<PAGE>
THE STRONG
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INCOME
FUNDS
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SEMI-ANNUAL REPORT o APRIL 30, 1998
===============================================================================
[PHOTO OF STRONG CAPITAL MANAGEMENT, INC.]
THE STRONG CORPORATE BOND FUND
THE STRONG GOVERNMENT SECURITIES FUND
THE STRONG HIGH-YIELD BOND FUND
THE STRONG SHORT-TERM BOND FUND
THE STRONG SHORT-TERM HIGH YIELD BOND FUND
[STRONG LOGO]
STRONG FUNDS
<PAGE>
- -------------------------------------------------------------------------------
PLEASE FILE THIS PROSPECTUS SUPPLEMENT WITH YOUR RECORDS.
STRONG CORPORATE BOND FUND
STRONG GOVERNMENT SECURITIES FUND
STRONG HIGH-YIELD BOND FUND
STRONG SHORT-TERM BOND FUND
STRONG SHORT-TERM HIGH YIELD BOND FUND
SUPPLEMENT TO THE PROSPECTUS DATED MARCH 31, 1998
STRONG CORPORATE BOND FUND. Effective immediately, Mr. Ivor E. Schucking joins
Mr. Jeffrey A. Koch and Mr. John T. Bender as a co-manager of the Strong
Corporate Bond Fund. Mr. Schucking joined Strong Capital Management, Inc.
("Advisor") in January 1996 as a senior research analyst. Before joining the
Advisor, Mr. Schucking spent seven years at Pacific Investment Management
Company, where he was a credit analyst. From August 1986 until October 1988,
Mr. Schucking acted as a tax consultant for Price Waterhouse. Mr. Schucking
received his B.S. degree in Economics and International Business from New York
University in 1986 and his M.B.A. in Finance and International Business from
New York University in 1991.
STRONG HIGH-YIELD BOND AND STRONG SHORT-TERM HIGH YIELD BOND FUNDS. Effective
immediately, Mr. Thomas M. Price joins Mr. Jeffrey A. Koch as a co-manager of
the Strong High-Yield Bond Fund and the Strong Short-Term High Yield Bond Fund.
Mr. Price joined the Advisor in April 1996 as a research analyst. Prior to
joining the Advisor, Mr. Price served at Northwestern Mutual Life Insurance as
a high-yield bond analyst. From June 1989 to June 1991, Mr. Price served
Houlihan, Lokey, Howard & Zukin as a financial analyst. Mr. Price received his
B.B.A. degree in Finance from the University of Michigan and his Masters of
Management in Finance from the Kellogg Graduate School of Management,
Northwestern University, in 1992.
The date of this Prospectus Supplement is May 15, 1998.
<PAGE>
THE STRONG
----------
INCOME
FUNDS
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SEMI-ANNUAL REPORT o APRIL 30, 1998
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TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong Corporate Bond Fund...........................................2
The Strong Government Securities Fund....................................4
The Strong High-Yield Bond Fund..........................................6
The Strong Short-Term Bond Fund..........................................8
The Strong Short-Term High Yield Bond Fund..............................10
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Corporate Bond Fund......................................12
The Strong Government Securities Fund...............................14
The Strong High-Yield Bond Fund.....................................16
The Strong Short-Term Bond Fund.....................................19
The Strong Short-Term High Yield Bond Fund..........................23
Statements of Assets and Liabilities....................................25
Statements of Operations................................................26
Statements of Changes in Net Assets.....................................27
Notes to Financial Statements...........................................29
FINANCIAL HIGHLIGHTS.........................................................32
<PAGE>
==============================
THE STRONG CORPORATE BOND FUND
==============================
WE ADDED VALUE TO THE PORTFOLIO BY AVOIDING THE PROBLEM AREAS IN THE CORPORATE
MARKET AND EMPHASIZING SOME OF THE INDUSTRIES AND CREDIT RATINGS THAT HAVE
PERFORMED WELL.
For the six month period ended 4-30-98, the Strong Corporate Bond Fund produced
a total return of 4.66% compared to 3.71% for the Lipper Corporate Debt Funds
BBB Rated Index. For the past 12 months the Fund's total return was 13.06%
compared to 11.47% for the Lipper Index.
======================================================
ASSET ALLOCATION
======================================================
Based on net assets as of 4-30-98
[PIE CHART]
Corporate Bonds 82.1%
Non-Agency Mortgage- and Asset-Backed Securities 8.9%
Preferred Stocks 4.2%
Short-Term Investments 2.9%
U.S. Government and Agency Issues 1.2%
Convertible Securities 0.7%
The Fund's asset allocation does not reflect any
futures positions held by the Fund.
======================================================
The Fund's performance was achieved by maintaining a fairly stable average
maturity and duration. We credit this performance to proper emphasis and
de-emphasis of certain sectors and careful issue selection. We also made modest
changes in the mix of maturities along the yield curve.
=========================================
PORTFOLIO STATISTICS
=========================================
As of 4-30-98
30-DAY ANNUALIZED YIELD(1) 6.54%
AVERAGE MATURITY(2) 12.5 YEARS
AVERAGE QUALITY RATING(3) BBB
=========================================
STABLE INTEREST RATES DEFINED MARKET CONDITIONS
The past six months produced a generally stable interest rate environment with
modest declines in rates across the yield curve. The Federal Reserve maintained
a steady 5.5% Federal Funds rate throughout the period. Although interest rates
changed little, there were periods of market volatility as a result of the
unfolding economic trauma in Southeast Asia.
Likewise, there was little change in the average pricing of corporate bonds
versus treasuries over the period. For example, the average ten-year BBB
corporate bond was priced at a spread (off ten-year treasuries) of 84 basis
points in yield at the end of April versus 79 basis points in October.
However, this modest change in "average pricing" masks some dramatic
divergences in "individual pricing" and, thus, performance across industries
and credit ratings. In the past six months, BBB Yankee corporate issues
underperformed comparable treasuries by more than a full percentage point in
total return, while BBB media and telecommunications bonds outperformed
comparable treasuries by more than two full percentage points of total return.
Yankee bonds are U.S. dollar-denominated securities issued by foreign
governments and corporations to the U.S. market.
PORTFOLIO STRATEGY DURING THE PAST SIX MONTHS
We added value to the portfolio by avoiding the problem areas in the corporate
market and emphasizing some of the industries and credit ratings that have
performed well.
For example, Yankee bonds represent 19.5% of the U.S. investment grade
corporate bond market. The bonds of Southeast Asian issuers, in particular,
came under meaningful pricing pressure at the end of 1997 as the market became
increasingly pessimistic about the prospects for these economies.
At the beginning of the past 6-month period, the Fund held less than 1% of
assets in Southeast Asian corporates, with $5 million invested in Hutchison
Whampoa. Then in January, we took advantage of the price weakness and added
modestly to our position with purchases in Korea. As of April 30th, 1998, the
Southeast Asian Yankees were 1.4% of the Fund.
================================
LIPPER TOTAL
RETURN RANKINGS(1)
================================
As of 4-30-98
1-YEAR #17 OF 98
3-YEAR #8 OF 60
5-YEAR #3 OF 36
10-YEAR #17 OF 18
SINCE INCEPTION(4) #5 OF 14
Category: Corporate Debt BBB
Rated Funds. Rankings are
historical and do not represent
future results. Source of Lipper
rankings is Lipper Analytical
Services, Inc.
================================
Our view is that the underlying fundamentals of many of these economies will
get worse before they get better. However, the potential for financial calamity
appears to have been minimized by the many changes aimed at improving fiscal
policy that have been implemented since late last year. Current prices reflect
a healthy amount of pessimism and, consequently, some careful investment is
warranted--but our commitment remains modest. While Southeast Asia remains a
very small part of what we are doing in the Corporate Bond Fund, we feel that a
discussion is warranted because it is a part of the marketplace which has
commanded considerable attention in recent months.
2
<PAGE>
On a more positive note, we're pleased to report that our investments in the
airlines, bank and finance, media, and telecommunications categories generally
did very well over the past six months. We experienced ratings upgrades in a
variety of credit ratings held in the portfolio, including Homeside Inc. and
Northwest Airlines.
We are very encouraged by the current environment for fixed-income investing.
Absent are the broad, powerful interest-rate trends (both up and down) which
characterized the first half of the 1990's, and so is the volatility which
accompanied them. Real (inflation-adjusted) interest rates are high, and we
believe there is ample opportunity to add value to the portfolio through
industry and credit-rating selection.
Thank you for investing in the Strong Corporate Bond Fund. We look forward to
earning your continued confidence.
Sincerely,
/s/ Jeffrey A. Koch
Jeffrey A. Koch
/s/ John T. Bender
John T. Bender
Portfolio Co-managers
[PHOTO OF JEFFREY A. KOCH AND JOHN T. BENDER]
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 12-12-85 to 4-30-98
[GRAPH]
THE STRONG Lehman Brothers Lipper Corporate
CORPORATE BOND Corporate BAA Debts Funds
FUND Bond Index* BBB Rated Index*
11-85 10,000 10,000 10,000
12-85 10,300 10,162 10,184
12-87 13,997 12,323 11,882
12-89 15,800 15,521 14,342
12-91 17,013 19,497 17,909
12-93 21,732 24,087 21,839
12-95 26,892 28,617 25,052
12-97 31,752 33,072 28,660
4-98 32,511 33,700 29,272
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 Corporate BAA Bond Index and the Lipper Corporate Debt Funds
BBB Rated Index. Results include the reinvestment of all dividends and capital
gains distributions. Performance is historical and does not represent future
results. Investment returns and principal value vary, and you may have a gain
or loss when you sell shares. To equalize the time periods, the indexes'
performance was prorated for the month of December 1985.
==========================
AVERAGE ANNUAL
TOTAL RETURNS(5)
==========================
As of 4-30-98
1-YEAR 13.06%
5-YEAR 10.40%
10-YEAR 8.13%
SINCE INCEPTION 9.99%
(on 12-12-85)
==========================
- -------------------------------------------------------------------------------
* The Lehman Brothers Corporate BAA Bond Index is an unmanaged index comprised
of all issues within the Lehman Brothers Corporate Bond Index that are rated
Baa by Moody's Investors Services, Inc. The Lipper Corporate Debt Funds BBB
Rated Index is an equally-weighted performance index of the largest
qualifying funds in this Lipper category. Source of the Lehman index data is
Standard & Poor' s Micropal. Source of the Lipper index data is Lipper
Analytical Services, Inc.
1 From time to time, the Fund's Advisor has waived its management fee and
absorbed expenses, which has resulted in higher returns and without these
waivers the rankings may have been lower. Yields are historical and do not
represent future yields, which will fluctuate.
2 The Fund's average maturity includes the effect of futures and options.
3 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
4 The since-inception ranking is based on performance from 12-31-85 to 4-30-98.
5 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.
3
<PAGE>
=====================================
THE STRONG GOVERNMENT SECURITIES FUND
=====================================
THE LARGEST CHANGE IN THE PORTFOLIO OVER THE PAST HALF YEAR HAS BEEN TO SHIFT
THE MATURITY MIX IN FAVOR OF INTERMEDIATE BONDS RATHER THAN COMBINING LONG AND
SHORT BONDS...
For the six-month period ended April 30, 1998, the Strong Government Securities
Fund produced a total return of 3.45% compared to 3.03% for the Lipper General
U.S. Government Funds Index. For the past 12 months, the Fund's total return
was 10.29% compared to 9.94% for the Lipper Index.(4)
============================================
ASSET ALLOCATION
============================================
Based on net assets as of 4-30-98
[PIE CHART]
U.S. Government and Agency Issues 88.9%
Corporate Bonds 7.4%
Preferred Stocks 2.0%
Short-Term Investments 1.0%
Municipal Bonds 0.4%
Non-Agency Mortgage-Backed Securities 0.3%
The Fund's asset allocation does not reflect
any futures positions held by the Fund. U.S.
Government and Agency issues include
short-term government issues.
============================================
The Fund's performance was achieved by maintaining a fairly stable average
maturity and duration, while making modest changes in the mix of maturities in
the portfolio.
======================================
PORTFOLIO STATISTICS
======================================
As of 4-30-98
30-DAY ANNUALIZED YIELD(1) 5.66%
AVERAGE MATURITY(2) 7.9 YEARS
AVERAGE QUALITY RATING(3) AAA
======================================
KEY INVESTMENT CONSIDERATIONS: STABLE U.S.INTEREST RATES AND VOLATILE ASIAN
ECONOMIES
The past six months were characterized by a modest decline in market interest
rates and a consequent increase in the prices of most bonds. This occurred
against a backdrop of no change in monetary policy by the Federal Reserve,
which left the Federal Funds rate stable at 5.5%. While market interest rates
overall changed very little during the past six months, there were periods of
disquiet in the market. These periods of heightened market volatility generally
coincided with rapid changes in the condition of economies in Southeast Asia
and the resulting policy responses.
A SPECIAL WORD ABOUT ASIA
Events in Asia have in recent months had a meaningful effect on the trading and
pricing of financial assets around the globe and we believe that this will be
the case for the foreseeable future. The problems in many of these economies
are large and may take years to resolve. The path toward resolution appears to
be underway in most affected economies and will likely proceed without
financial calamity or political upheaval. Since World War II, year-to-year
changes in U.S. foreign trade have generally added to, or subtracted from, the
rate of economic growth by no more than 1%. We would expect the effects of the
Asian slowdown on U.S. economic growth to be broadly consistent with this past
experience. As of this writing, April 30, 1998, the direct measured effects
have been modest but noticeable in the trade dependent sectors of the U.S.
economy against a backdrop of generally strong growth with very subdued
inflation. We are optimistic that these conditions will continue for the
foreseeable future.
OUR PAST AND FUTURE PORTFOLIO STRATEGY
Recent market conditions have not produced large capital gains in bonds from
declining interest rates, but nonetheless have provided a great environment for
fixed income investors. Real, or inflation-adjusted, yields are high by
historical standards and the ebb and flow of a dynamic economy have provided us
with opportunities to add value at the sector, sub-sector and issue selection
levels of decision-making.
==============================================
LIPPER TOTAL
RETURN RANKINGS(1)
==============================================
As of 4-30-98
1-YEAR #69 OF 179
3-YEAR #22 OF 148
5-YEAR #7 OF 92
10-YEAR #2 OF 53
SINCE INCEPTION(4) #1 OF 39
Category: General U.S. Government Funds.
Rankings are historical and do not represent
future results. Source of Lipper rankings is
Lipper Analytical Services, Inc.
==============================================
The largest change in the portfolio over the past half year has been to shift
the maturity mix in favor of intermediate bonds rather than combining long and
short bonds to achieve the desired duration or interest rate sensitivity. This
change reflects our view that the process of converging short and long term
interest rates is largely complete.
4
<PAGE>
With two-year treasuries yielding just eight basis points less than ten-year
treasuries, the yield curve is almost flat and we do not foresee conditions
which would push short-term interest rates above long-term rates.
The past few years we have maintained a commitment to U.S. treasuries and
agencies of slightly more than 80%, with the balance of the Fund invested in
investment grade corporate bonds. We have recently moved this up to 90%. This
change reflects our desire to manage this Fund well within the boundaries of
what defines a government securities fund.
Thank you for investing in the Strong Government Securities Fund. We look
forward to earning your continued confidence.
Sincerely,
/s/ Bradley C. Tank
Bradley C. Tank
/s/ John T. Bender
John T. Bender
Portfolio Co-managers
[PHOTO OF BRADLEY C. TANK AND JOHN T. BENDER]
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 10-29-86 to 4-30-98
[GRAPH]
THE STRONG Lehman Brothers Lipper General
GOVERNMENT Aggregate Bond U.S. Government
SECURITIES FUND Index* Fund Index*
9-86 10,000 10,000 10,000
12-86 10,218 10,188 10,171
12-88 11,683 11,294 10,903
12-90 13,953 14,092 13,239
12-92 17,781 17,557 16,102
12-94 19,364 18,706 16,615
12-96 23,873 22,963 19,820
4-98 26,560 25,706 21,925
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 Aggregate Bond Index and the Lipper General U.S. Government
Funds Index. Results include the reinvestment of all dividends and capital
gains distributions. Performance is historical and does not represent future
results. Investment returns and principal value will vary, and you may have a
gain or loss when you sell shares. To equalize the time periods, the indexes'
performance was prorated for the month of October 1986.
==================================
AVERAGE ANNUAL
TOTAL RETURNS(5)
==================================
As of 4-30-98
1-YEAR 10.29%
3-YEAR 8.57%
5-YEAR 7.00%
SINCE INCEPTION 8.86%
(on 10-29-86)
==================================
- -------------------------------------------------------------------------------
* The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of
investment-grade securities from the Lehman Brothers Government/Corporate
Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities
Index. The Lipper General U.S. Government Funds Index is an equally-weighted
performance index of the largest qualifying funds in this Lipper category.
Fund shares are neither insured nor guaranteed by the U.S. Government. Source
of the Lehman index data is Standard & Poor's Micropal. Source of the Lipper
index data is Lipper Analytical Services, Inc.
1 From time to time, the Fund's Advisor has waived its management fee and
absorbed expenses, which has resulted in higher returns and without these
waivers the rankings may have been lower. Yields are historical and do not
represent future yields, which will fluctuate.
2 The Fund's average maturity includes the effect of futures and options.
3 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
4 The since-inception ranking is based on performance from 10-31-86 to 4-30-98.
5 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.
5
<PAGE>
===============================
THE STRONG HIGH-YIELD BOND FUND
===============================
ONCE WE FORMULATE AN OPINION ON THESE MACRO-ECONOMIC FACTORS, WE POSITION THE
PORTFOLIO TO BENEFIT FROM THE REALIZATION OF OUR FORECAST.
========================================================
ASSET ALLOCATION
========================================================
Based on net assets as of 4-30-98
QUALITY BREAKDOWN
[PIE CHART]
B-Rated Bonds 46.5%
BB-Rated Bonds 22.9%
Unrated 12.8%
Stocks 9.8%
Short-Term Investments 5.2%
Investment Grade Bonds 1.6%
CCC-Rated Bonds 1.2%
SECTOR BREAKDOWN
[PIE CHART]
Corporate Bonds 81.3%
Stocks 9.4%
Short-Term Investments 5.2%
Non-Agency Mortgage- and Asset-Backed Securities 2.5%
Convertible Securities 1.6%
The Fund's asset allocation does not reflect any futures
positions held by the 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.
Total return for the six month period ended April 30, 1998 was 8.41%(1)
compared to 5.68% for our benchmark, the Lehman Brothers High-Yield Bond Index.
Total return for the last twelve-month period ending April 30, 1998 was 18.59%
compared to 14.51% for the Lehman Brothers High Yield Bond Index and 16.79% for
the Lipper High Current Yield Funds Index.
========================================
PORTFOLIO STATISTICS
========================================
As of 4-30-98
30-DAY ANNUALIZED YIELD(1) 8.41%
AVERAGE MATURITY(2) 7.7 YEARS
AVERAGE QUALITY RATING(3) B
========================================
A LOOK BACK AT THE MARKETS
For the past six months, we and others in the financial community have spent a
great deal of time trying to determine the ultimate impact of the Asian
financial and economic crisis that unfolded during the last quarter of 1997.
Financial markets initially feared the worst. The sell-off in world equity
markets was swift and severe. Interest rates headed lower as world economic
growth seemed poised to slow and commodity prices began to plunge. High yield
bonds, sensitive to the trend in economic growth, also traded lower. Although
both the high yield market and the stock market quickly recovered most of their
initial decline, the next few months were marked by volatility and uncertainty.
===================================
LIPPER TOTAL
RETURN RANKING(1)
===================================
As of 4-30-98
1-YEAR #50 OF 203
Category: High Current Yield Funds.
Rankings are historical and do not
represent future results. Source of
Lipper rankings is Lipper
Analytical Services, Inc.
===================================
Most market participants struggled to adjust their forecasts for U.S. economic
growth to account for the implications of the Asian crisis. And while there was
a great deal of debate on the outlook for economic growth, it became clear that
over the near term, inflation was headed lower and the Federal Reserve would
leave interest rates unchanged.
As time progressed, the economy showed few signs of being sidetracked. This
backdrop of lower inflation and stable to declining interest rates created the
conditions for a strong rally in equity prices during the first few months of
1998. In fact, the economy performed so well that as we close the month of
April, markets are now struggling to assess the likelihood of an increase in
interest rates by the Federal Reserve.
As we discussed in our annual report for the period ending October 31, 1997,
our view has been that the economy will continue to grow at a relatively
healthy pace, although somewhat subdued from the levels of 1997. Our view
continues to be one of cautious optimism. We believe that economic growth will
likely subside to more sustainable levels in the second and third quarters of
this year. Inflation has remained remarkably low and we believe it is not
likely to rise appreciably from here. As a result, we expect that the interest
rate environment should remain relatively stable over the near term.
OUR TOP-DOWN INVESTMENT APPROACH WAS ON TARGET
As can be gleaned from the above discussion, our approach to investing in the
high yield market begins with a top-down review of macroeconomic factors likely
to influence both the real economy and financial asset prices. Among others,
these factors include worldwide economic growth, inflation, interest rates,
monetary policy, fiscal policy and governmental regulation. Once we formulate
an opinion on these macro-economic factors, we position the portfolio to
benefit from the realization of our forecast. The portfolio's duration, rating
quality, industry allocation and even issue selection are all consistent with
this top-down macroeconomic review.
Because the success of an investment in any high yield bond is ultimately a
result of the issuer's creditworthiness, our research analysts rigorously
examine the fundamentals of all of the securities in which we invest. An
example of this process at work is our investment in Bay View Capital
Corporation, one of the largest positions in the Fund. Bay View, at $5.5
billion in assets, is the largest independent thrift headquartered in the San
Francisco area. It is a turnaround story, as new management that arrived in
1995 transformed an under-performing thrift into an institution more reflective
of a bank. Bay View has a low risk business profile with high quality assets
and a very clean balance sheet.
6
<PAGE>
It is benefiting from California's strong recovery and has produced steadily
improving credit fundamentals since new management took over. In addition,
the California market is undergoing tremendous consolidation activity. This
consolidation should benefit Bay View as it is a logical acquisition candidate
due to its strong core deposit franchise.
Qwest Communications is another large position in the Fund. Qwest is building a
state-of-the-art, nationwide fiber optic network and is benefiting from the
increased demand for fiber capacity driven by the increase in internet traffic.
Qwest's network is better positioned to carry the traffic than the outdated
networks of the existing long distance carriers. Along with strong underlying
credit fundamentals, Qwest's bonds recently appreciated with the pending
acquisition by Qwest of LCI International, an investment grade rated company,
which will further improve Qwest's financial condition.
We encourage investors to consider high yield bonds as part of their long-term
investment strategy. High yield bonds can be an attractive asset class by
themselves and are especially attractive as part of a well-diversified
portfolio. Please remember that because this Fund invests primarily in
non-investment grade bonds (sometimes called junk bonds), it is subject to
greater share-price volatility than a fund that invests primarily in investment
grade bonds.
We thank you for your investment in the Strong High-Yield Bond Fund and look
forward to continuing to serve your investment needs.
Sincerely,
/s/ Jeffrey A. Koch
Jeffrey A. Koch
Portfolio Manager
[PHOTO OF JEFFREY A. KOCH]
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 12-28-95 to 4-30-98
[GRAPH]
THE STRONG Lehman Brothers Lipper High
HIGH-YIELD High-Yield Bond Current Yield
BOND FUND Index* Funds Index*
11-95 10,000 10,000 10,000
12-95 10,031 10,015 10,015
6-96 11,425 10,361 10,436
12-96 12,724 11,152 11,282
6-97 13,607 11,800 11,922
12-97 14,758 12,575 12,739
4-98 15,476 13,048 13,342
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 and the Lipper High Current Yield Funds
Index. Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value vary, and you may have a gain or loss
when you sell shares. To equalize the time periods, the indexes' performance
was prorated for the month of December 1995.
==================================
AVERAGE ANNUAL
TOTAL RETURNS(4)
==================================
As of 4-30-98
1-YEAR 18.59%
SINCE INCEPTION 20.47%
(on 12-28-95)
==================================
- -------------------------------------------------------------------------------
* The Lehman Brothers High-Yield Bond Index is an unmanaged index generally
representative of corporate bonds rated below investment-grade. The Lipper
High Current Yield Funds Index is an equally-weighted performance index of
the largest qualifying funds in this Lipper category. Source of the Lehman
index data is Standard & Poor's Micropal. Source of the Lipper index data is
Lipper Analytical Services, Inc.
1 From time to time, the Fund's Advisor has waived its management fee and
absorbed expenses, which has resulted in higher returns and without these
waivers the rankings may have been lower. Yields are historical and do not
represent future yields, which will fluctuate.
2 The Fund's average maturity includes the effect of futures.
3 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
4 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.
7
<PAGE>
===============================
THE STRONG SHORT-TERM BOND FUND
===============================
WITHIN THE CORPORATE MARKET, OUR INVESTMENTS IN THE AIRLINES, BANK AND FINANCE,
AND TELECOMMUNICATIONS CATEGORIES DID PARTICULARLY WELL...
=======================================================
ASSET ALLOCATION
=======================================================
Based on net assets as of 4-30-98
[PIE CHART]
Corporate Bonds 55.7%
U.S. Government and Agency Issues 17.9%
Non-Agency Mortgage- and Asset-Backed Securities 16.9%
Preferred Stocks 7.4%
Short-Term Investments 2.0%
Convertible Securities 0.1%
The Fund's asset allocation does not reflect any
futures positions held by the 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 maturity will normally be between one and three
years.
========================================
PORTFOLIO STATISTICS
========================================
As of 4-30-98
30-DAY ANNUALIZED YIELD(1) 6.63%
AVERAGE MATURITY(2) 2.4 YEARS
AVERAGE QUALITY RATING(3) A
========================================
Total return for the six month period ended April 30, 1998 was 3.37% compared
to the 2.89% of our benchmark, the Lehman Brothers 1-3 Year Government/
Corporate Bond Index.(4) That total return also compared favorably to our peer
group average of 2.66%, as measured by the Lipper Short Investment Grade Debt
Average. For the past 12 months the Fund's total return was 7.27% compared to
6.66% for the Lipper average.
=====================================
LIPPER TOTAL
RETURN RANKINGS(1)
=====================================
As of 4-30-98
1-YEAR #23 OF 103
5-YEAR #4 OF 46
10-YEAR #3 OF 13
SINCE INCEPTION #3 OF 11
(on 8-31-87)
Category: Short Investment Grade Debt
Funds. Rankings are historical and do
not represent future results. Source
of Lipper rankings is Lipper
Analytical Services, Inc.
=====================================
STABLE U.S. INTEREST RATES, TROUBLED ASIAN ECONOMIES DICTATED MARKET CONDITIONS
In the past six months, we saw generally stable interest rates with modest
declines in rates across the yield curve. The Federal Reserve maintained a
steady 5.5% Federal Funds rate throughout the period. Although overall rate
levels changed little over the period, there were periods of market volatility
as a result of the unfolding economic problems of Southeast Asia.
Likewise, corporate and mortgage bond prices changed only modestly from the
beginning of the period to the end. However, interim pricing levels exhibited
significant volatility as investors reacted to the unfolding events in
Southeast Asia and the coinciding interest rate volatility in the U. S. The
mortgage market's under-performance in the first part of the six-month period
was caused by renewed prepayment fears (the ability of a homeowner to refinance
their current home mortgage at a lower interest rate), as interest rates
( i.e., 10-Year U.S. Government Note yields) reached a low of 5.36% and housing
starts and home sales stayed strong. However, as interest rates returned by the
end of the period to their levels at the beginning of the period, prepayment
fears subsided and mortgage prices rebounded.
Corporate bonds exhibited a greater amount of volatility in yield spreads as
the modest change in average pricing masked the dramatic divergences in pricing
and hence performance across sectors, industries, and individual credits. In
the past six months, BBB rated Yankee corporate issues (U.S. dollar denominated
securities issued by foreign governments and corporations into the U.S. market)
under-performed comparable treasuries by more than a full percent in total
return. At the same time, BBB rated media and telecommunications bonds
outperformed comparable treasuries by more than two full percentage points of
total return.
KEY FACTORS IN FUND PERFORMANCE
The Short-Term Bond Fund's performance was achieved by maintaining a stable
duration of about 1.8 years, careful issue and sector selection within the
corporate market, and maintaining our continued commitment to mortgage
securities which exhibit more predictable prepayment characteristics.
Within the corporate market, our investments in the airlines, bank and finance,
and telecommunications categories did particularly well, including a rating
upgrade in Homeside, Inc. Within the mortgage market, we selectively increased
our exposure to premium securities because we believe that any increase in
prepayments within this sector will be short lived.
8
<PAGE>
A POSITIVE OUTLOOK FOR FIXED INCOME INVESTORS
We are very encouraged by the current environment for fixed income investing.
Absent are the broad, powerful interest rate trends (both up and down) which
characterized the first half of the 1990s, but so is the attendant volatility.
Real (inflation-adjusted) interest rates are high and there is ample
opportunity to add value through industry and credit selection within the
corporate bond market. At the same time, the low volatility environment
provides a good backdrop for continued investments within the mortgage market.
Thank you for investing in the Strong Short-Term Bond Fund. We look forward to
earning your continued confidence.
Sincerely,
/s/ Bradley C. Tank
Bradley C. Tank
/s/ Lyle J. Fitterer
Lyle J. Fitterer
/s/ Shirish T. Malekar
Shirish T. Malekar
Portfolio Co-managers
[PHOTO OF BRADLEY C. TANK, LYLE J. FITTERER AND SHIRISH T. MALEKAR]
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 8-31-87 to 4-30-98
[GRAPH]
THE STRONG Lehman Brothers 1-3 Lipper Short
SHORT-TERM Year Government/Corporate Investment Grade
BOND FUND Bond Index* Debt Average*
8-87 10,000 10,000 10,000
12-87 10,318 10,303 10,247
12-89 12,295 12,156 12,100
12-91 14,837 14,913 14,489
12-93 17,302 16,743 16,233
12-95 19,064 18,677 17,886
12-96 20,353 19,638 18,711
12-97 21,809 20,946 19,873
4-98 22,281 21,357 20,237
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 1-3 Year Government/Corporate Bond Index and the Lipper Short
Investment Grade Debt Average. 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.
==================================
AVERAGE ANNUAL
TOTAL RETURNS(4)
==================================
As of 4-30-98
1-YEAR 7.27%
3-YEAR 8.02%
5-YEAR 6.16%
SINCE INCEPTION 7.80%
(on 8-31-87)
==================================
- -------------------------------------------------------------------------------
* The Lehman Brothers 1-3 Year Government/Corporate Bond Index is an unmanaged
index generally representative of government and investment-grade corporate
securities with maturities of one to three years. The Lipper Short Investment
Grade Debt Average represents funds that invest at least 65% of assets in
investment-grade debt issues (rated in the top four grades) with
dollar-weighted average maturities of less than three years. Source of the
Lehman data is Bloomberg. Source of the Lipper index data is Lipper
Analytical Services, Inc.
1 From time to time, the Fund's Advisor has waived its management fee and
absorbed expenses, which has resulted in higher returns and without these
waivers the rankings may have been lower. Yields are historical and do not
represent future yields, which will fluctuate.
2 The Fund's average maturity includes the effect of futures and options.
3 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
4 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.
9
<PAGE>
==========================================
THE STRONG SHORT-TERM HIGH YIELD BOND FUND
==========================================
...WE HAVE IDENTIFIED AN OPPORTUNITY IN THE SHORT END OF THE HIGH YIELD MARKET
THAT WE BELIEVE PRESENTS A VERY FAVORABLE RISK/REWARD TRADE-OFF.
=======================================================
ASSET ALLOCATION
=======================================================
Based on net assets as of 4-30-98
[PIE CHART]
Corporate Bonds 89.5%
Short-Term Investments 8.4%
Non-Agency Mortgage- and Asset-Backed Securities 2.1%
=======================================================
The Strong Short-Term High Yield Bond Fund invests for a high level of current
income with a moderate degree of share price fluctuation. The Fund invests
primarily in medium and lower quality corporate debt obligations with an
average maturity between one and three years.
For the six-month period ended April 30, 1998, the Fund posted a total return
of 6.51%.(4) That's well ahead of its benchmark figure, the Short-Term High
Yield Bond Index, which returned 3.79%.
========================================
PORTFOLIO STATISTICS
========================================
As of 4-30-98
30-DAY ANNUALIZED YIELD(1) 7.17%
AVERAGE MATURITY(2) 2.9 YEARS
AVERAGE QUALITY RATING(3) B
========================================
SIX MONTHS OF MARKET VOLATILITY
For the past six months, we and others in the financial community have spent a
great deal of time trying to determine the ultimate impact of the Asian
financial and economic crisis that unfolded during the last quarter of 1997.
Financial markets initially feared the worst. The sell-off in world equity
markets was swift and severe. Interest rates headed lower as world economic
growth seemed poised to slow and commodity prices began to plunge. High yield
bonds, sensitive to the trend in economic growth, also traded lower. Although
both the high yield market and the stock market quickly recovered most of their
initial decline, the next few months were marked by volatility and uncertainty.
Most market participants struggled to adjust their forecasts for U.S. economic
growth to account for the implications of the Asian crisis. And while there was
a great deal of debate on the outlook for economic growth, it became clear that
over the near term, inflation was headed lower and the Federal Reserve would
leave interest rates unchanged.
Meanwhile, as time progressed, the economy showed few signs of being
sidetracked. This backdrop of lower inflation and stable to declining interest
rates created the conditions for a strong rally in equity prices during the
first few months of 1998. In fact, the economy performed so well that as we
close the month of April, markets are now struggling to assess the likelihood
of an increase in interest rates by the Federal Reserve.
THE FUND'S POSITIVE STANCE PROVED RIGHT FOR CONDITIONS
Our approach to investing in the high yield market begins with a top-down
review of macro-economic factors likely to influence both the real economy and
financial asset prices. Among others, these factors include worldwide economic
growth, inflation, interest rates, monetary policy, fiscal policy and
governmental regulation. Once we formulate an opinion on these macro-economic
factors, we position the portfolio to benefit from the realization of our
forecast.
As we discussed in our annual report for the period ending October 31, 1997,
our view has been that the economy will continue to grow at a relatively
healthy pace, although somewhat subdued from the levels of 1997. Our view
continues to be one of cautious optimism. Economic growth will likely subside
to more sustainable levels in the second and third quarters of this year.
Inflation has remained remarkably low and is not likely to rise appreciably
from here. As a result, the interest rate environment should remain relatively
stable over the near term.
With this environment as a backdrop, we are encouraged by the prospects for the
Short-Term High Yield Bond Fund. As one aspect of our investment strategy, we
have identified an opportunity in the short end of the high yield market that
we believe presents a very favorable risk/reward trade-off. This opportunity
involves purchasing bonds with very high coupons that are callable at the
option of the issuer within the next one to three years. As always, we are
looking for companies that have exhibited improving credit profiles. Under
normal market conditions, it would be quite common for the issuer to wait until
the call date and then retire the high coupon debt either with another lower
coupon bond issue or with lower cost bank debt. However, in this market
environment, many issuers are electing to retire high coupon debt before it is
actually callable through a tender process. In a tender process, an issuer pays
a premium to retire debt early. By historical standards, today's low nominal
interest rates are enticing to most issuers and many are willing to tender for
debt early rather than take a chance that interest rates will rise in the
interim.
10
<PAGE>
An example of this opportunity is our investment in Commodore Media. We
purchased Commodore Media's 13.25% bonds for the Fund at a yield that was 2.35%
over the yield on a similar maturity treasury note. The bond was not callable
at the issuer's option until May 1999. Instead of waiting to retire this high
cost debt, Commodore made the decision to refund the bonds early through the
tender process. In order to entice investors to tender or sell their bonds back
to the company, Commodore had to pay a yield that was just 0.35% above the
yield on a similar maturity treasury. The resulting price appreciation was
earned with very little incremental risk.
LOOKING AHEAD
We encourage investors to consider high yield bonds as part of their long-term
investment strategy. High yield bonds can be an attractive asset class by
themselves and are especially attractive as part of a well-diversified
portfolio. Please remember that because this Fund invests primarily in
non-investment grade bonds (sometimes called junk bonds), it is subject to
greater share-price volatility than a fund that invests primarily in investment
grade bonds.
We thank you for your investment in the Strong Short-Term High Yield Bond Fund
and look forward to continuing to serve your investment needs.
Sincerely,
/s/ Jeffrey A. Koch
Jeffrey A. Koch
Portfolio Manager
[PHOTO OF JEFFREY A. KOCH]
===============================================================================
GROWTH OF AN ASSUMED $10,000 INVESTMENT
===============================================================================
From 6-30-97 to 4-30-98
[GRAPH]
THE STRONG Short-Term Lipper High
SHORT-TERM HIGH High Yield Current Yield
YIELD BOND FUND Bond Index* Funds Index*
6-97 10,000 10,000 10,000
8-97 10,368 10,126 10,284
10-97 10,487 10,221 10,488
12-97 10,777 10,334 10,686
2-98 11,024 10,470 10,989
4-98 11,169 10,608 11,192
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
Short-Term High Yield Bond Index and the Lipper High Current Yield Funds Index.
Results include the reinvestment of all dividends and capital gains
distributions. Performance is historical and does not represent future results.
Investment returns and principal value will vary, and you may have a gain or
loss when you sell shares.
===============================
TOTAL RETURN(4)
===============================
As of 4-30-98
SINCE INCEPTION 11.69%
(on 6-30-97)
===============================
- -------------------------------------------------------------------------------
* The Short-Term High Yield Bond Index is a market value weighted blend of the
Merrill Lynch High Yield, BB Rated, 1-2.99 Years Index and the Merrill Lynch
High Yield, B Rated, 1-2.99 Years Index. It is an unmanaged index generally
representative of corporate debt rated below investment-grade with maturities
of one to three years. The Lipper High Current Yield Funds Index is an
equally-weighted performance index of the largest qualifying funds in this
Lipper category. Source of the Short-Term High Yield Bond Fund Index is
Bloomberg. Source of the Lipper High Current Yield Funds Index is Lipper
Analytical Services, Inc.
1 From time to time, the Fund's Advisor has waived its management fee and
absorbed expenses, which has resulted in higher returns and without these
waivers the rankings may have been lower. Yields are historical and do not
represent future yields, which will fluctuate.
2 The Fund's average maturity includes the effect of futures.
3 For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
4 Total return is not annualized and measures aggregate change in the value
of an investment in the Fund, assuming reinvestment of dividends.
11
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG CORPORATE BOND FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
CORPORATE BONDS 80.6%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 $ 8,654,000 $ 9,327,541
Republic of Argentina Yankee Notes, 9.50%,
Due 11/30/02 5,500,000 5,438,125
Atlas Air, Inc. Notes, Series 1998-1, Class C, 8.01%,
Due 1/02/10 (Acquired 1/26/98 - 2/25/98;
Cost $12,182,965) (b) 12,180,000 12,199,488
Banco Sud Americano Subordinated Notes, 7.60%,
Due 3/15/07 (Acquired 7/15/97 - 7/23/97;
Cost $10,317,698) (b) 10,060,000 9,896,525
Beaver Valley Funding Corporation Debentures,
8.625%, Due 6/01/07 8,370,000 9,039,600
CNA Financial Notes, 6.50%, Due 4/15/05 7,220,000 7,179,279
CSC Holdings, Inc. Senior Notes, 7.875%,
Due 12/15/07 10,000,000 10,300,000
Cablevision Systems Corporation Notes, 7.875%,
Due 2/15/18 3,500,000 3,465,000
California Energy, Inc. Senior Notes, 9.875%,
Due 6/30/03 5,000,000 5,431,250
Cleveland Electric Illuminating Company Senior
Secured Notes, Series C, 7.88%, Due 11/01/17
(Acquired 12/16/97; Cost $5,272,650) (b) 5,000,000 5,266,665
Coca-Cola Femsa SA de CV Senior Notes, 9.40%,
Due 8/15/04 (Acquired 10/01/97;
Cost $8,640,000) (b) 8,000,000 8,510,232
Colonial Capital I Securities, Series A, 8.92%,
Due 1/15/27 3,600,000 3,896,503
ContiFinancial Corporation Senior Notes, 8.125%,
Due 4/01/08 10,000,000 10,144,560
Continental Airlines, Inc. Pass-Thru Certificates:
Series 1998-2B, 6.465%, Due 10/15/04 3,000,000 3,000,000
Series 1998-2C, 6.331%, Due 4/15/03 5,000,000 4,993,750
Crescent Real Estate Equities LP Notes,
7.125%, Due 9/15/07 (Acquired 9/19/97;
Cost $8,284,977) (b) 8,300,000 8,284,404
Delta Air Lines, Inc. Equipment Trust Certificates:
Series 1991-A, 10.14%, Due 8/14/12
(Acquired 9/10/96; Cost $2,257,280) (b) 2,000,000 2,495,382
Series 1991-B, 10.14%, Due 8/14/12
(Acquired 9/10/96; Cost $2,257,280) (b) 2,000,000 2,495,382
Series 1991-E, 10.14%, Due 8/26/12
(Acquired 9/10/96; Cost $2,257,680) (b) 2,000,000 2,496,192
Delta Air Lines, Inc. Pass-Thru Certificates:
Series 1992-B1, 9.375%, Due 9/11/07 3,255,830 3,680,911
Series 1993-A2, 10.50%, Due 4/30/16 5,000,000 6,600,750
Digital Equipment Corporation Debentures,
8.625%, Due 11/01/12 9,950,000 11,276,146
Walt Disney Company Euro-Dollar Senior Notes,
2.00%, Due 3/01/00 (Acquired 9/19/96;
Cost $6,196,558) (b) 5,000,000 5,475,000
Duke Realty LP Notes, 7.05%, Due 3/01/06 7,000,000 7,117,600
El Paso Electric Company First Mortgage Notes,
Series E, 9.40%, Due 5/01/11 12,998,000 14,882,710
Export-Import Bank Korea Yankee Notes, 6.50%,
Due 2/10/02 2,500,000 2,255,820
First Nationwide Bank Subordinated Debentures,
10.00%, Due 10/01/06 3,460,000 4,149,820
First Republic Bank Subordinated Notes, 7.75%,
Due 9/15/12 5,000,000 5,139,105
Fresenius Medical Capital Trust II Trust Preferred
Securities, 7.875%, Due 2/01/08 (Acquired
2/17/98; Cost $7,043,750) (b) 7,000,000 6,947,500
Fuji JGB Investment LLC Preferred Bonds, Series
A, 9.87%, Due 12/31/49 (Rate Reset Effective
6/30/08) (Acquired 3/24/98; Cost $1,990,000) (b) 2,000,000 1,898,532
GB Capital Trust Capital Securities, 10.25%,
Due 1/15/27 (Acquired 1/24/97;
Cost $3,000,000) (b) 3,000,000 3,714,000
Gulf Canada Resources, Ltd. Senior Yankee Notes,
8.35%, Due 8/01/06 6,000,000 6,495,714
HUBCO Capital Trust I Capital Securities, 8.98%,
Due 2/01/27 5,000,000 5,528,865
Health & Retirement Properties Senior Notes,
6.70%, Due 2/23/05 8,350,000 8,282,599
Hilton Hotels Corporation Senior Notes, 7.20%,
Due 12/15/09 10,770,000 10,413,255
Homeside, Inc. Senior Secured Second Priority
Notes, 11.25%, Due 5/15/03 1,796,000 2,137,240
Houston Light & Power Capital Trust II Capital
Securities, Series B, 8.257%, Due 2/01/37 12,000,000 12,542,964
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 7,200,000 8,216,114
KN Capital Trust III Capital Securities, 7.63%,
Due 4/15/28 5,400,000 5,425,024
Korea Development Bank Yankee Bonds, 6.50%,
Due 11/15/02 2,800,000 2,533,619
Republic of Korea Yankee Notes, 8.875%,
Due 4/15/08 5,000,000 4,917,340
LCI International, Inc. Senior Notes, 7.25%,
Due 6/15/07 5,000,000 4,998,365
Lehman Brothers Holdings, Inc. Senior Notes,
7.20%, Due 8/15/09 905,000 944,374
Lehman Brothers, Inc. Bonds, 6.50%, Due 4/15/08 5,000,000 4,962,500
Lehman Brothers, Inc. Notes, 7.36%, Due 12/15/03 4,060,000 4,246,756
Leucadia Capital Trust I Pass-Thru Securities,
8.65%, Due 1/15/27 7,000,000 7,449,701
Louis Dreyfus Natural Gas Corporation Notes, 6.875%,
Due 12/01/07 (Acquired 12/04/97;
Cost $4,969,600) (b) 5,000,000 4,994,445
Fred Meyer, Inc. Senior Notes, 7.375%,
Due 3/01/05 5,000,000 5,022,640
Mohegan Tribal Gaming Authority Connecticut Senior
Secured Notes, Series B, 13.50%, Due 11/15/02 8,000,000 10,200,000
NWA Trust Number 2 Mezzanine Aircraft Notes,
Class C, 11.30%, Due 6/21/14 8,844,769 11,462,963
News America Holdings, Inc. Notes, 8.25%,
Due 8/10/18 5,780,000 6,424,927
News America Holdings, Inc. Senior Debentures,
7.75%, Due 12/01/45 5,000,000 5,242,260
North Fork Bancorp Capital Trust Pass-Thru
Securities, 8.70%, Due 12/15/26 3,500,000 3,748,416
North Fork Capital Trust II Pass-Thru Securities,
8.00%, Due 12/15/27 9,500,000 9,661,690
PXRE Capital Trust I Pass-Thru Securities, 8.85%,
Due 2/01/27 5,750,000 6,165,955
Republic of Panama Yankee Notes, 8.25%,
Due 4/22/08 4,000,000 4,000,000
Panamerican Beverages, Inc. Senior Notes, 8.125%,
Due 4/01/03 3,000,000 3,219,876
Paramount Communications, Inc. Notes, 7.50%,
Due 1/15/02 4,015,000 4,104,787
Philip Morris Companies, Inc. Notes:
6.15%, Due 3/15/10 (Putable at $100 and Rate
Reset Effective 3/15/00) 4,260,000 4,264,430
6.80%, Due 12/01/03 5,000,000 5,051,000
R&B Falcon Corporation Senior Notes, 7.375%,
Due 4/15/18 (Acquired 4/08/98;
Cost $6,446,310) (b) 6,500,000 6,367,719
12
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG CORPORATE BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Riggs Capital Trust Preferred Securities:
Series A, 8.625%, Due 12/31/26 $ 200,000 $ 211,130
Series A, 8.625%, Due 12/31/26
(Acquired 12/10/96; Cost $5,000,000) (b) 5,000,000 5,278,260
Riggs Capital II Trust Preferred Securities,
Series B, 8.875%, Due 3/15/27 500,000 538,779
SB Treasury Company LLC Bonds, 9.40%, Due
12/29/49 (Acquired 2/11/98 - 3/12/98;
Cost $5,967,000) (b) 5,800,000 5,898,478
SIG Capital Trust I Securities, 9.50%, Due 8/15/27 4,500,000 4,578,750
Socgen Real Estate LLC Bonds, 7.64%,
Due 12/29/49 (Rate Reset Effective 10/01/07)
(Acquired 8/21/97 - 12/23/97; Cost $9,304,350) (b) 9,250,000 9,298,146
Spieker Properties LP Debentures, 7.35%,
Due 12/01/17 5,000,000 5,004,735
Stop & Shop Companies, Inc. Senior Subordinated
Notes, 9.75%, Due 2/01/02 12,100,000 13,511,126
Sunamerica, Inc. Debentures, 5.60%,
Due 7/31/2097 7,910,000 5,890,735
Suntrust Capital II Trust Bonds, 7.90%,
Due 6/15/27 100,000 105,433
System Energy Resources, Inc. First Mortgage
Bonds, 11.375%, Due 9/01/16 383,000 410,145
TCI Communications, Inc. Senior Debentures,
8.75%, Due 8/01/15 5,560,000 6,504,327
TKR Cable I, Inc. Senior Debentures, 10.50%,
Due 10/30/07 9,425,000 10,369,442
Teekay Shipping Corporation Guaranteed First
Preferred Mortgage Notes, 8.32%, Due 2/01/08 6,560,000 6,822,400
Tele Communications, Inc. Senior Notes, 7.25%,
Due 8/01/05 5,000,000 5,186,620
Tenet Healthcare Corporation Senior Notes, 8.00%,
Due 1/15/05 5,000,000 5,150,000
Terra Nova Insurance UK Holdings PLC Senior
Guaranteed Notes, 10.75%, Due 7/01/05 7,020,000 7,827,623
360 Communications Company Senior Notes,
7.60%, Due 4/01/09 9,105,000 9,773,052
Time Warner, Inc. Debentures:
6.95%, Due 1/15/28 (Acquired 1/06/98;
Cost $2,472,950) (b) 2,500,000 2,444,250
8.11%, Due 8/15/06 5,000,000 5,451,755
Tokai Preferred Capital Company LLC Bonds,
9.98%, Due 12/29/49 (Rate Reset Effective
6/30/08) (Acquired 3/19/98; Cost $5,000,000) (b) 5,000,000 4,939,550
Tosco Corporation First Mortgage Bonds, Series B,
9.625%, Due 3/15/02 6,000,000 6,660,780
US West Capital Funding, Inc. Notes, 7.30%,
Due 1/15/07 5,695,000 5,988,355
USX Corporation Notes, 6.85%, Due 3/01/08 9,520,000 9,561,288
Ultramar Diamond Shamrock Corporation Senior Notes:
7.20%, Due 10/15/17 1,000,000 1,024,454
7.45%, Due 10/15/2097 7,500,000 7,758,353
United Air Lines, Inc. Debentures:
Series A, 10.67%, Due 5/01/04 3,055,000 3,679,149
9.75%, Due 8/15/21 10,000,000 12,968,320
Valero Pass-Thru Asset Trust 1997-1 Securities,
6.75%, Due 12/15/02 (Acquired 12/05/97;
Cost $4,992,800) (b) 5,000,000 5,038,780
Videotron Holdings PLC Senior Discount Notes,
Zero %, Due 7/01/04 (Rate Reset
Effective 7/01/99) 7,000,000 6,790,000
Wilmington Trust Corporation Subordinated Notes,
6.625%, Due 5/01/08 7,000,000 7,034,510
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $549,445,917) 557,722,035
- ------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES 8.9%
BCF LLC Mortgage Pass-Thru Certificates,
Series 1997-R2, Class 3-A1, 7.00%, Due 12/25/35
(Acquired 6/17/97; Cost $4,675,932) (b) 4,672,788 4,701,993
Bear Stearns Mortgage Securities, Inc. Mortgage
Pass-Thru Certificates, Series 1995-1, Class 2-P,
Principal Only, Due 7/25/10 875,590 697,503
Commercial Mortgage Acceptance Corporation Variable
Rate Pass-Thru Certificates, Series 1997-ML1,
Class D, 6.9795%, Due 12/15/10 10,200,000 10,192,044
DLJ Mortgage Acceptance Corporation, Series 1997-E,
Class A, 7.55%, Due 12/26/26 (Acquired 12/18/97;
Cost $5,598,500) (b) 5,575,848 5,589,788
DLJ Mortgage Acceptance Corporation Variable Rate
Multifamily Mortgage Pass-Thru Certificates,
Series 1993-MF10, Class A-1, Interest Only,
0.80%, Due 7/15/03 32,771,843 458,806
FMAC Loan Receivables Trust, Series 1997-C,
Class B, 7.15%, Due 12/15/19 7,239,000 7,278,597
Merrill Lynch Mortgage Investors, Inc. Asset
Backed Certificates, Series 1998-GNI, Class M-2,
8.02%, Due 2/25/27 6,000,000 6,001,860
Mid State Trust Virgin Islands Asset Backed
Notes:
Series 6, Class A-1, 7.34%, Due 7/01/35 2,956,239 3,092,759
Series 6, Class A-2, 7.40%, Due 7/01/35 3,464,343 3,506,573
NPF IX, Inc. 97-1 Healthcare Receivables Notes,
Class A, 6.339%, Due 7/01/00 (Acquired 7/24/97;
Cost $2,999,964) (b) 3,000,000 3,009,390
RTC Mortgage Pass-Thru Securities, Inc.
Commercial Mortgage Certificates,
Series 1995-C1, Class D, 6.90%, Due 2/25/27 12,000,000 12,105,000
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage Bonds,
Series 1992-C, Class 3-A, 11.722%, Due 11/25/30 276,094 288,949
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Thru Certificates, Series 1997-A,
Class B-3, 7.3887%, Due 10/01/25 (Acquired
7/09/97; Cost $4,553,700) (b) 5,100,071 4,647,440
- ------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES
(COST $61,427,078) 61,570,702
- ------------------------------------------------------------------------------
FOREIGN BONDS 1.4%
Shaw Communications, Inc. Debentures, 8.54%,
Due 9/30/27 14,000,000 CAD 9,829,454
- ------------------------------------------------------------------------------
TOTAL FOREIGN BONDS (COST $9,131,870) 9,829,454
- ------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY ISSUES 1.2%
FHLMC Participation Certificates:
14.00%, Due 9/01/12 $ 28,939 34,522
14.75%, Due 3/01/10 15,647 18,905
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates,
13.50%, Due 4/01/11 (c) 146,417 173,252
GNMA Guaranteed Pass-Thru Certificates, 15.00%,
Due 8/15/11 thru 10/15/12 100,074 121,929
Small Business Administration Guaranteed Loan
Pool #40013, Interest Only Strips, 2.419%,
Due 9/30/17 8,925,879 783,781
United States Treasury Bonds:
6.125%, Due 11/15/27 495,000 507,066
6.375%, Due 8/15/27 390,000 410,841
United States Treasury Notes, 5.75%, Due 8/15/03 6,105,000 6,106,905
- ------------------------------------------------------------------------------
TOTAL UNITED STATES GOVERNMENT & AGENCY ISSUES (COST $8,791,535) 8,157,201
- ------------------------------------------------------------------------------
13
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG CORPORATE BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
OPTIONS 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.) $6,083,333 $ 643,617
- ------------------------------------------------------------------------------
TOTAL OPTIONS (COST $281,678) 643,617
- ------------------------------------------------------------------------------
PREFERRED STOCKS 4.2%
Indosuez Holdings SCA Sponsored ADR 10.375%
Representing 1/10 Series A (Acquired 2/05/98;
Cost $5,660,000) (b) 200,000 5,590,000
NB Capital Corporation 8.35% Exchangeable 10,000 10,216,000
Norwest Corporation Series A, Cumulative Tracking
Preferred Stock/Residential Home Mortgage LLC
(Acquired 12/16/97; Cost $2,000,000) (b) 10,000 2,067,800
Parmalat Capital Finance 8.1523% Series B 253,000 6,359,408
Webster Capital Corporation 7.375% Series A 5,000 5,046,850
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $29,020,740) 29,280,058
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 0.7%
Equity Office Properties Trust 5.25% Series B
(Acquired 2/13/98; Cost $5,500,000) (b) 110,000 5,115,000
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $5,500,000) 5,115,000
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 0.6%
COMMERCIAL PAPER 0.1%
INTEREST-BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.24% $ 500 500
Johnson Controls, Inc., 5.26% 364,400 364,400
------------
364,900
REPURCHASE AGREEMENT 0.4%
ABN-AMRO Chicago Corporation (Dated 4/30/98),
5.45%, Due 5/01/98 (Repurchase proceeds
$2,500,378); Collateralized by: $6,722,000 United
States Treasury Strips, Zero %, Due 2/15/14
(Market Value $2,553,889) (d) 2,500,000 2,500,000
UNITED STATES GOVERNMENT ISSUES 0.1%
United States Treasury Bills, Due 5/07/98 thru
7/23/98 (c) 850,000 845,076
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,709,745) 3,709,976
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $667,308,563) 97.7% 676,028,043
Other Assets and Liabilities, Net 2.3% 15,735,468
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $691,763,511
==============================================================================
FUTURES
- ------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------
Purchased:
169 Five-Year U.S. Treasury Notes 6/98 $18,402,516 $ 1,431
119 U.S. Treasury Bonds 6/98 2,284,156 (13,656)
Sold:
356 Ten-Year U.S. Treasury Notes 6/98 (39,983,250) 30,996
216 U.S. Treasury Bonds 6/98 (25,967,250) 119,786
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- -------------------------------------------------------------------------------
Settlement Value Unrealized
Date in USD Appreciation
- -------------------------------------------------------------------------------
Sold:
13,210,847 CAD 6/17/98 ($9,243,138) $176,495
SWAPS
- -------------------------------------------------------------------------------
Open index rate swap contract at April 30, 1998 consisted of the following:
- -------------------------------------------------------------------------------
Notional Closing Interest Index Unrealized
Amount Date Sold Bought Depreciation
- -------------------------------------------------------------------------------
$25,000,000 7/17/97 1 mo. LIBOR Lehman Brothers Baa ($180,835)
===============================================================================
STRONG GOVERNMENT SECURITIES FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY ISSUES 79.7%
FHA Insured Project Loan #956-55054, 2.93%,
Due 11/01/12 $ 3,796,162 $ 3,032,754
FHA Project Loan, 7.40%, Due 3/01/09 22,064,175 22,808,841
FHA Project Loan Section 223(f) - Hampshire
Tower Apartments, 7.50%, Due 11/15/30 9,013,400 9,261,268
FHLMC Guaranteed Multiclass Variable Rate
Mortgage Participation Certificates:
Pool #865496, 7.552%, Due 5/01/26 6,749,887 7,013,538
Series 1572-B, Class SA, 3.7675%, Due 10/15/00 3,000,000 2,801,943
Series 1539, Class FB, 5.668%, Due 6/15/05 5,151,505 5,133,232
FHLMC Multiclass Mortgage Guaranteed
Participation Certificates, Series 144,
Class 144-A, 8.75%, Due 6/15/00 340,875 344,284
FHLMC Participation Certificates:
7.00%, Due 1/25/21 3,830,585 3,880,880
7.25%, Due 7/01/08 1,480,827 1,502,788
7.26%, Due 6/01/06 6,831,795 7,190,464
8.00%, Due 7/01/08 thru 12/01/10 6,447,805 6,685,150
8.50%, Due 10/01/05 thru 5/01/16 8,012,240 8,284,261
9.00%, Due 8/01/09 thru 6/01/16 5,431,228 5,739,847
9.50%, Due 4/01/07 thru 12/01/19 3,991,131 4,181,526
9.75%, Due 8/01/02 1,209,138 1,255,351
10.00%, Due 10/01/05 thru 6/01/20 4,480,978 4,778,810
10.50%, Due 6/01/04 thru 8/01/20 4,013,654 4,383,205
11.00%, Due 1/01/01 16,822 17,520
11.25%, Due 1/01/01 55,539 58,001
11.75%, Due 10/01/15 122,724 137,592
12.00%, Due 11/01/15 60,712 69,143
12.25%, Due 7/01/15 thru 12/01/15 448,031 509,675
12.50%, Due 10/01/09 thru 1/01/15 212,581 244,256
13.00%, Due 7/01/14 56,054 65,292
13.75%, Due 5/01/02 50,104 54,774
14.00%, Due 9/01/10 thru 4/01/16 671,759 797,173
14.50%, Due 3/01/11 thru 12/01/11 7,141 8,603
14.75%, Due 8/01/11 thru 4/01/13 8,313 10,008
15.00%, Due 8/01/11 28,126 34,294
16.00%, Due 6/01/12 6,997 8,766
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
6.00%, Due 9/01/12 15,175,714 14,967,048
6.50%, Due 6/18/27 8,248,000 7,872,551
6.513%, Due 11/01/14 21,711,458 21,982,851
6.74%, Due 8/25/07 9,690,000 10,036,708
14
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG GOVERNMENT SECURITIES FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
7.00%, Due 9/01/15 $ 956,045 $ 977,289
7.50%, Due 12/01/07 thru 7/01/15 18,031,855 18,581,918
7.778%, Due 7/01/01 27,840,000 29,075,901
8.00%, Due 6/25/21 thru 11/01/26 38,323,864 39,833,391
8.50%, Due 11/25/02 thru 2/01/12 9,003,663 9,511,878
8.75%, Due 1/01/10 1,354,750 1,436,008
9.00%, Due 9/01/21 thru 10/25/21 8,962,654 9,552,317
9.25%, Due 4/25/18 2,025,496 2,134,623
9.40%, Due 10/25/19 7,988,714 8,624,968
9.50%, Due 3/25/19 10,156,703 11,445,386
10.00%, Due 4/01/20 3,324,950 3,635,002
11.75%, Due 12/01/10 118,821 135,926
12.00%, Due 1/01/16 thru 2/01/19 2,788,316 3,209,718
12.25%, Due 7/01/14 20,779 23,465
12.50%, Due 2/01/11 177,500 204,606
13.25%, Due 4/01/12 3,440 3,996
13.50%, Due 1/01/11 thru 1/01/12 28,421 31,734
13.75%, Due 10/01/10 6,474 7,669
14.00%, Due 1/01/12 thru 11/01/14 107,917 128,224
14.25%, Due 12/01/14 33,372 40,431
14.50%, Due 1/01/12 7,300 8,787
14.75%, Due 11/01/10 thru 3/01/12 155,699 187,417
15.00%, Due 10/01/12 10,227 12,544
15.50%, Due 10/01/12 11,961 14,732
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Certificates:
Pool #54844, 6.213%, Due 9/01/27 20,232,379 20,359,034
Pool #110238, 6.893%, Due 1/01/16 5,099,428 5,170,840
Pool #70843, 6.914%, Due 4/01/20 2,582,913 2,621,115
Pool #66414, 7.174%, Due 9/01/28 12,590,902 13,086,732
Pool #176367, 7.55%, Due 4/01/15 2,727,564 2,797,318
Pool #92068, 7.577%, Due 1/01/18 1,489,517 1,547,204
Pool #124013, 7.636%, Due 10/01/21 3,028,153 3,139,029
Pool #181826, 7.692%, Due 10/01/22 1,365,974 1,411,214
Pool #201427, 7.886%, Due 1/01/23 2,406,351 2,518,470
Series 1991-57, Class S, 7.7219%, Due 5/25/20 1,855,343 1,873,528
Series 1996-M6, Class A, 7.3781%, Due 8/17/03 1,363,653 1,394,335
Series 1997-M4, Class C, 7.2993%, Due 8/17/18 5,683,000 5,995,565
FNMA Stripped Mortgage-Backed Securities:
6.00%, Due 11/01/08 thru 5/01/09 10,774,364 10,702,832
Series 161, Class 2, 8.50%, Due 7/25/22 5,797,627 1,409,762
GNMA Guaranteed Pass-Thru Certificates:
9.00%, Due 12/15/06 thru 12/15/09 16,804,759 17,499,913
12.50%, Due 4/15/19 4,100,017 4,730,394
13.00%, Due 11/15/10 thru 11/15/14 596,962 695,420
13.50%, Due 7/15/10 thru 10/15/12 197,891 232,043
14.00%, Due 6/15/11 thru 12/20/14 191,966 227,531
14.50%, Due 6/15/11 thru 11/15/12 317,763 383,020
15.00%, Due 1/15/12 thru 9/15/12 132,664 161,141
16.00%, Due 4/15/12 9,695 11,893
GNMA Guaranteed Variable Rate Pass-Thru
Certificates:
Pool #8333, 7.00%, Due 3/20/18 1,362,008 1,404,282
Pool #8714, 7.00%, Due 11/20/20 7,825,568 8,077,833
Pool #8489, 7.375%, Due 4/20/19 300,656 310,386
Small Business Administration Guaranteed Loan,
Interest Only Custodial Receipts:
Series 1992-6A, 2.473%, Due 10/15/17 45,196,017 3,912,167
Series 1993-1A, 2.531%, Due 2/15/18 13,621,990 1,225,979
Student Loan Marketing Association Floating Rate
Bonds, Series 1997-3, Class A2, 5.8274%,
Due 10/25/10 5,000,000 4,959,400
USGI FHA Insured Project Pool #2040, 3.025%,
Due 11/01/06 6,688,237 6,002,693
United States Treasury Bonds:
5.50%, Due 2/15/08 9,000,000 8,884,692
6.125%, Due 11/15/27 113,395,000 116,159,116
9.25%, Due 2/15/16 17,830,000 24,098,368
United States Treasury Notes:
5.375%, Due 2/15/01 11,000,000 10,938,136
5.625%, Due 12/31/99 19,500,000 19,512,207
5.75%, Due 8/15/03 13,125,000 13,166,029
6.00%, Due 7/31/02 40,740,000 41,236,539
6.125%, Due 8/15/07 10,000,000 10,278,130
6.25%, Due 10/31/01 thru 8/31/02 65,410,000 66,633,006
6.875%, Due 5/15/06 64,355,000 68,960,437
7.50%, Due 2/15/05 9,100,000 9,990,098
7.875%, Due 11/15/04 15,225,000 16,980,640
- ------------------------------------------------------------------------------
TOTAL UNITED STATES GOVERNMENT & AGENCY ISSUES (COST $820,452,107) 824,668,798
- ------------------------------------------------------------------------------
CORPORATE BONDS 7.3%
Atlas Air, Inc. Pass-Thru Certificates, Series
1998-1, Class B, 7.68%, Due 1/02/14
(Acquired 1/26/98; Cost $10,000,000) (b) 10,000,000 9,989,580
Bank United Corporation Subordinated Notes,
8.875%, Due 5/01/07 10,000,000 10,929,000
Cullen/Frost Capital Trust I Bonds, 8.42%,
Due 2/01/27 1,000,000 1,059,703
HUBCO Capital Trust I Capital Securities, 8.98%,
Due 2/01/27 6,500,000 7,187,525
Riggs Capital Trust Preferred Securities, Series A,
8.625%, Due 12/31/26 (Acquired 12/10/96;
Cost $9,490,000) (b) 9,490,000 10,018,137
Socgen Real Estate LLC Bonds, 7.64%, Due 12/29/49
(Rate Reset Effective 10/01/07) (Acquired
8/21/97 - 10/29/97; Cost $9,986,600) (b) 10,000,000 10,052,050
United Air Lines, Inc. Debentures:
10.25%, Due 7/15/21 10,735,000 14,488,353
10.67%, Due 5/01/04 10,000,000 12,043,040
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $74,064,625) 75,767,388
- ------------------------------------------------------------------------------
MUNICIPAL BONDS 0.4%
Arkansas Development Finance Authority GNMA
Guaranteed Bonds, 9.75%, Due 11/15/14 3,100,000 3,877,920
- ------------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS (COST $3,801,208) 3,877,920
- ------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES 0.3%
Commercial Mortgage Acceptance Corporation
Commercial Mortgage Variable Rate Pass-Thru
Certificates, Series 1997-ML1, Class D, 7.0571%,
Due 12/15/10 2,500,000 2,498,050
Community Program Loan Trust Bonds, Series
1987-A, Class A5, 4.50%, Due 4/01/29 980,000 763,793
- ------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES(COST $3,237,007) 3,261,843
- ------------------------------------------------------------------------------
OPTIONS 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.) 12,166,667 1,287,233
- ------------------------------------------------------------------------------
TOTAL OPTIONS (COST $563,356) 1,287,233
- ------------------------------------------------------------------------------
15
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG GOVERNMENT SECURITIES FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
PREFERRED STOCKS 2.0%
NB Capital Corporation 8.35% Exchangeable 10,000 $ 10,216,000
Norwest Corporation Series A, Cumulative
Tracking Preferred Stock/Residential Home
Mortgage LLC (Acquired 12/16/94;
Cost $10,000,000) (b) 50,000 10,339,000
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $20,000,000) 20,555,000
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 9.2%
COMMERCIAL PAPER 0.0%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 5.26% $ 24,500 24,500
Wisconsin Electric Power Company, 5.24% 100 100
--------------
24,600
REPURCHASE AGREEMENT 5.8%
ABN-AMRO Chicago Corporation (Dated 4/30/98),
5.45%, Due 5/01/98 (Repurchase proceeds
$59,709,038); Collateralized by: $50,000,000
United States Treasury Strips, Zero %,
Due 8/15/99; $24,367,000 United States Treasury
Strips, Zero %, Due 2/15/07 (Market Value
$60,984,276) (d) 59,700,000 59,700,000
UNITED STATES GOVERNMENT ISSUES 3.4%
United States Treasury Bills, Due 5/21/98 thru
6/25/98 (c) 670,000 667,065
United States Treasury Notes:
5.875%, Due 1/31/99 7,500,000 7,521,097
6.25%, Due 3/31/99 27,200,000 27,378,514
--------------
35,566,676
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $95,045,220) 95,291,276
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $1,017,163,523) 99.0% 1,024,709,458
Other Assets and Liabilities, Net 1.0% 10,202,391
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $1,034,911,849
==============================================================================
FUTURES
- ------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------
Sold:
70 U.S. Treasury Bonds 6/98 ($8,415,313) $103,928
===============================================================================
STRONG HIGH-YIELD BOND FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
CORPORATE BONDS 80.5%
AP Holdings, Inc. Senior Discount Notes, Zero %,
Due 3/15/08 (Rate Reset Effective 3/15/03)
(Acquired 3/25/98 - 4/01/98; Cost $2,870,325)(b) $ 4,850,000 $ 2,958,500
Adelphia Communications Corporation Senior
Debentures, 11.875%, Due 9/15/04 11,805,000 13,044,525
Adelphia Communications Corporation Senior
Notes, 9.25%, Due 10/01/02 5,250,000 5,446,875
Allied Waste Industries, Inc. Senior Discount Notes,
Zero %, Due 6/01/07 (Rate Reset Effective 6/01/02) 4,000,000 2,970,000
Allied Waste North America, Inc. Senior
Subordinated Notes, 10.25%, Due 12/01/06 6,000,000 6,645,000
America Reefer Company, Ltd. First Preferred Ship
Mortgage Notes, 10.25%, Due 3/01/08
(Acquired 2/27/98 - 3/17/98; Cost $5,506,250) (b) 5,500,000 5,555,000
American Lawyer Media, Inc. Senior Subordinated
Notes, 9.75%, Due 12/15/07 (Acquired 12/17/97;
Cost $4,000,000) (b) 4,000,000 4,170,000
Anchor Glass Container Corporation First
Mortgage Notes, 11.25%, Due 4/01/05 6,000,000 6,630,000
Apcoa, Inc. Senior Subordinated Notes, 9.25%,
Due 3/15/08 (Acquired 3/25/98 - 3/26/98;
Cost $7,381,000) (b) 7,300,000 7,336,500
Republic of Argentina Floating Rate Yankee Notes,
9.50%, Due 11/30/02 6,500,000 6,426,875
Atlas Air, Inc. Senior Notes: 9.25%, Due 4/15/08
(Acquired 4/07/98; Cost $7,989,360) (b) 8,000,000 8,020,000
10.75%, Due 8/01/05 7,725,000 8,343,000
Autopistas Del Sol SA Senior Notes, 9.35%,
Due 8/01/04 (Acquired 8/11/97;
Cost $4,950,000) (b) 5,000,000 4,956,250
BankUnited Capital Trust Preferred Securities,
Series A, 10.25%, Due 12/31/26 3,000,000 3,217,500
Bay View Capital Corporation Subordinated Notes,
9.125%, Due 8/15/07 18,075,000 18,662,437
Big City Radio, Inc. Senior Discount Notes, Zero %,
Due 3/15/05 (Rate Reset Effective 3/15/01)
(Acquired 3/12/98; Cost $2,882,200) (b) 4,000,000 2,950,000
Boyds Collection, Ltd. Senior Subordinated Notes,
9.00%, Due 5/15/08 (Acquired 4/16/98;
Cost $3,300,000) (b) 3,300,000 3,333,000
Brill Media Company LLC/Brill Media Management,
Inc. Senior Notes, 7.50%, Due 12/15/07 (Rate Reset
Effective 12/15/99) 5,000,000 4,775,000
CSBI Capital Trust I Subordinated Income Capital
Securities, Series A, 11.75%, Due 6/06/27
(Acquired 7/10/97; Cost $2,000,000) (b) 2,000,000 2,000,000
Calair LLC/Calair Capital Corporation Capital
Securities, 8.125%, Due 4/01/08 (Acquired 4/14/98;
Cost $4,951,100) (b) 5,000,000 4,981,250
Capstar Radio Broadcasting Partners, Inc. Senior
Subordinated Notes, 9.25%, Due 7/01/07 5,350,000 5,604,125
William Carter Senior Subordinated Notes, Series A,
10.375%, Due 12/01/06 7,000,000 7,525,000
Cencall Communications Corporation Senior
Discount Notes, Zero %, Due 1/15/04 (Rate Reset
Effective 1/15/99) 4,500,000 4,393,125
Centennial Cellular Corporation Senior Notes,
8.875%, Due 11/01/01 4,945,000 5,142,800
Chattem, Inc. Senior Subordintated Notes, 8.875%,
Due 4/01/08 (Acquired 3/20/98;
Cost $3,000,000) (b) 3,000,000 3,022,500
Chesapeake Energy Corporation Senior Notes,
9.625%, Due 5/01/05 (Acquired 4/17/98;
Cost $6,500,000) (b) 6,500,000 6,573,125
Chiles Offshore LLC Senior Notes, 10.00%,
Due 5/01/08 1,000,000 1,002,500
Clark-Schwebel Holdings, Inc. Senior Debentures,
12.50%, Due 7/15/07 2,921,358 3,111,246
DTI Holdings, Inc. Units, Zero %, Due 3/01/08
(Rate Reset Effective 3/01/03) 6,000,000 3,435,000
Diamond Brands, Inc. Discount Debentures, Zero %,
Due 4/15/09 (Rate Reset Effective 4/15/03)
(Acquired 4/15/98; Cost $2,147,880) (b) 4,000,000 2,175,000
16
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Diamond Brands Operating Senior Subordinated Notes,
10.125%, Due 4/15/08 (Acquired 4/15/98;
Cost $2,000,000) (b) $ 2,000,000 $ 2,030,000
e.spire Communications, Inc. Senior Notes, 13.75%,
Due 7/15/07 2,000,000 2,370,000
Echostar Communications Corporation Senior
Secured Discount Notes, Zero %, Due
6/01/04 (Rate Reset Effective 6/01/99) 4,000,000 3,860,000
Echostar Satellite Broadcasting Corporation Senior
Secured Discount Notes, Zero %, Due 3/15/04
(Rate Reset Effective 3/15/00) 3,000,000 2,760,000
Equimar Shipholdings, Ltd. Guaranteed First
Preferred Ship Mortgage Notes, 9.875%,
Due 7/01/07 3,000,000 2,827,500
Esprit Telecom Group PLC Yankee Senior Notes,
11.50%, Due 12/15/07 2,000,000 2,180,000
FWT, Inc. Senior Subordinated Notes, 9.875%,
Due 11/15/07 (Acquired 11/12/97 - 3/25/98;
Cost $6,375,000) (b) 6,500,000 6,207,500
Finlay Enterprises, Inc. Senior Debentures, 9.00%,
Due 5/01/08 1,300,000 1,314,625
Finlay Fine Jewelry Corporation Senior Notes,
8.375%, Due 5/01/08 2,000,000 2,012,500
First Nationwide Holdings, Inc. Senior
Subordinated Notes, 10.625%, Due 10/01/03 13,800,000 15,490,500
First Palm Beach Bancorp, Inc. Senior Debentures,
10.35%, Due 6/30/02 1,500,000 1,597,500
Flag, Ltd. Senior Notes, 8.25%, Due 1/30/08
(Acquired 1/23/98 - 3/10/98; Cost $2,858,312) (b) 2,850,000 2,899,875
Fox Kids Worldwide, Inc. Senior Notes, 9.25%,
Due 11/01/07 (Acquired 4/16/98;
Cost $6,015,000) (b) 6,000,000 5,947,500
Fresenius Medical Capital Trust II Preferred
Securities, 7.875%, Due 2/01/08 (Acquired 2/13/98;
Cost $3,790,000) (b) 3,790,000 3,761,575
Fresenius Medical Care Capital Trust Preferred
Securities, 9.00%, Due 12/01/06 4,500,000 4,702,500
Fuji JGB Investment LLC Preferred Bonds, Series A,
9.87%, Due 12/31/49 (Rate Reset Effective 6/30/08)
(Acquired 4/13/98; Cost $2,446,875) (b) 2,500,000 2,373,165
GCI, Inc. Senior Notes, 9.75%, Due 8/01/07 4,000,000 4,230,000
GST Telecommunications Senior Subordinated
Notes, 12.75%, Due 11/15/07 4,000,000 4,740,000
Goss Graphic System, Inc. Senior Subordinated
Notes, 12.00%, Due 10/15/06 7,000,000 7,945,000
Graham Packaging Holdings Company/GPC Capital
Corporation II Senior Discount Notes, Zero %,
Due 1/15/09 (Rate Reset Effective 1/15/03)
(Acquired 1/23/98 - 3/23/98; Cost $3,875,245) (b) 6,450,000 4,079,625
Grove Holdings LLC Debentures, Zero %,
Due 5/01/09 (Rate Reset Effective 5/01/03)
(Acquired 4/22/98 - 4/23/98; Cost $3,609,910) (b) 6,250,000 3,671,875
Grove Worldwide LLC Senior Subordinated Notes, 9.25%,
Due 5/01/08 (Acquired 4/22/98;
Cost $2,000,000) (b) 2,000,000 2,000,000
Hermes Europe Railtel BV Senior Notes, 11.50%,
Due 8/15/07 2,000,000 2,270,000
Hudson Respiratory Care Senior Subordinated
Notes, 9.125%, Due 4/15/08 (Acquired 4/02/98 -
4/17/98; Cost $3,518,750) (b) 3,500,000 3,500,000
Huntsman Specialty Chemicals Corporation Floating
Rate Term Loans, 9.4375%, Due 3/17/07
(Acquired 3/17/97; Cost $5,000,000) (b) 5,000,000 5,075,000
IBJ Preferred Capital Company LLC Bonds, 8.79%,
Due 12/29/49 (Rate Reset Effective 6/30/08)
(Acquired 4/13/98; Cost $2,396,875) (b) 2,500,000 2,374,568
ICG Services, Inc. Senior Discount Notes, Zero %,
Due 2/15/08 (Rate Reset Effective 2/15/03)
(Acquired 2/09/98; Cost $3,067,050) (b) 5,000,000 3,175,000
IXC Communications, Inc. Senior Subordinated
Notes, 9.00%, Due 4/15/08 (Acquired 4/16/98;
Cost $4,000,000) (b) (e) 4,000,000 4,030,000
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 6,000,000 6,846,762
Intermedia Communications, Inc. Senior Notes,
Series B, 8.50%, Due 1/15/08 4,000,000 4,120,000
Jackson Products, Inc. Capital Securities, 9.50%,
Due 4/15/05 (Acquired 4/16/98;
Cost $1,291,823) (b) 1,300,000 1,316,250
Jafra Cosmetics International, Inc. Senior
Subordinated Notes, 11.75%, Due 5/01/08
(Acquired 4/28/98; Cost $3,000,000) (b) 3,000,000 3,022,500
Jordan Telecommunication Products, Inc. Senior
Subordinated Discount Notes, Zero %,
Due 8/01/07 (Rate Reset Effective 8/01/00) 10,115,000 8,648,325
Republic of Korea Yankee Notes, 8.875%,
Due 4/15/08 7,500,000 7,376,010
Lenfest Communications, Inc. Senior Subordinated
Notes, 8.25%, Due 2/15/08 (Acquired 1/30/98;
Cost $2,991,780) (b) 3,000,000 3,045,000
Market Hub Partners Storage LP/Market Hub
Partners Finance, Inc. Senior Notes, 8.25%, Due
3/01/08 (Acquired 2/27/98; Cost $5,507,500) (b) 5,500,000 5,596,250
Metronet Communications Corporation Senior
Discount Notes, Zero %, Due 11/01/07
(Rate Reset Effective 11/01/02)
(Acquired 10/23/97; Cost $1,184,480) (b) 2,000,000 1,360,000
Metronet Communications Corporation Senior
Notes, 12.00%, Due 8/15/07 (Acquired
7/18/97; Cost $2,999,970) (b) 3,000,000 3,480,000
Mobile Telecommunication Technologies
Corporation Senior Notes, 13.50%, Due 12/15/02 3,250,000 3,835,000
Mohegan Tribal Gaming Authority Connecticut Senior
Secured Notes, Series B, 13.50%,
Due 11/15/02 7,510,000 9,575,250
Motors and Gears, Inc. Senior Notes, Series C,
10.75%, Due 11/15/06 6,500,000 7,003,750
Newpark Resources, Inc. Senior Subordinated Notes,
8.625%, Due 12/15/07 (Acquired 12/10/97 - 2/17/98;
Cost $7,115,000) (b) 7,000,000 7,140,000
Nextel Communications, Inc. Senior Discount Notes,
Zero %, Due 8/15/04 (Rate Reset Effective
2/15/99) 5,000,000 4,837,500
Nextlink Communications, Inc. Senior Discount Notes,
Zero %, Due 4/15/08 (Rate Reset Effective
4/15/03) (Acquired 3/27/98; Cost $3,139,850) (b) 5,000,000 3,125,000
Nextlink Communications, Inc. Senior Notes, 9.00%,
Due 3/15/08 (Acquired 3/12/98;
Cost $355,250) (b) 350,000 358,750
Nextlink Communications LLC Senior Notes,
12.50%, Due 4/15/06 4,875,000 5,606,250
Offshore Logistics, Inc. Senior Notes, 7.875%, Due
1/15/08 (Acquired 1/22/98; Cost $3,490,305) (b) 3,500,000 3,517,500
Optel, Inc. Senior Notes, Series B, 13.00%,
Due 2/15/05 9,675,000 10,860,187
Orbital Imaging Corporation Units, 11.625%, Due
3/01/05 (Acquired 2/20/98; Cost $2,500,000) (b) 2,500,000 2,693,750
PX Escrow Corporation Senior Discount Notes,
Zero %, Due 2/01/06 (Rate Reset Effective 2/01/02)
(Acquired 2/06/98; Cost $2,753,520) (b) 4,000,000 2,870,000
Pagemart Nationwide, Inc. Senior Discount Notes,
Zero %, Due 2/01/05 (Rate Reset Effective
2/01/00) 9,000,000 8,010,000
17
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Parametric RE, Ltd. Floating Rate Notes, 10.2063%,
Due 11/19/07 (Acquired 11/12/97;
Cost $750,000) (b) $ 750,000 $ 753,750
Pathnet, Inc. Units, 12.25%, Due 4/15/08 (Acquired
4/01/98; Cost $4,000,000) (b) 4,000,000 4,110,000
Pegasus Shipping Hellas Senior Mortgage Notes,
11.875%, Due 11/15/04 (Acquired 11/19/97 -
4/29/98; Cost $2,949,000) (b) 3,000,000 3,015,000
Pharmaceutical Fine Chemicals SA Senior Subordinated
Notes, 9.75%, Due 11/15/07 (Acquired 11/12/97 -
1/05/98; Cost $5,532,500) (b) 5,500,000 5,582,500
Premier Parks, Inc. Senior Discount Notes, Zero %,
Due 4/01/08 (Rate Reset Effective 4/01/03) 4,000,000 2,555,000
Prime Succession Acquisition Corporation Senior
Subordinated Notes, 10.75%, Due 8/15/04 4,500,000 4,927,500
Printpack, Inc. Senior Notes, Series B, 9.875%,
Due 8/15/04 4,750,000 5,106,250
Psinet, Inc. Senior Notes, 10.00%, Due 2/15/05
(Acquired 4/07/98; Cost $4,500,000) (b) 4,500,000 4,635,000
Qwest Communications International, Inc. Senior
Discount Notes:
Zero %, Due 10/15/07 (Rate Reset Effective
10/15/02) 6,500,000 4,680,000
Zero %, Due 2/01/08 (Rate Reset Effective
2/01/03) (Acquired 1/22/98; Cost $3,995,520) (b) 6,000,000 4,140,000
Qwest Communications International, Inc. Senior
Notes, Series B, 10.875%, Due 4/01/07 4,000,000 4,620,000
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Notes, Series B, 10.00%, Due 3/15/05 5,000,000 5,562,500
Rogers Cantel, Inc. Senior Secured Yankee Notes,
8.30%, Due 10/01/07 5,000,000 4,925,000
Rose Hills Company Senior Subordinated Notes,
9.50%, Due 11/15/04 3,000,000 3,142,500
Rural/Metro Corporation Senior Notes, 7.875%, Due
3/15/08 (Acquired 3/11/98; Cost $2,495,700) (b) 2,500,000 2,512,500
SBA Communications Corporation Senior Discount
Notes, Zero %, Due 3/01/08 (Rate Reset Effective
3/01/03) (Acquired 3/17/98 - 3/20/98;
Cost $4,916,250) (b) 8,500,000 5,100,000
SF Holdings Group, Inc. UNITS, Zero %, Due
3/15/08 (Rate Reset Effective 3/15/03) 5,000,000 2,825,000
BF Saul Real Estate Investment Trust Senior Secured
Notes, 9.75%, Due 4/01/08 (Acquired 3/19/98;
Cost $7,000,000) (b) 7,000,000 7,035,000
Signature Resorts, Inc. Senior Notes, 9.25%, Due
5/15/06 (Acquired 4/09/98; Cost $3,000,000) (b) 3,000,000 3,030,000
Six Flags Entertainment Guaranteed Senior Notes,
8.875%, Due 4/01/06 1,000,000 1,015,000
Sun International Hotels Senior Subordinated
Notes, 8.625%, Due 12/15/07 5,000,000 5,162,500
Superior National Capital Trust I Notes, 10.75%,
Due 12/01/17 5,405,000 5,742,812
Town Sports International, Inc. Senior Notes,
Series B, 9.75%, Due 10/15/04 4,000,000 4,060,000
Transwestern Publishing Company LP/TWP Capital
Corporation Senior Subordinated Notes,
9.625%, Due 11/15/07 8,650,000 9,125,750
21st Century Telecom Group, Inc. Senior Discount
Notes, Zero %, Due 2/15/08 (Rate Reset Effective
2/15/03) (Acquired 2/02/98; Cost $3,043,416) (b) 5,500,000 3,135,000
US Air, Inc. Senior Notes, 9.625%, Due 2/01/01 10,530,000 11,043,422
United International Holdings, Inc. Senior Discount
Notes, Zero %, Due 2/15/08 (Rate Reset Effective
2/15/03) (Acquired 3/17/98; Cost $3,116,250) (b) 5,000,000 3,168,750
Universal Compression, Inc. Senior Discount Notes,
Zero %, Due 2/15/08 (Rate Reset Effective 2/15/03)
(Acquired 2/13/98 - 3/17/98; Cost $5,575,850) (b) 9,000,000 5,692,500
Verio, Inc. Units, 13.50%, Due 6/15/04 (Acquired
6/17/97 - 3/18/98; Cost $12,305,000) (b) 9,500,000 13,632,500
Viking Star Shipping, Inc. First Preferred Ship
Mortgage Notes, 9.625%, Due 7/15/03 1,942,000 2,019,680
Wam!Net, Inc. Units, Zero %, Due 3/01/05
(Rate Reset Effective 3/01/02) 5,000,000 3,225,000
Winstar Communications, Inc. Senior Subordinated
Deferred Interest Notes, 11.00%, Due 3/15/08
(Acquired 3/17/98 - 3/18/98; Cost $9,070,632) (b) 8,850,000 8,894,250
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $525,183,120) 542,250,639
- ------------------------------------------------------------------------------
CONVERTIBLE BONDS 1.3%
Key Energy Group, Inc. Subordinated Notes, 5.00%,
Due 9/15/04 4,900,000 4,119,087
Lukinter Finance BV Bonds, 1.00%, Due 11/03/03 5,105,000 4,339,250
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (COST $8,402,596) 8,458,337
- ------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES 2.5%
Aircraft Lease Portfolio Securitization Pass-Thru
Trust Certificates, Series 1996-1, Class D, 12.75%,
Due 6/15/06 4,986,262 4,986,262
Blaylock Mortgage Capital Corporation Subordinated
Bonds, Series 1997-A, Class B3, 6.425%, Due
10/15/03 (Acquired 3/11/98; Cost $3,158,335)(b) 3,351,574 3,145,251
CS First Boston Mortgage Securities Corporation
Mortgage Pass-Thru Certificates, Series 1992-4,
Class A-5, Interest Only, 0.625%, Due 10/25/22 21,101,232 217,554
Lehman Relocation Mortgage Trust Subordinated
Variable Rate Mortgage-Backed Certificates,
Series 1997-2, Class B1, 7.1263%, Due 6/28/26
(Acquired 2/05/98; Cost $2,272,266) (b) 2,485,898 2,234,200
Merrill Lynch Credit Corporation Floating Rate
Pass-Thru Asset-Backed Mortgage Loans,
Series 1996-C, Class B, 7.00%, Due 9/15/21
(Acquired 5/09/97; Cost $3,004,531) (b) 3,500,000 3,007,830
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Thru Certificates, Series 1997-A,
Class B-3, 7.3887%, Due 10/01/25 (Acquired
7/19/97; Cost $2,964,226) (b) 3,319,886 3,025,246
- ------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES (COST $16,601,934)
16,616,343
- ------------------------------------------------------------------------------
FOREIGN BONDS 0.8%
Shaw Communications, Inc. Debentures, 8.54%,
Due 9/30/27 8,000,000 CAD 5,616,831
- ------------------------------------------------------------------------------
TOTAL FOREIGN BONDS (COST $5,225,203) 5,616,831
- ------------------------------------------------------------------------------
PREFERRED STOCKS 8.9%
American Communications Services, Inc. 14.75%
(Acquired 2/09/98; Cost $3,705,000) (b) 3,000 3,780,000
Chancellor Media Corporation Exchangeable 12.00%
(Acquired 5/08/97 - 8/19/97; Cost $9,206,833) (b) 83,431 10,241,155
Chancellor Radio Broadcasting Company 12.25%
Senior Series A 17,000 2,418,250
e.spire Communications, Inc. 12.75% 1,162 1,353,734
IXC Communications, Inc. 12.50% Junior 3,190 3,820,539
Intermedia Communications, Inc. 13.50% Series B
Exchangeable 3,573 4,385,416
Jordan Telecommunication Products, Inc. 13.25%
Units 2,000 2,620,000
NTL, Inc. 13.00% Series B 5,978 7,128,765
18
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG HIGH-YIELD BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Nextlink Communications, Inc. 14.00% Senior
Exchangeable 783 $ 47,372
Primedia, Inc. 8.625% Series G Exchangeable
(Acquired 2/11/98 - 3/10/98; Cost $4,279,250) (b) 43,500 4,317,375
River Holding Corporation 11.50%
(Acquired 4/02/98; Cost $2,000,000) (b) 20,000 2,035,000
SFX Broadcasting, Inc. 12.625% Series E 54,219 6,384,287
Time Warner, Inc. 10.25% Exchangeable Series K 9,375 10,570,313
21st Century Telecom Group, Inc. 13.75% Units
(Acquired 2/02/98; Cost $1,000,000) (b) 1,000 1,120,000
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $57,318,407) 60,222,206
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS 0.3%
Chesapeake Energy Corporation 7.00% (Acquired
4/17/98; Cost $ 2,000,000) (b) 40,000 2,005,000
- ------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS (COST $2,000,000) 2,005,000
- ------------------------------------------------------------------------------
COMMON STOCKS 0.5%
Intermedia Communications, Inc. 30,000 2,189,531
Optel, Inc. Non-Voting (Acquired 2/07/97 - 4/14/98 ;
Cost $183,780) (b) 9,675 387,000
WinStar Communications, Inc. 20,000 777,500
- ------------------------------------------------------------------------------
TOTAL COMMON STOCKS (COST $3,067,305) 3,354,031
- ------------------------------------------------------------------------------
WARRANTS 0.0%
American Communications Services, Inc. Warrants,
Expire 11/01/05 (Acquired 2/14/96 - 3/22/96;
Cost $91,875) (b) 1,500 210,000
American Telecasting, Inc. Warrants, Expire 8/10/00 150 --
Metronet Communications Corporation Warrants 3,000 30
Powertel, Inc. Warrants, Expire 2/01/06 3,264 38,760
- ------------------------------------------------------------------------------
TOTAL WARRANTS (COST $95,655) 248,790
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 1.7%
COMMERCIAL PAPER 0.1%
INTEREST BEARING, DUE UPON DEMAND
American Family Financial Services, Inc., 5.24% $ 94,900 94,900
Johnson Controls, Inc., 5.26% 100 100
Pitney Bowes Credit Corporation, 5.26% 428,900 428,900
------------
523,900
REPURCHASE AGREEMENT 1.3%
ABN-AMRO Chicago Corporation (Dated 4/30/98), 5.45%,
Due 5/01/98 (Repurchase proceeds $8,501,287);
Collateralized by: $22,854,000 United States
Treasury Strips, Zero %, Due 2/15/14
(Market Value $8,682,920) (d) 8,500,000 8,500,000
TIME DEPOSITS 0.3%
U.S. Dollar Hedged GKO Pass-Thru, Zero %,
Due 6/24/98 2,313,324 2,289,219
UNITED STATES GOVERNMENT ISSUES 0.0%
United States Treasury Bills, Due 5/14/98 thru
7/23/98 (c) 140,000 139,345
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $11,422,517) 11,452,464
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $629,316,737) 96.5% 650,224,641
Other Assets and Liabilities, Net 3.5% 23,618,920
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $673,843,561
==============================================================================
FUTURES
- ------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------
Sold:
81 Ten-Year U.S. Treasury Notes 6/98 ($9,097,313) $65,205
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- -------------------------------------------------------------------------------
Settlement Value Unrealized
Date in USD Appreciation
- -------------------------------------------------------------------------------
Sold:
7,549,055 CAD 6/17/98 ($5,281,793) $100,855
SWAPS
- -------------------------------------------------------------------------------
Open index rate swap contract at April 30, 1998 consisted of the following:
- -------------------------------------------------------------------------------
Notional Closing Interest Index Unrealized
Amount Date Sold Bought Depreciation
- -------------------------------------------------------------------------------
$15,000,000 7/17/97 1 mo. LIBOR Lehman Brothers Baa ($108,491)
===============================================================================
STRONG SHORT-TERM BOND FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
CORPORATE BONDS 54.5%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 $10,600,000 $11,424,998
Amerco Asset Backed Bonds:
6.65%, Due 10/15/99 (Acquired 10/17/97;
Cost $9,996,500) (b) 10,000,000 9,991,000
6.89%, Due 10/15/00 (Acquired 10/17/97;
Cost $10,000,000) (b) 10,000,000 9,959,000
Republic of Argentina Yankee Notes, 9.50%,
Due 11/30/02 13,500,000 13,348,125
Atlas Air, Inc. Notes, Series 1998-1, Class C, 8.01%,
Due 1/02/10 (Acquired 1/26/98 - 2/25/98;
Cost $20,006,800) (b) 20,000,000 20,032,000
Bay View Capital Corporation Senior Debentures,
8.42%, Due 6/01/99 (Acquired 5/13/96 - 5/28/96;
Cost $7,000,000) (b) 7,000,000 7,106,841
Beaver Valley Funding Corporation Debentures,
8.625%, Due 6/01/07 10,000,000 10,800,000
Republic of Brazil Yankee Bonds, 9.375%,
Due 4/07/08 3,500,000 3,456,250
CMS Energy Corporation Notes, 8.125%, Due
5/15/02 7,500,000 7,701,840
CMS Energy Corporation Unsecured Senior Notes,
7.375%, Due 11/15/00 (Acquired 11/04/97;
Cost $4,995,850) (b) 5,000,000 5,040,220
California Energy, Inc. Senior Notes, 9.875%,
Due 6/30/03 9,442,000 10,256,373
Call-Net Enterprises, Inc. Senior Discount Notes,
Zero %, Due 12/01/04 (Rate Reset
Effective 12/01/99) 9,000,000 8,505,000
Century Communications Corporation Senior
Notes, 8.75%, Due 10/01/07 5,000,000 5,200,000
19
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Coca-Cola Femsa SA de CV Senior Notes, 9.40%,
Due 8/15/04 (Acquired 12/03/97;
Cost $5,217,100) (b) $ 5,000,000 $ 5,318,895
Computer Associates International, Inc. Bonds,
6.25%, Due 4/15/03 (Acquired 4/21/98;
Cost $2,505,281) (b) 2,510,000 2,499,930
ContiFinancial Corporation Senior Notes:
7.50%, Due 3/15/02 4,310,000 4,293,790
8.375%, Due 8/15/03 11,750,000 12,106,895
Continental Airlines, Inc. Pass-Thru Certificates,
Series 1998-2A, 6.41%, Due 4/15/07 2,500,000 2,506,000
Continental Airlines, Inc. Senior Notes, 9.50%,
Due 12/15/01 14,750,000 15,635,000
Continental Airlines Pass-Thru Certificates,
Series 1997-2D, 7.522%, Due 6/30/01 13,369,000 13,609,508
Custom Repackaged Asset Vehicle Trusts - CRAVE
Trust Certificates, Series 1997-800, 6.86%, Due
8/12/00 (Acquired 8/14/97; Cost $4,999,200) (b) 5,000,000 5,036,000
Custom Repackaged Asset Vehicle Trusts -
Wal-Mart Credit-Linked Trust Certificates, Series
1996-401, 7.35%, Due 7/17/06 (Acquired 10/16/96;
Cost $4,474,837) (b) 4,488,662 4,617,792
Custom Repackaged Asset Vehicle Trusts - Walt
Disney Credit-Linked Trust Certificates, Series
1996-403, 7.20%, Due 1/10/07 (Acquired 12/18/96;
Cost $4,247,174) (b) 4,249,979 4,366,284
Delta Air Lines, Inc. Pass-Thru Certificates:
Series 1992-B1, 9.375%, Due 9/11/07 (c) 19,066,956 21,556,338
Series 1993-A1, 9.875%, Due 4/30/08 7,992,511 9,254,689
Digital Equipment Corporation Notes, 7.125%,
Due 10/15/02 10,000,000 10,103,950
Walt Disney Company Euro-Dollar Senior Notes,
2.00%, Due 3/01/00 (Acquired 9/19/96; Cost
$12,393,116) (b) 10,000,000 10,950,000
Duke Realty LP Notes, 7.05%, Due 3/01/06 3,000,000 3,050,400
EOP Operating LP Mandatory Par Put Remarketed
Securities, 6.376%, Due 2/15/02 (Acquired
2/12/98; Cost $10,000,000) (b) 10,000,000 9,984,200
EOP Operating LP Notes, 6.375%, Due 2/15/03
(Acquired 2/12/98; Cost $998,700) (b) 1,000,000 995,838
El Paso Electric Company First Mortgage Notes,
Series E, 9.40%, Due 5/01/11 10,500,000 12,022,500
Export-Import Bank Korea Yankee Notes, 7.10%,
Due 3/15/07 8,300,000 7,732,695
First Nationwide Holdings, Inc. Senior Subordinated
Notes, 10.625%, Due 10/01/03 2,000,000 2,245,000
Fuji JGB Investment LLC Preferred Bonds, Series A,
9.87%, Due 12/31/49 (Rate Reset Effective 6/30/08)
(Acquired 3/05/98 - 3/12/98; Cost $10,468,400)(b) 10,500,000 9,967,293
Grupo Industrial Durango SA de CV Notes,
12.625%, Due 8/01/03 5,000,000 5,693,500
Grupo Industrial Durango Yankee Notes, 12.00%,
Due 7/15/01 4,000,000 4,390,000
Gulf Canada Resources, Ltd. Senior Yankee Notes,
8.35%, Due 8/01/06 12,800,000 13,857,523
Harrahs Operating, Inc. Guaranteed Senior
Subordinated Notes, 8.75%, Due 3/15/00 9,116,000 9,298,320
Homeside, Inc. Senior Secured Second Priority
Notes, 11.25%, Due 5/15/03 16,677,000 19,845,630
Huntington Capital I Variable Rate Capital Income
Securities, 6.4188%, Due 2/01/27 16,500,000 16,082,633
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 5,000,000 5,705,635
Republic of Korea Yankee Notes, 8.75%,
Due 4/15/03 14,000,000 14,037,450
Lehman Brothers Holdings, Inc. Bonds, 6.25%,
Due 4/01/03 5,000,000 4,979,600
Long Island Lighting Company Debentures, 8.90%,
Due 7/15/19 6,019,000 6,409,994
Marine Midland Bank Floating Rate Notes, 5.875%,
Due 12/31/09 (c) 4,400,000 4,274,600
Fred Meyer, Inc. Senior Notes, 7.15%, Due 3/01/03 15,000,000 14,936,400
Mohegan Tribal Gaming Authority Connecticut
Senior Secured Notes, Series B, 13.50%,
Due 11/15/02 17,910,000 22,835,250
NWA Trust Structured Enhanced Return Trusts
1998, 8.7063%, Due 4/15/11 15,000,000 15,240,000
NWCG Holdings Corporation Senior Secured
Discount Notes, Series B, Zero %, Due 6/15/99 1,968,000 1,833,763
North Fork Bancorp Capital Trust Pass-Thru
Securities, 8.70%, Due 12/15/26 13,000,000 13,922,688
Republic of Panama Notes, 7.875%, Due 2/13/02
(Acquired 5/09/97 - 2/04/98; Cost $14,847,250)(b) 15,000,000 15,090,000
Republic of Panama Yankee Notes, 8.25%,
Due 4/22/08 6,000,000 6,000,000
Panamerican Beverages, Inc. Senior Notes, 8.125%,
Due 4/01/03 8,300,000 8,908,324
Parametric RE, Ltd. Floating Rate Notes, 10.2063%,
Due 11/19/07 (Acquired 11/12/97; Cost $750,000) (b) 750,000 753,750
Riggs Capital Trust Preferred Securities, Series A,
8.625%, Due 12/31/26 (Acquired 12/20/96 -
1/15/97; Cost $11,565,210) (b) 11,500,000 12,139,998
SB Treasury Company LLC, 9.40%,Due 12/29/49
(Acquired 3/12/98; Cost $5,125,000) (b) 5,000,000 5,084,895
SIG Capital Trust I Securities, 9.50%, Due 8/15/27 10,250,000 10,429,375
Socgen Real Estate LLC Bonds, 7.64%, Due
12/29/49 (Rate Reset Effective 10/01/07) (Acquired
8/21/97 - 12/02/97; Cost $14,978,600) (b) 15,000,000 15,078,075
Spintab AB Floating Rate Subordinated Notes,
6.2758%, Due 12/29/49 (Acquired 11/21/97;
Cost $30,000,000) (b) 30,000,000 30,073,380
Star Capital Trust I Floating Rate Securities,
6.4525%, Due 6/15/27 10,000,000 9,913,510
Suntrust Capital Trust I Floating Rate Preferred
Securities, 6.295%, Due 5/15/27 10,000,000 9,996,280
Superior Financial Corporation Senior Notes,
8.65%, Due 4/01/03 (Acquired 3/27/98;
Cost $1,250,000) (b) 1,250,000 1,270,175
Swedbank Floating Rate Debt Unit (Medium
Term Structured Enhanced Return Trusts 1996,
Series R-35), 6.475%, Due 11/10/02 (Acquired
10/16/96; Cost $10,000,000) (b) 10,000,000 9,865,000
TKR Cable I, Inc. Senior Debentures, 10.50%,
Due 10/30/07 31,515,000 34,672,992
Terra Nova Insurance UK Holdings PLC Senior
Guaranteed Notes, 10.75%, Due 7/01/05 26,770,000 29,849,781
Time Warner Pass-Thru Asset Trust Securities,
Series 1997-1, 6.10%, Due 12/30/01
(Acquired 1/08/97; Cost $15,264,000) (b) 16,000,000 15,844,160
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 - 11/06/96;
Cost $12,243,008) (b) 12,500,000 12,468,750
Union Planters Trust Capital Securities, 8.20%,
Due 12/15/26 3,000,000 3,125,607
United Air Lines, Inc. Debentures, 10.25%,
Due 7/15/21 4,850,000 6,545,739
Valero Pass-Thru Asset Trust 1997-1 Securities,
6.75%, Due 12/15/02 (Acquired 12/05/97;
Cost $9,985,600) (b) 10,000,000 10,077,560
20
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Viacom International, Inc. Senior Subordinated
Notes, 8.75%, Due 5/15/01 (Rate Reset
Effective 5/15/98) $ 20,000,000 $ 20,353,400
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $721,527,659) 731,558,381
- ------------------------------------------------------------------------------
CONVERTIBLE BONDS 0.1%
Lukinter Finance BV Bonds, 1.00%, Due 11/03/03 2,000,000 1,700,000
- ------------------------------------------------------------------------------
TOTAL CONVERIBLE BONDS (COST $1,754,257) 1,700,000
- ------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES 16.9%
AMRESCO Commercial Mortgage Funding I Corporation
Variable Rate Depositor Mortgage Pass-Thru
Certificates, Series 1997-1, 7.5434%, Due 9/26/27
(Acquired 12/11/97; Cost $4,404,818) (b) 4,414,477 4,403,440
BCF LLC Mortgage Pass-Thru Certificates, Series
1997-R2, Class 3-A1, 7.00%, Due 6/25/25
(Acquired 6/17/97; Cost $7,013,898) (b) 7,009,182 7,052,990
CS First Boston Mortgage Securities Corporation
Mortgage Backed Certificates, 7.25%,
Due 8/25/27 3,968,235 3,993,036
CS First Boston Mortgage Securities Corporation
Variable Rate Mortgage Pass-Thru Certificates,
Series 1994-MHC1, Class D, 7.3875%, Due 4/25/11 3,106,879 3,137,948
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 1990-G, Class
A-Z1, 9.50%, Due 12/25/21 2,045,433 2,094,012
Chase Mortgage Finance Corporation Variable
Rate Multiclass Mortgage Pass-Thru Certificates,
Series 1992-2,Class B2, 8.0749%, Due 8/28/23
(Acquired 9/27/96 - 9/03/97; Cost $5,453,263) (b) 5,429,140 5,415,567
Citicorp Mortgage Securities, Inc. Mortgage Pass-
Thru Certificates, Series 1987-2, 8.50%,
Due 4/25/02 5,011,852 5,000,575
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1993-3, Class B1, 7.00%,
Due 3/25/08 (Acquired 10/23/96;
Cost $2,253,650) (b) 2,287,426 2,300,304
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Variable Rate
Pass-Thru Certificates, Series 1988-8, Class A-1,
8.4844%, Due 6/25/18 4,881,175 5,002,687
Cityscape Home Loan Owners' Trust Asset
Backed Notes, Series 1997-1, Class A-3,
6.63%, Due 3/25/18 5,350,000 5,369,260
Collateralized Mortgage Obligation Trust 47,
Class E, Principal Only, Due 9/01/18 1,413,232 803,562
Collateralized Mortgage Obligation Trust 61,
Class Z, 9.10%, Due 1/01/20 2,710,881 2,804,311
Collateralized Mortgage Obligation Trust Inverse
Floating Rate Collateralized Mortgage Obligation,
Series 13, Class Q, 15.4111%, Due 1/20/03 1,026,354 1,094,866
ContiMortgage Home Equity Loan Trust Interest
Only Senior Strip Certificates, Series 1996-2,
Class A, 1.18%, Due 7/15/27 (Acquired 6/14/96;
Cost $3,517,582) (b) 121,947,905 2,525,541
ContiSecurities Residual Corporation
ContiMortgage Net Interest Margin Notes,
Series 1997-A, 7.23%, Due 7/16/28 (Acquired
9/18/97; Cost $3,233,085) (b) 3,233,085 3,229,044
DLJ Mortgage Acceptance Corporation Variable Rate
Mortgage Pass-Thru Certificates, Series
92-Q4, Class A-2, 7.4196%, Due 7/25/22 1,941,645 1,965,289
DLJ Mortgage Acceptance Corporation Variable
Rate Multifamily Mortgage Pass-Thru
Certificates, Series 1993-MF10, Class A-1,
Interest Only, 0.80%, Due 7/15/03 22,920,190 320,883
Delta Funding Home Equity Loan Trust Asset
Backed Certificates, Series 1997-4,
Class A-4F, 7.07%, Due 12/25/28 10,225,000 10,250,563
Deutsche Mortgage and Asset Receiving
Corporation, Series 1998-C1, Class X,
Interest Only, 1.2545%, Due 2/15/23 145,000,000 10,150,000
GMBS, Inc. Countrywide Funding Certificates,
Series 1990-1, Class Z, 9.25%, Due 1/28/20 4,740,919 4,883,146
Greenwich Capital Acceptance, Inc. Mortgage
Securities, Series 1993-P01, Class E, Principal
Only, Due 11/26/17 8,290,792 5,824,281
Greenwich Capital Acceptance, Inc. Variable Rate
Mortgage Pass-Thru Certificates, Series 1991-1,
Class A, 7.2861%, Due 2/25/21 (Acquired 4/18/96;
Cost $11,116,928) (b) 10,898,949 11,157,799
Kmart CMBS Financing, Inc. Floating Rate Commercial
Mortgage Pass-Thru Certificates, Series 1997-1,
Class D, 6.7563%, Due 3/01/07 (Acquired 3/10/97;
Cost $4,516,875) (b) 4,500,000 4,504,230
ML TR X Collateralized Mortgage Obligation,
Class C, Principal Only, Due 7/25/17 8,065,951 6,493,228
Merrill Lynch Home Equity Acceptance, Inc.
Subordinated Variable Rate Mortgage-Backed
Certificates, Series 1994-A, Class A-1, 6.75%,
Due 8/17/23 9,523,457 9,434,222
Merrill Lynch Mortgage Investors, Inc. Mortgage
Pass-Thru Certificates, Series 1994-C1, Interest
Only, 0.5996%, Due 11/25/20 52,453,292 770,539
Merrill Lynch Mortgage Investors, Inc. Senior
Subordinated Pass-Thru Certificates, Series
1994-A, Class A-5, 7.035%, Due 2/15/24 16,123,441 16,120,861
The Money Store, Inc. Securitized Net Interest
Margin Trust 1997-1 Notes, 7.36%, Due 6/20/25
(Acquired 12/23/97; Cost $2,895,057) (b) 2,895,057 2,895,057
Morgan Stanley Capital I Variable Rate Commercial
Mortgage Pass-Thru Certificates, Series 1997-RR,
Class A, 6.8848%, Due 4/28/04 (Acquired
11/21/97; Cost $4,903,440) (b) 4,921,310 4,930,562
NPF XI, Inc. Health Care Receivables Program 97-1
Notes, Class A, 6.815%, Due 7/01/01 (Acquired
6/19/97; Cost $4,999,944) (b) 5,000,000 5,040,650
Prudential Home Mortgage Securities Company Mortgage
Pass-Thru Certificates, Series 1992-26,
Class A-18, 7.50%, Due 8/25/07 2,150,021 2,159,094
Prudential Home Thirty-Year Mortgage Trust
Subordinated Mortgage Securities, Series 1992-A,
Class B2-2, 7.90%, Due 4/28/22 (Acquired
10/03/96 - 3/08/98; Cost $14,579,525) (b) 14,555,347 14,655,488
RTC Mortgage Pass-Thru Securities, Inc.
Commercial Pass-Thru Certificates, Series
1994-C2, Class E, 8.00%, Due 4/25/25 11,697,357 11,967,098
RTC Variable Rate Mortgage Pass-Thru
Securities, Inc.:
Series 1991-11, Class 1-L, 8.625%, Due 10/25/21 11,850,000 11,998,125
Series 1992-1, Class A-2, 7.979%, Due 8/25/20 2,603,589 2,600,335
Series 1992-6, Class A-4, 7.5279%, Due 11/25/25 1,370,375 1,366,949
Residential Funding Mortgage Securities I, Inc.
Mortgage Pass-Thru Certificates, Series
1993-M23, Class A-1, 6.97%, Due 8/28/23 2,092,304 2,095,568
21
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Ryland Mortgage Securities Corporation Variable
Rate Mortgage Participation Securities:
Series 1991-1, 7.4004%, Due 3/25/20 $ 2,771,849 $ 2,813,427
Series 1992-3, Class A-2, 7.4751%, Due 6/25/20 7,503,182 7,493,803
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage Bonds,
Series 1992-C, Class 3-A, 11.722%,
Due 11/25/30 1,924,148 2,013,737
Ryland Mortgage Securities Corporation IV
Variable Rate Collateralized Mortgage Bonds,
Series 2, Class 3-A, 11.913%, Due 6/25/23 2,197,606 2,300,630
SWP Mortgage Securities Trust Mortgage Pass- Thru
Certificates, Series 1993-1, Class A, 6.54%, Due
12/15/02 (Acquired 1/23/98; Cost $3,798,636) (b) 3,775,042 3,783,310
Salomon Brothers Mortgage Securities VI, Inc.
Stripped Coupon Mortgage Pass-Thru
Certificates, Series 1987-3, Class A, Principal
Only, Due 10/23/17 1,615,554 1,287,813
Santa Barbara Savings & Loan Association Real
Estate Mortgage Investment Conduit
Participation Certificates, Series 1988-A, Class 2,
Principal Only, Due 9/01/18 1,322,812 1,024,359
Shearson Lehman Pass-Thru Securities, Inc. Asset
Trust Variable Rate Pass-Thru Certificates,
Series 88-3, 7.7198%, Due 9/15/18 5,715,666 5,729,955
Structured Asset Securities Corporation
Collateralized Mortgage Obligation, Series
1991-2, Class SC, 16.92%, Due 1/20/20 2,840,070 2,917,717
Structured Mortgage Asset Residential Trust
Multiclass Pass-Thru Certificates, Series 1992-5,
Class BO, Principal Only, Due 6/25/23 1,064,116 780,594
U-Haul Self-Storage Corporation Commercial
Mortgage Asset Trust Variable Rate Pass-Thru
Certificates, Series 1993-1, Class A1, 7.15%,Due
12/01/20 (Acquired 12/02/93; Cost $441,831) (b) 441,831 441,831
- ------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE & ASSET-BACKED SECURITIES (COST $225,928,768)
226,398,286
- ------------------------------------------------------------------------------
FOREIGN BONDS 0.9%
Shaw Communications, Inc. Debentures, 8.54%,
Due 9/30/27 18,091,000 CAD 12,701,761
- ------------------------------------------------------------------------------
TOTAL FOREIGN BONDS (COST $11,800,333) 12,701,761
- ------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY ISSUES 17.9%
FHLMC Participation Certificates:
6.50%, Due 5/01/04 1,438,711 1,445,904
8.50%, Due 4/01/01 thru 1/01/05 890,738 920,276
8.75%, Due 10/01/01 747,289 760,486
9.00%, Due 5/01/06 thru 8/01/18 14,070,720 14,970,079
9.50%, Due 3/01/11 470,411 501,406
9.75%, Due 8/01/02 2,153,777 2,236,094
10.25%, Due 7/01/09 thru 1/01/10 565,452 611,838
10.50%, Due 1/01/16 thru 7/01/19 1,247,148 1,372,838
10.75%, Due 9/01/09 thru 10/01/17 628,678 687,978
11.25%, Due 11/01/09 432,227 478,419
FHLMC Variable Rate Participation Certificates,
7.545%, Due 5/01/26 12,200,215 12,676,756
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
8.00%, Due 12/01/13 thru 9/01/23 14,264,880 14,881,934
8.50%, Due 4/01/08 thru 2/01/23 30,054,035 31,884,770
9.00%, Due 11/01/24 3,045,413 3,266,205
9.40%, Due 10/25/19 17,118,674 18,482,073
9.50%, Due 2/01/11 thru 3/01/15 10,983,418 11,882,771
10.00%, Due 7/01/04 thru 6/25/19 20,571,794 22,459,892
11.00%, Due 10/15/20 30,907,661 34,664,796
12.00%, Due 3/01/17 6,418,310 7,369,695
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 1,614 25,822
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Pass-Thru
Certificates, Series 1995-G2, Class IO, Interest
Only, 1.9751%, Due 5/25/20 12,083,315 2,240,452
FNMA Stripped Mortgage-Backed Securities:
Series 107, Class 1, Principal Only, Due 10/25/06 2,605,841 2,245,922
Series 1993-M1, Class N, Interest Only, 0.84%,
Due 4/25/20 35,426,717 210,435
GNMA Guaranteed Pass-Thru Certificates:
7.50%, Due 12/15/07 6,906,658 7,175,742
9.00%, Due 11/15/24 2,660,637 2,879,970
9.75%, Due 9/15/05 thru 11/15/05 1,748,017 1,836,048
10.00%, Due 2/20/18 664,077 724,834
11.50%, Due 4/15/13 137,679 156,606
12.50%, Due 4/15/19 28,646,118 33,050,459
Small Business Administration Guaranteed Loan,
Group #0190, Variable Rate Interest Only
Certificates, 3.069%, Due 7/30/18 20,992,233 2,414,107
Small Business Administration Guaranteed Loan,
Pool #440019, Interest Only Custodial Receipts,
Series 1993-1A, 2.4036%, Due 2/15/18 10,192,831 917,355
USGI FHA Insured Project Pool #2047, 6.90%,
Due 8/01/14 453,420 448,886
USGI FHA Insured Project Pool Banco 85, 7.387%,
Due 11/24/19 3,252,050 3,259,172
United States Treasury Notes, 5.75%, Due 8/15/03 1,240,000 1,243,827
- ------------------------------------------------------------------------------
TOTAL UNITED STATES GOVERNMENT & AGENCY ISSUES (COST $237,918,561) 240,383,847
- ------------------------------------------------------------------------------
PREFERRED STOCKS 7.4%
Banco Central Hispanoamericano, SA Eurocap 400,000 10,100,000
California Federal Capital Corporation 9.125%
Exchangeable Series A 320,000 8,640,000
First Nationwide Bank, Dallas, Texas 11.50% 89,100 10,157,400
Indosuez Holdings SCA Sponsored ADR 10.375%
Representing 1/10 Series A (Acquired 11/15/96 -
2/09/98; Cost $15,678,751) (b) 552,045 15,429,658
Norwest Corporation Series A, Cumulative
Tracking Preferred Stock/Residential
Home Mortgage LLC (Acquired 12/16/94;
Cost $23,000,000) (b) 115,000 23,779,700
Parmalat Capital Finance 8.1523% Series B 300,000 7,540,800
Time Warner, Inc. 10.25% Exchangeable Series K 12,028 13,561,570
Webster Capital Corporation 7.375% Series A 10,000 10,093,700
- ------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS (COST $97,607,357) 99,302,828
- ------------------------------------------------------------------------------
OPTIONS 0.3%
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.) $39,583,333 4,187,917
- ------------------------------------------------------------------------------
TOTAL OPTIONS (COST $1,832,838) 4,187,917
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 1.0%
COMMERCIAL PAPER 0.0%
INTEREST BEARING, DUE UPON DEMAND
Johnson Controls, Inc., 5.26% 276,700 276,700
Pitney Bowes Credit Corporation, 5.26% 293,200 293,200
------------
569,900
22
<PAGE>
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
CORPORATE BONDS 0.1%
Residential Reinsurance, Ltd. Floating Rate Notes,
11.4397%, Due 12/15/98 (Acquired 6/10/97;
Cost $1,000,000) (b) $1,000,000 $ 1,015,000
REPURCHASE AGREEMENT 0.7%
ABN-ARMO Chicago Corporation (Dated 4/30/98),
5.45%, Due 5/01/98 (Repurchase proceeds
$8,801,332); Collateralized by: $27,272,000 United
States Treasury Strips, Zero %, Due 5/15/16
(Market Value $8,989,397) (d) 8,800,000 8,800,000
UNITED STATES GOVERNMENT ISSUES 0.2%
United States Treasury Bills, Due 5/21/98
thru 7/23/98 (c) 2,965,000 2,948,192
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $13,317,124) 13,333,092
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $1,311,686,897) 99.0% 1,329,566,112
Other Assets and Liabilities, Net 1.0% 13,357,074
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $1,342,923,186
==============================================================================
FUTURES
- ------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------
Sold:
856 Five-Year U.S. Treasury Notes 6/98 ($ 93,210,375) ($145,045)
1,140 Ten-Year U.S. Treasury Notes 6/98 (128,036,250) 252,057
488 U.S. Treasury Bonds 6/98 (58,666,750) 341,506
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- -------------------------------------------------------------------------------
Settlement Value Unrealized
Date in USD Appreciation
- -------------------------------------------------------------------------------
Sold:
17,071,245 CAD 6/17/98 ($11,944,114) $228,070
===============================================================================
STRONG SHORT-TERM HIGH YIELD BOND FUND
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
CORPORATE BONDS 89.5%
Adelphia Communications Corporation Senior
Debentures, 11.875%, Due 9/15/04 $1,000,000 $1,105,000
Adelphia Communications Corporation Senior
Notes, 9.25%, Due 10/01/02 2,000,000 2,075,000
Aftermarket Technology Corporation Senior
Subordinated Notes, Series B, 12.00%,
Due 8/01/04 1,000,000 1,110,000
Alliance Imaging, Inc. Senior Subordinated
Floating Rate Notes, 10.0963%, Due 12/15/05 1,500,000 1,503,750
American Media Operations, Inc. Senior
Subordinated Notes, 11.625%, Due 11/15/04 2,225,000 2,414,125
Atlas Air, Inc. Pass-Thru Trust Certificates,
12.25%, Due 12/01/02 2,450,000 2,699,092
Call-Net Enterprises, Inc. Senior Discount Notes,
Zero %, Due 12/01/04 (Rate Reset
Effective 12/01/99) 1,600,000 1,512,000
Cencall Communications Corporation Senior Discount
Notes, Zero %, Due 1/15/04 (Rate Reset
Effective 1/15/99) 1,000,000 976,250
Centennial Cellular Corporation Senior Notes,
8.875%, Due 11/01/01 2,635,000 2,740,400
Clark-Schwebel Holdings, Inc. Senior Debentures,
12.50%, Due 7/15/07 2,091,988 2,227,967
Coinmach Corporation Senior Notes, Series D,
11.75%, Due 11/15/05 2,000,000 2,240,000
Day International Group, Inc. Senior Subordinated
Notes, Series B, 11.125%, Due 6/01/05 2,000,000 2,170,000
Finlay Enterprises Senior Discount Debentures,
Zero%, Due 5/01/05 (Rate Reset Effective 5/01/98) 1,000,000 1,020,000
First Nationwide Holdings, Inc. Senior Exchange
Notes, 12.25%, Due 5/15/01 1,000,000 1,110,000
First Nationwide Holdings, Inc. Senior Subordinated
Notes, 10.625%, Due 10/01/03 1,435,000 1,610,788
Florists Transworld Delivery, Inc. Senior
Subordinated Notes, Series B, 14.00%,
Due 12/15/01 1,000,000 1,110,000
Fresh Del Monte Produce NV Yankee Notes,
Series B, 10.00%, Due 5/01/03 2,000,000 2,110,000
Graham Packaging Company/GPC Capital Corporation I
Floating Rate Notes, 9.2813%, Due 1/15/08
(Acquired 1/23/98; Cost $1,000,000) (b) 1,000,000 1,000,000
Horseshoe Gaming LLC Senior Notes, Series B,
12.75%, Due 9/30/00 2,489,000 2,762,790
Huntsman Polymers Corporation Senior Notes,
11.75%, Due 12/01/04 1,660,000 1,842,600
Interlake Corporation Senior Subordinated
Debentures, 12.125%, Due 3/01/02 2,000,000 2,070,000
KCS Energy, Inc. Senior Notes, Series B, 11.00%,
Due 1/15/03 1,225,000 1,349,031
Mobile Telecommunication Technologies
Corporation Senior Notes, 13.50%, Due 12/15/02 3,000,000 3,540,000
Mohegan Tribal Gaming Authority Connecticut
Senior Secured Notes, Series B, 13.50%,
Due 11/15/02 2,000,000 2,550,000
NL Industries Senior Secured Notes, 11.75%,
Due 10/15/03 2,819,000 3,143,185
NS Group, Inc. Senior Notes, 13.50%, Due 7/15/03 2,000,000 2,305,000
Nextlink Communications LLC Senior Notes,
12.50%, Due 4/15/06 2,000,000 2,300,000
Plitt Theatres, Inc. Senior Subordinated Yankee
Notes, 10.875%, Due 6/15/04 2,000,000 2,175,000
Premier Parks, Inc. Senior Notes, Series A, 12.00%,
Due 8/15/03 2,000,000 2,227,500
Repap New Brunswick, Inc. First Priority Senior
Secured Floating Rate Notes, 9.00%, Due 7/15/00 1,600,000 1,600,000
SD Warren Company Senior Subordinated Notes,
Series B, 12.00%, Due 12/15/04 1,000,000 1,115,000
Showboat Marina Casino Partnership/Showboat Marina
Finance Corporation First Mortgage
Notes, Series B, 13.50%, Due 3/15/03 1,500,000 1,766,250
Star Markets Company Senior Subordinated Notes,
13.00%, Due 11/01/04 1,530,000 1,725,075
Superior Financial Corporation Senior Notes, 8.65%,
Due 4/01/03 (Acquired 3/27/98;
Cost $2,000,000) (b) 2,000,000 2,032,280
US Air, Inc. Senior Notes, 9.625%, Due 2/01/01 3,660,000 3,838,454
United Stationer Supply Senior Subordinated Notes,
12.75%, Due 5/01/05 2,000,000 2,300,000
23
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (CONTINUED) APRIL 30, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
===============================================================================
STRONG SHORT-TERM HIGH YIELD BOND FUND (CONTINUED)
===============================================================================
Shares or
Principal Value
Amount (Note 2)
- -------------------------------------------------------------------------------
Viking Star Shipping, Inc. First Preferred Ship
Mortgage Notes, 9.625%, Due 7/15/03 $2,000,000 $ 2,080,000
Westpoint Stevens, Inc. Senior Subordinated
Debentures, 9.375%, Due 12/15/05 3,000,000 3,187,500
World Color Press, Inc. Senior Subordinated Notes,
9.125%, Due 3/15/03 1,000,000 1,040,000
Young Broadcasting, Inc. Senior Subordinated
Notes, 11.75%, Due 11/15/04 2,200,000 2,436,500
- ------------------------------------------------------------------------------
TOTAL CORPORATE BONDS (COST $79,319,013) 80,120,537
- ------------------------------------------------------------------------------
NON-AGENCY MORTGAGE-BACKED SECURITIES 2.1%
Blaylock Mortgage Capital Corporation Subordinated
Bonds, Series 1997-A, Class B3, 6.425%,
Due 10/15/03 (Acquired 3/11/98;
Cost $1,884,688) (b) 2,000,000 1,876,880
- ------------------------------------------------------------------------------
TOTAL NON-AGENCY MORTGAGE-BACKED SECURITIES ( COST $1,887,302) 1,876,880
- ------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 4.0%
COMMERCIAL PAPER 0.4%
INTEREST BEARING, DUE UPON DEMAND
General Mills, Inc., 5.26% 183,500 183,500
Johnson Controls, Inc., 5.26% 87,600 87,600
Pitney Bowes Credit Corporation, 5.26% 72,800 72,800
Wisconsin Electric Power Company, 5.24% 100 100
-----------
344,000
REPURCHASE AGREEMENT 3.6%
ABN-AMRO Chicago Corporation (Dated 4/30/98),
5.45%, Due 5/01/98 (Repurchase proceeds
$3,200,484); Collateralized by: $3,112,000 United
States Treasury Bonds, 6.375%, Due 8/15/27
(Market Value $3,200,000) (d) 3,200,000 3,200,000
- ------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $3,544,000) 3,544,000
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES (COST $84,750,315) 95.6% 85,541,417
Other Assets and Liabilities, Net 4.4% 4,001,172
- ------------------------------------------------------------------------------
NET ASSETS 100.0% $89,542,589
==============================================================================
CURRENCY ABBREVIATIONS
- ------------------------------------------------------------------------------
CAD Canadian Dollar
LEGEND
- ------------------------------------------------------------------------------
(a) Short-term investments include 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) See Note 2(H) of notes to financial statements.
(e) When-issued security.
Percentages are stated as a percent of net assets.
See notes to financial statements.
24
<PAGE>
<TABLE>
STATEMENTS OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
(In Thousands, Except Per Share Amounts)
<CAPTION>
STRONG CORPORATE STRONG GOVERNMENT STRONG HIGH-YIELD
BOND FUND SECURITIES FUND BOND FUND
---------------- ----------------- -----------------
ASSETS:
<S> <C> <C> <C>
Investments in Securities, at Value (Cost of $667,309, $1,017,163
and $629,317, respectively) $676,028 $1,024,709 $650,225
Receivable for Securities Sold 24,052 15,262 19,005
Receivable for Fund Shares Sold 320 1,016 1,855
Dividends and Interest Receivable 11,280 15,258 9,914
-------- ---------- --------
Total Assets 711,680 1,056,245 680,999
LIABILITIES:
Payable for Securities Purchased 15,504 16,482 1,925
Payable for Fund Shares Redeemed 138 171 478
Dividends Payable 3,694 4,491 4,534
Accrued Operating Expenses and Other Liabilities 580 189 218
-------- ---------- --------
Total Liabilities 19,916 21,333 7,155
-------- ---------- --------
NET ASSETS $691,764 $1,034,912 $673,844
======== ========== ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $708,629 $1,014,941 $639,252
Undistributed Net Investment Income 62 -- 28
Undistributed Net Realized Gain (Loss) (25,781) 12,321 13,599
Net Unrealized Appreciation 8,854 7,650 20,965
-------- ---------- --------
Net Assets $691,764 $1,034,912 $673,844
======== ========== ========
Capital Shares Outstanding (Unlimited Number Authorized) 61,580 96,218 55,739
NET ASSET VALUE PER SHARE $11.23 $10.76 $12.09
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG SHORT-TERM HIGH
BOND FUND YIELD BOND FUND
----------------- ----------------------
ASSETS:
<S> <C> <C>
Investments in Securities, at Value (Cost of $1,311,687
and $84,750, respectively) $1,329,566 $85,541
Receivable for Securities Sold 4,010 1,016
Receivable for Fund Shares Sold 357 1,040
Interest Receivable 18,316 2,413
Other Assets -- 27
---------- -------
Total Assets 1,352,249 90,037
LIABILITIES:
Payable for Fund Shares Redeemed 153 --
Dividends Payable 7,144 482
Accrued Operating Expenses and Other Liabilities 2,029 12
---------- -------
Total Liabilities 9,326 494
---------- -------
NET ASSETS $1,342,923 $89,543
========== =======
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $1,414,592 $88,103
Undistributed Net Investment Income 80 --
Undistributed Net Realized Gain (Loss) (90,305) 649
Net Unrealized Appreciation 18,556 791
---------- -------
Net Assets $1,342,923 $89,543
========== =======
Capital Shares Outstanding (Unlimited Number Authorized) 137,370 8,537
NET ASSET VALUE PER SHARE $9.78 $10.49
===== ======
25
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------
For the Period Ended April 30, 1998 (Unaudited)
(In Thousands)
<CAPTION>
STRONG CORPORATE STRONG GOVERNMENT STRONG HIGH-YIELD
BOND FUND SECURITIES FUND BOND FUND
---------------- ----------------- -----------------
INCOME:
<S> <C> <C> <C>
Interest $21,181 $29,983 $26,694
Dividends 1,071 965 1,956
------- ------- -------
Total Income 22,252 30,948 28,650
EXPENSES:
Investment Advisory Fees 1,865 2,812 1,913
Custodian Fees 16 26 16
Shareholder Servicing Costs 542 753 367
Other 154 165 175
------- ------- -------
Total Expenses 2,577 3,756 2,471
------- ------- -------
NET INVESTMENT INCOME 19,675 27,192 26,179
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 6,708 15,995 13,704
Futures Contracts, Options and Forward Foreign Currency Contracts (124) (3,431) (250)
Foreign Currencies 2 -- 29
------- ------- -------
Net Realized Gain 6,586 12,564 13,483
Change in Unrealized Appreciation/Depreciation on:
Investments (180) (11,286) 8,525
Futures Contracts, Options and Forward Foreign Currency Contracts 210 2,608 222
------- ------- -------
Change in Unrealized Appreciation/Depreciation 30 (8,678) 8,747
------- ------- -------
NET GAIN 6,616 3,886 22,230
------- ------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $26,291 $31,078 $48,409
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
STRONG SHORT-TERM STRONG SHORT-TERM HIGH
BOND FUND YIELD BOND FUND
----------------- ----------------------
INCOME:
<S> <C> <C>
Interest $46,665 $2,668
Dividends 2,996 --
------- ------
Total Income 49,661 2,668
EXPENSES:
Investment Advisory Fees 4,087 209
Custodian Fees 25 3
Shareholder Servicing Costs 979 51
Federal and State Registration Fees 43 41
Other 171 14
------- ------
Total Expenses 5,305 318
------- ------
NET INVESTMENT INCOME 44,356 2,350
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments 856 650
Futures Contracts, Options and Forward Foreign Currency Contracts (9,149) --
Foreign Currencies 50 --
------- ------
Net Realized Gain (Loss) (8,243) 650
Change in Unrealized Appreciation/Depreciation on:
Investments 188 1,028
Futures Contracts, Options and Forward Foreign Currency Contracts 7,198 --
------- ------
Net Change in Unrealized Appreciation/Depreciation 7,386 1,028
------- ------
NET GAIN (LOSS) (857) 1,678
------- ------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $43,499 $4,028
======= ======
26
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------
(In Thousands)
STRONG CORPORATE STRONG GOVERNMENT
BOND FUND SECURITIES FUND
------------------------------- -------------------------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCT. 31, 1997 APRIL 30, 1998 OCT. 31, 1997
---------------- ------------- ---------------- -------------
(UNAUDITED) (UNAUDITED)
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income $ 19,675 $ 24,340 $ 27,192 $ 44,125
Net Realized Gain 6,586 12,133 12,564 11,201
Change in Unrealized Appreciation/Depreciation 30 3,082 (8,678) 7,916
-------- -------- ---------- --------
Increase in Net Assets Resulting from Operations 26,291 39,555 31,078 63,242
-------- -------- ---------- --------
DISTRIBUTIONS FROM NET INVESTMENT INCOME (19,613) (24,340) (27,192) (44,125)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 302,751 290,340 356,397 426,918
Proceeds from Reinvestment of Dividends 16,175 19,815 24,003 37,418
Payment for Shares Redeemed (126,133) (130,685) (192,841) (277,671)
-------- -------- ---------- --------
Increase in Net Assets from Capital Share Transactions 192,793 179,470 187,559 186,665
-------- -------- ---------- --------
TOTAL INCREASE IN NET ASSETS 199,471 194,685 191,445 205,782
NET ASSETS:
Beginning of Period 492,293 297,608 843,467 637,685
-------- -------- ---------- --------
End of Period $691,764 $492,293 $1,034,912 $843,467
======== ======== ========== ========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 26,934 26,715 33,081 40,687
Issued in Reinvestment of Dividends 1,444 1,833 2,231 3,570
Redeemed (11,216) (12,097) (17,907) (26,516)
------ ------ ------ ------
Net Increase in Shares of the Fund 17,162 16,451 17,405 17,741
====== ====== ====== ======
STRONG HIGH-YIELD STRONG SHORT-TERM
BOND FUND BOND FUND
------------------------------- -------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCT. 31, 1997 APRIL 30, 1998 OCT. 31, 1997
---------------- ------------- ---------------- -------------
(UNAUDITED) (UNAUDITED)
OPERATIONS:
Net Investment Income $ 26,179 $ 35,544 $ 44,356 $ 87,171
Net Realized Gain 13,483 15,012 (8,243) 3,621
Change in Unrealized Appreciation/Depreciation 8,747 8,476 7,386 (186)
-------- -------- ---------- ----------
Increase in Net Assets Resulting from Operations 48,409 59,032 43,499 90,606
DISTRIBUTIONS:
From Net Investment Income (26,151) (35,544) (43,724) (87,171)
In Excess of Net Investment Income -- (9) -- (244)
From Net Realized Gains (14,785) (3,167) -- --
-------- -------- ---------- ----------
Total Distributions (40,936) (38,720) (43,724) (87,415)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 411,512 820,857 292,957 620,442
Proceeds from Reinvestment of Dividends 33,262 30,446 37,052 72,872
Payment for Shares Redeemed (288,367) (578,653) (296,656) (534,521)
-------- -------- ---------- ----------
Increase in Net Assets from Capital Share Transactions 156,407 272,650 33,353 158,793
-------- -------- ---------- ----------
TOTAL INCREASE IN NET ASSETS 163,880 292,962 33,128 161,984
NET ASSETS:
Beginning of Period 509,964 217,002 1,309,795 1,147,811
-------- -------- ---------- ----------
End of Period $673,844 $509,964 $1,342,923 $1,309,795
======== ======== ========== ==========
TRANSACTIONS IN SHARES OF THE FUND:
Sold 34,166 70,489 29,922 63,352
Issued in Reinvestment of Dividends 2,786 2,617 3,785 7,441
Redeemed (23,923) (49,664) (30,301) (54,580)
------ ------ ------ ------
Net Increase in Shares of the Fund 13,029 23,442 3,406 16,213
====== ====== ====== ======
27
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
- -----------------------------------------------------------------------------------------
(In Thousands)
STRONG
SHORT-TERM HIGH
YIELD BOND FUND
-------------------------------
<CAPTION>
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCT. 31, 1997
---------------- -------------
(UNAUDITED) (NOTE 1)
OPERATIONS:
<S> <C> <C>
Net Investment Income $ 2,350 $ 624
Net Realized Gain 650 255
Change in Unrealized Appreciation/Depreciation 1,028 (236)
------- -------
Increase in Net Assets Resulting from Operations 4,028 643
DISTRIBUTIONS:
From Net Investment Income (2,350) (624)
From Net Realized Gains (256) --
------- -------
Total Distributions (2,606) (624)
CAPITAL SHARE TRANSACTIONS:
Proceeds from Shares Sold 67,949 55,814
Proceeds from Reinvestment of Dividends 2,108 292
Payment for Shares Redeemed (26,755) (11,306)
------- -------
Increase in Net Assets from Capital Share Transactions 43,302 44,800
------- -------
TOTAL INCREASE IN NET ASSETS 44,724 44,819
NET ASSETS:
Beginning of Period 44,819 --
------- -------
End of Period $89,543 $44,819
======= =======
TRANSACTIONS IN SHARES OF THE FUND:
Sold 6,522 5,449
Issued in Reinvestment of Dividends 203 28
Redeemed (2,565) (1,100)
----- -----
Net Increase in Shares of the Fund 4,160 4,377
===== =====
28
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
1. ORGANIZATION
The Strong Income Funds consist of Strong Corporate Bond Fund, Inc., Strong
Government Securities Fund, Inc., Strong High-Yield Bond Fund (a series of
Strong Income Funds, Inc.), Strong Short-Term Bond Fund, Inc., and Strong
Short-Term High Yield Bond Fund (a series of Strong Income Funds, Inc.). The
Funds are diversified, open-end management investment companies registered
under the Investment Company Act of 1940. The inception date for Strong
Short-Term High Yield Bond Fund is June 30, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) Security Valuation -- Securities of the Funds are valued through
valuations obtained by a commercial pricing service or the mean of the
bid and asked prices, when no last sales price is available. Securities
for which market quotations are not readily available are valued at fair
value as determined in good faith under consistently applied procedures
established by and under the general supervision of the Board of
Directors. Securities which are purchased within 60 days of their
stated maturity are valued at amortized cost, which approximates 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 acquisition cost and fair value of these restricted securities
held at April 30, 1998 were as follows:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE PERCENT OF
COST FAIR VALUE NET ASSETS LIQUID*
------------ ------------ ---------- -------
<S> <C> <C> <C> <C>
Strong Corporate Bond Fund $144,841,944 $144,660,341 20.9% 78.9%
Strong Government Securities Fund 39,476,600 40,398,767 3.9% 75.1%
Strong High-Yield Bond Fund 250,876,824 256,626,615 38.1% 96.0%
Strong Short-Term Bond Fund 346,118,909 346,171,207 25.8% 83.7%
Strong Short-Term High Yield Bond Fund 4,884,688 4,909,160 5.5% 100.0%
</TABLE>
*The above percentage is eligible for resale pursuant to Rule 144A under
the Securities Act of 1933 and also has 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 -- Gains or losses
realized on investment transactions are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.
(D) Futures -- Upon entering into a futures contract, the Funds pledge to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. 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 -- The Funds may write put or call options (none were written
during this period). 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.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
(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) Repurchase Agreements -- The Funds may enter into repurchase agreements
with institutions that the Funds' investment advisor, Strong Capital
Management, Inc. ("the Advisor") has determined are creditworthy
pursuant to criteria adopted by the Board of Directors. Each repurchase
agreement is recorded at cost. The Funds require that the collateral,
represented by securities (primarily U.S. Government securities),
purchased in a repurchase transaction be maintained in a segregated
account with a custodian in a manner sufficient to enable the Funds to
obtain those securities in the event of a default of the repurchase
agreement. On a daily basis, the Advisor monitors the value of the
collateral transferred under each repurchase agreement to ensure the
value of the collateral exceeds the amounts owed to the Funds under each
repurchase agreement by at least 2%.
(I) Additional Investment Risks -- The Funds may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with the
Fund's investment objectives and limitations. The Funds intend to use
such derivative instruments primarily to hedge or protect from adverse
movements in securities prices or interest rates. The use of these
instruments may involve risks such as the possibility of illiquid
markets or imperfect correlation between the value of the instruments
and the underlying securities, or that the counterparty will fail to
perform its obligations.
Foreign denominated assets and forward currency contracts may involve
greater risks than domestic transactions, including currency, political
and economic, regulatory and market risks.
(J) Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of increases and decreases in net assets from
operations during the reporting period. Actual results could differ
from those estimates.
(K) 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 premiums and discounts.
3. RELATED PARTY TRANSACTIONS
The Advisor, with whom certain officers and directors of the Funds are
affiliated, provides investment advisory services and shareholder
recordkeeping and related services to the Funds. Investment advisory fees,
which are established by terms of the Advisory Agreements, are based on the
following annualized rates of the average daily net assets: Strong
Government Securities Fund 0.60%, Strong Corporate Bond Fund, Strong
High-Yield Bond Fund, Strong Short-Term Bond Fund, and Strong Short-Term
High Yield Bond Fund 0.625%. Advisory fees are subject to reimbursement by
the Advisor if a Fund's 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.
The Funds may invest cash reserves in money market funds sponsored and
managed by the Advisor, subject to certain limitations. The terms of such
transactions are identical to those of non-related entities except that, to
avoid duplicate investment advisory fees, advisory fees of each Fund
invested in such money market funds are reduced by an amount equal to
advisory fees paid to the Advisor under its investment advisory agreements
with the money market funds.
30
<PAGE>
- -------------------------------------------------------------------------------
Certain information regarding related party transactions, excluding the
effects of waivers and reimbursements, for the period ended April 30, 1998
is as follows:
<TABLE>
<CAPTION>
OTHER SHAREHOLDER
PAYABLE TO SERVICING UNAFFILIATED
ADVISOR AT EXPENSES PAID DIRECTORS'
APRIL 30, 1998 TO ADVISOR FEES
-------------- ----------------- ------------
<S> <C> <C> <C>
Strong Corporate Bond Fund $47,009 $17,591 $2,971
Strong Government Securities Fund 88,578 3,125 4,816
Strong High-Yield Bond Fund 40,625 3,331 2,930
Strong Short-Term Bond Fund 88,366 13,046 7,292
Strong Short-Term High Yield Bond Fund 1,719 438 775
</TABLE>
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the period
ended April 30, 1998 were as follows:
<TABLE>
PURCHASES SALES
----------------------------- -----------------------------
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT
AND AGENCY OTHER AND AGENCY OTHER
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
Strong Corporate Bond Fund $ 492,431,034 $902,656,635 $ 507,630,238 $702,127,637
Strong Government Securities Fund 1,620,180,894 423,658,779 1,470,766,324 439,731,627
Strong High-Yield Bond Fund -- 848,224,742 -- 703,050,556
Strong Short-Term Bond Fund 159,243,253 859,474,940 164,176,565 884,936,583
Strong Short-Term High Yield Bond Fund -- 115,812,398 -- 80,187,222
</TABLE>
5. INCOME TAX INFORMATION
The investment cost, gross unrealized appreciation and depreciation on
investments and capital loss carryovers for federal income tax purposes were
as follows:
<TABLE>
AT APRIL 30, 1998 AT OCTOBER 31, 1997
---------------------------------------------------------- -------------------
<CAPTION>
NET
FEDERAL TAX UNREALIZED UNREALIZED APPRECIATION/ NET CAPITAL LOSS
COST APPRECIATION DEPRECIATION (DEPRECIATION) CARRYOVERS
-------------- ------------ ------------ -------------- ----------------
<S> <C> <C> <C> <C> <C>
Strong Corporate Bond Fund $ 667,457,320 $12,309,941 $ 3,739,218 $ 8,570,723 $32,587,509
Strong Government Securities Fund 1,017,388,926 12,878,946 5,558,414 7,320,532 1,556,973
Strong High-Yield Bond Fund 629,045,312 22,563,073 1,383,744 21,179,329 --
Strong Short-Term Bond Fund 1,314,161,972 25,492,935 10,088,795 15,404,140 81,223,078
Strong Short-Term High Yield Bond Fund 84,766,845 830,077 55,505 774,572 --
</TABLE>
Capital loss carryovers expire in varying amounts through 2005. Capital loss
carryovers of $25,407,487 for the Strong Corporate Bond Fund expire in 1998.
31
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA (a)
---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total In Excess Net Asset
Value, Net Gains from From Net of Net Value,
Beginning Investment (Losses) on Investment Investment Investment Total End of
of Period Income Investments Operations Income Income Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) $11.08 $0.36 $0.15 $0.51 ($0.36) -- ($0.36) $11.23
Oct. 31, 1997 10.64 0.74 0.44 1.18 (0.74) -- (0.74) 11.08
Oct. 31, 1996 10.56 0.73 0.08 0.81 (0.73) -- (0.73) 10.64
Oct. 31, 1995 (c) 9.36 0.63 1.22 1.85 (0.63) ($0.02) (0.65) 10.56
Dec. 31, 1994 10.24 0.73 (0.87) (0.14) (0.73) (0.01) (0.74) 9.36
Dec. 31, 1993 9.40 0.70 0.84 1.54 (0.70) -- (0.70) 10.24
Dec. 31, 1992 9.37 0.82 0.03 0.85 (0.82) -- (0.82) 9.40
</TABLE>
RATIOS AND SUPPLEMENTAL DATA
-------------------------------------------------------
Net Ratio of Net
Assets, Ratio of Investment
End of Expenses Income Portfolio
Total Period (In to Average to Average Turnover
Return Millions) Net Assets Net Assets Rate
April 30, 1998 (b) +4.7% $692 0.9%* 6.5%* 204.1%
Oct. 31, 1997 +11.5% 492 1.0% 6.8% 542.4%
Oct. 31, 1996 +8.0% 298 1.0% 7.0% 672.8%
Oct. 31, 1995 (c) +20.3% 218 1.0%* 7.5%* 621.4%
Dec. 31, 1994 -1.3% 123 1.1% 7.6% 603.0%
Dec. 31, 1993 +16.8% 123 1.1% 7.0% 665.8%
Dec. 31, 1992 +9.4% 103 1.3% 8.7% 557.0%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the six months ended April 30, 1998 (Unaudited). Total return and
portfolio turnover rate are not annualized.
(c) In 1995, the Fund changed its fiscal year end from December to October.
Total return and portfolio turnover rate are not annualized.
<TABLE>
STRONG GOVERNMENT SECURITIES FUND
- -----------------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA (a)
-----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ --------------------------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total In Excess In Excess Net Asset
Value, Net Gains from From Net of Net From Net of Net Value,
Beginning Investment (Losses) on Investment Investment Investment Realized Realized Total End of
of Period Income Investments Operations Income Income Gains Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) $10.70 $0.31 $0.06 $0.37 ($0.31) -- -- -- ($0.31) $10.76
Oct. 31, 1997 10.44 0.65 0.26 0.91 (0.65) -- -- -- (0.65) 10.70
Oct. 31, 1996 10.60 0.63 (0.16) 0.47 (0.63) -- -- -- (0.63) 10.44
Oct. 31, 1995 (c) 9.63 0.54 0.99 1.53 (0.54) ($0.02) -- -- (0.56) 10.60
Dec. 31, 1994 10.61 0.62 (0.98) (0.36) (0.62) -- -- -- (0.62) 9.63
Dec. 31, 1993 10.39 0.66 0.63 1.29 (0.66) -- ($0.32) ($0.09) (1.07) 10.61
Dec. 31, 1992 10.77 0.80 0.11 0.91 (0.80) -- (0.49) -- (1.29) 10.39
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) +3.5% $1,035 0.8%* 0.8%* 5.7%* 212.1%
Oct. 31, 1997 +9.1% 843 0.8% 0.8% 6.2% 474.9%
Oct. 31, 1996 +4.6% 638 0.9% 0.9% 6.0% 457.6%
Oct. 31, 1995 (c) +16.2% 456 0.9%* 0.9%* 6.2%* 409.2%
Dec. 31, 1994 -3.4% 277 0.9% 0.9% 6.2% 479.0%
Dec. 31, 1993 +12.7% 222 0.8% 1.0% 6.0% 520.9%
Dec. 31, 1992 +9.2% 82 0.7% 1.2% 7.7% 628.8%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
(c) In 1995, the Fund changed its fiscal year end from December to October. Total return and portfolio turnover rate are not
annualized.
</TABLE>
<TABLE>
STRONG HIGH-YIELD BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA (a)
-------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -----------------------------------
<CAPTION>
Net Asset Net Realized Total Net Asset
Value, Net and Unrealized from From Net From Net Value,
Beginning Investment Gains on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) $11.94 $0.51 $0.46 $0.97 ($0.50) ($0.32) ($0.82) $12.09
Oct. 31, 1997 11.26 1.05 0.81 1.86 (1.05) (0.13) (1.18) 11.94
Oct. 31, 1996 (c) 10.00 0.84 1.26 2.10 (0.84) -- (0.84) 11.26
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) +8.4% $674 0.8%* 0.8%* 8.4%* 121.5%
Oct. 31, 1997 +17.3% 510 0.6% 0.8% 8.9% 409.3%
Oct. 31, 1996 (c) +21.7% 217 0.0%* 1.0%* 9.6%* 390.8%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
(c) Inception date is December 28, 1995. Total return and portfolio turnover rate are not annualized.
</TABLE>
32
<PAGE>
<TABLE>
STRONG SHORT-TERM BOND FUND
- ---------------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA (a)
----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
------------------------------------ ----------------------------------------------
<CAPTION>
Net Realized
Net Asset and Unrealized Total In Excess From Net Asset
Value, Net Gains from From Net of Net Net Value,
Beginning Investment (Losses) on Investment Investment Investment Realized Total End of
of Period Income Investments Operations Income Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) $ 9.78 $0.33 -- $0.33 ($0.33) -- -- ($0.33) $ 9.78
Oct. 31, 1997 9.75 0.69 0.03 0.72 (0.69) -- -- (0.69) 9.78
Oct. 31, 1996 9.77 0.69 (0.02) 0.67 (0.69) -- -- (0.69) 9.75
Oct. 31, 1995 (c) 9.42 0.56 0.35 0.91 (0.56) -- -- (0.56) 9.77
Dec. 31, 1994 10.23 0.64 (0.80) (0.16) (0.65) -- -- (0.65) 9.42
Dec. 31, 1993 9.99 0.66 0.25 0.91 (0.66) ($0.01) -- (0.67) 10.23
Dec. 31, 1992 10.12 0.76 (0.11) 0.65 (0.76) -- ($0.02)(d) (0.78) 9.99
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) +3.4% $1,343 0.8%* 0.8%* 6.7%* 78.8%
Oct. 31, 1997 +7.6% 1,310 0.9% 0.9% 7.0% 193.8%
Oct. 31, 1996 +7.1% 1,148 0.9% 0.9% 7.1% 191.5%
Oct. 31, 1995 (c) +9.9% 1,083 0.9%* 0.9%* 7.0%* 317.1%
Dec. 31, 1994 -1.6% 1,041 0.9% 0.9% 6.5% 249.7%
Dec. 31, 1993 +9.3% 1,532 0.8% 0.9% 6.3% 444.9%
Dec. 31, 1992 +6.7% 757 0.6% 0.9% 7.3% 353.3%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
(c) In 1995, the Fund changed its fiscal year end from December to October. Total return and portfolio turnover rate are
not annualized.
(d) Ordinary income distribution for tax purposes.
</TABLE>
<TABLE>
STRONG SHORT-TERM HIGH YIELD BOND FUND
- ---------------------------------------------------------------------------------------------------------------------
SELECTED PER-SHARE DATA (a)
-------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS LESS DISTRIBUTIONS
-------------------------------------- -----------------------------------
<CAPTION>
Net Asset Net Realized Total Net Asset
Value, Net and Unrealized from From Net From Net Value,
Beginning Investment Gains on Investment Investment Realized Total End of
of Period Income Investments Operations Income Gains Distributions Period
<S> <C> <C> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) $10.24 $0.36 $0.30 $0.66 ($0.36) ($0.05) ($0.41) $10.49
Oct. 31, 1997 (c) 10.00 0.25 0.24 0.49 (0.25) -- (0.25) 10.24
</TABLE>
<TABLE>
RATIOS AND SUPPLEMENTAL DATA
--------------------------------------------------------------------------
<CAPTION>
Net Ratio of Expenses Ratio of Net
Assets, Ratio of to Average Net Investment
End of Expenses Assets Without Income Portfolio
Total Period (In to Average Waivers and to Average Turnover
Return Millions) Net Assets Absorptions Net Assets Rate
<S> <C> <C> <C> <C> <C> <C>
April 30, 1998 (b) +6.5% $90 0.9%* 0.9%* 6.9%* 124.8%
Oct. 31, 1997 (c) +4.9% 45 1.0%* 1.0%* 7.7%* 96.2%
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund outstanding for the entire period.
(b) For the six months ended April 30, 1998 (Unaudited). Total return and portfolio turnover rate are not annualized.
(c) Inception date is June 30, 1997. Total return and portfolio turnover rate are not annualized.
33
</TABLE>
<PAGE>
NOTES
- -------------------------------------------------------------------------------
34
<PAGE>
NOTES
- -------------------------------------------------------------------------------
35
<PAGE>
NOTES
- -------------------------------------------------------------------------------
<PAGE>
36
<PAGE>
DIRECTORS
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Marvin E. Nevins
William F. Vogt
OFFICERS
Richard S. Strong, Chairman of the Board
Mary F. Hoppa, Vice President
Thomas P. Lemke, Vice President
John S. Weitzer, Vice President
Stephen J. Shenkenberg, Vice President and Secretary
John A. Flanagan, Treasurer
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
DISTRIBUTOR
Strong Funds Distributors, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Trust Company
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
AUDITOR
Coopers & Lybrand L.L.P.
411 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management
fees and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only.
[PICTURE OF TELEPHONE]
To order a free prospectus kit,
CALL 1-800-368-1030
To learn more about our funds,
discuss an existing account,
or conduct a transaction,
CALL 1-800-368-3863
-------------------
If you are a
Financial Professional,
CALL 1-800-368-1683
[PICTURE OF STRONG WEB SITE ON COMPUTER]
Strong On-line
www.strong-funds.com
[STRONG LOGO]
STRONG FUNDS
P.O. Box 2936 o Milwaukee, Wisconsin 53201
Strong Funds Distributors, Inc. 7767E98 98SINC
