<PAGE>
THE STRONG
INCOME
FUNDS
SEMI-ANNUAL REPORT o APRIL 30, 1996
[PHOTO OF GRANDFATHER & GRANDSON]
THE STRONG MONEY MARKET FUND
THE STRONG SHORT-TERM BOND FUND
THE STRONG GOVERNMENT SECURITIES FUND
THE STRONG CORPORATE BOND FUND
THE STRONG HIGH-YIELD BOND FUND
[STRONG FUNDS LOGO]
STRONG FUNDS
<PAGE>
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. We're here 24
hours a day, seven days a week to take your call.
- ---------------------------------------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 of 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.
<PAGE>
THE STRONG
INCOME
FUNDS
SEMI-ANNUAL REPORT o APRIL 30, 1996
Table of Contents
INVESTMENT REVIEWS
The Strong Money Market Fund..............................2
The Strong Short-Term Bond Fund...........................4
The Strong Government Securities Fund.....................6
The Strong Corporate Bond Fund............................8
The Strong High-Yield Bond Fund..........................10
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Money Market Fund..........................12
The Strong Short-Term Bond Fund.......................15
The Strong Government Securities Fund.................19
The Strong Corporate Bond Fund........................20
The Strong High-Yield Bond Fund.......................22
Statements of Operations.................................25
Statements of Assets and Liabilities.....................26
Statements of Changes in Net Assets......................27
Notes to Financial Statements............................28
FINANCIAL HIGHLIGHTS..........................................30
<PAGE>
The Strong MONEY MARKET Fund
================================================================================
The Strong Money Market Fund seeks current income, a stable share price, and
daily liquidity. The Fund invests in corporate, bank, and government instruments
that present minimal credit risk.
[PHOTO OF COINS]
"Our view of the economy changed little over this period, while the market's
view changed a great deal."
Impressive Performance Continued
The Strong Money Market Fund once again ranked in the top 1% of all general
purpose money funds tracked by Lipper, based on total return, for the one-year
period ended 4-30-96. The Fund's performance was achieved through a combination
of prudent management and a temporary waiver of fees and expenses.
LIPPER ANALYTICAL
SERVICES, INC. RANKINGS2
as of 4-30-96
(based on total return)
RANK AMONG MONEY
TIME PERIOD MARKET INSTRUMENT FUNDS PERCENTAGE
1-year #2 of 273 Top 1%
5-year #5 of 172 Top 3%
10-year #3 of 104 Top 3%
Since inception #3 of 100 Top 3%
Rankings and performance are historical and do not represent future performance.
Interest Rates Take Off
As 1996 began, the consensus economic view was for weak growth in the U.S.
economy; gross domestic product estimates were revised downward, and some
economists even projected a recession beginning in the first half of the year.
Conflicting economic data so far this year-with strong economic numbers one week
often giving way to weak economic numbers the next-has made for a particularly
volatile bond market.
Driven by signs of lingering weakness, the 90-day Treasury bill yield dropped
approximately 40 basis points from 5.48% to 5.07% in December alone, presaging
the Federal Reserve Board's decision to cut its Fed Funds target rate to 5.25%
on January 31. Indeed, the market had already begun to price additional rate
cuts into Treasury yields, resulting in higher yields on one-month issues than
on one-year securities.
However, an unexpectedly strong employment report-indicating that a much larger
than expected number of jobs were created in February-shattered this pessimistic
view of the economy, and subsequent economic data tended to support the idea
that the economy was strengthening. As a result, interest rates-particularly
long-term rates-staged an abrupt reversal and headed higher; short-term rates
also rose, though less dramatically. The yield on the one-year Treasury bill
rose from 4.89% in January to 5.62% by the end of April. At the same time, the
yield on the 30-year Treasury bond jumped from 5.95% in December to 6.91% by
April 30.
2
<PAGE>
Our Strategy Remains on Course
Throughout the period, our portfolio strategy was to target a moderately long
average maturity. Higher yields, particularly on six- to 12-month maturities,
have resulted in a positively sloped yield curve and therefore greater
compensation for extending the Fund's duration.
Our view of the economy changed little over this period, while the market's view
changed a great deal. We never expected a recession to occur this year, while
the market made a complete turnaround from fear of recession to an equal fear of
too-rapid growth.
In our view, the underlying fundamentals of the U.S. bond market remain
positive. We expect to see growth in the gross domestic product of 2.5% or less
this year, which we believe should pose no threat to the current subdued level
of inflation. We believe fiscal policy will continue to be modestly restrictive;
and in the absence of an extensive balanced budget deal, spending should be
constrained by the inability of Congress and the President to come to an
agreement.
Given this positive fundamental outlook, we continue to believe that the Federal
Reserve could have room to ease short-term rates at least once more this year,
although such a move may not be imminent. We consider the odds of a reversal in
Fed policy to a tightening posture to be low at present.
As always, we thank you for your confidence and remain committed to meeting your
investment needs in the future.
Cordially,
/s/ Jay N. Mueller
Jay N. Mueller
Portfolio Manager
[PHOTO OF JAY N. MUELLER]
SHORT-TERM RATES DECLINED
3-month T-Bill yields through April
1-95 5.99%
2-95 5.93%
3-95 5.87%
4-95 5.86%
5-95 5.80%
6-95 5.56%
7-95 5.57%
8-95 5.44%
9-95 5.41%
10-95 5.50%
11-95 5.48%
12-95 5.07%
1-96 5.04%
2-96 5.02%
3-96 5.13%
4-96 5.15%
Source: Bloomberg
YIELD SUMMARY 1
as of 4-30-96
7-DAY CURRENT YIELD
5.14%
7-DAY EFFECTIVE YIELD
5.27%
AVERAGE MATURITY
66 DAYS
1 Yields are annualized for the 7-day period ended April 30, 1996. Effective
yield reflects the compounding of income. An investment in the Fund is
neither insured nor guaranteed by the U.S. government. There can be no
assurance that the Fund will be able to maintain a stable net asset value
of $1.00 per share. Yields are historical and do not represent future
yields, which will fluctuate. The Fund's advisor temporarily waived fees of
.11% and absorbed expenses of .25% during the 7-day period ended 4-30-96.
Otherwise, the Fund's current yield would have been 4.78%, and its
effective yield would have been 4.89%.
2 Lipper Analytical Services, Inc., rankings are based on total return with
dividends reinvested. The since-inception ranking is based on performance
from 10-31-85 to 4-30-96. From time to time, the Funds' Advisor has waived
its management fee and absorbed Fund expenses, resulting in higher returns.
3
<PAGE>
The Strong SHORT-TERM BOND Fund
================================================================================
The Strong Short-Term Bond Fund seeks total return by investing for a high level
of current income with a low degree of share-price fluctuation. The Fund invests
primarily in short- and intermediate-term, investment-grade debt obligations,
and its average portfolio maturity will normally be between one and three years.
[PHOTO OF NEWSPAPER, CALCULATOR & PEN]
"As always,we believe that successful bond investing stems from time in the
market rather than `timing the market.'"
The Fund Outperformed its Lipper Index
The Strong Short-Term Bond Fund posted a total return of 2.82% for the six
months ended April 30, 1996, a period marked by considerable volatility in the
U.S. bond market. Despite the challenges of investing in such a market, the Fund
nicely outperformed the Lipper Short Investment-Grade Fund Index, which gained
1.92% over the same period.1
The Fund also ranked highly among all short investment-grade debt funds tracked
by Lipper Analytical Services, Inc. over the long run, as shown on the right.
Conflicting Data Reported on the Economy
Coming into the year, many investors and analysts expected weak economic growth
to continue in the U.S. Some analysts even predicted a recession beginning in
the first half of the year, and the Federal Reserve Board cut its Fed Funds
target rate to 5.25% in January, a continuation of the easing it began last
July.
The expectation for slow growth reversed course abruptly in February, however,
as news of an unexpectedly large number of new jobs, and other indications of
stronger growth in the economy, led many to believe the economy was entering a
sustained period of strong growth.
Subsequently, interest rates across all maturities rose, with long rates rising
most steeply. The yield on the 30-year U.S. Treasury bond increased to 6.91%
from 6.33% six months earlier, while the three-year Treasury note increased
one-half percentage point in yield to close April at 6.18%. Short-term rates
also rose, though less dramatically. The yield on the one-year Treasury bill
increased from 5.54% to 5.62% over the same period.
We did not change the Fund's duration or asset allocation significantly over
this period, as our view of the economy remained relatively unchanged. Our usual
strategy remained in place; that is, to add value through active management by
scouring the market for bonds offering an incremental yield advantage or more
potential for price appreciation.
LIPPER ANALYTICAL
SERVICES, INC. RANKINGS2
as of 4-30-96
(based on total return)
RANK AMONG SHORT
TIME PERIOD INVESTMENT-GRADE PERCENTAGE
DEBT FUNDS
1-year #4 of 89 Top 5%
5-year #2 of 19 Top 11%
Since inception #3 of 12 Top 25%
Rankings are historical and do not represent future performance.
4
<PAGE>
ASSET ALLOCATION
as of 4-30-96
Short-Term Investments 0.8%
Preferred Stocks 3.2%
U.S. Government & Agency Issues 20.3%
Corporate Bonds
(including convertibles) 52.1%
Non-Agency Mortgage-Backed
Securities 23.6%
The Fund's asset allocation is presented as a percentage of net assets and does
not reflect any futures positions held by the Fund. Please see the Schedule of
Investments in Securities for a complete listing of the Fund's portfolio.
While rates may fluctuate in a range for the near term, we don't believe the
fundamentals in the U.S. bond market have changed dramatically. Therefore, we
will keep the Fund's sensitivity to interest rate changes relatively neutral
until we see that the shift in market sentiment has run its course.
We believe the increase in interest rates has brought value back to the bond
market, and our outlook for bonds remains positive. As always, we believe that
successful bond investing stems from time in the market rather than "timing the
market."
We appreciate your investment in the Strong Short-Term Bond Fund, and we will do
our best to earn your continued confidence.
Sincerely,
/s/ Bradley C. Tank
Bradley C. Tank
Portfolio Manager
/s/ Lyle J. Fitterer
Lyle J. Fitterer
Portfolio Manager
[PHOTO OF BRAD C. TANK & LYLE J. FITTERER]
AS OF 4-30-96
ANNUALIZED 30-DAY YIELD
7.48%
AVERAGE MATURITY3
2.6 YEARS
AVERAGE QUALITY RATING4
A
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 8-31-87 to 4-30-96
The Strong Short- Salomon Brothers Lipper Short Investment-
Term Bond Fund Short-Term Bond Index Grade Debt (Average)
8-87 10,000 10,000 10,000
12-87 10,318 10,298 10,247
12-88 11,362 10,957 10,967
12-89 12,295 12,154 12,114
12-90 12,944 13,332 13,050
12-91 14,836 14,914 14,563
12-92 15,827 15,876 15,362
12-93 17,302 16,772 16,273
12-94 17,022 16,871 16,306
12-95 19,064 18,706 17,905
4-96 19,240 18,802 17,960
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Salomon Brothers 1-3 year Treasury/Government-Sponsored/Corporate Bond Index
("Salomon Brothers Short-Term Bond Index") and the Lipper Short Investment-Grade
Debt (Average). The Salomon Brothers Short-Term Bond Index is an unmanaged,
market-capitalization weighted index generally representative of the performance
of investment-grade, short-term bonds. The Lipper Short Investment-Grade Debt
(Average) consists of funds that invest at least 65% of assets in
investment-grade debt issues (rated in the top four grades), with a
dollar-weighted average maturity of less than 5 years. Results include the
reinvestment of all dividends and capital gains distributions. Performance is
historical and does not represent future results. Investment returns and
principal value will vary, and you may have a gain or loss when you sell shares.
Source for the Salomon Brothers index data is Salomon Brothers. Source for the
Lipper index data is Lipper Analytical Services, Inc.
AVERAGE ANNUAL
TOTAL RETURNS1
as of 4-30-96
1-YEAR
8.84%
3-YEAR
5.21%
5-YEAR
7.39%
SINCE INCEPTION
on 8-31-87
7.84%
- --------------------------------------------------------------------------------
1 Source for the Lipper index data is Lipper Analytical Services, Inc.
Average annual total return and total return measure change in the value of
an investment in the Fund, assuming reinvestment of all dividends and
capital gains. Average annual total return reflects annualized change,
while total return reflects aggregate change. The Lipper Short
Investment-Grade Fund Index is an equally-weighted performance index,
adjusted for capital gains and income dividends, of the largest qualifying
funds in this investment objective.
2 From time to time, the Fund's advisor has waived its management fee and/or
absorbed expenses, which has resulted in higher returns. Lipper Analytical
Services, Inc. rankings are based on total return with dividends
reinvested. The since-inception ranking is based on performance from
8-31-87 to 4-30-96.
3 The Fund's average maturity includes the effect of futures and options
contracts, and when-issued securities.
4 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the advisor.
5
<PAGE>
The Strong GOVERNMENT SECURITIES Fund
================================================================================
The Strong Government Securities Fund seeks total return by investing for a high
level of current income with a moderate degree of share-price fluctuation. The
Fund normally invests at least 80% of its total assets in U.S. government
securities.
"The increase in interest rates appears to have brought value back into the bond
market, but we don't anticipate rates changing dramatically from current
levels."
The Fund Outperformed Its Lipper Index
The Fund outperformed its benchmark during this volatile period for the bond
market, posting a total return of 0.21% for the six-months ended 4-30-96. The
Fund's gain compared favorably to a loss of (0.32%) on the Lipper General U.S.
Government Fund Index.1
ASSET ALLOCATION
based on net assets as of 4-30-96
Preferred Stock 1.8%
Corporate Bonds 16.8%
U.S. Government & Agency Issues 81.4%
The Fund's asset allocation is presented as a percentage of net assets and does
not reflect any futures positions held by the Fund. The Government Issues
include short-term government securities. Please see the Schedule of Investments
in Securities for a complete listing of the Fund's portfolio.
Bond Market Cooled as Economic Growth Appeared to Strengthen
1995's impressive bond market rally cooled earlier this year on reports of
stronger-than-expected economic growth in the U.S. Market sentiment went
through a dramatic turnaround during the first quarter, shifting from the
expectation for further rate cuts by the Federal Reserve Board, to the
possibility of higher interest rates. This shift in sentiment had a dramatic
effect on the bond market as yields rose across all maturities.
Although the Fed lowered its Fed Funds target rate at the end of January to
5.25%, unexpectedly strong economic numbers- including a staggering number of
new jobs reported in February-led many to believe that the economy was entering
a sustained period of strong growth.
Yields on the 10-year and 30-year U.S. Treasury bonds rose substantially over
this six-month period-each increased its yield by more than one-half percentage
point. The 10-year bond closed April at 6.67%, while the 30-year bond rose to
6.91%.
Our Outlook Has Changed Little
While we believe the economy has certainly moved off the bottom, we do not
believe that it has entered a sustained period of rapid growth. The increase in
interest rates appears to have brought value back into the bond market, but we
don't anticipate rates changing dramatically from current levels. Therefore, our
neutral duration is likely to remain unchanged until the market has settled
down.
LIPPER ANALYTICAL
SERVICES, INC. RANKINGS2
as of 4-30-96
(based on total return)
RANK AMONG
TIME PERIOD U.S. GOVERNMENT PERCENTAGE
FUNDS
1-year #24 of 172 Top 14%
3-year #2 of 101 Top 2%
5-year #1 of 70 Top Fund
Since inception #1 of 42 Top Fund
Rankings are historical and do not represent future performance.
6
<PAGE>
Although the market's view of the economy changed dramatically earlier this
year, our view changed little. We didn't expect to see a recession in 1996, and
we continue to expect GDP growth of 2.5% or less this year. In our view, the
underlying fundamentals for the U.S. bond market remain positive.
We appreciate your investment in the Strong Government Securities Fund, and we
look forward to earning your continued confidence.
Sincerely,
/s/ Bradley C. Tank
Bradley C. Tank
Portfolio Manager
[PHOTO OF BRADLEY C. TANK]
AS OF 4-30-96
30-DAY ANNUALIZED YIELD
6.38%
AVERAGE MATURITY3
7.9 YEARS
AVERAGE QUALITY RATING
AAA
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 10-29-86 to 4-30-96
The Strong Government Lehman Brothers Lipper General U.S.
Securities Fund Aggregate Bond Index Government Fund Index
9-86 10,000 10,000 10,000
12-86 10,218 10,187 10,171
12-87 10,571 10,467 10,222
12-88 11,682 11,293 10,903
12-89 12,835 12,934 12,256
12-90 13,953 14,091 13,238
12-91 16,277 16,346 15,176
12-92 17,780 17,556 16,101
12-93 20,043 19,268 17,441
12-94 19,636 18,706 16,614
12-95 23,218 22,162 19,429
4-96 22,557 21,645 18,834
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Lehman Brothers Aggregate Bond Index and the Lipper General U.S. Government Fund
Index. The Lehman Brothers Aggregate Bond Index is an unmanaged index, composed
of securities from the Lehman Brothers Government/Corporate Bond Index,
Mortgage-Backed Securities Index, and Asset-Backed Securities Index. The Lipper
General U.S. Government Fund Index is an equally-weighted performance index,
adjusted for capital gains distributions and income dividends, of the 30 largest
General U.S. Government Fund portfolios in this Lipper category. To equalize the
time periods, the Indexes' performance was prorated for the month of October,
1986. Previous performance comparisons have shown the Fund compared to an
equivalent investment in the Salomon Brothers Broad Investment-Grade Bond Index.
We have replaced this index with the Lehman Brothers Aggregate Bond Index, a
similar index, because it allows for more in-depth modeling and closer
comparison with the Fund's portfolio. For the six-month period ended 4-30-96,
the Government Securities Fund had a return of 0.21%, compared to the Salomon
Index's return of 0.42% and the Lehman Index's return of 0.52%. Results include
the reinvestment of all dividends and capital gains distributions. Performance
is historical and does not represent future results. Investment returns and
principal value vary, and you may have a gain or loss when you sell shares.
Source of Lehman Brothers and Salomon Brothers index data is Micropal. Source of
Lipper index data is Lipper Analytical Services, Inc.
AVERAGE ANNUAL
TOTAL RETURNS1
as of 4-30-96
1-YEAR
8.68%
3-YEAR
6.01%
5-YEAR
9.42%
SINCE INCEPTION
on 10-29-86
8.93%
- --------------------------------------------------------------------------------
1 Source of Lipper index data is Lipper Analytical Services, Inc. Average
annual total return and total return measure change in the value of an
investment in the Fund, assuming reinvestment of all dividends and capital
gains. Average annual total return reflects anualized change, while total
return reflects aggregate change.
2 From time to time, the Fund's advisor has waived its management fee and/or
absorbed expenses, which has resulted in higher returns. Lipper Analytical
Services, Inc. rankings are based on total return with dividends
reinvested. The since inception ranking is based on performance from
10-31-86 to 4-30-96.
3 The Fund's average maturity includes the effect of futures and options
contracts.
7
<PAGE>
The Strong CORPORATE BOND Fund
================================================================================
The Strong Corporate Bond Fund seeks total return by investing for a high level
of current income with a moderate degree of share-price fluctuation. The Fund
invests primarily in investment-grade corporate debt obligations.
Shifting Fortunes in the Bond Market
The six-month period ended April 30, 1996, was characterized by rapidly shifting
fortunes in the corporate bond market. From October 1995 through February 1996,
the market climbed steadily, building on expectations for tepid economic growth,
and optimistic projections for everything from a balanced budget agreement to
meaningful progress on a potential "flat tax" package.
This euphoria abruptly reversed when February's employment report was
dramatically stronger than expected, indicating that the economy might be
growing faster than consensus expectations. This report, and subsequent data
which also suggested that the economy was strengthening, prompted investors to
anticipate rising interest rates, resulting in a sharp price correction,
particularly in the higher-grade areas of the bond market. Lower-quality bonds
tended to be less negatively affected.
So far in 1996, the market has continued to be buffeted by a number of
contradictory indicators, creating uncertainty as to the economy's strength and
the possible direction of interest rates.
LIPPER ANALYTICAL
SERVICES, INC. RANKINGS2
as of 4-30-96
(based on total return)
RANK AMONG CORPORATE
TIME PERIOD DEBT BBB-RATED FUNDS
1-year #5 of 86
3-year #2 of 49
5-year #3 of 27
10-year #17 of 18
Since inception #5 of 16
Rankings are historical and do not represent future performance
Adjusting The Fund to Changing Conditions
As you may know, part of our strategy for running the Strong Corporate Bond Fund
is to compare it to a relevant index-the Lehman Brothers Corporate BAA Bond
Index-and then make minor adjustments to the portfolio, based on our
expectations for the economy and certain sectors of the market. Our goal is to
add value versus the index over time without straying too far from "neutral
territory."
The value of our "versus the index" approach is apparent in volatile conditions
such as those we experienced from October 1995 through April 1996. Rather than
get caught up in the market's euphoria, we modestly increased the Fund's
duration versus the index to make it more sensitive to interest rates. This
helped us outperform the index as the market rallied.
When the market began to trade down in February, we reduced the Fund's duration
to neutral versus the index, and made moves to improve return potential through
our sector weightings. Specifically, we reduced our exposure to domestic
corporate bonds, and increased our weightings to mortgage-backed securities and
"Yankee bonds"-dollar-denominated corporate bonds issued by blue-chip foreign
companies.
These strategic adjustments helped us achieve a positive total return of 1.14%
for the 6-month period ended April 30, 1996, despite difficult market
conditions, and helped us outperform Lipper BBB Rated Fund Index, which returned
0.55% for the same period.1
Rates Likely to Remain Choppy
Following the correction of early 1996, we believe that corporate bond prices
have returned to a sustainable, arguably fair level. While economic indicators
continue to suggest no clear direction for the economy, there appears to be
little evidence of pent-up demand or a ground swell of underlying strength that
could lead to higher inflation long-term. Therefore, until the economy exhibits
a more predictable path, we expect the market to continue to focus on short-term
data, leading to modest ups and downs within a fairly narrow range.
ASSET ALLOCATION
based on net assets as of 4-30-96
Preferred Stock 3.4%
U.S. Government & Agency Issues 5.4%
Short-Term Investments 1.2%
Non-Agency Mortgage-Backed
Securities 6.3%
Corporate Bonds 83.7%
The Fund's asset allocation is presented as a percentage of net assets and does
not reflect any futures positions held by the Fund. Please see the Schedule of
Investments in Securities for a complete listing of the Fund's portfolio.
8
<PAGE>
For us, such a choppy rate environment would likely prompt us to maintain a
neutral duration, and to look for value on an individual bond basis. We intend
to continue focusing on those bonds that offer an incremental yield advantage,
or good prospects for a credit upgrade that would lead to a price gain.
Longer-term, provided inflation remains at the subdued level we expect, we
believe current rates offer investors an attractive level of income. And should
the bump up in rates act to slow the economy, we would look for interest rates
to trend down, leading to increased opportunities for capital
appreciation-overall, not a bad environment for long-term bond investors.
Thank you for your investment in the Strong Corporate Bond Fund. We look forward
to serving your investment needs in the future.
Sincerely,
/s/ Jeffrey A. Koch
Jeffrey A. Koch
Portfolio Manager
/s/ John T. Bender
John T. Bender
Portfolio Manager
[PHOTO OF JEFFREY A. KOCH & JOHN T. BENDER]
AS OF 4-30-96
30-DAY ANNUALIZED YIELD
7.24%
AVERAGE MATURITY3
13.6 years
AVERAGE QUALITY RATING
BBB
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 12-12-85 to 4-30-96
The Strong Lehman Brothers Lipper BBB
Corporate Bond Fund Corporate BAA Bond Index Rated Fund Index
11-85 10,000 10,000 10,000
12-85 10,300 10,161 10,184
12-86 13,399 11,800 11,595
12-87 13,997 12,322 11,881
12-88 15,744 13,653 12,977
12-89 15,799 15,521 14,342
12-90 14,816 16,341 15,275
12-91 17,013 19,497 17,908
12-92 18,611 21,329 19,361
12-93 21,731 24,086 21,838
12-94 21,447 23,317 20,846
12-95 26,892 28,617 25,052
4-96 26,092 27,670 24,382
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with similar investments in the
Lehman Brothers Corporate BAA Bond Index and the Lipper BBB Rated Fund Index.
The Lehman Brothers Corporate BAA Bond Index is an unmanaged index, comprised of
all issues within the Lehman Brothers Corporate Bond Index Rated Baa by Moody's
Investors Service. The Lipper BBB Rated Fund Index is an equally-weighted
performance index, adjusted for capital gains distributions and income
dividends, of the 30 largest BBB Rated Fund portfolios in this Lipper category.
To equalize the time periods, the Indexes' performance was prorated for the
month of December, 1985. Previous performance comparisons have shown the fund
compared to an equivalent investment in the Salomon Brothers BBB Rated Corporate
Bond Index. We have replaced this index with the Lehman Brothers Corporate BAA
Bond Index because it allows for more in-depth modeling and closer comparison
with the Fund's portfolio. For the six-month period ended 4-30-96, the Corporate
Bond Fund had a return of 1.14%, compared to the Salomon Index's return of 0.03%
and the Lehman Index's return of 0.19%. Results include the reinvestment of all
dividends and capital gains distributions. Performance is historical and does
not represent future results. Investment returns and principal value vary, and
you may have a gain or loss when you sell Fund shares. Source of the Lehman
Brothers index is Micropal. Source of the Lipper index is Lipper Analytical
Services, Inc. Source of the Salomon Brothers index is Salomon Brothers.
AVERAGE ANNUAL
TOTAL RETURNS1
as of 4-30-96
1-YEAR
11.98%
5-YEAR
10.82%
10-YEAR
7.47%
SINCE INCEPTION
(on 12-12-85)
9.67%
- --------------------------------------------------------------------------------
1 Source for index data is Lipper Analytical Services, Inc. Average annual
total return and total return measure change in the value of an investment
in the fund, assuming reinvestment of all dividends and capital gains.
Average annual total return reflects annualized change, while total return
reflects aggregate change.
2 Lipper Analytical Services, Inc. rankings are based on total return with
dividends reinvested. The since-inception ranking is based on performance
from 12-31-85 to 4-30-96.
3 The Fund's average maturity includes the effect of futures and options
contracts.
9
<PAGE>
The Strong HIGH-YIELD BOND Fund
================================================================================
The Strong High-Yield Bond 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.
ASSET ALLOCATION
as of 4-30-96
SECTOR BREAKDOWN QUALITY BREAKDOWN
Preferred Stocks & Warrants 6.4% Preferred Stocks & Warrants 6.4%
Short-Term Investments 6.6% Short-Term Investments 6.6%
Non-Agency Mortgage- Investment-Grade Bonds 7.4%
Backed Securities 1.3% BB-Rated Bonds 24.9%
Corporate Bonds 85.7% B-Rated Bonds 54.7%
This allocation is presented as a percentage of net assets. It does not reflect
any options or futures positions held by the Fund. Please see the Schedule of
Investments in Securities for a complete listing of the Fund's portfolio.
High-Yield Bonds Outperformed the Market
The first four months of 1996 have been a period of rapidly shifting fortunes
for many bond investors. The market began the year in the midst of a steady
rally in bond prices built on a forecast for tepid economic growth, and
optimistic projections for everything from a balanced budget agreement to
meaningful progress on a potential "flat tax" package.
This euphoria abruptly reversed when February's employment report was
dramatically stronger than expected, indicating that the economy might be
growing faster than consensus expectations. This report, and subsequent data
which also suggested that the economy was strengthening, prompted investors to
anticipate rising interest rates, resulting in a sharp price correction for
Treasuries and high-grade corporate bonds.
High-yield bond prices, however, were far less affected. Typically, when a
strong economy prompts a rise in interest rates, high-yield bonds are less
affected than higher-quality instruments, because investors are more confident
that corporations that have issued lower-quality bonds will meet their debt
payments.
Therefore, despite a difficult environment for high-quality bonds, the Strong
High-Yield Bond Fund achieved a 10.01% total return for the first four months of
1996. The Lehman Brothers High-Yield Bond Index posted a total return of 2.15%
for the same period.1
Mining Value in High-Yield Bonds
At Strong Funds, we manage and evaluate our bond portfolios according to a
"top-down" approach based on four major factors:
DURATION-how sensitive the portfolio should be to interest rate changes, based
on our expectations for the economy
YIELD CURVE-which maturities offer the best value at a given time
SECTOR-which industries and asset classes are poised to perform the best in the
current economic climate
ISSUES-which individual bonds are most attractive in light of the above factors
As mentioned earlier, high-yield bonds tend to be less affected by interest
rates than higher-grade bonds. In addition, they tend to be issued in
intermediate maturities. Therefore, our success at managing the Strong
High-Yield Bond Fund hinges, to a great extent, on our adeptness at
overweighting the most attractive sectors-both in terms of industry and credit
category-and then choosing the individual bonds that offer the best value.
The conditions that prevailed in early 1996 provide an excellent illustration of
our management process in action. Due to the uncertainty regarding the direction
of interest rates, we opted to maintain a neutral duration, and focus our
energies on looking for bonds offering value from underlying credit strength,
first by sector, then by individual issue.
With the economy appearing able to sustain a decent degree of growth, we
emphasized sectors whose performance tends to be closely tied to that of the
economy, such as airlines and paper companies. Both sectors performed well
overall during the first few months of 1996. We also lightened up on a few
selected, defensively-oriented holdings in the media sector, and established a
position in "Yankee bonds"-dollar-denominated corporate bonds issued by
blue-chip foreign companies.
10
<PAGE>
Also, with economic news suggesting a level of growth that would enable
high-yield bond issuers to more easily make payments on their debt, we felt
comfortable increasing the Fund's weighting in lower-rated, higher-yielding
paper. As a result, the portfolio was better able to generate more income to
help offset potential price declines. At the end of April, about half the
portfolio was invested in B-rated paper, and only a quarter was invested in
BB-rated paper.
In each case, we carefully analyzed individual bonds from both a credit
standpoint and a value standpoint. As a confidence measure, we sought to buy
bonds from companies whose prospects were bright enough that we wouldn't have
minded owning their stock as well.
As a result of these strategic moves, we were able to handily outperform the
high-yield bond index to which we compare ourselves.
Bonds Likely to Trade in a Range
While economic indicators currently suggest no clear direction for the economy,
there appears to be little evidence of underlying strength that could lead to
higher inflation long-term, or severe weakness that could jeopardize the income
stream of high-yield issuers. Therefore, until the economy exhibits a more
predictable path, we expect the market to continue to focus on short-term data,
leading to modest ups and downs within a fairly narrow range.
Longer-term, provided inflation remains at the subdued level we expect, we
believe current rates offer investors an attractive level of income. And should
the bump up in rates act to slow the economy, we would look for interest rates
to trend down, leading to increased opportunities for capital
appreciation-overall, not a bad environment for long-term bond investors.
Of course, investors should keep in mind that the Fund invests primarily in
non-investment grade bonds, and is therefore subject to greater share-price
volatility than a fund that invests primarily in investment grade bonds.
Thank you for your investment in the Strong High-Yield Bond Fund. We look
forward to serving your investment needs in the future.
Sincerely,
/s/ Jeffrey A. Koch
Jeffrey A. Koch
Portfolio Manager
[PHOTO OF JEFFREY A. KOCH]
AS OF 4-30-96
ANNUALIZED 30-DAY YIELD2
9.84%
AVERAGE MATURITY
6.3 YEARS
AVERAGE QUALITY RATING
B
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
from 12-28-95 to 4-30-96
The Strong Lehman Brothers
High-Yield Bond Fund High-Yield Bond Index
11-95 10,000 10,000
12-95 10,031 10,015
1-96 10,448 10,919
2-96 10,765 10,199
3-96 10,849 10,192
4-96 11,001 10,214
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with a similar investment in the
Lehman Brothers High-Yield Bond Index. Results include the reinvestment of all
dividends and capital gains distributions. The Lehman Brothers High-Yield Bond
Index is an unmanaged, market capitalization-weighted index generally
representative of the performance of corporate bonds rated below investment
grade. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell Fund shares. Source of index is Micropal.
TOTAL RETURNS1
since inception on
12-28-95 to 4-30-96
10.01%
- --------------------------------------------------------------------------------
1 Total return measures aggregate change in the value of an investment in the
Fund, assuming reinvestment of dividends. Total return is not annualized.
Source of index is Micropal.
2 The advisor temporarily waived fees of 0.625% and absorbed expenses of
0.475%. Otherwise, current yield would have been 8.74% and returns would
have been lower.
11
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG MONEY MARKET FUND
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (e) COST (d)
SECURITY (In Thousands) (In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CERTIFICATES OF DEPOSIT 8.1%
Advanta National Bank Certificate of Deposit:
6.26% $ 30,000 5.30% 2/07/97 $ 30,214
6.29% 33,000 5.18 2/07/97 33,275
5.875% 38,000 5.88 4/04/97 38,000
Fuji Bank, Ltd. New York Yankee Dollar Certificate of Deposit 30,000 5.62 6/14/96 30,004
Mitsubishi Bank, Ltd. New York Yankee Dollar Certificate of Deposit 29,000 5.74 6/10/96 28,999
-------
Total Certificates of Deposit 160,492
COMMERCIAL PAPER 66.2%
American Honda Finance Corporation 3,300 5.15 5/31/96 3,286
Anchor Funding Corporation 3,300 5.15 6/21/96 3,276
Anthem Financial, Inc. 20,000 5.47 5/23/96 19,933
Apex Funding Corporation 6,500 5.30 5/31/96 6,471
Arena Funding Corporation 8,145 5.08 7/15/96 8,059
Aristar, Inc. 22,500 5.39 5/21/96 22,433
11,000 5.38 6/03/96 10,946
13,100 5.38 6/06/96 13,030
15,098 5.38 6/07/96 15,014
Astro Capital Corporation 16,165 5.55 6/03/96 16,083
22,500 5.52 6/28/96 22,300
Brazos River Authority, Texas Pollution Control Revenue 5,000 5.41 5/22/96 5,000
10,715 5.45 6/19/96 10,715
Brownsville, Texas Utility Systems 7,269 5.35 5/14/96 7,255
Calcot, Ltd. 3,000 5.45 5/23/96 2,990
3,000 5.50 5/29/96 2,987
7,000 5.40 6/14/96 6,954
8,000 5.40 6/19/96 7,941
Creative Capital Corporation 6,866 5.22 5/07/96 6,860
8,724 4.98 8/02/96 8,612
Dynamic Funding Corporation 5,248 5.23 5/02/96 5,247
41,200 5.24 5/07/96 41,164
5,000 5.42 5/21/96 4,985
11,000 5.30 5/31/96 10,951
10,000 5.45 6/14/96 9,933
Equitable of Iowa Companies 10,000 5.50 5/22/96 9,968
FP Funding Corporation 20,000 5.40 7/02/96 19,814
Finova Capital Corporation 15,000 5.48 5/17/96 14,963
15,000 5.35 5/24/96 14,949
6,000 5.22 5/31/96 5,974
3,000 5.45 6/13/96 2,980
7,800 5.40 6/19/96 7,743
14,000 5.41 6/21/96 13,893
10,100 5.40 6/25/96 10,017
11,500 5.38 7/12/96 11,376
Frontier Corporation 16,800 5.40 6/04/96 16,714
GTE Finance Corporation 7,375 5.43 5/17/96 7,357
9,325 5.43 5/20/96 9,298
2,625 5.43 5/23/96 2,616
12,200 5.43 5/24/96 12,158
13,100 5.42 5/31/96 13,041
18,080 5.37 6/10/96 17,972
Hanson Finance PLC 6,550 5.25 5/09/96 6,542
18,000 5.38 5/24/96 17,938
14,000 5.17 5/28/96 13,946
12,500 5.25 5/30/96 12,447
9,880 5.38 6/04/96 9,830
7,700 5.40 7/19/96 7,609
Heller Financial, Inc. 46,000 5.52 5/09/96 45,944
10,600 5.45 6/05/96 10,544
20,300 5.42 6/12/96 20,172
10,000 5.33 6/24/96 9,920
8,700 5.46 7/10/96 8,608
Hilton Hotels Corporation 20,000 5.42 6/28/96 19,825
Iris Partners L.P. 7,500 5.40 5/06/96 7,494
6,500 5.30 6/04/96 6,467
</TABLE>
See notes to financial statements.
12
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG MONEY MARKET FUND (continued)
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (e) COST (d)
SECURITY (In Thousands) (In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jet Funding Corporation $ 20,979 5.33% 5/31/96 $ 20,886
Lehman Brothers Holdings, Inc. 10,800 5.17 5/07/96 10,791
25,800 5.40 6/20/96 25,607
8,950 5.40 7/08/96 8,859
3,100 5.20 7/09/96 3,069
3,875 5.18 7/11/96 3,835
9,650 5.37 7/17/96 9,539
Mercury Finance Corporation 7,000 5.54 5/06/96 6,995
12,200 5.25 5/10/96 12,184
4,000 5.36 5/17/96 3,990
1,000 5.25 5/21/96 997
9,500 5.70 5/28/96 9,460
9,700 5.24 5/30/96 9,659
6,161 5.34 6/06/96 6,128
10,200 5.38 6/11/96 10,137
2,155 5.45 6/18/96 2,139
8,500 5.47 6/24/96 8,430
3,100 5.50 6/25/96 3,074
10,000 5.52 7/08/96 9,896
15,000 5.51 7/09/96 14,842
New Hampshire Pollution Control 8,000 5.22 5/28/96 8,000
City of New York General Obligation 23,000 5.27 8/14/96 23,000
New York State Job Development Authority 1,200 5.17 8/05/96 1,200
1,800 5.22 8/09/96 1,800
8,335 5.55 8/19/96 8,335
13,300 5.20 8/20/96 13,300
8,020 5.61 8/21/96 8,020
37,670 5.55 8/22/96 37,670
12,990 5.55 8/23/96 12,990
Nynex Corporation 9,750 5.17 5/03/96 9,747
18,240 5.35 6/26/96 18,088
Oakland-Alameda County, California Coliseum Authority 5,320 5.45 5/21/96 5,320
20,465 5.45 6/18/96 20,465
Orix America, Inc. 18,800 5.54 6/14/96 18,673
6,790 5.30 7/10/96 6,720
20,000 5.25 7/23/96 19,758
10,000 5.24 7/26/96 9,875
6,000 5.10 7/30/96 5,924
5,000 5.02 8/15/96 4,926
PSE & G Fuel Corporation 3,800 5.50 6/07/96 3,778
18,700 5.50 6/11/96 18,583
Parish of Plaquemines, State of Louisiana 10,666 5.40 6/13/96 10,666
Parker Hannifin Corporation 10,000 5.40 5/10/96 9,986
Salomon, Inc. 15,300 5.60 5/01/96 15,300
25,030 5.65 5/13/96 24,983
5,450 5.55 5/29/96 5,426
Sanwa Business Credit Corporation 14,175 5.42 6/24/96 14,060
Sara Lee Corporation 309 5.01 Upon Demand 309
Society of the New York Hospital Fund, Inc. 4,350 5.15 5/22/96 4,337
8,930 5.38 6/05/96 8,883
Sotheby's, Inc. 6,875 5.40 5/08/96 6,868
5,000 5.38 5/20/96 4,986
Strait Capital Corporation 19,000 5.38 7/31/96 18,742
Strategic Asset Funding Corporation 15,402 5.35 5/31/96 15,333
Sunshine State Government Finance 14,198 5.40 6/17/96 14,098
Tambrands, Inc. 3,050 5.12 9/16/96 2,990
Torchmark Corporation 10,000 5.20 5/10/96 9,987
Tri-Lateral Capital, Inc. 20,000 5.20 5/16/96 19,957
Whirlpool Financial Corporation 25,000 5.29 5/08/96 24,974
Wisconsin Electric Power Company 13 5.07 Upon Demand 13
---------
Total Commercial Paper 1,309,131
CORPORATE FLOATING RATE NOTES 6.0%
American Honda Finance Corporation Medium Term Notes, Tranche #33 (Acquired
11/27/95; Cost $14,898) (b) 14,900 5.50 7/03/96 14,900
CS First Boston, Inc. Medium Term Notes (Acquired 6/30/95; Cost $25,000)(b) 25,000 5.53 7/07/96 25,000
</TABLE>
See notes financial statements.
13
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) April 30, 1996 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG MONEY MARKET FUND (continued)
PRINCIPAL YIELD TO MATURITY AMORTIZED
AMOUNT MATURITY DATE (e) COST (d)
SECURITY (In Thousands) (In Thousands)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fleet Mortgage Group, Inc. Floating Rate Notes:
Tranche #19 $ 2,000 5.49% 6/17/96 $ 2,001
Tranche #20 6,885 5.49 6/17/96 6,887
General Motors Acceptance Corporation Medium Term Notes 10,000 5.60 7/22/96 10,000
Shawmut Bank Connecticut Medium Term Notes, Tranche #10 60,000 5.32 5/10/96 60,000
-------
Total Corporate Floating Rate Notes 118,788
CORPORATE OBLIGATIONS 11.4%
AT&T Capital Corporation Medium Term Notes:
Tranche #478, 7.80% 2,625 5.27 12/30/96 2,668
Tranche #489, 7.68% 19,100 5.25 1/31/97 19,438
Aristar, Inc. Senior Notes, 7.375% 20,230 5.07 2/15/97 20,589
Bankers Trust NY Corporation Notes, 4.70% 12,000 5.92 7/01/96 11,976
Chrysler Financial Corporation Notes, 10.34% 64,358 6.54 5/15/96 64,457
Finova Capital Corporation Notes:
8.00% 4,000 5.21 1/15/97 4,077
8.25% 4,100 5.42 3/11/97 4,197
First National Bank Akron, Ohio Medium Term Notes, Tranche 1, 5.95% 20,000 5.91 8/01/96 20,002
Ford Motor Credit Company Medium Term Notes, 5.20% 4,000 5.24 1/01/97 3,999
General Motors Acceptance Corporation Medium Term Notes:
Tranche #90, 7.75% 1,000 5.71 1/17/97 1,014
Tranche #137, 7.60% 7,425 5.29 2/10/97 7,555
Tranche #176, 7.875% 10,000 5.25 2/28/97 10,211
Tranche #187, 7.85% 1,625 5.04 3/05/97 1,662
Tranche #224, 8.25% 10,000 5.11 1/06/97 10,209
Tranche #311, 8.00% 3,000 5.11 2/03/97 3,064
Tranche #428, 6.375% 7,000 5.80 5/23/96 7,003
Tranche #865, 5.25% 1,000 5.05 12/09/96 1,001
MCI Communications Senior Notes, 7.625% 2,625 5.27 11/07/96 2,656
Sears Roebuck & Company Medium Term Notes, Series V, 8.54% 3,000 5.63 8/14/96 3,027
Shearson Lehman Hutton Group, Inc., 8.875% 4,250 8.88 5/01/96 4,250
Waste Management Liquid Yield Option Notes, Zero % 22,950 6.01 6/30/96 8,936
World Savings & Loan Association Oakland, California Medium Term Notes,
Tranche #22, 7.625% 14,000 5.27 2/18/97 14,256
-------
Total Corporate Obligations 226,247
TAXABLE MUNICIPAL VARIABLE RATE PUT BONDS 7.4%
Alabama State Industrial Development Authority - S -Tool Project 8,000 5.60 5/02/96 8,000
Aurora, Kane & Dupage Counties, Illinois Industrial Development Revenue 1,700 5.65 5/02/96 1,700
Chattanooga, Tennessee Industrial Development Board Revenue - Radisson
Read Project 3,660 6.02 5/02/96 3,660
Community Health Systems, Inc. 3,900 5.65 5/01/96 3,900
Health Midwest Ventures Group, Inc. 8,600 5.75 5/01/96 8,600
Illinois Housing Development Authority 14,345 5.54 5/01/96 14,345
Ivex of Delaware, Inc. 6,400 6.25 5/02/96 6,400
J.H. Siroonian, Inc. 7,575 5.49 5/01/96 7,575
Kinder-Care Learning Centers, Inc. Industrial Refunding - Kinder-Care
Learning Centers, Inc. Projects 4,000 5.63 5/01/96 4,000
McQueen Village, Ltd. 3,200 5.60 5/02/96 3,200
Mississippi Business Finance Corporation Industrial Development - Morton
International, Inc. 14,500 5.54 5/01/96 14,500
Montgomery County, Pennsylvania Industrial Development Authority Revenue 5,000 5.65 5/02/96 5,000
New Jersey Sports & Exposition Authority Sports Complex Subordinated
Refunding Revenue 21,275 5.54 5/01/96 21,275
Passaic County, New Jersey General Obligation Refunding 13,800 5.60 5/01/96 13,800
South Carolina Jobs - Economic Development Authority Industrial
Development Revenue - Roller Bearing Company of America, Inc. Project 3,000 5.82 5/02/96 3,000
Southeast Atlantic Properties, L.L.C 7,450 5.60 5/02/96 7,450
Stanislaus County, California Pension Obligation 10,000 5.54 5/01/96 10,000
State of Virginia Housing Development Authority Multifamily Housing
Revenue 1,980 5.54 5/01/96 1,980
Thayer Properties, LLC 3,600 5.60 5/02/96 3,600
WLB, LLC 3,900 5.60 5/02/96 3,900
-------
Total Taxable Municipal Variable Rate Put Bonds 145,885
UNITED STATES GOVERNMENT AND AGENCY ISSUES 0.8%
Student Loan Marketing Association Floating Rate Notes: 5,000 5.32 5/07/96 5,000
10,000 5.34 5/07/96 10,000
---------
Total United States Government and Agency Issues 15,000
---------
TOTAL INVESTMENTS IN SECURITIES 99.9% 1,975,543
Other Assets and Liabilities, Net 0.1% 2,102
---------
NET ASSETS 100.0% $1,977,645
==========
</TABLE>
See notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
STRONG MONEY MARKET FUND (continued)
- --------------------------------------------------------------------------------
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- ----------------------------------------------
Personal & Commercial Lending....... 21.3%
Non-Agency Asset Backed............. 11.1
General Obligation.................. 8.0
Automobile.......................... 7.0
Brokerage & Investment Management... 6.9
Bank - Regional..................... 6.1
Industrial Development Revenue...... 5.2
Finance - Miscellaneous............. 4.3
Chemical............................ 3.5
Telephone........................... 3.2
Bank - Super Regional............... 3.0
Yankee Corporate.................... 3.0
Telecommunication Service........... 2.4
Leisure Service..................... 2.1
Consumer Related Products........... 1.4
Hospital Revenue.................... 1.3
Pollution Control Revenue........... 1.2
Agricultural Operations............. 1.1
Electric Power...................... 1.1
Insurance - Life.................... 1.0
SLMA................................ 0.8
Real Estate......................... 0.7
Savings & Loan...................... 0.7
Bank - Money Center................. 0.6
Consumer - Miscellaneous............ 0.6
Aerospace & Defense................. 0.5
Pollution Control................... 0.5
Mortgage & Related Service.......... 0.4
Other Revenue....................... 0.3
Commercial Service.................. 0.2
Parking Revenue..................... 0.2
Retail - Department Store........... 0.2
Other Assets and Liabilities, Net... 0.1
------
Total 100.0%
======
- --------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
CONVERTIBLE BONDS 1.9%
Time Warner, Inc. Convertible Liquid Yield Option
Notes, Zero %, Due 12/17/12 (Putable at 39.727
on 12/17/97) (COST $19,812) $ 58,000 $ 20,735
CORPORATE BONDS 50.0%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 2,000 2,229
American Standard, Inc. Senior Debentures,
11.375%, Due 5/15/04 4,300 4,671
Banesto Finance Limited Subordinated Floating
Rate Notes, 6.375%, Due 10/29/49 10,000 9,365
Bank of Boston Corporation Subordinated Floating
Rate Notes, 5.4375%, Due 2/28/01 8,850 8,787
Buckeye Cellulose Corporation Senior Subordinated
Notes, 8.50%, Due 12/15/05 5,770 5,597
Cablevision Industries Corporation Senior Notes,
10.75%, Due 1/30/02 2,000 2,155
California Hotel Finance Corporation Guaranteed
Senior Subordinated Notes, 11.00%, Due 12/01/02 9,710 10,317
Chelsea GCA Realty Partnership L.P. Notes, 7.75%,
Due 1/26/01 10,000 9,718
Citicorp Floating Rate Notes:
5.625%, Due 11/27/35 22,000 20,469
6.50%, Due 5/01/04 21,357 21,416
Delta Air Lines, Inc. Delaware Pass-Thru Certificates:
Series 1992-B1, 9.375%, Due 9/11/07 21,321 22,975
Series 1993-A1, 9.875%, Due 4/30/08 8,409 9,660
El Paso Electric Company First Mortgage Bond:
Series A, 7.25%, Due 2/01/99 4,000 3,955
Series B, 7.75%, Due 5/01/01 9,500 9,357
Empresa Electrica Guacolda SA Yankee Senior
Secured Loan Participation Certificates:
7.60%, Due 4/30/01 (Acquired 4/22/96;
Cost $10,000) (b) 10,000 9,978
7.95%, Due 4/30/03 (Acquired 4/22/96;
Cost $2,000) (b) 2,000 1,992
First Bank System, Inc. Floating Rate Subordinated
Notes, 5.4375%, Due 11/30/10
(Putable at 100 on 11/30/00) 4,000 4,012
First Nationwide Holdings, Inc. Senior Exchange
Notes, 12.25%, Due 5/15/01 5,000 5,525
Ford Motor Credit Debt Unit with Premium Call
(Structured Enhanced Return Trusts 1995,
Series R-20), 9.75%, Due 2/03/98 (Acquired 2/08/95;
Cost $9,995) (b) 10,000 10,450
General Electric Capital Corporation Remarketed
Reset Note, 8.65%, Due 5/01/18 (f) 7,620 7,628
Harrahs Operating, Inc. Guaranteed Senior
Subordinated Notes:
8.75%, Due 3/15/00 9,175 9,404
10.875%, Due 4/15/02 13,375 14,412
Health & Retirement Properties Trust Senior
Floating Rate Notes, Series B, 6.2552%,
Due 7/13/99 10,000 9,856
Hook-SupeRx, Inc. Senior Notes, 10.125%,
Due 6/01/02 8,180 8,822
Lenfest Communications, Inc. Senior Notes, 8.375%,
Due 11/01/05 10,000 9,600
Loewen Group International, Inc. Guaranteed Senior
Notes, 7.50%, Due 4/15/01 (Acquired 3/13/96;
Cost $9,970) (b) 10,000 9,888
Marine Midland Banks, Inc. Floating Rate
Subordinated Notes:
5.5625%, Due 12/20/00 5,000 4,955
5.625%, Due 12/31/09 4,400 4,224
See notes to financial statements.
15
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
Mark IV Industry, Inc. Senior Subordinated Notes,
8.75%, Due 4/01/03 $14,700 $ 14,884
NBD Bancorp, Inc. Subordinated Floating Rate
Notes, 5.625%, Due 12/18/05 5,000 4,928
NWA Trust Number 2 Subordinated Aircraft Notes,
13.875%, Due 6/21/08 5,209 6,127
New American Capital, Inc. Notes, 9.60%,
Due 1/12/99 (Acquired 3/22/96; Cost $2,121) (b) 2,000 2,118
Northwest Airlines, Inc. Guaranteed Senior Notes,
12.091%, Due 12/31/00 8,450 8,777
Okobank Subordinated Step-Up Perpetual Floating
Rate Notes, 6.9852%, Due 10/29/49 11,200 11,368
Panamerican Beverage Yankee Senior Notes, 8.125%,
Due 4/01/03 8,100 8,009
Panamsat L.P./ Panamsat Capital Corporation
Senior Secured Notes, 9.75%, Due 8/01/00 12,965 13,613
Republic of Argentina BOCON Previsional 2 Floating
Rate Notes, 5.4219%, Due 4/01/01 2,517 2,216
Republic of Argentina Bonds, 9.25%, Due 2/23/01 7,000 6,764
Republic of Argentina Floating Rate Euro Bearer
Bonds, 6.3125%, Due 3/31/05 18,998 14,510
Republic of Argentina Series L - GP Euro Par
Bonds, 5.25%, Due 3/31/23 3,115 1,694
Republic of Poland Yankee Bearer PDI Bonds,
3.75%, Due 10/27/14 1,905 1,455
Revco D.S., Inc. Senior Notes, 9.125%, Due 1/15/00 11,306 11,815
Rogers Cantel Mobile, Inc. Guaranteed Senior
Subordinated Notes, 11.125%, Due 7/15/02 10,000 10,687
Safeway, Inc. Senior Subordinated Notes, 9.35%,
Due 3/15/99 6,650 7,082
Salomon, Inc. Senior Notes, 7.25%, Due 5/01/01 10,000 9,938
Santa Fe Pacific Gold Corporation Senior
Debentures, 8.375%, Due 7/01/05 12,000 12,000
Summit Communications Group, Inc. Debentures,
10.50%, Due 4/15/05 10,000 11,025
TKR Cable I, Inc. Senior Debentures, 10.50%,
Due 10/30/07 20,270 23,133
Tanger Properties Limited Partnership Guaranteed
Notes, 8.75%, Due 3/11/01 13,000 12,740
Tele-Communications, Inc. Senior Notes, Series E,
10.25%, Due 9/30/00 10,000 10,581
Tenet Healthcare Corporation Senior Notes:
8.625%, Due 12/01/03 8,300 8,508
9.625%, Due 9/01/02 9,060 9,694
Time Warner, Inc. Debt Unit with Premium Call
(Medium Term Structured Enhanced Return
Trusts 1994, Series R-21), 8.58%, Due 6/22/98
(Acquired 2/24/95; Cost $9,966) (b) 10,000 10,317
Transportadora de Gas del Sur SA Yankee Notes,
10.25%, Due 4/25/01 5,000 5,038
Triton Energy Corporation Senior Subordinated
Discount Notes:
Zero %, Due 11/01/97 15,000 13,294
9.75%, Due 12/15/00 9,050 8,756
Union Bank of Norway:
Debt Unit with Premium Call (Medium Term
Structured Enhanced Return Trusts 1996,
Series R-33), 7.05%, Due 12/20/00 (Acquired
4/03/96; Cost $1,000)(b) 1,000 988
Dual Basis Notes (Medium Term Structured
Enhanced Return Trusts 1995, Series R-31),
6.7969%, Due 10/25/00 (Acquired 11/06/95;
Cost $10,000)(b) 10,000 10,137
United Airlines Pass-Thru Trust Certificates, Series
1996-A1, 7.27%, Due 1/30/13 5,512 5,095
Viacom, Inc. Notes, 6.75%, Due 1/15/03 24,840 23,463
--------
TOTAL CORPORATE BONDS (COST $555,743) 552,171
NON-AGENCY MORTGAGE &
ASSET-BACKED SECURITIES 23.6%
American Housing Trust XI Mortgage Pass-Thru
Certificates, Class 3-1, Interest Only, 0.581%,
Due 1/25/22 261,519 4,781
CBM Funding Corporation Mortgage Pass-Thru
Certificates, Series 96-1, Class C, 7.86%,
Due 2/01/13 (Acquired 1/16/96; Cost $7,498) (b) 7,275 7,089
Central Life Assurance Company Mortgage
Pass-Thru Certificates, Series 1988-1, Class A-4,
9.00%, Due 5/01/97 4,427 4,467
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 1990-G, Class A-Z1,
9.50%, Due 12/25/21 4,047 4,058
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1988-3, Class A-2, 9.00%,
Due 4/01/18 2,467 2,535
Collateralized Mortgage Obligation Trust 47,
Class E, Principal Only, Due 9/01/18 1,558 705
Collateralized Mortgage Obligation Trust Inverse
Floating Rate, Series 13, Class Q, 16.0871%,
Due 1/20/03 1,989 2,111
DLJ Mortgage Acceptance Corporation Variable
Rate Multifamily Mortgage Pass-Thru Certificates,
Series 1993-MF10, Class A-1, 0.80%, Due 7/15/03 24,469 680
First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates:
Series 1993-2, Class A-3, 7.50%, Due 3/25/33 5,500 5,427
Series 1994-MHC1, Class A-1X, Interest Only,
3.3038%, Due 4/25/11 73,085 3,814
First Boston Mortgage Securities Corporation
Variable Rate Mortgage Pass-Thru Certificates,
Series 1994-MHC1, Class D, 7.1023%, Due 4/25/11 5,000 5,000
Fund America Structured Transactions, LP
Collateralized Notes, Series 1996-1, Principal Only,
Due 3/29/96 (Acquired 3/07/96; Cost $10,739) (b) 15,000 10,373
GMBS, Inc. Countrywide Funding Certificates,
Series 1990-1, Class Z, 9.25%, Due 1/28/20 7,672 7,756
Green Tree Financial Corporation Certificates,
Series 1994-BII, Class A-1, 7.85%, Due 7/15/09 8,581 8,665
Green Tree Financial Corporation Home
Improvement Loan Certificates, Series 1995-E,
Class A, 6.80%, Due 8/15/20 9,830 9,768
Green Tree Securitized Net Interest Margin Trust
Certificates:
Series 1994-A, 6.90%, Due 2/15/04 6,401 6,384
Series 1994-B, 7.85%, Due 7/15/04 3,003 3,024
Series 1995-A, 7.25%, Due 7/15/05 4,750 4,741
Greenwich Capital Acceptance, Inc. Mortgage
Securities, Series 1993-P01, Class E, Principal
Only, Due 11/26/17 11,702 7,314
Greenwich Capital Acceptance, Inc. Variable Rate
Mortgage Pass-Thru Certificates, Series 1991-1,
Class A, 7.3949%, Due 2/25/21 (Acquired 4/18/96;
Cost $18,915) (b) 18,544 18,915
Home Equity Loan Real Estate Mortgage Investment
Conduit Trust, Closed-End Asset-Backed
Certificates, Series 1992-1, Class B, 5.85%,
Due 11/17/14 1,494 1,436
ML TR X Collateralized Mortgage Obligation,
Class C, Principal Only, Due 7/25/17 14,101 13,890
See notes to financial statements.
16
<PAGE>
- --------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
Merrill Lynch Credit Corporation Senior
Subordinated Variable Rate Mortgage Pass-Thru
Certificates, Series 1994-A, Class M1, 6.2375%,
Due 8/15/19 $ 13,423 $ 12,647
Merrill Lynch Home Equity Acceptance, Inc.
Subordinated Variable Rate Mortgage-Backed
Certificates, Series 1994-A, Class A-1, 6.4375%,
Due 8/17/23 13,254 13,013
Merrill Lynch Mortgage Investors, Inc. Mortgage
Pass-Thru Certificates, Series 1994-C1, Interest
Only, 0.6392%, Due 11/25/20 151,705 2,518
Merrill Lynch Mortgage Investors, Inc. Senior
Subordinated Variable Rate Pass-Thru
Certificates, Series 1994-H, Class M, 6.4375%,
Due 6/15/19 11,543 11,193
RTC Mortgage Pass-Thru Securities, Inc.
Commercial Certificates, Series 1992-CHF, Class B,
7.15%, Due 12/25/20 11,496 11,551
RTC Mortgage Pass-Thru Securities, Inc., Series
1991-11, Class 1-L, 8.625%, Due 10/25/21 11,850 12,124
RTC Variable Rate Mortgage Pass-Thru Securities,
Inc. Manufactured Housing Certificates, Series
1992-MH1, Class B2, 5.9625%, Due 8/15/19
(Acquired 4/21/95; Cost $6,556) (b) 6,659 6,582
RTC Variable Rate Mortgage Pass-Thru
Securities, Inc.:
Series 1992-6, Class A-4, 7.479%, Due 11/25/25 2,270 2,280
Series 1995-1, Class B-11, 7.10%, Due 10/25/28 6,559 6,584
Ryland Acceptance Corporation IV Collateralized
Mortgage Bonds, Series 53, Class 53-E, 10.00%,
Due 10/25/18 1,794 1,898
Ryland Mortgage Securities Corporation Mortgage
Participation Securities - Boston Safe Deposit,
Series 1991-1, 7.5541%, Due 3/25/20 (f) 3,438 3,495
Ryland Mortgage Securities Corporation III Variable
Rate Collateralized Mortgage Bonds, Series 1992-C,
Class 3-A, 11.8194%, Due 11/25/30 4,991 5,216
Ryland Mortgage Securities Corporation IV Variable
Rate Collateralized Mortgage Bonds, Series 2,
Class 3-A, 11.9893%, Due 6/25/23 3,675 3,861
Salomon Brothers Mortgage Securities VI, Inc.
Stripped Coupon Mortgage Pass-Thru Certificates,
Series 1987-3, Class A, Principal Only,
Due 10/23/17 2,336 1,842
Santa Barbara Savings & Loan Association
California Real Estate Mortgage Investment
Conduit Participation Certificates, Series 1988-A,
Class 2, Principal Only, Due 9/01/18 2,188 1,613
Shearson Lehman Variable Rate Pass-Thru
Securities, Inc. Asset Trust Certificates, Series 88-3,
7.8804%, Due 9/15/18 7,941 8,103
Structured Asset Securities Corporation Variable
Rate Collateralized Mortgage Obligation, Series
1991-2, Class SC, 13.95%, Due 1/20/20 17,859 18,724
Structured Mortgage Asset Residential Trust
Multiclass Pass-Thru Certificates, Series 1992-5,
Class BO, Principal Only, Due 6/25/23 1,992 1,484
U-Haul Self-Storage Corporation Variable Rate
Commercial Mortgage Asset Trust Pass-Thru
Certificates, Series 1993-1, Class A1, 6.90%,
Due 12/01/20 (Acquired 12/02/93; Cost $3,669) (b) 3,669 3,678
--------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES (COST $261,695) 261,339
UNITED STATES GOVERNMENT AND
AGENCY ISSUES 20.3%
FHLMC Participation Certificates:
6.50%, Due 5/01/04 2,472 2,466
7.559%, Due 7/01/24 8,532 8,717
8.50%, Due 4/01/01 thru 1/01/05 1,407 1,451
8.75%, Due 10/01/01 1,679 1,731
9.00%, 12/01/04 thru 3/01/22 23,274 24,460
9.50%, Due 3/01/11 916 985
9.75%, Due 8/01/02 5,893 6,181
10.25%, Due 7/01/09 thru 10/01/14 925 1,011
10.50%, Due 1/01/10 thru 7/01/19 1,984 2,189
10.75%, Due 9/01/09 thru 10/01/17 1,077 1,189
11.25%, Due 11/01/09 577 641
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates:
8.725%, Due 4/01/02 33,628 34,090
10.00%, Due 7/01/04 2,710 2,860
12.00%, Due 3/01/17 10,820 12,305
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates, Series 1992-41,
Class J, Accretion Directed Interest Only,
1005.049%, Due 12/25/02 23,900 244
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Variable Rate Pass-Thru Certificates:
Series 1991-01, Class 1L, Interest Only,
1087.173%, Due 1/25/21 53,700 1,692
Series 1992-187, Class SA, 8.40%, Due 10/25/07 3,211 2,890
Series 1992-G64, Class SE, 8.4607%, Due 3/25/22 5,220 4,006
Series 1993-93, Class S, 8.50%, Due 5/25/08 1,959 1,594
FNMA Stripped Mortgage-Backed Securities:
Series G-4, Class C, Principal Only, Due 5/25/16 1,452 1,431
Series 1993-M1, Class N, Interest Only, 0.84%,
Due 4/25/20 174,747 2,621
Series 1993-12, Class C, Principal Only,
Due 2/25/23 23,200 17,555
Series 1995-G2, Class IO, Interest Only,
1.0535%, Due 5/25/20 20,292 1,579
GNMA Guaranteed Pass-Thru Certificates:
9.75%, Due 9/15/05 thru 11/15/05 2,793 2,958
10.00%, Due 2/20/18 1,205 1,300
11.50%, Due 4/15/13 408 463
GNMA Guaranteed Platinum Pool Pass-Thru
Certificates:
11.00%, Due 6/15/20 13,144 14,794
12.50%, Due 4/15/19 49,945 58,155
Small Business Administration Guaranteed Loan
Group #0190, Variable Rate Interest Only
Certificates, 3.1226%, Due 7/30/18 26,213 3,146
Small Business Administration Guaranteed Loan
Pool #440019, Interest Only Custodial Receipts,
Series 1993-1A, 2.4959%, Due 2/15/18 16,705 1,937
USGI FHA Insured Project Pool Banco 85, 7.385%,
Due 11/24/19 5,117 5,061
USGI FHA Insured Project Pool #2047, 6.90%,
Due 8/01/14 2,864 2,667
--------
TOTAL UNITED STATES GOVERNMENT AND
AGENCY ISSUES (COST $224,480) 224,369
OPTIONS 0.2%
Merrill Lynch Swaption (The option to receive a
fixed interest rate of 7.75%; exercisable at a strike
price of 100 beginning 4/09/04 and expiring
4/09/25.)(COST $1,833) 39,583 1,884
See notes to financial statements.
17
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
PREFERRED STOCKS 3.2%
First Nationwide Bank, Dallas, Texas 11.50% 64,100 $ 7,195
Norwest Corporation Series A, Cumulative
Tracking/Residential Home Mortgage LLC
(Acquired 12/16/94; Cost $23,000) (b) 115,000 24,268
Time Warner, Inc. Exchangeable, Series K
(Acquired 4/03/96; Cost $3,500) (b) 3,500 3,500
--------
TOTAL PREFERRED STOCKS (COST $33,817) 34,963
CASH EQUIVALENTS (a) 1.5%
COMMERCIAL PAPER 1.2%
DISCOUNTED 0.9%
Lockeed Martin Corporation, Due 5/01/96 $10,600 10,600
INTEREST BEARING, DUE UPON DEMAND 0.3%
General Mills, Inc., 5.02% 23 23
Sara Lee Corporation, 5.01% 1,756 1,756
Southwestern Bell Telephone Company, 5.01% 80 80
Warner Lambert Company, 5.00% 1,000 1,000
Wisconsin Electric Power Company, 5.07% 35 35
-------
2,894
-------
Total Commercial Paper 13,494
TIME DEPOSIT 0.1%
Banco Nacional de Comercio Exterior, 9.875%,
Due 6/24/96 1,000 1,003
UNITED STATES GOVERNMENT ISSUES 0.2%
United States Treasury Bills:
Due 5/09/96 (c) 60 60
Due 5/16/96 75 75
Due 5/30/96 (c) 15 15
Due 6/06/96 (c) 655 652
Due 7/11/96 (c) 990 980
Due 7/18/96 (c) 300 297
-------
2,079
-------
TOTAL CASH EQUIVALENTS (COST $16,575) 16,576
---------
TOTAL INVESTMENTS IN SECURITIES
(COST $1,113,955) 100.7% 1,112,037
Other Assets and Liabilities, Net (0.7%) (7,799)
---------
NET ASSETS 100.0% $1,104,238
==========
FUTURES
- -------
UNDERLYING UNREALIZED
FACE AMOUNT APPRECIATION
EXPIRATION AT VALUE (DEPRECIATION)
DATE (In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
Purchased:
196 Two-Year U.S. Treasury Notes 6/96 $ 40,443 ($ 456)
Sold:
400 Five-Year U.S. Treasury Notes 6/96 (42,369) 464
961 Ten-Year U.S. Treasury Notes 6/96 (103,308) 2,155
OPTIONS
- -------
NOTIONAL
PAR VALUE PREMIUMS
(In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
Options outstanding at October 31, 1995 $27,800 $156
Options written during the period 27,800 154
Options closed (27,800) (154)
Options expired (27,800) (156)
------- ----
Options outstanding at April 30, 1996 $ -- $ --
======= ====
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- -----------------------------------------------------------
U.S. Government and Agency...................... 20.5%
Non-Agency Single Family........................ 12.2
Non-Agency Asset-Backed......................... 7.6
Media - Radio/TV................................ 5.3
Airline......................................... 4.8
Media - Publishing.............................. 4.1
Bank - Money Market............................. 3.8
Yankee Corporate................................ 3.6
Bank - Super Regional........................... 3.4
Leisure Service................................. 3.3
Real Estate..................................... 2.9
Foreign Government.............................. 2.4
Non-Agency Manufactured Housing................. 2.4
Electric Power.................................. 2.3
Telecommunication Service....................... 2.2
Oil - North American Exploration & Production... 2.0
Retail - Drug Store............................. 1.9
Healthcare - Patient Care....................... 1.6
Bank - Regional................................. 1.5
Auto and Truck Parts............................ 1.3
Brokerage & Investment Management............... 1.1
Precious Metal/Gem/Stone........................ 1.1
Manufacturing................................... 1.0
Telecommunication Equipment..................... 1.0
Automobile...................................... 0.9
Consumer - Miscellaneous........................ 0.9
Diversified Operations.......................... 0.9
Foreign Corporate............................... 0.9
Non-Agency Commercial........................... 0.9
Electrical Equipment............................ 0.7
Non-Agency Multi-Family......................... 0.6
Retail - Food Chain............................. 0.6
Paper & Forest Products......................... 0.5
Finance - Miscellaneous......................... 0.2
Food............................................ 0.2
Healthcare - Drug/Diversified................... 0.1
Other Assets and Liabilities,Net................ (0.7)
-----
Total 100.0%
=====
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- ------------------------------------------------
United States....................... 91.4%
Argentina........................... 2.7
Chile............................... 1.1
Canada.............................. 1.0
Finland............................. 1.0
Norway.............................. 1.0
Mexico.............................. 0.8
Spain............................... 0.8
United Kingdom...................... 0.8
Poland.............................. 0.1
Other Assets and Liabilities, Net... (0.7)
-----
Total 100.0%
=====
See notes to financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
CORPORATE BONDS 17.5%
AMR Corporation Delaware Debentures, 9.80%,
Due 10/01/21 $11,270 $ 13,055
Banc One Corporation Subordinated Notes, 9.875%,
Due 3/01/09 7,340 8,786
Columbia Gas Systems, Inc. Notes, 7.05%,
Due 11/28/07 10,000 9,635
Fleet Financial Group, Inc. Subordinated Notes,
7.125%, Due 4/15/06 5,400 5,331
Metropolitan Life Insurance Company Surplus Notes,
7.70%, Due 11/01/15 (Acquired 11/08/95;
Cost $6,776) (b) 6,800 6,591
Salomon, Inc. Senior Notes, 6.75%, Due 2/15/03 10,070 9,547
Time Warner, Inc. Debentures, 8.11%, Due 8/15/06 2,100 2,100
Time Warner, Inc. Notes:
7.75%, Due 6/15/05 12,000 11,860
7.975%, Due 8/15/04 5,000 4,997
U.S. Air, Inc. Enhanced Equipment Notes:
Class A, 6.76%, Due 4/15/08 (Acquired 2/09/96;
Cost $8,000) (b) 8,000 7,515
Class B, 7.50%, Due 4/15/08 (Acquired 2/09/96;
Cost $2,000) (b) 2,000 1,875
Viacom, Inc. Notes, 6.75%, Due 1/15/03 10,450 9,871
Yale University Notes, 7.375%, Due 4/15/96 7,200 6,957
-------
TOTAL CORPORATE BONDS (COST $101,128) 98,120
MUNICIPAL BONDS 0.7%
Arkansas Development Finance Authority GNMA
Guaranteed Bonds, 9.75%, Due 11/15/14
(COST $3,842) 3,100 3,747
UNITED STATES GOVERNMENT AND
AGENCY ISSUES 77.0%
FHA Insured Project Loan #956-55054, 2.93%,
Due 11/01/12 4,180 3,258
FHA Project Loan Section 223(f) - Hampshire Tower
Apartments, 7.50%, Due 11/15/30 9,114 8,875
FHLMC Guaranteed Multiclass Variable Rate
Mortgage Participation Certificates, Series 1324,
Class 1324-B, 7.00%, Due 4/15/18 1,502 1,504
FHLMC Participation Certificates:
6.00%, Due 12/15/08 12,250 10,937
6.642%, Due 3/13/06 19,725 18,826
7.00%, Due 1/25/21 4,896 4,718
7.25%, Due 7/01/08 2,662 2,669
8.00%, Due 7/01/08 thru 12/01/10 9,170 9,429
8.00%, Due 4/01/26 (f) 27,269 27,499
8.50%, Due 5/01/16 3,085 3,212
9.00%, Due 12/01/01 thru 6/01/16 9,375 9,921
9.50%, Due 1/01/11 thru 12/01/19 7,537 7,991
9.75%, Due 8/01/02 3,309 3,470
10.00%, Due 10/01/05 thru 6/01/20 18,433 20,093
10.50%, Due 6/01/04 thru 8/01/20 4,190 4,544
11.00%, Due 1/01/01 150 158
11.25%, Due 1/01/01 167 178
11.75%, Due 10/01/15 176 198
12.00%, Due 11/01/15 98 111
12.25%, Due 7/01/15 thru 12/01/15 666 755
12.50%, Due 10/01/09 thru 1/01/15 389 444
13.00%, Due 7/01/14 108 124
13.75%, Due 5/01/02 thru 5/01/12 129 146
14.00%, Due 9/01/10 thru 4/01/16 1,241 1,428
14.50%, Due 3/01/11 thru 12/01/11 15 17
14.75%, Due 8/01/11 thru 4/01/13 11 12
15.00%, Due 8/01/11 62 72
16.00%, Due 6/01/12 7 9
-------
140,598
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates:
8.50%, Due 7/01/10 thru 7/25/22 12,718 12,900
10.00%, Due 4/01/20 4,880 5,364
11.75%, Due 12/01/10 201 226
12.00%, Due 1/01/16 thru 2/01/19 4,060 4,620
12.25%, Due 7/01/14 34 38
12.50%, Due 2/01/11 thru 5/01/15 7,754 8,852
13.00%, Due 10/01/15 11,507 13,318
13.25%, Due 4/01/12 4 4
13.50%, Due 1/01/11 thru 1/01/12 60 67
13.75%, Due 10/01/10 7 8
14.00%, Due 1/01/12 thru 11/01/14 154 180
14.25%, Due 12/01/14 34 40
14.50%, Due 1/01/12 8 10
14.75%, Due 11/01/10 thru 3/01/12 237 276
15.00%, Due 10/01/12 11 13
15.50%, Due 10/01/12 21 25
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates, Series 1989-11,
Class 11-C, Principal Only, Due 1/25/14 301 299
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Variable Rate Pass-Thru Certificates:
Pool #92068, 7.694%, Due 1/01/18 2,264 2,326
Pool # 327442, 7.648%, Due 8/01/25 18,108 18,639
Series 1991-57, Class S, 8.1047%, Due 5/25/20 6,884 6,707
-------
73,912
GNMA Guaranteed Pass-Thru Certificates:
6.50%, Due 11/15/23 (f) 10,890 8,930
9.00%, Due 1/15/08 thru 12/15/09 15,662 16,535
12.50%, Due 4/15/19 7,148 8,323
13.00%, Due 11/15/10 thru 11/15/14 928 1,074
13.50%, Due 7/15/10 thru 10/15/12 328 381
14.00%, Due 6/15/11 thru 12/20/14 298 345
14.50%, Due 6/15/11 thru 11/15/12 432 508
15.00%, Due 1/15/12 thru 9/15/12 180 212
16.00%, Due 4/15/12 20 24
-------
36,332
Small Business Administration Guaranteed Loan,
Interest Only Custodial Receipts:
Series 1992-6 A, 2.473%, Due 10/15/17 62,763 7,100
Series 1993-1 A, 2.483%, Due 2/15/18 22,755 2,638
Series 1993-9 A, 3.19%, Due 9/15/18 53,288 7,793
Tennessee Valley Authority Power Bond, Series
1995A, 6.375%, Due 6/15/05 6,200 5,982
United States Treasury Bonds:
6.875%, Due 8/15/25 3,600 3,558
7.625%, Due 2/15/25 10,025 10,758
11.25%, Due 2/15/15 8,470 12,178
11.625%, Due 11/15/04 3,900 5,137
United States Treasury Notes:
5.625%, Due 2/15/06 1,160 1,076
5.75%, Due 8/15/03 1,370 1,303
5.875%, Due 11/15/05 4,115 3,885
6.25%, Due 5/31/00 - 2/15/03 23,025 22,861
6.375%, Due 8/15/02 3,300 3,274
6.50%, Due 8/15/05 5,635 5,563
7.50%, Due 2/15/05 2,200 2,316
7.75%, Due 1/31/00 31,640 33,103
7.875%, Due 8/15/01 19,725 20,970
8.00%, Due 8/15/99 23,300 24,465
-------
173,960
USGI FHA Insured Project Pool #2040, 3.025%,
Due 11/01/06 8,576 7,672
-------
TOTAL UNITED STATES GOVERNMENT AND
AGENCY ISSUES (COST $434,807) 432,474
See notes to financial statements.
19
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND(continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
OPTION 0.1%
Merrill Lynch Swaption (The option to receive a fixed
interest rate of 7.75%; exercisable at a strike price
of 100 beginning 4/09/04 and expiring 4/09/25.)
(COST $563) $12,167 $ 579
PREFERRED STOCK 1.9%
Norwest Corporation Series A, Cumulative Tracking/
Residential Home Mortgage LLC (Acquired
12/16/94; COST $10,000) (b) 50,000 10,551
CASH EQUIVALENTS(a) 8.4%
COMMERCIAL PAPER 0.1%
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.03% 22 22
Pitney Bowes Credit Corporation, 5.03% 58 58
Sara Lee Corporation, 5.01% 232 232
Southwestern Bell Telephone Company, 5.01% 32 32
Wisconsin Electric Power Company, 5.07% 29 29
------
373
REPURCHASE AGREEMENT 8.3%
Cantor Fitzgerald & Co., Inc. (Collateralized by:
$6,372 United States Treasury Notes, 5.75%,
Due 9/30/97; $29,726 United States Treasury
Notes, 6.125%, Due 9/30/00; and $11,034 United
States Treasury Note Strips, Due 6/20/96), 5.34%,
Due 5/01/96 (e) 46,500 46,500
UNITED STATES GOVERNMENT ISSUES 0.0%
United States Treasury Bills, Due 5/23/96 170 169
-------
TOTAL CASH EQUIVALENTS (COST $47,042) 47,042
TOTAL INVESTMENTS IN SECURITIES
(COST $597,382) 105.6% 592,513
Other Assets and Liabilities, Net (5.6%) (31,537)
-------
NET ASSETS 100.0% $560,976
========
FUTURES
- -------
UNDERLYING UNREALIZED
FACE AMOUNT APPRECIATION
EXPIRATION AT VALUE (DEPRECIATION)
DATE (In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
Purchased:
140 U.S. Treasury Bonds 6/96 $15,282 ($888)
Sold:
224 Ten-Year U.S. Treasury Notes 6/96 (24,080) 75
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- ---------------------------------------------------------------
United States Government and Agency Issues.. 86.1%
Bank - Super Regional........................ 4.4
Airline...................................... 4.0
Media - Publishing........................... 3.4
Media - Radio/TV............................. 1.8
Brokerage & Investment Management............ 1.7
Natural Gas Distribution..................... 1.7
Education.................................... 1.2
Insurance - Life............................. 1.2
Finance - Miscellaneous...................... 0.1
Other Assets and Liabilities, Net............(5.6)
------
Total 100.0%
======
- --------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
CORPORATE BONDS 83.6%
AGCO Corporation Senior Subordinated Notes,
8.50%, Due 3/15/06 (Acquired 3/15/96; Cost
$4,957) (b) $ 5,000 $ 5,013
AMR Corporation Delaware Debentures:
9.00%, Due 8/01/12 5,000 5,332
9.80%, Due 10/01/21 2,500 2,896
10.00%, Due 4/15/21 4,000 4,692
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 5,415 6,035
Acetex Corporation Senior Secured Notes, 9.75%,
Due 10/01/03 1,000 1,005
Apache Corporation Debentures, 7.95%, Due 4/15/26 5,000 4,902
Banc One Corporation Subordinated Notes, 9.875%,
Due 3/01/09 6,084 7,282
Banesto Finance Limited Subordinated Notes,
6.375%, Due 10/29/49 2,000 1,873
Buckeye Cellulose Corporation Senior Subordinated
Notes, 8.50%, Due 12/15/05 5,530 5,364
Coastal Corporation Senior Debentures, 10.75%,
Due 10/01/10 5,000 6,324
Columbia Gas Systems, Inc. Notes, 7.05%,
Due 11/28/07 5,000 4,818
Delta Air Lines, Inc. Delaware Pass-Thru
Certificates, Series 1992-B1, 9.375%, Due 9/11/07 3,641 3,923
Empresa Electrica Guacolda SA Yankee Senior
Secured Loan Participation Certificates, 7.95%,
Due 4/30/03 (Acquired 4/22/96; Cost $3,000) (b) 3,000 2,989
First Nationwide Holdings, Inc. Senior Subordinated
Notes, 9.125%, Due 1/15/03 (Acquired
1/23/96-2/20/96; Cost $1,145) (b) 1,140 1,109
Fleet Financial Group, Inc. Subordinated Notes,
7.125%, Due 4/15/06 3,000 2,962
Freeport - McMoRan Resource Partners, Limited
Partnership Senior Notes, 7.00%, Due 2/15/08 9,940 9,223
GNS Finance Corporation Senior Subordinated
Notes, Series B, 9.25%, Due 3/15/03 4,250 4,590
Harrahs Operating, Inc. Guaranteed Senior
Subordinated Notes, 8.75%, Due 3/15/00 4,500 4,612
IMC Global, Inc. Senior Notes, Series B:
10.125%, Due 6/15/01 3,400 3,655
10.75%, Due 6/15/03 1,000 1,075
Intelcom Group USA, Inc. Colorado Senior
Discounted Notes, 13.50%, Due 9/15/05 2,000 1,250
Kansallis-Osake-Pankki Subordinated Notes, 8.65%,
Due 12/29/49 (Rate Reset Effective 8/15/99)
(Acquired 9/19/95; Cost $3,158) (b) 3,000 3,129
Lehman Brothers Holdings, Inc. Senior Notes, 8.80%,
Due 3/01/15 6,500 7,060
Loewen Group International, Inc. Guaranteed Senior
Notes, 8.25%, Due 4/15/03 (Acquired 3/13/96;
Cost $3,995) (b) 4,000 3,985
MFS Communications, Inc. Senior Discount Notes,
Zero%, Due 01/15/06 (Rate Reset Effective 1/15/01) 3,600 2,236
Mark IV Industries, Inc. Senior Subordinated Notes,
7.75%, Due 4/01/06 3,500 3,334
Metropolitan Life Insurance Company Surplus
Notes, 7.70%, Due 11/01/15 (Acquired 11/08/95;
Cost $3,986) (b) 4,000 3,877
Nextlink Communications LLC Senior Discounted
Notes, 12.50%, Due 4/15/06 (Acquired 4/18/96;
Cost $3,000) (b) 3,000 3,030
Owens-Illinois, Inc. Senior Debentures, 11.00%,
Due 12/01/03 3,703 4,055
See notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
Panamerican Beverage Yankee Senior Notes, 8.125%,
Due 4/01/03 $ 3,000 $ 2,966
Panamsat L.P./ Panamsat Capital Corporation Senior
Secured Notes, 9.75%, Due 8/01/00 1,500 1,575
Panamsat L.P./ Panamsat Capital Corporation Senior
Subordinated Discount Notes, Zero %,
Due 8/01/03 (Rate Reset Effective 8/01/98) 6,000 5,130
Paramount Communications, Inc. Debentures, 8.25%,
Due 8/01/22 4,800 4,573
Principal Mutual Life Insurance Company Surplus
Notes, 8.00%, Due 3/01/44 (Acquired
10/17/95-3/13/96; Cost $9,138) (b) 9,125 8,630
Republic of Argentina Floating Rate Euro Bearer
Bonds, 6.3125%, Due 3/31/05 6,653 5,081
Republic of Argentina Series L-GP Euro Par Bonds,
5.25%, Due 3/31/23 2,575 1,400
Republic of Poland Yankee Bearer PDI Bonds,
3.75%, Due 10/27/14 5,540 4,231
Revco D.S., Inc. Senior Notes, 9.125%, Due 1/15/00 3,950 4,128
Salomon, Inc. Senior Notes, 7.25%, Due 5/01/01 3,465 3,444
Santa Fe Pacific Gold Corporation Senior
Debentures, 8.375%, Due 7/01/05 2,000 2,000
Stratospere Corporation Guaranteed First Mortgage
Notes, 14.25%, Due 5/15/02 4,000 5,020
System Energy Resources, Inc. First Mortgage
Bonds, 11.375%, Due 9/01/16 3,500 3,781
TNT Transport PLC/TNT USA, Inc. Senior Notes,
11.50%, Due 4/15/04 170 179
Teekay Shipping Corporation Guaranteed First
Preferred Mortgage Notes, 8.32%, Due 2/01/08 2,450 2,343
Tenaga Nasional Berhad Debentures, 7.50%, Due
1/15/96 (Acquired 2/27/96-3/28/96; Cost $7,272)(b) 7,500 6,751
Tenet Healthcare Corporation Senior Notes, 8.625%,
Due 12/01/03 8,000 8,200
Terra Nova Insurance UK Holdings PLC Senior
Guaranteed Notes, 10.75%, Due 7/01/05 6,920 7,768
Time Warner, Inc. Debentures:
8.11%, Due 8/15/06 3,010 3,011
9.125%, Due 1/15/13 5,000 5,314
Tosco Corporation Guaranteed First Mortgage
Bonds, 8.25%, Due 5/15/03 1,880 1,966
UCAR Global Enterprises, Inc. Senior
Subordinated Notes, 12.00%, Due 1/15/05 2,895 3,329
U.S. Air, Inc. Enhanced Equipment Notes, Class C,
8.93%, Due 4/15/08 (Acquired 2/14/96;
Cost $3,505) (b) 3,500 3,279
USG Corporation Senior Notes, Series B, 9.25%,
Due 9/15/01 3,000 3,135
Viacom, Inc. Notes, 6.75%, Due 1/15/03 7,300 6,895
-------
TOTAL CORPORATE BONDS (COST $229,568) 225,759
NON-AGENCY MORTGAGE &
ASSET-BACKED SECURITIES 6.3%
Bear Stearns Mortgage Securities, Inc. Mortgage
Pass-Thru Certificates, Series 1995-1, Class 2-P,
Principal Only, Due 7/25/10 1,196 881
CBM Funding Corporation Mortgage Pass-Thru
Certificates, Series 96-1:
Class C, 7.86%, Due 2/01/08 4,725 4,604
Class D, 8.64%, Due 2/01/08 1,960 1,923
DLJ Mortgage Acceptance Corporation Variable Rate
Multifamily Mortgage Pass-Thru Certificates,
Series 1993-MF10, Class A-1, Interest Only, 0.80%,
Due 7/14/03 34,987 973
First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates, Series
1994-MHC1, Class A-1X, Interest Only, 3.3038%,
Due 4/25/11 7,517 392
Fund America Structured Transactions, LP
Collateralized Notes, Series 1996-1, Principal Only,
Due 10/28/33 (Acquired 3/07/96; Cost $3,487) (b) 5,000 3,458
Ryland Mortgage Securities Corporation III Variable
Rate Collateralized Mortgage Bonds, Series 1992-C,
Class 3-A, 11.8194%, Due 11/25/30 732 765
Westam Mortgage Financial Corporation
Collateralized Mortgage Bonds, Series 10,
Class 10-D, Principal Only, Due 7/26/18 7,703 4,025
-------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES (COST $18,302) 17,021
UNITED STATES GOVERNMENT
AND AGENCY ISSUES 5.4%
FHLMC Participation Certificates:
14.00%, Due 9/01/12 36 41
14.75%, Due 3/01/10 24 27
FNMA Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates, 13.50%,
Due 4/01/11 209 242
GNMA Guaranteed Pass-Thru Certificates, 15.00%,
Due 8/15/11 thru 10/15/12 155 183
Small Business Administration Guaranteed Loan
Pool #40013, Interest Only Strips, 2.419%,
Due 9/30/17 15,169 1,640
United States Treasury Notes:
6.25%, Due 2/15/03 7,915 7,776
6.375%, Due 8/15/02 285 283
6.875%, Due 8/15/25 4,500 4,448
-------
TOTAL UNITED STATES GOVERNMENT AND
AGENCY ISSUES (COST $14,808) 14,640
OPTION 0.1%
Merrill Lynch Swaption (The option to receive a
fixed interest rate of 7.75%; exercisable at a strike
price of 100 beginning 4/09/04 and expiring
4/09/25.) (COST $282) 6,083 290
PREFERRED STOCK 3.4%
Cablevision Systems Corporation, Series L
(Acquired 2/8/96-4/01/96; Cost $1,521) (b) 15,213 1,487
First Nationwide Bank, Dallas, Texas 11.50% 1,000 112
Norwest Corporation Series A, Cumulative
Tracking/Residential Home Mortgage LLC
(Acquired 12/16/94; Cost $2,000) (b) 10,000 2,110
Time Warner, Inc. Exchangeable, Series K
(Acquired 4/3/96; Cost $5,500) (b) 5,500 5,500
-------
TOTAL PREFERRED STOCK (COST $9,134) 9,209
CASH EQUIVALENTS (a) 0.9%
COMMERCIAL PAPER 0.7%
DISCOUNTED 0.5%
Lockheed Martin Corporation, Due 5/01/96 1,400 1,400
INTEREST BEARING, DUE UPON DEMAND 0.2%
General Mills, Inc., 5.02% 160 160
Pitney Bowes Credit Corporation, 5.03% 270 270
Sara Lee Corporation, 5.01% 32 32
Wisconsin Electric Power Company, 5.07% 27 27
------
489
------
Total Commercial Paper 1,889
See notes to financial statements.
21
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
UNITED STATES GOVERNMENT ISSUES 0.2%
United States Treasury Bills:
Due 5/02/96 (c) $ 45 $ 45
Due 6/06/96 35 35
Due 7/11/96 340 337
--------
417
--------
TOTAL CASH EQUIVALENTS (COST $2,306) 2,306
--------
TOTAL INVESTMENTS IN SECURITIES
(COST $274,400) 99.7% 269,225
Other Assets and Liabilities, Net 0.3% 852
--------
NET ASSETS 100.0% $270,077
========
FUTURES
- -------
UNDERLYING UNREALIZED
FACE AMOUNT APPRECIATION
EXPIRATION AT VALUE (DEPRECIATION)
DATE (In Thousands) (In Thousands)
- --------------------------------------------------------------------------------
Purchased:
16 Five-Year U.S. Treasury Notes 6/96 $ 1,695 ($ 37)
66 Ten-Year U.S. Treasury Notes 6/96 7,095 (40)
25 U.S. Treasury Bonds 6/96 2,729 (20)
Sold:
45 U.S. Treasury Bonds 6/96 (4,912) 236
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- -----------------------------------------------
Yankee Corporate..................... 9.6%
Airline.............................. 7.5
Leisure Service...................... 7.5
U.S. Government...................... 5.6
Chemical............................. 5.2
Media-Publishing..................... 5.1
Telecommunication Service............ 4.9
Media-Radio/T.V...................... 4.8
Insurance-Life....................... 4.6
Natural Gas Distribution............. 4.1
Foreign Government................... 4.0
Brokerage and Investment Management.. 3.9
Non-Agency Single Family............. 3.7
Healthcare-Patient Care.............. 3.0
Bank-Super Regional.................. 2.7
Non-Agency Commercial................ 2.4
Bank-Regional........................ 2.3
Paper and Forest Products............ 2.0
Machinery-Agriculture................ 1.9
Diversified Operations............... 1.8
Foreign Corporate.................... 1.8
Container............................ 1.5
Retail-Drug Store.................... 1.5
Electric Utility..................... 1.4
Auto and Truck Parts................. 1.2
Engineering and Construction......... 1.2
Steel................................ 1.2
Shipping............................. 0.9
Oil-North American Integrated........ 0.7
Precious Metal/Gem/Stone............. 0.7
Manufacturing........................ 0.5
Non-Agency Manufactured Housing...... 0.2
Finance-Miscellaneous................ 0.1
Food................................. 0.1
Office Automation.................... 0.1
Other Assets and Liabilities, Net.... 0.3
-----
Total 100.0%
=====
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- -----------------------------------------------
United States....................... 85.8%
United Kingdom...................... 2.9
Malaysia............................ 2.5
Argentina........................... 2.4
Poland.............................. 1.6
Chile............................... 1.1
Japan............................... 1.1
Mexico.............................. 1.1
Spain............................... 0.7
Canada.............................. 0.4
Australia........................... 0.1
Other Assets and Liabilities, Net... 0.3
-----
Total 100.0%
=====
- --------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
CORPORATE BONDS 85.7%
AMF Group Senior Subordinated Notes, 10.875%,
Due 3/15/06 (Acquired 3/07/96; Cost $500) (b) $ 500 $ 496
Acetex Corporation Senior Secured Notes, 9.75%,
Due 10/01/03 1,000 1,005
American Radio Systems Corporation Senior
Subordinated Notes, 9.00%, Due 2/01/06 500 482
BE Aerospace, Inc. Senior Subordinated Notes,
9.875%, Due 2/01/06 (Acquired 1/19/96;
Cost $100) (b) 100 98
Benton Oil & Gas Company Senior Notes, 11.625%,
Due 5/01/03 (Acquired 4/29/96; Cost $1,000) (b) 1,000 1,017
Buckeye Cellulose Corporation Senior Subordinated
Notes, 8.50%, Due 12/15/05 470 456
California Hotel Finance Corporation Guaranteed
Senior Subordinated Notes, 11.00%, Due 12/01/02 790 839
Canandaigua Wine, Inc. Senior Subordinated Notes,
8.75%, Due 12/15/03 215 215
Clark Oil & Refining Corporation Senior Notes,
10.50%, Due 12/01/01 1,240 1,293
Clark-Schwebel, Inc. Senior Notes, 10.50%, Due
4/15/06 (Acquired 4/12/96; Cost $1,000) (b) 1,000 1,023
Doane Products Company Senior Notes, 10.625%,
Due 3/01/06 1,000 1,020
Domtar, Inc. Debentures, 11.25%, Due 9/15/17 100 105
Ekco Group, Inc. Senior Notes, 9.25%, Due 4/01/06
(Acquired 3/20/96; Cost $496) (b) 500 495
Exide Electronics Group, Inc. Unit Senior
Subordinated Notes, 11.50%, Due 3/15/06
(Acquired 3/07/96; Cost $500) (b) 500 520
Figgie International, Inc. Senior Notes, 9.875%,
Due 10/01/99 150 153
First Nationwide Parent Holdings, Inc. Senior Notes,
12.50%, Due 4/15/03 (Acquired 4/12/96;
Cost $989) (b) 1,000 1,020
Howmet Corporation Senior Subordinated Notes,
10.00%, Due 12/01/03 (Acquired 12/27/95-1/08/96;
Cost $315) (b) 300 318
IMC Global, Inc. Senior Notes, Series B, 10.125%,
Due 6/15/01 465 500
See notes to financial statements
22
<PAGE>
- --------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND(continued)
SHARES OR VALUE
PRINCIPAL (NOTE 2)
AMOUNT (In Thousands)
- --------------------------------------------------------------------------------
IMO Industries, Inc. Senior Subordinated Notes,
11.75%, Due 5/01/06 (Acquired 4/23/96;
Cost $986) (b) $ 1,000 $ 1,007
InterCel, Inc. Unit Senior Discount Notes, Zero %,
Due 2/01/06 1,020 648
KCS Energy, Inc. Senior Notes, 11.00%, Due 1/15/03
(Acquired 4/22/96; Cost $1,075) (b) 1,000 1,073
MFS Communications, Inc. Senior Discount Notes,
Zero %, Due 1/15/06 900 559
Mark IV Industry, Inc. Senior Subordinated Notes,
8.75%, Due 4/01/03 327 331
Mesa Capital Corporation/Mesa, Inc./Mesa
Operating L.P. Secured Discount Notes, 12.75%,
Due 6/30/98 1,000 1,007
Newsquest Capital PLC Senior Subordinated Notes,
11.00%, Due 5/01/06 (Acquired 4/03/96;
Cost $500) (b) 500 500
Nextlink Communications LLC Senior Discounted
Notes, 12.50%, Due 4/15/06 (Acquired 4/18/96;
Cost $1,000) (b) 1,000 1,010
Northwest Airlines, Inc. Guaranteed Senior Notes,
12.0916%, Due 12/31/00 757 786
Owens-Illinois, Inc. Senior Debentures, 11.00%,
Due 12/01/03 1,000 1,095
Paging Network, Inc. Senior Subordinated Notes,
11.75%, Due 5/15/02 140 153
Panamsat L.P./ Panamsat Capital Corporation Senior
Subordinated Discount Notes, Zero %,
Due 8/01/03 1,155 988
Republic of Argentina Floating Rate Euro Bearer
Bonds, 6.3125%, Due 3/31/05 337 257
Republic of Argentina Series L-GP Euro Par Bonds,
5.25%, Due 3/31/23 310 169
Republic of Poland Yankee Bearer PDI Bonds, 3.75%,
Due 10/27/14 870 664
Revlon Worldwide Corporation Senior Secured
Discount Notes, Series B, Zero %, Due 3/15/98 364 294
Riverwood International Corporation Senior Notes,
10.25%, Due 4/01/06 500 502
Shared Technologies Fairchild Corporation Senior
Subordinated Discount Notes, Zero %, Due 3/01/06
(Acquired 3/08/96; Cost $703) (b) 1,000 740
Showboat Marina Casino Partnership/Showboat
Marina Financial Corporation First Mortgage
Notes, 13.50%, Due 3/15/03 (Acquired 3/21/96;
Cost $1,000) (b) 1,000 1,060
Simmons Company Senior Subordinated Notes,
10.75%, Due 4/15/06 (Acquired 4/15/96;
Cost $500) (b) 500 504
Southdown, Inc. Senior Subordinated Notes, 10.00%,
Due 3/01/06 (Acquired 3/13/96; Cost $500) (b) 500 500
Station Casinos, Inc. Senior Subordinated Notes,
10.125%, Due 3/15/06 500 491
Stratospere Corporation Guaranteed First Mortgage
Notes, 14.25%, Due 5/15/02 1,500 1,883
TNT Transport PLC/TNT USA, Inc. Senior Notes,
11.50%, Due 4/15/04 480 504
Teekay Shipping Corporation Guaranteed First
Preferred Mortgage Notes, 8.32%, Due 2/01/08 550 526
Triton Energy Corporation Senior Subordinated
Discount Notes, Zero %, Due 12/15/00 1,250 1,209
Trump Atlantic City Associates/Trump Atlantic City
Funding, Inc. First Mortgage Notes,
11.25%, 5/01/06 1,000 1,016
UCAR Global Enterprises, Inc. Senior Subordinated
Notes, 12.00%, Due 1/15/05 105 121
U.S. Air, Inc. 1993-A Pass-Thru Trust Certificates,
Series 1993-A2, 9.625%, Due 9/01/03 325 312
U.S. Air, Inc. Enhanced Equipment Notes, Class C,
8.93%, Due 4/15/08 (Acquired 2/09/96;
Cost $500) (b) 500 468
------
TOTAL CORPORATE BONDS (COST $31,267) 31,432
NON-AGENCY MORTGAGE AND
ASSET-BACKED SECURITIES 1.3%
First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates, Series 92-4,
Class A-5, Interest Only, 0.625%, Due 10/25/22 32,451 228
RTC Variable Rate Mortgage Pass-Thru Securities,
Inc. Series 1991-7, Class A, 7.75%, Due 12/25/18 272 265
------
TOTAL NON-AGENCY MORTGAGE AND
ASSET-BACKED SECURITIES (COST $495) 493
CONVERTIBLE PREFERRED STOCKS 1.5%
Station Casinos, Inc. $3.50 (COST $500) 10,000 534
NON-CONVERTIBLE PREFERRED STOCKS 4.7%
Cablevision Systems Corporation, Series L (Acquired
2/08/96-4/01/96; Cost $507) (b) 5,071 496
First Nationwide Bank, Dallas, Texas 1.50% 2,000 224
Time Warner, Inc. Exchangeable, Series K
(Acquired 4/03/96; Cost $1,000) (b) 1,000 1,000
------
TOTAL NON-CONVERTIBLE PREFERRED STOCKS
(COST $1,733) 1,720
WARRANTS 0.2%
American Communications Services, Inc. Warrants,
Expire 11/01/05 1,500 86
American Telecasting, Inc. Warrants, Expire 8/10/00 150 4
------
TOTAL WARRANTS (COST $96) 90
CASH EQUIVALENTS(a) 5.4%
COMMERCIAL PAPER 0.2%
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.03% 32 32
Sara Lee Corporation, 5.01% 2 2
Wisconsin Electric Power Company, 5.07% 41 41
------
75
REPURCHASE AGREEMENT 5.2%
Cantor Fitzgerald & Co., Inc., 5.34%, Due 5/01/96 1,900 1,900
------
TOTAL CASH EQUIVALENTS (COST $1,974) 1,975
------
TOTAL INVESTMENTS IN SECURITIES
(COST $36,065) 98.8% 36,244
Other Assets and Liabilities, Net 1.2% 424
------
NET ASSETS 100.0% $36,668
=======
See notes to financial statements.
23
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) April 30, 1996 (Unaudited)
- --------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND(continued)
- --------------------------------------------------------------------------------
PERCENTAGE OF
INDUSTRY DIVERSIFICATION NET ASSETS
- ---------------------------------------------------------
Leisure Service................................ 15.9%
Telecommunication Service...................... 11.4
Oil - North American Exploration and Production 8.8
Oil - North American Integrated................ 6.4
Yankee Corporate............................... 5.5
US Government.................................. 5.2
Airline........................................ 4.3
Computer - Peripheral Equipment................ 4.2
Bank - Regional................................ 3.4
Diversified Operations......................... 3.2
Container...................................... 3.0
Foreign Government............................. 3.0
Paper & Forest Products........................ 2.9
Consumer - Miscellaneous....................... 2.8
Household Appliance & Furnishings.............. 2.7
Media - Publishing............................. 2.7
Media - Radio/TV............................... 2.7
Chemical....................................... 1.4
Metals & Mining................................ 1.4
Shipping....................................... 1.4
Leisure Product................................ 1.3
Aerospace & Defense............................ 1.1
Auto & Truck Parts............................. 0.9
Cosmetic & Personal Care....................... 0.8
Non-Agency Multi-Family........................ 0.7
Beverage - Alcoholic........................... 0.6
Non-Agency Asset-Backed........................ 0.6
Steel.......................................... 0.3
Electric Power................................. 0.1
Finance - Miscellaneous........................ 0.1
Other Assets and Liabilities, Net.............. 1.2
------
Total 100.0%
======
PERCENTAGE OF
COUNTRY DIVERSIFICATION NET ASSETS
- -----------------------------------------------
United States....................... 90.1%
Canada.............................. 3.0
Poland.............................. 1.8
United Kingdom...................... 1.4
Australia........................... 1.3
Argentina........................... 1.2
Other Assets and Liabilities, Net... 1.2
------
Total 100.0%
======
LEGEND
- ------
(a) Cash equivalents includes any security which has a maturity of less than
one year.
(b) Restricted security.
(c) All or a portion of security pledged to cover margin requirements for
futures contracts.
(d) Maturity date represents actual maturity, earliest put date, or for U.S.
Government Agency Securities, the next interest adjustment date.
(e) The Funds may engage in repurchase agreements where the underlying
collateral consists of U.S. government securities which are maintained in a
segregated account with a custodian. The market value of the collateral
must exceed the principal amount by at least two percent on a daily basis.
(f) When-Issued security.
All principal amounts and costs are stated in thousands.
Percentages are stated as a percent of net assets.
INCOME TAX INFORMATION
At April 30, 1996, the investment cost and gross unrealized appreciation and
depreciation on investments for Federal income tax purposes were as follows (in
thousands):
STRONG SHORT-TERM STRONG GOVERNMENT
BOND FUND SECURITIES FUND
----------------- -----------------
Aggregate Investment Cost $1,122,341 $597,411
========== ========
Aggregate Unrealized:
Appreciation $ 13,746 $ 4,188
Depreciation (24,050) (9,087)
-------- -------
($ 10,304) ($ 4,899)
============ ==========
STRONG CORPORATE STRONG HIGH-YIELD
BOND FUND BOND FUND
----------------- -----------------
Aggregate Investment Cost $ 274,402 $ 36,065
========== =========
Aggregate Unrealized:
Appreciation $ 1,702 $ 476
Depreciation (6,878) (297)
------- -----
($ 5,176) $ 179
============ =========
See notes to financial statements.
24
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
For the Period Ended April 30, 1996 (Unaudited) (Note 1)
(In Thousands)
STRONG MONEY STRONG SHORT-TERM STRONG GOVERNMENT
MARKET FUND BOND FUND SECURITIES FUND
----------- --------- ---------------
<S> <C> <C> <C>
INCOME:
Interest $ 57,136 $ 43,155 $ 17,345
Dividends -- 94 --
------- ------ -------
Total Income 57,136 43,249 17,345
EXPENSES:
Investment Advisory Fees 4,963 3,484 1,560
Custodian Fees 93 61 27
Shareholder Servicing Costs 1,805 1,107 436
Reports to Shareholders 817 320 94
Federal and State Registration Fees 425 24 42
Other 62 80 33
------ ------ -----
Total Expenses before Waivers and Absorptions 8,165 5,076 2,192
Voluntary Expense Waivers and Absorptions by Advisor (5,226) -- --
------ ------- ------
Expenses, Net 2,939 5,076 2,192
------ ------- ------
NET INVESTMENT INCOME 54,197 38,173 15,153
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments -- 9,763 (142)
Futures Contracts, Options and Forward Currency Contracts -- (2,975) (3,191)
Change in Unrealized Appreciation/Depreciation on:
Investments -- (16,955) (11,789)
Futures Contracts, Options and Forward Currency Contracts -- 2,783 (1,079)
----- ----- ------
NET LOSS -- (7,384) (16,201)
----- ------ -------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 54,197 $ 30,789 ($ 1,048)
============ ============== ===========
</TABLE>
<TABLE>
<CAPTION>
STRONG CORPORATE STRONG HIGH-YIELD
BOND FUND BOND FUND
--------- ---------
<S> <C> <C>
INCOME:
Interest $10,248 $ 557
Dividends 24 12
------ ---
Total Income 10,272 569
EXPENSES:
Investment Advisory Fees 814 40
Custodian Fees 23 3
Shareholder Servicing Costs 313 8
Reports to Shareholders 71 4
Federal and State Registration Fees 14 4
Other 17 --
----- ---
Total Expenses before Waivers and Absorptions 1,252 59
Voluntary Expense Waivers and Absorptions by Advisor -- (59)
----- ---
Expenses, Net 1,252 --
----- ---
NET INVESTMENT INCOME 9,020 569
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 2,515 412
Futures Contracts, Options and Forward Currency Contracts (199) --
Change in Unrealized Appreciation/Depreciation on:
Investments (9,718) 179
Futures Contracts, Options and Forward Currency Contracts 19 --
------ ---
NET GAIN (LOSS) (7,383) 591
------ ---
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,637 $ 1,160
======= =======
</TABLE>
See notes to financial statements.
25
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
April 30, 1996 (Unaudited)
(In Thousands, Except Per Share Amounts)
STRONG MONEY STRONG SHORT-TERM STRONG GOVERNMENT
MARKET FUND BOND FUND SECURITIES FUND
----------- --------- ---------------
<S> <C> <C> <C>
ASSETS:
Investments in Securities, at Value (Cost of
$1,975,543, $1,113,955 and $597,382, respectively) $ 1,975,543 $1,112,037 $592,513
Receivable from Brokers for Securities and Forward Foreign
Currency Contracts Sold -- 8,725 28,620
Dividends and Interest Receivable 11,162 12,565 7,342
--------- --------- -------
Total Assets 1,986,705 1,133,327 628,475
LIABILITIES:
Payable to Brokers for Securities and Forward Foreign
Currency Contracts Payable -- 21,963 64,257
Dividends Payable 8,321 6,125 2,726
Accrued Operating Expenses and Other Liabilities 739 1,001 516
----- ------ ------
Total Liabilities 9,060 29,089 67,499
----------- ---------- --------
NET ASSETS $ 1,977,645 $1,104,238 $560,976
=========== ========== ========
Capital Shares
Authorized 10,000,000 1,000,000 100,000
Outstanding 1,977,645 113,754 54,347
NET ASSET VALUE PER SHARE $ 1.00 $ 9.71 $ 10.32
=========== ========== ========
</TABLE>
<TABLE>
<CAPTION>
STRONG CORPORATE STRONG HIGH-YIELD
BOND FUND BOND FUND
--------- ---------
<S> <C> <C>
ASSETS:
Investments in Securities, at Value (Cost of
$274,400 and $36,065, respectively) $ 269,225 $ 36,244
Receivable from Brokers for Securities and Forward Foreign
Currency Contracts Sold 12,233 3,124
Dividends and Interest Receivable 4,579 534
Other Assets -- 82
------- ------
Total Assets 286,037 39,984
LIABILITIES:
Payable to Brokers for Securities and Forward Foreign
Currency Contracts Payable 13,889 3,000
Dividends Payable 1,535 234
Accrued Operating Expenses and Other Liabilities 536 82
------ -----
Total Liabilities 15,960 3,316
---------- --------
NET ASSETS $ 270,077 $ 36,668
========== ========
Capital Shares
Authorized 300,000 300,000
Outstanding 26,159 3,435
NET ASSET VALUE PER SHARE $ 10.32 $ 10.68
========== ========
</TABLE>
See notes to financial statements.
26
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
For the Periods Ended April 30, 1996 (Unaudited) and October 31, 1995 (Note 1)
(In Thousands)
STRONG MONEY STRONG SHORT-TERM
MARKET FUND BOND FUND
----------- ---------
APRIL 30, 1996 OCT. 31, 1995 APRIL 30, 1996 OCT. 31, 1995
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 54,197 $ 88,460 $ 38,173 $ 61,118
Net Realized Gain (Loss) -- -- 6,788 (29,982)
Change in Unrealized Appreciation/Depreciation -- -- (14,172) 67,272
------ ------ ------- ------
Increase in Net Assets Resulting from Operations 54,197 88,460 30,789 98,408
CAPITAL SHARE TRANSACTIONS 43,574 1,393,088 28,549 4,450
DISTRIBUTIONS:
From Net Investment Income (54,197) (88,460) (38,173) (60,866)
------- ------- ------- -------
TOTAL INCREASE IN NET ASSETS 43,574 1,393,088 21,165 41,992
NET ASSETS:
Beginning of Period 1,934,071 540,983 1,083,073 1,041,081
--------- ------- --------- ---------
End of Period $1,977,645 $1,934,071 $1,104,238 $1,083,073
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
STRONG GOVERNMENT STRONG CORPORATE
SECURITIES FUND BOND FUND
--------------- ---------
APRIL 30, 1996 OCT. 31, 1995 APRIL 30, 1996 OCT. 31, 1995
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 15,153 $ 17,902 $ 9,020 $ 10,294
Net Realized Gain (Loss) (3,333) 17,964 2,316 13,871
Change in Unrealized Appreciation/Depreciation (12,868) 14,201 (9,699) 5,743
------- ------ ------ -----
Increase (Decrease) in Net Assets Resulting
from Operations (1,048) 50,067 1,637 29,908
CAPITAL SHARE TRANSACTIONS 120,945 148,275 59,399 75,563
DISTRIBUTIONS:
From Net Investment Income (15,153) (17,902) (9,020) (10,294)
In Excess of Net Investment Income -- (1,040) -- (421)
------- ------- ------ ------
TOTAL INCREASE IN NET ASSETS 104,744 179,400 52,016 94,756
NET ASSETS:
Beginning of Period 456,232 276,832 218,061 123,305
------- ------- ------- -------
End of Period $ 560,976 $ 456,232 $ 270,077 $ 218,061
========== ========== ========== ==========
</TABLE>
STRONG HIGH-YIELD
BOND FUND
---------
APRIL 30, 1996
--------------
OPERATIONS:
Net Investment Income $ 569
Net Realized Gain (Loss) 412
Change in Unrealized Appreciation/Depreciation 179
-----
Increase in Net Assets Resulting from Operations 1,160
CAPITAL SHARE TRANSACTIONS 36,077
DISTRIBUTIONS:
From Net Investment Income (569)
------
TOTAL INCREASE IN NET ASSETS 36,668
NET ASSETS:
Beginning of Period --
--------
End of Period $ 36,668
========
See notes to financial statements.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
April 30, 1996 (Unaudited)
1. ORGANIZATION
The Strong Income Funds consist of Strong Money Market Fund, Inc., Strong
Short-Term Bond Fund, Inc., Strong Government Securities Fund, Inc., Strong
Corporate Bond Fund, Inc. (formerly Strong Income Fund, Inc.), and Strong
High-Yield Bond Fund. The Funds are separately incorporated, diversified,
open-end management investment companies registered under the Investment
Company Act of 1940. The Board of Directors of the Funds approved changing
the Strong Money Market Fund, Inc., Strong Short-Term Bond Fund, Inc., Strong
Government Securities Fund, Inc., and Strong Corporate Bond Fund, Inc. fiscal
year-ends from December 31 to October 31 in 1995. The inception date for the
Strong High-Yield Bond Fund was December 28, 1995.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
Funds in the preparation of their financial statements.
(A) Security Valuation -- Securities of the Funds except the Strong Money
Market Fund are valued through valuations obtained by a commercial
pricing service or the mean of the bid and asked prices, when no last
sales price is available. Securities for which market quotations are not
readily available are valued at fair value as determined in good faith
under consistently applied procedures established by and under the
general supervision of the Board of Directors. Securities which are
purchased within 60 days of their stated maturity and all investments in
the Strong Money Market Fund are valued at amortized cost, which
approximates current value.
The Funds may own certain investment securities which are restricted as
to resale. These securities are valued after giving due consideration to
pertinent factors including recent private sales, market conditions and
the issuer's financial performance. The Funds generally bear the costs,
if any, associated with the disposition of restricted securities.
Aggregate cost and fair value of these restricted securities held at
April 30, 1996 were as follows (in thousands):
STRONG MONEY STRONG SHORT-TERM STRONG GOVERNMENT
MARKET FUND BOND FUND SECURITIES FUND
----------- --------- ---------------
Aggregate Cost $39,898 $128,929 $26,776
Aggregate Fair Value 39,900 130,273 26,532
Percent of Net Assets 2.0% 11.8% 4.7%
STRONG CORPORATE STRONG HIGH-YIELD
BOND FUND BOND FUND
--------- ---------
Aggregate Cost $ 55,664 $13,171
Aggregate Fair Value 54,347 13,345
Percent of Net Assets 20.1%* 36.4%**
*Of these securities, which are restricted from resale, 72% are eligible
for resale pursuant to Rule 144A under the Securities Act of 1933 and
also have been determined to be liquid by the Advisor based upon
guidelines established by the Fund's Board of Directors.
**Of these securities, which are restricted from resale, 96% are eligible
for resale pursuant to Rule 144A under the Securities Act of 1933 and also
have been determined to be liquid by the Advisor based upon guidelines
established by the Fund's Board of Directors.
(B) Federal Income and Excise Taxes and Distributions to Shareholders -- It
is the Funds' policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no Federal income or excise tax provision is required.
The character of distributions made during the year from net investment
income or net realized gains may differ from the characterization for
Federal income tax purposes due to differences in the recognition of
income and expense items for financial statement and tax purposes. Where
appropriate, reclassifications between net asset accounts are made for
such differences that are permanent in nature.
(C) Realized Gains and Losses on Investment Transactions -- Gain or loss
realized on investment transactions is determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
(D) Futures -- Upon entering into a futures contract, the Funds pledge to the
broker cash, U.S. government securities or other liquid, high-grade debt
obligations equal to the minimum "initial margin" requirements of the
exchange. The Funds also receive from or pay to the broker an amount of
cash equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin," and are recorded as
unrealized gains or losses. When the futures contract is closed, a
realized gain or loss is recorded equal to the difference between the
value of the contract at the time it was opened and the value at the time
it was closed.
(E) Options -- Premiums received by the Funds upon writing put or call
options are recorded as an asset with a corresponding liability which is
subsequently adjusted to the current market value of the option. When an
option expires, is exercised, or is closed, the Funds realize a gain or
loss, and the liability is eliminated. The Funds continue to bear the
risk of adverse movements in the price of the underlying asset during the
period of the option, although any potential loss during the period would
be reduced by the amount of the option premium received.
28
<PAGE>
(F) Foreign Currency Translation -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are converted
to U.S. dollars based upon current exchange rates. Purchases and sales of
foreign investment securities and income are converted to U.S. dollars
based upon currency exchange rates prevailing on the respective dates of
such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a
component of such gains or losses.
(G) Forward Foreign Currency Exchange Contracts -- Forward foreign currency
exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the Funds record an
exchange gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was
closed.
(H) Additional Investment Risk -- The use of futures contracts, options,
foreign denominated assets and forward currency contracts for purposes of
hedging the Funds' investment portfolios involves, to varying degrees,
elements of market risk in excess of the amount recognized in the
statement of assets and liabilities. The predominant risk with futures
contracts is an imperfect correlation between the value of the contracts
and the underlying securities. Foreign denominated assets and forward
currency contracts may involve greater risks than domestic transactions,
including currency, political and economic, regulatory and market risks.
(I) Other -- Investment security transactions are recorded as of the trade
date. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Interest income is recorded on the accrual basis
and includes amortization of premium and discounts.
3. NET ASSETS
Net assets as of April 30, 1996 were as follows (in thousands):
STRONG MONEY STRONG SHORT-TERM
MARKET FUND BOND FUND
----------- ---------
Capital Stock $1,977,645 $1,183,739
Undistributed Net Realized Loss -- (79,746)
Net Unrealized Appreciation (Depreciation) -- 245
---------- ----------
$1,977,645 $1,104,238
========== ==========
STRONG GOVERNMENT STRONG CORPORATE
SECURITIES FUND BOND FUND
--------------- ---------------
Capital Stock $571,763 $ 317,220
Undistributed Net Realized Gain (Loss) (5,105) (42,107)
Net Unrealized Appreciation (Depreciation) (5,682) (5,036)
-------- ----------
$560,976 $ 270,077
======== ==========
STRONG HIGH-YIELD
BOND FUND
---------
Capital Stock $ 36,077
Undistributed Net Realized Gain (Loss) 412
Net Unrealized Appreciation (Depreciation) 179
--------
$ 36,668
========
4. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Funds for the period ended April 30, 1996 and
the year ended October 31, 1995 were as follows (in thousands):
1996 1995
---- ----
SHARES DOLLARS SHARES DOLLARS
------ ------- ------ -------
STRONG MONEY MARKET FUND
Shares Sold 2,023,998 $2,023,998 4,636,534 $4,636,534
Dividends Reinvested 51,741 51,741 73,780 73,780
Shares Redeemed (2,032,165) (2,032,165) (3,317,226) (3,317,226)
---------- ---------- ---------- ----------
43,574 $ 43,574 1,393,088 $1,393,088
====== ========== ========= ==========
STRONG SHORT-TERM BOND FUND
Shares Sold 28,625 $ 280,630 35,782 $ 344,472
Dividends Reinvested 3,229 31,631 5,258 50,403
Shares Redeemed (28,995) (283,712) (40,704) (390,425)
------- -------- ------- --------
2,859 $ 28,549 336 $ 4,450
===== ========== === ==========
STRONG GOVERNMENT
SECURITIES FUND
Shares Sold 20,137 $ 214,377 25,489 $ 262,132
Dividends Reinvested 1,163 12,386 1,493 15,239
Shares Redeemed (9,973) (105,818) (12,720) (129,096)
------ -------- ------- --------
11,327 $ 120,945 14,262 $ 148,275
====== ========== ====== ==========
STRONG CORPORATE BOND FUND
Shares Sold 13,571 $ 145,064 13,929 $ 140,983
Dividends Reinvested 684 7,298 808 8,099
Shares Redeemed (8,752) (92,963) (7,261) (73,519)
------ ------- ------ -------
5,503 $ 59,399 7,476 $ 75,563
===== ========== ===== ==========
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS(continued)
- -------------------------------------------------------------------------------
April 30, 1996 (Unaudited)
4. CAPITAL SHARE TRANSACTIONS (CONTINUED)
1996
----
SHARES DOLLARS
------ -------
STRONG HIGH-YIELD BOND FUND
Shares Sold 4,563 $ 48,023
Dividends Reinvested 23 247
Shares Redeemed (1,152) (12,193)
------ -------
3,434 $ 36,077
===== ==========
5. RELATED PARTY TRANSACTIONS
Strong Capital Management, Inc. (the "Advisor"), with whom certain officers
and directors of the Funds are affiliated, provides investment advisory
services and shareholder recordkeeping and related services to the Funds.
Investment advisory fees, which are established by terms of the Advisory
Agreements, are based on the following annualized rates of the average daily
net assets: Strong Money Market Fund .50%, Strong Government Securities Fund
.60%, Strong Short-Term Bond Fund, Strong Corporate Bond Fund and Strong
High-Yield Bond Fund .625%. Advisory fees are subject to reimbursement by the
Advisor if the Funds' operating expenses exceed certain levels. Shareholder
recordkeeping and related service fees are based on contractually established
rates for each open and closed shareholder account. In addition, the Advisor
is compensated for certain other services related to costs incurred for
reports to shareholders.
Certain information regarding related party transactions, excluding the
effects of waivers and reimbursements, for the period ended April 30, 1996 is
as follows (in thousands):
STRONG MONEY STRONG SHORT-TERM
MARKET FUND BOND FUND
----------- ---------
Payable to Advisor at April 30, 1996 $762 $629
Other Shareholder Servicing Expenses
Paid to Advisor -- 18
Unaffiliated Directors' Fees 8 5
STRONG GOVERNMENT STRONG CORPORATE
SECURITIES FUND BOND FUND
--------------- ---------
Payable to Advisor at April 30, 1996 $291 $137
Other Shareholder Servicing Expenses
Paid to Advisor 4 5
Unaffiliated Directors' Fees 2 1
STRONG HIGH-YIELD
BOND FUND
----------------
Payable to Advisor at April 30, 1996 $131
Other Shareholder Servicing Expenses
Paid to Advisor --
Unaffiliated Directors' Fees --
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities during the period
ended April 30, 1996 were as follows (in thousands):
STRONG SHORT-TERM STRONG GOVERNMENT
BOND FUND SECURITIES FUND
--------- ---------------
Purchases:
U.S. Government and Agency $491,276 $801,672
Other 830,201 424,257
Sales:
U.S. Government and Agency 667,638 792,046
Other 725,427 382,612
STRONG CORPORATE STRONG HIGH-YIELD
BOND FUND BOND FUND
--------- ---------
Purchases:
U.S. Government and Agency $759,964 $ 408
Other 321,910 115,079
Sales:
U.S. Government and Agency 678,234 407
Other 338,474 81,449
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following presents information relating to a share of capital stock of each
of the Funds, outstanding for the entire period.
PERIOD ENDED
APRIL 30
--------
STRONG HIGH-YIELD BOND FUND 1996(a)
-------
(UNAUDITED)
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.31
Net Realized and Unrealized Gains on Investments 0.68
----
TOTAL FROM INVESTMENT OPERATIONS 0.99
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.31)
-----
TOTAL DISTRIBUTIONS (0.31)
-----
NET ASSET VALUE, END OF PERIOD $ 10.68
=======
Total Return +10.0%
Net Assets, End of Period (In Thousands) $36,668
Ratio of Expenses to Average Net Assets 0.0%*
Ratio of Expenses to Average Net Assets Without
Waivers and Absorptions 0.9%*
Ratio of Net Investment Income to Average Net Assets 9.0%*
Portfolio Turnover Rate 464.3%
* Calculated on an annualized basis.
(a) Inception date is December 28, 1995. Total return and portfolio turnover
rate are not annualized.
30
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS PERIOD ENDED
ENDED APRIL 30 OCTOBER 31 YEAR ENDED
-------------- ----------- -------------------------------------
STRONG MONEY MARKET FUND 1996(a) 1995(a) 1994 1993 1992 1991
------- ------- ---- ---- ---- ----
(UNAUDITED) (NOTE 1)
<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 0.05 0.04 0.03 0.04 0.06
Dividends From Net Investment Income (0.03) (0.05) (0.04) (0.03) (0.04) (0.06)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ====== ====== ====== ====== ======
Total Return +2.8% +5.2% +4.0% +2.9% +3.7% +6.1%
Net Assets, End of Period (In Thousands) $1,977,645 $1,934,071 $540,983 $329,988 $390,003 $533,869
Ratio of Expenses to Average Net Assets 0.3%* 0.0%* 0.6% 0.7% 0.8% 0.7%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.8%* 0.7%* 0.9% 1.0% 1.1% 1.0%
Ratio of Net Investment Income to
Average Net Assets 5.5%* 6.1%* 4.0% 2.9% 3.7% 6.0%
<CAPTION>
YEAR ENDED
----------
STRONG MONEY MARKET FUND 1990 1989 1988 1987
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income 0.08 0.09 0.07 0.06
Dividends From Net Investment Income (0.08) (0.09) (0.07) (0.06)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00
====== ====== ===== ======
Total Return +8.1% +9.2% +7.5% +6.4%
Net Assets, End of Period (In Thousands) $768,870 $829,332 $464,459 $194,963
Ratio of Expenses to Average Net Assets 0.7% 0.7% 1.1% 0.8%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.9% 1.0% 1.1% 1.1%
Ratio of Net Investment Income to
Average Net Assets 7.8% 8.8% 7.4% 6.6%
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS PERIOD ENDED
ENDED APRIL 30 OCTOBER 31 YEAR ENDED
-------------- ----------- --------------------------------------
STRONG SHORT-TERM BOND FUND 1996(a) 1995(a) 1994 1993 1992 1991
------- ------- ---- ---- ---- ----
(UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.77 $ 9.42 $ 10.23 $ 9.99 $ 10.12 $ 9.53
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.33 0.56 0.64 0.66 0.76 0.75
Net Realized and Unrealized Gains
(Losses) on Investments (0.06) 0.35 (0.80) 0.25 (0.11) 0.59
----- ---- ----- ---- ----- ----
TOTAL FROM INVESTMENT OPERATIONS 0.27 0.91 (0.16) 0.91 0.65 1.34
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.33) (0.56) (0.65) (0.66) (0.76) (0.75)
In Excess of Net Investment Income -- -- -- (0.01) -- --
From Net Realized Gains -- -- -- -- (0.02)(c) --
----- ---- ----- ---- ----- ----
TOTAL DISTRIBUTIONS (0.33) (0.56) (0.65) (0.67) (0.78) (0.75)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 9.71 $ 9.77 $ 9.42 $ 10.23 $ 9.99 $ 10.12
========= ========== ========== ========= ========= ==========
Total Return +2.8% +9.9% -1.6% +9.3% +6.7% +14.6%
Net Assets, End of Period (In Thousands) $1,104,238 $1,083,073 $1,041,081 $1,531,627 $756,867 $ 164,954
Ratio of Expenses to Average Net Assets 0.9%* 0.9%* 0.9% 0.8% 0.6% 1.0%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.9%* 0.9%* 0.9% 0.9% 0.9% 1.2%
Ratio of Net Investment Income to
Average Net Assets 6.8%* 7.0%* 6.5% 6.3% 7.3% 7.8%
Portfolio Turnover Rate 114.9% 317.1% 249.7% 444.9% 353.3% 398.1%
</TABLE>
YEAR ENDED
----------------------------------
STRONG SHORT-TERM BOND FUND 1990 1989 1988 1987(b)
---- ---- ---- -------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.86 $ 10.09 $ 10.03 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.81 0.99 0.86 0.27
Net Realized and Unrealized Gains
(Losses) on Investments (0.33) (0.18) 0.13 0.04
----- ----- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 0.48 0.81 0.99 0.31
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.81) (0.99) (0.86) (0.27)
In Excess of Net Investment Income -- -- -- --
From Net Realized Gains -- (0.05) (0.07) (0.01)
----- ----- ---- ----
TOTAL DISTRIBUTIONS (0.81) (1.04) (0.93) (0.28)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 9.53 $ 9.86 $ 10.09 $ 10.03
======== ========= ========= =======
Total Return +5.3% +8.2% +10.1% +3.2%
Net Assets, End of Period (In Thousands $ 80,070 $ 130,001 $ 102,175 $ 17,128
Ratio of Expenses to Average Net Assets 1.3% 1.1% 1.0% 0.1%*
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.3% 1.2% 1.2% 0.8%*
Ratio of Net Investment Income to
Average Net Assets 8.6% 9.7% 8.5% 8.8%*
Portfolio Turnover Rate 313.8% 177.0% 461.3% 45.2%
* Calculated on an annualized basis.
(a) Total return and portfolio turnover rate are not annualized.
(b) Inception date is August 31, 1987 for Strong Short-Term Bond Fund. Total
return and portfolio turnover rate are not annualized.
(c) Ordinary income distribution for tax purposes.
31
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------
SIX MONTHS PERIOD ENDED
ENDED APRIL 30 OCTOBER 31 YEAR ENDED
-------------- --------- ---------------------------------
STRONG GOVERNMENT SECURITIES FUND 1996(a) 1995(a) 1994 1993 1992 1991
------- ------- ---- ---- ---- ----
(UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.60 $ 9.63 $ 10.61 $ 10.39 $ 10.77 $ 10.10
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.31 0.54 0.62 0.66 0.80 0.77
Net Realized and Unrealized Gains
(Losses) on Investments (0.28) 0.99 (0.98) 0.63 0.11 0.84
----- ---- ----- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 0.03 1.53 (0.36) 1.29 0.91 1.61
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.31) (0.54) (0.62) (0.66) (0.80) (0.77)
In Excess of Net Investment Income -- (0.02) -- -- -- --
From Net Realized Gains -- -- -- (0.32) (0.49) (0.17)
In Excess of Net Realized Gains -- -- -- (0.09) -- --
----- ---- ----- ---- ---- ----
TOTAL DISTRIBUTIONS (0.31) (0.56) (0.62) (1.07) (1.29) (0.94)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 10.32 $ 10.60 $ 9.63 $ 10.61 $ 10.39 $ 10.77
======== ======== ======== ======== ======== ========
Total Return +0.2% +16.2% -3.4% +12.7% +9.2% +16.7%
Net Assets, End of Period (In Thousands) $560,976 $456,232 $276,832 $221,961 $ 82,169 $ 51,934
Ratio of Expenses to Average Net Assets 0.8%* 0.9%* 0.9% 0.8% 0.7% 0.8%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 0.8%* 0.9%* 0.9% 1.0% 1.2% 1.4%
Ratio of Net Investment Income to
Average Net Assets 5.8%* 6.2%* 6.2% 6.0% 7.7% 7.5%
Portfolio Turnover Rate 234.3% 409.2% 479.0% 520.9% 628.8% 292.9%
</TABLE>
YEAR ENDED
----------------------------------
STRONG GOVERNMENT SECURITIES FUND 1990 1989 1988 1987
---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.08 $ 9.98 $ 9.75 $ 10.09
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.72 0.78 0.68 0.65
Net Realized and Unrealized Gains
(Losses) on Investments 0.12 0.17 0.32 (0.34)
---- ---- ---- -----
TOTAL FROM INVESTMENT OPERATIONS 0.84 0.95 1.00 0.31
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.72) (0.78) (0.68) (0.65)
In Excess of Net Investment Income -- -- -- --
From Net Realized Gains (0.10) (0.07) (0.09) --
In Excess of Net Realized Gains -- -- -- --
---- ---- ---- -----
TOTAL DISTRIBUTIONS (0.82) (0.85) (0.77) (0.65)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 10.10 $ 10.08 $ 9.98 $ 9.75
======== ======== ======== ========
Total Return +8.7% +9.9% +10.5% +3.4%
Net Assets, End of Period (In Thousands) $ 41,099 $ 35,119 $ 25,408 $ 11,380
Ratio of Expenses to Average Net Assets 1.3% 1.3% 0.4% 1.0%
Ratio of Expenses to Average Net Assets
Without Waivers and Absorptions 1.5% 1.6% 1.6% 1.6%
Ratio of Net Investment Income to
Average Net Assets 7.2% 7.6% 6.9% 6.6%
Portfolio Turnover Rate 254.2% 421.6% 1,727.8% 715.0%
<TABLE>
<CAPTION>
SIX MONTHS PERIOD ENDED
ENDED APRIL 30 OCTOBER 31 YEAR ENDED
-------------- --------- --------------------------------
STRONG CORPORATE BOND FUND 1996(a) 1995(a) 1994 1993 1992 1991
------- ------- ---- ---- ---- ----
(UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.56 $ 9.36 $ 10.24 $ 9.40 $ 9.37 $ 8.87
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 0.37 0.63 0.73 0.70 0.82 0.76
Net Realized and Unrealized Gains
(Losses) on Investments (0.24) 1.22 (0.87) 0.84 0.03 0.50
----- ---- ----- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS 0.13 1.85 (0.14) 1.54 0.85 1.26
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (0.37) (0.63) (0.73) (0.70) (0.82) (0.76)
In Excess of Net Investment Income -- (0.02) (0.01) -- -- --
From Net Realized Gains -- -- -- -- -- --
----- ---- ----- ---- ---- ----
TOTAL DISTRIBUTIONS (0.37) (0.65) (0.74) (0.70) (0.82) (0.76)
----- ---- ----- ---- ---- ----
NET ASSET VALUE, END OF PERIOD $ 10.32 $ 10.56 $ 9.36 $ 10.24 $ 9.40 $ 9.37
======== ======== ======== ======== ======== ========
Total Return +1.1% +20.3% -1.3% +16.8% +9.4% +14.8%
Net Assets, End of Period (In Thousands) $270,077 $218,061 $123,305 $123,400 $102,783 $ 92,364
Ratio of Expenses to Average Net Assets 1.0%* 1.0%* 1.1% 1.1% 1.3% 1.5%
Ratio of Net Investment Income to
Average Net Assets 6.9%* 7.5%* 7.6% 7.0% 8.7% 8.4%
Portfolio Turnover Rate 400.2% 621.4% 603.0% 665.8% 557.0% 392.4%
</TABLE>
YEAR ENDED
---------------------------------
STRONG CORPORATE BOND FUND 1990 1989 1988 1987
---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.57 $ 11.88 $ 11.64 $ 12.65
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------
Net Investment Income 1.06 1.40 1.17 1.23
Net Realized and Unrealized Gains
(Losses) on Investments (1.70) (1.31) 0.24 (0.67)
----- ----- ---- -----
TOTAL FROM INVESTMENT OPERATIONS (0.64) 0.09 1.41 0.56
LESS DISTRIBUTIONS
- ------------------
From Net Investment Income (1.06) (1.40) (1.17) (1.53)
In Excess of Net Investment Income -- -- -- --
From Net Realized Gains -- -- -- (0.04)
----- ----- ---- -----
TOTAL DISTRIBUTIONS (1.06) (1.40) (1.17) (1.57)
----- ----- ---- -----
NET ASSET VALUE, END OF PERIOD $ 8.87 $ 10.57 $ 11.88 $ 11.64
======== ======== ======== ========
Total Return -6.2% +0.4% +12.5% +4.5%
Net Assets, End of Period (In Thousands)$ 92,201 $195,350 $202,623 $137,898
Ratio of Expenses to Average Net Assets 1.4% 1.2% 1.2% 1.1%
Ratio of Net Investment Income to
Average Net Assets 11.2% 12.1% 9.8% 10.6%
Portfolio Turnover Rate 293.5% 207.2% 400.2% 245.4%
* Calculated on an annualized basis.
(a) Total return and portfolio turnover rate are not annualized.
32
<PAGE>
SHAREHOLDER PRIVILIGES*
STRONG FUNDS
[PICTURE OF TELEPHONE]
24-HOUR SERVICE
TELEPHONE PURCHASE
Make additional investments into any Strong Fund by calling us toll-free at
1-800-368-3863.
TELEPHONE EXCHANGE
If your financial goals change, you can exchange your investments between any of
the Strong Funds.
TELEPHONE REDEMPTION
You can call toll-free to redeem your mutual fund shares at any time. Your
shares will be redeemed no later than the close of the next business day.
STRONG FUNDS
[PICTURE OF DOLLAR SIGN]
AUTOMATIC EXCHANGE
AUTOMATIC INVESTMENT PLAN
This plan allows you to set up regular transfers from your bank checking or NOW
account to your Strong Funds account.
PAYROLL DIRECT DEPOSIT PLAN
You can automatically transfer all or a portion of your net pay at each pay
period. This eliminates the delay of depositing paychecks to your bank and then
sending a check through the mail to Strong Funds.
For more information about these privileges, call us at 1-800-368-3863.
To reduce the volume of mail you receive, only one copy of certain materials,
such as prospectuses and shareholder reports, is mailed to your household.
Please call 1-800-368-3863 if you wish to receive additional copies, free of
charge.
* Each Fund reserves the right to terminate or modify any of these privileges.
<PAGE>
Bulk Rate
U.S. Postage
PAID
Milw, WI
Permit #4134
FOR LITERATURE AND INFORMATION REQUESTS,
CALL 1-800-368-1030.
TO DISCUSS AN EXISTING ACCOUNT OR
CONDUCT A TRANSACTION,
CALL 1-800-368-3863.
For a prospectus containing more complete information, including management fees
and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This annual report does not constitute an offer for
the sale of securities. Strong Funds are offered for sale by prospectus only.
[Strong Funds Logo]
STRONG FUNDS DISTRIBUTORS, INC.
P.O. Box 2936
Milwaukee, Wisconsin 53201
http://www.strong-funds.com
3016E96N
