<PAGE>
[PHOTO OF WOMEN WITH 3 KIDS] [LOGO]
THE STRONG
INCOME
FUNDS
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ANNUAL REPORT - OCTOBER 31, 1999
The Strong Bond Fund
The Strong Corporate Bond Fund
The Strong Government Securities Fund
The Strong Short-Term Bond Fund
The Strong High-Yield Bond Fund
The Strong Short-Term High Yield Bond Fund
<PAGE>
LETTER FROM THE CHAIRMAN
Dear Strong Investor,
The year was 1966. Lyndon B. Johnson was president, the Green Bay Packers were
headed for yet another NFL title, and I had just landed my first job in the
investment business. I was full of raw energy and exuberance and figured life
couldn't get much better. But it did--and fast. My first day on the job, the Dow
Jones Industrial Average crossed 1,000 for the first time in history. Even
though I was greener than grass, I knew that was BIG!
And now, almost 34 years later, it looks like the Dow will finish 1999 somewhere
above 11,000. A far cry from where the market was when I started in the
business. If you had told me back then that a massive bull market would start
running from around the 800-point mark in 1982, and that it would still be
roaring at the turn of the century, I would have given you a bewildered look.
That's not to say there haven't been plenty of bumps and bruises along the way.
I think we're still feeling the residual effects of the Vietnam War. We also
lived through 1973-74 when the stock market dropped 48%--not to mention the
dangerously high inflation and the rust bowl of the late 1970s, and the market
crash of October 1987.
But, mostly, it's been remarkably smooth sailing. The numbers tell the story
better than any words: The Dow has been increasing at an annual rate of 11.5%
since 1966. But, starting in 1982 it has been compounding at an astounding rate
of 19.0% per year. During the 1990s, inflation has averaged a modest 2.4%. As
the son of Depression Era parents, I can tell you that we have enjoyed the sort
of prosperity that the young people I grew up with didn't dare dream of.
Through thick and thin, however, one lesson sticks with me: In the investment
business, everything is cyclical. By all means, enjoy the good times, but bear
in mind that nothing--not even this bull market--will last forever. Boom
followed by economic correction is the nature of free enterprise. History has
proven that time and time again.
Since I started in the investment business, I've observed two significant
changes that have directly affected the investment world. First, people are
living much longer and healthier lives. Second, government and corporations have
gradually been shifting the financial responsibility for retirement directly
onto the shoulders of the individual. This phenomenon created new savings
vehicles such as IRAs and 401(k) plans. The fact that each of us will be
responsible for the financing of our own retirement is an awesome
responsibility. In truth, it's a job few of us have the training, aptitude, or
time to do well.
A long-term perspective is essential as you invest your precious retirement
money. A portfolio sensibly balanced between stocks and bonds should provide the
financial wherewithal for a long and financially viable retirement.
/s/ Dick
<PAGE>
THE STRONG
INCOME FUNDS
------------
ANNUAL REPORT - OCTOBER 31, 1999
TABLE OF CONTENTS
INVESTMENT REVIEWS
The Strong Bond Fund .....................................................2
The Strong Corporate Bond Fund ...........................................4
The Strong Government Securities Fund ....................................6
The Strong Short-Term Bond Fund ..........................................8
The Strong High-Yield Bond Fund .........................................10
The Strong Short-Term High Yield Bond Fund ..............................12
BOND GLOSSARY ................................................................14
FINANCIAL INFORMATION
Schedules of Investments in Securities
The Strong Bond Fund ................................................15
The Strong Corporate Bond Fund ......................................17
The Strong Government Securities Fund ...............................21
The Strong Short-Term Bond Fund .....................................23
The Strong High-Yield Bond Fund .....................................27
The Strong Short-Term High Yield Bond Fund ..........................30
Statements of Assets and Liabilities ....................................32
Statements of Operations ................................................34
Statements of Changes in Net Assets .....................................36
Notes to Financial Statements ...........................................38
FINANCIAL HIGHLIGHTS .........................................................45
REPORT OF INDEPENDENT ACCOUNTANTS ............................................52
<PAGE>
THE STRONG BOND FUND
--------------------
PERSPECTIVES
FROM THE MANAGERS
/s/ Bradley C. Tank /s/ Jeffrey A. Koch
Bradley C. Tank Jeffrey A. Koch
Portfolio Co-manager Portfolio Co-manager
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Lower-quality corporate bonds have been the best-performing asset class in which
the Strong Bond Fund, formerly the Strong Institutional Bond Fund, invests. Here
we have maintained a modest overweight versus our normal allocation of 15% of
the Fund. We currently have approximately 20% of the Fund invested in U.S.
high-yield bonds and continue to find many opportunities to add value through
rigorous research and careful issue selection. Investments in telecommunications
companies such as Global Crossing, Nextlink, and Winstar have generally done
quite well. Rising oil and gas prices have proven to be beneficial for the
Fund's energy holdings in companies such as Pogo Producing, Snyder Oil, and
Vintage Petroleum.
- --------------------------------------------------------------------------------
U.S. agency securities...to us represent great relative value, and we have
significantly enlarged our commitment to this sector.
- --------------------------------------------------------------------------------
Bond markets around the world generally underperformed the U.S. market recently.
We are maintaining a modest underweight in non-U.S. bonds, which are currently
approximately 9.1% of the total portfolio. Current holdings include modest
positions in the sovereign debt of Australia, New Zealand, and the U.K.
Presently, all positions are hedged back to U.S. dollars. As with our U.S.
holdings, we are maintaining a shorter-than-benchmark duration in the non-U.S.
portion of the Fund.
The high-grade U.S. portion of the Fund is more-or-less equally invested in
corporates, mortgages, and U.S. Treasuries. During the recent period, A-rated or
better corporate bonds have
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- The eight months ended October 31, 1999 were characterized by rising
interest rates, with U.S. Treasury two-year notes up in yield by 65 basis
points and U.S. Treasury 30-year bonds up in yield by 59 basis points. Our
response to this environment has been to maintain a defensive posture with
respect to interest-rate risk.
--------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 10-31-99
INVESTOR CLASS (1)
1-year 2.58%
Since Inception 10.11%
(on 12-31-96)
ADVISOR CLASS (2)
1-year 2.04%
Since Inception 9.60%
(on 12-31-96)
INSTITUTIONAL CLASS
1-year 2.68%
Since Inception 10.31%
(on 12-31-96)
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[SIDENOTE]
PORTFOLIO STATISTICS
AS OF 10-31-99
INVESTOR CLASS
30-day annualized yield(3) 6.69%
ADVISOR CLASS
30-day annualized yield(3) 5.80%
INSTITUTIONAL CLASS
30-day annualized yield(3) 7.09%
Average maturity(4) 8.0 years
Average
quality rating(5) A
- --------------------------------------------------------------------------------
(1) The performance of the Investor Class shares prior to 8-30-99 is based on
the Fund's Institutional Class shares' performance, restated for the higher
expense ratio of the Investor Class shares. Please consult a prospectus for
information about all share classes.
(2) The performance of the Advisor Class shares prior to 8-30-99 is based on the
Fund's Institutional Class shares' performance, restated for the higher
expense ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
(3) Yields are historical and do not represent future yields, which will
fluctuate. Yields are as of 10-29-99.
(4) The Fund's average maturity includes the effect of futures and when-issued
securities.
(5) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
2
<PAGE>
underperformed Treasuries, while BBBs have outperformed. We have taken advantage
of market circumstances to do a number of up-in-quality trades in recent
weeks. U.S. agency securities, for example, represent to us great relative
value, and we have significantly enlarged our commitment to this sector.
Looking forward, our view is that the movement toward lower bond prices is
substantially over in terms of price, but not necessarily in terms of time.
Which is to say that the Federal Reserve will continue to raise short-term
interest rates modestly from current levels, but such policy moves are already
substantially reflected in current market prices. We anticipate the Federal
Reserve will remain successful in containing any meaningful rise in price
inflation. We also believe that the recent increases in market interest rates
and the price of energy will begin to dampen consumer demand for housing and
autos in the period ahead, ultimately bringing this episode of rising rates to
an end. Current yields of 6% for U.S. Treasuries, 7% for AA corporates, and 11%
for U.S. high-yield bonds represent terrific value against a backdrop of 2 1/2%
price inflation, and we would encourage investors to consider a fixed-income
allocation in the months ahead.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 12-31-96 TO 10-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG Lehman Brothers Lipper Intermediate Investment
BOND FUND Aggregate Bond Index* Grade Debt Funds Index*
---------- --------------------- ------------------------------
<S> <C> <C> <C>
12-96 $10,000 $10,000 $10,000
6-97 $11,032 $10,309 $10,294
12-97 $11,886 $10,965 $10,879
6-98 $12,451 $11,396 $11,289
12-98 $13,174 $11,918 $11,735
6-99 $13,103 $11,755 $11,569
10-99 $13,206 $11,878 $11,660
</TABLE>
This graph, prepared 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 Intermediate Investment
Grade Debt 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. This graph is based on Institutional Class
shares only; performance for other classes will vary due to differences in fee
structures.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG BOND FUND SEEKS TOTAL RETURN BY INVESTING FOR A HIGH LEVEL OF CURRENT
INCOME WITH A MODERATE DEGREE OF SHARE-PRICE FLUCTUATION. THE FUND INVESTS
PRIMARILY IN INVESTMENT-GRADE DEBT OBLIGATIONS, AND ITS AVERAGE PORTFOLIO
DURATION WILL NORMALLY VARY BETWEEN THREE AND SIX YEARS. THE FUND MAY INVEST UP
TO 20% OF ITS NET ASSETS IN NON-INVESTMENT-GRADE DEBT OBLIGATIONS AND OTHER
HIGH-YIELD SECURITIES. THE FUND MAY ALSO INVEST UP TO 20% OF ITS NET ASSETS IN
SECURITIES DENOMINATED IN FOREIGN CURRENCIES.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - While consumer prices throughout much of the world's developed economies
continue to be very well-behaved, the recent movement toward near-perfect
price stability appears to be over.
- - April witnessed the first meaningful negative surprise in the U.S. on price
inflation in quite some time. This news, in conjunction with continued
tightness in labor markets, prompted the Federal Reserve to begin unwinding
its series of reductions in the federal funds rate.
- - In late June and again in late August, the federal funds rate was raised by
25 basis points. U.S. Treasury yields rose higher than the yields of
lower-quality corporate bonds and mortgage securities.
- --------------------------------------------------------------------------------
* 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 Intermediate Investment Grade Debt 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 Inc.
3
<PAGE>
THE STRONG CORPORATE BOND FUND
------------------------------
PERSPECTIVES
FROM THE MANAGERS
/s/ Jeffrey A. Koch /s/ John T. Bender /s/ Ivor Schucking
Jeffrey A. Koch John T. Bender Ivor Schucking
Portfolio Co-manager Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
During this period, strong global economic growth, tight labor-market
conditions, and rising equity markets led the Federal Reserve Board to raise
interest rates twice. We believe that the decline in bond prices is near an end
and are willing to increase our interest-rate risk if evidence of a slowing in
the economy begins to appear.
To provide positive value to our shareholders through credit research, we must
effectively select outperforming companies and avoid declining credits that
occasionally infect the market. During this period, we had success in both
areas. First, we were overweighted in lower-quality telecommunications and cable
debt throughout the year. Sprint, Cablevision Systems, and Qwest Communications
bonds outperformed the overall corporate market as consolidation increased in
these industries. We also underweighted credits such as Rite Aid, which was
downgraded to below investment grade. By maintaining an underweight position in
this credit, we were able to protect our shareholders from the decline in value
that followed.
- --------------------------------------------------------------------------------
WE MAINTAINED A NEUTRAL DURATION AND A BIAS TOWARD A FLATTER YIELD CURVE, AND
OVER THE PAST SEVERAL MONTHS WE FOCUSED ON INDUSTRY WEIGHTINGS AND ISSUE
SELECTION.
- --------------------------------------------------------------------------------
The Fund's total return was also enhanced by maintaining a higher income level
than the benchmark, positioning for a flatter yield curve, and overweighting the
energy sector. These positive factors were somewhat offset by an overweight
position in lower-rated bank and finance credits.
We did not make any significant changes in duration or yield-curve exposure in
the Fund. We maintained a neutral duration and a bias
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - During the past year, the Fund was overweighted in the energy and
telecommunications sectors, as higher oil prices caused energy credits to be
among the top-performing bonds in the market and lower-rated
telecommunications credits improved due to mergers with higher-rated
companies.
- - We also enhanced total return by maintaining a higher income level than our
benchmark and positioning for a flatter yield curve.
--------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 10-31-99
INVESTOR CLASS
1-year 2.18%
5-year 9.94%
10-year 7.71%
Since Inception 9.19%
(on 12-12-85)
ADVISOR CLASS (1)
1-year 1.86%
5-year 9.69%
10-year 7.47%
Since Inception 8.98%
(on 12-12-85)
INSTITUTIONAL CLASS (2)
1-year 2.17%
5-year 9.94%
10-year 7.70%
Since Inception 9.19%
(on 12-12-85)
--------------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO STATISTICS
AS OF 10-31-99
INVESTOR CLASS
30-day annualized yield(3) 7.51%
ADVISOR CLASS
30-day annualized yield(3) 6.71%
INSTITUTIONAL CLASS
30-day annualized yield(3) 7.89%
Average maturity(4) 12.1 years
Average
quality rating(5) BBB
- --------------------------------------------------------------------------------
(1) The performance of the Advisor Class shares prior to 8-30-99 is based on the
Fund's Investor Class shares' performance, restated for the higher expense
ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
(2) The performance of the Institutional Class shares prior to 8-30-99 is based
on the Fund's Investor Class shares' performance. Please consult a
prospectus for information about all share classes.
(3) Yields are historical and do not represent future yields, which will
fluctuate. Yields are as of 10-29-99.
(4) The Fund's average maturity includes the effect of futures, options, and
when-issued securities.
4
<PAGE>
toward a flatter yield curve, and over the past several months we focused on
industry weightings and issue selection.
The fundamentals supporting corporate credit quality remain positive. Economic
growth and corporate profitability have continued to be stronger than
anticipated; however, diligent research is more essential than ever as the bonds
of companies that have disappointed investors are underperforming the market
significantly.
Looking forward, we expect to add duration to the portfolio as evidence of
economic slowing begins to develop. We believe recent increases in market rates
will slow demand for durable goods such as housing and autos. The difference
between 10-year Treasury yields and inflation is quite high by historical
standards; therefore, a meaningful decline in market rates is likely once the
economy peaks. We also anticipate maintaining a full commitment to the corporate
market, as credit fundamentals are strong and the relative valuation of the
corporate sector is very attractive.
Thank you for your continued interest in the Strong Corporate Bond Fund.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 12-12-85 TO 10-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG Lehman Brothers Lipper Corporate
CORPORATE Corporate Baa Debt Funds
BOND FUND Bond Index* BBB Rated Index*
---------- --------------- ----------------
<S> <C> <C> <C>
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 $15,517 $14,342
12-91 $17,013 $19,490 $17,909
12-93 $21,732 $24,080 $21,839
12-95 $26,893 $28,606 $25,052
12-97 $31,752 $33,057 $28,800
10-99 $33,912 $35,082 $30,160
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
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. This graph is based on Investor Class
shares only; performance for other classes will vary due to differences in fee
structures.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG CORPORATE BOND FUND INVESTS FOR HIGH CURRENT INCOME WITH MODERATE
SHARE-PRICE FLUCTUATION. THE FUND IS DESIGNED FOR LONGER-TERM INVESTORS SEEKING
HIGHER INCOME THAN SHORTER-TERM BONDS OFFER AND WHO ARE WILLING TO ACCEPT
MODERATELY HIGHER SHARE-PRICE CHANGES. THE FUND INVESTS PRIMARILY IN
INVESTMENT-GRADE CORPORATE BONDS BUT MAY INVEST UP TO 25% OF ITS ASSETS IN ANY
OTHER BOND CATEGORIES, INCLUDING GOVERNMENT AND MORTGAGE-BACKED BONDS. NORMALLY,
THE FUND'S AVERAGE MATURITY WILL BE BETWEEN SEVEN AND 12 YEARS, WHICH MEANS ITS
SHARE PRICE HAS HEIGHTENED SENSITIVITY TO CHANGES IN INTEREST RATES.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - The Federal Reserve Board raised the federal funds rate by 50 basis points
to 5.25% during the past six months. This tightening pushed market interest
rates up 50 to 75 basis points across the yield curve.
- - The yield on two-year Treasuries rose from 4.12% to 5.78%, while the yield
on 30-year Treasury bonds rose 100 basis points to 6.16%.
- - The BBB corporate bond sector outperformed the Treasury market by
approximately 448 basis points on a duration-adjusted basis over the fiscal
year period, but underperformed the Treasury market by approximately 41
basis points over the last six months.
- --------------------------------------------------------------------------------
(5) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
* 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 Inc.
5
<PAGE>
THE STRONG GOVERNMENT SECURITIES FUND
-------------------------------------
PERSPECTIVES
FROM THE MANAGERS
/s/ Bradley C. Tank /s/ Thomas Sontag
Bradley C. Tank Thomas Sontag
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
During the 12-month period recently ended, interest rates continued to rise, and
U.S. agency mortgage-backed securities generally performed better than U.S.
Treasuries. While mortgages have produced better total returns than comparable
Treasuries, we believe that they continue to be attractive on a relative basis,
and we have maintained an overweight position in mortgage securities in the
portfolio.
In managing the interest-rate risk of the Fund, we have generally maintained
duration short of the benchmark throughout the period. In the last weeks of
October, with long Treasuries near 6.50%, we moved to a neutral posture. It is
our view that, while the Federal Reserve will raise short-term interest rates
modestly from current levels, such policy changes are already substantially
reflected in current market prices.
- --------------------------------------------------------------------------------
THIS PRESENTED US WITH THE BEST BUYING OPPORTUNITY IN [AGENCY NOTES AND BONDS]
THAT WE HAVE SEEN IN YEARS.
- --------------------------------------------------------------------------------
A shift in hedging preferences on the part of market makers in fixed-income
securities put considerable pressure on the prices of agency notes and bonds
during the third quarter as interest rates moved higher. This presented us with
the best buying opportunity in these securities that we have seen in years. In
recent years, agency debentures offered a yield advantage over Treasuries of as
little as 1/8% to 1/4%. In August and September, we were able to achieve yield
pickups in excess of 3/4%. At the end of October, we had in excess of 10%
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - This period was characterized by rising interest rates, with U.S. Treasury
two-year notes up in yield by 1.66% and U.S. Treasury 30-year bonds up in
yield by 1.00%.
- - Our response to this environment has been to maintain a defensive posture
with respect to interest-rate risk.
- --------------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 10-31-99
INVESTOR CLASS
1-year -0.04%
5-year 7.76%
10-year 8.20%
Since Inception 8.23%
(on 10-29-86)
ADVISOR CLASS (1)
1-year -0.45%
5-year 7.42%
10-year 7.87%
Since Inception 7.91%
(on 10-29-86)
INSTITUTIONAL CLASS (2)
1-year -0.07%
5-year 7.75%
10-year 8.20%
Since Inception 8.23%
(on 10-29-86)
- --------------------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO STATISTICS
AS OF 10-31-99
INVESTOR CLASS
30-day annualized yield(3) 6.07%
ADVISOR CLASS
30-day annualized yield(3) 5.59%
INSTITUTIONAL CLASS
30-day annualized yield(3) 6.56%
Average maturity(4) 7.2 years
Average
quality rating(5) AAA
- --------------------------------------------------------------------------------
(1) The performance of the Advisor Class shares prior to 8-30-99 is based on
the Fund's Investor Class shares' performance, restated for the higher
expense ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
(2) The performance of the Institutional Class shares prior to 8-30-99 is based
on the Fund's Investor Class shares' performance. Please consult a
prospectus for information about all share classes.
(3) Yields are historical and do not represent future yields, which will
fluctuate. Yields are as of 10-29-99.
6
<PAGE>
of the Fund invested in agency debentures, and we remain quite optimistic about
their future performance.
Looking forward, our view is that the Federal Reserve will remain successful in
containing any meaningful rise in price inflation. We also believe that the
recent increases in market interest rates and the price of energy will begin to
dampen consumer demand for housing and autos in the period ahead, ultimately
bringing this episode of rising rates to an end. Current yields of 6% for U.S.
Treasuries and 7 1/2% for agency mortgage pass-throughs represent great value
against a backdrop of 2 1/2% price inflation, and we would encourage investors
toward a fixed-income allocation in the months ahead.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG GOVERNMENT SECURITIES FUND USUALLY INVESTS 90% OR MORE (AND ALWAYS AT
LEAST 80%) OF ITS ASSETS IN BONDS ISSUED BY THE U.S. GOVERNMENT OR ITS AGENCIES.
THESE ARE AMONG THE HIGHEST QUALITY OF BONDS AVAILABLE. THE FUND GENERALLY KEEPS
AN AVERAGE MATURITY OF FIVE TO 10 YEARS, SO ITS SHARE PRICE WILL SHOW
SENSITIVITY TO CHANGES IN INTEREST RATES. THE FUND MAY ALSO MAKE SMALL
INVESTMENTS IN HIGH-QUALITY BONDS FROM OTHER SECTORS IN AN EFFORT TO IMPROVE
YIELD AND TOTAL RETURN. ANALYSIS OF THE ECONOMY, INTEREST-RATE TRENDS, AND BOND
MARKETS DRIVE OUR INVESTMENT PROCESS.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - While consumer prices throughout much of the world's developed economies
continue to be very well-behaved, the recent movement toward near-perfect
price stability appears to be over.
- - April witnessed the first meaningful negative surprise in the U.S. on price
inflation in quite some time. This news, in conjunction with continued
tightness in labor markets, prompted the Federal Reserve to begin unwinding
its series of reductions in the federal funds rate.
- - In June and again in August, the federal funds rate was raised by 25 basis
points. U.S. Treasury yields rose higher than the yields of lower-quality
corporate bonds and mortgage securities.
- --------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 10-29-86 TO 10-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG Lehman Brothers Lipper General
GOVERNMENT Aggregate U.S. Government
SECURITIES FUND Bond Index* Funds Index*
--------------- --------------- ---------------
<S> <C> <C>
10-86 $10,000 $10,000 $10,000
12-88 $11,683 $11,294 $10,904
12-90 $13,953 $14,094 $13,239
12-92 $17,781 $17,559 $16,102
12-94 $19,364 $18,709 $16,615
12-96 $23,873 $22,970 $19,849
12-98 $28,153 $27,376 $23,357
10-99 $27,986 $27,284 $22,913
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
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. This graph is based on
Investor Class shares only; performance for other classes will vary due to
differences in fee structures.
- --------------------------------------------------------------------------------
(4) The Fund's average maturity includes the effect of futures, options, and
when-issued securities.
(5) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
* 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 Inc.
7
<PAGE>
THE STRONG SHORT-TERM BOND FUND
-------------------------------
PERSPECTIVES FROM THE MANAGERS
/s/ Bradley C. Tank /s/ John T. Bender
Bradley C. Tank John T. Bender
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
The past 12 months were characterized by rising interest rates and generally
contracting credit spreads that had been underway for a full year. The Fund's
commitment to maintaining a modest degree of interest-rate risk, while
emphasizing higher-yielding mortgage and corporate bonds rather than Treasuries,
has helped to produce returns over this period that are superior to those
produced by most bond funds.
During most of this period, we maintained a portfolio duration of less than two
years while continuing to emphasize security selection, based upon the work of
our research team, to drive portfolio performance. Early in the period, BBB
rated corporate bonds meaningfully outperformed A and AA rated corporate bonds,
providing a great opportunity to upgrade the credit quality of the Fund while
sacrificing minimal income potential. While the Fund has the latitude to invest
up to 25% of assets in BB rated bonds, we maintained holdings in this area well
below the threshold, as we have had no shortage of good investment opportunities
in BBB and higher rated bonds.
- --------------------------------------------------------------------------------
...WE HAVE HAD NO SHORTAGE OF GOOD INVESTMENT OPPORTUNITIES IN BBB AND HIGHER
RATED BONDS.
- --------------------------------------------------------------------------------
Looking forward, our view is that the movement toward lower bond prices is
substantially over in terms of price, but not necessarily in terms of time. That
is to say that the Federal Reserve will continue to raise short-term interest
rates modestly from current levels, but such policy moves are already
substantially reflected in
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - Our response to the recent period of rising interest rates has been to
maintain a defensive posture with respect to interest-rate risk.
- - During most of this period, we maintained a portfolio duration of less than
two years while continuing to emphasize security selection.
- --------------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 10-31-99
INVESTOR CLASS
1-year 4.82%
5-year 6.64%
10-year 6.75%
Since Inception 7.33%
(on 8-31-87)
ADVISOR CLASS (1)
1-year 4.51%
5-year 6.34%
10-year 6.45%
Since Inception 7.03%
(on 8-31-87)
INSTITUTIONAL CLASS (2)
1-year 5.00%
5-year 6.68%
10-year 6.77%
Since Inception 7.35%
(on 8-31-87)
- --------------------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO STATISTICS
AS OF 10-31-99
INVESTOR CLASS
30-day annualized yield(3) 7.10%
ADVISOR CLASS
30-day annualized yield(3) 6.30%
INSTITUTIONAL CLASS
30-day annualized yield(3) 7.39%
Average maturity(4) 1.9 years
Average
quality rating(5) A
- --------------------------------------------------------------------------------
(1) The performance of the Advisor Class shares prior to 8-30-99 is based on
the Fund's Investor Class shares' performance, restated for the higher
expense ratio of the Advisor Class shares. Please consult a prospectus for
information about all share classes.
(2) The performance of the Institutional Class shares prior to 8-30-99 is based
on the Fund's Investor Class shares' performance. Please consult a
prospectus for information about all share classes.
(3) Yields are historical and do not represent future yields, which will
fluctuate. Yields are as of 10-29-99.
(4) The Fund's average maturity includes the effect of futures and when-issued
securities.
8
<PAGE>
current market prices. We anticipate the Federal Reserve will remain successful
in containing any meaningful rise in price inflation. We also believe that the
recent increases in market interest rates and the price of energy will begin to
dampen consumer demand for housing and autos in the period ahead, ultimately
bringing this episode of rising interest rates to an end. Current yields of 6%
for U.S. Treasuries, 7% for AA corporates, and 11% for U.S. high-yield bonds
represent terrific value against a backdrop of 2 1/2% price inflation, and we
would encourage investors to consider a fixed-income allocation in the months
ahead.
Thank you for your continued confidence in the Short-Term Bond Fund.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 8-31-87 TO 10-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG Lehman Brothers Lipper Short
SHORT-TERM 1-3 Year Government/ Investment Grade
BOND FUND Corporate Bond Index* Debt Funds Average*
---------- --------------------- -------------------
<S> <C> <C> <C>
8-87 $10,000 $10,000 $10,000
12-87 $10,318 $10,303 $10,246
12-89 $12,295 $12,157 $12,139
12-91 $14,837 $14,913 $14,570
12-93 $17,302 $16,743 $16,393
12-95 $19,065 $18,677 $18,101
12-97 $21,809 $20,946 $20,111
10-99 $23,653 $23,041 $21,780
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
Lehman Brothers 1-3 Year Government/Corporate Bond Index and the Lipper Short
Investment Grade Debt Funds 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. This graph is based on
Investor Class shares only; performance for other classes will vary due to
differences in fee structures.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG SHORT-TERM BOND FUND PURSUES TOTAL RETURN BY INVESTING FOR A HIGH
LEVEL OF CURRENT INCOME WITH A LOW DEGREE OF SHARE-PRICE FLUCTUATION. THE FUND
DOES THIS BY INVESTING PRIMARILY IN SHORT-TERM, INTERMEDIATE- AND HIGH-QUALITY
BONDS ISSUED BY U.S. COMPANIES. THE FUND'S AVERAGE MATURITY IS NORMALLY BETWEEN
ONE AND THREE YEARS, WHICH HELPS TO KEEP SHARE-PRICE FLUCTUATIONS LOW. THE
PORTFOLIO MANAGEMENT TEAM WORKS TO ADD VALUE WITH AN INVESTMENT PROCESS THAT
FOCUSES ON FUNDAMENTAL MACROECONOMIC RESEARCH AS WELL AS RIGOROUS ANALYSIS OF
INDIVIDUAL BONDS.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - The Federal Reserve Board raised the federal funds rate by 50 basis points
to 5.25% during the last six months. This tightening pushed market interest
rates up 50 to 75 basis points across the yield curve.
- - The yield on two-year Treasuries rose from 4.12% to 5.78%, while the
30-year Treasury bond yield rose 100 basis points to 6.16%.
- - Early in the period, BBB rated corporate bonds meaningfully outperformed A
and AA rated corporate bonds, providing a great opportunity to upgrade the
credit quality of the Fund while sacrificing minimal income potential.
- --------------------------------------------------------------------------------
(5) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
* 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 Funds 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 index data is Bloomberg. Source of the Lipper index
data is Lipper Inc.
9
<PAGE>
THE STRONG HIGH-YIELD BOND FUND
-------------------------------
PERSPECTIVES FROM THE MANAGERS
/s/ Jeffrey A. Koch /s/ Thomas M. Price
Jeffrey A. Koch Thomas M. Price
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
Despite volatility throughout the year, 1999 marked a return to normalcy for the
financial markets as fixed-income markets unwound from the stimulus of
interest-rate cuts in 1998. Market interest rates led the way to higher yields
with the 10-year Treasury rising steadily throughout the year to a peak of 6.24%
in October. The Federal Reserve followed with two increases in the federal funds
rate, taking it from 4.75% to 5.25%, and appeared poised to increase rates at
least once more in the next six to 12 months. We are now in a more "normal"
environment for this point in the economic cycle.
Credit quality in several sectors was hurt by the collapse in global financial
markets and emerging economies. In the high-yield market, the default rate rose
from 1.64% a year ago to 3.4% at the end of October. Due to the decline in
credit quality, the yield premium of the high-yield market rose dramatically
over the past year and a half to a level of 5.17% above the 10-year Treasury.
Given our outlook for continued solid growth in the U.S. economy, we view this
as an attractive valuation level for investing in the high-yield market.
Interest-rate stability combined with attractive valuation levels could pave the
way for good total returns in the high-yield market over the next 12 to 18
months.
- --------------------------------------------------------------------------------
WE ARE NOW IN A MORE "NORMAL" ENVIRONMENT FOR THIS POINT IN THE ECONOMIC CYCLE.
- --------------------------------------------------------------------------------
As always, diligent credit research is key to success in this market. Our
efforts led us to companies that exhibit positive momentum in their credit
quality--companies that can
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - The Strong High-Yield Bond Fund returned 9.77% for the year ended October
31, 1999. For the same period, the Lehman Brothers High-Yield Bond Index
returned 4.34%.*
- - We maintained our emphasis on single-B rated securities, targeting
competitive local exchange carriers, cable TV, and radio broadcasting.
- - We focused on companies exhibiting rapid de-leveraging potential, through
internal cash flow generation (Station Casinos and Motors and Gears) or
from a favorable merger and acquisition climate (Global Crossing and
MetroNet Communications).
- --------------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 10-31-99
1-year 9.77%
3-year 9.12%
Since Inception 12.65%
(on 12-28-95)
- --------------------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO STATISTICS
AS OF 10-31-99
30-day annualized
yield(1) 11.36%
Average maturity(2) 7.5 years
Average
quality rating(3) B
- --------------------------------------------------------------------------------
(1) Yields are historical and do not represent future yields, which will
fluctuate. Yield is as of 10-29-99.
(2) The Fund's average maturity includes the effect of when-issued securities.
(3) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
10
<PAGE>
and will de-leverage their balance sheets. Many of our best ideas involve
companies that produce a tremendous amount of free cash flow and whose
managements pursue a stated goal of using free cash flow to de-leverage. Station
Casinos and Motors and Gears are two good examples. Another opportunity is in
companies in rapidly growing industries (e.g., telecommunications) that are
quickly building asset value which is recognized through strategic combinations
or mergers. These combinations frequently result in improved credit quality, as
was the case with MetroNet Communications and Global Crossing, two of our
successful investments in telecommunications.
Our outlook is for continued strong but moderating growth coupled with low
inflation--an environment supportive to bond yields at their current levels. We
are optimistic on the outlook for high-yield bonds and thank you for the
confidence you have placed in us.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 12-28-95 TO 10-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG Lehman Brothers Lipper High
HIGH-YIELD High-Yield Current Yield
BOND FUND Bond Index* Funds Index*
---------- --------------- -------------
<S> <C> <C> <C>
11-95 $10,000 $10,000 $10,000
12-95 $10,031 $10,015 $10,015
6-96 $11,425 $10,361 $10,440
12-96 $12,724 $11,152 $11,314
6-97 $13,607 $11,800 $11,969
12-97 $14,758 $12,575 $12,805
6-98 $15,652 $13,141 $13,418
12-98 $15,211 $12,810 $12,796
6-99 $15,881 $13,091 $13,290
10-99 $15,809 $12,819 $13,019
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
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.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG HIGH-YIELD BOND FUND SEEKS TOTAL RETURN BY INVESTING FOR A HIGH LEVEL
OF CURRENT INCOME AND CAPITAL GROWTH. THE FUND DOES THIS BY USING A DISCIPLINED
APPROACH TO THE HIGH-YIELD BOND MARKET. THE MANAGERS' INVESTMENT PROCESS
COMBINES A TOP-DOWN OUTLOOK OF BROAD ECONOMIC AND INTEREST-RATE TRENDS WITH A
BOTTOM-UP ANALYSIS OF INDIVIDUAL BONDS. THE FORMATION OF THEIR MACROECONOMIC
OUTLOOK PROVIDES THE BASIS FOR STRUCTURING OVERALL PORTFOLIO RISK. THE FUND'S
INTEREST-RATE SENSITIVITY AND THE CREDIT QUALITY OF ITS SELECTIONS ARE
CONSISTENT WITH THIS OUTLOOK. RIGOROUS CREDIT ANALYSIS AND ADHERENCE TO STRICT
VALUATION CRITERIA PROVIDE THE FOUNDATION FOR BUILDING THE PORTFOLIO FROM THE
BOTTOM UP.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - The Federal Reserve raised interest rates twice, taking the federal funds
rate from 4.75% to 5.25%. Interest rates across the rest of the yield curve
rose as well, with the 10-year Treasury rate climbing from 5.35 to 6.02%.
- - The yield premium on high-yield bonds (i.e., the extra yield earned on
high-yield bonds versus U.S. Treasury securities) rose slightly during
1999, reaching a spread of 5.17% at the end of October.
- - Default rates rose over the course of the year. Emerging markets, energy,
and healthcare bonds have constituted over two-thirds of the default rate.
- --------------------------------------------------------------------------------
* 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 Inc.
11
<PAGE>
THE STRONG SHORT-TERM HIGH YIELD BOND FUND
------------------------------------------
PERSPECTIVES FROM THE MANAGERS
/s/ Jeffrey A. Koch /s/ Thomas M. Price
Jeffrey A. Koch Thomas M. Price
Portfolio Co-manager Portfolio Co-manager
- --------------------------------------------------------------------------------
The financial markets returned to a more normal environment in 1999, following
the global financial crisis of 1998 which forced the Federal Reserve to lower
interest rates. As the global economy recovered this year, interest rates moved
higher. The Federal Reserve followed with two increases in the federal funds
rate from 4.75% to 5.25%, with at least one more increase likely during the next
year. We are now back to a more normal environment for this point in the
economic cycle.
The high-yield market spent much of 1999 overcoming the increase in interest
rates and a deterioration in the credit quality of several sectors. The default
rate rose from 1.6% a year ago to 3.4% at the end of this reporting period. The
decline in credit quality has been a major contributor to the increase in the
yield premium for the high-yield market over the past 18 months. At the end of
October, the yield premium was 5.17% above the 10-year Treasury rate.
- --------------------------------------------------------------------------------
DILIGENT CREDIT RESEARCH CONTINUES TO BE VITAL TO SUCCESS IN THE HIGH-YIELD
MARKET...
- --------------------------------------------------------------------------------
Diligent credit research continues to be vital to success in the high-yield
market and takes on an even more meaningful role in a time of credit
deterioration. Since the Fund is designed to have substantially less volatility
than the Strong High-Yield Bond Fund, it is imperative that we select bonds with
- --------------------------------------------------------------------------------
[SIDENOTE]
FUND
HIGHLIGHTS
- - The Strong Short-Term High Yield Bond Fund returned 8.51% for the year
ended October 31, 1999, compared to 8.05% for the Short-Term High Yield
Bond Index.*
- - Our focus continued to be on high-coupon, callable bonds and
short-maturity, high-yield bonds which help limit share-price volatility.
Several of our higher-coupon issues were retired early at premium prices.
- - Telecommunications was a key sector for the Fund. New entrants into the
telecommunications industry issued high-coupon debt several years ago and
are now positioned to refinance at more favorable interest rates in the
next few years.
- --------------------------------------------------------------------------------
[SIDENOTE]
AVERAGE ANNUAL
TOTAL RETURNS
AS OF 10-31-99
1-year 8.51%
Since Inception 9.11%
(on 6-30-97)
- --------------------------------------------------------------------------------
[SIDENOTE]
PORTFOLIO STATISTICS
AS OF 10-31-99
30-day annualized
yield(1) 8.37%
Average maturity 2.2 years
Average
quality rating(2) BB
- --------------------------------------------------------------------------------
(1) Yields are historical and do not represent future yields, which will
fluctuate. Yield is as of 10-29-99.
(2) For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
12
<PAGE>
improving fundamentals and avoid deteriorating credits so that our bonds are
retired on the target date.
The Fund benefited less this year than in prior years from tender premiums.
Companies are willing to pay premiums to retire high-coupon bonds when they can
refinance at substantially lower rates. Two factors contributed to a decrease in
activity during 1999: First, higher Treasury rates and yield premiums increased
the interest rates at which companies could refinance; and second, the strong
new-issue market in 1997 and early 1998 enabled many companies to retire
high-coupon paper, leaving less refinancing activity for 1999.
As we look forward to 2,000, our outlook for high-yield bonds is positive based
on bond yields in the current economic environment. We sincerely appreciate your
confidence and will strive to continue producing consistent and predictable
investment results.
GROWTH OF AN ASSUMED $10,000 INVESTMENT
FROM 6-30-97 TO 10-31-99
[GRAPH]
<TABLE>
<CAPTION>
THE STRONG Short-Term Lipper High
SHORT-TERM HIGH High Yield Current Yield
YIELD BOND FUND Bond Index* Funds Index*
--------------- ----------- -------------
<S> <C> <C> <C>
6-97 $10,000 $10,000 $10,000
12-97 $10,777 $10,334 $10,699
6-98 $11,324 $10,736 $11,211
12-98 $11,680 $10,897 $10,691
6-99 $12,075 $11,245 $11,104
10-99 $12,255 $11,471 $10,878
</TABLE>
This graph, provided in accordance with SEC regulations, compares a $10,000
investment in the Fund, made at its inception, with the performance of the
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.
- --------------------------------------------------------------------------------
[SIDENOTE]
YOUR FUND'S
APPROACH
THE STRONG SHORT-TERM HIGH YIELD BOND FUND SEEKS TOTAL RETURN BY INVESTING FOR A
HIGH LEVEL OF CURRENT INCOME WITH MODERATE VOLATILITY. THE FUND FOCUSES ON
SHORT- TO INTERMEDIATE-TERM HIGH-YIELD BONDS IN AN EFFORT TO PRODUCE A HIGH
LEVEL OF CURRENT INCOME, WHILE LIMITING CHANGES IN SHARE PRICE. THE MANAGERS'
INVESTMENT PROCESS COMBINES A TOP-DOWN OUTLOOK OF BROAD ECONOMIC AND
INTEREST-RATE TRENDS WITH A BOTTOM-UP ANALYSIS OF INDIVIDUAL BONDS. THEIR
OUTLOOK PROVIDES THE BASIS FOR STRUCTURING OVERALL PORTFOLIO RISK, INCLUDING THE
FUND'S INTEREST-RATE SENSITIVITY AND THE CREDIT QUALITY OF ITS SELECTIONS.
RIGOROUS CREDIT ANALYSIS AND ADHERENCE TO STRICT VALUATION CRITERIA PROVIDE THE
FOUNDATION FOR INDIVIDUAL SELECTIONS.
- --------------------------------------------------------------------------------
[SIDENOTE]
MARKET
HIGHLIGHTS
- - The Federal Reserve raised interest rates twice in 1999, increasing the
federal funds rate from 4.75% to 5.25%. Interest rates across the yield
curve rose as well, with the three-year Treasury rate climbing from 5.10%
on March 31 to 5.87% on October 29.
- - The new-issue market for high-yield securities showed moderate strength.
Many companies have used this opportunity to refinance higher-coupon,
short-term paper with lower-coupon, longer-maturity debt.
- - Default rates rose during the year. Emerging-market issues along with
energy and healthcare bonds accounted for over two thirds of the default
rate.
- --------------------------------------------------------------------------------
* The Short-Term High Yield Bond Index is a market value weighted blend of
the Merrill Lynch High Yield U.S. Corporates, Cash Pay, BB Rated, 1-3 Years
Index and the Merrill Lynch High Yield U.S. Corporates, Cash Pay, B Rated,
1-3 Years Index. It is an unmanaged index generally representative of
corporate debt rated below investment-grade with maturities of one to three
years which more closely approximates the performance of the Strong
Short-Term High Yield Bond Fund. 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
Inc.
13
<PAGE>
- --------------------------------------------------------------------------------
BOND
GLOSSARY
BOND QUALITY RATINGS -- There are services that analyze the financial
condition of a bond's issuer and then assign it a rating. The best-known
rating agencies are Standard and Poors and Moody's. The highest-quality bonds
are rated AAA (S&P) or Aaa (Moody's). The scale descends to AA, A, then BBB,
and so on, down to D. Bonds with a rating of BBB or higher are considered
investment-grade. Bonds rated BB and below are considered "junk bonds."
Typically, the lower a bond's rating, the higher yield it must pay in order
to compensate the bondholder for the added risk.
MATURITY -- Like a loan, a bond must be paid off on a certain date. A bond's
maturity is the time remaining until it is paid off. Bonds typically mature
in a range from overnight to 30 years from now. Typically, bonds with longer
maturities will have higher yields and larger price changes in reaction to
interest-rate changes. In rare situations, shorter-term bonds will have
higher yields; this is known as an inverted yield curve (see definition that
follows).
DURATION -- Duration is similar to maturity, but also accounts for the
semi-annual interest payments made by most bonds. Duration is a useful tool
for determining a bond or a bond fund's sensitivity to interest-rate changes.
The higher the duration, the more a bond's price will fluctuate when interest
rates change.
TREASURY SPREAD -- The Treasury spread is the difference in yield between a
Treasury bond (issued by the federal government) and a bond with an equal
maturity, but from another category, such as a corporate bond. This
calculation is used to measure the prices of corporate bonds, mortgage-backed
securities, and other non-government issues relative to Treasuries. Higher
spreads occur in uncertain times when investors buy Treasuries for their
safety and sell other types of bonds.
YIELD -- Yield is the income your investment is generating. It is calculated
by taking the income paid by a bond in a given period of time, often 30 days,
annualizing it, and stating it as a percentage of the money invested.
YIELD CURVE -- The yield curve is a graph that plots the yields of Treasury
bonds against their maturities. Under normal circumstances, this line will
slope upward, reflecting longer-maturity bonds having higher yields. In rare
circumstances, such as in a time of deflation, the yield curve may slope
downward, or "invert." The steepness of the yield curve shifts depending on
economic trends and outlooks. Properly positioned, a bond investor can profit
from these shifts.
14
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG BOND FUND
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 37.5%
@Entertainment, Inc. Senior Discount Notes,
Series B, Zero %, Due 7/15/08 (Rate Reset
Effective 7/15/03) $1,000,000 $ 647,500
APCOA/Standard Parking, Inc. Senior
Subordinated Notes, 9.25%, Due 3/15/08 1,500,000 1,254,375
Air 2 US Enhanced Equipment Notes,
Series A, 8.027%, Due 10/01/19
(Acquired 10/28/99; Cost $2,095,000) (b) (e) 2,095,000 2,118,150
Allied Waste North America, Inc. Senior
Subordinated Notes, 10.00%, Due 8/01/09
(Acquired 8/16/99; Cost $983,750) (b) 1,000,000 851,250
Amerada Hess Corporation Bonds, 7.875%,
Due 10/01/29 965,000 959,837
Atlas Air, Inc. Senior Notes, 10.75%,
Due 8/01/05 275,000 273,625
Capital One Capital I Floating Rate Subordinated
Capital Income Securities, 6.8625%, Due 2/01/27
(Acquired 5/05/99; Cost $1,316,250) (b) 1,500,000 1,254,872
Cendant Corporation Notes, 7.75%,
Due 12/01/03 3,000,000 2,995,710
Continental Airlines Pass-Thru Trusts
Pass-Thru Certificates, Series 1999-2,
Class A-2, 7.056%, Due 9/15/09 865,000 856,960
DTE Capital Corporation Notes, 6.17%,
Due 6/15/03 (Acquired 6/16/98; Cost $845,000) (b) 845,000 812,043
E.I. Du Pont de Nemours & Company Notes,
6.875%, Due 10/15/09 695,000 693,145
El Paso Energy Corporation Senior Notes,
6.625%, Due 7/15/01 2,035,000 2,027,047
Ford Motor Credit Company Notes:
6.70%, Due 7/16/04 2,090,000 2,072,013
7.375%, Due 10/28/09 1,055,000 1,066,775
Fresenius Medical Care Capital Trust II
Guaranteed Preferred Securities, 7.875%,
Due 2/01/08 500,000 455,000
Global Crossing Holding, Ltd. Senior Yankee
Notes, 9.625%, Due 5/15/08 500,000 510,000
Graham Packaging Holdings Company/GPC
Capital Corporation II Senior Discount Notes,
Zero %, Due 1/15/09 (Rate Reset
Effective 1/15/03) 1,000,000 650,000
Intermedia Communications, Inc. Senior Notes,
8.60%, Due 6/01/08 500,000 445,000
Jordan Telecommunication Products, Inc. Senior
Subordinated Discount Notes, Zero %,
Due 8/01/07 (Rate Reset Effective 8/01/00) 385,000 317,625
KN Energy, Inc. Senior Notes:
6.45%, Due 3/01/03 1,425,000 1,391,762
6.80%, Due 3/01/08 365,000 346,860
LCI International, Inc. Senior Notes, 7.25%,
Due 6/15/07 820,000 804,312
Lehman Brothers Holdings, Inc. Senior Notes,
7.875%, Due 11/01/09 1,160,000 1,173,166
Lilly Del Mar, Inc. Floating Rate Capital
Securities, 7.717%, Due 8/01/29 (Rate Reset
Effective 8/01/04) (Acquired 7/29/99;
Cost $650,000) (b) 650,000 651,997
Lyondell Chemical Company Senior Secured
Notes, Series B, 9.875%, Due 5/01/07 2,000,000 2,000,000
MCI Worldcom, Inc. Notes, 6.125%, Due 4/15/12
(Remarketing Date 4/15/02) 1,235,000 1,216,201
MetroNet Communications Corporation
Senior Discount Yankee Notes,
Zero %, Due 11/01/07 (Rate Reset
Effective 11/01/02) 500,000 412,500
MetroNet Communications Corporation
Senior Yankee Notes,
10.625%, Due 11/01/08 1,350,000 1,539,000
Motors and Gears, Inc. Senior Notes, Series C,
10.75%, Due 11/15/06 $ 750,000 $ 708,750
NTL Communications Corporation Senior Notes,
Series B, 11.50%, Due 10/01/08 500,000 536,250
National Wine & Spirits, Inc. Senior Notes,
10.125%, Due 1/15/09 750,000 742,500
Nextlink Communications, Inc. Senior Discount
Notes, Zero %, Due 6/01/09 (Rate Reset
Effective 6/01/04) 1,000,000 590,000
Nextlink Communications, Inc. Senior Notes,
10.75%, Due 6/01/09 1,000,000 1,025,000
Pogo Producing Company Senior Subordinated
Notes, 10.375%, Due 2/15/09 500,000 518,750
Premier International Foods PLC Senior Yankee
Notes, 12.00%, Due 9/01/09 (Acquired 8/16/99;
Cost $1,005,000) (b) 1,000,000 1,005,000
Repap New Brunswick Senior Yankee Notes,
10.625%, Due 4/15/05 1,000,000 885,000
Riggs Capital Trust Preferred Securities,
Series A, 8.625%, Due 12/31/26 180,000 165,837
Riggs Capital Trust II Preferred Securities,
Series B, 8.875%, Due 3/15/27 685,000 641,403
Rohm & Haas Company Notes, 6.95%, Due 7/15/04
(Acquired 6/30/99; Cost $1,102,934) (b) 1,105,000 1,103,952
Simon Property Group LP Notes, 6.75%,
Due 2/09/04 1,545,000 1,478,540
Snyder Oil Corporation Senior Subordinated
Notes, 8.75%, Due 6/15/07 1,500,000 1,481,250
Sonat, Inc. Notes, 7.625%, Due 7/15/11 1,000,000 1,006,493
Spanish Broadcasting System, Inc. Senior
Subordinated Notes, 9.625%, Due 11/01/09 1,000,000 1,011,250
Sprint Capital Corporation Guaranteed Notes,
5.875%, Due 5/01/04 1,545,000 1,484,458
Stater Brothers Holdings, Inc. Senior Notes,
10.75%, Due 8/15/06 1,000,000 1,022,500
Station Casinos, Inc. Senior Subordinated Notes,
9.75%, Due 4/15/07 750,000 761,250
Stop & Shop Companies, Inc. Senior Subordinated
Notes, 9.75%, Due 2/01/02 375,000 396,740
SunAmerica, Inc. Debentures, 5.60%,
Due 7/31/97 1,100,000 781,645
SunTrust Capital III Floating Rate Notes, 6.16%,
Due 3/15/28 2,125,000 1,995,524
Telewest PLC Senior Discount Debentures,
Zero %, Due 10/01/07 (Rate Reset
Effective 10/01/00) 1,000,000 913,750
Transwestern Publishing Company LP/TWP
Capital Corporation Senior Subordinated Notes,
Series D, 9.625%, Due 11/15/07 850,000 823,437
United Industries Corporation Senior Subordinated
Notes, 9.875%, Due 4/01/09 (Acquired 8/16/99;
Cost $910,000) (b) 1,000,000 900,000
United International Holdings, Inc. Senior
Secured Discount Notes, Series B, Zero %,
Due 2/15/08 (Rate Reset Effective 2/15/03) 2,000,000 1,145,000
Universal Compression, Inc. Senior Discount
Notes, Zero %, Due 2/15/08 (Rate Reset
Effective 2/15/03) 2,500,000 1,562,500
Verio, Inc. Senior Notes, 11.25%, Due 12/01/08 1,000,000 1,050,000
Viatel, Inc. Senior Notes, 11.25%, Due 4/15/08 1,000,000 945,000
Vintage Petroleum, Inc. Senior Subordinated Notes,
9.75%, Due 6/30/09 750,000 759,375
Wal-Mart Stores, Inc. Senior Notes, 6.875%,
Due 8/10/09 1,050,000 1,055,918
Waste Management, Inc. Senior Notes, 6.125%,
Due 7/15/01 805,000 753,824
Williams Communications Group, Inc. Senior
Notes, 10.875%, Due 10/01/09 1,000,000 1,030,000
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Winstar Communications, Inc. Senior Subordinated
Deferred Interest Notes, Zero %, Due 3/01/07
(Rate Reset Effective 9/01/02) $1,000,000 $1,180,000
ZSC Specialty Chemicals PLC Senior Yankee
Notes, 11.00%, Due 7/01/09 (Acquired 7/12/99;
Cost $1,025,000) (b) 1,000,000 1,006,250
- -------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $63,355,281) 62,263,871
- -------------------------------------------------------------------------------------------
CONVERTIBLE BONDS 1.2%
Bell Atlantic Financial Services, Inc. Senior
Notes, 5.75%, Due 4/01/03
(Acquired 2/12/98; Cost $2,028,750) (b) 2,000,000 1,995,000
- ------------------------------------------------------------------------------------------
Total Convertible Bonds (Amortized
Cost $2,020,095) 1,995,000
- ------------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 20.9%
Asset Securitization Corporation Commercial
Mortgage Pass-Thru Certificates:
Series 1995-MD4, Class A-1, 7.10%, Due 8/13/29 1,958,839 1,952,091
Series 1996-MD6, Class A-1B, 6.88%,
Due 11/13/26 995,000 990,647
Bear Stearns Mortgage Securities, Inc. Mortgage
Pass-Thru Certificates, Series 1995-1, Class 2-P,
Principal Only, Due 7/25/10 173,927 142,513
Commercial Mortgage Asset Trust Commercial
Mortgage Pass-Thru Certificates:
Series 1999-C2, Class A-2, 7.546%, Due 12/17/09 1,080,000 1,085,227
Series 1999-C2, Class A-3, 7.737%, Due 10/17/12 2,420,000 2,432,560
The Equitable Life Assurance Society of the
United States Floating Rate Notes, Series 174,
Class A2, 5.74%, Due 5/15/03
(Acquired 1/29/99; Cost $1,491,914) (b) 1,500,000 1,494,427
Headlands Mortgage Securities, Inc. Mortgage
Pass-Thru Certificates, Series 1997-5, Class AII1,
6.75%, Due 11/25/27 535,277 532,084
LB Commercial Conduit Mortgage Trust Mortgage
Pass-Thru Certificates, Series 1999-C1, Class A2,
6.78%, Due 4/15/09 1,240,000 1,205,187
Metris Master Trust Floating Rate
Asset-Backed Securities, Series 1999-2, Class A,
5.9275%, Due 1/20/10 2,065,000 2,063,224
Morgan Stanley Capital I, Inc. Commercial
Mortgage Pass-Thru Certificates,
Series 1999-FNV1, Class A2, 6.53%, Due 3/15/31 870,000 826,361
Mortgage Capital Funding, Inc. Mortgage
Pass-Thru Certificates, Series 1998-MC3,
Class A2, 6.337%, Due 11/18/31 4,150,000 3,907,661
Mountain Capital CLO I, Ltd./Mountain Capital
CLO I Corporation Floating Rate Bonds,
Series 1A, Class A-1, 6.7775%, Due 4/15/11 5,000,000 5,000,000
Nomura Asset Securities Corporation,
Series 1994-4B, Class 4PO, Principal Only,
Due 9/25/24 88,201 68,907
Norwest Asset Securities Corporation Mortgage
Pass-Thru Certificates:
Series 1999-14, Class B3, 6.50%, Due 6/25/29 2,091,268 1,750,631
Series 1999-16, Class B3, 6.50%, Due 6/25/29 1,046,710 875,924
Series 1999-21, Class B3, 7.00%, Due 9/25/29 1,486,645 1,277,772
PNC Mortgage Securities Corporation Mortgage
Pass-Thru Certificates:
Series 1998-1, Class 4B4, 6.75%, Due 3/25/13
(Acquired 10/23/98; Cost $279,015) (b) 350,480 277,002
Series 1998-11, Class 2B4, 6.25%, Due 11/25/13
(Acquired 10/23/98; Cost $274,469) (b) 363,836 273,161
Resolution Trust Corporation Mortgage
Pass-Thru Securities, Inc. Commercial
Certificates, Series 1995-C2, Class D, 7.00%,
Due 5/25/27 $ 983,714 $ 975,328
Resolution Trust Corporation Mortgage
Pass-Thru Securities, Inc. Commercial Mortgage
Pass-Thru Certificates, Series 1995-C1, Class C,
6.90%, Due 2/25/27 1,000,000 996,105
Resolution Trust Corporation Mortgage
Pass-Thru Securities, Inc. Variable Rate
Commercial Certificates:
Series 1991-M4, Class A-1, 6.062%, Due 2/25/20 1,370,916 1,372,047
Series 1992-C8, Class A-2, 6.7875%, Due 12/25/23 626,940 627,959
Rural Housing Trust 1987-1 Senior Mortgage
Pass-Thru Certificates, Series 1, Class D,
6.33%, Due 4/01/26 1,163,185 1,155,339
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Thru Certificates:
Series 1996-LB2, Class A-5, 7.25%, Due 10/25/26 1,202,726 1,201,085
Series 1997-LB2, Class A-3, 7.20%, Due 4/25/27 118,074 117,696
Summit CBO I, Ltd./Summit CBO I Funding
Corporation Second Priority Senior Secured
Floating Rate Bonds, Series 1A, Class B,
6.0725%, Due 5/23/11 (Acquired 4/07/99;
Cost $2,000,000) (b) 2,000,000 1,990,320
- ------------------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed
Securities (Cost $34,658,862) 34,591,258
- ------------------------------------------------------------------------------------------
MUNICIPAL BONDS 0.5%
New Jersey Economic Development Authority State
Pension Funding Revenue, 7.425%, Due 2/15/29 915,000 899,830
- ------------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $1,005,425) 899,830
- -----------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT & AGENCY
ISSUES 30.7%
FHLMC Participation Certificates:
6.25%, Due 6/15/12 thru 9/15/22 2,640,000 2,519,651
7.20%, Due 11/01/06 (e) 2,615,000 2,622,348
10.50%, Due 8/01/19 865,157 935,315
FNMA Corporate Notes:
6.50%, Due 8/15/04 3,080,000 3,090,697
6.625%, Due 9/15/09 3,770,000 3,755,448
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
6.52%, Due 7/25/08 962,635 950,578
7.085%, Due 9/01/06 836,416 848,636
8.00%, Due 4/01/17 thru 9/01/23 2,657,236 2,722,137
8.33%, Due 7/15/20 2,295,080 2,382,277
8.50%, Due 8/01/12 thru 5/01/26 4,083,784 4,249,310
9.00%, Due 12/01/16 thru 8/01/17 2,171,381 2,285,324
9.50%, Due 6/01/05 712,550 741,249
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Mortgage
Certificates, Pool #92117, 7.095%, Due 6/01/18 88,595 91,044
Federal Home Loan Bank Medium-Term Notes,
7.955%, Due 8/01/25 784,146 798,681
United States Treasury Bonds:
5.25%, Due 2/15/29 4,035,000 3,491,538
5.50%, Due 8/15/28 1,985,000 1,764,790
6.50%, Due 11/15/26 1,700,000 1,719,657
United States Treasury Notes:
6.00%, Due 8/15/04 thru 8/15/09 5,190,000 5,202,494
6.50%, Due 5/15/05 thru 10/15/06 2,080,000 2,117,700
7.00%, Due 7/15/06 5,275,000 5,510,729
7.50%, Due 2/15/05 2,980,000 3,166,250
- -----------------------------------------------------------------------------------------
Total United States Government & Agency
Issues (Cost $51,287,740) 50,965,853
- -----------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FOREIGN GOVERNMENT ISSUES 4.7%
Australian Government Bonds, 7.50%,
Due 7/15/05 2,900,000 AUD $1,944,310
Government of New Zealand Notes,
10.00%, Due 3/15/02 2,500,000 NZD 1,368,518
Government of United Kingdom Treasury
Notes, 7.25%, Due 12/07/07 2,500,000 GBP 4,491,720
- -----------------------------------------------------------------------------------------
Total Foreign Government Issues (Cost $7,961,209) 7,804,548
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS 3.0%
Caisse National De Credit Agricole Sponsored
ADR 10.375% Series A
(Acquired 2/05/98; Cost $1,981,000) (b) 70,000 1,855,000
Centaur Funding Corporation 9.08% Series B
(Acquired 12/09/98 - 5/24/99;
Cost $1,471,695) (b) 1,465 1,525,431
R&B Falcon Corporation 13.875% Senior 537 510,150
Superior Healthcare Management 7.75%
Series A (Acquired 12/30/97; Cost $1,006,460) (b) 1,000 1,006,680
- -----------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $4,986,253) 4,897,261
- -----------------------------------------------------------------------------------------
COMMON STOCKS 0.0%
OpTel, Inc. Non-Voting (Acquired 4/14/98;
Cost $20,000) (b) (f) 500 2,500
- -----------------------------------------------------------------------------------------
Total Common Stocks (Cost $20,000) 2,500
- -----------------------------------------------------------------------------------------
WARRANTS 0.1%
MetroNet Communications Corporation Warrants,
Expire 8/15/07 350 28,700
R&B Falcon Corporation Warrants, Expire 5/01/09
(Acquired 4/29/99; Cost $41,250) (b) 500 125,000
- -----------------------------------------------------------------------------------------
Total Warrants (Cost $41,253) 153,700
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 4.1%
COMMERCIAL PAPER 1.8%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 5.01% $1,180,000 1,180,000
Warner Lambert Company, 4.99% 1,142,700 1,142,700
Wisconsin Electric Power Company, 4.99% 684,700 684,700
----------
3,007,400
CONVERTIBLE BONDS 0.3%
Corporate Express, Inc. Subordinated Notes,
4.50%, Due 7/01/00 500,000 496,875
CORPORATE BONDS 0.1%
ARA Services, Inc. Guaranteed Notes,
10.625%, Due 8/01/00 134,000 136,147
REPURCHASE AGREEMENTS 1.6%
ABN-AMRO Inc. (Dated 10/29/99), 5.22%,
Due 11/01/99 (Repurchase proceeds $2,601,131);
Collateralized by: U.S. Government & Agency
Issues and Non-Agency Mortgage &
Asset-Backed Securities (d) 2,600,000 2,600,000
UNITED STATES GOVERNMENT ISSUES 0.3%
United States Treasury Bills,
Due 11/04/99 thru 12/09/99 (c) 435,000 433,374
- -----------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $6,655,847) 6,673,796
=========================================================================================
Total Investments in Securities (Cost $171,991,965) 102.7% 170,247,617
Other Assets and Liabilities, Net (2.7%) (4,376,564)
- -----------------------------------------------------------------------------------------
NET ASSETS 100.0% $165,871,053
=========================================================================================
<CAPTION>
FUTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
65 Ten-Year Euro Bund 12/99 $ 7,234,564 ($168,071)
2 Ten-Year Japanese Government Bonds 3/00 2,509,199 46,568
77 U.S. Treasury Bonds 12/99 8,746,719 (73,718)
Sold:
44 Five-Year U.S. Treasury Notes 12/99 4,749,938 35,718
101 Ten-Year U.S. Treasury Notes 12/99 11,081,594 (51,710)
<CAPTION>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized
Settlement Appreciation
Date Value in USD (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold:
3,150,000 AUD 3/29/00 $2,011,926 $ 44,079
2,725,000 GBP 3/29/00 4,484,496 (3,234)
2,700,000 NZD 3/29/00 1,373,322 28,248
<CAPTION>
SWAPS
- ------------------------------------------------------------------------------------------------------------------------------------
Open index rate swap contracts at October 31, 1999 consisted of the following:
- ------------------------------------------------------------------------------------------------------------------------------------
Notional Termination Interest Index Unrealized
Amount Date Sold Bought Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$5,000,000 7/31/00 1 mo. LIBOR ERISA Eligible $ 32,858
Lehman CMBS*
</TABLE>
* Lehman Brothers Investment Grade Index - ERISA Eligible Sub Index
Collateralized Mortgage-Backed Securities Index Total Return Swap
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 84.1%
Air 2 US Enhanced Equipment Notes:
Series A, 8.027%, Due 10/01/19
(Acquired 10/28/99; Cost $2,025,000) (b) (e) $ 2,025,000 $ 2,047,376
Series C, 10.127%, Due 10/01/20
(Acquired 10/28/99; Cost $9,500,000) (b) (e) 9,500,000 9,619,415
Amerada Hess Corporation Bonds,
7.875%, Due 10/01/29 11,085,000 11,025,695
American Airlines, Inc. Pass-Thru Trust
Pass-Thru Certificates, Series 1999-1,
Class C, 7.155%, Due 10/15/04 2,000,000 1,989,520
Apache Corporation Debentures,
7.375%, Due 8/15/47 9,000,000 8,330,283
Atlas Air, Inc. Pass-Thru Certificates:
Series 1998-1, Class C, 8.01%, Due 1/02/10 11,417,531 10,832,210
Series 1999-1, Class C, 8.77%, Due 7/02/12 2,000,000 1,946,570
Bank United Corporation Subordinated Notes,
8.875%, Due 5/01/07 3,500,000 3,407,715
Beaver Valley Funding Corporation Debentures,
8.625%, Due 6/01/07 8,254,000 8,408,762
British Sky Broadcasting Group PLC Yankee
Notes, 6.875%, Due 2/23/09 5,000,000 4,458,455
CE Generation LLC Senior Secured Bonds,
7.416%, Due 12/15/18 (Acquired 2/25/99;
Cost $5,572,665) (b) 5,500,000 5,223,091
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CMS Energy Corporation Senior Notes,
Series B, 6.75%, Due 1/15/04 $ 5,000,000 $ 4,676,485
CMS Panhandle Holding Company Senior
Notes, 6.50%, Due 7/15/09 6,000,000 5,563,745
CSC Holdings, Inc. Debentures, 7.625%,
Due 7/15/18 13,300,000 12,119,625
CSC Holdings, Inc. Senior Notes:
7.875%, Due 12/15/07 1,810,000 1,791,900
8.125%, Due 7/15/09 2,250,000 2,258,437
CSX Corporation Debentures, 6.95%,
Due 5/01/27 3,000,000 3,011,643
CSX Corporation Medium-Term Notes,
Tranche #00043, 6.80%, Due 12/01/28 4,500,000 3,994,609
CalEnergy, Inc. Senior Bonds, 8.48%,
Due 9/15/28 14,000,000 14,934,724
Capital One Capital I Floating Rate
Subordinated Capital Income Securities,
6.8625%, Due 2/01/27 (Acquired 5/05/99;
Cost $6,581,250) (b) 7,500,000 6,274,358
Cendant Corporation Notes, 7.75%,
Due 12/01/03 17,920,000 17,894,374
Coastal Corporation Senior Debentures:
7.42%, Due 2/15/37 5,036,000 4,691,271
7.75%, Due 10/15/35 7,100,000 6,903,898
Colonial Capital I Securities, Series A, 8.92%,
Due 1/15/27 2,600,000 2,346,913
Continental Airlines, Inc. Pass-Thru
Certificates, Series 1998-2B, 6.465%,
Due 10/15/04 2,831,474 2,739,012
Delta Air Lines, Inc. Debentures,
9.75%, Due 5/15/21 8,000,000 9,199,456
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 2,297,882
Series 1991-B, 10.14%, Due 8/14/12
(Acquired 9/10/96; Cost $2,257,280) (b) 2,000,000 2,297,882
Series 1991-E, 10.14%, Due 8/26/12
(Acquired 9/10/96; Cost $2,257,680) (b) 2,000,000 2,298,450
Delta Air Lines, Inc. Pass-Thru Certificates,
Series 1992-B1, 9.375%, Due 9/11/07 2,958,801 3,112,171
EOP Operating LP Notes, 6.80%, Due 1/15/09 6,500,000 6,051,058
EOP Operating LP Senior Notes, 6.763%,
Due 6/15/07 5,700,000 5,342,023
El Paso Electric Company First Mortgage Notes,
Series E, 9.40%, Due 5/01/11 5,998,000 6,562,118
El Paso Energy Corporation Senior Notes,
6.75%, Due 5/15/09 9,000,000 8,566,272
First Nationwide Bank Subordinated
Debentures, 10.00%, Due 10/01/06 3,460,000 3,610,711
First Republic Bank Subordinated Notes,
7.75%, Due 9/15/12 5,610,000 4,912,711
Ford Motor Credit Company Notes, 7.375%,
Due 10/28/09 14,125,000 14,282,649
Fresenius Medical Care Capital Trust II
Guaranteed Preferred Securities,
7.875%, Due 2/01/08 7,000,000 6,370,000
GB Capital Trust Capital Securities,
10.25%, Due 1/15/27 (Acquired 1/24/97;
Cost $3,000,000) (b) 3,000,000 3,086,250
GS Escrow Corporation Floating Rate
Senior Notes, 6.3125%, Due 8/01/03 8,000,000 7,611,208
GS Escrow Corporation Senior Notes, 7.00%,
Due 8/01/03 18,540,000 17,457,394
Global Crossing Holding, Ltd. Senior Yankee
Notes, 9.625%, Due 5/15/08 7,500,000 7,650,000
Homeside International, Inc. Senior Secured
Second Priority Notes, 11.25%, Due 5/15/03 1,796,000 2,033,970
ITT Corporation Notes, 6.75%, Due 11/15/03 $ 2,600,000 $ 2,449,686
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 7,200,000 6,783,545
Imperial Tobacco Overseas BV Guaranteed
Yankee Notes, 7.125%, Due 4/01/09 10,000,000 9,277,730
International Game Technology Senior Notes,
8.375%, Due 5/15/09 11,000,000 10,532,500
Jones Intercable, Inc. Senior Notes:
8.875%, Due 4/01/07 9,250,000 9,597,005
9.625%, Due 3/15/02 2,000,000 2,095,090
KN Capital Trust I Pass-Thru Securities,
8.56%, Due 4/15/27 5,000,000 4,761,890
KN Energy, Inc. Senior Notes:
6.65%, Due 3/01/05 4,500,000 4,368,177
6.80%, Due 3/01/08 4,500,000 4,276,355
KPNQwest BV Senior Notes, 8.125%,
Due 6/01/09 (Acquired 5/25/99;
Cost $11,418,695) (b) 11,500,000 10,982,500
Lehman Brothers Holdings, Inc. Notes,
7.375%, Due 5/15/07 11,044,000 11,128,166
Lehman Brothers Holdings, Inc. Senior
Notes, 7.875%, Due 11/01/09 1,365,000 1,380,493
Liberty Media Corporation Senior Notes,
8.50%, Due 7/15/29 (Acquired 10/21/99 -
10/22/99; Cost $4,829,229) (b) 4,840,000 4,857,652
Lyondell Chemical Company Senior Secured
Notes, Series B, 9.875%, Due 5/01/07 10,000,000 10,000,000
Market Hub Partners Storage LP/Market Hub
Partners Finance, Inc. Senior Notes,
8.25%, Due 3/01/08 1,000,000 970,000
MetroNet Communications Corporation
Senior Discount Yankee Notes:
Zero %, Due 11/01/07 (Rate Reset
Effective 11/01/02) 1,500,000 1,237,500
Zero %, Due 6/15/08 (Rate Reset
Effective 6/15/03) 11,000,000 8,607,500
MetroNet Communications Corporation
Senior Yankee Notes:
10.625%, Due 11/01/08 19,680,000 22,435,200
12.00%, Due 8/15/07 4,950,000 5,791,500
Midwest Energy, Inc. Senior Notes, 8.70%,
Due 10/15/09 (Acquired 10/13/99;
Cost $8,975,880) (b) 9,000,000 9,157,419
News America Holdings, Inc. Debentures,
7.90%, Due 12/01/95 6,175,000 5,639,066
Noble Drilling Corporation Senior Notes, 7.50%,
Due 3/15/19 10,710,000 10,460,029
Norfolk Southern Corporation Senior Notes,
6.20%, Due 4/15/09 4,500,000 4,124,345
Occidental Petroleum Corporation Senior
Notes, 6.50%, Due 4/01/05 4,000,000 3,859,168
Osprey Trust/Osprey I, Inc. Senior Secured
Notes, 8.31%, Due 1/15/03 (Acquired 9/16/99;
Cost $6,500,000) (b) 6,500,000 6,494,839
PXRE Capital Trust I Pass-Thru Securities,
8.85%, Due 2/01/27 5,750,000 4,532,185
Park Place Entertainment Corporation
Senior Notes:
7.00%, Due 7/15/04 8,100,000 7,695,559
7.95%, Due 8/01/03 (Acquired 7/28/99;
Cost $8,941,500) (b) 9,000,000 8,931,771
Qwest Communications International, Inc.
Senior Notes, Series B, 10.875%, Due 4/01/07 7,125,000 8,015,625
Riggs Capital Trust Preferred Securities,
Series A, 8.625%, Due 12/31/26 16,420,000 15,128,042
Riggs Capital Trust II Preferred Securities,
Series B, 8.875%, Due 3/15/27 1,185,000 1,109,581
Saks, Inc. Guaranteed Notes, 7.00%, Due 7/15/04 5,000,000 4,698,545
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Saks, Inc. Notes:
7.50%, Due 12/01/10 $11,800,000 $10,698,163
8.25%, Due 11/15/08 9,000,000 8,712,684
Simon Debartolo Group LP Notes, 6.75%,
Due 6/15/05 4,500,000 4,242,942
Simon Property Group LP Notes:
6.75%, Due 2/09/04 3,385,000 3,239,391
7.125%, Due 2/09/09 6,150,000 5,713,947
Sonat, Inc. Notes, 7.625%, Due 7/15/11 8,440,000 8,494,801
Southdown, Inc. Senior Subordinated Notes,
Series B, 10.00%, Due 3/01/06 15,000,000 16,333,230
Spieker Properties LP Notes, 7.25%,
Due 5/01/09 6,000,000 5,715,984
Sprint Capital Corporation Guaranteed
Bonds, 6.90%, Due 5/01/19 10,000,000 9,356,070
Starwood Hotels & Resorts Worldwide, Inc.,
7.375%, Due 11/15/15 14,780,000 12,281,012
Stop & Shop Companies, Inc. Senior
Subordinated Notes, 9.75%, Due 2/01/02 12,100,000 12,801,461
TXU Eastern Funding Company Guaranteed
Senior Notes, 6.75%, Due 5/15/09
(Acquired 5/06/99 - 7/08/99; Cost $8,749,660) (b) 9,000,000 8,360,379
Texas Utilities Company Senior Notes,
Series E, 6.50%, Due 8/16/04
(Remarketing Date 8/16/02) 11,250,000 11,196,495
Time Warner, Inc. Debentures:
9.125%, Due 1/15/13 8,000,000 9,029,512
9.15%, Due 2/01/23 4,000,000 4,598,312
Tosco Corporation Debentures, 7.80%,
Due 1/01/27 5,000,000 4,890,845
Tosco Corporation First Mortgage Bonds,
Series B, 9.625%, Due 3/15/02 6,000,000 6,324,762
Tricon Global Restaurants, Inc. Senior Notes:
7.45%, Due 5/15/05 4,300,000 4,134,841
7.65%, Due 5/15/08 14,340,000 13,781,557
Turner Broadcasting System, Inc.
Senior Notes, 8.375%, Due 7/01/13 11,200,000 11,988,693
USX-Marathon Group Debentures, 9.125%,
Due 1/15/13 2,000,000 2,228,890
Ultramar Diamond Shamrock Corporation
Senior Notes, 7.20%, Due 10/15/17 11,000,000 10,214,402
United Air Lines, Inc. Debentures,
Series A, 10.67%, Due 5/01/04 6,305,000 7,014,357
United Pan-Europe Communications NV
Senior Yankee Notes, 10.875%,
Due 11/01/07 (Acquired 10/22/99;
Cost $10,000,000) (b) 10,000,000 10,112,500
Univision Network Holding LP
Subordinated Notes, 7.00%, Due 12/17/02 7,855,000 10,368,600
Waste Management, Inc. Senior Notes:
6.50%, Due 12/15/02 11,705,000 10,534,699
7.00%, Due 10/15/06 6,000,000 5,031,558
Williams Communications Group, Inc.
Senior Notes, 10.70%, Due 10/01/07 6,150,000 6,372,938
YPF Sociedad Anonima Yankee Notes,
7.75%, Due 8/27/07 7,000,000 6,707,099
- -----------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $752,808,550) 731,091,078
- -----------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 8.0%
Asset Securitization Corporation
Commercial Mortgage Pass-Thru
Certificates, Series 1995-MD4,
Class A-1, 7.10%, Due 8/13/29 7,807,307 7,780,410
BCF LLC Mortgage Pass-Thru Certificates,
Series 1997-R2, Class 3-A1, 7.00%,
Due 12/25/35 (Acquired 6/17/97;
Cost $1,708,233) (b) $ 1,707,085 $ 1,705,181
Bear Stearns Mortgage Securities, Inc.
Mortgage Pass-Thru Certificates,
Series 1995-1, Class 2-P, Principal
Only, Due 7/25/10 528,138 432,749
Chase Mortgage Finance Trust Multiclass
Mortgage Pass-Thru Certificates:
Series 1999-S8, Class B2, 6.75%, Due 7/25/29 2,491,935 2,127,677
Series 1999-S10, Class B2, 6.75%, Due 8/25/29 2,444,135 2,085,959
Series 1999-S11, Class B2, 6.75%, Due 9/25/29 1,597,590 1,355,571
Commercial Trust I Lease-Backed Certificates,
Series 1993-K-A, Class A2, 7.63%,
Due 12/15/13 (Acquired 4/20/99;
Cost $8,221,993) (b) 8,441,298 7,351,442
Countrywide Home Loans, Inc. Mortgage
Pass-Thru Certificates, Series 1999-11,
Class B2, 7.25%, Due 11/25/29 1,746,945 1,554,475
DLJ Mortgage Acceptance Corporation Variable
Rate Multi-Family Mortgage Pass-Thru
Certificates, Series 1993-MF10, Class A-1,
Interest Only, 0.80%, Due 7/15/03 30,858,013 154,290
DLJ Mortgage Acceptance Corporation Variable
Rate Trust Certificates, Series 1997-E,
Class A, 7.55%, Due 12/28/26
(Acquired 12/18/97; Cost $5,466,039) (b) 5,443,923 4,782,323
FMAC Loan Receivables Trust Notes,
Series 1997-C, Class B, 7.15%, Due 12/15/19
(Acquired 12/10/97; Cost $7,279,720) (b) 7,239,000 6,587,490
GE Capital Mortgage Services, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1999-18, Class B2, 7.00%,
Due 11/25/29 2,010,447 1,751,974
Golden National Mortgage Asset-Backed
Certificates, Series 1998-GNI, Class M-2,
8.02%, Due 2/25/27 6,000,000 5,808,780
Mid State Trust Virgin Islands Asset-Backed Notes:
Series 6, Class A-1, 7.34%, Due 7/01/35 2,456,780 2,433,601
Series 6, Class A-2, 7.40%, Due 7/01/35 2,879,039 2,830,470
Resolution Trust Corporation Mortgage Pass-Thru
Securities, Inc. Commercial Mortgage
Certificates, Series 1995-C1, Class D, 6.90%,
Due 2/25/27 12,000,000 11,827,560
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage
Bonds, Series 1992-C, Class 3-A, 11.7547%,
Due 11/25/30 43,284 43,142
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 $4,146,239) (b) 4,643,721 3,803,579
Sutter CBO, Ltd./Sutter CBO Corporation Notes,
Series 1999-1, Class B1, 9.942%, Due 11/30/14
(Acquired 10/05/99; Cost $5,000,000) (b) (e) 5,000,000 5,006,250
- -----------------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed
Securities (Cost $72,670,534) 69,422,923
- -----------------------------------------------------------------------------------------
FOREIGN BONDS 0.8%
Shaw Communications, Inc. Debentures, 8.54%,
Due 9/30/27 11,500,000 CAD 7,114,208
- -----------------------------------------------------------------------------------------
Total Foreign Bonds (Cost $7,507,355) 7,114,208
- -----------------------------------------------------------------------------------------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES GOVERNMENT &
AGENCY ISSUES 0.3%
FHLMC Participation Certificates:
14.00%, Due 9/01/12 $ 21,073 $ 24,081
14.75%, Due 3/01/10 9,494 10,971
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates,
13.50%, Due 4/01/11 69,003 78,267
GNMA Guaranteed Pass-Thru Certificates,
15.00%, Due 8/15/11 thru 10/15/12 65,120 76,829
Small Business Administration Guaranteed
Loan Pool #40013, Interest Only Strips,
2.419%, Due 9/30/17 4,607,333 234,698
United States Treasury Notes, 6.00%, Due 8/15/04 1,575,000 1,577,953
- -----------------------------------------------------------------------------------------
Total United States Government &
Agency Issues (Cost $3,008,518) 2,002,799
- -----------------------------------------------------------------------------------------
OPTIONS 0.0%
MCI Worldcom, Inc. Call Options: (Strike
price is 100. Expiration date is 6/20/03.) 25,000,000 225,000
- -----------------------------------------------------------------------------------------
Total Options (Cost $562,500) 225,000
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS 4.9%
Caisse National De Credit Agricole Sponsored
ADR 10.375% Series A (Acquired 2/05/98;
Cost $5,660,000) (b) 200,000 5,300,000
Centaur Funding Corporation 9.08% Series B
(Acquired 12/09/98 - 4/13/99; Cost $17,562,591) (b) 16,450 17,128,563
Golden State Bancorp, Inc.
9.125% Exchangeable Series A 100,000 2,225,000
News Corporation Finance Trust 5.00% 85,000 4,945,938
Norwest Corporation Series A, Cumulative
Tracking Stock/Residential Home
Mortgage LLC (Acquired 12/16/94;
Cost $2,000,000) (b) 10,000 2,010,560
Parmalat Capital Finance 7.70% Series B 253,000 5,819,000
Webster Capital Corporation 7.375% Series A 5,000 5,043,750
- -----------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $44,880,481) 42,472,811
- -----------------------------------------------------------------------------------------
WARRANTS 0.0%
EOP Operating LP Warrants, Expire 1/18/00 7,500 7,500
- -----------------------------------------------------------------------------------------
Total Warrants (Cost $60,000) 7,500
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 1.9%
COMMERCIAL PAPER 0.3%
INTEREST-BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 5.01% $ 818,600 818,600
Warner Lambert Company, 4.99% 2,120,100 2,120,100
Wisconsin Electric Power Company, 4.99% 100 100
----------
2,938,800
CORPORATE NOTES 1.1%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 4,355,000 4,424,763
Walt Disney Company Euro-Dollar Senior
Participating Notes, 2.00%, Due 3/01/00
(Acquired 9/19/96; Cost $6,250,000) (b) 5,000,000 4,850,000
----------
9,274,763
REPURCHASE AGREEMENTS 0.4%
Barclays Capital, Inc. (Dated 10/29/99), 5.22%,
Due 11/01/99 (Repurchase proceeds
$3,101,349); Collateralized by: United States
Treasury Notes (d) $3,100,000 $3,100,000
UNITED STATES GOVERNMENT ISSUES 0.1%
United States Treasury Bills, Due 11/18/99
thru 1/20/00 (c) 1,035,000 1,029,034
- -----------------------------------------------------------------------------------------
Total Short-Term Investments
(Cost $16,528,088) 16,342,597
=========================================================================================
Total Investments in Securities (Cost $898,026,026) 100.0% 868,678,916
Other Assets and Liabilities, Net 0.0% 390,037
- -----------------------------------------------------------------------------------------
NET ASSETS 100.0% $869,068,953
=========================================================================================
<CAPTION>
FUTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
130 Two-Year U.S. Treasury Notes 12/99 $26,916,094 ($10,865)
386 U.S. Treasury Bonds 12/99 43,847,188 33,562
Sold:
197 Five-Year U.S. Treasury Notes 12/99 21,266,766 9,884
3 Ten-Year U.S. Treasury Notes 12/99 329,156 (2,263)
<CAPTION>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
- ------------------------------------------------------------------------------------------------------------------------------------
Settlement Unrealized
Date Value in USD Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold:
11,000,000 CAD 3/17/00 $7,503,183 $9,995
<CAPTION>
SWAPS
- ------------------------------------------------------------------------------------------------------------------------------------
Open index rate swap contracts at October 31, 1999 consisted of the following:
- ------------------------------------------------------------------------------------------------------------------------------------
Notional Termination Interest Index Unrealized
Amount Date Sold Bought Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$25,000,000 6/01/00 1 mo. LIBOR Lehman Brothers $208,131
Baa
20,000,000 7/31/00 1 mo. LIBOR ERISA Eligible 131,431
Lehman CMBS*
</TABLE>
* Lehman Brothers Investment Grade Index - ERISA Eligible Sub Index
Collateralized Mortgage-Backed Securities Index Total Return Swap
20
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
UNITED STATES GOVERNMENT &
AGENCY ISSUES 86.5%
FHA Insured Project Loan #956-55054, 2.93%,
Due 11/01/12 $ 3,533,603 $ 2,797,695
FHA Project Loan, 7.40%, Due 3/01/09 20,099,898 20,426,521
FHLMC Guaranteed Multiclass Variable
Rate Mortgage Participation Certificates:
Pool #865496, 7.468%, Due 5/01/26 2,705,558 2,736,743
Series 1539, Class FB, 5.262%, Due 6/15/05 1,716,530 1,715,134
FHLMC Notes, 6.625%, Due 9/15/09 74,655,000 74,366,832
FHLMC Participation Certificates:
5.50%, Due 12/15/08 3,649,556 3,622,348
6.00%, Due 1/01/13 (c) 11,533,019 11,148,510
6.05%, Due 6/25/14 (c) 20,476,913 20,368,487
6.25%, Due 9/15/22 6,305,000 6,042,176
6.59%, Due 6/25/12 6,253,174 6,234,071
6.775%, Due 11/01/03 6,079,723 6,089,207
7.00%, Due 5/01/03 thru 1/25/21 5,199,615 5,176,726
7.20%, Due 11/01/06 (e) 10,163,000 10,191,558
7.25%, Due 7/01/08 851,447 858,841
7.26%, Due 6/01/06 (c) 6,674,960 6,731,363
7.625%, Due 8/25/22 3,519,619 3,516,821
8.00%, Due 7/01/08 thru 2/01/17 5,024,418 5,153,516
8.50%, Due 10/01/05 thru 6/01/17 24,480,782 25,327,904
9.00%, Due 9/15/05 thru 4/01/17 8,166,310 8,521,681
9.30%, Due 7/15/21 3,216,775 3,334,424
9.50%, Due 4/01/07 thru 12/01/19 2,024,477 2,102,486
9.75%, Due 8/01/02 443,527 457,933
10.00%, Due 10/01/05 thru 6/01/20 2,456,387 2,571,941
10.50%, Due 6/01/04 thru 8/01/20 4,362,204 4,712,113
11.00%, Due 1/01/01 4,009 4,081
11.25%, Due 1/01/01 20,810 21,204
11.75%, Due 10/01/15 62,623 68,113
12.00%, Due 11/01/15 24,459 27,114
12.25%, Due 7/01/15 thru 12/01/15 228,592 250,683
12.50%, Due 10/01/09 thru 1/01/15 140,212 155,522
13.00%, Due 7/01/14 45,021 50,525
13.75%, Due 5/01/02 29,968 31,844
14.00%, Due 6/01/11 thru 4/01/16 443,221 506,134
14.50%, Due 3/01/11 thru 12/01/11 6,540 7,543
14.75%, Due 8/01/11 thru 4/01/13 6,146 7,097
15.00%, Due 8/01/11 23,621 27,496
16.00%, Due 6/01/12 6,354 7,545
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
5.00%, Due 7/01/06 58,121,638 53,924,674
5.60%, Due 5/01/04 thru 11/01/05 2,122,825 2,042,913
6.00%, Due 9/01/12 thru 1/25/39 17,403,858 16,913,713
6.09%, Due 1/01/03 12,572,436 12,302,378
6.125%, Due 11/25/03 1,030,806 1,026,677
6.30%, Due 12/25/15 2,861,379 2,787,598
6.32%, Due 8/15/08 (c) 11,500,000 10,995,093
6.49%, Due 12/25/25 8,553,790 8,546,733
6.50%, Due 6/18/27 thru 8/01/28 (c) 31,680,397 30,056,487
6.53%, Due 7/01/02 2,385,349 2,363,154
6.91%, Due 4/01/15 1,728,110 1,765,162
7.00%, Due 9/01/07 thru 6/25/22 (c) 24,333,632 24,160,539
7.11%, Due 10/01/09 5,000,000 5,001,550
7.17%, Due 10/01/09 4,356,000 4,377,780
7.18%, Due 10/01/09 3,451,100 3,471,600
7.50%, Due 7/01/03 thru 10/01/18 28,322,702 28,721,961
8.00%, Due 4/01/17 thru 11/01/26 29,282,951 29,885,288
8.25%, Due 1/25/06 1,398,213 1,414,627
8.305%, Due 4/01/01 5,334,128 5,418,895
8.40%, Due 2/25/09 (c) 25,623,332 26,231,246
8.43%, Due 4/01/01 (c) 10,298,587 10,475,566
8.50%, Due 7/01/10 thru 5/01/26 (c) 31,350,108 32,687,823
8.55%, Due 8/25/26 5,734,000 5,913,188
8.75%, Due 1/01/10 923,901 974,809
9.00%, Due 9/01/21 thru 11/01/21 (c) $ 6,232,974 $ 6,559,788
9.25%, Due 4/25/18 1,062,687 1,115,702
9.40%, Due 10/25/19 4,025,479 4,222,087
9.50%, Due 6/01/05 thru 7/01/28 (c) 13,563,901 14,319,329
10.00%, Due 4/01/20 2,067,848 2,230,602
11.00%, Due 2/01/19 1,960,901 2,185,006
11.50%, Due 2/01/19 1,142,149 1,282,218
11.75%, Due 12/01/10 80,995 89,973
12.00%, Due 1/01/16 thru 2/01/19 1,765,806 1,983,670
12.25%, Due 7/01/14 19,702 21,869
12.50%, Due 2/01/11 127,724 143,638
13.25%, Due 4/01/12 3,211 3,714
13.50%, Due 1/01/12 4,433 5,018
13.75%, Due 10/01/10 6,112 6,832
14.00%, Due 1/01/12 thru 11/01/14 75,653 84,869
14.25%, Due 12/01/14 32,548 36,572
14.50%, Due 1/01/12 6,457 7,283
14.75%, Due 3/01/12 93,546 109,035
15.00%, Due 10/01/12 9,887 11,300
15.50%, Due 10/01/12 7,340 8,429
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates,
Pool #313629, 8.50%, Due 11/01/02 441,999 452,259
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Certificates:
Pool #54844, 5.754%, Due 9/01/27 (c) 14,282,084 14,007,161
Pool #66414, 6.492%, Due 9/01/28 (c) 10,595,648 10,926,946
Pool #70279, 6.367%, Due 4/01/19 860,496 870,591
Pool #70843, 6.163%, Due 4/01/20 1,737,466 1,734,650
Pool #92068, 7.035%, Due 1/01/18 825,120 846,793
Pool #109031, 6.695%, Due 8/01/05 10,000,000 9,873,118
Pool #110238, 6.121%, Due 1/01/16 3,712,917 3,704,343
Pool #124013, 7.114%, Due 10/01/21 1,143,465 1,175,145
Pool #181826, 7.085%, Due 10/01/22 693,591 712,420
Pool #201427, 6.777%, Due 1/01/23 1,407,886 1,457,401
Pool #323127, 6.071%, Due 8/01/15 (c) 17,690,083 17,431,631
Pool #380317, 6.292%, Due 5/01/05 (c) 9,261,984 8,982,654
Pool #457277, 7.396%, Due 10/01/27 23,130,715 23,667,503
Pool #505642, 6.894%, Due 5/01/28 7,307,812 7,433,118
Pool #513627, 6.902%, Due 3/01/28 15,262,474 15,634,573
Series 1996-M6, Class A, 7.3879%,
Due 8/17/03 505,013 507,035
Series 1997-M4, Class C, 7.2984%,
Due 8/17/18 5,683,000 5,659,842
Series 1999-W6, Class A, 9.0931%,
Due 9/25/28 12,905,066 13,530,187
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Mortgage
Securities, 5.74%, Due 3/01/18 2,735,543 2,689,608
FNMA Medium-Term Notes:
5.75%, Due 2/03/04 4,050,000 3,919,428
6.05%, Due 4/17/03 4,812,000 4,723,397
FNMA Notes, 6.50%, Due 8/15/04 17,500,000 17,560,778
FNMA Stripped Mortgage-Backed Securities:
Series B, Class B-1, 6.00%, Due 5/01/09 2,261,463 2,225,837
Series C, Class C-1, 6.00%, Due 5/01/09 1,994,232 1,954,947
Series K, Class K-1, 6.00%, Due 11/01/08 (c) 11,949,700 11,808,620
FNMA Stripped Mortgage-Backed Securities,
Interest Only Custodial Receipts, Series 161,
Class 2, 8.50%, Due 7/25/22 3,173,622 847,301
Federal Agricultural Mortgage Corporation
Guaranteed Mortgage Variable Rate
Pass-Thru Certificates:
Series BA -1001, Class 1, 7.012%, Due 1/25/03 2,860,200 2,900,414
Series CS -1001, Class 1, 7.185%, Due 7/25/01 2,045,409 2,097,833
Series CS -1004, Class 1, 7.109%, Due 1/25/02 4,589,122 4,624,964
Series CS -1010, Class 1, 7.436%, Due 7/25/02 7,160,587 7,308,310
Series GS -1001, Class 1, 7.023%, Due 1/25/08 1,289,836 1,288,224
Series GS -1002, Class 1, 6.71%, Due 7/25/08 452,437 446,922
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Federal Home Loan Banks Consolidated
Bonds, Series SG, 5.19%, Due 3/01/01 (c) $10,000,000 $ 9,887,280
GNMA Guaranteed Pass-Thru Certificates:
8.35%, Due 4/15/20 17,174,279 17,888,440
9.00%, Due 12/15/06 thru 12/15/09 8,398,409 8,721,809
12.50%, Due 4/15/19 2,447,475 2,814,166
13.00%, Due 12/15/10 thru 11/15/14 372,749 430,187
13.50%, Due 7/15/10 thru 10/15/12 84,034 97,730
14.00%, Due 4/15/12 thru 12/20/14 105,316 122,505
14.50%, Due 6/15/11 thru 11/15/12 221,504 259,338
15.00%, Due 1/15/12 thru 9/15/12 95,758 111,826
16.00%, Due 4/15/12 9,373 11,051
GNMA Guaranteed Variable Rate
Pass-Thru Certificates:
Pool #8333, 6.375%, Due 3/20/18 979,551 996,701
Pool #8489, 6.375%, Due 4/20/19 217,562 221,209
Pool #8678, 6.625%, Due 8/20/20 7,316,616 7,456,224
Pool #8714, 6.125%, Due 11/20/20 5,542,263 5,649,681
HHS Project Loan, 7.83%, Due 11/01/01 1,197,979 1,214,451
Small Business Administration Guaranteed
Loan Interest Only Custodial Receipts:
Series 1992-6A, 2.473%, Due 10/15/17 26,491,058 1,158,984
Series 1993-1A, 2.5312%, Due 2/15/18 21,767,917 938,850
Student Loan Marketing Association Student
Loan Trust Floating Rate Securities:
Series 1995-1, Class A1, 5.711%, Due 4/25/04 2,248,888 2,246,650
Series 1996-3, Class A1, 5.626%, Due 10/25/04 23,873,185 23,768,979
USGI FHA Insured Project Pool #2040,
3.025%, Due 11/01/06 5,277,936 4,864,885
United States Department of Veterans Affairs
Guaranteed Real Estate Mortgage Investment
Conduit Pass-Thru Certificates - Vendee
Mortgage Trust:
Series 1992-1, Class 2J, 7.75%, Due 3/15/05 11,801,000 11,975,977
Series 1995-1, Class 3I, 8.00%, Due 4/15/06 10,000,000 10,253,550
Series 1995-1, Class 4, 8.8519%, Due 2/15/25 6,879,701 7,191,988
Series 1995-2, Class 3, 8.7925%, Due 6/15/25 15,173,958 15,715,887
United States Treasury Securities Stripped
Interest Payment, Zero%, Due 5/15/13 83,540,000 34,546,380
United States Treasury Notes:
5.25%, Due 2/15/29 (c) 51,495,000 44,559,293
6.00%, Due 8/15/09 2,195,000 2,192,943
6.125%, Due 11/15/27 (c) 13,125,000 12,682,031
6.375%, Due 8/15/02 8,815,000 8,925,188
6.50%, Due 10/15/06 16,100,000 16,391,813
7.00%, Due 7/15/06 11,690,000 12,212,403
9.25%, Due 2/15/16 69,600,000 88,587,785
11.75%, Due 2/15/10 8,900,000 11,047,125
- -----------------------------------------------------------------------------------------
Total United States Government & Agency
Issues (Cost $1,172,563,230) 1,159,403,582
- -----------------------------------------------------------------------------------------
CORPORATE BONDS 6.5%
Air 2 US Enhanced Equipment Notes, Series A,
8.027%, Due 10/01/19 (Acquired 10/28/99;
Cost $9,710,000) (b) (e) 9,710,000 9,777,096
Atlas Air, Inc. Pass-Thru Certificates,
Series 1998-1, Class B, 7.68%, Due 1/02/14 9,884,147 9,300,143
Bank United Medium-Term Bank Notes,
Tranche #00001, 8.00%, Due 3/15/09 10,000,000 9,567,650
Continental Airlines Pass-Thru Trusts
Pass-Thru Certificates, Series 1999-2,
Class A-1, 7.256%, Due 3/15/20 (c) 8,500,000 8,288,053
Ford Motor Credit Company Notes, 7.375%,
Due 10/28/09 10,000,000 10,111,610
GS Escrow Corporation Senior Notes, 7.00%,
Due 8/01/03 (c) 19,400,000 18,267,176
Riggs Capital Trust Preferred Securities,
Series A, 8.625%, Due 12/31/26 (c) 9,490,000 8,743,308
United Air Lines, Inc. Debentures, 10.25%,
Due 7/15/21 (c) $10,735,000 $12,907,979
- -----------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $90,500,540) 86,963,015
- -----------------------------------------------------------------------------------------
MUNICIPAL BONDS 0.3%
Arkansas Development Finance Authority GNMA
Guaranteed Bonds, 9.75%, Due 11/15/14 (c) 3,100,000 3,672,604
- -----------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $3,766,371) 3,672,604
- -----------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 0.3%
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1999-3, Class B2, 6.50%,
Due 5/25/29 1,349,145 1,124,428
Community Program Loan Trust Bonds,
Series 1987-A, Class A5, 4.50%, Due 4/01/29 2,480,000 1,808,788
Norwest Asset Securities Corporation Mortgage
Pass-Thru Certificates, Series 1999-23,
Class B3, 7.00%, Due 10/25/29 1,126,151 981,193
- -----------------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed
Securities (Cost $3,948,314) 3,914,409
- -----------------------------------------------------------------------------------------
OPTIONS 0.0%
FNMA Bond Put Options: (Strike
price is 98.16. Expiration date is 11/19/99.) 5,250,000 4,922
MCI Worldcom, Inc. Call Options: (Strike
price is 100. Expiration date is 6/20/03.) 25,000,000 225,000
United States Treasury Bond Futures Put
Options: (Strike price is 110. Expiration date
is 11/19/99.) 75,000 4,688
United States Treasury Bond Put Options: (Strike
price is 96. Expiration date is 11/19/99.) 100,000 21,094
- -----------------------------------------------------------------------------------------
Total Options (Cost $733,463) 255,704
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS 2.4%
Centaur Funding Corporation 9.08% Series B
(Acquired 12/09/98 - 5/24/99; Cost $22,046,718) (b) 21,000 21,866,250
Norwest Corporation Series A Cumulative
Tracking/Residential Home Mortgage LLC
(Acquired 12/16/94; Cost $10,000,000) (b) 50,000 10,052,800
- -----------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $32,046,718) 31,919,050
- -----------------------------------------------------------------------------------------
WARRANTS 0.0%
EOP Operating LP Warrants, Expire 1/18/00 7,500 7,500
- -----------------------------------------------------------------------------------------
Total Warrants (Cost $60,000) 7,500
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 4.4%
COMMERCIAL PAPER 0.1%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 5.01% $ 985,700 985,700
Warner Lambert Company, 4.99% 420,900 420,900
Wisconsin Electric Power Company, 4.99% 91,300 91,300
-----------
1,497,900
REPURCHASE AGREEMENTS 1.8%
ABN-AMRO Inc. (Dated 10/29/99), 5.22%,
Due 11/01/99 (Repurchase proceeds $24,410,614);
Collateralized by: U.S. Government & Agency
Issues and Non-Agency Mortgage &
Asset-Backed Securities (d) 24,400,000 24,400,000
UNITED STATES GOVERNMENT ISSUES 2.5%
FHLMC Guaranteed Multiclass Variable Rate
Mortgage Participation Certificates,
Series 1572-B, Class SA, 4.3175%, Due 10/15/00 2,842,838 2,772,826
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
FHLMC Multiclass Mortgage Guaranteed
Participation Certificates, Series 144,
Class 144-A, 8.75%, Due 6/15/00 $ 33,158 $ 33,158
Federal Home Loan Banks Consolidated Bonds:
Series H, 4.875%, Due 3/17/00 (c) 8,000,000 7,971,072
Series TS, 5.125%, Due 5/19/00 (c) 20,000,000 19,932,560
United States Treasury Bills, Due 11/04/99
thru 1/13/00 (c) 2,385,000 2,372,126
------------
33,081,742
- -----------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $58,990,214) 58,979,642
=========================================================================================
Total Investments in Securities
(Cost $1,362,608,850) 100.4% 1,345,115,506
Other Assets and Liabilities, Net (0.4%) (5,053,694)
- -----------------------------------------------------------------------------------------
NET ASSETS 100.0% $1,340,061,812
=========================================================================================
<CAPTION>
FUTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
946 Five-Year U.S. Treasury Notes 12/99 $102,123,656 ($985,224)
635 Ten-Year U.S. Treasury Notes 12/99 69,671,406 402,840
109 U.S. Treasury Bonds 12/99 12,381,719 (104,354)
Sold:
478 Ten-Year U.S. Treasury Notes 3/00 46,814,125 (390,406)
<CAPTION>
SWAPS
- ------------------------------------------------------------------------------------------------------------------------------------
Open index rate swap contracts at October 31, 1999 consisted of the following:
- ------------------------------------------------------------------------------------------------------------------------------------
Notional Termination Interest Index Unrealized
Amount Date Sold Bought Depreciation
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$50,000,000 7/31/00 1 mo. LIBOR ERISA Eligible $328,580
Lehman CMBS*
* Lehman Brothers Investment Grade Index - ERISA Eligible Sub Index
Collateralized Mortgage-Backed Securities Index Total Return Swap
<CAPTION>
WRITTEN OPTIONS ACTIVITY
- ------------------------------------------------------------------------------------------------------------------------------------
Contracts Premiums
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of year -- $ --
Options written during the year 554,495 1,458,771
Options closed (501,545) (1,259,683)
Options expired -- --
Options exercised -- --
-------- -------------
Options outstanding at end of year 52,950 $ 199,088
-------- -------------
-------- -------------
Closed options resulted in a capital gain of $327,649.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
WRITTEN OPTIONS DETAIL
- ------------------------------------------------------------------------------------------------------------------------------------
Contracts (100
shares per
contract) Value (Note 2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
United States Treasury 10 Year Options
Puts: (Strike price is 98.81. Expiration date
is 11/19/99. Premium received $54,297.) 50,000 ($ 12,500)
United States Treasury Bond Futures Options
Calls: (Strike price is 116.00. Expiration date is
12/17/99. Premium received is $26,850.) 300* (93,750)
Puts: (Strike price is 108.00. Expiration date is
11/19/99. Premium received is $12,572.) 75* (2,344)
Puts: (Strike price is 109.00. Expiration date is
11/19/99. Premium received is $23,119.) 75* (2,344)
Puts: (Strike price is 109.00. Expiration date is
12/17/99. Premium received is $18,613.) 400* (12,500)
Puts: (Strike Price is 116.00. Expiration date is
12/17/99. Premium received is $8,950.) 100* (254,600)
United States Treasury Bond Options
Puts: (Strike price is 93.00. Expiration date
is 11/19/99. Premium received is $12,500.) 1,000 (1,562)
Puts: (Strike price is 95.00. Expiration date
is 11/19/99. Premium received is $42,187.) 1,000 (10,156)
----- -------
52,950 ($389,756)
------ ---------
------ ---------
</TABLE>
* These contracts are 1000 shares per contract.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 53.2%
Air 2 US Enhanced Equipment Notes, Series A,
8.027%, Due 10/01/19
(Acquired 10/28/99; Cost $10,000,000) (b) (e) $10,000,000 $10,110,500
Atlas Air, Inc. Pass-Thru Certificates,
Series 1998-1, Class C, 8.01%, Due 1/02/10 18,747,998 17,786,882
Beaver Valley Funding Corporation
Debentures, 8.625%, Due 6/01/07 9,860,000 10,044,875
Blackstone Hotel Acquisitions Company
Debt Unit (Medium-Term Structured
Enhanced Return Trusts 1998), Series R-38,
6.4188%, Due 6/30/03
(Acquired 7/30/98; Cost $14,000,000) (b) 14,000,000 13,912,500
CMS Energy Corporation Senior Notes,
8.375%, Due 7/01/13 (Remarketing
Date 7/01/03) 10,000,000 9,893,700
CSC Holdings, Inc. Senior Notes, Series B,
8.125%, Due 7/15/09 6,500,000 6,524,375
CSC Holdings, Inc. Senior Subordinated
Debentures:
9.875%, Due 2/15/13 3,275,000 3,397,812
9.875%, Due 4/01/23 8,875,000 9,207,813
Cendant Corporation Notes:
7.50%, Due 12/01/00 10,000,000 10,035,590
7.75%, Due 12/01/03 11,540,000 11,523,498
Coastal Corporation Notes, 6.20%, Due 5/15/04 5,000,000 4,848,165
Continental Airlines, Inc. Senior Notes, 9.50%,
Due 12/15/01 14,750,000 14,971,250
Continental Airlines Pass-Thru Certificates:
Series 1997-2D, 7.522%, Due 6/30/01 7,188,740 7,210,989
Series 1998-2A, 6.41%, Due 4/15/07 2,359,571 2,271,076
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
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 $3,870,676) (b) $ 3,882,634 $ 3,875,731
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 $3,726,921) (b) 3,729,382 3,708,528
Delta Air Lines, Inc. Pass-Thru Certificates:
Series 1992-B1, 9.375%, Due 9/11/07 11,835,206 12,448,683
Series 1993-A1, 9.875%, Due 4/30/08 14,151,247 15,311,154
El Paso Electric Company First Mortgage
Notes, Series E, 9.40%, Due 5/01/11 6,018,000 6,583,999
El Paso Energy Corporation Senior
Notes, 6.625%, Due 7/15/01 7,900,000 7,869,127
Empress Entertainment, Inc. Senior
Subordinated Notes, 8.125%, Due 7/01/06 10,000,000 9,975,000
First Industrial LP Notes, 6.50%,
Due 4/05/11 (Remarketing Date 3/15/01) 10,000,000 9,864,160
Ford Motor Credit Company Notes:
5.75%, Due 2/23/04 12,125,000 11,635,186
6.70%, Due 7/16/04 2,970,000 2,944,440
7.375%, Due 10/28/09 11,875,000 12,007,537
GS Escrow Corporation Floating Rate
Senior Notes, 6.3125%, Due 8/01/03 5,000,000 4,757,005
GS Escrow Corporation Senior Notes:
6.75%, Due 8/01/01 34,500,000 33,622,561
7.00%, Due 8/01/03 8,700,000 8,191,981
Homeside International, Inc. Senior
Secured Second Priority Notes,
Series B, 11.25%, Due 5/15/03 27,468,000 31,107,510
Huntington Capital I Variable Rate Capital
Income Securities, 6.905%, Due 2/01/27 16,500,000 15,323,731
ITT Corporation Notes:
6.25%, Due 11/15/00 5,500,000 5,402,754
6.75%, Due 11/15/03 10,400,000 9,798,745
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 5,000,000 4,710,795
Jones Intercable, Inc. Senior Notes, 9.625%,
Due 3/15/02 15,325,000 16,053,627
KN Energy, Inc. Senior Notes, 6.45%,
Due 11/30/01 10,440,000 10,335,715
KPNQwest BV Senior Notes, 8.125%,
Due 6/01/09 (Acquired 5/25/99;
Cost $9,929,300) (b) 10,000,000 9,550,000
Lilly Del Mar, Inc. Floating Rate Capital
Securities, 6.57%, Due 8/05/29
(Acquired 7/29/99; Cost $15,000,000) (b) 15,000,000 15,143,505
MetroNet Communications Corporation Senior
Discount Yankee Notes, Zero %, Due 6/15/08
(Rate Reset Effective 6/15/03) 13,000,000 10,172,500
MetroNet Communications Corporation
Senior Notes, 12.00%, Due 8/15/07 15,000,000 17,550,000
MetroNet Communications Corporation Senior
Yankee Notes, 10.625%, Due 11/01/08 22,000,000 25,080,000
NWA Trust Structured Enhanced Return
Trusts 1998, 8.4563%, Due 4/15/11
(Acquired 4/06/98; Cost $15,240,000) (b) 15,000,000 13,425,000
Niagara Mohawk Power Corporation
Senior Notes, Series C, 7.125%, Due 7/01/01 23,817,071 23,847,295
Occidental Petroleum Corporation Senior
Notes, 6.50%, Due 4/01/05 10,000,000 9,647,920
Osprey Trust/Osprey I, Inc. Senior Secured
Notes, 8.31%, Due 1/15/03
(Acquired 9/16/99; Cost $7,500,000) (b) 7,500,000 7,494,045
Qwest Communications International, Inc.
Senior Notes, Series B, 10.875%, Due 4/01/07 13,609,741 15,310,959
Riggs Capital Trust Preferred Securities,
Series A, 8.625%, Due 12/31/26 $11,500,000 $10,595,157
Saks, Inc. Guaranteed Notes, 7.00%,
Due 7/15/04 10,000,000 9,397,090
Simon Debartolo Group LP Notes, 6.625%,
Due 6/15/03 10,000,000 9,619,090
Spintab AB Floating Rate Subordinated
Yankee Notes, 6.12%, Due 12/29/49
(Acquired 11/21/97; Cost $30,000,000) (b) 30,000,000 30,090,120
Sprint Capital Corporation Guaranteed
Notes, 5.875%, Due 5/01/04 11,385,000 10,938,867
Sprint Spectrum LP/Sprint Spectrum
Finance Corporation Senior Notes, 11.00%,
Due 8/15/06 14,648,000 16,625,480
Star Capital Trust I Floating Rate Securities,
6.275%, Due 6/15/27 10,000,000 9,619,790
Superior Financial Corporation Senior
Notes, 8.65%, Due 4/01/03 1,250,000 1,200,000
Swedbank Floating Rate Debt Unit
(Medium-Term Structured Enhanced
Return Trusts 1996, Series R-35), 6.22%,
Due 11/10/02 (Acquired 10/16/96;
Cost $10,000,000) (b) 10,000,000 9,600,000
Tricon Global Restaurants, Inc. Senior
Notes, 7.45%, Due 5/15/05 16,815,000 16,169,153
United Airlines, Inc. Debentures, 10.25%,
Due 7/15/21 4,850,000 5,831,737
Univision Network Holding LP Subordinated
Notes, 7.00%, Due 12/17/02 19,730,000 26,043,600
Waste Management, Inc. Senior Notes:
6.125%, Due 7/15/01 10,000,000 9,364,270
6.50%, Due 12/15/02 2,000,000 1,800,034
Williams Communications Group, Inc.
Senior Notes, 10.875%, Due 10/01/09 3,000,000 3,090,000
- -----------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $695,655,321) 684,472,606
- -----------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-
BACKED SECURITIES 23.0%
Asset Securitization Corporation Commercial
Mortgage Pass-Thru Certificates,
Series 1995-MD4, Class A-1, 7.10%, Due 8/13/29 22,428,599 22,351,332
BCF LLC Mortgage Pass-Thru Certificates,
Series 1997-R2, Class 3-A1, 7.00%,
Due 12/25/35 (Acquired 6/17/97;
Cost $2,562,350) (b) 2,560,627 2,557,772
CS First Boston Mortgage Securities
Corporation Mortgage-Backed Certificates,
7.25%, Due 8/25/27 1,458,882 1,461,311
Chase Mortgage Finance Corporation
Mortgage Pass-Thru Certificates,
Series 1990-G, Class A-Z1, 9.50%, Due 12/25/21 714,303 725,131
Chase Mortgage Finance Corporation Variable
Rate Multiclass Mortgage Pass-Thru
Certificates, Series 1992-2, Class B2, 7.9663%,
Due 8/28/23 (Acquired 9/27/96 - 9/03/97;
Cost $2,330,241) (b) 2,319,933 2,312,741
Cistron Biotechnology, Inc. Asset-Backed
Notes, Series 1997-A, Class A-6, 6.35%,
Due 4/15/11 8,055,000 8,022,901
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates:
Series 1988-8, Class A1, 7.7722%, Due 6/25/18 3,166,561 3,200,235
Series 1993-3, Class B1, 7.00%, Due 3/25/08
(Acquired 10/23/96; Cost $1,645,505) (b) 1,670,166 1,648,662
Cityscape Home Loan Owners Trust Asset-
Backed Notes, Series 1997-1, Class A-3,
6.63%, Due 3/25/18 3,867,389 3,855,265
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Collateralized Mortgage Obligation Trust 47,
Class E, Principal Only, Due 9/01/18 $ 568,824 $ 346,446
Collateralized Mortgage Obligation Trust
Inverse Floating Rate Collateralized
Mortgage Obligation, Series 13, Class Q,
15.8166%, Due 1/20/03 425,314 442,251
ContiMortgage Home Equity Loan Trust
Interest Only Senior Strip Certificates,
Series 1996-2, Class A, 0.8879%, Due 7/15/27 66,011,785 924,165
ContiSecurities Residual Corporation
ContiMortgage Net Interest Margin Notes,
Series 1997-A, 7.23%, Due 7/16/28
(Acquired 9/18/97; Cost $2,008,119) (b) 2,008,119 1,305,277
Countrywide Mortgage-Backed Securities,
Inc. Variable Rate Mortgage Pass-Thru
Certificates, Series 1994-D, Class A6, 5.5495%,
Due 3/25/24 4,491,070 4,296,729
DLJ Mortgage Acceptance Corporation
Variable Rate Multi-Family Mortgage
Pass-Thru Certificates, Series 1993-MF10,
Class A-1, Interest Only, 0.80%, Due 7/15/03 21,581,683 107,908
Drexel Burnham Lambert Collateralized
Mortgage Obligation Trust, Series T,
Class T-4, 8.45%, Due 9/20/19 6,600,000 6,729,644
The Equitable Life Assurance Society of
the United States Floating Rate Notes,
Series 174, Class A2, 5.74%, Due 5/15/03
(Acquired 9/10/99; Cost $9,967,188) (b) 10,000,000 9,962,850
FirstPlus Global Issuance Corporation
Asset-Backed Notes, Series 1998-4,
Class A, Interest Only, 6.10%, Due 9/10/24 52,379,000 2,299,962
GMBS, Inc. Countrywide Funding Certificates,
Series 1990-1, Class Z, 9.25%, Due 1/28/20 2,069,292 2,062,308
GS Mortgage Securities Corporation Variable
Rate Mortgage Participation Securities,
Series 1998-1, Class A, 8.00%, Due 9/20/27
(Acquired 5/19/98; Cost $8,156,839) (b) 7,784,637 7,952,473
GS Mortgage Securities Corporation II
Commercial Mortgage Pass-Thru
Certificates, Series 1999-C1, Class X, Interest
Only, 0.9653%, Due 11/18/30 118,758,109 6,699,739
Greenwich Capital Acceptance, Inc.
Mortgage Securities, Series 1993-P01,
Class E, Principal Only, Due 11/26/17 4,397,005 3,190,598
Greenwich Capital Acceptance, Inc. Variable
Rate Mortgage Pass-Thru Certificates,
Series 1991-1, Class A, 6.3984%, Due 2/25/21
(Acquired 4/18/96; Cost $5,660,489) (b) 5,549,499 5,578,967
Greenwich Capital Markets, Inc. Commercial
Mortgage Loan Facility Variable Rate
Funding Certificates, Series 1998 SFT-1,
Class B, 9.6875%, Due 3/31/01
(Acquired 9/29/98 - 9/30/99; Cost $10,587,368) (b) 10,587,368 10,587,368
Kmart CMBS Financing, Inc. Floating Rate
Commercial Mortgage Pass-Thru Certificates,
Series 1997-1, Class D, 6.50%, Due 3/01/07
(Acquired 3/10/97; Cost $4,516,875) (b) 4,500,000 4,474,463
Merrill Lynch Home Equity Acceptance, Inc.
Subordinated Variable Rate Mortgage-
Backed Certificates, Series 1994-A, Class A-1,
6.375%, Due 8/17/23 6,271,839 6,236,591
Merrill Lynch Mortgage Investors, Inc.
Mortgage Pass-Thru Certificates,
Series 1994-C1, Interest Only, 0.6440%,
Due 11/25/20 18,874,268 35,484
Merrill Lynch Mortgage Investors, Inc. Senior
Subordinated Pass-Thru Certificates,
Series 1994-A, Class A-5, 7.035%, Due 2/15/24 13,074,806 12,885,809
Merrill Lynch Mortgage Investors, Inc.
Variable Rate Mortgage Pass-Thru
Certificates, Series 1994-M1, Class E,
8.4274%, Due 6/25/22 (Acquired 11/19/98;
Cost $6,663,900) (b) $ 6,870,000 $ 6,837,058
Mid-State Trust II Mortgage-Backed Notes,
Class A4, 9.625%, Due 4/01/03 5,204,500 5,409,721
Morgan Stanley Capital I, Inc. Variable Rate
Commercial Mortgage Pass-Thru Certificates:
Series 1997-RR, Class A, 6.8284%,
Due 4/30/39 (Acquired 11/21/97;
Cost $4,291,517) (b) 4,292,758 4,133,110
Series 1999-WF1, Class X, Interest Only,
0.8418%, Due 2/25/29 (Acquired 2/10/99;
Cost $4,947,574) (b) 96,056,339 4,655,370
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 5,001,550
Option One Mortgage Securities Corporation
Net Interest Margin Trust, Series 1999-2,
9.66%, Due 6/25/29 (Acquired 4/23/99;
Cost $5,397,091) (b) 5,397,091 5,370,106
Oregon Commercial Mortgage, Inc. Variable
Rate Commercial Mortgage Pass-Thru
Certificates, Series 1995-1, Class E, 9.3279%,
Due 6/25/26 (Acquired 5/13/98;
Cost $7,997,923) (b) 7,688,000 7,577,523
Paine Webber Mortgage Acceptance
Corporation IV Mortgage Pass-Thru
Certificates, Series 1995-M1, Class B, 6.95%,
Due 1/15/07 (Acquired 9/08/99;
Cost $13,056,875) (b) 13,000,000 12,991,940
Prudential Home Mortgage Securities
Company Mortgage Pass-Thru Certificates,
Series 1992-26, Class A-18, 7.50%, Due 8/25/07 1,580,480 1,586,407
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 - 3/18/98;
Cost $2,344,706) (b) 2,340,818 2,337,646
Residential Funding Mortgage Securities I,
Inc. Mortgage Pass-Thru Certificates,
Series 1993-M23, Class A-1, 6.97%, Due 8/28/23 812,961 808,364
Resolution Trust Corporation Mortgage
Pass-Thru Securities, Inc.
Commercial Certificates:
Series 1994-C2, Class E, 8.00%, Due 4/25/25 11,236,437 11,128,512
Series 1995-C2, Class D, 7.00%, Due 5/25/27 4,988,250 4,945,726
Resolution Trust Corporation Variable Rate
Mortgage Pass-Thru Securities:
Series 1991-11, Class 1-L, 8.625%, Due 10/25/21 6,564,717 6,544,662
Series 1992-1, Class A-2, 7.4219%, Due 8/25/20 1,389,840 1,385,483
Rural Housing Trust 1987-1 Senior Mortgage
Pass-Thru Certificates, Series 1, Class D,
6.33%, Due 4/01/26 314,374 312,254
Rural Housing Trust 1987-1 Senior Mortgage
Pass-thru Subordinated Certificates,
Class 3B, 7.33%, Due 4/01/26 8,103,860 8,138,018
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage
Bonds, Series 1992-C, Class 3-A, 11.7547%,
Due 11/25/30 301,652 300,667
Ryland Mortgage Securities Corporation IV
Variable Rate Collateralized Mortgage
Bonds, Series 2, Class 3-A, 12.0657%,
Due 6/25/23 1,194,528 1,213,748
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Ryland Mortgage Securities Corporation
Variable Rate Mortgage Participation
Securities, Series 1992-3, Class A-2, 6.6426%,
Due 6/25/20 $ 3,770,968 $ 3,775,073
SL Commercial Mortgage Trust Mortgage
Pass-Thru Certificates, Series 1997-C1,
Class A, 6.875%, Due 7/25/04
(Acquired 3/23/99 - 10/27/99;
Cost $21,276,087) (b) 20,965,699 20,848,187
SWP Mortgage Securities Trust Mortgage
Pass-Thru Certificates Series 1993-1, Class A,
6.54%, Due 12/15/02 (Acquired 1/23/98;
Cost $3,045,346) (b) 3,026,431 3,022,648
Salomon Brothers Mortgage Securities VI,
Inc. Stripped Coupon Mortgage Pass-Thru
Certificates, Series 1987-3, Class A, Principal
Only, Due 10/23/17 1,058,101 893,275
Sequoia Mortgage Trust Adjustable Rate
Asset-Backed Certificates, Series 3, Class M-1,
6.85%, Due 6/25/28 11,127,300 11,162,129
Shearson Lehman Pass-Thru Securities, Inc.
Asset Trust Variable Rate Pass-Thru
Certificates, Series 88-3, 6.9044%, Due 9/15/18 3,832,926 3,800,059
Structured Mortgage Asset Residential Trust
Multiclass Pass-Thru Certificates, Series 1992-5,
Class BO, Principal Only, Due 6/25/23 423,807 346,328
Structured Mortgage Trust Commercial
Mortgage-Backed Securities, Series 1997-2,
Class A, 7.3427%, Due 1/30/06
(Acquired 5/12/98; Cost $10,592,586) (b) 10,712,139 10,169,890
Triumph Capital CBO I, Ltd./Triumph Capital
CBO I, Inc. Senior Secured Floating Rate
Notes, Class A-2, 5.8342%, Due 6/15/11
(Acquired 4/15/99; Cost $18,000,000) (b) 18,000,000 17,842,500
- -----------------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-
Backed Securities (Cost $299,614,889) 294,792,336
- -----------------------------------------------------------------------------------------
UNITED STATES GOVERNMENT &
AGENCY ISSUES 14.2%
FHLMC Participation Certificates:
6.50%, Due 5/01/04 841,136 819,317
8.50%, Due 4/01/01 thru 1/01/05 368,466 377,881
8.75%, Due 10/01/01 264,225 270,287
9.00%, Due 5/01/06 thru 8/01/18 7,457,340 7,841,770
9.50%, Due 3/01/11 168,806 180,059
9.75%, Due 8/01/02 790,033 815,693
10.25%, Due 7/01/09 thru 1/01/10 399,406 428,044
10.50%, Due 1/01/16 thru 7/01/19 7,608,074 8,206,123
10.75%, Due 9/01/09 thru 10/01/17 370,222 397,203
11.25%, Due 11/01/09 343,115 372,779
FHLMC Variable Rate Participation Certificates,
7.468%, Due 5/01/26 4,890,213 4,946,580
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
7.00%, Due 6/25/22 6,740,522 6,657,529
8.00%, Due 12/01/13 thru 9/01/23 30,921,259 31,689,508
8.50%, Due 4/01/08 thru 2/01/23 18,979,456 19,786,462
9.00%, Due 11/01/24 2,102,841 2,213,253
9.40%, Due 10/25/19 8,626,026 9,047,329
9.50%, Due 2/01/11 thru 2/15/11 6,869,137 7,342,265
10.00%, Due 7/01/04 thru 6/25/19 10,097,129 10,721,734
11.00%, Due 10/15/20 18,119,450 20,179,591
12.00%, Due 3/01/17 3,498,566 3,928,127
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 11,022 10,471
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Pass-
Thru Certificates, Series 1995-G2, Interest
Only, 7.2455%, Due 5/25/20 $ 6,713,785 $ 1,637,588
FNMA Stripped Mortgage-Backed Securities:
Series 107, Class 1, Principal Only, Due 10/25/06 1,394,178 1,214,521
Series 1993-M1, Class N, Interest Only, 0.84%,
Due 4/25/20 3,442,474 1,067
GNMA Guaranteed Pass-Thru Certificates:
7.50%, Due 12/15/07 4,584,225 4,669,231
8.00%, Due 12/15/08 1,642,389 1,703,493
8.50%, Due 5/15/10 1,338,211 1,396,820
9.00%, Due 11/15/24 1,459,029 1,543,503
9.75%, Due 9/15/05 thru 11/15/05 1,087,817 1,134,543
10.00%, Due 2/20/18 330,952 359,732
11.50%, Due 4/15/13 39,645 44,457
12.50%, Due 4/15/19 17,100,090 19,662,097
Small Business Administration Guaranteed
Loan Group #0190, Variable Rate Interest
Only Certificates, 3.1109%, Due 7/30/18 12,640,425 837,428
USGI FHA Insured Project Pool Banco 85,
7.4408%, Due 11/24/19 2,980,165 2,897,286
United States Treasury Notes, 6.00%,
Due 8/15/04 8,975,000 8,997,437
- -----------------------------------------------------------------------------------------
Total United States Government & Agency
Issues (Cost $182,757,425) 182,331,208
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS 6.0%
Caisse National De Credit Agricole Sponsored
ADR 10.375% Series A
(Acquired 11/15/96 - 5/21/98;
Cost $16,309,146) (b) 574,479 15,223,694
Golden State Bancorp, Inc. 9.125% Exchangeable
Series A 320,000 7,120,000
News Corporation Finance Trust 5.00% 100,000 5,818,750
Norwest Corporation Series A Cumulative
Tracking/Residential Home Mortgage
LLC (Acquired 12/16/94; Cost $23,000,000) (b) 115,000 23,121,440
Parmalat Capital Finance 7.70% Series B 300,000 6,900,000
TCI Communications Financing IV Trust 9.72% 347,300 9,203,450
Webster Capital Corporation 7.375% Series A 10,000 10,087,500
- -----------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $80,849,054) 77,474,834
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 3.6%
COMMERCIAL PAPER 0.2%
INTEREST BEARING, DUE UPON DEMAND
Pitney Bowes Credit Corporation, 5.01% 878,300 878,300
Warner Lambert Company, 4.99% 1,176,900 1,176,900
Wisconsin Electric Power Company, 4.99% 267,600 267,600
----------
2,322,800
CORPORATE BONDS 2.3%
ARA Services, Inc. Guaranteed Notes, 10.625%,
Due 8/01/00 5,273,000 5,357,468
Amerco Asset-Backed Bonds, 6.89%,
Due 10/15/00 (Acquired 10/17/97;
Cost $10,000,000) (b) 10,000,000 9,890,800
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 4,993,000
Walt Disney Company Euro-Dollar
Senior Participating Notes, 2.00%, Due 3/01/00
(Aquired 9/19/96; Cost $12,500,000) (b) 10,000,000 9,700,000
----------
29,941,268
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 1.0%
Barclays Capital, Inc. (Dated 10/29/99), 5.22%,
Due 11/01/99 (Repurchase proceeds
$12,505,438); Collateralized by: United
States Treasury Notes (d) $12,500,000 $ 12,500,000
United States Government Issues 0.1%
United States Treasury Bills, Due 11/26/99
thru 1/27/00 (c) 1,670,000 1,661,792
- -----------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS (COST $46,931,969) 46,425,860
=========================================================================================
Total Investments in Securities
(Cost $1,305,808,658) 100.0% 1,285,496,844
Other Assets and Liabilities, Net 0.0% 54,943
- -----------------------------------------------------------------------------------------
Net Assets 100.0% $1,285,551,787
=========================================================================================
<CAPTION>
FUTURES
- ------------------------------------------------------------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation
Date at Value (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
35 Two-Year U.S. Treasury Notes 12/99 $ 7,246,641 $ 5,867
Sold:
944 Five-Year U.S. Treasury Notes 12/99 101,907,750 (510,028)
567 Ten-Year U.S. Treasury Notes 12/99 62,210,531 (407,035)
50 U.S. Treasury Bonds 12/99 5,679,688 66,975
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 85.1%
@ Entertainment, Inc. Senior Discount
Notes, Series B:
Zero %, Due 7/15/08 (Rate Reset
Effective 7/15/03) $20,500,000 $13,273,750
Zero %, Due 2/01/09 (Rate Reset
Effective 2/01/04) 4,500,000 2,778,750
AP Holdings, Inc. Senior Discount Notes,
Zero %, Due 3/15/08 (Rate Reset
Effective 3/15/03) 7,950,000 3,865,688
APCOA/Standard Parking, Inc. Senior
Subordinated Notes, 9.25%, Due 3/15/08 11,210,000 9,374,362
ASAT Finance LLC Units, 12.50%,
Due 11/01/06 (Acquired 10/20/99 - 10/27/99;
Cost $2,967,430) (b) 3,000,000 3,000,000
Adelphia Communications Corporation
Senior Notes, 7.875%, Due 5/01/09 5,000,000 4,581,250
Airgate PCS, Inc. Senior Subordinated
Discount Notes, Zero %, Due 10/01/09
(Rate Reset Effective 10/01/04) 10,000,000 5,212,500
Allegiance Telecom, Inc. Senior Discount
Notes, Zero %, Due 2/15/08 (Rate Reset
Effective 2/15/03) 11,000,000 7,535,000
Allied Waste North America, Inc. Senior
Subordinated Notes, 10.00%, Due 8/01/09
(Acquired 7/27/99 - 10/21/99; Cost
$17,428,485) (b) 17,800,000 15,152,250
Anchor Glass Container Corporation
First Mortgage Notes, 11.25%, Due 4/01/05 6,500,000 6,435,000
Anthony Crane Rental Holdings LP/Anthony
Crane Holdings Capital Corporation
Senior Discount Debentures, Zero %,
Due 8/01/09 (Rate Reset Effective 8/01/03) 8,400,000 3,717,000
Argosy Gaming Company Senior Subordinated
Notes, 10.75%, Due 6/01/09 $4,000,000 $4,135,000
Atlas Air, Inc. Senior Notes, 10.75%,
Due 8/01/05 9,725,000 9,676,375
BankUnited Capital Trust Preferred
Securities, Series A, 10.25%, Due 12/31/26 4,300,000 4,052,750
Blount, Inc. Senior Subordinated Notes,
13.00%, Due 8/01/09
(Acquired 8/26/99 - 10/05/99; Cost $2,501,550) (b) 2,420,000 2,486,550
Buhrmann US, Inc. Guaranteed Senior
Subordinated Notes, 12.25%, Due 11/01/09
(Acquired 10/26/99; Cost $5,915,520) (b) 6,000,000 5,985,000
CD Radio, Inc. Senior Secured Notes,
14.50%, Due 5/15/09 (Acquired 5/13/99;
Cost $3,499,895) (b) 3,500,000 3,045,000
William Carter Senior Subordinated Notes,
Series A, 10.375%, Due 12/01/06 8,000,000 7,800,000
Crown Castle International Corporation
Senior Discount Notes, Zero %,
Due 5/15/11 (Rate Reset Effective 5/15/04) 5,000,000 2,987,500
Cumulus Media, Inc. Senior Subordinated
Notes, 10.375%, Due 7/01/08 7,000,000 7,253,750
Florida Panthers Holdings, Inc. Senior
Subordinated Notes, 9.875%, Due 4/15/09 7,000,000 6,615,000
Formica Corporation Senior Subordinated
Notes, Series B, 10.875%, Due 3/01/09 4,000,000 3,620,000
GST Network Funding, Inc. Senior Secured
Discount Notes, Zero %, Due 5/01/08
(Rate Reset Effective 5/01/03) 3,500,000 1,627,500
Generac Portable Products LLC/GPPW,
Inc. Guaranteed Senior Subordinated
Notes, 11.25%, Due 7/01/06 2,500,000 2,512,500
Graham Packaging Holdings Company/GPC
Capital Corporation II Senior Discount
Notes, Zero %, Due 1/15/09 (Rate Reset
Effective 1/15/03) 8,150,000 5,297,500
Hollywood Entertainment Corporation
Senior Subordinated Notes, Series B,
10.625%, Due 8/15/04 4,500,000 3,847,500
ICG Holdings, Inc. Senior Discount Notes,
Zero %, Due 9/15/05 (Rate Reset Effective
9/15/00) 6,025,000 5,151,375
Imperial Capital Trust I Guaranteed
Capital Securities, 9.98%, Due 12/31/26 6,000,000 5,652,954
Intermedia Communications, Inc. Senior Notes:
8.875%, Due 11/01/07 1,750,000 1,583,750
Series B, 8.50%, Due 1/15/08 2,000,000 1,775,000
Jackson Products, Inc. Senior Subordinated
Notes, Series B, 9.50%, Due 4/15/05 8,300,000 7,594,500
Jazz Casino Company LLC Senior
Subordinated Notes, 5.927%, Due 11/15/09 5,148,175 3,269,091
Jordan Telecommunication Products,
Inc. Senior Subordinated Discount
Notes, Zero %, Due 8/01/07 (Rate Reset
Effective 8/01/00) 11,615,000 9,582,375
KMC Telecom Holdings, Inc. Senior
Notes, 13.50%, Due 5/15/09 (Acquired
5/19/99; Cost $3,000,000) (b) 3,000,000 2,955,000
Key Energy Services, Inc. Senior
Subordinated Notes, 14.00%, Due 1/15/09 4,000,000 4,320,000
Knowles Electronics, Inc. Senior
Subordinated Notes, 13.125%, Due
10/15/09 (Acquired 9/28/99; Cost
$4,897,700) (b) 5,000,000 4,925,000
La Petite Academy, Inc./LPA Holding
Corporation Senior Notes, Series B,
10.00%, Due 5/15/08 6,300,000 5,008,500
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Lyondell Chemical Company Senior
Secured Notes, Series B, 9.875%,
Due 5/01/07 $12,400,000 $12,400,000
Lyondell Chemical Company Senior
Subordinated Notes, 10.875%, Due 5/01/09 3,500,000 3,500,000
MJD Communications, Inc. Senior
Subordinated Notes, 9.50%, Due 5/01/08 3,000,000 2,715,000
Market Hub Partners Storage LP/Market
Hub Partners Finance, Inc. Senior
Notes, 8.25%, Due 3/01/08 4,300,000 4,171,000
Mediacom LLC/Mediacom Capital
Corporation Senior Notes, Series B,
8.50%, Due 4/15/08 4,000,000 3,730,000
Metromedia Fiber Network, Inc. Senior
Notes, 10.00%, Due 11/15/08 5,000,000 4,937,500
Motors and Gears, Inc. Senior Notes,
Series C, 10.75%, Due 11/15/06 9,400,000 8,883,000
NTL Communications Corporation
Senior Notes, Series B, 11.50%, Due 10/01/08 5,500,000 5,898,750
NTL, Inc. Senior Notes, Zero %,
Due 4/01/08 (Rate Reset Effective 4/01/03) 5,500,000 3,671,250
National Wine & Spirits, Inc. Senior
Notes, 10.125%, Due 1/15/09 8,250,000 8,167,500
Nextel Communications, Inc. Senior
Discount Notes, 10.125% Due 1/15/04 4,500,000 4,612,500
Nextlink Communications, Inc. Senior
Discount Notes, Zero %, Due 6/01/09
(Rate Reset Effective 6/01/04) 8,000,000 4,720,000
Nextlink Communications, Inc. Senior Notes:
10.75%, Due 11/15/08 6,000,000 6,090,000
10.75%, Due 6/01/09 5,970,000 6,119,250
Ono Finance PLC Yankee Notes, 13.00%,
Due 5/01/09 (Acquired 4/29/99; Cost
$2,848,500) (b) 3,000,000 2,955,000
Orbital Imaging Corporation Senior Notes:
Series B, 11.625%, Due 3/01/05 3,500,000 2,502,500
Series D, 11.625%, Due 3/01/05 3,000,000 2,145,000
PSINet, Inc. Senior Notes, 11.00%,
Due 8/01/09 (Acquired 7/16/99; Cost
$10,000,000) (b) 10,000,000 10,325,000
Perry Ellis International, Inc. Senior
Subordinated Notes, 12.25%, Due 4/01/06 3,500,000 3,386,250
Pogo Producing Company Senior
Subordinated Notes, 10.375%, Due 2/15/09 4,815,000 4,995,563
Premier International Foods PLC Senior
Yankee Notes, 12.00%, Due 9/01/09
(Acquired 8/05/99; Cost $10,000,000) (b) 10,000,000 10,050,000
RCN Corporation Senior Discount
Notes, Zero %, Due 2/15/08 (Rate Reset
Effective 2/15/03) 4,600,000 2,926,750
Renaissance Media Louisiana LLC/Renaissance
Media Tennessee/Renaissance Media
Capital Corporation Senior Discount
Notes, Zero %, Due 4/15/08 (Rate Reset
Effective 4/15/03) 4,000,000 2,800,000
Repap New Brunswick Senior Yankee
Notes, 10.625%, Due 4/15/05 3,900,000 3,451,500
SF Holdings Group, Inc. Senior Secured
Discount Notes, Zero %, Due 3/15/08
(Rate Reset Effective 3/15/03) 5,000,000 2,175,000
Sabreliner Corporation Senior Notes,
11.00%, Due 6/15/08 (Acquired 6/19/98;
Cost $6,000,000) (b) 6,000,000 4,470,000
Snyder Oil Corporation Senior Subordinated
Notes, 8.75%, Due 6/15/07 5,000,000 4,937,500
Spectrasite Holdings, Inc. Senior Discount
Notes, Zero %, Due 4/15/09 (Rate Reset
Effective 4/15/04) 8,500,000 4,462,500
Stater Brothers Holdings, Inc. Senior Notes,
10.75%, Due 8/15/06 $8,000,000 $8,180,000
Steel Heddle Manufacturing Company
Senior Subordinated Notes, 10.625%,
Due 6/01/08 5,000,000 2,825,000
Superior National Capital Trust I Notes,
10.75%, Due 12/01/17 5,405,000 4,878,012
Telecommunications Techniques Company
LLC Senior Subordinated Notes, 9.75%,
Due 5/15/08 3,000,000 2,865,000
Telecorp PCS, Inc. Senior Subordinated
Discount Notes, Zero %, Due 4/15/09
(Rate Reset Effective 4/15/04) (Acquired
4/20/99 - 5/06/99; Cost $4,506,600) (b) 8,000,000 4,940,000
Telemundo Holdings, Inc. Senior Discount
Notes, Zero %, Due 8/15/08 (Rate Reset
Effective 8/15/03) 5,300,000 3,047,500
Telewest Communications PLC Senior
Discount Notes, Zero %, Due 4/15/09
(Rate Reset Effective 4/15/04) (Acquired
4/01/99; Cost $1,590,700) (b) 2,500,000 1,550,000
Teligent, Inc. Senior Notes, 11.50%, Due
12/01/07 6,500,000 6,004,375
Time Warner Telecom LLC Senior Notes,
9.75%, Due 7/15/08 5,000,000 5,150,000
Town Sports International, Inc. Senior
Notes, Series B, 9.75%, Due 10/15/04 7,100,000 6,656,250
Transportation Manufacturing Operations,
Inc. Senior Subordinated Notes, 11.25%,
Due 5/01/09 (Acquired 6/14/99; Cost
$4,435,875) (b) 4,500,000 4,432,500
Transwestern Publishing Company LP/TWP
Capital Corporation II Senior Subordinated
Notes, Series D, 9.625%, Due 11/15/07 8,880,000 8,602,500
Triarc Consumer Products Group LLC/Triarc
Beverage Holdings Corporation Senior
Subordinated Notes, 10.25%, Due 2/15/09
(Acquired 4/13/99; Cost $6,191,300) (b) 6,130,000 5,792,850
Tri-State Outdoor Media Group, Inc. Senior
Notes, 11.00%, Due 5/15/08 6,300,000 6,205,500
Unilab Finance Corporation Senior Subordinated
Notes, 12.75%, Due 10/01/09 (Acquired
9/21/99; Cost $4,863,400) (b) 5,000,000 5,031,250
United Industries Corporation Senior
Subordinated Notes, 9.875%, Due 4/01/09
(Acquired 3/19/99 - 8/16/99; Cost $6,905,000) (b) 7,250,000 6,525,000
United International Holdings, Inc. Senior
Secured Discount Notes, Series B, Zero %,
Due 2/15/08 (Rate Reset Effective 2/15/03) 10,250,000 5,868,125
United Pan-Europe Communications NV
Senior Yankee Notes, 11.25%, Due 11/01/09
(Acquired 10/22/99; Cost $9,926,200) (b) 10,000,000 9,975,000
Universal Compression, Inc. Senior Discount
Notes, Zero %, Due 2/15/08 (Rate Reset
Effective 2/15/03) 7,500,000 4,687,500
Venetian Casino Resort LLC/Las Vegas Sands,
Inc. Secured Mortgage Notes, 12.25%,
Due 11/15/04 3,000,000 2,340,000
Verio, Inc. Senior Notes, 13.50%, Due 6/15/04 6,500,000 7,133,750
Versatel Telecom BV Senior Yankee Notes,
13.25%, Due 5/15/08 3,000,000 3,030,000
Versatel Telecom International NV Senior
Yankee Notes, 11.875%, Due 7/15/09 3,000,000 2,798,493
Viatel, Inc. Senior Notes, 11.50%, Due 3/15/09 5,000,000 4,850,000
Vintage Petroleum, Inc. Senior Subordinated
Notes, 9.75%, Due 6/30/09 4,075,000 4,125,938
Williams Communications Group, Inc. Senior
Notes, 10.875%, Due 10/01/09 18,000,000 18,540,000
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Winstar Communications, Inc. Senior
Subordinated Deferred Interest Notes,
Zero %, Due 3/01/07 (Rate Reset Effective
9/01/02) $ 7,000,000 $ 8,260,000
Worldwide Fiber, Inc. Senior Yankee Notes,
12.00%, Due 8/01/09 (Acquired 7/23/99;
Cost $5,000,000) (b) 5,000,000 5,025,000
ZSC Specialty Chemicals PLC Senior
Yankee Notes, 11.00%, Due 7/01/09
(Acquired 6/24/99 - 7/08/99; Cost $8,595,000) (b) 8,500,000 8,553,125
- -----------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $533,081,177) 506,756,001
- -----------------------------------------------------------------------------------------
CONVERTIBLE BONDS 0.8%
Exide Corporation Senior Subordinated
Notes, 2.90%, Due 12/15/05 (Acquired
5/27/99; Cost $2,975,000) (b) 5,000,000 2,612,500
Total Renal Care Holdings, Inc. Subordinated
Notes, 5.625%, Due 7/15/06 3,000,000 1,953,750
- -----------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $5,562,995) 4,566,250
- -----------------------------------------------------------------------------------------
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 3.5%
Aircraft Lease Portfolio Securitization
Pass-Thru Trust Certificates,
Series 1996-1, Class D, 12.75%, Due 6/15/06 4,298,934 4,255,945
Blaylock Mortgage Capital Corporation
Subordinated Notes, Series 1997-A,
Class B3, 6.425%, Due 10/25/03 (Acquired
3/11/98; Cost $3,158,335) (b) 3,351,574 2,836,269
CS First Boston Mortgage Securities
Corporation Mortgage Pass-Thru
Certificates, Series 1992-4, Class A5, Interest
Only, 0.625%, Due 10/25/22 10,317,296 106,371
Chase Mortgage Finance Trust Multiclass
Mortgage Pass-Thru Certificates,
Series 1999-S2, Class B3, 6.50%, Due 3/25/29
(Acquired 4/14/99; Cost $1,169,236) (b) 1,564,522 1,089,690
Merrill Lynch Mortgage Investors, Inc.
Variable Rate Mortgage Pass-Thru
Certificates, Series 1994-M1, Class E,
8.4274%, Due 6/25/22 (Acquired 11/19/98;
Cost $4,850,000) (b) 5,000,000 4,976,025
Norwest Asset Securities Corporation
Mortgage Pass-Thru Certificates:
Series 1998-30, Class B4, 6.25%, Due 12/25/28
(Acquired 4/14/99; Cost $875,796) (b) 1,190,041 817,570
Series 1999-4, Class B4, 6.50%, Due 3/25/29
(Acquired 4/14/99; Cost $1,560,508) (b) 2,088,074 1,454,489
Salomon Brothers Mortgage Securities VII,
Inc. Mortgage Pass-Thru Certificates,
Series 1997-A, Class B3, 7.3887%, Due
10/01/25 (Acquired 7/09/97; Cost
$2,698,990) (b) 3,022,825 2,475,936
Sutter CBO, Ltd./Sutter CBO Corporation,
Series 1999-1, Class B2, 13.442%, Due
11/30/14 (Acquired 10/05/99; Cost
$3,000,000) (b) (e) 3,000,000 3,003,750
- -----------------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed
Securities (Cost $21,859,714) 21,016,045
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS 7.6%
Capstar Communications, Inc.
12.625% Exchangeable 28,281 3,372,509
Capstar Radio Broadcasting Partners, Inc. 12.00%
Senior Exchangeable 71,460 8,521,605
e.spire Communications, Inc. 14.75% 3,862 1,544,750
Global Crossing Holdings, Ltd. 10.50% Senior
Exchangeable $ 40,000 $4,230,000
Intermedia Communications, Inc. 13.50% Series B
Exchangeable 7,342 6,699,914
Jordan Telecommunications Products, Inc. 13.25%
Series B Senior Exchangeable 2,683 2,683,000
NTL, Inc. 13.00% Series B Senior Exchangeable 7,240 7,710,600
Nextlink Communications, Inc. 14.00% Senior
Exchangeable 54,555 2,795,936
R&B Falcon Corporation 13.875% Senior 7,519 7,143,050
21st Century Telecom Group, Inc. 13.75% Senior
Exchangeable 1,226 613,000
- -----------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $51,351,773) 45,314,364
- -----------------------------------------------------------------------------------------
COMMON STOCKS 0.6%
Jordan Telecommunications Products, Inc.
(Acquired 2/25/98; Cost $0) (b) (f) 2,000 400,000
OpTel, Inc. Non-Voting (Acquired 2/07/97 -
5/07/98; Cost $596,280) (b) (f) 17,175 85,875
SF Holdings Group, Inc. Class C (Acquired
3/05/98; Cost $20,000) (b) (f) 10,000 100
Verio, Inc. (f) 83,080 3,099,923
- -----------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,560,165) 3,585,898
- -----------------------------------------------------------------------------------------
WARRANTS 0.7%
American Telecasting, Inc. Warrants,
Expire 8/10/00 150 0
CD Radio, Inc. Warrants, Expire 5/15/09
(Acquired 5/13/99; Cost $105) (b) 10,500 551,250
e.spire Communications, Inc. Warrants,
Expire 11/01/05 1,500 19,500
Key Energy Services, Inc. Warrants,
Expire 1/15/09 3,000 6,000
MetroNet Communications Corporation
Warrants, Expire 8/15/07 3,000 246,000
NTL, Inc. Warrants, Expire 10/14/08 (Acquired
10/28/98; Cost $50,000) (b) 3,800 190,000
Ono Finance PLC Warrants, Expire 5/31/09
(Acquired 4/29/99; Cost $151,500) (b) 3,000 151,500
Orbital Imaging Corporation Warrants,
Expire 3/01/05 (Acquired 2/20/98 - 5/04/98;
Cost $1) (b) 6,500 130,000
Powertel, Inc. Warrants, Expire 2/01/06 3,264 152,184
R&B Falcon Corporation Warrants, Expire
5/01/09 (Acquired 4/15/99 - 4/28/99; Cost
$577,500) (b) 7,000 1,750,000
21st Century Telecom Group, Inc. Warrants,
Expire 2/15/10 (Acquired 2/02/98; Cost
$55,000) (b) 1,000 15,000
Versatel Telecom International NV Warrants,
Expire 5/15/08 (Acquired 5/20/98;
Cost $40,000) (b) 4,000 580,000
- -----------------------------------------------------------------------------------------
Total Warrants (Cost $972,011) 3,791,434
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 0.4%
Commercial Paper 0.1%
Interest Bearing, Due Upon Demand
Warner Lambert Company, 4.99% 646,500 646,500
Wisconsin Electric Power Company, 4.99% 17,300 17,300
------------
663,800
Repurchase Agreements 0.3%
ABN-AMRO Inc. (Dated 10/29/99), 5.22%,
Due 11/01/99 (Repurchase proceeds
$1,600,696); Collateralized by: U.S. Government &
Agency Issues and Non-Agency Mortgage
& Asset-Backed Securities (d) 1,600,000 1,600,000
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
United States Government Issues 0.0%
United States Treasury Bills, Due 11/26/99 $ 75,000 $ 74,777
- -----------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $2,338,551) 2,338,577
=========================================================================================
Total Investments in Securities (Cost $616,726,386) 98.7% 587,368,569
Other Assets and Liabilities, Net 1.3% 7,828,267
- -----------------------------------------------------------------------------------------
NET ASSETS 100.0% $595,196,836
=========================================================================================
<CAPTION>
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD BOND FUND
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
CORPORATE BONDS 84.5%
Adelphia Communications Corporation Senior
Notes, Series B, 7.50%, Due 1/15/04 $3,000,000 $2,827,500
Alliance Imaging, Inc. Senior Subordinated
Floating Rate Notes, 9.54%, Due 12/15/05 2,000,000 2,052,500
Bresnan Communications Group LLC/Bresnan
Capital Corporation Senior Discount Notes,
Series B:
Zero %, Due 2/01/09 (Rate Reset
Effective 2/01/04) 2,000,000 1,367,500
8.00%, Due 2/01/09 3,000,000 3,003,750
CSC Holdings, Inc. Senior Subordinated
Notes, 9.875%, Due 5/15/06 2,500,000 2,606,250
Capstar Broadcasting Partners, Inc. Senior
Discount Notes, Zero %, Due 2/01/09 (Rate
Reset Effective 2/01/02) 2,200,000 1,941,500
Century Communications Corporation Senior
Discount Notes, Zero %, Due 3/15/03 4,000,000 2,880,000
Chancellor Media Corporation Senior
Subordinated Notes, 9.375%, Due 10/01/04 5,000,000 5,125,000
Coinmach Corporation Senior Notes, Series D,
11.75%, Due 11/15/05 2,000,000 2,080,000
Continental Airlines, Inc. Senior Notes, 9.50%,
Due 12/15/01 2,000,000 2,030,000
Day International Group, Inc. Senior Subordinated
Notes, Series B, 11.125%, Due 6/01/05 2,500,000 2,512,500
Del Monte Corporation Senior Subordinated
Notes, 12.25%, Due 4/15/07 2,600,000 2,866,500
Dial Call Communications, Inc. Senior Discount
Notes, Series B, 10.25%, Due 12/15/05 1,000,000 1,025,000
Empress Entertainment, Inc. Senior Subordinated
Notes, 8.125%, Due 7/01/06 7,600,000 7,581,000
FrontierVision Operating Partners LP/
FrontierVision Capital Corporation Senior
Subordinated Notes, 11.00%, Due 10/15/06 2,500,000 2,650,000
GS Escrow Corporation Senior Notes, 7.00%,
Due 8/01/03 4,000,000 3,766,428
Graham Packaging Company/GPC Capital
Corporation I Floating Rate Notes, 9.2238%,
Due 1/15/08 1,000,000 915,000
ISP Holdings, Inc. Senior Notes, 9.00%,
Due 10/15/03 2,000,000 1,975,000
ITT Corporation Notes, 6.25%, Due 11/15/00 7,000,000 6,876,233
Interpool, Inc. Notes, 6.625%, Due 3/01/03 5,000,000 4,555,645
Keebler Corporation Senior Subordinated
Notes, 10.75%, Due 7/01/06 5,000,000 5,419,755
Lyondell Chemical Company Debentures, 9.90%,
Due 11/01/00 5,000,000 5,035,300
MCI Worldcom Senior Notes, 13.50%,
Due 12/15/02 10,200,000 11,602,500
MJD Communications, Inc. Floating Rate Notes,
9.2475%, Due 5/01/08 5,000,000 4,680,000
MetroNet Communications Corporation Senior
Notes, 12.00%, Due 8/15/07 4,000,000 4,680,000
NL Industries Senior Secured Notes, 11.75%,
Due 10/15/03 5,355,000 5,542,425
NS Group, Inc. Senior Notes, 13.50%, Due 7/15/03 $3,600,000 $3,735,000
NTL, Inc. Senior Deferred Coupon Notes,
Series A, Zero %, Due 4/15/05 (Rate Reset
Effective 4/15/00) 4,500,000 4,466,250
NTL, Inc. Senior Yankee Discount Debentures,
Zero %, Due 11/15/07 (Rate Reset
Effective 11/15/00) 2,500,000 2,312,500
Nextel Communications, Inc. Senior Discount Notes:
9.75%, Due 8/15/04 2,000,000 2,050,000
10.125%, Due 1/15/04 6,250,000 6,406,250
Nextlink Communications LLC Senior Notes,
12.50%, Due 4/15/06 5,000,000 5,337,500
Oregon Steel Mills, Inc. First Mortgage Notes,
11.00%, Due 6/15/03 3,000,000 3,075,000
Pathmark Stores, Inc. Senior Subordinated
Notes, 9.625%, Due 5/01/03 1,000,000 975,000
Pathmark Stores, Inc. Subordinated Debentures,
12.625%, Due 6/15/02 2,000,000 1,950,000
Pathmark Stores, Inc. Subordinated Notes,
11.625%, Due 6/15/02 4,000,000 3,900,000
Paxson Communications Corporation Senior
Subordinated Notes, 11.625%, Due 10/01/02 3,000,000 3,120,000
Pegasus Media & Communications, Inc. Senior
Subordinated Notes, Series B, 12.50%,
Due 7/01/05 3,000,000 3,240,000
PharMerica, Inc. Senior Subordinated Notes,
8.375%, Due 4/01/08 2,000,000 1,310,000
Qwest Communications International, Inc. Senior
Notes, Series B, 10.875%, Due 4/01/07 3,250,000 3,656,250
SC International Services, Inc. Senior
Subordinated Notes, 9.25%, Due 9/01/07 4,500,000 4,162,500
SD Warren Company Senior Subordinated Notes,
Series B, 12.00%, Due 12/15/04 4,500,000 4,747,500
SFX Broadcasting, Inc. Senior Subordinated
Notes, 10.75%, Due 5/15/06 3,269,000 3,620,417
Selmer Company, Inc. Senior Subordinated
Notes, 11.00%, Due 5/15/05 3,945,000 4,161,975
Sprint Spectrum LP/Sprint Spectrum Finance
Corporation Senior Notes, 11.00%, Due 8/15/06 3,945,000 4,477,575
Star Markets Company Senior Subordinated
Notes, 13.00%, Due 11/01/04 4,030,000 4,291,950
Statia Terminals International/Statia Terminals
Canada, Inc. First Mortgage Notes, Series B,
11.75%, Due 11/15/03 5,935,000 6,202,075
Superior Financial Corporation Senior Notes,
8.65%, Due 4/01/03 2,000,000 1,920,000
Telewest PLC Senior Discount Debentures,
Zero %, Due 10/01/07 (Rate Reset
Effective 10/01/00) 3,000,000 2,741,250
Triton Energy, Ltd./Triton Energy Corporation
Senior Notes, 8.75%, Due 4/15/02 8,000,000 7,960,000
UCAR Global Enterprises, Inc. Senior
Subordinated Notes, 12.00%, Due 1/15/05 3,250,000 3,396,250
US Air, Inc. Senior Notes, 9.625%, Due 2/01/01 2,660,000 2,688,090
Unisys Corporation Senior Notes, 12.00%,
Due 4/15/03 2,700,000 2,895,750
United Stationers Supply Senior Subordinated
Notes, 12.75%, Due 5/01/05 4,000,000 4,325,000
Univision Network Holding LP Subordinated
Notes, 7.00%, Due 12/17/02 6,000,000 7,920,000
Waste Management, Inc. Senior Notes:
6.125%, Due 7/15/01 2,000,000 1,872,854
6.50%, Due 12/15/02 500,000 450,009
Young Broadcasting, Inc. Senior Subordinated
Notes, 11.75%, Due 11/15/04 2,200,000 2,299,000
- -----------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $216,823,363) 213,263,231
- -----------------------------------------------------------------------------------------
CONVERTIBLE BONDS 0.7%
CUC International, Inc. Subordinated Notes,
3.00%, Due 2/15/02 2,000,000 1,805,000
- -----------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $1,872,925) 1,805,000
- -----------------------------------------------------------------------------------------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 1999
- -----------------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD BOND FUND (continued)
- -----------------------------------------------------------------------------------------
Shares or
Principal Value
Amount (Note 2)
- -----------------------------------------------------------------------------------------
<S> <C> <C>
NON-AGENCY MORTGAGE & ASSET-BACKED
SECURITIES 3.8%
Blaylock Mortgage Capital Corporation
Subordinated Notes, Series 1997-A, Class B3,
6.425%, Due 10/25/03 (Acquired 3/11/98;
Cost $1,884,688) (b) $2,000,000 $1,692,500
Lehman Relocation Mortgage Trust
Subordinated Variable Rate Mortgage-Backed
Certificates, Series 1997-2, Class B1, 7.1263%,
Due 6/28/26 (Acquired 10/26/98;
Cost $2,031,346) (b) 2,432,750 1,760,897
Mellon Residential Funding Corporation Variable
Rate Mortgage Pass-Thru Certificates,
Series 1999-TBC3:
Class B-4, 6.034%, Due 10/20/29 (Acquired
9/20/99; Cost $808,408) (b) 1,029,000 808,413
Class B-5, 6.034%, Due 10/20/29 (Acquired
9/20/99; Cost $467,088) (b) 617,000 467,088
Merrill Lynch Mortgage Investors, Inc. Variable
Rate Mortgage Pass-thru Certificates,
Series 1994-M1, Class E, 8.4274%, Due 6/25/22
(Acquired 11/19/98; Cost $2,910,000) (b) 3,000,000 2,985,615
Oregon Commercial Mortgage, Inc. Variable Rate
Commercial Mortgage Pass-Thru Certificates,
Series 1995-1, Class E, 9.3279%, Due 6/25/26
(Acquired 5/13/98; Cost $2,080,625) (b) 2,000,000 1,971,260
- -----------------------------------------------------------------------------------------
Total Non-Agency Mortgage & Asset-Backed
Securities (Cost $10,276,600) 9,685,773
- -----------------------------------------------------------------------------------------
PREFERRED STOCKS 2.9%
CSC Holdings, Inc. 11.125% Series M 22,317 2,404,656
Capstar Communications, Inc.
12.625% Exchangeable 40,607 4,842,385
- -----------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $7,231,320) 7,247,041
- -----------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) 8.9%
Commercial Paper 0.3%
Interest Bearing, Due Upon Demand
Warner Lambert Company, 4.99% $ 514,300 514,300
Wisconsin Electric Power Company, 4.99% 305,400 305,400
------------
819,700
Convertible Bonds 2.2%
Corporate Express, Inc. Subordinated Notes,
4.50%, Due 7/01/00 5,500,000 5,465,625
Corporate Bonds 0.7%
Key Plastics, Inc. Senior Notes, 14.00%,
Due 11/15/99 1,900,000 1,909,500
Repurchase Agreements 5.7%
ABN-AMRO Inc. (Dated 10/29/99), 5.22%, Due
11/01/99 (Repurchase proceeds $14,306,221);
Collateralized by: U.S. Government & Agency
Issues and Non-Agency Mortgage &
Asset-Backed Securities (d) 14,300,000 14,300,000
- -----------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $22,341,058) 22,494,825
=========================================================================================
Total Investments in Securities (Cost $258,545,266) 100.8% 254,495,870
Other Assets and Liabilities, Net (0.8%) (1,997,906)
- -----------------------------------------------------------------------------------------
NET ASSETS 100.0% $252,497,964
=========================================================================================
</TABLE>
LEGEND
- --------------------------------------------------------------------------------
(a) Short-term investments include any security which has a remaining maturity
of less than one year.
(b) Restricted security.
(c) All or a portion of security pledged to cover margin requirements for
futures contracts or written options.
(d) See Note 2(I) of Notes to Financial Statements.
(e) All or a portion of security is when-issued.
(f) Non-income producing security.
Percentages are stated as a percent of net assets.
CURRENCY ABBREVIATIONS
- --------------------------------------------------------------------------------
AUD Australian Dollar
CAD Canadian Dollar
GBP British Pound
NZD New Zealand Dollar
USD United States Dollar
See Notes to Financial Statements.
31
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1999
(In Thousands, Except As Noted)
Strong Strong Strong
Strong Corporate Government Short-Term
Bond Fund Bond Fund Securities Fund Bond Fund
--------- --------- --------------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Investments in Securities, at Value
(Cost of $171,992, $898,026, $1,362,609 and $1,305,809,
respectively) $170,248 $868,679 $1,345,116 $1,285,497
Receivable for Securities Sold 6,887 7,903 11,081 476
Receivable for Fund Shares Sold -- 217 531 173
Interest and Dividends Receivable 2,245 17,395 12,332 19,385
Other Assets 146 167 516 527
-------- -------- ---------- ----------
Total Assets 179,526 894,361 1,369,576 1,306,058
LIABILITIES:
Payable for Securities Purchased 12,652 20,002 22,219 12,473
Written Options, at Value
(Premiums Received of $0, $0, $199 and $0, respectively) -- -- 390 --
Payable for Fund Shares Redeemed -- 222 578 106
Dividends Payable 962 4,956 6,166 6,836
Accrued Operating Expenses and Other Liabilities 41 112 161 1,091
-------- -------- ---------- ----------
Total Liabilities 13,655 25,292 29,514 20,506
-------- -------- ---------- ----------
NET ASSETS $165,871 $869,069 $1,340,062 $1,285,552
======== ======== ========== ==========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $171,806 $926,435 $1,392,912 $1,405,835
Accumulated Net Investment Income (20) (1,354) 107 (343)
Accumulated Net Realized Loss (3,926) (26,346) (33,867) (98,784)
Net Unrealized Depreciation (1,989) (29,666) (19,090) (21,156)
-------- -------- ---------- ----------
Net Assets $165,871 $869,069 $1,340,062 $1,285,552
======== ======== ========== ==========
INVESTOR CLASS ($ AND SHARES IN FULL)
Net Assets $24,238 $868,328,547 $1,339,882,597 $1,272,141,877
Capital Shares Outstanding (Unlimited Number Authorized) 2,268 81,926,928 131,021,869 135,166,870
NET ASSET VALUE PER SHARE $10.69 $10.60 $10.23 $9.41
======== ======== ========== ==========
INSTITUTIONAL CLASS ($ AND SHARES IN FULL)
Net Assets $165,845,815 $739,405 $178,214 $13,408,911
Capital Shares Outstanding (Unlimited Number Authorized) 15,536,119 69,830 17,429 1,423,492
NET ASSET VALUE PER SHARE $10.67 $10.59 $10.22 $9.42
======== ======== ========== ==========
ADVISOR CLASS ($ AND SHARES IN FULL)
Net Assets $1,000 $1,001 $1,001 $999
Capital Shares Outstanding (Unlimited Number Authorized) 94 95 98 106
NET ASSET VALUE PER SHARE $10.68 $10.59 $10.22 $9.41
======== ======== ========== ==========
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF ASSETS AND LIABILITIES (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1999
(In Thousands, Except As Noted)
Strong High-Yield Strong Short-Term
Bond Fund High Yield Bond Fund
----------------- --------------------
<S> <C> <C>
ASSETS:
Investments in Securities, At Value
(Cost of $616,726 and $258,545, respectively) $587,369 $254,496
Receivable for Securities Sold 7,392 522
Receivable for Fund Shares Sold 52 45
Interest and Dividends Receivable 12,672 5,929
Other Assets 24 7
-------- --------
Total Assets 607,509 260,999
LIABILITIES:
Payable for Securities Purchased 6,520 6,616
Payable for Fund Shares Redeemed 88 104
Dividends Payable 5,478 1,724
Accrued Operating Expenses and Other Liabilities 226 57
-------- --------
Total Liabilities 12,312 8,501
-------- --------
NET ASSETS $595,197 $252,498
======== ========
NET ASSETS CONSIST OF:
Capital Stock (par value and paid-in capital) $639,047 $256,494
Accumulated Net Investment Income (36) --
Accumulated Net Realized Gain (Loss) (14,456) 53
Net Unrealized Depreciation (29,358) (4,049)
-------- --------
Net Assets $595,197 $252,498
======== ========
Capital Shares Outstanding (Unlimited Number Authorized) 56,152 24,719
NET ASSET VALUE PER SHARE $10.60 $10.21
======== ========
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Strong Strong Strong
Strong Strong Corporate Government Short-Term
Bond Fund Bond Fund Bond Fund Securities Fund Bond Fund
----------- ---------- ---------- --------------- -----------
Year Ended Year Ended Year Ended Year Ended Year Ended
October 31, Feb. 28, October 31, October 31, October 31,
1999 1999 1999 1999 1999
----------- ---------- ---------- --------------- -----------
(Note 1)
<S> <C> <C> <C> <C> <C>
INCOME:
Interest $6,871 $5,179 $62,121 $82,546 $91,490
Dividends 370 272 3,485 1,826 4,621
------ ------ ------- ------ -------
Total Income 7,241 5,451 65,606 84,372 96,111
EXPENSES:
Investment Advisory Fees 254 213 5,046 7,482 7,635
Administrative Fee - Investor Class -- -- 367 556 538
Administrative Fee - Institutional Class 5 -- -- -- --
Custodian Fees 19 25 57 67 73
Shareholder Servicing Costs - Investor Class -- -- 1,485 2,310 1,945
Shareholder Servicing Costs - Institutional Class 15 26 -- -- --
Professional Fees 16 14 33 42 65
Reports to Shareholders - Investor Class -- -- 215 210 380
Reports to Shareholders - Institutional Class 11 4 -- -- --
Federal and State Registration Fees 53 24 71 83 35
Other 10 9 35 55 62
------ ------ ------- ------ -------
Total Expenses 383 315 7,309 10,805 10,733
------ ------ ------- ------ -------
NET INVESTMENT INCOME 6,858 5,136 58,297 73,567 85,378
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (3,835) 1,792 (13,168) (26,248) (8,927)
Futures Contracts, Options and Forward Foreign
Currency Contracts 133 (252) (7,052) (4,844) 8,920
Foreign Currencies (2) 16 5 -- 4
------ ------ ------- ------ -------
Net Realized Gain (Loss) (3,704) 1,556 (20,215) (31,092) (3)
Net Change in Unrealized Appreciation/Depreciation on:
Investments (1,543) (985) (19,259) (40,016) (19,671)
Futures Contracts, Options and Forward Foreign
Currency Contracts (398) 164 (695) (3,758) (3,379)
Foreign Currencies 4 (4) -- -- --
------ ------ ------- ------ -------
Net Change in Unrealized Appreciation/Depreciation (1,937) (825) (19,954) (43,774) (23,050)
------ ------ ------- ------ -------
NET GAIN (LOSS) ON INVESTMENTS (5,641) 731 (40,169) (74,866) (23,053)
------ ------ ------- ------ -------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS $1,217 $5,867 $18,128 ($1,299) $62,325
====== ====== ======= ======== =======
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Strong High-Yield Strong Short-Term
Bond Fund High Yield Bond Fund
----------------- --------------------
Year Ended Year Ended
October 31, October 31,
1999 1999
----------------- --------------------
<S> <C> <C>
INCOME:
Interest $57,454 $16,739
Dividends 5,955 259
------- -------
Total Income 63,409 16,998
EXPENSES:
Investment Advisory Fees 3,465 1,166
Administrative Fees 252 105
Custodian Fees 28 8
Shareholder Servicing Costs 799 239
Federal and State Registration Fees 70 94
Other 247 64
------- -------
Total Expenses 4,861 1,676
------- -------
NET INVESTMENT INCOME 58,548 15,322
REALIZED AND UNREALIZED GAIN (LOSS):
Net Realized Gain (Loss) on:
Investments (13,553) 184
Futures Contracts, Options and Forward Foreign Currency Contracts 150 170
Foreign Currencies 3 --
------- -------
Net Realized Gain (Loss) (13,400) 354
Net Change in Unrealized Appreciation/Depreciation on:
Investments 7,823 (1,460)
Futures Contracts, Options and Forward Foreign Currency Contracts (1,068) (362)
------- -------
Net Change in Unrealized Appreciation/Depreciation 6,755 (1,822)
------- -------
NET LOSS ON INVESTMENTS (6,645) (1,468)
------- -------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $51,903 $13,854
======= =======
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Strong Bond Fund
--------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1999 Feb. 28, 1999 Feb. 28, 1998 Dec. 31, 1997
------------- ------------- ------------- -------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 6,858 $ 5,136 $ 547 $ 1,321
Net Realized Gain (Loss) (3,704) 1,556 529 771
Net Change in Unrealized Appreciation/Depreciation (1,937) (825) 19 752
-------- -------- ------- -------
Net Increase in Net Assets Resulting from Operations 1,217 5,867 1,095 2,844
DISTRIBUTIONS:
From Net Investment Income:
Investor Class (1) -- -- --
Institutional Class (6,898) (5,167) (535) (1,321)
In Excess of Net Investment Income - Institutional Class -- -- (12) --
From Net Realized Gains - Institutional Class (732) (1,721) -- (547)
-------- -------- ------- -------
Total Distributions (7,631) (6,888) (547) (1,868)
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net Increase in Net Assets from
Capital Share Transactions 37,569 79,173 4,008 51,032
-------- -------- ------- -------
TOTAL INCREASE IN NET ASSETS 31,155 78,152 4,556 52,008
NET ASSETS:
Beginning of Year 134,716 56,564 52,008 --
-------- -------- ------- -------
End of Year $165,871 $134,716 $56,564 $52,008
======== ======== ======= =======
<CAPTION>
Strong Corporate Strong Government
Bond Fund Securities Fund
------------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1999 Oct. 31, 1998 Oct. 31, 1999 Oct. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 58,297 $ 44,943 $ 73,567 $ 58,933
Net Realized Gain (Loss) (20,215) 13,301 (31,092) 25,249
Net Change in Unrealized Appreciation/Depreciation (19,954) (18,536) (43,774) 8,357
-------- -------- ---------- ----------
Net Increase (Decrease) in Net Assets Resulting
from Operations 18,128 39,708 (1,299) 92,539
DISTRIBUTIONS:
From Net Investment Income:
Investor Class (58,058) (44,943) (73,567) (58,933)
Institutional Class (3) -- (1) --
In Excess of Net Investment Income - Investor Class -- (605) -- --
From Net Realized Gains - Investor Class -- -- (27,673) --
-------- -------- ---------- ----------
Total Distributions (58,061) (45,548) (101,241) (58,933)
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net Increase in Net Assets from
Capital Share Transactions 90,355 332,194 133,700 431,829
-------- -------- ---------- ----------
TOTAL INCREASE IN NET ASSETS 50,422 326,354 31,160 465,435
NET ASSETS:
Beginning of Year 818,647 492,293 1,308,902 843,467
-------- -------- ---------- ----------
End of Year $869,069 $818,647 $1,340,062 $1,308,902
======== ======== ========== ==========
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
(In Thousands)
Strong Short-Term
Bond Fund
-------------------------------------
Year Ended Year Ended
Oct. 31, 1999 Oct. 31, 1998
------------- -------------
<S> <C> <C>
OPERATIONS:
Net Investment Income $ 85,378 $ 90,390
Net Realized Loss (3) (19,898)
Net Change in Unrealized Appreciation/Depreciation (23,050) (9,276)
---------- ----------
Net Increase in Net Assets Resulting from Operations 62,325 61,216
DISTRIBUTIONS:
From Net Investment Income
Investor Class (84,060) (90,390)
Institutional Class (27) --
In Excess of Net Investment Income - Investor Class -- (224)
---------- ----------
Total Distributions (84,087) (90,614)
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (21,821) 48,738
---------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS (43,583) 19,340
NET ASSETS:
Beginning of Year 1,329,135 1,309,795
---------- ----------
End of Year $1,285,552 $1,329,135
========== ==========
<CAPTION>
Strong High-Yield Strong Short-Term
Bond Fund High Yield Bond Fund
------------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1999 Oct. 31, 1998 Oct. 31, 1999 Oct. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net Investment Income $ 58,548 $ 54,306 $ 15,322 $ 6,444
Net Realized Gain (Loss) (13,400) 3,082 354 332
Net Change in Unrealized Appreciation/Depreciation 6,755 (48,330) (1,822) (1,991)
--------- --------- --------- ----------
Net Increase in Net Assets Resulting from Operations 51,903 9,058 13,854 4,785
DISTRIBUTIONS:
From Net Investment Income (58,243) (54,306) (15,322) (6,444)
In Excess of Net Investment Income -- (353) -- --
From Net Realized Gains (4,243) (14,785) (632) (256)
--------- --------- --------- ----------
Total Distributions (62,486) (69,444) (15,954) (6,700)
CAPITAL SHARE TRANSACTIONS (NOTE 4):
Net Increase in Net Assets from
Capital Share Transactions 143,280 12,922 148,364 63,330
--------- --------- --------- ----------
TOTAL INCREASE (DECREASE) IN NET ASSETS 132,697 (47,464) 146,264 61,415
NET ASSETS:
Beginning of Year 462,500 509,964 106,234 44,819
--------- --------- --------- ----------
End of Year $595,197 $462,500 $252,498 $106,234
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
October 31, 1999
1. ORGANIZATION
The accompanying financial statements represent the Strong Income Funds
(the "Funds"), which include the following funds, each with its own
investment objectives and policies:
- Strong Bond Fund (a series of Strong Income Funds II, Inc.(1))
(formerly known as Strong Institutional Bond Fund, a series of Strong
Institutional Funds, Inc.)
- Strong Corporate Bond Fund, Inc.(1)
- Strong Government Securities Fund, Inc.(1)
- Strong Short-Term Bond Fund, Inc.(1)
- Strong High-Yield Bond Fund (a series of Strong Income Funds, Inc.(1))
- Strong Short-Term High Yield Bond Fund (a series of Strong Income
Funds, Inc.(1))
(1) A diversified, open-end management investment company registered under
the Investment Company Act of 1940, as amended.
During 1999, the Board of Directors of the Strong Bond Fund approved
changing the Fund's fiscal year-end from February 28th to October 31st.
During 1997, the Board of Directors of the Fund approved changing the
Fund's fiscal year-end from December 31st to February 28th.
Effective September 1, 1999, the Strong Bond Fund, Strong Corporate Bond
Fund, Strong Government Securities Fund and Strong Short-Term Bond Fund
have issued three classes of shares: Investor Class, Institutional Class
and Advisor Class. The Advisor Class shares are subject to an annual
distribution fee as described in Note 3. Each class of shares has identical
rights and privileges except with respect to voting rights on matters
pertaining to that class. Income, expenses (other than expenses
attributable to a specific class), and realized and unrealized gains or
losses on investments are allocated to each class of shares based on its
relative net assets.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements.
(A) SECURITY VALUATION -- Securities of the Funds are valued at fair value
through valuations obtained by a commercial pricing service or the
mean of the bid and asked prices when no last sales price is
available. Securities for which market quotations are not readily
available are valued at fair value as determined in good faith under
consistently applied procedures established by and under the general
supervision of the Board of Directors. Securities which are purchased
within 60 days of their stated maturity are valued at amortized cost,
which approximates fair value.
The Funds may own certain investment securities which are restricted
as to resale. These securities are valued after giving due
consideration to pertinent factors, including recent private sales,
market conditions and the issuer's financial performance. The Funds
generally bear the costs, if any, associated with the disposition of
restricted securities. Aggregate cost and fair value of these
restricted securities held at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Percent of
Cost Fair Value Net Assets Liquid*
------------- ------------- ---------- -------
<S> <C> <C> <C> <C>
Strong Bond Fund $ 20,527,487 $ 20,248,035 12.2% 95.0%
Strong Corporate Bond Fund 156,160,934 150,567,152 17.3% 98.7%
Strong Government Securities Fund 41,756,718 41,696,146 3.1% 75.9%
Strong Short-Term Bond Fund 336,123,766 327,006,964 25.4% 82.1%
Strong High-Yield Bond Fund 142,851,406 140,293,479 23.6% 93.3%
Strong Short-Term High Yield Bond Fund 10,182,155 9,685,773 3.8% 51.7%
</TABLE>
*Percentage of restricted securities which are either Section 4(2)
commercial paper or are eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 and also have been determined to be
liquid by the Advisor based upon guidelines established by the Funds'
Board of Directors.
(B) FEDERAL INCOME AND EXCISE TAXES AND DISTRIBUTIONS TO SHAREHOLDERS --
The Funds intend to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to
distribute substantially all of their taxable income to their
shareholders in a manner which results in no tax cost to the Funds.
Therefore, no federal income or excise tax provision is required.
Net investment income and net realized gains for financial statement
purposes may differ from the characterization for federal income tax
purposes due to differences in the recognition of income and expense
items for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
Each Fund generally pays dividends from net investment income monthly
and distributes any net capital gains that it realizes annually.
Dividends are declared on each day that the net asset value is
calculated, except for bank holidays.
38
<PAGE>
- --------------------------------------------------------------------------------
October 31, 1999
(C) REALIZED GAINS AND LOSSES ON INVESTMENT TRANSACTIONS -- Investment
security transactions are recorded as of the trade date. Gains or
losses realized on investment transactions are determined by comparing
the identified cost of the security lot sold with the net sales
proceeds.
(D) CERTAIN INVESTMENT RISKS -- The Funds may utilize derivative
instruments including options, futures and other instruments with
similar characteristics to the extent that they are consistent with
the 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.
Investments in foreign denominated assets or forward currency
contracts may involve greater risks than domestic transactions, due to
currency, political, economic, regulatory and market risks.
(E) FUTURES -- Upon entering into a futures contract, the Funds pledge to
the broker cash or other investments equal to the minimum "initial
margin" requirements of the exchange. Additional securities held by
the Funds may be designated as collateral on open futures contracts.
The Funds also receive from or pay to the broker an amount of cash
equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin," and are recorded
as unrealized gains or losses. When the futures contract is closed, a
realized gain or loss is recorded equal to the difference between the
value of the contract at the time it was opened and the value at the
time it was closed.
(F) OPTIONS -- The Funds may write put or call options. Premiums received
by the Funds upon writing put or call options are recorded as an asset
with a corresponding liability which is subsequently adjusted to the
current market value of the option. 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.
Additional securities held by the Funds may be designated as
collateral on written options.
(G) FOREIGN CURRENCY TRANSLATION -- Investment securities and other assets
and liabilities initially expressed in foreign currencies are
converted to U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income are converted to
U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. The effect of changes in
foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses.
(H) FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- Forward foreign
currency exchange contracts are valued at the forward rate and are
marked-to-market daily. The change in market value is recorded as an
unrealized gain or loss. When the contract is closed, the Funds record
an exchange gain or loss equal to the difference between the value of
the contract at the time it was opened and the value at the time it
was closed.
(I) REPURCHASE AGREEMENTS -- The Funds may enter into repurchase
agreements with institutions that the Funds' investment advisor,
Strong Capital Management, Inc. ("the Advisor"), has determined are
creditworthy pursuant to criteria adopted by the Board of Directors.
Each repurchase agreement is recorded at cost. The Funds require that
the collateral, represented by securities (primarily U.S. Government
securities), in a repurchase transaction be maintained in a segregated
account with a custodian bank in a manner sufficient to enable the
Funds to obtain those securities in the event of a default of the
repurchase agreement. On a daily basis, the Advisor monitors the value
of the collateral, including accrued interest, to ensure it is at
least equal to the amounts owed to the Funds under each repurchase
agreement.
(J) USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts in these financial statements. Actual results could differ
from those estimates.
(K) OTHER -- Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income is recorded on the
accrual basis and includes amortization of premiums and discounts.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
October 31, 1999
3. RELATED PARTY TRANSACTIONS
The Advisor, with whom certain officers and directors of the Funds are
affiliated, provides investment advisory, administrative, shareholder
recordkeeping and related services to the Funds. Investment advisory and
administrative fees, which are established by terms of the Advisory
Agreements, are based on the following annualized rates of the average
daily net assets of the respective Fund:
<TABLE>
<CAPTION>
Administrative Administrative Administrative
Fees - Fees - Fees -
Advisory Fees Advisory Fees Investor Class Institutional Class Advisor Class
Nov. 1, Sept. 1, Sept. 1, Sept. 1, Sept. 1,
1998-Aug. 31, 1999-Oct. 31, 1999-Oct. 31, 1999-Oct. 31, 1999-Oct. 31,
1999 1999 1999 1999 1999
------------- ------------- -------------- ------------------- --------------
<S> <C> <C> <C> <C> <C>
Strong Bond Fund 0.25% 0.23% 0.25% 0.02% 0.25%
Strong Corporate Bond Fund 0.625% 0.375% 0.25% 0.02% 0.25%
Strong Government Securities Fund 0.60% 0.35% 0.25% 0.02% 0.25%
Strong Short-Term Bond Fund 0.625% 0.375% 0.25% 0.02% 0.25%
Strong High-Yield Bond Fund 0.625% 0.375% 0.25% * *
Strong Short-Term High Yield Bond Fund 0.625% 0.375% 0.25% * *
</TABLE>
*The Strong High-Yield Bond Fund and the Strong Short-Term High Yield Bond
Fund do not offer Institutional or Advisor Class shares.
Based on the terms of the Advisory Agreements, advisory fees,
administrative fees and other expenses will be waived by the Advisor if the
Fund's operating expenses exceed 2% of the average daily net assets of the
Fund. In addition, the Fund's Advisor may voluntarily waive or absorb
certain expenses at its discretion. Shareholder recordkeeping and related
service fees are based on contractually established rates for each open and
closed shareholder account. The Advisor is compensated for certain other
services related to costs incurred for reports to shareholders.
The Strong Bond Fund, Strong Corporate Bond Fund, Strong Government
Securities Fund and Strong Short-Term Bond Fund have entered into a
distribution agreement with Strong Investments, Inc. (the "Distributor"),
pursuant to Rule 12b-1 under the 1940 Act, on behalf of each of the Fund's
Advisor Class shares. Under the agreement, the Distributor is paid an
annual rate of 0.25% of the average daily net assets of the Advisor Class
shares as compensation for services provided and expenses incurred,
including amounts paid to brokers or dealers, in connection with the sale
of each Fund's shares. During the period September 1, 1999 to October 31,
1999, there were no material 12b-1 fees incurred for the Funds.
The Funds may invest cash in money market funds sponsored and managed by
the Advisor, subject to certain limitations. The terms of such transactions
are identical to those of non-related entities except that, to avoid
duplicate investment advisory fees, advisory fees of each Fund are reduced
by an amount equal to advisory fees paid to the Advisor under its
investment advisory agreements with the money market funds.
Certain information regarding related party transactions, for the year
ended October 31, 1999 is as follows:
<TABLE>
<CAPTION>
Payable to Shareholder Servicing Unaffiliated
Advisor at and Other Expenses Directors'
October 31, 1999 Paid to Advisor Fees
---------------- --------------------- ------------
<S> <C> <C> <C>
Strong Bond Fund (Note 1) $ 24,197 $ 19,297 $ 750
Strong Corporate Bond Fund 75,453 1,804,079 8,129
Strong Government Securities Fund 112,700 2,375,260 12,011
Strong Short-Term Bond Fund 47,775 2,145,880 12,936
Strong High-Yield Bond Fund 26,233 908,490 6,325
Strong Short-Term High Yield Bond Fund 8,131 247,956 2,343
</TABLE>
The Advisor owns 100% of the outstanding Advisor Class shares of the Strong
Corporate Bond Fund, Strong Government Securities Fund, Strong Short-Term
Bond Fund, and Strong Bond Fund, respectively.
One shareholder owns 99%, 99%, and 98% of the outstanding Institutional
Class shares of the Strong Corporate Bond Fund, Strong Government
Securities Fund, and Strong Short-Term Bond Fund, respectively.
40
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1999
4. CAPITAL SHARE TRANSACTIONS
Strong Bond Fund
------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1999 Feb. 28, 1999 Feb. 28, 1998 Dec. 31, 1997
------------- ------------- ------------- -------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS OF EACH CLASS OF
SHARES OF THE FUNDS WERE AS FOLLOWS:
INVESTOR CLASS
Proceeds from Shares Sold $ 50,909 $ -- $ -- $ --
Proceeds from Reinvestment of Distributions 29 -- -- --
Payment for Shares Redeemed (26,443) -- -- --
----------- ----------- ---------- -----------
Net Increase in Net Assets from
Capital Share Transactions 24,495 -- -- --
INSTITUTIONAL CLASS
Proceeds from Shares Sold 46,264,460 86,338,180 3,994,776 66,565,110
Proceeds from Reinvestment of Distributions 7,303,493 6,064,592 536,657 1,576,599
Payment for Shares Redeemed (16,024,859) (13,230,237) (523,288) (17,109,973)
----------- ----------- ---------- -----------
Net Increase in Net Assets from
Capital Share Transactions 37,543,094 79,172,535 4,008,145 51,031,736
ADVISOR CLASS
Proceeds from Shares Sold 1,000 -- -- --
Proceeds from Reinvestment of Distributions -- -- -- --
Payment for Shares Redeemed -- -- -- --
----------- ----------- ---------- -----------
Net Increase in Net Assets from
Capital Share Transactions 1,000 -- -- --
----------- ----------- ---------- -----------
NET INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS $37,568,589 $79,172,535 $4,008,145 $51,031,736
=========== =========== ========== ===========
TRANSACTIONS IN SHARES OF EACH CLASS OF
THE FUNDS WERE AS FOLLOWS:
INVESTOR CLASS
Sold 4,755 -- -- --
Issued in Reinvestment of Distributions 3 -- -- --
Redeemed (2,490) -- -- --
----------- ----------- ---------- -----------
Net Increase in Shares 2,268 -- -- --
INSTITUTIONAL CLASS
Sold 4,218,165 7,695,552 357,661 6,116,637
Issued in Reinvestment of Distributions 669,679 542,552 48,261 143,923
Redeemed (1,470,954) (1,180,209) (46,916) (1,558,230)
----------- ----------- ---------- -----------
Net Increase in Shares 3,416,890 7,057,895 359,006 4,702,330
ADVISOR CLASS
Sold 94 -- -- --
Issued in Reinvestment of Distributions -- -- -- --
Redeemed -- -- -- --
----------- ----------- ---------- -----------
Net Increase in Shares 94 -- -- --
----------- ----------- ---------- -----------
NET INCREASE IN SHARES OF THE FUND 3,419,252 7,057,895 359,006 4,702,330
=========== =========== ========== ===========
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1999
Strong Corporate Strong Government
Bond Fund Securities Fund
-------------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1999 Oct. 31, 1998 Oct. 31, 1999 Oct. 31, 1998
------------- ------------- ------------- -------------
(Note 1) (Note 1)
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS OF EACH CLASS OF
SHARES OF THE FUNDS WERE AS FOLLOWS:
INVESTOR CLASS
Proceeds from Shares Sold $429,535,815 $594,283,413 $755,357,728 $834,332,410
Proceeds from Reinvestment of Distributions 49,946,788 38,335,863 91,843,389 51,705,862
Payment for Shares Redeemed (389,860,325) (300,425,411) (713,679,897) (454,208,698)
------------- ------------ ------------ ------------
Net Increase in Net Assets from
Capital Share Transactions 89,622,278 332,193,865 133,521,220 431,829,574
INSTITUTIONAL CLASS
Proceeds from Shares Sold 731,831 -- 177,782 --
Proceeds from Reinvestment of Distributions -- -- -- --
Payment for Shares Redeemed -- -- -- --
------------- ------------ ------------ ------------
Net Increase in Net Assets from
Capital Share Transactions 731,831 -- 177,782 --
ADVISOR CLASS
Proceeds from Shares Sold 1,000 -- 1,000 --
Proceeds from Reinvestment of Distributions -- -- -- --
Payment for Shares Redeemed -- -- -- --
------------- ------------ ------------ ------------
Net Increase in Net Assets from
Capital Share Transactions 1,000 -- 1,000 --
------------- ------------ ------------ ------------
NET INCREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS $ 90,355,109 $332,193,865 $133,700,002 $431,829,574
============= ============ ============ ============
TRANSACTIONS IN SHARES OF EACH CLASS OF
THE FUNDS WERE AS FOLLOWS:
INVESTOR CLASS
Sold 39,176,996 52,726,335 71,553,931 76,822,791
Issued in Reinvestment of Distributions 4,551,881 3,400,003 8,657,453 4,773,165
Redeemed (35,637,373) (26,709,024) (67,792,818) (41,805,754)
------------- ------------ ------------ ------------
Net Increase in Shares 8,091,504 29,417,314 12,418,566 39,790,202
INSTITUTIONAL CLASS
Sold 69,830 -- 17,429 --
Issued in Reinvestment of Distributions -- -- -- --
Redeemed -- -- -- --
------------- ------------ ------------ ------------
Net Increase in Shares 69,830 -- 17,429 --
ADVISOR CLASS
Sold 95 -- 98 --
Issued in Reinvestment of Distributions -- -- -- --
Redeemed -- -- -- --
------------- ------------ ------------ ------------
Net Increase in Shares 95 -- 98 --
------------- ------------ ------------ ------------
NET INCREASE IN SHARES OF THE FUND 8,161,429 29,417,314 12,436,093 39,790,202
=========== =========== ========== ===========
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1999
Strong Short-Term
Bond Fund
-------------------------------
Year Ended Year Ended
Oct. 31, 1999 Oct. 31, 1998
------------- -------------
(Note 1)
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS OF EACH CLASS OF SHARES OF
THE FUNDS WERE AS FOLLOWS:
INVESTOR CLASS
Proceeds from Shares Sold $508,980,681 $576,620,860
Proceeds from Reinvestment of Distributions 71,427,426 75,869,239
Payment for Shares Redeemed (615,610,523) (603,753,336)
------------ --------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (35,202,416) 48,736,763
INSTITUTIONAL CLASS
Proceeds from Shares Sold 13,380,825 --
Proceeds from Reinvestment of Distributions -- --
Payment for Shares Redeemed -- --
------------ --------------
Net Increase in Net Assets from
Capital Share Transactions 13,380,825 --
ADVISOR CLASS
Proceeds from Shares Sold 1,000 --
Proceeds from Reinvestment of Distributions -- --
Payment for Shares Redeemed -- --
------------ --------------
Net Increase in Net Assets from
Capital Share Transactions 1,000 --
------------ --------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ($ 21,820,591) $ 48,736,763
============= ==============
TRANSACTIONS IN SHARES OF EACH CLASS OF
THE FUNDS WERE AS FOLLOWS:
INVESTOR CLASS
Sold 53,341,059 59,070,642
Issued in Reinvestment of Distributions 7,487,998 7,768,417
Redeemed (64,563,131) (61,901,224)
------------ --------------
Net Increase (Decrease) in Shares (3,734,074) 4,937,835
INSTITUTIONAL CLASS
Sold 1,423,492 --
Issued in Reinvestment of Distributions -- --
Redeemed -- --
------------ --------------
Net Increase in Shares 1,423,492 --
ADVISOR CLASS
Sold 106 --
Issued in Reinvestment of Distributions -- --
Redeemed -- --
------------ --------------
Net Increase in Shares 106 --
------------ --------------
NET INCREASE (DECREASE) IN SHARES OF THE FUND (2,310,476) 4,937,835
============= ==============
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
NOTES TO FINANCIAL STATEMENTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
October 31, 1999
Strong High-Yield Strong Short-Term High
Bond Fund Yield Bond Fund
------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 1999 Oct. 31, 1998 Oct. 31, 1999 Oct. 31, 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS OF EACH CLASS OF
SHARES OF THE FUNDS WERE AS FOLLOWS:
Proceeds from Shares Sold $521,184,654 $ 675,257,570 $301,740,464 $ 153,366,077
Proceeds from Reinvestment of Distributions 47,980,853 56,534,875 12,650,126 5,490,461
Payment for Shares Redeemed (425,885,389) (718,870,595) (166,026,909) (95,526,183)
------------ ------------- ------------ -------------
Net Increase in Net Assets from
Capital Share Transactions $143,280,118 $ 12,921,850 $148,363,681 $ 63,330,355
============ ============= ============ =============
TRANSACTIONS IN SHARES OF EACH CLASS OF
THE FUNDS WERE AS FOLLOWS:
Sold 47,126,183 56,756,277 29,118,632 14,716,221
Issued in Reinvestment of Distributions 4,349,203 4,758,296 1,223,033 526,763
Redeemed (38,435,669) (61,112,110) (16,039,459) (9,203,402)
------------ ------------- ------------ -------------
Net Increase in Shares of the Fund 13,039,717 402,463 14,302,206 6,039,582
============ ============= ============ =============
</TABLE>
5. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of long-term securities for the year
ended October 31, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
---------------------------------- -----------------------------------
U.S. Government U.S. Government
and Agency Other and Agency Other
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Strong Bond Fund $ 194,830,350 $ 218,649,119 $ 193,332,474 $ 180,816,048
Strong Corporate Bond Fund 1,199,310,404 2,321,699,027 1,223,277,103 2,200,317,997
Strong Government Securities Fund 2,053,649,423 431,930,185 1,986,303,118 398,268,357
Strong Short-Term Bond Fund 495,103,244 1,127,212,836 546,268,184 1,058,242,220
Strong High-Yield Bond Fund -- 966,518,071 -- 831,752,883
Strong Short-Term High Yield Bond Fund -- 254,762,734 -- 114,267,984
</TABLE>
6. LINE OF CREDIT
The Strong Funds have established a line of credit agreement ("LOC") with
certain financial institutions to be used for temporary or emergency
purposes, primarily for financing redemption payments. Combined borrowings
among all participating Strong Funds are subject to a $350 million cap on
the total line of credit. For individual Funds, borrowings under the LOC
are limited to either the lesser of 15% of the market value of total assets
or any explicit borrowing limits in the Fund's prospectus. Borrowings under
the LOC bear interest based on prevailing market rates as defined in the
LOC. A commitment fee of .08% per annum is incurred on the unused portion
of the line of credit and is allocated to all participating Strong Funds.
At October 31, 1999, there were no borrowings by the Funds under the LOC.
7. INCOME TAX INFORMATION
At October 31, 1999, the investment cost, gross unrealized appreciation and
depreciation on investments and capital loss carryovers (expiring in
varying amounts through 2007) for federal income tax purposes were as
follows:
<TABLE>
<CAPTION>
Federal Tax Unrealized Unrealized Net Net Capital Loss
Cost Appreciation Depreciation Depreciation Carryovers
-------------- ------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Strong Bond Fund $ 172,173,830 $ 815,126 $ 2,741,339 $ 1,926,213 $ --
Strong Corporate Bond Fund 898,324,820 2,922,678 32,568,582 29,645,904 26,021,145
Strong Government Securities Fund 1,368,859,104 153,551 23,897,149 23,743,598 28,942,438
Strong Short-Term Bond Fund 1,310,236,152 6,600,457 31,339,765 24,739,308 95,200,461
Strong High-Yield Bond Fund 617,169,511 11,387,828 41,188,770 29,800,942 14,013,144
Strong Short-Term High Yield Bond Fund 258,545,945 1,403,987 5,454,062 4,050,075 --
</TABLE>
During the year ended October 31, 1999, the Funds paid capital gains
distributions (taxable as long-term capital gains at 20%) to shareholders
as follows (unaudited): Strong Bond Fund $41,367, Strong Corporate Bond
Fund $0, Strong Government Securities Fund $4,849,045, Strong Short-Term
Bond Fund $0, Strong High-Yield Bond Fund $3,985,698, and Strong Short-Term
High Yield Bond Fund $132,320.
The Strong Short-Term Bond Fund utilized $1,217,004 of it's capital loss
carryovers during the year ended October 31, 1999.
For corporate shareholders in the Funds, the percentage of dividend income
distributed for the period ended October 31, 1999 which is designated as
qualifying for the dividends-received deduction is as follows (unaudited):
Strong Bond Fund 1.1%, Strong Corporate Bond Fund 9.9%, Strong Government
Securities Fund 1.3%, Strong High-Yield Bond Fund 10.2%, Strong Short-Term
Bond Fund 5.6%, and Strong Short-Term High Yield Bond Fund 1.7%.
44
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG BOND FUND - INVESTOR CLASS
- --------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
SELECTED PER-SHARE DATA(a) 1999(b)
- --------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.68
Income From Investment Operations:
Net Investment Income 0.12
Net Realized and Unrealized Gains on Investments 0.01
- --------------------------------------------------------------------------------------
Total from Investment Operations 0.13
Less Distributions:
From Net Investment Income (0.12)
- --------------------------------------------------------------------------------------
Total Distributions (0.12)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.69
======================================================================================
RATIOS AND SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------
Total Return 1.2%
Net Assets, End of Period (In Millions) $0(c)
Ratio of Expenses to Average Net Assets 0.6%*
Ratio of Net Investment Income to Average Net Assets 7.7%*
Portfolio Turnover Rate(d) 250.7%
<CAPTION>
STRONG BOND FUND - INSTITUTIONAL CLASS
- ---------------------------------------------------------------------------------------------------------------------
Year Ended
----------------------------------------
Oct. 31, Feb. 28, Feb. 28, Dec. 31,
SELECTED PER-SHARE DATA(a) 1999(e) 1999 1998(f) 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.12 $11.18 $11.06 $10.00
Income From Investment Operations:
Net Investment Income 0.48 0.67 0.11 0.66
Net Realized and Unrealized Gains (Losses) on Investments (0.39) 0.19 0.12 1.18
- ---------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.09 0.86 0.23 1.84
Less Distributions:
From Net Investment Income (0.48) (0.68) (0.11) (0.66)
In Excess of Net Investment Income -- -- (0.00)(g) --
From Net Realized Gains (0.06) (0.24) -- (0.12)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (0.54) (0.92) (0.11) (0.78)
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.67 $11.12 $11.18 $11.06
=====================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Total Return +0.9% +7.9% +2.1% +18.9%
Net Assets, End of Period (In Millions) $166 $135 $57 $52
Ratio of Expenses to Average Net Assets without Waivers or Absorptions 0.4%* 0.4% 0.4%* 0.7%
Ratio of Expenses to Average Net Assets 0.4%* 0.4% 0.4%* 0.4%
Ratio of Net Investment Income to Average Net Assets 6.6%* 6.0% 6.2%* 6.3%
Portfolio Turnover Rate(d) 250.7% 305.4% 68.1% 358.6%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from September 1, 1999 (Commencement of Class) to October
31, 1999. (Note 1)
(c) Amount is less than $500,000.
(d) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(e) In 1999, the Fund changed its fiscal year-end from February to October.
(Note 1)
(f) In 1997, the Fund changed its fiscal year-end from December to February.
(Note 1)
(g) Amount calculated is less than $0.01.
See Notes to Financial Statements.
45
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG BOND FUND - ADVISOR CLASS
- ---------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
SELECTED PER-SHARE DATA(a) 1999(b)
- ---------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.68
Income From Investment Operations:
Net Investment Income 0.11
- ---------------------------------------------------------------------------------------
Total from Investment Operations 0.11
Less Distributions:
From Net Investment Income (0.11)
- ---------------------------------------------------------------------------------------
Total Distributions (0.11)
- ---------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.68
=======================================================================================
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Total Return +1.0%
Net Assets, End of Period (In Millions) $ 0(c)
Ratio of Expenses to Average Net Assets 1.3%*
Ratio of Net Investment Income to Average Net Assets 6.2%*
Portfolio Turnover Rate(d) 250.7%
<CAPTION>
STRONG CORPORATE BOND FUND - INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended
---------------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Dec. 31,
SELECTED PER-SHARE DATA(a) 1999 1998 1997 1996 1995(e) 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.09 $11.08 $10.64 $10.56 $9.36 $10.24
Income From Investment Operations:
Net Investment Income 0.73 0.73 0.74 0.73 0.63 0.73
Net Realized and Unrealized Gains (Losses) on Investments (0.49) 0.02 0.44 0.08 1.22 (0.87)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.24 0.75 1.18 0.81 1.85 (0.14)
Less Distributions:
From Net Investment Income (0.73) (0.73) (0.74) (0.73) (0.63) (0.73)
In Excess of Net Investment Income -- (0.01) -- -- (0.02) (0.01)
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.73) (0.74) (0.74) (0.73) (0.65) (0.74)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.60 $11.09 $11.08 $10.64 $10.56 $9.36
================================================================================================================================
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return +2.2% +6.8% +11.5% +8.0% +20.3% -1.3%
Net Assets, End of Period (In Millions) $868 $819 $492 $298 $218 $123
Ratio of Expenses to Average Net Assets 0.8% 0.9% 1.0% 1.0% 1.0%* 1.1%
Ratio of Net Investment Income to Average Net Assets 6.7% 6.5% 6.8% 7.0% 7.5%* 7.6%
Portfolio Turnover Rate(d) 403.2% 366.9% 542.4% 672.8% 621.4% 603.0%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from September 1, 1999 (Commencement of Class) to October
31, 1999. (Note 1)
(c) Amount is less than $500,000.
(d) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(e) In 1995, the Fund changed its fiscal year-end from December to October.
See Notes to Financial Statements.
46
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND - INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
Selected Per-Share Data(a) 1999(b)
- --------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.58
Income From Investment Operations:
Net Investment Income 0.13
Net Realized and Unrealized Gains on Investments 0.01
- --------------------------------------------------------------------------------------
Total from Investment Operations 0.14
Less Distributions:
From Net Investment Income (0.13)
- --------------------------------------------------------------------------------------
Total Distributions (0.13)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.59
======================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------
Total Return +1.4%
Net Assets, End of Period (In Millions) $ 1
Ratio of Expenses to Average Net Assets 0.4%*
Ratio of Net Investment Income to Average Net Assets 6.9%*
Portfolio Turnover Rate(c) 403.2%
<CAPTION>
STRONG CORPORATE BOND FUND - ADVISOR CLASS
- --------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
Selected Per-Share Data(a) 1999(b)
- --------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.58
Income From Investment Operations:
Net Investment Income 0.12
Net Realized and Unrealized Gains on Investments 0.01
- --------------------------------------------------------------------------------------
Total from Investment Operations 0.13
Less Distributions:
From Net Investment Income (0.12)
- --------------------------------------------------------------------------------------
Total Distributions (0.12)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.59
======================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------
Total Return +1.2%
Net Assets, End of Period (In Millions) $ 0(d)
Ratio of Expenses to Average Net Assets 1.2%*
Ratio of Net Investment Income to Average Net Assets 6.8%*
Portfolio Turnover Rate(c) 403.2%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from September 1, 1999 (Commencement of Class) to October
31, 1999. (Note 1)
(c) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(d) Amount is less than $500,000.
See Notes to Financial Statements.
47
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND - INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended
--------------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998 1997 1996 1995(b) 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $11.04 $10.70 $10.44 $10.60 $9.63 $10.61
Income From Investment Operations:
Net Investment Income 0.58 0.60 0.65 0.63 0.54 0.62
Net Realized and Unrealized Gains (Losses) on Investments (0.58) 0.34 0.26 (0.16) 0.99 (0.98)
- --------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations (0.00) 0.94 0.91 0.47 1.53 (0.36)
Less Distributions:
From Net Investment Income (0.58) (0.60) (0.65) (0.63) (0.54) (0.62)
In Excess of Net Investment Income -- -- -- -- (0.02) --
From Net Realized Gains (0.23) -- -- -- -- --
Total Distributions (0.81) (0.60) (0.65) (0.63) (0.56) (0.62)
- --------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.23 $11.04 $10.70 $10.44 $10.60 $9.63
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------------------------------------------------
Total Return 0.0%(c) +9.1% +9.1% +4.6% +16.2% -3.4%
Net Assets, End of Period (In Millions) $1,340 $1,309 $ 843 $ 638 $ 456 $ 277
Ratio of Expenses to Average Net Assets 0.8% 0.8% 0.8% 0.9% 0.9%* 0.9%
Ratio of Net Investment Income to Average Net Assets 5.5% 5.5% 6.2% 6.0% 6.2%* 6.2%
Portfolio Turnover Rate(d) 185.3% 284.1% 474.9% 457.6% 409.2% 479.0%
<CAPTION>
STRONG GOVERNMENT SECURITIES FUND - INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
Selected Per-Share Data(a) 1999(e)
- --------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.21
Income From Investment Operations:
Net Investment Income 0.11
Net Realized and Unrealized Gains on Investments 0.01
- --------------------------------------------------------------------------------------
Total from Investment Operations 0.12
Less Distributions:
From Net Investment Income (0.11)
- --------------------------------------------------------------------------------------
Total Distributions (0.11)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.22
======================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------
Total Return +1.1%
Net Assets, End of Period (In Millions) $0(f)
Ratio of Expenses to Average Net Assets 0.4%*
Ratio of Net Investment Income to Average Net Assets 5.9%*
Portfolio Turnover Rate(d) 185.3%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) In 1995, the Fund changed its fiscal year-end from December to October.
(c) Amount calculated is less than 0.1%.
(d) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(e) For the period from September 1, 1999 (Commencement of Class) to October
31, 1999. (Note 1)
(f) Amount is less than $500,000.
See Notes to Financial Statements.
48
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND - ADVISOR CLASS
- --------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
Selected Per-Share Data(a) 1999(b)
- --------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $10.21
Income From Investment Operations:
Net Investment Income 0.09
Net Realized and Unrealized Gains on Investments 0.01
- --------------------------------------------------------------------------------------
Total from Investment Operations 0.10
Less Distributions:
From Net Investment Income (0.09)
- --------------------------------------------------------------------------------------
Total Distributions (0.09)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.22
======================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------
Total Return +1.0%
Net Assets, End of Period (In Millions) $0(c)
Ratio of Expenses to Average Net Assets 1.2%*
Ratio of Net Investment Income to Average Net Assets 5.4%*
Portfolio Turnover Rate(d) 185.3%
<CAPTION>
STRONG SHORT-TERM BOND FUND - INVESTOR CLASS
- ---------------------------------------------------------------------------------------------------------------------------------
Year Ended
---------------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31, Dec. 31,
Selected Per-Share Data(a) 1999 1998 1997 1996 1995(e) 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $9.57 $9.78 $9.75 $9.77 $9.42 $10.23
Income From Investment Operations:
Net Investment Income 0.62 0.66 0.69 0.69 0.56 0.64
Net Realized and Unrealized Gains (Losses) on Investments (0.17) (0.21) 0.03 (0.02) 0.35 (0.80)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.45 0.45 0.72 0.67 0.91 (0.16)
Less Distributions:
From Net Investment Income (0.61) (0.66) (0.69) (0.69) (0.56) (0.65)
In Excess of Net Investment Income -- 0.00(f) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.61) (0.66) (0.69) (0.69) (0.56) (0.65)
- ---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.41 $9.57 $9.78 $9.75 $9.77 $ 9.42
=================================================================================================================================
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return +4.8% +4.7% +7.6% +7.1% +9.9% -1.6%
Net Assets, End of Period (In Millions) $1,272 $1,329 $1,310 $1,148 $1,083 $1,041
Ratio of Expenses to Average Net Assets 0.8% 0.8% 0.9% 0.9% 0.9%* 0.9%
Ratio of Net Investment Income to Average Net Assets 6.5% 6.7% 7.0% 7.1% 7.0%* 6.5%
Portfolio Turnover Rate(d) 124.2% 138.3% 193.8% 191.5% 317.1% 249.7%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from September 1, 1999 (Commencement of Class) to October
31, 1999. (Note 1)
(c) Amount is less than $500,000.
(d) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(e) In 1995, the Fund changed its fiscal year-end from December to October.
(f) Amount calculated is less than $0.01.
See Notes to Financial Statements.
49
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND - INSTITUTIONAL CLASS
- --------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
Selected Per-Share Data(a) 1999(b)
- --------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $9.42
Income From Investment Operations:
Net Investment Income 0.11
- --------------------------------------------------------------------------------------
Total from Investment Operations 0.11
Less Distributions:
From Net Investment Income (0.11)
- --------------------------------------------------------------------------------------
Total Distributions (0.11)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.42
======================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------
Total Return +1.2%
Net Assets, End of Period (In Millions) $13
Ratio of Expenses to Average Net Assets 0.4%*
Ratio of Net Investment Income to Average Net Assets 6.8%*
Portfolio Turnover Rate(c) 124.2%
<CAPTION>
STRONG SHORT-TERM BOND FUND - ADVISOR CLASS
- --------------------------------------------------------------------------------------
Year Ended
----------
Oct. 31,
Selected Per-Share Data(a) 1999(b)
- --------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $9.42
Income From Investment Operations:
Net Investment Income 0.10
Net Realized and Unrealized Losses on Investments (0.01)
- --------------------------------------------------------------------------------------
Total from Investment Operations 0.09
Less Distributions:
From Net Investment Income (0.10)
- --------------------------------------------------------------------------------------
Total Distributions (0.10)
- --------------------------------------------------------------------------------------
Net Asset Value, End of Period $9.41
======================================================================================
Ratios and Supplemental Data
- --------------------------------------------------------------------------------------
Total Return +0.9%
Net Assets, End of Period (In Millions) $0(d)
Ratio of Expenses to Average Net Assets 1.2%*
Ratio of Net Investment Income to Average Net Assets 6.3%*
Portfolio Turnover Rate(c) 124.2%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from September 1, 1999 (Commencement of Class) to October
31, 1999. (Note 1)
(c) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(d) Amount is less than $500,000.
See Notes to Financial Statements.
50
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (continued)
- ------------------------------------------------------------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND
- ----------------------------------------------------------------------------------------------------------------------
Year Ended
-----------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31,
Selected Per-Share Data(a) 1999 1998 1997 1996(b)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.73 $11.94 $11.26 $10.00
Income From Investment Operations:
Net Investment Income 1.09 1.05 1.05 0.84
Net Realized and Unrealized Gains on Investments (0.05) (0.89) 0.81 1.26
- ----------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 1.04 0.16 1.86 2.10
Less Distributions:
From Net Investment Income (1.08) (1.04) (1.05) (0.84)
In Excess of Net Investment Income -- (0.01) -- --
From Net Realized Gains (0.09) (0.32) (0.13) --
- ----------------------------------------------------------------------------------------------------------------------
Total Distributions (1.17) (1.37) (1.18) (0.84)
- ----------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.60 $10.73 $11.94 $11.26
======================================================================================================================
Ratios and Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------
Total Return +9.8% +0.9% +17.3% +21.7%
Net Assets, End of Period (In Millions) $595 $462 $510 $217
Ratio of Expenses to Average Net Assets without Waivers or Absorptions 0.8% 0.8% 0.8% 1.0%*
Ratio of Expenses to Average Net Assets 0.8% 0.8% 0.6% 0.0%*
Ratio of Net Investment Income to Average Net Assets 9.8% 8.8% 8.9% 9.6%*
Portfolio Turnover Rate 144.7% 224.4% 409.3% 390.8%
<CAPTION>
STRONG SHORT-TERM HIGH YIELD BOND FUND
- ------------------------------------------------------------------------------------------------
Year Ended
------------------------------
Oct. 31, Oct. 31, Oct. 31,
Selected Per-Share Data(a) 1999 1998 1997(c)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $10.20 $10.24 $10.00
Income From Investment Operations:
Net Investment Income 0.79 0.77 0.25
Net Realized and Unrealized Gains on Investments 0.06 0.01 0.24
- ------------------------------------------------------------------------------------------------
Total from Investment Operations 0.85 0.78 0.49
Less Distributions:
From Net Investment Income (0.79) (0.77) (0.25)
From Net Realized Gains (0.05) (0.05) --
- ------------------------------------------------------------------------------------------------
Total Distributions (0.84) (0.82) (0.25)
- ------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.21 $10.20 $10.24
================================================================================================
Ratios and Supplemental Data
- ------------------------------------------------------------------------------------------------
Total Return +8.5% +7.7% +4.9%
Net Assets, End of Period (In Millions) $252 $106 $45
Ratio of Expenses to Average Net Assets 0.8% 0.9% 1.0%*
Ratio of Net Investment Income to Average Net Assets 7.6% 7.4% 7.7%*
Portfolio Turnover Rate 60.1% 190.1% 96.2%
</TABLE>
* Calculated on an annualized basis.
(a) Information presented relates to a share of capital stock of the Fund
outstanding for the entire period.
(b) For the period from January 1, 1996 (Commencement of Operations) to October
31, 1996.
(c) For the period from June 30, 1997 (Inception) to October 31, 1997.
See Notes to Financial Statements.
51
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of the
Strong Income Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments in securities, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Strong Bond Fund (a
series of Strong Income Funds II, Inc.), Strong High-Yield Bond Fund, Strong
Short-Term High-Yield Bond Fund (two of the portfolios constituting the Strong
Income Funds, Inc.), Strong Corporate Bond Fund, Inc., Strong Government
Securities Fund, Inc., and Strong Short-Term Bond Fund, Inc. (the "Funds"), at
October 31, 1999, the results of each of their operations, the changes in each
of their net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 1999 by
correspondence with the custodians and brokers, and the application of
alternative auditing procedures where broker confirmations were not received,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 8, 1999
52
<PAGE>
DIRECTORS
Richard S. Strong
Marvin E. Nevins
William F. Vogt
Willie D. Davis
Stanley Kritzik
OFFICERS
Richard S. Strong, CHAIRMAN OF THE BOARD
Thomas M. Zoeller, VICE PRESIDENT
Dennis A. Wallestad, VICE PRESIDENT
Stephen J. Shenkenberg, VICE PRESIDENT AND SECRETARY
John S. Weitzer, VICE PRESIDENT
John W. Widmer, TREASURER
Rhonda K. Haight, ASSISTANT TREASURER
INVESTMENT ADVISOR
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
DISTRIBUTOR
Strong Investments, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
CUSTODIAN
Firstar Bank Milwaukee, N.A.
P.O. Box 701, Milwaukee, Wisconsin 53201
TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT
Strong Capital Management, Inc.
P.O. Box 2936, Milwaukee, Wisconsin 53201
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street, Milwaukee, Wisconsin 53202
<PAGE>
For a prospectus containing more complete information, including management fees
and expenses, please call 1-800-368-1030. Please read it carefully before
investing or sending money. This report does not constitute an offer for the
sale of securities. Strong Funds are offered for sale by prospectus only. Strong
Investments, Inc. 13451L99
------------------------------------
[GRAPHIC]
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
------------------------------------
------------------------------------
[GRAPHIC]
Visit our web site at
www.eStrong.com
------------------------------------
[LOGO]
STRONG FUNDS -Registered Trademark-
P.O. Box 2936
Milwaukee, Wisconsin 53201 AINC
