of principal
and interest on asset-backed securities may be supported by non-governmental
credit enhancements similar to those utilized in connection with
mortgage-backed securities.

The yield characteristics of mortgage- and asset-backed securities
differ from those of traditional debt securities. Among the principal
differences are that interest and principal payments are made more frequently
on mortgage-and asset-backed securities, usually monthly, and that principal
may be prepaid at any time because the underlying mortgage loans or other
assets generally may be prepaid at any time. As a result, if a Fund purchases
these securities at a premium, a prepayment rate that is faster than expected
will reduce yield to maturity, while a prepayment rate that is slower than
expected will have the opposite effect of increasing the yield to maturity.
Conversely, if a Fund purchases these securities at a discount, a prepayment
rate that is faster than expected will increase yield to maturity, while a
prepayment rate that is slower than expected will reduce yield to maturity.
Amounts available for reinvestment by a Fund are likely to be greater during a
period of declining interest rates and, as a result, are likely to be
reinvested at lower interest rates than during a period of rising interest
rates. Accelerated prepayments on securities purchased by a Fund at a premium
also impose a risk of loss of principal because the premium may not have been
fully amortized at the time the principal is prepaid in full. The market for
privately issued mortgage- and asset-backed securities is smaller and less
liquid than the market for government-sponsored mortgage-backed securities.

The Funds may invest in stripped mortgage- or asset-backed securities,
which receive differing proportions of the interest and principal payments from
the underlying assets. The market value of such securities generally is more
sensitive to changes in prepayment and interest rates than is the case with
traditional mortgage- and asset-backed securities, and in some cases such
market value may be extremely volatile. With respect to certain stripped
securities, such as interest only and principal only classes, a rate of
prepayment that is faster or slower than anticipated may result in a Fund
failing to recover all or a portion of its investment, even though the
securities are rated investment grade.

REPURCHASE AGREEMENTS

The Funds may invest in repurchase agreements. In a repurchase
agreement, a Fund buys a security at one price, and at the time of sale, the
seller agrees to repurchase the obligation at a mutually agreed upon time and
price (usually within seven days). The repurchase agreement, thereby,
determines the yield during the purchaser's holding period, while the seller's
obligation to repurchase is secured by the value of the underlying security.
If the value of such securities is less than the repurchase price, plus any
agreed-upon additional amount, the other party to the agreement will be
required to provide additional collateral so that at all times the collateral
is at least equal to the repurchase price, plus any agreed-upon additional
amount. The Advisor will monitor, on an ongoing basis, the value of the
underlying securities to ensure that the value always equals or exceeds the
repurchase price plus accrued interest. A Fund may, under certain
circumstances, deem repurchase agreements, collateralized by U.S. government
securities to be investments in U.S. government securities.

BORROWING

Each Fund may borrow money from banks, limited by each Fund's
fundamental investment restriction to 33 1/3% of its total assets, and may
engage in mortgage dollar roll transactions and reverse repurchase agreements
which may be considered a form of borrowing. (See "Implementation of Policies
and Risks - Mortgage Dollar Rolls and Reverse Repurchase Agreements" in the
Funds' Prospectus.) In addition, each Fund may borrow up to an additional 5%
of its total assets from banks for temporary or emergency purposes. A Fund will
not purchase securities when bank borrowings exceed 5% of the Fund's total
assets.

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INVESTMENT POLICIES AND TECHNIQUES--MONEY FUND

RULE 2A-7: MATURITY, QUALITY, AND DIVERSIFICATION RESTRICTIONS

The Money Fund is subject to certain maturity restrictions pursuant to
Rule 2a-7 under the 1940 Act for money market funds that use the amortized cost
method of valuation to maintain a stable net asset value of $1.00 per share.
Accordingly, the Money Fund will (i) maintain a dollar weighted average
portfolio maturity of 90 days or less, and (ii) will purchase securities with a
remaining maturity of no more than 13 months (397 calendar days). And, the
Money Fund will buy only U.S. dollar-denominated securities which represent
minimal credit risks and meet certain credit quality and diversification
requirements. For purposes of calculating the maturity of portfolio
instruments, the Money Fund will follow the requirements of Rule 2a-7. Under
Rule 2a-7, the maturity of portfolio instruments is calculated as indicated
below.

Generally, the maturity of a portfolio instrument shall be deemed to
be the period remaining (calculated from the trade date or such other date on
which the Money Fund's interest in the instrument is subject to market action)
until the date noted on the face of the instrument as the date on which the
principal amount must be paid, or in the case of an instrument called for
redemption, the date on which the redemption payment must be made, except that:

(1) An instrument that is issued or guaranteed by the U.S. government
or any agency thereof which has a variable rate of interest readjusted no less
frequently than every 762 days shall be deemed to have a maturity equal to the
period remaining until the next readjustment of the interest rate.

(2) A Variable Rate Instrument, the principal amount of which is
scheduled on the face of the instrument to be paid on 397 calendar days or less
shall be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate.

(3) A Variable Rate Instrument that is subject to a Demand Feature
shall be deemed to have a maturity equal to the longer of the period remaining
until the next readjustment of the interest rate or the period remaining until
the principal amount can be recovered through demand.

(4) A Floating Rate Instrument that is subject to a Demand Feature
shall be deemed to have a maturity equal to the period remaining until the
principal amount can be recovered through demand.

(5) A repurchase agreement shall be deemed to have a maturity equal
to the period remaining until the date on which the repurchase of the
underlying securities is scheduled to occur, or, where no date is specified,
but the agreement is subject to a demand, the notice period applicable to a
demand for the repurchase of the securities.

With respect to the Money Fund, it is subject to certain credit
quality restrictions pursuant to Rule 2a-7 under the 1940 Act. The Money Fund
will invest at least 95% of its assets in instruments determined to present
minimal credit risks and, at the time of acquisition, are (i) obligations
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; (ii) rated by at least two nationally recognized rating
agencies (or by one agency if only one agency has issued a rating) (the
"required rating agencies") in the highest rating category for short-term debt
obligations; (iii) unrated but whose issuer is rated in the highest category by
the required rating agencies with respect to a class of short-term debt
obligations or any security within that class that is comparable in priority
and security with the instrument; or (iv) unrated (other than the type
described in (iii)) but determined by the Board of Directors of the Fund to be
of comparable quality to the foregoing (provided the unrated security has not
received a short-term rating, and with respect to a long-term security with a
remaining maturity within the Fund's maturity restrictions, has not received a
long-term rating from any agency that is other than in its highest rating
category). The foregoing are referred to as "first-tier securities."

The balance of the securities in which the Money Fund may invest are
instruments determined to present minimal credit risks, which do not qualify as
first-tier securities, and, at the time of acquisition, are (i) rated by the
required rating agencies in one of the two highest rating categories for
short-term debt obligations; (ii) unrated but whose issuer is rated in one of
the two highest categories by the required rating agencies with respect to a
class of short-term debt obligations or any security within that class that is
comparable in priority and security with the obligation; or (iii) unrated
(other than described in (ii)) but determined by the Board of Directors of the
Fund to be of comparable quality to the foregoing (provided the unrated
security has not received a short-term

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<PAGE> 62

rating and, with respect to a long-term security with a remaining maturity
within the Fund's maturity restrictions, has not received a long-term rating
from any agency that is other than in one of its highest two rating
categories). The foregoing are referred to as "second-tier securities."

In addition to the foregoing guidelines, the Money Fund is subject to
certain diversification restrictions pursuant to Rule 2a-7 under the 1940 Act,
which include (i) the Fund will not acquire a second-tier security of an issuer
if, after giving effect to the acquisition, the Fund would have invested more
than the greater of 1% of its total assets or one million dollars in
second-tier securities issued by that issuer, or (ii) the Fund will not invest
more than 5% of the Fund's assets in the securities (other than securities
issued by the U.S. government or any agency or instrumentality thereof) issued
by a single issuer, except for certain investments held for not more than 3
business days.

As used herein, all capitalized but undefined terms shall have the
meaning such terms have in Rule 2a-7.

INVESTMENT POLICIES AND TECHNIQUES -
SHORT-TERM BOND, GOVERNMENT, CORPORATE BOND, AND HIGH-YIELD FUNDS

CASH MANAGEMENT

From time to time the Advisor may determine to use a non-affiliated money
market fund to manage some or all of the Fund's short-term cash positions. The
Advisor will do this only when the Advisor reasonably believes that this
action will result in a return to the Fund that is equal to, or better than,
the return that could be achieved by direct investments in money market
instruments. In such cases, to ensure no double charging of fees, the Advisor
will credit any management or other fees of the non-affiliated money market
fund against the Advisor's management fee.

DERIVATIVE INSTRUMENTS

GENERAL DESCRIPTION. As discussed in the Prospectus, the Funds may
use a variety of derivative instruments, including options, futures contracts
(sometimes referred to as "futures") and options on futures contracts for any
lawful purpose consistent with each Fund's investment objective, such as
hedging the Fund's portfolio or risk management, but not for speculation.

The use of these instruments is subject to applicable regulations of
the Securities and Exchange Commission (the "SEC"), the several options and
futures exchanges upon which they may be traded, the Commodity Futures Trading
Commission ("CFTC") and various state regulatory authorities. In addition, the
Funds' ability to use these instruments will be limited by tax considerations.

In addition to the products, strategies and risks described below and
in the Prospectus, the Advisor may discover additional derivative instruments
and other hedging techniques. These new opportunities may become available as
the Advisor develops new techniques or as regulatory authorities broaden the
range of permitted transactions. The Advisor may utilize these opportunities
to the extent that they are consistent with the Funds' investment objectives
and permitted by the Funds' investment limitations and applicable regulatory
authorities.

SPECIAL RISKS OF THESE INSTRUMENTS. The use of derivative instruments
involves special considerations and risks as described below. Risks pertaining
to particular instruments are described in the sections that follow.

(1) Successful use of most of these instruments depends upon the
Advisor's ability to predict movements of the overall securities and currency
markets, which requires different skills than predicting changes in the prices
of individual securities. While the Advisor is experienced in the use of these
instruments, there can be no assurance that any particular strategy adopted
will succeed.

(2) There might be imperfect correlation, or even no correlation,
between price movements of an instrument and price movements of investments
being hedged. For example, if the value of an instrument used in a short hedge
(such as writing a call option, buying a put option, or selling a futures
contract) increased by less than the decline in value of the hedged investment,
the hedge would not be fully successful. Such a lack of correlation might
occur due to factors unrelated to the value of the investments being hedged,
such as speculative or other pressures on the markets in which these
instruments are traded. The effectiveness of hedges using instruments on
indices will depend on the degree of correlation between price movements in the
index and price movements in the investments being hedged.

(3) Hedging strategies, if successful, can reduce the risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can
also reduce opportunity for gain by offsetting the positive effect of favorable
price movements in the hedged investments. For example, if a Fund entered into
a

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<PAGE> 63

short hedge because the Advisor projected a decline in the price of a security
in the Fund's portfolio, and the price of that security increased instead, the
gain from that increase might be wholly or partially offset by a decline in the
price of the instrument. Moreover, if the price of the instrument declined by
more than the increase in the price of the security, the Fund could suffer a
loss.

(4) As described below, a Fund might be required to maintain assets
as "cover," maintain segregated accounts, or make margin payments when it takes
positions in these instruments involving obligations to third parties (i.e.,
instruments other than purchased options). If a Fund were unable to close out
its positions in such instruments, it might be required to continue to maintain
such assets or accounts or make such payments until the position expired or
matured. The requirements might impair the Fund's ability to sell a portfolio
security or make an investment at a time when it would otherwise be favorable
to do so, or require that the Fund sell a portfolio security at a
disadvantageous time. A Fund's ability to close out a position in an
instrument prior to expiration or maturity depends on the existence of a liquid
secondary market or, in the absence of such a market, the ability and
willingness of the other party to the transaction ("counter party") to enter
into a transaction closing out the position. Therefore, there is no assurance
that any hedging position can be closed out at a time and price that is
favorable to a Fund.

For a discussion of the federal income tax treatment of the Funds'
derivative instruments, see "Taxes - Derivative Instruments" below.

GENERAL LIMITATIONS ON CERTAIN DERIVATIVE TRANSACTIONS. The
Short-Term Bond, Government, Corporate Bond, and High-Yield Funds have each
filed a notice of eligibility for exclusion from the definition of the term
"commodity pool operator" with the CFTC and the National Futures Association,
which regulate trading in the futures markets. Pursuant to Rule 4.5 of the
regulations under the Commodity Exchange Act (the "CEA"), the notice of
eligibility for each Fund includes representations that the Fund will use
futures contracts and related options solely for bona fide hedging purposes
within the meaning of CFTC regulations, provided that a Fund may hold other
positions in futures contracts and related options that do not qualify as a
bona fide hedging position if the aggregate initial margin deposits and
premiums required to establish these positions, less the amount by which any
such options positions are "in the money," do not exceed 5% of the Fund's net
assets. Adoption of these guidelines does not limit the percentage of a Fund's
assets at risk to 5%.

In addition, (i) the aggregate value of securities underlying call
options on securities written by a Fund or obligations underlying put options
on securities written by a Fund determined as of the date the options are
written will not exceed 50% of the Fund's net assets; (ii) the aggregate
premiums paid on all options purchased by a Fund and which are being held will
not exceed 20% of the Fund's net assets; and (iii) a Fund will not purchase put
or call options, other than hedging positions, if, as a result thereof, more
than 5% of its total assets would be so invested; and (iv) the aggregate margin
deposits required on all futures and options on futures transactions being held
will not exceed 5% of a Fund's total assets.

The foregoing limitations are not fundamental policies of the Funds
and may be changed by each Fund's Board of Directors without shareholder
approval as regulatory agencies permit.

Transactions using options (other than purchased options) expose the
Funds to counter-party risk. To the extent required by SEC guidelines, a Fund
will not enter into any such transactions unless it owns either (1) an
offsetting ("covered") position in securities, other options, or futures or (2)
cash and liquid high grade debt securities with a value sufficient at all times
to cover its potential obligations to the extent not covered as provided in (1)
above. Each Fund will also set aside cash and/or appropriate liquid assets in
a segregated custodial account if required to do so by the SEC and CFTC
regulations. Assets used as cover or held in a segregated account cannot be
sold while the position in the corresponding option or futures contract is
open, unless they are replaced with similar assets. As a result, the
commitment of a large portion of a Fund's assets to segregated accounts as a
cover could impede portfolio management or a Fund's ability to meet redemption
requests or other current obligations.

In some cases, a Fund may be required to maintain or limit exposure to
a specified percentage of its assets to a particular asset class or foreign
country. In such cases, when a Fund uses a derivative instrument to increase
or decrease exposure to an asset class or foreign country and is required by
applicable SEC guidelines to set aside liquid assets in a segregated account to
secure its obligations under the derivative instruments, the Advisor will
measure compliance with the applicable percentage by reference to the nature of
the economic exposure created through the use of the derivative instrument and
not by reference to the nature of the

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<PAGE> 64

exposure arising from the liquid assets set aside in the segregated account
(unless another interpretation is specified by applicable regulatory
requirements.)

OPTIONS. Each Fund may also purchase or write put and call options on
securities and enter into closing transactions with respect to such options to
terminate an existing position. The purchase of call options serves as a long
hedge, and the purchase of put options serves as a short hedge. Writing put or
call options can enable a Fund to enhance income by reason of the premiums paid
by the purchaser of such options. Writing call options serves as a limited
short hedge because declines in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However,
if the security appreciates to a price higher than the exercise price of the
call option, it can be expected that the option will be exercised and the Fund
will be obligated to sell the security at less than its market value or will be
obligated to purchase the security at a price greater than that at which the
security must be sold under the option. All or a portion of any assets used as
cover for over-the-counter ("OTC") options written by a Fund would be
considered illiquid to the extent described under " Common Investment Policies
and Techniques--Illiquid Securities." Writing put options serves as a limited
long hedge because increases in the value of the hedged investment would be
offset to the extent of the premium received for writing the option. However,
if the security depreciates to a price lower than the exercise price of the put
option, it can be expected that the put option will be exercised and the Fund
will be obligated to purchase the security at more than its market value.

The value of an option position will reflect, among other things, the
historical price volatility of the underlying investment, the current market
value of the underlying investment, the time remaining until expiration, the
relationship of the exercise price to the market price of the underlying
investment, and general market conditions. Options that expire unexercised
have no value.

A Fund may effectively terminate its right or obligation under an
option by entering into a closing transaction. For example, a Fund may
terminate its obligation under a call or put option that it had written by
purchasing an identical call or put option; this is known as a closing purchase
transaction. Conversely, a Fund may terminate a position in a put or call
option it had purchased by writing an identical put or call option; this is
known as a closing sale transaction. Closing transactions permit the Funds to
realize the profit or limit the loss on an option position prior to its
exercise or expiration.

The Funds may purchase or write both exchange-traded and OTC options.
Exchange-traded options are issued by a clearing organization affiliated with
the exchange on which the option is listed that, in effect, guarantees
completion of every exchange-traded option transaction. OTC options are
contracts between a Fund and the other party to the transaction ("counter
party") (usually a securities dealer or a bank) with no clearing organization
guarantee. Thus, when a Fund purchases or writes an OTC option, it relies on
the counter party to make or take delivery of the underlying investment upon
exercise of the option. Failure by the counter party to do so would result in
the loss of any premium paid by the Fund as well as the loss of any expected
benefit of the transaction.

The Funds' ability to establish and close out positions in
exchange-listed options depends on the existence of a liquid market. The Funds
intend to purchase or write only those exchange-traded options for which there
appears to be a liquid secondary market. However, there can be no assurance
that such a market will exist at any particular time. Closing transactions can
be made for OTC options only by negotiating directly with the counter party, or
by a transaction in the secondary market if any such market exists. Although
the Funds will enter into OTC options only with counter parties that are
expected to be capable of entering into closing transactions with the Funds,
there is no assurance that the Funds will in fact be able to close out an OTC
option at a favorable price prior to expiration. In the event of insolvency of
the counter party, a Fund might be unable to close out an OTC option position
at any time prior to its expiration.

If a Fund were unable to effect a closing transaction for an option it
had purchased, it would have to exercise the option to realize any profit. The
inability to enter into a closing purchase transaction for a covered call
option written by a Fund could cause material losses because the Fund would be
unable to sell the investment used as a cover for the written option until the
option expires or is exercised.

The writing and purchasing of options is a highly specialized activity
that involves investment techniques and risks different from those associated
with ordinary portfolio securities transactions. Imperfect correlation between
the options and securities markets may detract the effectiveness of attempted
hedging.

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<PAGE> 65

SPREAD TRANSACTIONS. Each Fund may purchase from securities dealers
covered spread options. Such covered spread options are not presently
exchange-listed or exchange-traded. The purchase of a spread option gives the
Fund the right to put, or sell, a security that it owns at a fixed dollar
spread or fixed yield spread in relationship to another security that the Fund
does not own, but which is used as a benchmark. The risk to the Fund in
purchasing covered spread options is the cost of the premium paid for the
spread option and any transaction costs. In addition, there is no assurance
that closing transactions will be available. The purchase of spread options
will be used to protect the Fund against adverse changes in prevailing credit
quality spreads, i.e., the yield spread between high quality and lower quality
securities. Such protection is only provided during the life of the spread
option.

FUTURES CONTRACTS. Each Fund may enter into futures contracts,
including interest rate and index futures. Each Fund may also purchase put and
call options, and write covered put and call options, on futures in which it is
allowed to invest. The purchase of futures or call options thereon can serve
as a long hedge, and the sale of futures or the purchase of put options thereon
can serve as a short hedge. Writing covered call options on futures contracts
can serve as a limited short hedge, and writing covered put options on futures
contracts can serve as a limited long hedge, using a strategy similar to that
used for writing covered options in securities. The Funds' hedging may include
purchases of futures as an offset against the effect of expected increases in
securities prices and sales of futures as an offset against the effect of
expected declines in securities prices. The Funds' futures transactions may be
entered into for any lawful purpose consistent with each Fund's investment
objective, such as hedging purposes or risk management, but not for
speculation. The Funds may also write put options on interest rate futures
contracts while at the same time purchasing call options on the same futures
contracts in order to create synthetically a long futures contract position.
Such options would have the same strike prices and expiration dates. The Funds
will engage in this strategy only when the Advisor believes it is more
advantageous to the Funds than is purchasing the futures contract.

To the extent required by regulatory authorities, the Funds only enter
into futures contracts that are traded on national futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading are regulated under the CEA by the CFTC. Although
techniques other than sales and purchases of futures contracts could be used to
reduce a Fund's exposure to interest rate fluctuations, a Fund may be able to
hedge its exposure more effectively and perhaps at a lower cost through using
futures contracts.

An interest rate futures contract provides for the future sale by one
party and purchase by another party of a specified amount of a specific
financial instrument (e.g., debt security) for a specified price at a
designated date, time, and place. An index futures contract is an agreement
pursuant to which the parties agree to take or make delivery of an amount of
cash equal to the difference between the value of the index at the close of the
last trading day of the contract and the price at which the index futures
contract was originally written. Transactions costs are incurred when a
futures contract is bought or sold and margin deposits must be maintained. A
futures contract may be satisfied by delivery or purchase, as the case may be,
of the instrument or by payment of the change in the cash value of the index.
More commonly, futures contracts are closed out prior to delivery by entering
into an offsetting transaction in a matching futures contract. Although the
value of an index might be a function of the value of certain specified
securities, no physical delivery of those securities is made. If the
offsetting purchase price is less than the original sale price, a Fund realizes
a gain; if it is more, a Fund realizes a loss. Conversely, if the offsetting
sale price is more than the original purchase price, a Fund realizes a gain; if
it is less, a Fund realizes a loss. The transaction costs must also be
included in these calculations. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular futures contract at a particular time. If a Fund is not able to
enter into an offsetting transaction, the Fund will continue to be required to
maintain the margin deposits on the futures contract.

No price is paid by a Fund upon entering into a futures contract.
Instead, at the inception of a futures contract, a Fund is required to deposit
in a segregated account with its custodian, in the name of the futures broker
through whom the transaction was effected, "initial margin" consisting of cash,
U.S. government securities or other liquid, high grade debt securities, in an
amount generally equal to 10% or less of the contract value. High grade
securities include securities rated "A" or better by an NRSRO. Margin must
also be deposited when writing a call or put option on a futures contract, in
accordance with applicable exchange rules. Unlike margin in securities
transactions, initial margin on futures contracts does not represent a
borrowing, but rather is in the nature of a performance bond or good-faith
deposit that is returned to the Fund at the termination of the transaction if
all contractual obligations have been satisfied. Under certain circumstances,
such as periods of high volatility, a Fund may be

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<PAGE> 66

required by an exchange to increase the level of its initial margin payment,
and initial margin requirements might be increased generally in the future by
regulatory action.

Subsequent "variation margin" payments are made to and from the
futures broker daily as the value of the futures position varies, a process
known as "marking to market." Variation margin does not involve borrowing, but
rather represents a daily settlement of a Fund's obligations to or from a
futures broker. When a Fund purchases an option on a future, the premium paid
plus transaction costs is all that is at risk. In contrast, when a Fund
purchases or sells a futures contract or writes a call or put option thereon,
it is subject to daily variation margin calls that could be substantial in the
event of adverse price movements. If a Fund has insufficient cash to meet
daily variation margin requirements, it might need to sell securities at a time
when such sales are disadvantageous. Purchasers and sellers of futures
positions and options on futures can enter into offsetting closing transactions
by selling or purchasing, respectively, an instrument identical to the
instrument held or written. Positions in futures and options on futures may be
closed only on an exchange or board of trade that provides a secondary market.
The Funds intend to enter into futures transactions only on exchanges or boards
of trade where there appears to be a liquid secondary market. However, there
can be no assurance that such a market will exist for a particular contract at
a particular time.

Under certain circumstances, futures exchanges may establish daily
limits on the amount that the price of a future or option on a futures contract
can vary from the previous day's settlement price; once that limit is reached,
no trades may be made that day at a price beyond the limit. Daily price limits
do not limit potential losses because prices could move to the daily limit for
several consecutive days with little or no trading, thereby preventing
liquidation of unfavorable positions.

If a Fund were unable to liquidate a futures or option on a futures
contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would
continue to be subject to market risk with respect to the position. In
addition, except in the case of purchased options, the Fund would continue to
be required to make daily variation margin payments and might be required to
maintain the position being hedged by the future or option or to maintain cash
or securities in a segregated account.

Certain characteristics of the futures market might increase the risk
that movements in the prices of futures contracts or options on futures
contracts might not correlate perfectly with movements in the prices of the
investments being hedged. For example, all participants in the futures and
options on futures contracts markets are subject to daily variation margin
calls and might be compelled to liquidate futures or options on futures
contracts positions whose prices are moving unfavorably to avoid being subject
to further calls. These liquidations could increase price volatility of the
instruments and distort the normal price relationship between the futures or
options and the investments being hedged. Also, because initial margin deposit
requirements in the futures markets are less onerous than margin requirements
in the securities markets, there might be increased participation by
speculators in the future markets. This participation also might cause
temporary price distortions. In addition, activities of large traders in both
the futures and securities markets involving arbitrage, "program trading" and
other investment strategies might result in temporary price distortions.

FOREIGN CURRENCY-RELATED DERIVATIVE STRATEGIES - SPECIAL
CONSIDERATIONS. The Funds may purchase and sell foreign currency on a spot
basis, and may use currency-related derivatives instruments such as options on
foreign currencies, futures on foreign currencies, options on futures on
foreign currencies and forward currency contracts (i.e., an obligation to
purchase or sell a specific currency at a specified future date, which may be
any fixed number of days from the contract date agreed upon by the parties, at
a price set at the time the contract is entered into). The Funds may use these
instruments for hedging or any other lawful purpose consistent with their
respective investment objectives, including transaction hedging, anticipatory
hedging, cross hedging, proxy hedging, and position hedging. The Funds' use of
currency-related derivative instruments will be directly related to a Fund's
current or anticipated portfolio securities, and the Funds may engage in
transactions in currency-related derivative instruments as a means to protect
against some or all of the effects of adverse changes in foreign currency
exchange rates on their portfolio investments. In general, if the currency in
which a portfolio investment is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase. Conversely, a decline
in the exchange rate of the currency would adversely affect the value of the
portfolio investment expressed in U.S. dollars.

For example, a Fund might use currency-related derivative instruments
to "lock in" a U.S. dollar price for a portfolio investment, thereby enabling
the Fund to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar and the subject foreign
currency during the period between the date the security is purchased or sold
and

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<PAGE> 67

the date on which payment is made or received. A Fund also might use
currency-related derivative instruments when the Advisor believes that one
currency may experience a substantial movement against another currency,
including the U.S. dollar, and it may use currency-related derivative
instruments to sell or buy the amount of the former foreign currency,
approximating the value of some or all of the Fund's portfolio securities
denominated in such foreign currency. Alternatively, where appropriate, a Fund
may use currency-related derivative instruments to hedge all or part of its
foreign currency exposure through the use of a basket of currencies or a proxy
currency where such currency or currencies act as an effective proxy for other
currencies. The use of this basket hedging technique may be more efficient and
economical than using separate currency-related derivative instruments for each
currency exposure held by the Fund. Furthermore, currency-related derivative
instruments may be used for short hedges - for example, a Fund may sell a
forward currency contract to lock in the U.S. dollar equivalent of the proceeds
from the anticipated sale of a security denominated in a foreign currency.

In addition, a Fund may use a currency-related derivative instrument
to shift exposure to foreign currency fluctuations from one foreign country to
another foreign country where the Advisor believes that the foreign currency
exposure purchased will appreciate relative to the U.S. dollar and thus better
protect the Fund against the expected decline in the foreign currency exposure
sold. For example, if a Fund owns securities denominated in a foreign currency
and the Advisor believes that currency will decline, it might enter into a
forward contract to sell an appropriate amount of the first foreign currency,
with payment to be made in a second foreign currency that the Advisor believes
would better protect the Fund against the decline in the first security than
would a U.S. dollar exposure. Hedging transactions that use two foreign
currencies are sometimes referred to as "cross hedges." The effective use of
currency-related derivative instruments by a Fund in a cross hedge is dependent
upon a correlation between price movements of the two currency instruments and
the underlying security involved, and the use of two currencies magnifies the
risk that movements in the price of one instrument may not correlate or may
correlate unfavorably with the foreign currency being hedged. Such a lack of
correlation might occur due to factors unrelated to the value of the currency
instruments used or investments being hedged, such as speculative or other
pressures on the markets in which these instruments are traded.

A Fund also might seek to hedge against changes in the value of a
particular currency when no hedging instruments on that currency are available
or such hedging instruments are more expensive than certain other hedging
instruments. In such cases, the Fund may hedge against price movements in that
currency by entering into transactions using currency-related derivative
instruments on another foreign currency or a basket of currencies, the values
of which the Advisor believes will have a high degree of positive correlation
to the value of the currency being hedged. The risk that movements in the
price of the hedging instrument will not correlate perfectly with movements in
the price of the currency being hedged is magnified when this strategy is used.

The use of currency-related derivative instruments by a Fund involves
a number of risks. The value of currency-related derivative instruments
depends on the value of the underlying currency relative to the U.S. dollar.
Because foreign currency transactions occurring in the interbank market might
involve substantially larger amounts than those involved in the use of such
derivative instruments, a Fund could be disadvantaged by having to deal in the
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than
for round lots (generally consisting of transactions of greater than $1
million).

There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information generally is representative of very large transactions in
the interbank market and thus might not reflect odd-lot transactions where
rates might be less favorable. The interbank market in foreign currencies is a
global, round-the-clock market. To the extent the U.S. options or futures
markets are closed while the markets for the underlying currencies remain open,
significant price and rate movements might take place in the underlying markets
that cannot be reflected in the markets for the derivative instruments until
they re-open.

Settlement of transactions in currency-related derivative instruments
might be required to take place within the country issuing the underlying
currency. Thus, a Fund might be required to accept or make delivery of the
underlying foreign currency in accordance with any U.S. or foreign regulations
regarding the maintenance of foreign banking arrangements by U.S. residents and
might be required to pay any fees, taxes and charges associated with such
delivery assessed in the issuing country.

When a Fund engages in a transaction in a currency-related derivative
instrument, it relies on the counterparty to make or take delivery of the
underlying currency at the maturity of the contract or otherwise complete the
contract. In other words, the

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<PAGE> 68

Fund will be subject to the risk that a loss may be sustained by the Fund as a
result of the failure of the counterparty to comply with the terms of the
transaction. The counterparty risk for exchange-traded instruments is
generally less than for privately-negotiated or OTC currency instruments, since
generally a clearing agency, which is the issuer or counterparty to each
instrument, provides a guarantee of performance. For privately-negotiated
instruments, there is no similar clearing agency guarantee. In all
transactions, the Fund will bear the risk that the counterparty will default,
and this could result in a loss of the expected benefit of the transaction and
possibly other losses to the Fund. The Funds will enter into transactions in
currency-related derivative instruments only with counterparties that the
Advisor reasonably believes are capable of performing under the contract.

Purchasers and sellers of currency-related derivative instruments may
enter into offsetting closing transactions by selling or purchasing,
respectively, an instrument identical to the instrument purchased or sold.
Secondary markets generally do not exist for forward currency contracts, with
the result that closing transactions generally can be made for forward currency
contracts only by negotiating directly with the counterparty. Thus, there can
be no assurance that a Fund will in fact be able to close out a forward
currency contract (or any other currency-related derivative instrument) at a
time and price favorable to a Fund. In addition, in the event of insolvency of
the counterparty, a Fund might be unable to close out a forward currency
contract at any time prior to maturity. In the case of an exchange-traded
instrument, a Fund will be able to close the position out only on an exchange
which provides a market for the instruments. The ability to establish and
close out positions on an exchange is subject to the maintenance of a liquid
market, and there can be no assurance that a liquid market will exist for any
instrument at any specific time. In the case of a privately-negotiated
instrument, a Fund will be able to realize the value of the instrument only by
entering into a closing transaction with the issuer or finding a third party
buyer for the instrument. While a Fund will enter into privately-negotiated
transactions only with entities who are expected to be capable of entering into
a closing transaction, there can be no assurance that a Fund will in fact be
able to enter into such closing transactions.

The precise matching of currency-related derivative instrument amounts
and the value of the portfolio securities involved generally will not be
possible because the value of such securities, measured in the foreign
currency, will change after the currency-related derivative instrument position
has been established. Thus, a Fund might need to purchase or sell foreign
currencies in the spot (cash) market. The projection of short-term currency
market movements is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain.

Permissible foreign currency options will include options traded
primarily in the OTC market. Although options on foreign currencies are traded
primarily in the OTC market, the Funds will normally purchase or sell OTC
options on foreign currency only when the Advisor reasonably believes a liquid
secondary market will exist for a particular option at any specific time.

There will be a cost to a Fund of engaging in transactions in
currency-related derivative instruments that will vary with factors such as the
contract or currency involved, the length of the contract period and the market
conditions then prevailing. A Fund using these instruments may have to pay a
fee or commission or, in cases where the instruments are entered into on a
principal basis, foreign exchange dealers or other counterparties will realize
a profit based on the difference ("spread") between the prices at which they
are buying and selling various currencies. Thus, for example, a dealer may
offer to sell a foreign currency to a Fund at one rate, while offering a lesser
rate of exchange should the Fund desire to resell that currency to the dealer.

When required by the SEC guidelines, the Funds will set aside
permissible liquid assets in segregated accounts or otherwise cover their
respective potential obligations under currency-related derivatives
instruments. To the extent a Fund's assets are so set aside, they cannot be
sold while the corresponding currency position is open, unless they are
replaced with similar assets. As a result, if a large portion of a Fund's
assets are so set aside, this could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.

The Advisor's decision to engage in a transaction in a particular
currency-related derivative instrument will reflect the Advisor's judgment that
the transaction will provide value to the Fund and its shareholders and is
consistent with the Fund's objectives and policies. In making such a judgment,
the Advisor will analyze the benefits and risks of the transaction and weigh
them in the context of the Fund's entire portfolio and objectives. The
effectiveness of any transaction in a currency-related derivative instrument is
dependent on a variety of factors, including the Advisor's skill in analyzing
and predicting currency values and upon a correlation between price movements
of the currency instrument and the underlying security. There might be
imperfect correlation, or even no correlation, between price movements of an
instrument and price movements of investments being hedged. Such a lack of
correlation might occur due to factors unrelated to the value of the
investments being hedged, such

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<PAGE> 69

as speculative or other pressures on the markets in which these instruments are
traded. In addition, a Fund's use of currency-related derivative instruments
is always subject to the risk that the currency in question could be devalued
by the foreign government. In such a case, any long currency positions would
decline in value and could adversely affect any hedging position maintained by
the Fund.

The Funds' dealing in currency-related derivative instruments will
generally be limited to the transactions described above. However, the Funds
reserve the right to use currency-related derivatives instruments for different
purposes and under different circumstances. Of course, the Funds are not
required to use currency-related derivatives instruments and will not do so
unless deemed appropriate by the Advisor. It also should be realized that use
of these instruments does not eliminate, or protect against, price movements in
the Funds' securities that are attributable to other (i.e., non-currency
related) causes. Moreover, while the use of currency-related derivatives
instruments may reduce the risk of loss due to a decline in the value of a
hedged currency, at the same time the use of these instruments tends to limit
any potential gain which may result from an increase in the value of that
currency.

HIGH-YIELD (HIGH-RISK) SECURITIES

IN GENERAL. The Corporate Bond Fund may invest up to 25% of its
assets, and the High-Yield Fund may invest without limitation, in
non-investment grade debt obligations. The Short-Term Bond Fund may invest up
to 25% of its assets only in non-investment grade debt obligations rated in the
fifth highest rating category (e.g., BB by S&P) or comparable unrated
securities. Securities rated BB are considered the least speculative of
non-investment grade obligations. With respect to the Corporate Bond and
High-Yield Funds, non-investment grade debt obligations (hereinafter referred
to as "lower-quality securities") include (i) bonds rated as low as C by
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings Group
("S&P"), or Fitch Investors Service, Inc. ("Fitch"), or CCC by Duff & Phelps,
Inc. ("D&P"); (ii) commercial paper rated as low as C by S&P, Not Prime by
Moody's or Fitch 4 by Fitch; and (iii) unrated debt securities of comparable
quality. Lower-quality securities, while generally offering higher yields than
investment grade securities with similar maturities, involve greater risks,
including the possibility of default or bankruptcy. They are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal. The special risk considerations in connection with
investments in these securities are discussed below. Refer to the Appendix of
this Statement of Additional Information for a discussion of securities
ratings.

EFFECT OF INTEREST RATES AND ECONOMIC CHANGES. The lower-quality and
comparable unrated security market is relatively new and its growth has
paralleled a long economic expansion. As a result, it is not clear how this
market may withstand a prolonged recession or economic downturn. Such an
economic downturn could severely disrupt the market for and adversely affect
the value of such securities.

All interest-bearing securities typically experience appreciation when
interest rates decline and depreciation when interest rates rise. The market
values of lower-quality and comparable unrated securities tend to reflect
individual corporate developments to a greater extent than do higher rated
securities, which react primarily to fluctuations in the general level of
interest rates. Lower-quality and comparable unrated securities also tend to be
more sensitive to economic conditions than are higher-rated securities. As a
result, they generally involve more credit risks than securities in the
higher-rated categories. During an economic downturn or a sustained period of
rising interest rates, highly leveraged issuers of lower-quality and comparable
unrated securities may experience financial stress and may not have sufficient
revenues to meet their payment obligations. The issuer's ability to service
its debt obligations may also be adversely affected by specific corporate
developments, the issuer's inability to meet specific projected business
forecasts or the unavailability of additional financing. The risk of loss due
to default by an issuer of these securities is significantly greater than
issuers of higher-rated securities because such securities are generally
unsecured and are often subordinated to other creditors. Further, if the
issuer of a lower-quality or comparable unrated security defaulted, a Fund
might incur additional expenses to seek recovery. Periods of economic
uncertainty and changes would also generally result in increased volatility in
the market prices of these securities and thus in the Fund's net asset value.

As previously stated, the value of a lower-quality or comparable
unrated security will decrease in a rising interest rate market, and
accordingly so will a Fund's net asset value. If a Fund experiences unexpected
net redemptions in such a market, it may be forced to liquidate a portion of
its portfolio securities without regard to their investment merits. Due to the
limited liquidity of lower-quality and comparable unrated securities (discussed
below), a Fund may be forced to liquidate these securities at a

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<PAGE> 70

substantial discount. Any such liquidation would reduce the Fund's asset base
over which expenses could be allocated and could result in a reduced rate of
return for the Fund.

PAYMENT EXPECTATIONS. Lower-quality and comparable unrated securities
typically contain redemption, call or prepayment provisions which permit the
issuer of such securities containing such provisions to, at its discretion,
redeem the securities. During periods of falling interest rates, issuers of
these securities are likely to redeem or prepay the securities and refinance
them with debt securities with a lower interest rate. To the extent an issuer
is able to refinance the securities, or otherwise redeem them, a Fund may have
to replace the securities with a lower yielding security, which would result in
a lower return for the Funds.

CREDIT RATINGS. Credit ratings issued by credit-rating agencies
evaluate the safety of principal and interest payments of rated securities.
They do not, however, evaluate the market value risk of lower-quality and
comparable unrated securities and, therefore, may not fully reflect the true
risks of an investment. In addition, credit rating agencies may or may not
make timely changes in a rating to reflect changes in the economy or in the
condition of the issuer that affect the market value of the security.
Consequently, credit ratings are used only as a preliminary indicator of
investment quality. Investments in lower-quality and comparable unrated
securities will be more dependent on the Advisor's credit analysis than would
be the case with investments in investment-grade debt securities. The Advisor
employs its own credit research and analysis, which includes a study of
existing debt, capital structure, ability to service debt and to pay dividends,
the issuer's sensitivity to economic conditions, its operating history and the
current trend of earnings. The Advisor continually monitors the investments in
each Fund's portfolio and carefully evaluates whether to dispose of or to
retain lower-quality and comparable unrated securities whose credit ratings or
credit quality may have changed.

LIQUIDITY AND VALUATION. A Fund may have difficulty disposing of
certain lower-quality and comparable unrated securities because there may be a
thin trading market for such securities. Because not all dealers maintain
markets in all lower-quality and comparable unrated securities, there is no
established retail secondary market for many of these securities. The Funds
anticipate that such securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market
does exist, it is generally not as liquid as the secondary market for
higher-rated securities. The lack of a liquid secondary market may have an
adverse impact on the market price of the security. As a result, a Fund's
asset value and ability to dispose of particular securities, when necessary to
meet the Fund's liquidity needs or in response to a specific economic event,
may be impacted. The lack of a liquid secondary market for certain securities
may also make it more difficult for a Fund to obtain accurate market quotations
for purposes of valuing the Fund's portfolio. Market quotations are generally
available on many lower-quality and comparable unrated issues only from a
limited number of dealers and may not necessarily represent firm bids of such
dealers or prices for actual sales. During periods of thin trading, the spread
between bid and asked prices is likely to increase significantly. In addition,
adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of lower-quality and comparable
unrated securities, especially in a thinly traded market.

RECENT AND PROPOSED LEGISLATION. Recent legislation has been adopted,
and from time to time proposals have been discussed, regarding new legislation
designed to limit the use of certain lower-quality and comparable unrated
securities by certain issuers. An example of legislation is a recent law which
requires federally insured savings and loan associations to divest their
investments in these securities over time. It is not currently possible to
determine the impact of the recent legislation or the proposed legislation on
the lower-quality and comparable unrated securities market. However, it is
anticipated that if additional legislation is enacted or proposed, it could
have a material affect on the value of these securities and the existence of a
secondary trading market for the securities.

SHORT SALES AGAINST THE BOX

The Funds may sell securities short against the box to hedge
unrealized gains on portfolio securities. Selling securities short against the
box involves selling a security that a Fund owns or has the right to acquire,
for delivery at a specified date in the future. If a Fund sells securities
short against the box, it may protect unrealized gains, but will lose the
opportunity to profit on such securities if the price rises. In addition, the
High-Yield Fund may sell securities short that are not against the box up to 5%
of its net assets provided that the Fund covers such short sales as required by
SEC guidelines.

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<PAGE> 71

TEMPORARY DEFENSIVE POSITION

When the Advisor determines that market conditions warrant a temporary
defensive position, the Funds may invest without limitation in cash and
short-term fixed income securities, including U.S. government securities,
commercial paper, banker's acceptances, certificates of deposit, and time
deposits.

WARRANTS

Warrants are securities giving the holder the right, but not the
obligation, to buy the stock of an issuer at a given price (generally higher
than the value of the stock at the time of issuance) during a specified period
or perpetually. Warrants may be acquired separately or in connection with the
acquisition of securities. A Fund will not purchase warrants, valued at the
lower of cost or market value, in excess of 5% of the Fund's net assets.
Included in that amount, but not to exceed 2% of the Fund's net assets, may be
warrants that are not listed on any stock exchange. Warrants acquired by a
Fund in units or attached to securities are not subject to these restrictions.
Warrants do not carry with them the right to dividends or voting rights with
respect to the securities that they entitle their holder to purchase, and they
do not represent any rights in the assets of the issuer. As a result, warrants
may be considered more speculative than certain other types of investments. In
addition, the value of a warrant does not necessarily change with the value of
the underlying securities, and a warrant ceases to have value if it is not
exercised prior to its expiration date.

INVESTMENT POLICIES AND TECHNIQUES -
SHORT-TERM BOND, CORPORATE BOND, AND HIGH-YIELD FUNDS

DEPOSITARY RECEIPTS

As indicated in the Prospectus, the Funds may invest in foreign
securities by purchasing depositary receipts, including American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs") or other securities
convertible into securities or issuers based in foreign countries. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. Generally, ADRs, in registered
form, are denominated in U.S. dollars and are designed for use in the U.S.
securities markets, while EDRs, in bearer form, may be denominated in other
currencies and are designed for use in European securities markets. ADRs are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities. EDRs are European receipts evidencing a similar
arrangements. For purposes of the Funds' investment policies, ADRs and EDRs
are deemed to have the same classification as the underlying securities they
represent. Thus, an ADR or EDR representing ownership of common stock will be
treated as common stock.

ADR facilities may be established as either "unsponsored" or
"sponsored." While ADRs issued under these two types of facilities are in some
respects similar, there are distinctions between them relating to the rights
and obligations of ADR holders and the practices of market participants. A
depositary may establish an unsponsored facility without participation by (or
even necessarily the acquiescence of) the issuer of the deposited securities,
although typically the depositary requests a letter of non-objection from such
issuer prior to the establishment of the facility. Holders of unsponsored ADRs
generally bear all the costs of such facilities. The depositary usually
charges fees upon the deposit and withdrawal of the deposited securities, the
conversion of dividends into U.S. dollars, the disposition of non-cash
distributions, and the performance of other services. The depositary of an
unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited securities
or to pass through voting rights to ADR holders in respect of the deposited
securities. Sponsored ADR facilities are created in generally the same manner
as unsponsored facilities, except that the issuer of the deposited securities
enters into a deposit agreement with the depositary. The deposit agreement
sets out the rights and responsibilities of the issuer, the depositary and the
ADR holders. With sponsored facilities, the issuer of the deposited securities
generally will bear some of the costs relating to the facility (such as
dividend payment fees of the depositary), although ADR holders continue to bear
certain other costs (such as deposit and withdrawal fees). Under the terms of
most sponsored arrangements, depositories agree to distribute notices of
shareholder meetings and voting instructions, and to provide shareholder
communications and other information to the ADR holders at the request of the
issuer of the deposited securities.

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<PAGE> 72

LOAN INTERESTS

Each Fund may acquire a loan interest (a "Loan Interest"). A Loan
Interest is typically originated, negotiated, and structured by a U.S. or
foreign commercial bank, insurance company finance company, or other financial
institution (the "Agent") for a lending syndicate of financial institutions.
The Agent typically administers and enforces the loan on behalf of the other
lenders in the syndicate. In addition, an institution, typically but not
always the Agent (the "Collateral Bank"), holds collateral (if any) on behalf
of the lenders. These Loan Interests may take the form of participation
interests in, assignments of or novations of a loan during its secondary
distribution, or direct interests during a primary distribution. Such Loan
Interests may be acquired from U.S. or foreign banks, insurance companies,
finance companies, or other financial institutions who have made loans or are
members of a lending syndicate or from other holders of Loan Interests. A Fund
may also acquire Loan Interests under which the Fund derives its rights
directly from the borrower. Such Loan Interests are separately enforceable by
a Fund against the borrower and all payments of interest and principal are
typically made directly to a Fund from the borrower. In the event that a Fund
and other lenders become entitled to take possession of shared collateral, it
is anticipated that such collateral would be held in the custody of a
Collateral Bank for their mutual benefit. The Funds may not act as an Agent, a
Collateral Bank, a guarantor or sole negotiator or structurer with respect to a
loan.

The Advisor will analyze and evaluate the financial condition of the
borrower in connection with the acquisition of any Loan Interest. The Advisor
also analyzes and evaluates the financial condition of the Agent and, in the
case of Loan Interests in which the Fund does not have privity with the
borrower, those institutions from or through whom the Fund derives its rights
in a loan (the "Intermediate Participants").

In a typical loan the Agent administers the terms of the loan
agreement. In such cases, the Agent is normally responsible for the collection
of principal and interest payments from the borrower and the apportionment of
these payments to the credit of all institutions which are parties to the loan
agreement. A Fund will generally rely upon the Agent or an Intermediate
Participant to receive and forward to the Fund its portion of the principal and
interest payments on the loan. Furthermore, unless under the terms of a
participation agreement a Fund has direct recourse against the borrower, the
Fund will rely on the Agent and the other members of the lending syndicate to
use appropriate credit remedies against the borrower. The Agent is typically
responsible for monitoring compliance with covenants contained in the loan
agreement based upon reports prepared by the borrower. The seller of the Loan
Interest usually does, but is often not obligated to, notify holders of Loan
Interests of any failures of compliance. The Agent may monitor the value of
the collateral and, if the value of the collateral declines, may accelerate the
loan, may give the borrower an opportunity to provide additional collateral or
may seek other protection for the benefit of the participants in the loan. The
Agent is compensated by the borrower for providing these services under a loan
agreement, and such compensation may include special fees paid upon structuring
and funding the loan and other fees paid on a continuing basis. With respect
to Loan Interests for which the Agent does not perform such administrative and
enforcement functions, a Fund will perform such tasks on its own behalf,
although a Collateral Bank will typically hold any collateral on behalf of the
Fund and the other lenders pursuant to the applicable loan agreement.

A financial institution's appointment as Agent may usually be
terminated in the event that it fails to observe the requisite standard of care
or becomes insolvent, enters Federal Deposit Insurance Corporation ("FDIC")
receivership, or, if not FDIC insured, enters into bankruptcy proceedings. A
successor Agent would generally be appointed to replace the terminated Agent,
and assets held by the Agent under the loan agreement should remain available
to holders of Loan Interests. However, if assets held by the Agent for the
benefit of the Fund were determined to be subject to the claims of the Agent's
general creditors, the Fund might incur certain costs and delays in realizing
payment on a loan interest, or suffer a loss of principal and/or interest. In
situations involving Intermediate Participants similar risks may arise.

Purchasers of Loan Interests depend primarily upon the
creditworthiness of the borrower for payment of principal and interest. If a
Fund does not receive scheduled interest or principal payments on such
indebtedness, the Fund's share price and yield could be adversely affected.
Loans that are fully secured offer a Fund more protections than an unsecured
loan in the event of non-payment of scheduled interest or principal. However,
there is no assurance that the liquidation of collateral from a secured loan
would satisfy the borrower's obligation, or that the collateral can be
liquidated. Indebtedness of borrowers whose creditworthiness is poor involves
substantially greater risks, and may be highly speculative. Borrowers that are
in bankruptcy or restructuring may never pay off their indebtedness, or may pay
only a small fraction of the amount owed. Direct indebtedness of developing
countries will also involve a risk that the governmental entities responsible
for the repayment of the debt may be unable, or unwilling, to pay interest and
repay principal when due.

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FOREIGN INVESTMENT COMPANIES

Some of the countries in which the Funds invest may not permit direct
investment by outside investors. Investments in such countries may only be
permitted through foreign government-approved or -authorized investment
vehicles, which may include other investment companies. Investing through such
vehicles may involve frequent or layered fees or expenses and may also be
subject to limitation under the 1940 Act. Under the 1940 Act, a Fund may
invest up to 10% of its assets in shares of investment companies and up to 5%
of its assets in any one investment company as long as the investment does not
represent more than 3% of the voting stock of the acquired investment company.

DIRECTORS AND OFFICERS OF THE FUNDS

Directors and officers of the Funds, together with information as to
their principal business occupations during the last five years, and other
information are shown below. Each director who is deemed an "interested
person," as defined in the 1940 Act, is indicated by an asterisk. Each officer
and director holds the same position with the following registered investment
companies, and any series thereof: Strong Advantage Fund, Inc.; Strong Asia
Pacific Fund, Inc.; Strong Asset Allocation Fund, Inc.; Strong Common Stock
Fund, Inc.; Strong Conservative Equity Funds, Inc.; Strong Discovery Fund,
Inc.; Strong Equity Funds, Inc.; Strong Heritage Reserve Series, Inc.; Strong
High-Yield Municipal Bond Fund, Inc.; Strong Income Funds, Inc.; Strong Insured
Municipal Bond Fund, Inc.; Strong International Bond Fund, Inc.; Strong
International Stock Fund, Inc.; Strong Municipal Bond Fund, Inc.; Strong
Municipal Funds, Inc.; Strong Opportunity Fund, Inc.; Strong Short-Term Global
Bond Fund, Inc.; Strong Short-Term Municipal Bond Fund, Inc.; and Strong Total
Return Fund, Inc. (collectively, the "Strong Funds"); and Strong Institutional
Funds, Inc.; Strong Special Fund II, Inc.; and Strong Variable Insurance Funds,
Inc.

*Richard S. Strong (DOB 5/12/42), Chairman of the Board and Director
of the Funds.

Prior to August 1985, Mr. Strong was Chief Executive Officer of the
Advisor, which he founded in 1974. Since August 1985, Mr. Strong has been a
Security Analyst and Portfolio Manager of the Advisor. In October 1991, Mr.
Strong also became the Chairman of the Advisor. Mr. Strong is a director of
the Advisor. Since October 1993, Mr. Strong has been Chairman and a director
of Strong Holdings, Inc., a Wisconsin corporation and subsidiary of the Advisor
("Holdings"), and the Fund's underwriter, Strong Funds Distributors, Inc., a
Wisconsin corporation and subsidiary of Holdings ("Distributor"). Since
January 1994, Mr. Strong has been Chairman and a director of Heritage Reserve
Development Corporation, a Wisconsin corporation and subsidiary of Holdings;
and since February 1994, Mr. Strong has been a member of the Managing Boards of
Fussville Real Estate Holdings L.L.C., a Wisconsin Limited Liability Company
and subsidiary of the Advisor, and Fussville Development L.L.C. a Wisconsin
Limited Liability Company and subsidiary of the Advisor, and certain of its
subsidiaries. Mr. Strong has served as a director and Chairman of the Board of
the (i) Money Fund since July 1986; (ii) Short-Term Bond Fund since August
1987; (iii) Government Fund since October 1986; (iv) Corporate Bond Fund since
December 1985; and (v) High-Yield Fund since October 1995.

Marvin E. Nevins (DOB 7/9/18), Director of the Funds.

Private Investor. From 1945 to 1980, Mr. Nevins was Chairman of
Wisconsin Centrifugal Inc., a foundry. From July 1983 to December 1986, he was
Chairman of General Casting Corp., Waukesha, Wisconsin, a foundry. Mr. Nevins
is a former Chairman of the Wisconsin Association of Manufacturers & Commerce.
He was also a regent of the Milwaukee School of Engineering and a member of the
Board of Trustees of the Medical College of Wisconsin. Mr. Nevins has served
as a director of the (i) Money Fund since July 1986; (ii) Short-Term Bond Fund
since August 1987; (iii) Government Fund since October 1986; (iv) Corporate
Bond Fund since December 1985; and (v) High-Yield Fund since October 1995.

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<PAGE> 74

Willie D. Davis (DOB 7/24/34), Director of the Funds.

Mr. Davis has been director of Alliance Bank since 1980, Sara Lee
Corporation (a food/consumer products company) since 1983, KMart Corporation (a
discount consumer products company) since 1985, YMCA Metropolitan - Los Angeles
since 1985, Dow Chemical Company since 1988, MGM Grand, Inc. (an
entertainment/hotel company) since 1990, WICOR, Inc. (a utility company) since
1990, Johnson Controls, Inc. (an industrial company) since 1992, L.A. Gear (a
footwear/sportswear company) since 1992, and Rally's Hamburger, Inc. since
1994. Mr. Davis has been a trustee of the University of Chicago since 1980,
Marquette University since 1988, and Occidental College since 1990. Since
1977, Mr. Davis has been President and Chief Executive Officer of All Pro
Broadcasting, Inc. Mr. Davis was a director of the Fireman's Fund (an
insurance company) from 1975 until 1990. Mr. Davis has served as a director of
the (i) Money, Short-Term Bond, Government, and Corporate Bond Funds since July
1994; and (ii) High-Yield Fund since October 1995.

*John Dragisic (DOB 11/26/40), President and Director of the Funds.

Mr. Dragisic has been President of the Advisor since October 1995 and
a director of the Advisor, Holdings, and Distributor since July 1994. Mr.
Dragisic previously served as a director of the Money, Short-Term Bond,
Government, and Corporate Bond Funds between 1991 and 1994; and as Vice
Chairman of the Funds from July 1994 until October 1995. Mr. Dragisic was the
President and Chief Executive Officer of Grunau Company, Inc. (a mechanical
contracting and engineering firm), Milwaukee, Wisconsin from 1987 until July
1994. From 1981 to 1987, he was an Executive Vice President with Grunau
Company, Inc. From 1969 until 1973, Mr. Dragisic worked for the InterAmerican
Development Bank. Mr. Dragisic received his Ph.D. in Economics in 1971 from
the University of Wisconsin - Madison and his B.A. degree in Economics in 1962
from Lake Forest College. Mr. Dragisic has served as (i) President of the
Money, Short-Term Bond, Government, and Corporate Bond Funds since November
1995; (ii) director of the Money, Short-Term Bond, Government, and Corporate
Bond Funds since April 1995; (iii) President of the High-Yield Fund since
November 1995; and as (iv) director of the High-Yield Fund since October 1995.

Stanley Kritzik (DOB 1/9/30), Director of the Funds.

Mr. Kritzik has been a Partner of Metropolitan Associates since 1962,
a Director of Aurora Health Care since 1987, and Health Network Ventures, Inc.
since 1992. He has served as a director of the (i) Money, Short-Term Bond,
Government, and Corporate Bond Funds since April 1995; and (ii) High-Yield Fund
since October 1995.

William F. Vogt (DOB 7/19/47), Director of the Funds.

Mr. Vogt has been the President of Vogt Management Consulting, Inc.
since 1990. From 1982 until 1990, he served as Executive Director of
University Physicians of the University of Colorado. Mr. Vogt is the Past
President of the Medical Group Management Association and a Fellow of the
American College of Medical Practice Executives. He has served as a director
of the (i) Money, Short-Term Bond, Government, and Corporate Bond Funds since
April 1995; and (ii) High-Yield Fund since October 1995.

Lawrence A. Totsky (DOB 5/6/59), C.P.A., Vice President of the Funds.

Mr. Totsky has been Senior Vice President of the Advisor since
September 1994. Mr. Totsky served as Vice President of the Advisor from
December 1992 to September 1994. Mr. Totsky acted as the Advisor's Manager of
Shareholder Accounting and Compliance from June 1987 to June 1991 when he was
named Director of Mutual Fund Administration. Mr. Totsky has been a Vice
President of the (i) Money, Short-Term Bond, Government, and Corporate Bond
Funds since May 1993; and (ii) High-Yield Fund since October 1995.

- 22 -
<PAGE> 75

Thomas P. Lemke (DOB 7/30/54), Vice President of the Funds.

Mr. Lemke has been Senior Vice President, Secretary, and General
Counsel of the Advisor since September 1994. For two years prior to joining
the Advisor, Mr. Lemke acted as Resident Counsel for Funds Management at J.P.
Morgan & Co., Inc. From February 1989 until April 1992, Mr. Lemke acted as
Associate General Counsel to Sanford C. Bernstein Co., Inc. For two years
prior to that, Mr. Lemke was Of Counsel at the Washington, D.C. law firm of Tew
Jorden & Schulte, a successor of Finley, Kumble Wagner. From August 1979 until
December 1986, Mr. Lemke worked at the Securities and Exchange Commission, most
notably as the Chief Counsel to the Division of Investment Management (November
1984 - December 1986), and as Special Counsel to the Office of Insurance
Products, Division of Investment Management (April 1982 - October 1984). Mr.
Lemke has been a Vice President of the (i) Money, Short-Term Bond, Government,
and Corporate Bond Funds since October 1994; and (ii) High-Yield Fund since
October 1995.

Ann E. Oglanian (DOB 12/7/61), Secretary of the Funds.

Ms. Oglanian has been an Associate Counsel to the Advisor since
January 1992. Ms. Oglanian acted as Associate Counsel for the Chicago-based
investment management firm, Kemper Financial Services, Inc., from June 1988
until December 1991. Ms. Oglanian has been the Secretary of the (i) Money,
Short-Term Bond, Government, and Corporate Bond Funds since May 1994; and (ii)
High-Yield Fund since October 1995.

Ronald A. Neville (DOB 5/21/47), C.P.A., Treasurer of the Funds.

Mr. Neville has been the Senior Vice President and Chief Financial
Officer of the Advisor since January 1995. For fourteen years prior to that,
Mr. Neville worked at Twentieth Century Companies, Inc., most notably as Senior
Vice President and Chief Financial Officer (1988 until December 1994). Mr.
Neville received his M.B.A. in 1972 from the University of Missouri - Kansas
City and his B.A. degree in Business Administration and Economics in 1969 from
Drury College. Mr. Neville has been the Treasurer of the (i) Money, Short-Term
Bond, Government, and Corporate Bond Funds since April 1995; and (ii)
High-Yield Fund since October 1995.

Except for Messrs. Nevins, Davis, Kritzik and Vogt, the address of all
of the above persons is P.O. Box 2936, Milwaukee, Wisconsin 53201. Mr. Nevins'
address is 6075 Pelican Bay Boulevard, Naples, Florida 33963. Mr. Davis'
address is 161 North La Brea, Inglewood, California 90301, Mr. Kritzik's
address is 1123 North Astor Street, P.O. Box 92547, Milwaukee, Wisconsin
53202-0547. Mr. Vogt's address is 2830 East Third Avenue, Denver, Colorado
80206.

The mutual fund complex that is managed by the Advisor, which is
composed of 26 open-end management investment companies consisting of 37 mutual
funds, of which the Funds are a part, in the aggregate, pays each Director who
is not a director, officer, or employee of the Advisor, or any affiliated
company (a "disinterested director") an annual fee of $50,000, plus $100 per
Board meeting for each mutual fund. In addition, each disinterested director
is reimbursed by the mutual funds for travel and other expenses incurred in
connection with attendance at such meetings. Other officers and directors of
the mutual funds receive no compensation or expense reimbursement from the
mutual funds.

As of November 30, 1995, the officers and directors of the Money,
Short-Term Bond, Government, and Corporate Bond Funds in the aggregate
beneficially owned less than 1% of each Fund's then outstanding shares. As of
December 27, 1995, the officers and directors of the High-Yield Fund
beneficially owned 110,000 shares of common stock of the Fund, which was 100% of
the Fund's then outstanding shares.

- 23 -
<PAGE> 76

PRINCIPAL SHAREHOLDERS

As of March 31, 1995, the following persons owned of record or are
known by the Funds to own of record or beneficially, more than 5% of the listed
Fund's outstanding shares:

<TABLE>
<CAPTION>
NAME AND ADDRESS FUND/SHARES PERCENT OF CLASS
---------------- ----------- ----------------
<S> <C> <C>
Charles Schwab & Co., Inc. Short-Term Bond/15,209,195 14.08%
101 Montgomery Street Government/11,067,349 35.89
San Francisco, California 94104 Corporate Bond/1,921,679 12.33

</TABLE>

As of December 27, 1995, the Advisor owned both of record and
beneficially, and Mr. Strong, who controls the Advisor, owned beneficially,
110,000 shares (100%) of the High-Yield Fund's outstanding shares.

A shareholder owning more than 25% of a Fund's shares may be
considered a "controlling person" of the Fund. Accordingly, its vote could
have a more significant effect on matters presented to shareholders for
approval than the vote of other Fund shareholders.

INVESTMENT ADVISOR AND DISTRIBUTOR

The Advisor to the Funds is Strong Capital Management, Inc. Mr.
Richard S. Strong controls the Advisor. Mr. Strong is the Chairman and a
director of the Advisor, Mr. Dragisic is the President and a director of the
Advisor, Mr. Totsky is a Senior Vice President of the Advisor, Mr. Lemke is a
Senior Vice President, Secretary and General Counsel of the Advisor, Mr.
Neville is a Senior Vice President and Chief Financial Officer of the Advisor,
and Ms. Oglanian is an Associate Counsel of the Advisor. A brief description
of each Fund's investment advisory agreement ("Advisory Agreement") is set
forth in the Prospectus under "About the Funds - Management."

The Advisory Agreements for the Money, Short-Term Bond, Government,
and Corporate Bond Funds, dated May 1, 1995, were last approved by shareholders
at the annual meeting of shareholders held on April 13, 1995. The High-Yield
Fund's Advisory Agreement, dated December 27, 1995, was last approved by the
sole shareholder on December 27, 1995, and will remain in effect as to the Fund
for a period of two years. Each Advisory Agreement is required to be approved
annually by either the Board of Directors of the Fund or by vote of a majority
of the Fund's outstanding voting securities (as defined in the 1940 Act). In
either case, each annual renewal must be approved by the vote of a majority of
the Fund's directors who are not parties to the Advisory Agreement or
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Each Advisory Agreement is terminable,
without penalty, on 60 days' written notice by the Board of Directors of the
Fund, by vote of a majority of the Fund's outstanding voting securities, or by
the Advisor. In addition, an Advisory Agreement will terminate automatically
in the event of its assignment.

Under the terms of each Advisory Agreement, the Advisor manages the
Fund's investments subject to the supervision of the Fund's Board of Directors.
The Advisor is responsible for investment decisions and supplies investment
research and portfolio management. At its expense, the Advisor provides office
space and all necessary office facilities, equipment and personnel for
servicing the investments of the Fund. The Advisor places all orders for the
purchase and sale of the Fund's portfolio securities at the Fund's expense.

Except for expenses assumed by the Advisor as set forth above or by
the Distributor as described below with respect to the distribution of a Fund's
shares, a Fund is responsible for all its other expenses, including, without
limitation, interest charges, taxes, brokerage commissions, and similar
expenses; expenses of issue, sale, repurchase, or redemption of shares;
expenses of registering or qualifying shares for sale; expenses for printing
and distribution costs of Prospectuses and quarterly financial statements
mailed to existing shareholders; and charges of custodians, transfer agents
(including the printing and mailing of reports and notices to shareholders),
registrars, auditing and legal services, clerical services related to
recordkeeping and shareholder relations, printing stock certificates; and fees
for directors who are not "interested persons" of the Advisor.

- 24 -
<PAGE> 77

As compensation for its services, each Fund pays to the Advisor
monthly management fees at the following annual rates: (1) Money Fund: .50% of
average daily net assets; (2) Short-Term Bond Fund: .625% of average daily net
assets; (3) Government Fund: .60% of average daily net assets; and (4)
Corporate Bond and High-Yield Funds: .625% of average daily net assets. (See
"Shareholder Manual - Determining Your Share Price" in the Prospectus.) From
time to time, the Advisor may voluntarily waive all or a portion of its
management fee for a Fund.

The following table sets forth certain information concerning
management fees for each Fund that has completed a fiscal year:

<TABLE>
<CAPTION>
Management Fee
Incurred Management Fee Management Fee
by Fund Waiver Paid by Fund
------- ------ ------------
<S> <C> <C> <C>
Money Fund
1992 $2,248,285 $1,388,272 $ 860,013
1993 $1,771,980 $1,118,603 $ 653,377
1994 $2,159,922 $1,108,463 $1,051,459

Short-Term Bond Fund
1992 $3,070,066 $ 730,213 $2,339,853
1993 $6,876,818 $ 659,797 $6,217,021
1994 $8,715,270 $ 0 $8,715,270

Government Fund
1992 $ 389,659 $ 281,732 $ 107,927
1993 $ 922,030 $ 205,059 $ 716,971
1994 $1,537,259 $ 150,180 $1,387,079

Corporate Bond Fund
1992 $ 606,085 $ 0 $ 606,085
1993 $ 724,883 $ 0 $ 724,883
1994 $ 773,759 $ 0 $ 773,759
- ---------------------------------------------------------

</TABLE>
Each Advisory Agreement requires the Advisor to reimburse a Fund in
the event that the expenses and charges payable by the Fund in any fiscal year,
including the management fee but excluding taxes, interest, brokerage
commissions, and similar fees and to the extent permitted extraordinary
expenses, exceed the percentage of the average net asset value of the Fund for
such year. Such excess is determined by valuations made as of the close of
each business day of the year, which is the most restrictive percentage
provided by the laws of the various states in which the Fund's common stock is
qualified for sale; or if the states in which the Fund's common stock is
qualified for sale impose no restrictions, the Advisor shall reimburse the Fund
in the event the expenses and charges payable by the Fund in any fiscal year
(as described above) exceed 2%. The most restrictive percentage limitation
currently applicable to a Fund is 2.5% of its average daily net assets up to
$30,000,000, 2% on the next $70,000,000 of its average daily net assets and
1.5% of its average daily net assets in excess of $100,000,000. Reimbursement
of expenses in excess of the applicable limitation will be made on a monthly
basis and will be paid to the Fund by reduction of the Advisor's fee, subject
to later adjustment, month by month, for the remainder of the Fund's fiscal
year. The Advisor may from time to time voluntarily absorb expenses for a Fund
in addition to the reimbursement of expenses in excess of application
limitations.

On July 12, 1994, the Securities and Exchange Commission (the "SEC")
filed an administrative action (Order) against the Advisor, Mr. Strong, and
another employee of the Advisor in connection with conduct that occurred
between 1987 and early 1990. In re Strong/Corneliuson Capital Management, Inc.,
et al. Admin. Proc. File No. 3-8411. The proceeding was settled by consent
without admitting or denying the allegations in the Order. The Order alleged
that the Advisor and Mr. Strong aided and abetted violations of Section 17(a)
of the 1940 Act by effecting trades between mutual funds, and between mutual
funds and Harbour Investments Ltd. ("Harbour"), without complying with the
exemptive provisions of SEC Rule 17a-7 or otherwise

- 25 -
<PAGE> 78

obtaining an exemption. It further alleged that the Advisor violated, and Mr.
Strong aided and abetted violations of, the disclosure provisions of the 1940
Act and the Investment Advisers Act of 1940 by misrepresenting the Advisor's
policy on personal trading and by failing to disclose trading by Harbour, an
entity in which principals of the Advisor owned between 18 and 25 percent of
the voting stock. As part of the settlement, the respondents agreed to a
censure and a cease and desist order and the Advisor agreed to various
undertakings, including adoption of certain procedures and a limitation for six
months on accepting certain types of new advisory clients.

The staff of the U.S. Department of Labor (the "Staff") has contacted
the Advisor regarding alleged cross-trading of securities between 1987 and
early 1990 involving various customer accounts subject to the Employee
Retirement Security Act of 1974 ("ERISA") and managed by the Advisor. The
Advisor has informed the Staff of the basis for its position that the trades
complied with ERISA and that, in any event, any alleged noncompliance was not
the cause of any losses to the accounts. The Staff has stated that it
disagrees with the Advisor's positions, although to date it has not filed any
action against the Advisor. At this time, the Advisor is negotiating with the
Staff regarding a possible resolution of the matter, but it cannot presently
determine whether the matter will be settled or litigated or, if it is settled
or litigated, how it ultimately will be resolved. However, management
presently believes, based on current knowledge and the Advisor's insurance
coverage, that the ultimate resolution of this matter should not have a
material adverse effect on the Advisor's financial position.

The Advisor has adopted a Code of Ethics (the "Code") which governs
the personal trading activities of all "Access Persons" of the Advisor. Access
Persons include every director and officer of the Advisor and the investment
companies managed by the Advisor, including the Funds, as well as certain
employees of the Advisor who have access to information relating to the
purchase or sale of securities by the Advisor on behalf of accounts managed by
it. The Code is based upon the principal that such Access Persons have a
fiduciary duty to place the interests of the Advisor's clients ahead of their
own.

The Code requires Access Persons (other than Access Persons who are
independent directors of the investment companies managed by the Advisor,
including the Funds) to, among other things, preclear their securities
transactions (with limited exceptions, such as transactions in shares of mutual
funds, direct obligations of the U.S. government and certain options on
broad-based securities market indexes) and to execute such transactions through
the Advisor's trading department. The Code, which applies to all Access Persons
(other than Access Persons who are independent directors of the investment
companies managed by the Advisor, including the Funds), includes a ban on
acquiring any securities in an initial public offering, other than a new
offering of a registered open-end investment company, and a prohibition from
profiting on short-term trading in securities. In addition, no Access Person
may purchase or sell any security which, at the time, is being purchased or
sold, or to the knowledge of the Access Person, is being considered for
purchase or sale, by the Advisor on behalf of any mutual fund or other account
managed by it. Finally, the Code provides for trading "black out" periods
which prohibit trading by Access Persons who are portfolio managers within
seven calendar days of trading in the same securities by any mutual fund or
other account managed by the portfolio manager.

Under a Distribution Agreement dated December 1, 1993 with the Money,
Short-Term Bond, Government, and Corporate Bond Funds, and a Distribution
Agreement dated December 27, 1995 for the High-Yield Fund (the "Distribution
Agreements"), Strong Funds Distributors, Inc. ("Distributor"), a subsidiary of
the Advisor, acts as underwriter of each Fund's shares. The Distribution
Agreements provide that the Distributor will use its best efforts to distribute
the Fund's shares. Since the Funds are "no-load" funds, no sales commissions
are charged on the purchase of Fund shares. Each Distribution Agreement
further provides that the Distributor will bear the additional costs of
printing Prospectuses and shareholder reports which are used for selling
purposes, as well as advertising and any other costs attributable to the
distribution of a Fund's shares. The Distributor is an indirect subsidiary of
the Advisor and controlled by the Advisor and Richard S. Strong. Prior to
December 1, 1993, the Advisor acted as underwriter for the Money, Short-Term
Bond, Government, and Corporate Bond Funds. On December 1, 1993, the
Distributor succeeded to the broker-dealer registration of the Advisor and, in
connection therewith, the Distribution Agreements for the Money, Short-Term
Bond, Government, and Corporate Bond Funds were executed on substantially
identical terms as the former distribution agreements with the Advisor as
distributor. The Distribution Agreements are subject to the same termination
and renewal provisions as are described above with respect to the Advisory
Agreements.

From time to time, the Distributor may hold in-house sales incentive
programs for its associated persons under which these persons may receive
non-cash compensation awards in connection with the sale and distribution of a
Fund's shares. These awards may include items such as, but not limited to,
gifts, merchandise, gift certificates, and payment of travel expenses, meals
and lodging. As required by the National Association of Securities Dealers,
Inc. or NASD's proposed rule amendments in this

- 26 -
<PAGE> 79

area, any in-house sales incentive program will be multi-product oriented,
i.e., any incentive will be based on an associated person's gross production of
all securities within a product type and will not be based on the sales of
shares of any specifically designated mutual fund.

PORTFOLIO TRANSACTIONS AND BROKERAGE

The Advisor is responsible for decisions to buy and sell
securities for the Funds and for the placement of the Funds' portfolio
business and the negotiation of the commissions to be paid on such
transactions. It is the policy of the Advisor to seek the best execution at
the best security price available with respect to each transaction, in light
of the overall quality of brokerage and research services provided to the
Advisor or the Funds. In over-the-counter transactions, orders are placed
directly with a principal market maker unless it is believed that a better
price and execution can be obtained using a broker. The best price to the
Funds means the best net price without regard to the mix between purchase or
sale price and commissions, if any. In selecting broker-dealers and in
negotiating commissions, the Advisor considers a variety of factors, including
best price and execution, the full range of brokerage services provided by
the broker, as well as its capital strength and stability, and the quality of
the research and research services provided by the broker. Brokerage will not
be allocated based on the sale of any shares of the Strong Funds.

Section 28(e) of the Securities Exchange Act of 1934 ("Section
28(e)") permits an investment advisor, under certain circumstances, to cause
an account to pay a broker or dealer a commission for effecting a transaction
in excess of the amount of commission another broker or dealer would have
charged for effecting the transaction in recognition of the value of the
brokerage and research services provided by the broker or dealer. Brokerage
and research services include (a) furnishing advice as to the value of
securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; (b) furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio strategy, and
the performance of accounts; and (c) effecting securities transactions and
performing functions incidental thereto (such as clearance, settlement, and
custody).

In carrying out the provisions of the Advisory Agreements, the
Advisor may cause the Funds to pay a broker, which provides brokerage and
research services to the Advisor, a commission for effecting a securities
transaction in excess of the amount another broker would have charged for
effecting the transaction. The Advisor believes it is important to its
investment decision-making process to have access to independent research.
The Advisory Agreements provide that such higher commissions will not be
paid by a Fund unless (a) the Advisor determines in good faith that the
amount is reasonable in relation to the services in terms of the particular
transaction or in terms of the Advisor's overall responsibilities with
respect to the accounts as to which it exercises investment discretion; (b)
such payment is made in compliance with the provisions of Section 28(e),
other applicable state and federal laws, and the Advisory Agreement; and (c) in
the opinion of the Advisor, the total commissions paid by a Fund will be
reasonable in relation to the benefits to the Fund over the long term.
The investment management fees paid by the Funds under the Advisory
Agreements are not reduced as a result of the Advisor's receipt of research
services.

Generally, research services provided by brokers may include
information on the economy, industries, groups of securities, individual
companies, statistical information, accounting and tax law interpretations,
political developments, legal developments affecting portfolio securities,
technical market action, pricing and appraisal services, credit analysis,
risk measurement analysis, performance analysis, and analysis of corporate
responsibility issues. Such research services are received primarily in the
form of written reports, telephone contacts, and personal meetings with
security analysts. In addition, such research services may be provided
in the form of access to various computer-generated data, computer
hardware and software, and meetings arranged with corporate and industry
spokespersons, economists, academicians, and government representatives. In
some cases, research services are generated by third parties but are provided
to the Advisor by or through brokers. Such brokers may pay for all or a portion
of computer hardware and software costs relating to the pricing of securities.

Where the Advisor itself receives both administrative benefits and
research and brokerage services from the services provided by brokers, it
makes a good faith allocation between the administrative benefits and the
research and brokerage services, and will pay for any administrative benefits
with cash. In making good faith allocations of costs between
administrative benefits and research and brokerage services, a conflict of
interest may exist by reason of the Advisor's allocation of the costs of such
benefits and services between those that primarily benefit the Advisor and
those that primarily benefit the Funds and other advisory clients.

- 27 -
<PAGE> 80

From time to time, the Advisor may purchase securities for a Fund in
a fixed price offering. In these situations, the seller may be a member of
the selling group that will, in addition to selling the securities to the
Funds and other advisory clients, provide the Advisor with research. The
National Association of Securities Dealers has adopted rules expressly
permitting these types of arrangements under certain circumstances.
Generally, the seller will provide research "credits" in these situations at a
rate that is higher than that which is available for typical secondary market
transactions. These arrangements may not fall within the safe harbor of Section
28(e).

Each year, the Advisor considers the amount and nature of research and
research services provided by brokers, as well as the extent to which such
services are relied upon, and attempts to allocate a portion of the
brokerage business of the Funds and other advisory clients on the basis of
that consideration. In addition, brokers may suggest a level of business
they would like to receive in order to continue to provide such services.
The actual brokerage business received by a broker may be more or less than
the suggested allocations, depending upon the Advisor's evaluation of all
applicable considerations.

During its last fiscal year, the Advisor had an arrangement with
various brokers whereby, in consideration of the providing of research
services, the Advisor allocated brokerage to those firms, provided that their
brokerage and research services were satisfactory to the Advisor and their
execution capabilities were compatible with the Advisor's policy of seeking
best execution at the best security price available, as discussed above.

The Advisor may direct the purchase of securities on behalf of the
Funds and other advisory clients in secondary market transactions, in public
offerings directly from an underwriter, or in privately negotiated
transactions with an issuer. When the Advisor believes the circumstances so
warrant, securities purchased in public offerings may be resold shortly after
acquisition in the immediate aftermarket for the security in order to take
advantage of price appreciation from the public offering price or for other
reasons. Short-term trading of securities acquired in public offerings, or
otherwise, may result in higher portfolio turnover and associated brokerage
expenses.

The Advisor places portfolio transactions for other advisory accounts,
including other mutual funds managed by the Advisor. Research services
furnished by firms through which the Funds effect their securities transactions
may be used by the Advisor in servicing all of its accounts; not all of such
services may be used by the Advisor in connection with the Funds. In the
opinion of the Advisor, it is not possible to measure separately the benefits
from research services to each of the accounts (including the Funds) managed by
the Advisor. Because the volume and nature of the trading activities of the
accounts are not uniform, the amount of commissions in excess of those charged
by another broker paid by each account for brokerage and research services will
vary. However, in the opinion of the Advisor, such costs to the Funds will not
be disproportionate to the benefits received by the Funds on a continuing
basis.

The Advisor seeks to allocate portfolio transactions equitably
whenever concurrent decisions are made to purchase or sell securities by the
Funds and another advisory account. In some cases, this procedure could have an
adverse effect on the price or the amount of securities available to the Funds.
In making such allocations between a Fund and other advisory accounts, the main
factors considered by the Advisor are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held, and the opinions of the persons responsible for recommending
the investment.

Where consistent with a client's investment objectives, investment
restrictions, and risk tolerance, the Advisor may purchase securities sold in
underwritten public offerings for client accounts, commonly referred to as
"deal" securities. The Advisor has adopted deal allocation procedures (the
"procedures"), summarized below, that reflect the Advisor's overriding policy
that deal securities must be allocated among participating client accounts in a
fair and equitable manner and that deal securities may not be allocated in a
manner that unfairly discriminates in favor of certain clients or types of
clients.

The procedures provide that, in determining which client accounts a
portfolio manager team will seek to have purchase deal securities, the team
will consider all relevant factors including, but not limited to, the nature,
size, and expected allocation to the Advisor of deal securities; the size of
the account(s); the accounts' investment objectives and restrictions; the risk
tolerance of the client; the client's tolerance for possibly higher portfolio
turnover; the amount of commissions generated by the account during the past
year; and the number of other deals the client has participated in during the
past year.

- 28 -
<PAGE> 81

Where more than one of the Advisor portfolio manager team seeks to
have client accounts participate in a deal and the amount of deal securities
allocated to the Advisor by the underwriting syndicate is less than the
aggregate amount ordered by the Advisor (a "reduced allocation"), the deal
securities will be allocated among the portfolio manager teams based on all
relevant factors. The primary factor shall be assets under management,
although other factors that may be considered in the allocation decision
include, but are not limited to, the nature, size, and expected Advisor
allocation of the deal; the amount of brokerage commissions or other amounts
generated by the respective participating portfolio manager teams; and which
portfolio manager team is primarily responsible for the Advisor receiving
securities in the deal. Based on the relevant factors, the Advisor has
established general allocation percentages for its portfolio manager teams, and
these percentages are reviewed on a regular basis to determine whether asset
growth or other factors make it appropriate to use different general allocation
percentages for reduced allocations.

When a portfolio manager team receives a reduced allocation of deal
securities, the portfolio manager team will allocate the reduced allocation
among client accounts in accordance with the allocation percentages set forth
in the team's initial allocation instructions for the deal securities, except
where this would result in a de minimis allocation to any client account. On a
regular basis, the Advisor reviews the allocation of deal securities to ensure
that they have been allocated in a fair and equitable manner that does not
unfairly discriminate in favor of certain clients or types of clients.

The Money Fund paid brokerage commissions during 1992, 1993 and 1994
of $0, $0, and $0, respectively. The Short-Term Bond Fund paid brokerage
commissions during 1992, 1993, and 1994 of approximately $203,000, $286,000,
and $66,000, respectively. The Government Fund paid brokerage commissions
during 1992, 1993, and 1994 of approximately $50,000, $63,000, and $8,000,
respectively. The Corporate Bond Fund paid brokerage commissions during 1992,
1993, and 1994 of approximately $113,000, $61,000 and $4,000, respectively.

For the 1993 fiscal period ended December 31, the Short-Term Bond
Fund's portfolio turnover rate was 444.9%. For the 1993 and 1994 fiscal
periods ended December 31, the Government and Corporate Bond Funds' respective
portfolio turnover rates were as follows: (1) Government Fund: 520.9% and
479.0%; and (2) Corporate Bond Fund: 665.8% and 603.0%. The above listed
portfolio turnover rates for the respective Funds were higher than anticipated
primarily because each Fund employed a trading strategy to take advantage of
yield spread opportunities to help enhance the Fund's total return.

As of December 31, 1994, the Money Fund had acquired securities of its
regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or
their parents in the following amounts:

<TABLE>
<CAPTION>
Regular Broker or Dealer or Parent Issuer Value of Securities Owned as of December 31, 1994*
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Goldman Sachs & Co. $10,000,000
Merrill Lynch & Company, Inc. 1,000,000
</TABLE>

*To the nearest thousand.

CUSTODIAN

As custodian of each Fund's assets, Firstar Trust Company, P.O. Box
701, Milwaukee, Wisconsin 53201, has custody of all securities and cash of
the Funds, delivers and receives payment for securities sold, receives
and pays for securities purchased, collects income from investments, and
performs other duties, all as directed by the officers of the Funds. With
respect to the Money Fund only, the custodian has entered into a
sub-custodial arrangement with First National Bank of Chicago ("First
Chicago") pursuant to which First Chicago may retain custody of certain Money
Fund foreign securities. The custodian and, if applicable, the sub-custodian
are in no way responsible for any of the investment policies or decisions of
the Funds.

- 29 -
<PAGE> 82

TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT

The Advisor acts as transfer agent and dividend-disbursing agent for
the Funds. The Advisor is compensated based on an annual fee per open
account of $32.50 for the Money Fund, and $31.50 for the Short-Term
Bond, Government, Corporate Bond, and High-Yield Funds, plus out-of-pocket
expenses, such as postage and printing expenses in connection with
shareholder communications. The Advisor also receives an annual fee per
closed account of $4.20 from each Fund. The fees received and the services
provided as transfer agent and dividend disbursing agent are in addition to
those received and provided by the Advisor under the Advisory Agreement. In
addition, the Advisor provides certain printing and mailing services for the
Funds, such as printing and mailing of shareholder account statements, checks,
and tax forms.

The following table sets forth certain information concerning amounts
paid by each Fund that has completed a fiscal year for transfer agency and
dividend disbursing and printing and mailing services:

<TABLE>
<CAPTION>
Transfer Agency and Dividend Disbursement
Services Charges Incurred
---------------------------------------------------------------------------------
Per Printing and Amounts Net Amount
Account Expense Mailing Waived By Paid By
Fund Charges Reimbursements Services Advisor Fund
---- ------- -------------- -------- ------- ----
<S> <C> <C> <C> <C> <C>
Money Fund
1992 $1,535,244 $700,855 $73,041 $ 0 $ 2,309,140
1993 1,257,905 486,852 50,097 0 1,794,854
1994 1,155,437 438,197 31,377 187 1,460,176
Short-Term Bond Fund
1992 $ 907,739 $289,618 $ 6,071 $ 633,343 $ 570,085
1993 1,818,354 503,093 65,804 0 2,387,251
1994 2,550,992 528,202 58,057 0 3,137,251
Government Fund
1992 $ 184,550 $ 49,701 $ 6,981 $ 0 $ 241,232
1993 334,277 76,557 10,009 0 420,843
1994 525,837 81,183 9,695 0 616,715
Corporate Bond Fund
1992 $ 409,159 $ 85,929 $14,271 $ 0 $ 509,359
1993 374,189 82,743 11,692 0 468,624
1994 389,833 79,434 8,512 0 477,779
- ----------------------------------------------------------------------
</TABLE>

From time to time, the Funds, directly or indirectly through
arrangements with the Advisor, and/or the Advisor may pay amounts to third
parties that provide transfer agent and other administrative services relating
to the Funds to persons who beneficially own interests in the Funds, such as
participants in 401(k) plans. These services may include, among other things,
sub-accounting services, answering inquiries relating to the Funds,
transmitting, on behalf of the Funds, proxy statements, annual reports,
updated Prospectuses, other communications regarding the Funds, and related
services as the Funds or beneficial owners may reasonably request. In such
cases, the Funds will not pay fees at a rate that is greater than the rate the
Funds are currently paying the Advisor for providing these services to Fund
shareholders.

- 30 -
<PAGE> 83

TAXES

GENERAL

As indicated under "About the Funds - Distributions and Taxes" in the
Prospectus, each Fund intends to continue to qualify annually for treatment as
a regulated investment company ("RIC") under the Internal Revenue Code of
1986, as amended (the "Code"). This qualification does not involve government
supervision of the Funds' management practices or policies.

In order to qualify for treatment as a RIC under the Code, each Fund
must distribute to its shareholders for each taxable year at least 90% of its
investment company taxable income (consisting generally of net investment
income, net short-term capital gain, and net gains from certain foreign
currency transactions ) ("Distribution Requirement") and must meet several
additional requirements. For each Fund these requirements include the
following: (1) the Fund must derive at least 90% of its gross income each
taxable year from dividends, interest, payments with respect to securities
loans, and gains from the sale or other disposition of securities or foreign
currencies or other income (including gains from options, futures, or forward
currency contracts) derived with respect to its business of investing in
securities or these currencies ("Income Requirement"); (2) the Fund must
derive less than 30% of its gross income each taxable year from the sale
or other disposition of securities, or options or futures (other than those
on foreign currencies), or foreign currencies (or options, futures, or
forward contracts thereon) that are not directly related to the Fund's
principal business of investing in securities (or options and futures with
respect to securities) that were held for less than three months ("30%
Limitation"); (3) at the close of each quarter of a Fund's taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. government securities, securities of other RICs, and other
securities, with these other securities limited, in respect of any one
issuer, to an amount that does not exceed 5% of the value of the Fund's total
assets and that does not represent more than 10% of the issuer's outstanding
voting securities; and (4) at the close of each quarter of the Fund's taxable
year, not more than 25% of the value of its total assets may be invested in
securities (other than U.S. government securities or the securities of other
RICs) of any one issuer. From time to time the Advisor may find it necessary
to make certain types of investments for the purpose of ensuring that the Fund
continues to qualify for treatment as a RIC under the Code.

If Fund shares are sold at a loss after being held for six
months or less, the loss will be treated as long-term, instead of
short-term, capital loss to the extent of any capital gain distributions
received on those shares.

Each Fund will be subject to a nondeductible 4% excise tax ("Excise
Tax") to the extent it fails to distribute by the end of any calendar year
substantially all of its ordinary income for that year and capital gain net
income for the one-year period ending on October 31 of that year, plus certain
other amounts.

FOREIGN TRANSACTIONS

Interest and dividends received by a Fund may be subject to income,
withholding, or other taxes imposed by foreign countries and U.S.
possessions that would reduce the yield on its securities. Tax conventions
between certain countries and the United States may reduce or eliminate
these foreign taxes, however, and many foreign countries do not impose taxes
on capital gains in respect of investments by foreign investors.

Each Fund maintains its accounts and calculates its income in U.S.
dollars. In general, gain or loss (1) from the disposition of foreign
currencies and forward currency contracts, (2) from the disposition of
foreign-currency-denominated debt securities that are attributable to
fluctuations in exchange rates between the date the securities are acquired
and their disposition date, and (3) attributable to fluctuations in exchange
rates between the time a Fund accrues interest or other receivables or
expenses or other liabilities denominated in a foreign currency and the time
the Fund actually collects those receivables or pays those liabilities, will
be treated as ordinary income or loss. A foreign-currency-denominated debt
security acquired by a Fund may bear interest at a high normal rate that takes
into account expected decreases in the value of the principal amount of the
security due to anticipated currency devaluations; in that case, the Fund
would be required to include the interest in income as it accrues but
generally would realize a currency loss with respect to the principal only
when the principal was received (through disposition or upon maturity).

- 31 -
<PAGE> 84

DERIVATIVE INSTRUMENTS

The use of derivatives strategies, such as purchasing and selling
(writing) options and futures and entering into forward currency contracts,
involves complex rules that will determine for income tax purposes the
character and timing of recognition of the gains and losses the Funds realize
in connection therewith. Gains from the disposition of foreign currencies
(except certain gains therefrom that may be executed by future regulations),
and income from transactions in options, futures, and forward currency
contracts derived by a Fund with respect to its business of investing in
securities or foreign currencies, will qualify as permissible income under
the Income Requirement. However, income from the disposition of options and
futures (other than those on foreign currencies) will be subject to the 30%
Limitation if they are held for less than three months. Income from the
disposition of foreign currencies, and options, futures, and forward
contracts on foreign currencies that are not directly related to a Fund's
principal business of investing in securities (or options and futures with
respect to securities) also will be subject to the 30% Limitation if they are
held for less than three months.

If a Fund satisfies certain requirements, any increase in value of a
position that is part of a "designated hedge" will be offset by any decrease
in value (whether realized or not) of the offsetting hedging position during
the period of the hedge for purposes of determining whether the Fund satisfies
the 30% Limitation. Thus, only the net gain (if any) from the designated hedge
will be included in gross income for purposes of that limitation. The Funds
intend that, when they engage in hedging strategies, the hedging transactions
will qualify for this treatment, but at the present time it is not clear
whether this treatment will be available for all of the Funds' hedging
transactions. To the extent this treatment is not available or is not elected
by a Fund, it may be forced to defer the closing out of certain options,
futures, or forward currency contracts beyond the time when it otherwise would
be advantageous to do so, in order for the Fund to continue to qualify as a
RIC.

For federal income tax purposes, each Fund is required to recognize as
income for each taxable year its net unrealized gains and losses on options,
futures, or forward currency contracts that are subject to section 1256 of
the Code ("Section 1256 Contracts") and are held by the Fund as of the end of
the year, as well as gains and losses on Section 1256 Contracts actually
realized during the year. Except for Section 1256 Contracts that are part of
a "mixed straddle" and with respect to which a Fund makes a certain election,
any gain or loss recognized with respect to Section 1256 Contracts is
considered to be 60% long-term capital gain or loss and 40% short-term
capital gain or loss, without regard to the holding period of the Section
1256 Contract. Unrealized gains on Section 1256 Contracts that have been held
by a Fund for less than three months as of the end of its taxable year, and
that are recognized for federal income tax purposes as described above, will
not be considered gains on investments held for less than three months for
purposes of the 30% Limitation.

ZERO-COUPON, STEP-COUPON, AND PAY-IN-KIND SECURITIES

Certain Funds may acquire zero-coupon, step-coupon, or other
securities issued with original issue discount. As a holder of those
securities, a Fund must include in its income the original issue discount
that accrues on the securities during the taxable year, even if the Fund
receives no corresponding payment on the securities during the year.
Similarly, a Fund must include in its income securities it receives as
"interest" on pay-in-kind securities. Because a Fund annually must
distribute substantially all of its investment company taxable income,
including any original issue discount and other non-cash income, to satisfy
the Distribution Requirement and avoid imposition of the Excise Tax, it may
be required in a particular year to distribute as a dividend an amount that
is greater than the total amount of cash it actually receives. Those
distributions may be made from the proceeds on sales of portfolio securities,
if necessary. A Fund may realize capital gains or losses from those sales,
which would increase or decrease its investment company taxable income or net
capital gain, or both. In addition, any such gains may be realized on the
disposition of securities held for less than three months. Because of the 30%
Limitation, any such gains would reduce the Fund's ability to sell other
securities, or certain options, or futures, or forward currency contracts,
held for less that three months that it might wish to sell in the ordinary
course of its portfolio management.

The foregoing federal tax discussion as well as the tax
discussion contained within the Prospectus under "About the Funds -
Distributions and Taxes" is intended to provide you with an overview of
the impact of federal income tax provisions on each Fund or its
shareholders. These tax provisions are subject to change by legislative or
administrative action at the federal, state, or local level, and any changes
may be applied retroactively. Any such action that limits or restricts
each Fund's current ability to pass-through earnings without taxation at the
Fund level, or otherwise materially changes a Fund's tax treatment, could
adversely affect the value of a shareholder's investment in a Fund. Because
each Fund's taxes are a complex matter, you should

- 32 -
<PAGE> 85

consult your tax adviser for more detailed information concerning the
taxation of a Fund and the federal, state, and local tax consequences to
shareholders of an investment in a Fund.

DETERMINATION OF NET ASSET VALUE

As set forth in the Prospectus under the caption "Shareholder Manual
- - Determining Your Share Price," the net asset value of each Fund will be
determined as of the close of trading on each day the New York Stock
Exchange (the "NYSE") is open for trading. The New York Stock Exchange is
open for trading Monday through Friday except New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. Additionally, if any of the aforementioned holidays falls
on a Saturday, the NYSE will not be open for trading on the preceding
Friday, and when any such holiday falls on a Sunday, the NYSE will not be
open for trading on the succeeding Monday, unless unusual business conditions
exist, such as the ending of a monthly or yearly accounting period.

The Money Fund values its securities on the amortized cost basis
and seeks to maintain its net asset value at a constant $1.00 per share. In
the event a difference of 1/2 of 1% or more were to occur between the net
asset value calculated by reference to market values and the Money Fund's
$1.00 per share net asset value, or if there were any other deviation which
the Board of Directors believed would result in a material dilution to
shareholders or purchasers, the Board of Directors would consider taking any
one or more of the following actions or any other action considered
appropriate: selling portfolio securities to shorten average portfolio
maturity or to realize capital gains or losses, reducing or suspending
shareholder income accruals, redeeming shares in kind, or utilizing a value
per unit based upon available indications of market value. Available
indications of market value may include, among other things, quotations or
market value estimates of securities and/or values based on yield data relating
to money market securities that are published by reputable sources.

ADDITIONAL SHAREHOLDER INFORMATION

TELEPHONE EXCHANGE AND REDEMPTION PRIVILEGES AND AUTOMATIC EXCHANGE PLAN

Shares of a Fund and any other funds sponsored by the Advisor may be
exchanged for each other at relative net asset values. Exchanges will be
effected by redemption of shares of the Fund held and purchase of shares of
the fund for which Fund shares are being exchanged (the "New Fund"). For
federal income tax purposes, any such exchange constitutes a sale upon
which a capital gain or loss will be realized, depending upon whether the
value of the shares being exchanged is more or less than the shareholder's
adjusted cost basis. If you are interested in exercising any of these
exchange privileges, you should obtain Prospectuses of other funds sponsored
by the Advisor from the Advisor. Upon a telephone exchange, the transfer
agent establishes a new account in the New Fund with the same registration and
dividend and capital gains options as the redeemed account, unless otherwise
specified, and confirms the purchase to you.

The Funds employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. The Funds may not be liable for losses
due to unauthorized or fraudulent instructions. Such procedures include
but are not limited to requiring a form of personal identification prior
to acting on instructions received by telephone, providing written
confirmations of such transactions to the address of record, and tape
recording telephone instructions.

The Telephone Exchange and Redemption Privileges and Automatic
Exchange Plan are available only in states where shares of the New Fund may
be sold, and may be modified or discontinued at any time. Additional
information regarding the Telephone Exchange and Redemption Privileges and
Automatic Exchange Plan is contained in the Funds' Prospectus.

RETIREMENT PLANS

Individual Retirement Account (IRA): Everyone under age 70 1/2 with earned
income may contribute to a tax-deferred IRA. The Strong Funds offer a prototype
plan for you to establish your own IRA. You are allowed to contribute up to the
lesser of $2,000 or 100% of your earned income each year to your IRA. Under
certain circumstances, your contribution will be deductible.

- 33 -
<PAGE> 86

Direct Rollover IRA: To avoid the mandatory 20% federal withholding tax on
distributions, you must transfer the qualified retirement or Code section
403(b) plan distribution directly into an IRA. This tax cannot be avoided if
you receive a distribution and then roll it over into an IRA. The amount of
your Direct Rollover IRA contribution will not be included in your taxable
income for the year.

Simplified Employee Pension Plan (SEP-IRA): A SEP-IRA allows an employer to
make deductible contributions to separate IRA accounts established for each
eligible employee.

Salary Reduction Simplified Employee Pension Plan (SAR SEP-IRA): A SAR SEP-IRA
is a type of SEP-IRA in which an employer may allow employees to defer part of
their salaries and contribute to an IRA account. These deferrals help lower the
employees' taxable income.

Defined Contribution Plan: A defined contribution plan allows self-employed
individuals, partners, or a corporation to provide retirement benefits for
themselves and their employees. There are three plan types: a profit-sharing
plan, a money purchase pension plan, and a paired plan (a combination of a
profit-sharing plan and a money purchase plan).

401(k) Plan: A 401(k) plan is a type of profit-sharing plan that allows
employees to have part of their salary contributed to a retirement plan which
will earn tax-deferred income. A 401(k) plan is funded by employee
contributions, employer contributions, or a combination of both.

403(b)(7) Plan: A tax-sheltered custodial account designed to qualify under
section 403(b)(7) of the Code is available for use by employees of certain
educational, non-profit, hospital, and charitable organizations.

FUND ORGANIZATION

The Money, Short-Term Bond, Government, and Corporate Bond Funds are
Wisconsin corporations (each a "Corporation") that are authorized to offer
separate series of shares representing interests in separate portfolios of
securities, each with differing investment objectives. The High-Yield Fund is
a series of common stock of Strong Income Funds, Inc., a Wisconsin corporation
(a "Corporation") that is authorized to offer separate series of shares
representing interests in separate portfolios of securities, each with
differing objectives. The shares in any one portfolio may, in turn, be offered
in separate classes, each with differing preferences, limitations or relative
rights. However, the Articles of Incorporation for each of the Corporations
provides that if additional classes of shares are issued by a Corporation, such
new classes of shares may not affect the preferences, limitations or relative
rights of the Corporation's outstanding shares. In addition, the Board of
Directors of each Corporation is authorized to allocate assets, liabilities,
income and expenses to each series and class. Classes within a series may have
different expense arrangements than other classes of the same series and,
accordingly, the net asset value of shares within a series may differ.
Finally, all holders of shares of a Corporation may vote on each matter
presented to shareholders for action except with respect to any matter which
affects only one or more series or class, in which case only the shares of the
affected series or class are entitled to vote. Fractional shares have the same
rights proportionately as do full shares. Shares of the Corporation have no
preemptive, conversion, or subscription rights. If a Corporation issues
additional series, the assets belonging to each series of shares will be held
separately by the custodian, and in effect each series will be a separate fund.

- 34 -
<PAGE> 87

Each Corporation was organized on the following dates and currently
has the following authorized shares of capital stock:

<TABLE>
<CAPTION>
Incorporation Date Series Authorized Par
Corporation Date Created Shares Value($)
----------- ------------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Strong Corporate Bond Fund, Inc. 07/19/85 300,000,000 .001
Strong Government Securities Fund, Inc. 08/08/86 100,000,000 .001
Strong Income Funds, Inc. 02/24/89 10,000,000,000 .00001
- Strong U.S. Treasury Money Fund* 2/24/89 3,000,000,000 .00001
- Strong High-Yield Bond Fund 10/27/95 300,000,000 .00001
Strong Money Market Fund, Inc. 07/19/85 10,000,000,000 .00001
Strong Short-Term Bond Fund, Inc. 03/20/87 1,000,000,000 .001

</TABLE>

* Described in a different prospectus and statement of additional information.

SHAREHOLDER MEETINGS

The Wisconsin Business Corporation Law permits registered investment
companies, such as the Corporations, to operate without an annual meeting of
shareholders under specified circumstances if an annual meeting is not required
by the 1940 Act. Each Corporation has adopted the appropriate provisions in
their Bylaws and may, at their discretion, not hold an annual meeting in any
year in which the election of directors is not required to be acted on by
shareholders under the 1940 Act.

Each Corporation's Bylaws allow for a director to be removed by its
shareholders with or without cause, only at a meeting called for the purpose
of removing the director. Upon the written request of the holders of shares
entitled to not less than ten percent (10%) of all the votes entitled to be
cast at such meeting, the Secretary of the Corporation shall promptly call a
special meeting of shareholders for the purpose of voting upon the question of
removal of any director. The Secretary of the Corporation shall inform such
shareholders of the reasonable estimated costs of preparing and mailing the
notice of the meeting, and upon payment to the Corporation of such costs, the
Corporation shall give not less than ten nor more than sixty days notice of the
special meeting.

PERFORMANCE INFORMATION

As described in the "About the Funds - Performance Information"
section of the Funds' Prospectus, each Fund's historical performance or return
may be shown in the form of "yield." In addition, the Short-Term Bond,
Government, Corporate Bond, and High-Yield Funds' performance may be shown in
the form of "average annual total return," "total return," and "cumulative
total return," and the Money Fund's performance may be shown in the form of
"effective yield." From time to time, the advisor agrees to waive or reduce
its management fee and to absorb certain operating expenses for a Fund.
Without these waivers and absorptions, the performance results for the Funds
noted herein would have been lower. All performance and returns noted herein
are historical and do not represent the future performance of a Fund.

- 35 -
<PAGE> 88

YIELD

The Short-Term Bond, Government, Corporate Bond, and High-Yield Funds'
yield is computed in accordance with a standardized method prescribed by rules
of the SEC. Under that method, the current yield quotation for a Fund is based
on a one month or 30-day period. The yield is computed by dividing the net
investment income per share earned during the 30-day or one month period by the
maximum offering price per share on the last day of the period, according to
the following formula:

6
YIELD = 2[( a-b + 1) - 1]
---
cd

Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.

For the 30-day period ended December 30, 1994, the Short-Term Bond
Fund's yield was 8.25%, the Government Fund's yield was 7.41%, and the
Corporate Bond Fund's yield was 8.85%. In computing yield, the Funds follow
certain standardized accounting practice specified by SEC rules. These
practices are not necessarily consistent with those that the Funds use to
prepare annual and interim financial statements in conformity with generally
accepted accounting principles.

CURRENT YIELD

The Money Fund's current yield quotation is based on a seven-day
period and is computed as follows. The first calculation is net investment
income per share, which is accrued interest on portfolio securities, plus or
minus amortized premium, less accrued expenses. This number is then divided by
the price per share (expected to remain constant at $1.00) at the beginning of
the period ("base period return"). The result is then divided by 7 and
multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and unrealized
appreciation or depreciation of investments are not included in the
calculation. For the seven-day period ended December 30, 1994, the Money Fund's
current yield was 6.11%. During this period, the Advisor waived management fees
of 0.15% for the Money Fund, and absorbed expenses of 0.50% for the Money Fund.
Without these waivers and absorptions, the Money Fund's current yield would
have been 5.30%.

EFFECTIVE YIELD

The Money Fund's effective yield is determined by taking the base
period return (computed as described above) and calculating the effect of
assumed compounding. The formula for the effective yield is: (base period
return + 1)(365/7) - 1. For the seven-day period ended December 30, 1994, the
Money Fund's effective yield was 6.29%. Without the waivers and absorptions
noted above, the Money Fund's effective yield would have been 5.48%.

DISTRIBUTION RATE

The distribution rate is computed, according to a non-standardized
formula, by dividing the total amount of actual distributions per share paid by
a Fund over a twelve month period by the Fund's net asset value on the last day
of the period. The distribution rate differs from a Fund's yield because the
distribution rate includes distributions to shareholders from sources other
than dividends and interest, such as premium income from option writing and
short-term capital gains. Therefore, a Fund's distribution rate may be
substantially different than its yield. Both a Fund's yield and distribution
rate will fluctuate.

- 36 -
<PAGE> 89

AVERAGE ANNUAL TOTAL RETURN

The Short-Term Bond, Government, Corporate Bond, and High-Yield Funds'
average annual total return quotation is computed in accordance with a
standardized method prescribed by rules of the SEC. The average annual total
return for a Fund for a specific period is found by first taking a hypothetical
$10,000 investment ("initial investment") in the Fund's shares on the first day
of the period and computing the "redeemable value" of that investment at the
end of the period. The redeemable value is then divided by the initial
investment, and this quotient is taken to the Nth root (N representing the
number of years in the period) and 1 is subtracted from the result, which is
then expressed as a percentage. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset
value on the reinvestment dates during the period. Average annual total return
figures for various periods are set forth in the table below.

TOTAL RETURN

Calculation of each Fund's total return is not subject to a
standardized formula. Total return performance for a specific period is
calculated by first taking an investment (assumed below to be $10,000)
("initial investment") in the Fund's shares on the first day of the period and
computing the "ending value" of that investment at the end of the period. The
total return percentage is then determined by subtracting the initial
investment from the ending value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains dividends paid by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Total return may also be shown as the increased dollar value of the
hypothetical investment over the period. Total return figures for various
periods are set forth in the table below.

CUMULATIVE TOTAL RETURN

Calculation of each Fund's cumulative total return is not subject to a
standardized formula and represents the simple change in value of our
investment over a stated period and may be quoted as a percentage or as a
dollar amount. Total returns and cumulative total returns may be broken down
into their components of income and capital (including capital gains and
changes in share price) in order to illustrate the relationship between these
factors and their contributions to total return.

A Fund's performance figures are based upon historical results and do
not represent future results. Each Fund's shares are sold at net asset value
per share. The Short-Term Bond, Government, Corporate Bond, and High-Yield
Fund's returns and net asset value will fluctuate and shares are redeemable at
the then current net asset value of the Fund, which may be more or less than
original cost. The yield for the Money Fund will fluctuate. While the Money
Fund seeks to maintain a stable net asset value of $1.00, there is no assurance
that the Fund will be able to do so. An investment in the Money Fund is
neither insured nor guaranteed by the U.S. government. Factors affecting a
Fund's performance include general market conditions, operating expenses and
investment management. Any additional fees charged by a dealer or other
financial services firm would reduce the returns described in this section.

The figures below show performance information for various periods
ended December 31, 1994. No adjustment has been made for taxes, if any,
payable on dividends. Securities prices fluctuated during these periods.

SHORT-TERM BOND FUND

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial
$10,000 Ending Value Percentage Percentage
Investment December 31, 1994 Increase Increase
-----------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $17,023 70.23% 7.52%
------------------------------------
Five Years 10,000 13,845 38.45 6.72
------------------------------------
One Year 10,000 9,838 -1.62 -1.62
------------------------------------
- -----------------------
</TABLE>
(1) August 31, 1987

- 37 -
<PAGE> 90

GOVERNMENT FUND

Total Average Annual
Return Total Return
------ ------------
Initial
$10,000 Ending Value Percentage Percentage
Investment December 31, 1994 Increase Increase
------------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $19,364 93.64% 8.42 %
------------------------------------
Five Years 10,000 15,086 50.86 8.57
------------------------------------
One Year 10,000 9,661 -3.39 -3.39
------------------------------------
</TABLE>
- ------------------------
(1) October 29, 1986

CORPORATE BOND FUND

<TABLE>
<CAPTION>
Total Average Annual
Return Total Return
------ ------------
Initial
$10,000 Ending Value Percentage Percentage
Investment December 31, 1994 Increase Increase
-----------------------------------------------------
<S> <C> <C> <C> <C>
Life of Fund(1) $10,000 $21,447 114.47 % 8.79 %
------------------------------------
Five Years 10,000 13,574 35.74 6.30
------------------------------------
One Year 10,000 9,869 -1.31 -1.31
------------------------------------
</TABLE>
- ------------------------
(1) December 12, 1985

The Short-Term Bond, Government, and Corporate Bond Funds' total
return for the three months ending March 31, 1995, were 2.23%, 5.49%, and
6.70%, respectively.

COMPARISONS

(1) U.S. TREASURY BILLS, NOTES, OR BONDS
Investors may want to compare the performance of a Fund to that of
U.S. Treasury bills, notes or bonds, which are issued by the U.S. government.
Treasury obligations are issued in selected denominations. Rates of Treasury
obligations are fixed at the time of issuance and payment of principal and
interest is backed by the full faith and credit of the United States Treasury.
The market value of such instruments will generally fluctuate inversely with
interest rates prior to maturity and will equal par value at maturity.
Generally, the values of obligations with shorter maturities will fluctuate
less than those with longer maturities.

(2) CERTIFICATES OF DEPOSIT
Investors may want to compare a Fund's performance to that of
certificates of deposit offered by banks and other depositary institutions.
Certificates of deposit may offer fixed or variable interest rates and
principal is guaranteed and may be insured. Withdrawal of the deposits prior to
maturity normally will be subject to a penalty. Rates offered by banks and
other depositary institutions are subject to change at any time specified by
the issuing institution.

(3) MONEY MARKET FUNDS
Investors may also want to compare performance of a Fund to that of
money market funds. Money market fund yields will fluctuate and shares are not
insured, but share values usually remain stable.

- 38 -
<PAGE> 91

(4) LIPPER ANALYTICAL SERVICES, INC. ("LIPPER") AND OTHER INDEPENDENT
RANKING ORGANIZATIONS
From time to time, in marketing and other fund literature, a Fund's
performance may be compared to the performance of other mutual funds in general
or to the performance of particular types of mutual funds, with similar
investment goals, as tracked by independent organizations. Among these
organizations, Lipper, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives, and assets, may be
cited. Lipper performance figures are based on changes in net asset value,
with all income and capital gain dividends reinvested. Such calculations do
not include the effect of any sales charges imposed by other funds. A Fund
will be compared to Lipper's appropriate fund category, that is, by fund
objective and portfolio holdings. A Fund's performance may also be compared to
the average performance of its Lipper category.

(5) MORNINGSTAR, INC.
A Fund's performance may also be compared to the performance of other
mutual funds by Morningstar, Inc. which rates funds on the basis of historical
risk and total return. Morningstar's ratings range from five stars (highest)
to one star (lowest) and represent Morningstar's assessment of the historical
risk level and total return of a fund as a weighted average for 3, 5, and 10
year periods. Ratings are not absolute and do not represent future results.

(6) INDEPENDENT SOURCES
Evaluations of Fund performance made by independent sources may also
be used in advertisements concerning a Fund, including reprints of, or
selections from, editorials or articles about a Fund, especially those with
similar objectives. Sources for Fund performance information and articles
about a Fund may include publications such as Money, Forbes, Kiplinger's, Smart
Money, Morningstar, Inc., Financial World, Business Week, U.S. News and World
Report, The Wall Street Journal, Barron's, and a variety of investment
newsletters.

(7) VARIOUS BANK PRODUCTS
Each Fund's performance also may be compared on a before or after-tax
basis to various bank products, including the average rate of bank and thrift
institution money market deposit accounts, Super N.O.W. accounts and
certificates of deposit of various maturities as reported in the Bank Rate
Monitor, National Index of 100 leading banks, and thrift institutions as
published by the Bank Rate Monitor, Miami Beach, Florida. The rates published
by the Bank Rate Monitor National Index are averages of the personal account
rates offered on the Wednesday prior to the date of publication by 100 large
banks and thrifts in the top ten Consolidated Standard Metropolitan Statistical
Areas. The rates provided for the bank accounts assume no compounding and are
for the lowest minimum deposit required to open an account. Higher rates may
be available for larger deposits.

With respect to money market deposit accounts and Super N.O.W.
accounts, account minimums range upward from $2,000 in each institution and
compounding methods vary. Super N.O.W. accounts generally offer unlimited
check writing while money market deposit accounts generally restrict the number
of checks that may be written. If more than one rate is offered, the lowest
rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Generally, the
rates offered for these products take market conditions and competitive product
yields into consideration when set. Bank products represent a taxable
alternative income producing product. Bank and thrift institution deposit
accounts may be insured. Shareholder accounts in the Fund are not insured.
Bank passbook savings accounts compete with money market mutual fund products
with respect to certain liquidity features but may not offer all of the
features available from a money market mutual fund, such as check writing.
Bank passbook savings accounts normally offer a fixed rate of interest while
the yield of the Fund fluctuates. Bank checking accounts normally do not pay
interest but compete with money market mutual fund products with respect to
certain liquidity features (e.g., the ability to write checks against the
account). Bank certificates of deposit may offer fixed or variable rates for a
set term. (Normally, a variety of terms are available.) Withdrawal of these
deposits prior to maturity will normally be subject to a penalty. In contrast,
shares of each Fund are redeemable at the net asset value (normally, $1.00 per
share) next determined after a request is received, without charge.

- 39 -
<PAGE> 92

(8) INDICES
The Funds may compare their performance to a wide variety of indices
including the following:

<TABLE>
<S> <C>
(a) The Consumer Price Index
(b) Merrill Lynch 91 Day Treasury Bill Index
(c) Merrill Lynch Government/Corporate 1-3 Year Index
(d) IBC/Donoghue's General Purpose Money Fund AverageTM
(e) IBC/Donoghue's Taxable Money Fund AverageTM
(f) IBC/Donoghue's Government Money Fund AverageTM
(g) Salomon Brothers 1-Month Treasury Bill Index
(h) Salomon Brothers 3-Month Treasury Bill Index
(i) Salomon Brothers 1-Year Treasury Benchmark-on-the-Run Index
(j) Salomon Brothers 1-3 Year Treasury/Government-Sponsored/Corporate Bond
Index
(k) Salomon Brothers Corporate Bond Index
(l) Salomon Brothers AAA, AA, A, BBB, and BB Corporate Bond Indexes
(m) Salomon Brothers Broad Investment-Grade Bond Index
(n) Salomon Brothers High-Yield BBB Index
(o) Lehman Brothers Aggregate Bond Index
(p) Lehman Brothers 1-3 Year Government/Corporate Bond Index
(q) Lehman Brothers Intermediate Government/Corporate Bond Index
(r) Lehman Brothers Intermediate AAA, AA, and A Corporate Bond Indexes
(s) Lehman Brothers Government/Corporate Bond Index
(t) Lehman Brothers Corporate Baa Index
(u) Lehman Brothers Intermediate Corporate Baa Index
(v) Lehman Brothers High-Yield Index

</TABLE>

There are differences and similarities between the investments which a
Fund may purchase and the investments measured by the indices which are noted
herein. The market prices and yields of taxable and tax-exempt bonds will
fluctuate. There are important differences among the various investments
included in the indices that should be considered in reviewing this
information.

(9) HISTORICAL ASSET CLASS RETURNS
From time to time, marketing materials may portray the historical
returns of various asset classes. Such presentations will typically compare
the average annual rates of return of inflation, U.S. Treasury bills, bonds,
common stocks, and small stocks. There are important differences between each
of these investments that should be considered in viewing any such comparison.
The market value of stocks will fluctuate with market conditions, and
small-stock prices generally will fluctuate more than large-stock prices.
Stocks are generally more volatile than bonds. In return for this volatility,
stocks have generally performed better than bonds or cash over time. Bond
prices generally will fluctuate inversely with interest rates and other market
conditions, and the prices of bonds with longer maturities generally will
fluctuate more than those of shorter-maturity bonds. Interest rates for bonds
may be fixed at the time of issuance, and payment of principal and interest may
be guaranteed by the issuer and, in the case of U.S. Treasury obligations,
backed by the full faith and credit of the U.S. Treasury.

- 40 -
<PAGE> 93

(10) STRONG FAMILY OF FUNDS
The Strong Family of Funds offers a comprehensive range of
conservative to aggressive investment options. All of the members of the Strong
Family and their investment objectives are listed below. The Funds are listed
in ascending order of risk and return, as determined by the Funds' Advisor.

<TABLE>
<CAPTION>
FUND NAME INVESTMENT OBJECTIVE
<S> <C>
Strong U.S. Treasury Money Fund Current income, a stable share price, and daily liquidity.
Strong Money Market Fund Current income, a stable share price, and daily liquidity.
Strong Heritage Money Fund Current income, a stable share price, and daily liquidity.
Strong Municipal Money Market Federally tax-exempt current income, a stable share-price, and daily
Fund liquidity.
Strong Municipal Advantage Fund Federally tax-exempt current income with a very low degree of
share-price fluctuation.
Strong Advantage Fund Current income with a very low degree of share-price fluctuation.

Strong Short-Term Bond Fund Total return by investing for a high level of current income with a low
degree of share-price fluctuation.
Strong Short-Term Municipal Bond Total return by investing for a high level of federally tax-exempt
Fund current income with a low degree of share-price fluctuation.
Strong Short-Term Global Bond Total return by investing for a high level of income with a low degree
Fund of share-price fluctuation.
Strong Government Securities Total return by investing for a high level of current income with a
Fund moderate degree of share-price fluctuation.
Strong Insured Municipal Bond Total return by investing for a high level of federally tax-exempt
Fund current income with a moderate degree of share-price fluctuation.
Strong Municipal Bond Fund Total return by investing for a high level of federally tax-exempt
current income with a moderate degree of share-price fluctuation.

Strong Corporate Bond Fund Total return by investing for a high level of current income with a
moderate degree of share-price fluctuation.
Strong International Bond Fund High total return by investing for both income and capital appreciation.
Strong High-Yield Bond Fund Total return by investing for a high level of current income and capital
growth.
Strong High-Yield Municipal Bond Total return by investing for a high level of federally tax-exempt
Fund current income.
Strong Asset Allocation Fund High total return consistent with reasonable risk over the long term.
Strong Equity Income Fund Total return by investing for both income and capital growth.
Strong American Utilities Fund Total return by investing for both income and capital growth.

Strong Total Return Fund High total return by investing for capital growth and income.
Strong Growth and Income Fund High total return by investing for capital growth and income.
Strong Value Fund Capital growth.
Strong Opportunity Fund Capital growth.
Strong Growth Fund Capital growth.
Strong Common Stock Fund* Capital growth.

Strong Small Cap Fund Capital growth.
Strong Discovery Fund Capital growth.
Strong International Stock Fund Capital growth.
Strong Asia Pacific Fund Capital growth.
</TABLE>

* The Fund is currently closed to new investors.

The Advisor also serves as Advisor or Subadvisor to several management
investment companies, some of which fund variable annuity separate accounts of
certain insurance companies.

- 41 -
<PAGE> 94

Each Fund may from time to time be compared to the other funds in the
Strong Family of Funds based on a risk/reward spectrum. In general, the amount
of risk associated with any investment product is commensurate with that
product's potential level of reward. The Strong Funds risk/reward continuum or
any Fund's position on the continuum may be described or diagrammed in
marketing materials. The Strong Funds risk/reward continuum positions the risk
and reward potential of each Strong Fund relative to the other Strong Funds,
but is not intended to position any Strong Fund relative to other mutual funds
or investment products. Marketing materials may also discuss the relationship
between risk and reward as it relates to an individual investor's portfolio.

Financial goals vary from person to person. You may choose one or
more of the Strong Funds to help you reach your financial goals. To help you
better understand the Strong Income Funds and determine which Fund or
combination of Funds best meets your personal investment objectives, they are
described in the same Prospectus. Though they appear in the same Prospectus,
each of the Income Funds is a separately incorporated investment company.
Because the Funds share a Prospectus, there may be the possibility of cross
liability between the Funds.

(10) TYING TIME FRAMES TO YOUR GOALS

There are many issues to consider as you make your investment
decisions, including analyzing your risk tolerance, investing experience, and
asset allocations. You should start to organize your investments by learning
to link your many financial goals to specific time frames. Then you can begin
to identify the appropriate types of investments to help meet your goals. As a
general rule of thumb, the longer your time horizon, the more price fluctuation
you will be able to tolerate in pursuit of higher returns. For that reason,
many people with longer-term goals select stocks or long-term bonds, and many
people with nearer-term goals match those up with for instance, short-term
bonds. The Advisor developed the following suggested holding periods to help
our investors set realistic expectations for both the risk and reward potential
of our funds. (See table below.) Of course, time is just one element to
consider when making your investment decision.

STRONG FUNDS SUGGESTED MINIMUM HOLDING PERIODS

<TABLE>
<CAPTION>
UNDER 1 YEAR 1 TO 2 YEARS 4 TO 7 YEARS 5 OR MORE YEARS
------------ ------------ ------------ ---------------
<S> <C> <C> <C>
U.S. Treasury Money Fund Advantage Fund Government Securities Total Return Fund
Money Market Fund Municipal Advantage Fund Fund Opportunity Fund
Heritage Money Fund Insured Municipal Bond Growth Fund
Municipal Money Market 2 TO 4 YEARS Fund Common Stock Fund*
Fund ------------ Municipal Bond Fund Discovery Fund
Short-Term Bond Fund Corporate Bond Fund International Stock
Short-Term Municipal Bond International Bond Fund Fund
Fund High-Yield Municipal Bond Asia Pacific Fund
Short-Term Global Bond Fund Value Fund
Fund Asset Allocation Fund Small Cap Fund
American Utilities Fund Equity Income Fund
High-Yield Bond Fund Growth and Income
Fund

</TABLE>

*This fund is currently closed to new investors.

ADDITIONAL FUND INFORMATION

(1) DURATION

Duration is a calculation that measures the price sensitivity of a
Fund to changes in interest rates. Theoretically, if a Fund had a duration of
2.0, a 1% increase in interest rates would cause the prices of the bonds in the
Fund to decrease by approximately 2%. Conversely, a 1% decrease in interest
rates would cause the prices of the bonds in the Fund to increase by
approximately 2%. Depending on the direction of market interest rates, a Fund's
duration may be shorter or longer than its average maturity.

- 42 -
<PAGE> 95

(2) PORTFOLIO CHARACTERISTICS

In order to present a more complete picture of a Fund's portfolio,
marketing materials may include various actual or estimated portfolio
characteristics, including but not limited to median market capitalizations,
earnings per share, alphas, betas, price/earnings ratios, returns on equity,
dividend yields, capitalization ranges, growth rates, price/book ratios, top
holdings, sector breakdowns, asset allocations, quality breakdowns, and
breakdowns by geographic region.

(3) MEASURES OF VOLATILITY AND RELATIVE PERFORMANCE

Occasionally statistics may be used to specify Fund volatility or
risk. The general premise is that greater volatility connotes greater risk
undertaken in achieving performance. Measures of volatility or risk are
generally used to compare the Fund's net asset value or performance relative to
a market index. One measure of volatility is beta. Beta is the volatility of
a fund relative to the total market as represented by the Standard & Poor's 500
Stock Index. A beta of more than 1.00 indicates volatility greater than the
market, and a beta of less than 1.00 indicates volatility less than the market.
Another measure of volatility or risk is standard deviation. Standard deviation
is a statistical tool that measures the degree to which a fund's performance
has varied from its average performance during a particular time period.

Standard deviation is calculated using the following formula:

Standard deviation = the square root of E(xi - xm)2
-----------
n-1
where E = "the sum of",
xi = each individual return during the time period,
xm = the average return over the time period, and
n = the number of individual returns during the time period.

Statistics may also be used to discuss a Fund's relative performance.
One such measure is alpha. Alpha measures the actual return of a fund compared
to the expected return of a fund given its risk (as measured by beta). The
expected return is based on how the market as a whole performed, and how the
particular fund has historically performed against the market. Specifically,
alpha is the actual return less the expected return. The expected return is
computed by multiplying the advance or decline in a market representation by
the fund's beta. A positive alpha quantifies the value that the fund manager
has added, and a negative alpha quantifies the value that the fund manager has
lost.

Other measures of volatility and relative performance may be used as
appropriate. However, all such measures will fluctuate and do not represent
future results.

GENERAL INFORMATION

BUSINESS PHILOSOPHY

The Advisor is an independent, Midwestern-based investment advisor,
owned by professionals active in its management. Recognizing that investors are
the focus of its business, the Advisor strives for excellence both in
investment management and in the service provided to investors. This commitment
affects many aspects of the business, including professional staffing, product
development, investment management, and service delivery. Through its
commitment to excellence, the Advisor intends to benefit investors and to
encourage them to think of Strong Funds as their mutual fund family.

The increasing complexity of the capital markets requires specialized
skills and processes for each asset class and style. Therefore, the Advisor
believes that active management should produce greater returns than a passively
managed index. The Advisor has brought together a group of top-flight
investment professionals with diverse product expertise, and each concentrates
on their investment specialty. The Advisor believes that people are the firm's
most important asset. For this reason, continuity of professionals is critical
to the firm's long-term success.

- 43 -
<PAGE> 96

INVESTMENT ENVIRONMENT

Discussions of economic, social, and political conditions and their
impact on the Funds may be used in advertisements and sales materials. Such
factors that may impact the Funds include, but are not limited to, changes in
interest rates, political developments, the competitive environment, consumer
behavior, industry trends, technological advances, macroeconomic trends, and
the supply and demand of various financial instruments. In addition, marketing
materials may cite the portfolio management's views or interpretations of such
factors.

EIGHT BASIC PRINCIPLES FOR SUCCESSFUL MUTUAL FUND INVESTING

These common sense rules are followed by many successful investors.
They make sense for beginners, too. If you have a question on these principles,
or would like to discuss them with us, please contact us at 1-800-368-3863.

1. Have a plan - even a simple plan can help you take control of your
financial future. Review your plan once a year, or if your circumstances
change.

2. Start investing as soon as possible. Make time a valuable ally. Let it put
the power of compounding to work for you, while helping to reduce your
potential investment risk.

3. Diversify your portfolio. By investing in different asset classes - stocks,
bonds, and cash - you help protect against poor performance in one type of
investment while including investments most likely to help you achieve your
important goals.

4. Invest regularly. Investing is a process, not a one-time event. By
investing regularly over the long term, you reduce the impact of short-term
market gyrations, and you attend to your long-term plan before you're
tempted to spend those assets on short-term needs.

5. Maintain a long-term perspective. For most individuals, the best discipline
is staying invested as market conditions change. Reactive, emotional
investment decisions are all too often a source of regret - and principal
loss.

6. Consider stocks to help achieve major long-term goals. Over time, stocks
have provided the more powerful returns needed to help the value of your
investments stay well ahead of inflation.

7. Keep a comfortable amount of cash in your portfolio. To meet current needs,
including emergencies, use a money market fund or a bank account - not your
long-term investment assets.

8. Know what you're buying. Make sure you understand the potential risks and
rewards associated with each of your investments. Ask questions...request
information...make up your own mind. And choose a fund company that helps
you make informed investment decisions.

STRONG RETIREMENT PLAN SERVICES

Strong Retirement Plan Services offers a full menu of high quality,
affordable retirement plan options, including traditional money purchase
pension and profit sharing plans, 401(k) plans, simplified employee pension
plans, salary reduction plans, Keoghs, and 403(b) plans. Retirement plan
specialists are available to help companies determine which type of retirement
plan may be appropriate for their particular situation.

- 44 -
<PAGE> 97

Markets:

The retirement plan services provided by the Advisor focus on four
distinct markets, based on the belief that a retirement plan should fit the
customer's needs, not the other way around.

1. Small company plans. Small company plans are designed for companies with
1-50 plan participants. The objective is to incorporate the features and
benefits typically reserved for large companies, such as sophisticated
recordkeeping systems, outstanding service, and investment expertise, into
a small company plan without administrative hassles or undue expense.
Small company plan sponsors receive a comprehensive plan administration
manual as well as toll-free telephone support.

2. Large company plans. Large company plans are designed for companies with
between 51 and 1,000 plan participants. Each large company plan is
assigned a team of professionals consisting of an account manager, who is
typically an attorney, CPA, or holds a graduate degree in business, a
conversion specialist (if applicable), an accounting manager, a
legal/technical manager, and an education/communications educator.

3. Women-owned businesses.

4. Non-profit and educational organizations (the 403(b) market).

Turnkey approach:

The retirement plans offered by the Advisor are designed to be streamlined
and simple to administer. To this end, the Advisor has invested heavily in the
equipment, systems, and people necessary to adopt or convert a plan, and to
keep it running smoothly. The Advisor provides all aspects of the plan,
including plan design, administration, recordkeeping, and investment
management. To streamline plan design, the Advisor provides customizable
IRS-approved prototype documents. The Advisor's services also include annual
government reporting and testing as well as daily valuation of each
participant's account. This structure is intended to eliminate the confusion
and complication often associated with dealing with multiple vendors. It is
also designed to save plan sponsors time and expense.

The Advisor strives to provide one-stop retirement savings programs that
combine the advantages of proven investment management, flexible plan design
and a wide range of investment options. The open architecture design of the
plans allow for the use of the family of mutual funds managed by the Advisor as
well as a stable asset value option. Large company plans may supplement these
options with their company stock (if publicly traded) or funds from other
well-known mutual fund families. Education:

Participant education and communication is key to the success of any
retirement program, and therefore is one of the most important services that
the Advisor provides. The Advisor's goal is twofold: to make sure that plan
participants fully understand their options and to educate them about the
lifelong investment process. To this end, the Advisor provides attractive,
readable print materials that are supplemented with audio and video tapes and
retirement education programs.

Service:

The Advisor's goal is to provide a world class level of service. One
aspect of that service is an experienced, knowledgeable team that provides
ongoing support for plan sponsors, both at adoption or conversion and
throughout the life of a plan. The Advisor is committed to delivering accurate
and timely information, evidenced by straightforward, complete, and
understandable reports, participant account statements and plan summaries.

The Advisor has designed both "high-tech" and "high-touch" systems,
providing an automated telephone system as well as personal contact.
Participants can access daily account information, conduct transactions, or
have questions answered in the way that is most comfortable for them.

- 45 -
<PAGE> 98

STRONG FINANCIAL ADVISORS GROUP

The Strong Financial Advisors Group is dedicated to helping financial
advisors better serve their clients. Financial advisors receive regular
updates on the mutual funds managed by the Advisor, access to portfolio
managers through special conference calls, consolidated mailings of duplicate
confirmation statements, access to the Advisor's network of regional
representatives, and other specialized services. For more information on the
Strong Financial Advisors Group, call 1-800-368-1683.

PORTFOLIO MANAGEMENT

Each portfolio manager works with a team of analysts, traders, and
administrative personnel. From time to time, marketing materials may discuss
various members of the team, including their education, investment experience,
and other credentials.

The Advisor believes that actively managing each Fund's portfolio and
adjusting the average portfolio maturity according to the Advisor's interest
rate outlook is the best way to achieve the Fund's objectives. This policy is
based on a fundamental belief that economic and financial conditions create
favorable and unfavorable investment periods (or seasons) and that these
different seasons require different investment approaches. Through its active
management approach, the Advisor seeks to avoid or reduce any negative change
in the Fund's net asset value per share during the periods of falling bond
prices and provide consistently positive annual returns throughout the seasons
of investment.

SHORT-TERM BOND, GOVERNMENT, CORPORATE BOND, AND HIGH YIELD FUNDS

The Advisor's investment philosophy includes the following basic beliefs:

- - Active management pursued by a team with a uniform discipline across the
fixed income spectrum can produce results that are superior to those
produced through passive management.

- - Controlling risk by making only moderate deviations from the defined
benchmark is the cornerstone of successful fixed income investing.

- - Successful fixed income management is best pursued on a top-down basis
utilizing fundamental techniques.

The investment process includes decisions made at four levels that are
consistent with the Advisor's viewpoint of the path of economic activity,
interest rates, and the supply of and demand for credit.

MONEY FUND

The Advisor's investment philosophy includes the following basic beliefs:

- - Successful fixed-income management begins with a top-down, fundamental
analysis of the economy, interest rates, and the supply of and demand for
credit.

- - Value can be added through active management of average maturity, yield
curve positioning, sector emphasis, and issue selection.

The goal is to derive equivalent amounts of excess performance and risk control
over the long run from each of the four levels of decision-making:

1. Duration. Each Fund's portfolio duration is managed within a range
relative to its respective benchmark.

2. Yield Curve. Modest overweights and underweights along the yield curve are
made to benefit from changes in the yield curve's shape.

3. Sector/Quality. Sector weightings are generally maintained between zero and
two times those of the benchmark.

4. Security Selection. Quantitative analysis drives issue selection in the
Treasury and mortgage marketplace. Proactive credit research drives
corporate issue selection.

- 46 -
<PAGE> 99

Risk control is pursued at three levels:

1. Portfolio structure. In structuring the portfolio, the Advisor carefully
considers such factors as position sizes, duration, benchmark
characteristics, and the use of illiquid securities.

2. Credit research. Proactive credit research is used to identify issues which
the Advisor believes will be candidates for credit upgrade. This research
includes visiting company management, establishing appropriate values for
credit ratings, and monitoring yield spread relationships.

3. Portfolio monitoring. Portfolio fundamentals are re-evaluated continuously,
and buy/sell targets are established and generally adhered to.

LEGAL COUNSEL

Godfrey & Kahn, S.C., 780 North Water Street, Milwaukee, Wisconsin
53202, acts as outside legal counsel for the Funds.

INDEPENDENT ACCOUNTANTS

Coopers & Lybrand L.L.P., 411 East Wisconsin Avenue, Milwaukee,
Wisconsin 53202, are the independent accountants for the Funds, providing audit
services and assistance and consultation with respect to the preparation of
filings with the SEC.

FINANCIAL STATEMENTS

The Annual Report for the Money, Short-Term Bond, Government, and
Corporate Bond Funds that is attached hereto contains the following audited
financial information for the Funds:

(a) Schedules of Investments in Securities.
(b) Statements of Operations.
(c) Statements of Assets and Liabilities.
(d) Statements of Changes in Net Assets.
(e) Notes to Financial Statements.
(f) Financial Highlights.
(g) Report of Independent Accountants.

The Semiannual Report for the Money, Short-Term Bond, Government, and
Corporate Bond Funds that is attached hereto contains the following unaudited
financial information for the six months ended June 30, 1995 for the Funds:

In the opinion of management of the Funds, the unaudited financial
statements reflect all adjustments which are necessary to a fair statement of
the results for the six months ended June 30, 1995. All such adjustments are
of a normal recurring nature.

- 47 -
<PAGE> 100

APPENDIX

BOND RATINGS

STANDARD & POOR'S DEBT RATINGS

A Standard & Poor's corporate or municipal debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. This assessment may take into consideration obligors such as
guarantors, insurers, or lessees.

The debt rating is not a recommendation to purchase, sell, or hold a
security, inasmuch as it does not comment as to market price or suitability for
a particular investor.

The ratings are based on current information furnished by the issuer
or obtained by S&P from other sources it considers reliable. S&P does not
perform an audit in connection with any rating and may, on occasion, rely on
unaudited financial information. The ratings may be changed, suspended, or
withdrawn as a result of changes in, or unavailability of, such information, or
for other circumstances.

The ratings are based, in varying degrees, on the following
considerations:

1. Likelihood of default -- capacity and willingness of the
obligor as to the timely payment of interest and repayment
of principal in accordance with the terms of the
obligation.

2. Nature of and provisions of the obligation.

3. Protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization, or
other arrangement under the laws of bankruptcy and other
laws affecting creditors' rights.

INVESTMENT GRADE
AAA Debt rated 'AAA' has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.

AA Debt rated 'AA' has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in small degree.

A Debt rated 'A' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.

BBB Debt rated 'BBB' is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than in higher rated categories.

SPECULATIVE GRADE
Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. 'BB' indicates the least degree of speculation
and 'C' the highest. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.

BB Debt rated 'BB' has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to inadequate capacity to meet timely interest and principal payments.
The 'BB' rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-' rating.

B Debt rated 'B' has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest

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and repay principal. The 'B' rating category is also used for debt
subordinated to senior debt that is assigned an actual or implied 'BB' or 'BB-'
rating.

CCC Debt rated 'CCC' has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In
the event of adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal. The 'CCC'
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied 'B' or 'B-' rating.

CC Debt rated 'CC' typically is applied to debt subordinated to
senior debt that is assigned an actual or implied 'CCC' rating.

C Debt rated 'C' typically is applied to debt subordinated to senior
debt which is assigned an actual or implied 'CCC-' debt rating. The 'C' rating
may be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.

CI The rating 'CI' is reserved for income bonds on which no interest
is being paid.

D Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grade period. The 'D' rating also will
be used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

MOODY'S LONG-TERM DEBT RATINGS

Aaa - Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged". Interest payments are protected by a large or by
an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.

A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium grade obligations. Factors
giving security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment some time in the
future.

Baa - Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such Bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.

Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes Bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa - Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.

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Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

FITCH INVESTORS SERVICE, INC. BOND RATINGS

Fitch investment grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
represent Fitch's assessment of the issuer's ability to meet the obligations of
a specific debt issue or class of debt in a timely manner.

The rating takes into consideration special features of the issue,
its relationship to other obligations of the issuer, the current and
prospective financial condition and operating performance of the issuer and any
guarantor, as well as the economic and political environment that might affect
the issuer's future financial strength and credit quality.

Fitch ratings do not reflect any credit enhancement that may be
provided by insurance policies or financial guaranties unless otherwise
indicated.

Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories do not fully reflect small
differences in the degrees of credit risk.

Fitch ratings are not recommendations to buy, sell, or hold any
security. Ratings do not comment on the adequacy of market price, the
suitability of any security for a particular investor, or the tax-exempt nature
or taxability of payments made in respect of any security.

Fitch ratings are based on information obtained from issuers, other
obligors, underwriters, their experts, and other sources Fitch believes to be
reliable. Fitch does not audit or verify the truth or accuracy of such
information. Ratings may be changed, suspended, or withdrawn as a result of
changes in, or the unavailability of, information or for other reasons.

AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.

AA Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay
0principal is very strong, although not quite as strong as bonds
rated 'AAA'. Because bonds rated in the 'AAA' and 'AA'
categories are not significantly vulnerable to foreseeable
future developments, short-term debt of the issuers is generally
rated 'F-1+'.

A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.

BBB Bonds considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in
economic conditions and circumstances, however, are more likely
to have adverse impact on these bonds, and therefore impair
timely payment. The likelihood that the ratings of these bonds
will fall below investment grade is higher than for bonds with
higher ratings.

Fitch speculative grade bond ratings provide a guide to investors in
determining the credit risk associated with a particular security. The ratings
('BB' to 'C') represent Fitch's assessment of the likelihood of timely payment
of principal and interest in accordance with the terms of obligation for bond
issues not in default. For defaulted bonds, the rating ('DDD' to 'D') is an
assessment of the ultimate recovery value through reorganization or
liquidation.

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Bonds that have the same rating are of similar but not necessarily
identical credit quality since the rating categories cannot fully reflect the
differences in the degrees of credit risk. Moreover, the character of the risk
factor varies from industry to industry and between corporate, health care and
municipal obligations.

BB Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.

B Bonds are considered highly speculative. While bonds in this
class are currently meeting debt service requirements, the
probability of continued timely payment of principal and
interest reflects the obligor's limited margin of safety and the
need for reasonable business and economic activity throughout
the life of the issue.

CCC Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations
requires an advantageous business and economic environment.

CC Bonds are minimally protected. Default in payment of interest
and/or principal seems probable over time.

C Bonds are in imminent default in payment of interest or
principal.

DDD, DD
and, D Bonds are in default on interest and/or principal payments.
Such bonds are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or
reorganization of the obligor. 'DDD' represents the highest
potential for recovery of these bonds, and 'D' represents the
lowest potential for recovery.

DUFF & PHELPS, INC. LONG-TERM DEBT RATINGS

These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related to
such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and
expertise. The projected viability of the obligor at the trough of the cycle
is a critical determination.

Each rating also takes into account the legal form of the security,
(e.g., first mortgage bonds, subordinated debt, preferred stock, etc.). The
extent of rating dispersion among the various classes of securities is
determined by several factors including relative weightings of the different
security classes in the capital structure, the overall credit strength of the
issuer, and the nature of covenant protection. Review of indenture
restrictions is important to the analysis of a company's operating and
financial constraints.

The Credit Rating Committee formally reviews all ratings once per
quarter (more frequently, if necessary). Ratings of 'BBB-' and higher fall
within the definition of investment grade securities, as defined by bank and
insurance supervisory authorities.

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<TABLE>
<CAPTION>
RATING SCALE DEFINITION
- -------------------------------------------------------------------------------------------------------------
<S> <C>
AAA Highest credit quality. The risk factors are negligible, being only slightly more
than for risk-free U.S. Treasury debt.
- -------------------------------------------------------------------------------------------------------------
AA+ High credit quality. Protection factors are strong. Risk is modest, but may
AA vary slightly from time to time because of economic conditions.
AA-
- -------------------------------------------------------------------------------------------------------------
A+ Protection factors are average but adequate. However, risk factors are more
A variable and greater in periods of economic stress.
A-
- -------------------------------------------------------------------------------------------------------------
BBB+ Below average protection factors but still considered sufficient for prudent
BBB investment. Considerable variability in risk during economic cycles.
BBB-
- -------------------------------------------------------------------------------------------------------------
BB+ Below investment grade but deemed likely to meet obligations when due.
BB Present or prospective financial protection factors fluctuate according to
BB- industry conditions or company fortunes. Overall quality may move up or
down frequently within this category.
- -------------------------------------------------------------------------------------------------------------
B+ Below investment grade and possessing risk that obligations will not be met
B when due. Financial protection factors will fluctuate widely according to
B- economic cycles, industry conditions and/or company fortunes. Potential
exists for frequent changes in the rating within this category or into a higher
or lower rating grade.
- -------------------------------------------------------------------------------------------------------------
CCC Well below investment grade securities. Considerable uncertainty exists as to
timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
- -------------------------------------------------------------------------------------------------------------
DD Defaulted debt obligations. Issuer failed to meet scheduled principal and/or
interest payments.
DP Preferred stock with dividend arrearages.
- -------------------------------------------------------------------------------------------------------------
</TABLE>

SHORT-TERM RATINGS

STANDARD & POOR'S COMMERCIAL PAPER RATINGS

A Standard & Poor's commercial paper rating is a current assessment
of the likelihood of timely payment of debt considered short-term in the
relevant market.

Ratings graded into several categories, ranging from 'A-1' for the
highest quality obligations to 'D' for the lowest. These categories are as
follows:

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<PAGE> 105

A-1 This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to possess
extremely strong safety characteristics are denoted with a plus sign (+)
designation.

A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated 'A-1'.

A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

B Issues rated 'B' are regarded as having only speculative capacity
for timely payment.

C This rating is assigned to short-term debt obligations with
doubtful capacity for payment.

D Debt rated 'D' is in payment default. The 'D' rating category is
used when interest payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period.

STANDARD & POOR'S NOTE RATINGS

A S&P note rating reflects the liquidity factors and market-access
risks unique to notes. Notes maturing in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating.

The following criteria will be used in making the assessment:

Amortization schedule - the larger the final maturity relative
to other maturities, the more likely the issue is to be treated
as a note.

Source of payment - the more the issue depends on the market for
its refinancing, the more likely it is to be considered a note.

The note rating symbols and definitions are as follows:

SP-1 Strong capacity to pay principal and interest. Issues
determined to possess very strong characteristics are given a plus (+)
designation.

SP-2 Satisfactory capacity to pay interest and principal, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

SP-3 Speculative capacity to pay principal and interest.

MOODY'S COMMERCIAL PAPER RATINGS

The term "commercial paper" as used by Moody's means promissory
obligations not having an original maturity in excess of nine months. Moody's
makes no representation as to whether such commercial paper is by any other
definition "commercial paper" or is exempt from registration under the
Securities Act of 1933, as amended.

Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually promissory obligations not having an original
maturity in excess of nine months. Moody's makes no representation that such
obligations are exempt from registration under the Securities Act of 1933, nor
does it represent that any specific note is a valid obligation of a rated
issuer or

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<PAGE> 106

issued in conformity with any applicable law. Moody's employs the following
three designations, all judged to be investment grade, to indicate the relative
repayment capacity of rated issuers:

Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: (i)
leading market positions in well established industries, (ii) high rates of
return on funds employed, (iii) conservative capitalization structures with
moderate reliance on debt and ample asset protection, (iv) broad margins in
earnings coverage of fixed financial charges and high internal cash generation,
and (v) well established access to a range of financial markets and assured
sources of alternate liquidity.

Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.

Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effect of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.

Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.

Moody's Note Ratings

MIG 1/VMIG 1 This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad based access to the market for refinancing.

MIG 2/VMIG 2 This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

MIG 3/VMIG 3 This designation denotes favorable quality. All
security elements are accounted for but there is lacking the undeniable
strength of the preceding grades. Liquidity and cash flow protection may be
narrow and market access for refinancing is likely to be less well established.

MIG 4/VMIG 4 This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.

SG This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.

FITCH INVESTORS SERVICE, INC. SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable
on demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal and
investment notes.

The short-term rating places greater emphasis than a long-term rating
on the existence of liquidity necessary to meet the issuer's obligations in a
timely manner.

F-1+ (Exceptionally Strong Credit Quality) Issues assigned this
rating are regarded as having the strongest degree of assurance
for timely payment.

F-1 (Very Strong Credit Quality) Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated 'F-1+'.

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<PAGE> 107

F-2 (Good Credit Quality) Issues assigned this rating have a
satisfactory degree of assurance for timely payment but the
margin of safety is not as great as for issues assigned 'F-1+'
and 'F-1' ratings.

F-3 (Fair Credit Quality) Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment grade.

F-S (Weak Credit Quality) Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near-term adverse changes
in financial and economic conditions.

D (Default) Issues assigned this rating are in actual or imminent
payment default.

LOC The symbol LOC indicates that the rating is based on a letter of
credit issued by a commercial bank.

DUFF & PHELPS, INC. SHORT-TERM DEBT RATINGS

Duff & Phelps' short-term ratings are consistent with the
rating criteria utilized by money market participants. The ratings apply to
all obligations with maturities of under one year, including commercial paper,
the uninsured portion of certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of credit, and current
maturities of long-term debt. Asset-backed commercial paper is also rated
according to this scale.

Emphasis is placed on liquidity which as defined as not only
cash from operations, but also access to alternative sources of funds including
trade credit, bank lines, and the capital markets. An important consideration
is the level of an obligor's reliance on short-term funds on an ongoing basis.

Rating Scale: Definition

Duff 1+ Highest certainty of timely payment.
Short-term liquidity, including internal
operating factors and/or access to
alternative sources of funds, is outstanding,
and safety is just below risk-free U.S.
Treasury short-term obligations.

Duff 1 Very high certainty of timely payment.
Liquidity factors are excellent and supported
by good fundamental protection factors. Risk
factors are minor.

Duff 1- High certainty of timely payment. Liquidity
factors are strong and supported by good
fundamental protection factors. Risk factors
are very small.

Good Grade

Duff 2 Good certainty of timely payment. Liquidity
factors and company fundamentals are sound.
Although ongoing funding needs may enlarge
total financing requirements, access to
capital markets is good. Risk factors are
small.

Satisfactory Grade

Duff 3 Satisfactory liquidity and other protection
factors qualify issue as to investment grade.
Risk factors are larger and subject to more
variation. Nevertheless, timely payment is
expected.

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<PAGE> 108

Non-investment Grade

Duff 4 Speculative investment characteristics.
Liquidity is not sufficient to insure against
disruption in debt service. Operating
factors and market access may be subject to a
high degree of variation.

Default

Duff 5 Issuer failed to meet scheduled principal
and/or interest payments.

A-9