<PAGE>
ANNUAL REPORT | October 31, 2000
The Strong
Income
--------------------------------------------------------------------------------
Funds
[PHOTO HERE]
Strong Bond Fund
Strong Corporate Bond Fund
Strong Government Securities Fund
Strong Short-Term Bond Fund
Strong High-Yield Bond Fund
Strong Short-Term High Yield Bond Fund
[LOGO HERE] STRONG
<PAGE>
A Few Words From Dick Strong
--------------------------------------------------------------------------------
[PHOTO HERE]
153 Rate Increases Later...
When Will the Pendulum Swing?
During the last 18 months, the central bankers of the world's most powerful
countries have had one overriding objective on their minds: to slow the economic
growth of their countries. To accomplish this objective, they have raised
interest rates around the globe a staggering total of 153 times.
Included in those 153 rate increases were 6 by the Federal Reserve Bank of the
United States. The Fed governors' objective was the same as their counterparts'
worldwide--to slow economic growth. And make no mistake...THEY WILL NOT FAIL!
Economic management is a nebulous process of leads and lags. It often takes
months or even years to get an accurate fix on the economy and gauge the
reaction to each action. It is an inexact cross between art and science.
In the last year and a half, the U.S. economy has contended with:
. Higher interest rates
. Oil selling upwards of $30 a barrel
. A strong U.S. dollar that rendered American goods and services more
expensive and less attractive to foreigners
. The erosion of wealth caused by a nearly 40% correction in the Nasdaq
The end result of it all is less money circulating through our economy and a
slowing of economic growth.
We have already begun to see signs of a weakening economy. Sales falling short
of expectations, layoffs, disappointing corporate profits, and business failures
all point to a slowdown. How much more weakening lies ahead is impossible to
know. The combination of higher interest rates, expensive oil, the strong U.S.
dollar, and further market corrections could deliver one heck of a wallop!
The lesson to be learned from all of this is that the world's financial markets
and economies are inherently cyclical. There will always be good times and bad
times, booms and busts. A solid investment program must be built to withstand
the stress of expanding and contracting economic cycles.
At Strong, our research indicates that sometime soon, the central bankers of the
world will begin to actively stimulate their respective economies by easing up
on interest rates. The internal fabric of the U.S. economy remains the best it
has been in several decades. We believe that the economy and the financial
markets will once again begin to grow and prosper in late 2001 and 2002.
The financial markets have recently had a significant correction reminiscent of
1973-74. The stock market is usually an early indicator of economic strength or
weakness and will begin to move long before earnings, job reports, and business
activity catch up.
The important thing for investors to remember is not to react to whatever the
most recent stimulus has been, but to have a well-thought-out plan to reach
their objectives--and to stay the course with that plan. At Strong, we continue
to believe, as we did back in 1975, that a balanced approach to investing can
serve you and your family well. Our recommendation continues to be that
investors should construct a balanced portfolio of money funds, bond mutual
funds, and stock mutual funds.
/s/ Dick
<PAGE>
ANNUAL REPORT | October 31, 2000
The Strong
Income
--------------------------------------------------------------------------------
Funds
Table of Contents
<TABLE>
<S> <C>
Investment Reviews
Strong Bond Fund......................................................... 2
Strong Corporate Bond Fund............................................... 4
Strong Government Securities Fund........................................ 6
Strong Short-Term Bond Fund.............................................. 8
Strong High-Yield Bond Fund.............................................. 10
Strong Short-Term High Yield Bond Fund................................... 12
Bond Glossary............................................................... 14
Financial Information
Schedules of Investments in Securities
Strong Bond Fund..................................................... 15
Strong Corporate Bond Fund........................................... 18
Strong Government Securities Fund.................................... 21
Strong Short-Term Bond Fund.......................................... 24
Strong High-Yield Bond Fund.......................................... 27
Strong Short-Term High Yield Bond Fund............................... 30
Statements of Assets and Liabilities..................................... 33
Statements of Operations................................................. 35
Statements of Changes in Net Assets...................................... 37
Notes to Financial Statements............................................ 39
Financial Highlights........................................................ 48
Report of Independent Accountants........................................... 56
</TABLE>
<PAGE>
Strong Bond Fund
Effective November 30, 2000, the Fund's name is changing from the Strong Bond
Fund to the Strong Advisor Bond Fund.
--------------------------------------------------------------------------------
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 higher- and medium-quality corporate, mortgage- and asset-backed,
U.S. government, and foreign government bonds. The Fund's duration will normally
vary between three and six years. The Fund may invest up to 20% of its assets in
securities denominated in foreign currencies and may invest beyond this limit in
U.S. dollar-denominated securities of foreign issuers. The Fund may also invest
up to 20% of its assets in lower-quality, high-yield bonds. In selecting bonds
for the portfolio, the managers engage in rigorous, security-by-security
research as well as thorough analysis of general economic conditions. Generally,
quantitative analysis (focused on such factors as duration, yield spreads, and
yield curves) drives issue selection in the Treasury and mortgage marketplace,
and proactive credit research drives corporate issue selection.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-31-96 to 10-31-00
[GRAPH]
Lipper
Lehman Brothers Intermediate
The Strong Aggregate Investment Grade
Bond Fund Bond Index* Debt Funds Index*
Dec 96 $10,000 $10,000 $10,000
Jun 97 $11,020 $10,309 $10,294
Dec 97 $11,859 $10,966 $10,879
Jun 98 $12,409 $11,396 $11,289
Dec 98 $13,114 $11,918 $11,735
Jun 99 $13,028 $11,755 $11,569
Dec 99 $13,255 $11,820 $11,620
Jun 00 $13,722 $12,291 $12,003
Oct 00 $14,218 $12,746 $12,399
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.
Q: How did your fund perform?
A: Having the Fund positioned defensively in the early part of the fiscal year
protected performance, as the Federal Reserve's interest rate hikes earlier
in the year drove market interest rates higher. However, it was somewhat
surprising that the market was able to rally so strongly in the spring. As we
perceived that the Fed was becoming less aggressive, we adopted a less
defensive posture and extended out the Fund's interest rate exposure to match
that of the benchmark, the Lehman Brothers Aggregate Bond Index.*
Q: What market conditions, market events, and other factors impacted your fund's
performance?
A: Over the course of the past year, the bond market has been driven by the twin
forces of the Federal Reserve and the federal government's budget surpluses.
The Federal Reserve's activity has driven short-term Treasury rates higher by
more than 100 basis points, while budget surpluses have helped to lower long-
term Treasury rates, including 10-and 30-year bonds, by almost 50 basis
points.
After being plagued by budget deficits for decades, the U.S. Treasury is on
track to run a surplus of more than $225 billion for fiscal year 2000. Much
of this surplus has been targeted toward buying back longer-term Treasuries,
which has driven yields on those bonds lower. With a changing administration
in Washington, the precise path of fiscal policy is somewhat uncertain, but
we believe it is likely that under most scenarios, large surpluses will
persist.
2
<PAGE>
Strong demand for a shrinking pool of Treasuries, along with a modest
deterioration in credit quality, led corporate bonds to underperform for
the year.
Q: What investment strategies and techniques impacted your fund's performance?
A: To manage the Fund's risk from interest rate changes, early in 2000, we
positioned the portfolio with a barbell strategy. This involved selling
intermediate-term Treasuries, while simultaneously purchasing longer-term
Treasuries and holding cash instruments. This allowed the Fund to maintain
an overall exposure to interest rates that was in line with the Fund's
benchmarks, while also allowing it to own the portion of the bond market
(long Treasuries) that was appreciating in price due to high demand from
Treasury buybacks. It also allowed the Fund to collect the relatively high
yields on cash instruments, while decreasing the overall risk of the
portfolio. As this strategy worked, we took profits in the third quarter.
The Fund's asset allocation de-emphasized foreign bonds throughout the
year. We began the year with an overweighting in high-yield bonds, but as
time progressed, we decreased our weighting within these securities.
Q: What is your future outlook?
A: The prevailing wisdom in the market holds that the Fed is finished with
raising rates and is moving toward lowering them. We don't expect any rate
hikes, but we believe rate cuts are at least a few policy meetings away.
Our reasoning is that the Fed continues to view inflation, not recession,
to be the primary risk to the economy. Further, the Fed should consider the
potential for future tax cuts or government spending programs--either of
which could come from our new President and Congress--to stimulate further
economic growth.
As with stocks, the difference in price performance between those bonds
that are supported by positive underlying fundamentals and those that are
not can be dramatic. We are, therefore, increasing our emphasis on careful
selection of individual issues, backed by the research of our analysts
working with the portfolio managers.
Thank you for your investment in the Strong Bond Fund.
Jeffrey A. Koch Bradley C. Tank
Portfolio Co-Manager Portfolio Co-Manager
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS/1/
-----------------
1-year 7.26%
3-year 6.53%
Since Inception 9.36%
(12-31-96)
ADVISOR CLASS/2/
----------------
1-year 6.79%
3-year 6.03%
Since Inception 8.86%
(12-31-96)
INSTITUTIONAL CLASS
-------------------
1-year 7.66%
3-year 6.78%
Since Inception 9.62%
(12-31-96)
PORTFOLIO STATISTICS
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/3/ 7.14%
ADVISOR CLASS
-------------
30-day annualized yield/3/ 6.77%
INSTITUTIONAL CLASS
-------------------
30-day annualized yield/3/ 7.54%
Average maturity/4/ 6.0 years
Average quality rating/5/ AA
The Fund invests a portion of its assets in lower-quality securities that
present a significant risk for loss of principal and interest. Securities of the
Fund are generally valued at fair value through valuations obtained by a
commercial pricing service. Please consider this before investing.
--------------------------------------------------------------------------------
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Investor Class shares prior to 8-31-99 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 8-31-99 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. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.03%. Otherwise, the current yield would have been 6.74%, and
returns would have been lower.
/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.
* The Lehman Brothers Aggregate Bond Index is an unmanaged index composed of
investment-grade securities from the Lehman Brothers Government/Credit 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>
Strong Corporate Bond Fund
--------------------------------------------------------------------------------
Your Fund's Approach
The Strong Corporate Bond Fund seeks total return by investing for a high level
of current income with a moderate degree of share-price fluctuation. The Fund
invests primarily in intermediate-maturity bonds issued by U.S. companies. The
Fund invests primarily in higher- and medium-quality bonds. To increase the
income it pays out, it may also invest a small portion of its assets in lower-
quality, high-yield bonds. The managers focus primarily upon high-yield bonds
rated BB with positive or improving credit fundamentals. The Fund's
dollar-weighted average maturity will normally be between 7 and 12 years. To a
limited extent, the Fund may also invest in foreign securities.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-12-85 to 10-31-00
[GRAPH]
<TABLE>
<CAPTION>
The Strong Lehman Brothers Lipper Corporate
Corporate Credit BAA Debt Funds BBB
Bond Fund Bond Index* Rated Index*
<S> <C>
Nov 85 $10,000 $10,000 $10,000
Dec 86 $13,399 $11,800 $11,596
Dec 88 $15,745 $13,653 $12,978
Dec 90 $14,817 $16,337 $15,276
Dec 92 $18,612 $21,322 $19,362
Dec 94 $21,447 $23,310 $20,847
Dec 96 $28,380 $29,775 $26,115
Dec 98 $34,053 $35,320 $30,526
Oct 00 $35,854 $36,628 $31,591
</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 Credit 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' performances
were 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.
Q: How did your fund perform?
A: During the last half of the fiscal year, the Fund kept pace with both the
Lehman Brothers Credit BAA Bond Index* and the Lipper Corporate Debt Funds
BBB Rated Index*. For the fiscal year as a whole, however, the Fund
surpassed these indexes by a significant margin. We credit our intensive
bond research for allowing us to select industries and companies that
successfully navigated the difficult market environment during the year.
Q: What market conditions, market events, and other factors impacted your
fund's performance?
A: Two events that dominated the corporate bond market over the past year were
the changing relationship between long- and short-term interest rates,
evidenced by the inverted yield curve, and the decline in credit quality in
some sectors of the market. This "inversion" of the yield curve began when
the U.S. government announced plans to use some of the budget surplus to
buy back long-maturity Treasury bonds. This benefited the Fund's
performance, as we held a larger exposure to high-quality, long-maturity
bonds than the benchmark held.
During the year, it also became clear that corporate credit quality had
peaked in many industries. Careful selection of individual bonds, an
approach we take in the Fund, was essential, and investors who were too
aggressive in accepting credit risk paid the price.
4
<PAGE>
Q: What investment strategies and techniques impacted your fund's performance?
A: The Strong Corporate Bond Fund has performed strongly over the past year
because, with our emphasis on intensive bond research, we have been able to
identify industries and companies that could report improved operating
performance even in a difficult environment.
Two examples are in defense and health care, areas where we added to our
holdings even though these sectors have recently been relatively out of
favor. We believed certain companies could address the challenges these
industries faced. The defense industry was coming out of a period of
reduced military spending and poor operating management, both of which we
felt were about to change. For their part, hospital companies were
beginning to receive higher payments from managed-care providers, helping
their earnings. By identifying these trends early, our research team
recommended bonds from issuers such as Lockheed Martin and Tenet
Healthcare, both of which have outperformed the market in recent months.
Q: What is your future outlook?
A: Rising budget surpluses are supporting the bond market by reducing the
level of government debt. In addition, the economy's rate of growth began
to slow in 2000's third quarter. Inflation is, however, rising modestly,
and labor markets remain tight. This combination of circumstances is likely
to lead to a more stable policy from the Federal Reserve going forward,
which in turn should lead to relatively stable bond yields.
Corporate bond yields are likely to decline modestly over the next 12
months. The corporate sector has underperformed the broader market
recently, hurt by an increase in new debt issuance as well as deteriorating
credit quality. We look for the sector to rebound over the next year,
however, as we expect the economy will avoid recession and corporate credit
quality will begin to stabilize. Thank you for investing in the Strong
Corporate Bond Fund.
Jeffrey A. Koch John T. Bender
Portfolio Co-Manager Portfolio Co-Manager
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 5.73%
5-year 6.80%
10-year 9.28%
Since Inception 8.96%
(12-12-85)
ADVISOR CLASS/1/
----------------
1-year 5.49%
5-year 6.55%
10-year 9.04%
Since Inception 8.74%
(12-12-85)
INSTITUTIONAL CLASS/2/
----------------------
1-year 6.22%
5-year 6.90%
10-year 9.33%
Since Inception 8.99%
(12-12-85)
PORTFOLIO STATISTICS
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/3/ 8.56%
ADVISOR CLASS
-------------
30-day annualized yield/3/ 8.42%
INSTITUTIONAL CLASS
-------------------
30-day annualized yield/3/ 9.09%
Average maturity/4/ 10.4 years
Average quality rating/5/ BBB
The Fund invests a portion of its assets in lower-quality securities that
present a significant risk for loss of principal and interest. Securities of the
Fund are generally valued at fair value through valuations obtained by a
commercial pricing service. Please consider this before investing.
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 8-31-99 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 8-31-99 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. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.08%. Otherwise, the current yield would have been 8.34%, and
returns would have been lower.
/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 Credit BAA Bond Index is an unmanaged index comprised of
all issues within the Lehman Brothers Credit 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>
Strong Government Securities Fund
--------------------------------------------------------------------------------
Your Fund's Approach
The Strong Government Securities Fund seeks total return by investing for a high
level of current income with a moderate degree of share-price fluctuation. The
Fund invests primarily in higher-quality bonds issued by the U.S. government.
The Fund's dollar-weighted average maturity will normally be between five and
ten years. To a limited extent, the Fund may also invest in dollar-denominated
foreign securities.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 10-29-86 to 10-31-00
[GRAPH]
The Strong Government Lehman Brothers Lipper General U.S.
Securities Fund Aggregate Bond Index* Government Funds Index*
Sep 86 $10,000 $10,000 $10,000
Dec 86 $10,218 $10,188 $10,171
Dec 88 $11,683 $11,294 $10,904
Dec 90 $13,953 $14,094 $13,239
Dec 92 $17,781 $17,559 $16,102
Dec 94 $19,364 $18,709 $16,615
Dec 96 $23,873 $22,970 $19,849
Dec 98 $28,153 $27,376 $23,357
Oct 00 $29,941 $29,276 $24,490
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 vary, and you may have a gain or loss
when you sell shares. To equalize the time periods, the indexes' performances
were 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.
Q: How did your fund perform?
A: Having the Fund positioned defensively in the early part of the fiscal year
protected performance, as the Federal Reserve's interest rate hikes earlier
in the year drove market interest rates higher. However, it was somewhat
surprising that the market was able to rally so strongly in the spring. As we
perceived that the Fed was becoming less aggressive, we extended out the
Fund's interest rate exposure to match that of the benchmark.
Q: What market conditions, market events, and other factors impacted your fund's
performance?
A: Over the course of the past year, the government bond market has been driven
by the twin forces of the Federal Reserve and the federal government's budget
surpluses. This combination has driven short-term Treasury rates higher by
more than 100 basis points, and long-term Treasury rates lower by almost 50
basis points. As the United States economy continued its growth spurt, the
Federal Reserve raised short-term rates to stave off inflationary pressures.
After being plagued by budget deficits for decades, the U.S. Treasury is on
track to run a surplus of more than $225 billion for fiscal year 2000. Much
of this surplus has been targeted toward buying back longer-term Treasuries,
which has driven yields on those bonds lower. Additionally, the Treasury has
dramatically reduced the issuance of new debt.
6
<PAGE>
Q: What investment strategies and techniques impacted your fund's performance?
A: In response to the aforementioned forces on the Treasury bond market, early
in 2000, we positioned the Fund in a barbell strategy. This involved
simultaneously selling intermediate-term Treasuries while purchasing
longer-term Treasuries and holding cash instruments in such a way as to not
increase the Fund's overall interest rate risk.
There were two benefits to the Fund from the barbell strategy. First, it
allowed the portfolio to own the portion of the bond market that was in
high demand from the Treasury buybacks and therefore was appreciating in
price. Second, it allowed us to collect the relatively high yields on cash
instruments, while also decreasing the overall risk of the portfolio.
Late in the summer, we gradually unwound this strategy in order to realize
our profits. We also believed that this strategy had limited further
upside, given that projected budget surpluses are questionable in the face
of a new administration and new Congress in Washington.
Q: What is your future outlook?
A: The prevailing wisdom in the market holds that the Fed is finished with
raising rates and is in fact moving toward lowering them in the future. We
don't expect any rate hikes, but we question the prevailing wisdom
regarding the possibility of lower rates.
Our reasoning is that the Fed continues to state that it views inflation,
not recession, to be the primary risk to the economy. Furthermore, the Fed
must take into account the potential for future tax cuts or government
spending programs to stimulate further economic growth. We have, therefore,
kept the Fund's duration slightly short of its benchmark.
We're currently finding the most compelling opportunities in the government
agency and mortgage markets. We are maintaining extensive weightings in
these sectors, which provide significant yield advantages to Treasury
securities with negligible added risk.
Thank you for your investment in the Strong Government Securities Fund.
Bradley C. Tank Thomas Sontag
Portfolio Co-Manager Portfolio Co-Manager
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 6.99%
5-year 5.87%
10-year 8.17%
Since Inception 8.14%
(10-29-86)
ADVISOR CLASS/1/
----------------
1-year 6.76%
5-year 5.56%
10-year 7.85%
Since Inception 7.82%
(10-29-86)
INSTITUTIONAL CLASS/2/
----------------------
1-year 7.69%
5-year 6.01%
10-year 8.24%
Since Inception 8.19%
(10-29-86)
PORTFOLIO STATISTICS
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/3/ 5.99%
ADVISOR CLASS
-------------
30-day annualized yield/3/ 5.81%
INSTITUTIONAL CLASS
-------------------
30-day annualized yield/3/ 6.53%
Average maturity/4/ 5.9 years
Average quality rating/5/ AAA
--------------------------------------------------------------------------------
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 8-31-99 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 8-31-99 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. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.87%. Otherwise, the current yield would have been 4.94%, and
returns would have been lower.
/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/Credit 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>
Strong Short-Term Bond Fund
--------------------------------------------------------------------------------
Your Fund's Approach
The Strong Short-Term Bond Fund seeks total return by investing for a high level
of current income with a low degree of share-price fluctuation. The Fund invests
primarily in short- and intermediate-term corporate, mortgage- and asset-backed,
and U.S. government bonds. The Fund invests primarily in higher- and
medium-quality bonds. The Fund's dollar-weighted average maturity will normally
be between one and three years. The Fund may also invest a portion of its assets
in lower-quality, high-yield bonds. The managers focus primarily upon high-yield
bonds rated BB with positive or improving credit fundamentals. To a limited
extent, the Fund may also invest in foreign securities.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 8-31-87 to 10-31-00
[GRAPH]
<TABLE>
<CAPTION>
Lehman Brothers
1-3 Year Lipper Short
The Strong Government/ Investment
Short-Term Credit Bond Grade Debt
Bond Fund Index* Funds Average*
<S> <C> <C> <C>
Aug 87 $10,000 $10,000 $10,000
Dec 88 $11,362 $10,955 $10,976
Dec 90 $12,945 $13,334 $12,967
Dec 92 $15,827 $15,861 $15,415
Dec 94 $17,023 $16,833 $16,382
Dec 96 $20,353 $19,638 $18,910
Dec 98 $22,877 $22,408 $21,289
Oct 00 $25,109 $24,453 $23,058
</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/Credit 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 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.
Q: How did your fund perform?
A: The Fund's return was influenced both by movements in general market
interest rates and by changes in the supply and demand for corporate and
mortgage bonds. Over the past 12 months, the Fund returned slightly less
than its stated yield3 (7.45%), the result of a slight rise in two-year
Treasury rates and a slight decline in corporate bond prices relative to
Treasuries.
Q: What marketconditions, market events, and other factors impacted your
fund's performance?
A: From November through May, the Federal Reserve followed a tight monetary
policy, increasing the fed funds rate 125 basis points to 6.50%. However,
the Fed stood firm over the later months of the fiscal year, as the economy
slowed, the stock market fell, and inflation remained tame. Two-year yields
increased slightly over the past year, while longer yields fell, as the
Federal Reserve's activity has a more direct impact on short-maturity
yields.
Corporate bond yields increased slightly more than government yields due to
a decline in credit quality in some sectors. The number of companies that
saw their credit ratings decline increased due to stock buybacks, debt-
financed mergers, and earnings volatility. Returns to investors in the
corporate bond sector depended more on specific company news than they have
in the past. Diligent credit analysis allowed the Fund to avoid many credit
problems, despite our ongoing commitment to the corporate market.
8
<PAGE>
Q: What investment strategies and techniques impacted your fund's performance?
A: Throughout the year, the Strong Short-Term Bond Fund remained invested in
the corporate and mortgage sectors. Although yields on these assets rose
slightly more than government yields, the additional income provided by
these assets more than offset their price declines.
Several strategies were responsible for our success in avoiding many of the
problem credits in the corporate bond sector. First, our credit research
philosophy emphasizes investment in industries and companies that have
positive credit dynamics. This led us to invest in industries such as
energy, utilities, telecommunications, and health care. It also led us to
begin reducing the Fund's exposure to airlines and banking. These
strategies allowed us to avoid all but one of the many problem credits in
the marketplace (retailer Sak's was the one exception), while profiting
from improving fundamentals in health care and energy. In addition, we also
shortened the maturity of the Fund's corporate holdings.
Q: What is your future outlook?
A: We believe short-term government yields will hold relatively stable over
the next year. Slowing economic growth should allow the Federal Reserve to
delay further rate increases. The greatest risk to the bond market is that
labor markets are still tight and energy prices remain high. These factors
could spark inflation, which in turn could lead to further rate hikes from
the Fed.
We believe that the mortgage and corporate bond sectors will perform better
than the government sector as we enter 2001. Mortgage bonds should benefit
from lower interest rate volatility, while the spreads between the yields
on corporate issues and those on Treasuries are at their widest since 1990.
This indicates the opportunity for strong performance in 2001 if corporate
credit quality stabilizes and the economy avoids recession.
We thank you for your investment in the Strong Short-Term Bond Fund.
Bradley C. Tank John T. Bender
Portfolio Co-Manager Portfolio Co-Manager
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 6.16%
5-year 6.06%
10-year 7.04%
Since Inception 7.24%
(8-31-87)
ADVISOR CLASS/1/
----------------
1-year 5.81%
5-year 5.75%
10-year 6.73%
Since Inception 6.94%
(8-31-87)
INSTITUTIONAL CLASS/2/
----------------------
1-year 6.60%
5-year 6.19%
10-year 7.10%
Since Inception 7.29%
(8-31-87)
PORTFOLIO STATISTICS
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/3/ 7.45%
ADVISOR CLASS
-------------
30-day annualized yield/3/ 7.05%
INSTITUTIONAL CLASS
-------------------
30-day annualized yield/3/ 7.90%
Average maturity/4/ 2.0 years
Average quality rating/5/ A
The Fund invests a portion of its assets in lower-quality securities that
present a significant risk for loss of principal and interest. Securities of the
Fund are generally valued at fair valued through valuation obtained by a
commercial pricing service. Please consider this before investing.
--------------------------------------------------------------------------------
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 8-31-99 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 8-31-99 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. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.87%. Otherwise, the current yield would have been 4.94%, and
returns would have been lower.
/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/Credit 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.
9
<PAGE>
Strong High-Yield Bond Fund
--------------------------------------------------------------------------------
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 invests primarily in medium- and
lower-quality corporate bonds. The managers focus primarily upon high-yield
bonds with positive or improving credit fundamentals. The Fund will typically
maintain a dollar-weighted average maturity between five and ten years. The Fund
invests a portion of its assets (up to 20%) in common stocks. To a limited
extent, the Fund may also invest in foreign securities.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 12-28-95 to 10-31-00
[GRAPH]
<TABLE>
<CAPTION>
Lipper
The Strong Lehman Brothers High Current
High-Yield High-Yield Yield Funds
Bond Fund Bond Index* Index*
<S> <C> <C> <C>
Nov 95 $10,000 $10,000 $10,000
Dec 95 $10,031 $10,015 $10,015
Dec 96 $12,724 $11,152 $11,314
Dec 97 $14,758 $12,575 $12,805
Dec 98 $15,211 $12,810 $12,796
Dec 99 $16,399 $13,116 $13,408
Oct 00 $16,115 $12,613 $12,603
</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' performances
were prorated for the month of December 1995. This graph is based on Investor
Class shares only; performance for other classes will vary due to differences in
fee structures.
Q: How did your fund perform?
A: The major driver of performance in the high-yield market, particularly in the
difficult market environment that existed over this past fiscal year, was
proper credit selection. We believe our research and investment process was
the main reason for the Fund's outperformance relative to the Lehman Brothers
High-Yield Bond Index.* In fact, the Fund outperformed this index during each
quarter of the fiscal year.
Q: What market conditions, market events, and other factors impacted your fund's
performance?
A: The financial performance of many issuers of high-yield bonds declined during
the past year because of slower economic growth, higher energy prices, high
levels of corporate debt, and in some cases, poor business execution. The
annual default rate as measured by Moody's is approximately 5%. Because of
our rigorous bond selection process, however, we managed to have only one
bond in the portfolio default--and at the time of that default, it
constituted less than 0.4% of assets.
High-yield bonds are not highly correlated with either interest rates or
equity prices. However, the performance of high-yield bonds, particularly B-
rated bonds, can be affected by large swings in equity prices. Therefore, the
lower returns in the equity market compared with recent years had a negative
impact on
10
<PAGE>
high-yield bond market. Lower stock prices prevented companies from issuing new
equity in order to either pay back debt or to expand their operations.
Q: What investment strategies and techniques impacted your fund's performance?
A: Many of our important sector weightings remained at relatively comparable
levels. The telecommunications industry continues to be the Fund's largest
industry concentration. We made the decision earlier in 2000 to focus our
investments in companies with the best management teams, which led us to sell
bonds from several issuers that subsequently announced disappointing
earnings.
Another sector we continue to overweight is cable. These companies have
invested heavily in upgrading facilities recently, and as a result, now offer
more attractive services, including digital cable and high-speed Internet
access. We believe the combination of improved product offerings and slowing
capital expenditures should allow cable bonds to outperform going forward.
Areas we continue to underweight are the more cyclical industries, including
steel, capital goods, and autos. These industries have already started to
show deterioration in credit quality, and we believe they will weaken further
in a period of slower economic growth.
Q: What is your future outlook?
A: We believe the high-yield market is positioned to perform well over the next
year. Yields are at attractive levels, and although the default rate is
approximately 5%, we believe current bond prices more than reflect this.
Because we do not anticipate a recession in the next 12 months that would
drive further credit troubles, we believe high-yield bond prices should rise
from their currently depressed levels. Given current yields, any increase in
bond prices could lead to strong performance for the high-yield market.
Thank you for your investment in the Strong High-Yield Bond Fund. We look
forward to serving your investment needs in the future.
Jeffrey A. Koch Thomas M. Price
Portfolio Co-Manager Portfolio Co-Manager
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 1.94%
3-year 4.13%
Since Inception 10.35%
(12-28-95)
ADVISOR CLASS/1/
----------------
1-year 1.57%
3-year 3.82%
Since Inception 10.04%
(12-28-95)
PORTFOLIO STATISTICS
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/2/ 12.64%
ADVISOR CLASS
-------------
30-day annualized yield/2/ 12.47%
Average maturity 6.5 years
Average quality rating/3/ B
The Fund invests in lower-quality securities that present a significant risk for
loss of principal and interest. Securities of the Fund are generally valued at
fair value through valuations obtained by a commercial pricing service. Please
consider this before investing.
--------------------------------------------------------------------------------
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 2-29-00 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/ Yields are historical and do not represent future yields. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.02%. Otherwise, the current yield would have been 12.45%, and
returns would have been lower.
/3/ 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 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.
<PAGE>
Strong Short-Term High Yield Bond Fund
--------------------------------------------------------------------------------
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 a moderate degree of share-price fluctuation.
The Fund invests primarily in short- and intermediate-term corporate bonds. The
Fund invests primarily in medium- and lower-quality, high-yield bonds. The
managers focus primarily upon high-yield bonds with positive or improving credit
fundamentals. The Fund's dollar-weighted average maturity will normally be
between one and three years. To a limited extent, the Fund may also invest in
foreign securities.
--------------------------------------------------------------------------------
GROWTH OF AN ASSUMED $10,000 INVESTMENT
From 6-30-97 to 10-31-00
[GRAPH]
The Strong Lipper
Short-Term Short Term Short Term High Current
High Yield High-Yield High-Yield Yield Funds
Bond Fund Bond IndexII* Bond Index* Index*
Jun 97 $10,000 $10,000 $10,000 $10,000
Dec 97 $10,777 $10,502 $10,334 $10,699
Jun 98 $11,324 $10,933 $10,736 $11,211
Dec 98 $11,680 $10,993 $10,897 $10,691
Jun 99 $12,075 $11,374 $11,245 $11,104
Dec 99 $12,301 $11,569 $11,593 $11,202
Jun 00 $12,572 $11,599 $11,768 $10,988
Oct 00 $12,856 $11,461 $12,139 $10,530
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 II, 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 vary,
and you may have a gain or loss when you sell shares. We are replacing the
Short-Term High Yield Bond Index with the Short-Term High Yield Bond Index II as
we believe the Short-Term High Yield Bond Index II more accurately reflects the
Fund's investment program. This graph is based on Investor Class shares only;
performance for other classes will vary due to differences in fee structures.
Q: How did your fund perform?
A: The major driver of performance in the high-yield market, particularly in
the difficult market environment that existed over the past year, is proper
bond selection. We believe our process for researching and selecting bonds
was the main contributor to our performance versus the index, the High-
Yield Bond Index II.* The Fund also performed well relative to the overall
high-yield market due to its short-term design, which involves less risk
than the overall market.
Q: What market conditions, market events, and other factors impacted on our
funds performance?
A: The primary factor affecting the short-term high-yield market was a decline
in overall credit quality in the high-yield market. Credit quality is
weaker for various reasons, including slower economic growth, rising energy
prices, and high levels of corporate debt. Exacerbating these conditions
for some early-stage telecommunications companies was poor business
execution. The annual default rate as measured by Moody's is approximately
5%.
The weaker environment for corporate debt affects the short-term market in
two ways. First, it makes it less likely that companies will be able to
refinance their debt obligations at maturity. Second, it is no longer
profitable for companies to call their higher-coupon
12
<PAGE>
debt and refinance at lower interest rates. This led to fewer bonds in the
Fund being tendered at premium prices this year.
Q: What investment strategies and techniques impacted your fund's
performance?
A: Our strategy has not changed. We continued to focus on high-coupon,
callable bonds and short-maturity bonds. Due to this strategy, our
investment decisions are not typically driven by sector allocation issues,
but are based on the characteristics of individual bonds and our
determination of their ability to refinance.
Q: What is your future outlook?
A: We believe the overall high-yield market is positioned to perform well over
the next 12 months. Yields are currently at attractive levels. Despite the
approximately 5% default rate, we believe high default rates are more than
reflected in bond prices. We do not anticipate a level of economic activity
or a recession that would drive further credit weakness in the coming year.
In our estimation, market conditions should work to the favor of short-term
high-yield bonds going forward. Companies may be able to refinance debt
obligations at maturity, and with an improvement in the overall market,
companies may be more likely to call higher-coupon debt.
Thank you for your investment in the Strong Short-Term High Yield Bond
Fund. We look forward to serving your investment needs in the future.
Jeffrey A. Koch Thomas M. Price
Portfolio Co-Manager Portfolio Co-Manager
--------------------------------------------------------------------------------
AVERAGE ANNUAL
TOTAL RETURNS
As of 10-31-00
INVESTOR CLASS
--------------
1-year 4.91%
3-year 7.03%
Since Inception 7.83%
(6-30-97)
ADVISOR CLASS/1/
----------------
1-year 4.57%
3-year 6.69%
Since Inception 7.49%
(6-30-97)
PORTFOLIO STATISTICS
As of 10-31-00
INVESTOR CLASS
--------------
30-day annualized yield/2/ 9.15%
ADVISOR CLASS
-------------
30-day annualized yield/2/ 8.84%
Average maturity/3/ 2.5 years
Average quality rating/4/ BB
The Fund invests in lower-quality securities that present a significant risk for
loss of principal and interest. Securities of the Fund are generally valued at
fair value through valuations obtained by a commercial pricing service. Please
consider this before investing.
--------------------------------------------------------------------------------
From time to time, the Fund's advisor has waived its management fee and/or
absorbed fund expenses, which has resulted in higher yields and returns.
/1/ The performance of the Advisor Class shares prior to 2-29-00 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/ Yields are historical and do not represent future yields. Yields fluctuate.
Yields are as of 10-31-00. The Advisor Class has temporarily absorbed
expenses of 0.02%. Otherwise, the current yield would have been 8.82%, and
returns would have been lower.
/3/ The Fund's average maturity includes the effect of when-issued securities.
/4/ For purposes of this average rating, the Fund's short-term debt obligations
have been assigned a long-term rating by the Advisor.
* The Short-Term High Yield Bond Index II is a market-value-weighted blend of
the Merrill Lynch High Yield U.S. Corporates, Cash Pay, BB Rated, 1-5 Years
Index and the Merrill Lynch High Yield U.S. Corporates, Cash Pay, B Rated,
1-5 Years Index. It is an unmanaged index generally representative of
corporate debt rated below investment-grade with maturities of one to five
years, which more closely approximates the performance of the Strong Short-
Term High Yield Bond Fund. 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. 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 Index and the Short-Term High Yield Bond Index II 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 (S&P) 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 on this page).
Duration--Duration is similar to maturity, but also accounts for the semiannual
interest payments made by most bonds. Duration is a useful tool for determining
a bond's 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>
SCHEDULES OF INVESTMENTS IN SECURITIES October 31, 2000
--------------------------------------------------------------------------------
STRONG BOND FUND
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds 32.4%
@Entertainment, Inc. Senior Discount Notes,
Series B, Zero %, Due 2/01/09
(Rate Reset Effective 2/01/04) (b) $1,000,000 $ 555,000
AES Corporation Senior Notes,
9.375%, Due 9/15/10 815,000 831,300
APCOA/Standard Parking, Inc. Senior
Subordinated Notes, 9.25%, Due 3/15/08 1,500,000 534,375
AT&T Corporation Notes, 6.50%, Due 3/15/29 1,795,000 1,413,606
Adelphia Communications Corporation
Senior Notes, 10.875%, Due 10/01/10 930,000 874,200
Airgate PCS, Inc. Senior Subordinated
Discount Notes, Zero %, Due 10/01/09
(Rate Reset Effective 10/01/04) 745,000 430,237
Aladdin Gaming Holdings LLC/Aladdin Capital
Corporation Senior Discount Notes, Zero %,
Due 3/01/10 (Rate Reset Effective 3/01/03) 920,000 437,000
Allied Waste North America, Inc. Senior
Subordinated Notes, 10.00%, Due 8/01/09 1,000,000 860,000
Anthony Crane Rental LP Senior Notes,
10.375%, Due 8/01/08 450,000 191,250
Asia Global Crossing, Ltd. Senior Yankee
Notes, 13.375%, Due 10/15/10 (b) 725,000 674,250
Avencia Group PLC Yankee Notes, 11.00%,
Due 7/01/09 675,000 651,375
Burlington Northern Santa Fe Corporation
Debentures, 6.70%, Due 8/01/28 1,865,000 1,584,838
Callahan Nordrhein-Westfalen GmbH Senior
Yankee Notes, 14.00%, Due 7/15/10 (b) 345,000 331,200
William Carter Senior Subordinated Notes,
Series A, 10.375%, Due 12/01/06 775,000 740,125
Cendant Corporation Notes, 7.75%,
Due 12/01/03 (c) 4,112,000 3,991,087
Chattem, Inc. Senior Subordinated Notes,
8.875%, Due 4/01/08 430,000 273,050
Columbia/HCA Healthcare Corporation
Notes, 8.36%, Due 4/15/24 1,000,000 927,848
DTE Capital Corporation Notes, 6.17%,
Due 6/15/03 (b) 845,000 826,370
Duke Energy Field Services LLC Notes:
7.50%, Due 8/16/05 1,475,000 1,489,771
8.125%, Due 8/16/30 1,545,000 1,568,244
ESAT Telecom Group PLC Senior Yankee Notes:
Zero %, Due 2/01/07
(Rate Reset Effective 2/01/02) 1,380,000 1,337,500
Series B, 11.875%, Due 12/01/08 (c) 4,785,000 5,670,225
Echostar Broadband Corporation
Senior Notes, 10.375%, Due 10/01/07 (b) 930,000 936,975
ekabel Hessen GmbH Senior Yankee Notes,
14.50%, Due 9/01/10 (b) 965,000 916,750
Equistar Chemicals LP/Equistar Funding
Corporation Notes, 8.75%, Due 2/15/09 1,000,000 942,832
Exodus Communications, Inc. Senior Notes,
11.625%, Due 7/15/10 (b) 325,000 302,250
Felcor Lodging LP Senior Notes, 9.50%,
Due 9/15/08 750,000 748,125
Ford Motor Credit Company Notes (c):
7.60%, Due 8/01/05 1,045,000 1,052,950
7.875%, Due 6/15/10 385,000 388,885
Fresenius Medical Care Capital Trust II
Guaranteed Preferred Securities, 7.875%,
Due 2/01/08 800,000 746,000
GT Group Telecom, Inc. Senior Yankee
Discount Notes, Zero %, Due 2/01/10
(Rate Reset Effective 2/01/05) 1,420,000 525,400
General Binding Corporation Senior
Subordinated Notes, 9.375%, Due 6/01/08 325,000 264,875
General Electric Capital Corporation Medium-
Term Notes, 6.80%, Due 11/01/05 2,530,000 2,531,037
Global Crossing Holdings, Ltd. Senior Yankee
Notes, 9.125%, Due 11/15/06 920,000 882,050
Graham Packaging Holdings Company/
GPC Capital Corporation II Senior Discount
Notes, Zero %, Due 1/15/09
(Rate Reset Effective 1/15/03) 1,350,000 540,000
HCA-The Healthcare Company Notes,
8.75%, Due 9/01/10 470,000 474,999
Horizon PCS, Inc. Units, Zero %, Due 10/01/10
(Rate Reset Effective 10/01/05) (b) 950,000 456,000
Horseshoe Gaming Holding Corporation
Senior Subordinated Notes, Series B, 8.625%,
Due 5/15/09 480,000 465,600
Hydro-Quebec Yankee Debentures, Series IF,
8.00%, Due 2/01/13 955,000 1,015,432
International Bank for Reconstruction and
Development Unsubordinated Yankee Notes,
7.00%, Due 1/27/05 (c) 1,500,000 1,526,221
International Game Technology Senior Notes,
8.375%, Due 5/15/09 810,000 793,800
Jostens, Inc. Senior Subordinated Notes,
12.75%, Due 5/01/10 (b) 680,000 659,600
Level 3 Communications, Inc. Senior Notes,
11.00%, Due 3/15/08 900,000 814,500
Lockheed Martin Corporation Notes, 7.95%,
Due 12/01/05 (c) 1,330,000 1,368,055
Lyondell Chemical Company Senior Secured
Notes, Series A, 9.625%, Due 5/01/07 900,000 875,250
MCI Communications Corporation Senior
Debentures, 7.125%, Due 6/15/27 (c) 605,000 605,800
Mandalay Resort Group Senior Subordinated
Notes, Series B, 10.25%, Due 8/01/07 (b) 615,000 631,913
Mediacom LLC/Mediacom Capital Corporation
Senior Notes, 7.875%, Due 2/15/11 450,000 390,375
Metromedia Fiber Network, Inc. Senior Notes,
10.00%, Due 12/15/09 750,000 669,375
MetroNet Communications Corporation Senior
Yankee Notes (c):
10.625%, Due 11/01/08 2,600,000 2,869,022
12.00%, Due 8/15/07 1,255,000 1,397,401
Midwest Generation LLC Pass-Thru Certificates,
Series B, 8.56%, Due 1/02/16 (b) 1,135,000 1,111,698
Motors and Gears, Inc. Senior Notes, Series C,
10.75%, Due 11/15/06 750,000 731,250
NTC Capital I Floating Rate Notes, 7.3181%,
Due 1/15/27 520,000 487,534
NTL Communications Corporation Senior Notes,
Series B, 11.50%, Due 10/01/08 575,000 529,000
Nextel Communications, Inc. Senior Serial Notes,
9.375%, Due 11/15/09 980,000 948,150
Nextlink Communications, Inc. Senior Notes,
10.75%, Due 6/01/09 1,000,000 882,500
Norcen Energy Resources, Ltd. Yankee Debentures,
7.375%, Due 5/15/06 (c) 1,435,000 1,424,322
Northpoint Communications Group, Inc. Senior
Notes, 12.875%, Due 2/15/10 715,000 668,525
Occidental Petroleum Corporation Senior Notes,
8.45%, Due 2/15/29 (c) 1,915,000 2,015,470
Pogo Producing Company Senior Subordinated
Notes, 10.375%, Due 2/15/09 500,000 522,500
</TABLE>
15
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Premier International Foods PLC Senior
Yankee Notes, 12.00%, Due 9/01/09 $ 1,000,000 $ 780,000
Qwest Capital Funding, Inc. Guaranteed Notes,
7.90%, Due 8/15/10 (b) 1,645,000 1,672,809
Repap New Brunswick Senior Yankee Notes,
10.625%, Due 4/15/05 1,000,000 1,032,500
Rhythms NetConnections, Inc. Senior Notes,
12.75%, Due 4/15/09 270,000 126,900
Riggs Capital Trust II Preferred Securities,
Series B, 8.875%, Due 3/15/27 385,000 283,766
Riverwood International Corporation Senior
Subordinated Notes, 10.875%, Due 4/01/08 300,000 272,250
Spanish Broadcasting System, Inc. Senior
Subordinated Notes, 9.625%, Due 11/01/09 700,000 680,750
Spectrasite Holdings, Inc. Senior Discount Notes,
Series B, Zero %, Due 3/15/10
(Rate Reset Effective 3/15/05) 2,260,000 1,107,400
Stop & Shop Companies, Inc. Senior
Subordinated Notes, 9.75%, Due 2/01/02 670,000 683,029
SunTrust Capital III Floating Rate Notes,
7.31%, Due 3/15/28 (c) 2,125,000 1,998,584
Tekni-Plex, Inc. Senior Subordinated Notes,
Series B, 12.75%, Due 6/15/10 470,000 430,050
Telewest PLC Senior Discount Debentures,
11.00%, Due 10/01/07 1,000,000 875,000
Teligent, Inc. Senior Notes, 11.50%, Due 12/01/07 715,000 311,025
Tenet Healthcare Corporation Senior Notes,
Series B, 9.25%, Due 9/01/10 795,000 836,738
Time Warner, Inc. Debentures, 9.125%,
Due 1/15/13 1,180,000 1,320,519
Town Sports International, Inc. Senior Notes,
Series B, 9.75%, Due 10/15/04 750,000 716,250
Transwestern Publishing Company LP/TWP
Capital Corporation II Senior Subordinated
Notes, Series D, 9.625%, Due 11/15/07 850,000 847,875
Tri-State Outdoor Media Group, Inc. Senior
Notes, 11.00%, Due 5/15/08 250,000 217,500
Triarc Consumer Products Group LLC/Triarc
Beverage Holdings Corporation Senior
Subordinated Notes, 10.25%, Due 2/15/09 850,000 979,549
Tricon Global Restaurants, Inc. Senior Notes,
7.45%, Due 5/15/05 1,500,000 1,425,332
Triton Energy, Ltd. Senior Notes, 8.875%,
Due 10/01/07 (b) 870,000 875,438
Triton PCS, Inc. Senior Subordinated Discount
Notes, Zero %, Due 5/01/08
(Rate Reset Effective 5/01/03) 940,000 716,750
US Airways Pass-Thru Trust Mortgage
Pass-Thru Certificates, Series 2000-3G, 7.89%,
Due 3/01/19 1,875,000 1,881,619
USX-Marathon Group Notes:
6.65%, Due 2/01/06 15,000 14,539
6.85%, Due 3/01/08 1,000,000 959,620
United Industries Corporation Senior
Subordinated Notes, Series B, 9.875%,
Due 4/01/09 1,000,000 440,000
United International Holdings, Inc. Senior
Secured Discount Notes, Series B, Zero %,
Due 2/15/08 (Rate Reset Effective 2/15/03) 2,000,000 1,230,000
Universal Compression, Inc. Senior Discount
Notes, Zero %, Due 2/15/08
(Rate Reset Effective 2/15/03) 1,500,000 1,222,500
Venetian Casino Resort LLC/Las Vegas Sands,
Inc. Secured Mortgage Notes, 12.25%,
Due 11/15/04 800,000 814,000
Versatel Telecom International NV Senior
Yankee Notes, 11.875%, Due 7/15/09 $ 600,000 $ 441,000
Viatel, Inc. Senior Notes, 11.25%, Due 4/15/08 1,000,000 505,000
Voicestream Wireless Corporation/Voicestream
Wireless Holdings Corporation Senior
Notes, 10.375%, Due 11/15/09 2,000,000 2,150,000
Williams Communications Group, Inc. Senior
Notes, 11.875%, Due 8/01/10 (b) 950,000 847,875
Williams Companies, Inc. Notes, 7.625%,
Due 7/15/19 1,200,000 1,164,635
Winstar Communications, Inc. Senior
Discount Notes, Zero %, Due 4/15/10
(Rate Reset Effective 4/15/05) 1,924,000 625,300
WorldCom, Inc. Notes, 7.875%, Due 5/15/03 (c) 1,290,000 1,312,600
--------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $97,234,335) 93,103,974
--------------------------------------------------------------------------------------------------
Convertible Bonds 0.7%
Bell Atlantic Financial Services, Inc. Senior
Notes, 5.75%, Due 4/01/03 (b) (c) 2,000,000 1,927,500
--------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $2,014,567) 1,927,500
--------------------------------------------------------------------------------------------------
Non-Agency Mortgage &
Asset-Backed Securities 23.4%
Arran Master Trust Floating Rate Notes,
Series 2000-C, Class A, 6.8113%, Due 9/15/07 1,750,000 1,750,000
Asset Securitization Corporation Commercial
Mortgage Pass-Thru Certificates, Series
1996-MD6, Class A-1B, 6.88%, Due 11/13/26 1,045,000 1,044,185
Associates Credit Card Master Notes Trust
Variable Rate Asset-Backed Notes, Series 2000-2,
Class A, 6.72%, Due 9/18/06 5,315,000 5,320,095
Bear Stearns Mortgage Securities, Inc. Principal
Only Mortgage Pass-Thru Certificates,
Series 1995-1, Class 2-P, Due 7/25/10 140,891 117,173
Cit Rv Trust Asset-Backed Notes, Series 1997-A,
Class A-6, 6.35%, Due 4/15/11 445,000 441,346
The Equitable Life Assurance Society of the
United States Floating Rate Notes, Series 174,
Class A2, 6.98%, Due 5/15/03 (b) 1,500,000 1,503,389
Headlands Mortgage Securities, Inc. Mortgage
Pass-Thru Certificates, Series 1997-5, Class AII1,
6.75%, Due 11/25/27 434,695 428,594
Holmes Financing Number 1 PLC Floating Rate
Notes, Series 1, Class 1A, 6.9381%, Due 7/15/05 8,000,000 8,002,480
Irwin Home Equity Trust Floating Rate
Asset-Backed Certificates, Series 2000-1,
Class A-2, 6.74%, Due 9/25/02 3,917,000 3,913,318
Mellon Residential Funding Corporation Variable
Rate Mortgage Pass-Thru Certificates, Series
2000-TBC3, Class A-1, 6.84%, Due 12/15/30 3,451,981 3,451,981
Metris Master Trust Floating Rate Asset-Backed
Securities:
Series 1999-2, Class A, 7.14%, Due 1/20/10 1,090,000 1,099,059
Series 2000-2, Class A, 6.83%, Due 1/22/07 1,415,000 1,417,681
Morgan Stanley Dean Witter Capital I Trust
Commercial Mortgage Pass-Thru Certificates,
Series 2000-LIFE2, Class A2, 7.20%, Due 9/15/10 4,595,000 4,619,399
Mountain Capital CLO I, Ltd./Mountain Capital
CLO I Corporation Floating Rate Bonds,
Series 1A, Class A-1, 7.3981%, Due 4/15/11 (c) 5,000,000 5,018,750
National City Credit Card Master Trust Floating
Rate Asset-Backed Certificates, Series 2000-1,
Class A, 6.77%, Due 8/15/07 1,000,000 1,001,279
</TABLE>
16
<PAGE>
--------------------------------------------------------------------------------
STRONG BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
---------------------------------------------------------------------------------------
<S> <C> <C>
Nomura Asset Securities Corporation Principal
Only Certificates, Series 1994-4B, Class 4PO,
Due 9/25/24 $ 77,564 $ 57,277
Norwest Asset Securities Corporation Mortgage
Pass-Thru Certificates:
Series 1999-14, Class B3, 6.50%, Due 6/25/29 2,068,666 1,760,321
Series 1999-16, Class B3, 6.50%, Due 6/25/29 1,035,653 880,962
Series 1999-21, Class B3, 7.00%, Due 9/25/29 1,471,551 1,299,055
PECO Energy Transition Trust Transition Bonds,
Series 2000-A, Class A-1, 7.18%, Due 9/01/03 2,810,000 2,807,541
PNC Mortgage Acceptance Corporation
Commercial Mortgage Pass-Thru Certificates,
Series 2000-C2, Class A2, 7.30%,
Due 9/12/10 (c) 7,350,000 7,408,580
PNC Mortgage Securities Corporation
Mortgage Pass-Thru Certificates:
Series 1998-1, Class 4B4, 6.75%,
Due 3/25/13 (b) 333,507 272,225
Series 1998-11, Class 2B4, 6.25%,
Due 11/25/13 (b) 343,118 267,848
Resolution Trust Corporation Mortgage
Pass-Thru Securities, Inc. Commercial Certificates:
Series 1995-C1, Class C, 6.90%, Due 2/25/27 887,774 881,342
Series 1995-C2, Class D, 7.00%, Due 5/25/27 954,293 944,137
Rural Housing Trust 1987-1 Senior Mortgage
Pass-Thru Certificates, Series 1, Class D, 6.33%,
Due 4/01/26 1,119,429 1,107,982
Saxon Asset Securities Trust Mortgage Loan
Asset-Backed Certificates, Series 2000-3,
Class AF1, 6.73%, Due 8/25/15 2,830,000 2,830,000
Summit CBO I, Ltd./Summit CBO I Funding
Corporation Second Priority Senior Secured
Floating Rate Bonds, Series 1A, Class B, 8.06%,
Due 5/23/11 (b) 2,000,000 1,929,680
USAA Auto Loan Guarantor Trust Pass-Thru
Certificates, Series 1999-1, Class A, 6.10%,
Due 2/15/06 50,013 49,683
Volkswagen Credit Auto Master Owner Trust
Floating Rate Loan-Backed Notes, Series 2000-1,
Class A, 6.775%, Due 8/20/07 (c) 5,685,000 5,693,674
---------------------------------------------------------------------------------------
Total Non-Agency Mortgage &
Asset-Backed Securities (Cost $67,277,942) 67,319,036
---------------------------------------------------------------------------------------
Municipal Bonds 1.0%
New Jersey Economic Development Authority State
Pension Funding Revenue, 7.425%, Due 2/15/29 2,975,000 2,955,365
---------------------------------------------------------------------------------------
Total Municipal Bonds (Cost $3,063,979) 2,955,365
---------------------------------------------------------------------------------------
United States Government
& Agency Issues 42.4%
FHLMC Participation Certificates:
6.25%, Due 6/15/12 thru 9/15/22 (c) 2,640,000 2,547,332
7.00%, Due 1/15/15 (e) 6,000,000 5,964,360
7.20%, Due 10/01/06 2,591,842 2,612,085
7.50%, Due 4/15/15 thru 10/15/29 (e) 7,440,000 7,480,372
8.50%, Due 4/15/28 (e) 3,500,000 3,583,125
10.50%, Due 8/01/19 666,650 719,270
FNMA Corporate Notes:
7.00%, Due 7/15/05 8,645,000 8,810,569
7.125%, Due 6/15/10 2,505,000 2,587,129
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
6.085%, Due 10/01/08 68,443 65,421
6.52%, Due 7/25/08 2,267,755 2,243,390
7.085%, Due 9/01/06 830,227 838,359
7.181%, Due 10/01/06 54,577 54,788
7.50%, Due 3/25/30 (e) 1,500,000 1,498,125
8.00%, Due 4/01/17 thru 9/01/23 (c) $ 3,638,248 $ 3,706,021
8.33%, Due 7/15/20 (c) 2,076,827 2,130,092
8.50%, Due 8/01/12 thru 5/01/26 (c) 3,453,096 3,542,320
9.00%, Due 12/01/16 thru 8/01/17 (c) 1,933,962 2,010,703
9.50%, Due 6/01/05 389,591 397,688
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Mortgage
Certificates, Pool 92117, 7.799%, Due 6/01/18 86,302 88,132
Federal Home Loan Bank Medium-Term Notes,
7.925%, Due 8/01/25 613,411 631,654
GNMA Guaranteed Pass-Thru Certificates:
7.50%, Due 10/15/29 (e) 14,445,000 14,501,246
8.00%, Due 12/25/29 (e) 2,280,000 2,317,050
Student Loan Marketing Association Student
Loan Trust Floating Rate Loan-Backed Notes:
Series 1998-1, Class A1, 7.054%, Due 1/25/07 4,027,368 4,030,489
Series 2000-1, Class A1L, 6.85%, Due 10/27/08 2,200,018 2,202,339
United States Treasury Bonds:
6.125%, Due 8/15/29 2,885,000 2,988,681
7.125%, Due 2/15/23 1,830,000 2,082,161
7.625%, Due 11/15/22 4,340,000 5,196,104
8.75%, Due 5/15/17 5,000,000 6,425,565
9.875%, Due 11/15/15 485,000 669,366
United States Treasury Notes:
3.625%, Due 7/15/02 3,233,790 3,240,866
5.50%, Due 5/31/03 1,560,000 1,544,370
5.75%, Due 8/15/10 5,355,000 5,351,658
6.50%, Due 10/15/06 thru 2/15/10 9,135,000 9,481,762
6.75%, Due 5/15/05 9,960,000 10,328,839
---------------------------------------------------------------------------------------
Total United States Government &
Agency Issues (Cost $121,325,058) 121,871,431
---------------------------------------------------------------------------------------
Foreign Government Issues 2.4%
Republic of Germany Bonds, Series 97,
6.00%, Due 7/04/07 4,500,000 EUR 3,979,271
United Kingdom Treasury Bonds,
7.00%, Due 6/07/02 2,000,000 GBP 2,949,742
---------------------------------------------------------------------------------------
Total Foreign Government Issues (Cost $8,039,159) 6,929,013
---------------------------------------------------------------------------------------
Preferred Stocks 1.5%
Caisse National De Credit Agricole Sponsored ADR
10.375% Series A (Acquired 2/05/98;
Cost $1,981,000) (b) 70,000 1,789,410
R&B Falcon Corporation 13.875% Senior 615 793,975
Rural Cellular Corporation 12.25%
Junior Exchangeable 809 647,233
Superior Healthcare Management Series A
7.75% (Acquired 12/30/97; Cost $1,006,460) (b) 1,000 1,048,290
---------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $4,351,249) 4,278,908
---------------------------------------------------------------------------------------
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 0.2%
Aladdin Gaming Enterprises, Inc.,
Expire 3/01/10 (b) 9,200 92
GT Group Telecom, Inc., Expire 2/01/10
(Acquired 8/23/00-8/24/00, Cost $68,032) (b) 1,420 71,710
Jostens, Inc., Expire 5/01/10 680 13,600
MetroNet Communications Corporation,
Expire 8/15/07 (b) 350 31,500
R&B Falcon Corporation, Expire 5/01/09 (b) 500 325,000
---------------------------------------------------------------------------------------
Total Warrants (Cost $122,978) 441,902
---------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
-------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Investments (a) 6.9%
Commercial Paper 0.5%
Interest Bearing, Due Upon Demand
Firstar Bank, N.A., 6.29% $ 368,500 $ 368,500
Sara Lee Corporation, 6.22% 685,100 685,100
Wisconsin Electric Power Company, 6.22% 503,900 503,900
-------------
1,557,500
Corporate Notes 0.7%
El Paso Energy Corporation Senior Notes,
6.625%, Due 7/15/01 (c) 2,035,000 2,029,158
Repurchase Agreements 5.4%
ABN-AMRO Inc. (Dated 10/31/00), 6.56%,
Due 11/01/00 (Repurchase proceeds
$15,502,824); Collateralized by: United
States Government & Agency Issues (d) 15,500,000 15,500,000
United States Government & Agency Issues 0.3%
Federal Home Loan Bank Bonds,
5.875%, Due 9/17/01 585,000 581,635
United States Treasury Bills,
Due 12/28/00 thru 1/11/01 (c) 165,000 163,203
-------------
744,838
-------------------------------------------------------------------------------
Total Short-Term Investments (Cost $19,834,253) 19,831,496
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total Investments in Securities (Cost $323,283,520) 110.9% 318,661,125
Other Assets and Liabilities, Net (10.9%) (31,236,884)
-------------------------------------------------------------------------------
Net Assets 100.0% $ 287,424,241
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
FUTURES
-------------------------------------------------------------------------------
Expiration Underlying Unrealized
Date Face Amount Appreciation
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
1 Ten-Year Japanese Government
Bonds 12/00 $1,221,174 $ 18,868
5 Ten-Year U.S. Treasury Notes 12/00 503,516 2,010
Sold:
89 Five-Year U.S. Treasury Notes 12/00 8,961,188 2,887
19 U.S. Treasury Bonds 12/00 1,897,031 18,919
</TABLE>
<TABLE>
<CAPTION>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
-------------------------------------------------------------------------------
Settlement Unrealized
Date Value in USD Appreciation
-------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold:
4,800,000 EUR 1/19/01 $4,087,696 $ 441,584
2,050,000 GBP 1/19/01 2,972,500 112,648
</TABLE>
<TABLE>
<CAPTION>
SWAPS
-------------------------------------------------------------------------------
Open Index Rate Swap contracts at October 31, 2000 consisted of the following:
-------------------------------------------------------------------------------
Notional Termination Interest Index Unrealized
Amount Date Sold Bought Appreciation
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 mo. ERISA Eligible
$5,000,000 8/01/01 LIBOR Lehman CMBS* $ 16,886
</TABLE>
*Lehman Brothers Investment Grade Index-ERISA Eligible Sub Index
Collateralized Mortgage-Backed Securities Index Total Return Swap
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
WRITTEN OPTIONS ACTIVITY
-------------------------------------------------------------------------------
Contracts Premiums
-------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of year -- $ --
Options written during the year 300 26,849
Options closed (200) (22,587)
Options expired (100) (4,262)
Options exercised -- --
----- ---------
Options outstanding at end of year -- $ --
===== =========
</TABLE>
Closed and expired options resulted in a capital gain of $16,124.
----------------------------------------------------------------
STRONG CORPORATE BOND FUND
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds 80.2%
@Entertainment, Inc. Senior Discount Notes,
Series B:
Zero %, Due 7/15/08 (Rate Reset
Effective 7/15/03) $ 3,000,000 $ 1,815,000
Zero %, Due 2/01/09 (Rate Reset
Effective 2/01/04) (b) 15,100,000 8,380,500
AES Ironwood LLC Senior Secured Bonds,
8.857%, Due 11/30/25 6,500,000 6,567,041
AT&T Corporation Notes:
6.00%, Due 3/15/09 5,000,000 4,395,130
6.50%, Due 3/15/29 1,500,000 1,181,286
Abitibi-Consolidated, Inc. Debentures,
8.85%, Due 8/01/30 5,000,000 4,828,520
American Airlines, Inc. Pass-Thru Trust
Certificates, Series 1999-1, Class C,
7.155%, Due 10/15/04 2,000,000 1,967,930
Apache Corporation Debentures,
7.375%, Due 8/15/47 (c) 9,000,000 8,159,589
Arrow Electronics, Inc. Senior Notes,
9.15%, Due 10/01/10 (b) 1,750,000 1,746,775
Atlas Air, Inc. Pass-Thru Trust Certificates,
Series 1999-1, Class C, 8.77%, Due 7/02/12 1,807,141 1,802,091
Bausch & Lomb, Inc. Notes, 6.375%,
Due 8/01/13 (Remarketing Date 8/01/03) 2,000,000 1,852,416
Beaver Valley Funding Corporation
Debentures, 8.625%, Due 6/01/07 (c) 8,254,000 8,161,142
British Sky Broadcasting Group PLC
Yankee Notes, 6.875%, Due 2/23/09 10,500,000 9,003,015
Burlington Northern Santa Fe Corporation
Debentures, 8.125%, Due 4/15/20 5,250,000 5,257,376
CILCORP, Inc. Senior Bonds,
9.375%, Due 10/15/29 9,000,000 9,648,027
CILCORP, Inc. Senior Notes,
8.70%, Due 10/15/09 (c) 9,000,000 9,291,744
Calpine Corporation Senior Notes,
8.625%, Due 8/15/10 9,850,000 9,743,551
Capital One Floating Rate Subordinated
Capital Income Securities, 8.2613%,
Due 2/01/27 (b) 3,000,000 2,564,898
Cendant Corporation Notes,
7.75%, Due 12/01/03 (c) 14,265,000 13,845,538
Coastal Corporation Senior Debentures:
7.42%, Due 2/15/37 (c) 5,036,000 4,588,410
7.75%, Due 10/15/35 7,100,000 6,776,325
Colonial Capital I Securities, Series A,
8.92%, Due 1/15/27 2,600,000 2,187,879
Columbia Healthcare Corporation
Debentures, 7.50%, Due 11/15/95 4,500,000 3,519,176
</TABLE>
18
<PAGE>
--------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------------
<S> <C> <C>
Columbia Healthcare Corporation Notes,
8.36%, Due 4/15/24 $ 4,500,000 $ 4,175,316
Continental Airlines, Inc. Pass-Thru
Certificates, Series 1998-2, Class 2B,
6.465%, Due 10/15/04 2,697,932 2,638,024
Delhaize America, Inc. Notes,
7.55%, Due 4/15/07 5,000,000 4,684,880
Delta Air Lines, Inc. Debentures,
9.75%, Due 5/15/21 8,000,000 7,958,472
Delta Air Lines, Inc. Pass-Thru Certificates,
Series 1992-B1, 9.375%, Due 9/11/07 2,581,432 2,680,624
Duke Energy Field Services LLC Notes:
7.875%, Due 8/16/10 7,900,000 8,061,034
8.125%, Due 8/16/30 8,000,000 8,120,360
ESAT Telecom Group PLC Senior Yankee
Notes, Zero %, Due 2/01/07 (Rate Reset
Effective 2/01/02) 850,000 824,500
Enron Corporation Notes, 6.95%, Due 7/15/28 6,180,000 5,644,324
Equistar Chemicals LP/Equistar Funding
Corporation Notes:
8.50%, Due 2/15/04 4,375,000 4,263,411
8.75%, Due 2/15/09 11,465,000 10,809,569
First Nationwide Bank Subordinated
Debentures, 10.00%, Due 10/01/06 3,460,000 3,741,499
First Republic Bank Subordinated Notes,
7.75%, Due 9/15/12 5,610,000 4,664,866
Ford Motor Company Global Landmark
Securities, 7.45%, Due 7/16/31 (c) 16,000,000 14,789,440
Fresenius Medical Care Capital Trust II
Guaranteed Preferred Securities,
7.875%, Due 2/01/08 (c) 7,000,000 6,527,500
GS Escrow Corporation Floating Rate
Senior Notes, 7.7113%, Due 8/01/03 (c) 8,000,000 7,764,072
Georgia-Pacific Corporation Debentures,
7.70%, Due 6/15/15 2,750,000 2,568,266
Global Crossing Holdings, Ltd. Senior
Yankee Notes:
9.125%, Due 11/15/06 5,000,000 4,793,750
9.625%, Due 5/15/08 7,500,000 7,200,000
Gulf Canada Resources, Ltd. Senior Notes:
8.25%, Due 3/15/17 7,335,000 7,426,688
8.375%, Due 11/15/05 5,000,000 5,100,000
HCA-The Healthcare Company Medium-Term
Notes, Tranche 00004, 8.12%, Due 8/04/03 5,100,000 5,049,668
HealthSouth Corporation Senior Notes,
7.00%, Due 6/15/08 1,000,000 853,544
Homeside International, Inc. Senior
Secured Second Priority Notes,
Series B, 11.25%, Due 5/15/03 1,796,000 1,937,435
Hyder PLC Yankee Notes,
6.50%, Due 12/15/08 (b) 8,500,000 7,150,124
Imperial Capital Trust I Guaranteed
Capital Securities, 9.98%, Due 12/31/26 1,175,000 963,829
Imperial Tobacco Overseas BV Guaranteed
Yankee Notes, 7.125%, Due 4/01/09 7,500,000 6,834,937
International Game Technology Senior
Notes, 8.375%, Due 5/15/09 7,000,000 6,860,000
International Paper Company Notes,
8.125%, Due 7/08/05 (b) 4,500,000 4,610,151
Jones Intercable, Inc. Senior Notes:
8.875%, Due 4/01/07 9,250,000 9,695,498
9.625%, Due 3/15/02 4,490,000 4,607,665
KN Capital Trust I Pass-Thru Securities,
8.56%, Due 4/15/27 (c) 17,500,000 16,920,907
KN Energy, Inc. Senior Notes,
6.65%, Due 3/01/05 4,500,000 4,385,389
KPNQwest BV Senior Yankee Notes,
8.125%, Due 6/01/09 6,500,000 5,817,500
Kroger Company Notes, 6.80%, Due 12/15/18 $ 5,000,000 $ 4,306,935
Lenfest Communications, Inc. Senior
Subordinated Notes, 10.50%, Due 6/15/06 7,700,000 8,688,757
Lockheed Martin Corporation Bonds,
8.50%, Due 12/01/29 3,780,000 4,056,103
Lockheed Martin Corporation Notes:
7.70%, Due 6/15/08 (c) 10,555,000 10,716,101
7.95%, Due 12/01/05 2,500,000 2,571,532
Louisiana Pacific Corporation Senior Notes,
8.875%, Due 8/15/10 11,000,000 10,645,316
MCI Communications Corporation Senior
Notes, 6.50%, Due 4/15/10 9,907,000 9,174,546
MGM Mirage, Inc. Senior Notes,
8.50%, Due 9/15/10 13,500,000 13,273,267
McKesson Corporation Notes,
6.40%, Due 3/01/08 9,500,000 7,875,794
MetroNet Communications Corporation
Senior Discount Yankee Notes:
Zero %, Due 11/01/07
(Rate Reset Effective 11/01/02) 1,500,000 1,308,843
Zero %, Due 6/15/08
(Rate Reset Effective 6/15/03) 8,500,000 6,902,077
MetroNet Communications Corporation
Senior Yankee Notes:
10.625%, Due 11/01/08 19,680,000 21,716,290
12.00%, Due 8/15/07 8,950,000 9,965,530
MidAmerican Energy Holdings Company
Senior Bonds, 8.48%, Due 9/15/28 3,430,000 3,557,229
Midwest Generation LLC Pass-Thru
Certificates, Series B, 8.56%, Due 1/02/16 (b) 9,175,000 8,986,637
Mirage Resorts, Inc. Senior Notes,
7.25%, Due 10/15/06 2,000,000 1,888,866
Nextel Finance Company Term Loan:
Tranche B, 10.19%, Due 6/30/08
(Acquired 8/14/00; Cost $1,008,200) (b) 1,000,000 1,005,000
Tranche C, 10.44%, Due 12/31/08
(Acquired 8/14/00; Cost $1,008,200) (b) 1,000,000 1,005,000
Noble Drilling Corporation Senior Notes,
7.50%, Due 3/15/19 7,710,000 7,327,746
Northrop Grumman Corporation
Debentures, 7.75%, Due 3/01/16 3,500,000 3,403,729
Northrop Grumman Corporation
Notes, 7.00%, Due 3/01/06 4,000,000 3,890,224
Occidental Petroleum Corporation Senior Notes:
7.65%, Due 2/15/06 8,145,000 8,282,642
8.45%, Due 2/15/29 5,250,000 5,525,441
PSEG Energy Holdings, Inc. Senior Notes,
9.125%, Due 2/10/04 3,500,000 3,543,750
Park Place Entertainment Corporation Senior
Notes, 7.00%, Due 7/15/04 3,600,000 3,503,376
Petroleos Mexicanos Guaranteed Notes,
8.85%, Due 9/15/07 2,500,000 2,425,000
Pinnacle One Partners LP/Pinnacle One, Inc.
Senior Secured Notes, 8.83%, Due 8/15/04 (b) 9,850,000 9,957,926
Pioneer Natural Resources Company Senior Notes:
6.50%, Due 1/15/08 4,500,000 3,989,421
9.625%, Due 4/01/10 3,000,000 3,157,269
Qwest Communications International, Inc.
Senior Notes, Series B, 10.875%, Due 4/01/07 10,125,000 11,005,936
R&B Falcon Corporation Senior Notes,
Series B, 6.50%, Due 4/15/03 4,500,000 4,297,500
Raytheon Company Notes:
6.75%, Due 8/15/07 4,714,000 4,530,899
8.20%, Due 3/01/06 4,375,000 4,529,591
Riggs Capital Trust II Preferred Securities:
Series A, 8.625%, Due 12/31/26 (c) 16,420,000 11,786,539
Series B, 8.875%, Due 3/15/27 1,185,000 873,409
</TABLE>
19
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Saks, Inc. Guaranteed Notes,
7.00%, Due 7/15/04 $ 12,000,000 $ 8,100,000
Saks, Inc. Notes, 7.50%, Due 12/01/10 600,000 327,000
Southern Energy, Inc. Senior Notes,
7.90%, Due 7/15/09 (b) 4,385,000 4,203,759
Sprint Capital Corporation Guaranteed
Bonds, 6.90%, Due 5/01/19 9,250,000 7,890,528
Sprint Capital Corporation Guaranteed
Senior Notes, 6.875%, Due 11/15/28 4,500,000 3,714,637
Starwood Hotels & Resorts Worldwide,
Inc., 6.75%, Due 11/15/05 8,000,000 7,483,936
Stop & Shop Companies, Inc. Senior
Subordinated Notes, 9.75%, Due 2/01/02 8,630,000 8,797,819
TCI Communications, Inc. Senior
Debentures, 8.75%, Due 8/01/15 4,675,000 4,860,308
Tele-Communications, Inc. Non-Redeemable
Senior Debentures, 9.80%, Due 2/01/12 5,000,000 5,701,350
Telefonica de Argentina SA Medium-Term
Notes, 9.125%, Due 5/07/08 (b) 12,000,000 10,500,000
Tenet Healthcare Corporation Senior Notes:
7.875%, Due 1/15/03 2,500,000 2,475,000
8.625%, Due 12/01/03 3,000,000 3,023,268
Series B, 7.625%, Due 6/01/08 5,000,000 4,775,000
Texas Utilities Company Senior Floating Rate
Notes, Series E, 6.50%, Due 8/16/04
(Remarketing Date 8/16/02) (c) 11,250,000 11,171,295
Time Warner Entertainment Company
LP Senior Notes, 10.15%, Due 5/01/12 5,265,000 6,208,846
Time Warner, Inc. Debentures,
9.15%, Due 2/01/23 8,000,000 8,980,296
Tricon Global Restaurants, Inc. Senior Notes:
7.45%, Due 5/15/05 7,300,000 6,936,613
7.65%, Due 5/15/08 2,515,000 2,331,850
Triton Energy, Ltd./Triton Energy Corporation
Senior Notes:
8.75%, Due 4/15/02 (c) 4,800,000 4,987,200
8.875%, Due 10/01/07 (b) 12,000,000 12,075,000
USX-Marathon Group Debentures:
8.125%, Due 7/15/23 4,500,000 4,523,760
9.125%, Due 1/15/13 2,000,000 2,181,456
United International Holdings, Inc. Senior
Secured Discount Notes, Series B, Zero %,
Due 2/15/08 (Rate Reset Effective 2/15/03) 12,350,000 7,595,250
United Mexican States Medium-Term Yankee
Notes, Tranche 00004, 9.875%, Due 2/01/10 10,000,000 10,425,000
United Mexican States Yankee Bonds,
11.375%, Due 9/15/16 5,000,000 5,675,000
United Pan-Europe Communications NV
Senior Discount Notes, Series B, Zero %,
Due 8/01/09 (Rate Reset Effective 8/01/04) 6,000,000 2,370,000
Univision Network Holding LP Subordinated
Notes, 7.00%, Due 12/17/02 (c) 7,855,000 10,918,450
WMX Technologies, Inc. Notes,
7.10%, Due 8/01/26 3,000,000 2,896,128
Waste Management, Inc. Senior Notes:
6.50%, Due 12/15/02 10,605,000 10,234,217
6.875%, Due 5/15/09 3,275,000 2,983,234
Williams Communications Group, Inc.
Senior Notes, 11.875%, Due 8/01/10 (b) 13,500,000 12,048,750
Williams Companies, Inc. Notes,
7.625%, Due 7/15/19 6,500,000 6,308,439
--------------------------------------------------------------------------------
Total Corporate Bonds (Cost $771,814,055) 749,784,211
--------------------------------------------------------------------------------
Non-Agency Mortgage &
Asset-Backed Securities 11.5%
ABN-AMRO Mortgage Corporation Mortgage
Pass-Thru Certificates, Series 2000-2,
Class B-2, 8.00%, Due 5/25/30 980,994 932,577
BCF LLC Mortgage Pass-Thru Certificates,
Series 1997-R2, Class 3-A1, 7.00%,
Due 12/25/35 (b) $ 343,781 $ 342,243
Bank of America Mortgage Securities, Inc.
Mortgage Pass-Thru Certificates:
Series 2000-2, Class B3, 7.50%, Due 4/25/30 897,641 826,319
Series 2000-3, Class B3, 7.75%, Due 6/25/30 897,096 838,583
Bear Stearns Mortgage Securities, Inc. Principal
Only Mortgage Pass-Thru Certificates,
Series 1995-1, Class 2-P, Due 7/25/10 (c) 427,825 355,803
Chase Credit Card Master Trust Floating Rate
Asset-Backed Notes, Series 2000-2, Class A,
6.72%, Due 3/17/03 25,000,000 25,036,625
Chase Mortgage Finance Trust
Mortgage Pass-Thru Certificates:
Series 1999-S8, Class B2, 6.75%, Due 7/25/29 2,468,386 2,138,646
Series 1999-S11, Class B2, 6.75%, Due 9/25/29 1,583,613 1,373,318
Citicorp Mortgage Securities, Inc. Pass-Thru
Certificates, Series 1999-7, Class B-2,
7.00%, Due 9/25/29 1,109,070 980,823
Commercial Trust I Lease-Backed Certificates,
Series 1993-K-A, Class A2, 7.63%,
Due 12/15/13 (b) 8,441,298 6,119,941
DLJ Mortgage Acceptance Corporation
Variable Rate Interest Only Multi-Family
Mortgage Pass-Thru Certificates, Series
1993-MF10, Class A-1, 0.80%, Due 7/15/03 29,446,265 3
DLJ Mortgage Acceptance Corporation
Variable Rate Trust Certificates, Series
1997-E, Class A, 7.55%, Due 12/28/26 (b) 5,255,954 4,779,660
Discover Card Master Trust I Floating Rate
Credit Card Asset-Backed Certificates,
Series 2000-3, Class A, 6.74%, Due 9/15/05 25,000,000 25,047,940
FMAC Loan Receivables Trust Notes, Series
1997-C, Class B, 7.15%, Due 12/15/19 (b) 7,239,000 6,732,270
Golden National Mortgage Asset-Backed
Certificates, Series 1998-GNI, Class M-2,
8.02%, Due 2/25/27 6,000,000 5,886,330
Mid State Trust Virgin Islands Asset-Backed
Notes, Series 6, Class A-2, 7.40%, Due 7/01/35 2,645,479 2,619,825
Norwest Asset Securities Corporation
Mortgage Pass-Thru Certificates, Series
1998-23, Class B-3, 6.75%, Due 10/25/28 3,523,858 3,079,728
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 11,735,596
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage
Bonds, Series 1992-C, Class 3-A,
11.6247%, Due 11/25/30 18,114 18,038
Salomon Brothers Mortgage Securities VII,
Inc. Mortgage Pass-Thru Certificates, Series
1997-A, Class B3, 7.3887%, Due 10/01/25 (b) 4,407,154 3,536,080
Sutter CBO, Ltd./Sutter CBO Corporation
Notes, Series 1999-1, Class B-1,
9.942%, Due 11/30/14 (b) 5,000,000 4,797,900
--------------------------------------------------------------------------------
Total Non-Agency Mortgage &
Asset-Backed Securities (Cost $111,319,132) 107,178,248
--------------------------------------------------------------------------------
Municipal Bonds 0.9%
New Jersey Economic Development Bonds,
Series B, Zero %, Due 2/15/14 (c) 21,500,000 8,125,065
--------------------------------------------------------------------------------
Total Municipal Bonds (Cost $7,700,569) 8,125,065
--------------------------------------------------------------------------------
</TABLE>
20
<PAGE>
--------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
United States Government &
Agency Issues 2.5%
FHLMC Participation Certificates:
8.50%, Due 4/15/28 (e) $ 6,000,000 $ 6,142,500
14.00%, Due 9/01/12 (c) 17,027 19,463
14.75%, Due 3/01/10 (c) 7,018 8,110
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru
Certificates, 13.50%, Due 4/01/11 (c) 33,628 38,324
GNMA Guaranteed Pass-Thru Certificates,
15.00%, Due 8/15/11 thru 10/15/12 (c) 51,407 60,035
Small Business Administration Guaranteed
Loan Pool 40013, Interest Only Strips,
2.419%, Due 9/30/17 (c) 2,723,027 122,536
United States Treasury Bonds,
6.125%, Due 8/15/29 7,750,000 8,028,458
United States Treasury Notes:
5.75%, Due 8/15/10 6,675,000 6,670,835
6.75%, Due 5/15/05 2,125,000 2,202,694
--------------------------------------------------------------------------------
Total United States Government &
Agency Issues (Cost $24,452,430) 23,292,955
--------------------------------------------------------------------------------
Options 0.0%
MCI Worldcom, Inc. Call Options: (Strike price
is $100. Expiration date is 6/20/03.) 25,000,000 187,500
--------------------------------------------------------------------------------
Total Options (Cost $562,500) 187,500
--------------------------------------------------------------------------------
Preferred Stocks 2.2%
Caisse National De Credit Agricole Sponsored
ADR 10.375% Series A (Acquired 2/05/98-
12/08/99; Cost $10,985,000) (b) 400,000 10,225,200
Parmalat Capital Finance 8.9225% Series B 253,000 5,692,500
Webster Capital Corporation 7.375% Series A 5,000 4,990,600
--------------------------------------------------------------------------------
Total Preferred Stocks (Cost $22,345,740) 20,908,300
--------------------------------------------------------------------------------
Short-Term Investments (a) 2.1%
Commercial Paper 0.2%
Interest Bearing, Due Upon Demand
Firstar Bank, N.A., 6.29% $ 187,000 187,000
Sara Lee Corporation, 6.22% 928,900 928,900
Wisconsin Electric Power Company, 6.22% 434,200 434,200
----------
1,550,100
Corporate Notes 0.8%
GS Escrow Corporation Senior Notes,
6.75%, Due 8/01/01 1,650,000 1,629,230
Tosco Corporation Floating Rate Notes,
7.1375%, Due 5/16/01 6,000,000 5,999,622
----------
7,628,852
Repurchase Agreements 1.1%
Barclays Capital, Inc. (Dated 10/31/00), 6.53%,
Due 11/01/00 (Repurchase proceeds
$10,601,922); Collateralized by: United
States Treasury Bonds (d) 10,600,000 10,600,000
United States Government Issues 0.0%
United States Treasury Bills, Due 12/14/00 (c) 400,000 397,109
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $20,164,808) 20,176,061
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $958,359,234) 99.4% 929,652,340
Other Assets and Liabilities, Net 0.6% 5,602,819
--------------------------------------------------------------------------------
Net Assets 100.0% $935,255,159
================================================================================
</TABLE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
FUTURES
----------------------------------------------------------------------------------------
Underlying Unrealized
Expiration Face Amount Appreciation/
Date at Value (Depreciation)
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
394 Five-Year U.S. Treasury Notes 12/00 $39,670,875 $ 278,701
10 Two-Year U.S. Treasury Notes 12/00 2,001,250 10,114
Sold:
340 Ten-Year U.S. Treasury Notes 12/00 34,239,062 (326,383)
15 U.S. Treasury Bonds 12/00 1,497,656 (533)
</TABLE>
<TABLE>
<CAPTION>
SWAPS
----------------------------------------------------------------------------------------
Open Swap contracts at October 31, 2000 consisted of the following:
----------------------------------------------------------------------------------------
Unrealized
Notional Termination Interest Index Appreciation/
Amount Date Sold Bought (Depreciation)
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 mo. LIBOR Lehman
$25,000,000 2/28/01 -15 bp Brothers Baa ($166,680)
1 mo. LIBOR Lehman
50,000,000 1/01/01 -30 bp Brothers Baa (319,636)
5,000,000* 10/12/05 1.70% -- 7,500
5,000,000* 10/12/05 1.90% -- (15,000)
</TABLE>
*Credit Swap
--------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
United States Government &
Agency Issues 104.3%
FHA Insured Project Loan 956-55054,
2.93%, Due 11/01/12 $ 3,278,918 $ 2,573,951
FHLMC Notes, 5.53%, Due 2/05/04 9,000,000 8,723,718
FHLMC Participation Certificates:
5.50%, Due 12/15/08 1,962,006 1,945,476
6.00%, Due 1/01/28 (e) 62,000,000 58,164,061
6.05%, Due 6/25/14 (c) 7,878,833 7,831,441
6.25%, Due 9/15/22 6,305,000 6,097,849
6.765%, Due 2/25/07 19,541,275 19,547,334
6.775%, Due 11/01/03 (c) 5,781,773 5,745,637
7.00%, Due 5/01/03 thru 1/25/21 (e) 34,835,462 34,610,781
7.172%, Due 1/01/26 2,585,838 2,626,115
7.20%, Due 10/01/06 (c) 10,073,000 10,151,670
7.25%, Due 7/01/08 613,833 612,292
7.26%, Due 6/01/06 (c) 6,559,126 6,659,612
7.50%, Due 4/15/15 (e) 9,530,000 9,598,521
7.56%, Due 5/01/26 2,188,656 2,231,656
7.734%, Due 10/01/26 7,384,632 7,515,407
8.00%, Due 7/01/08 thru 2/01/17 3,966,103 3,999,896
8.50%, Due 10/01/05 thru 4/15/28 (c) (e) 20,220,673 20,632,514
9.00%, Due 9/15/05 thru 4/01/17 6,013,337 6,157,102
9.30%, Due 7/15/21 2,272,145 2,334,065
9.50%, Due 4/01/07 thru 4/01/25 5,733,587 5,997,163
9.75%, Due 8/01/02 329,301 336,830
10.00%, Due 10/01/05 thru 6/01/20 1,778,275 1,859,739
10.50%, Due 6/01/04 thru 8/01/20 3,551,376 3,831,025
11.75%, Due 10/01/15 52,550 57,802
12.25%, Due 7/01/15 thru 12/01/15 187,771 209,449
12.50%, Due 10/01/09 thru 1/01/15 112,513 126,330
13.00%, Due 7/01/14 7,872 8,919
13.75%, Due 5/01/02 17,386 17,784
14.00%, Due 6/01/11 thru 11/01/12 43,301 49,312
14.50%, Due 3/01/11 thru 12/01/11 6,130 7,088
14.75%, Due 8/01/11 thru 4/01/13 4,487 5,179
15.00%, Due 8/01/11 23,162 26,969
16.00%, Due 6/01/12 5,801 6,903
</TABLE>
21
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
---------------------------------------------------------------------------
<S> <C> <C>
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
5.00%, Due 7/01/06 (c) $ 49,183,297 $ 46,496,714
5.60%, Due 5/01/04 thru 11/01/05 1,782,572 1,730,886
6.07%, Due 10/01/08 (c) 6,689,393 6,487,550
6.09%, Due 1/01/03 (c) 12,343,809 12,126,576
6.125%, Due 11/25/03 209,232 204,962
6.292%, Due 5/01/05 9,156,046 8,940,954
6.30%, Due 12/25/15 4,020,273 3,960,440
6.32%, Due 8/15/08 (c) 11,500,000 11,148,523
6.49%, Due 12/25/25 (c) 5,244,485 5,201,716
6.50%, Due 6/18/27 thru 8/01/28 (c) 29,564,246 28,051,218
6.52%, Due 7/25/08 4,833,581 4,781,648
6.53%, Due 7/01/02 2,352,800 2,328,480
6.695%, Due 8/01/05 10,000,000 9,940,826
6.97%, Due 6/01/07 15,068,978 14,993,633
7.00%, Due 9/01/07 thru 6/25/22 (c) 19,579,028 19,384,906
7.11%, Due 10/01/09 4,962,122 5,006,307
7.125%, Due 12/25/20 595,424 595,419
7.17%, Due 10/01/09 4,324,738 4,388,084
7.18%, Due 10/01/09 3,427,665 3,479,875
7.50%, Due 7/01/03 thru 7/01/15 (c) 19,077,136 19,192,181
8.00%, Due 4/01/17 thru 11/01/26 (c) 25,490,851 25,908,316
8.25%, Due 1/25/06 531,207 531,353
8.40%, Due 2/25/09 (c) 16,469,025 16,572,561
8.50%, Due 11/01/02 thru 5/01/26 (c) 25,683,093 26,382,203
8.55%, Due 8/25/26 2,503,609 2,571,854
8.75%, Due 1/01/10 798,566 822,735
9.00%, Due 9/01/21 thru 10/25/25 7,913,129 8,267,194
9.25%, Due 4/25/18 866,361 913,768
9.40%, Due 10/25/19 3,064,295 3,199,575
9.50%, Due 6/01/05 thru 7/01/28 (c) 10,445,517 10,955,027
10.00%, Due 4/01/20 1,655,118 1,738,076
11.00%, Due 2/01/19 thru 10/15/20 3,754,844 4,074,461
11.50%, Due 2/01/19 918,657 1,009,612
11.75%, Due 12/01/10 73,184 80,108
12.00%, Due 1/01/16 thru 2/01/19 1,505,454 1,681,064
12.25%, Due 7/01/14 18,846 20,512
12.50%, Due 2/01/11 94,358 104,962
13.25%, Due 4/01/12 2,978 3,377
13.50%, Due 1/01/12 3,955 4,480
13.75%, Due 10/01/10 5,825 6,426
14.00%, Due 1/01/12 thru 8/01/13 59,963 66,303
14.25%, Due 12/01/14 31,916 35,447
14.50%, Due 1/01/12 5,768 6,426
14.75%, Due 3/01/12 80,926 93,834
15.00%, Due 10/01/12 9,612 10,835
15.50%, Due 10/01/12 5,504 6,244
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Certificates:
Pool #53843, 8.233%, Due 7/01/26 3,826,798 3,936,422
Pool #54844, 6.706%, Due 9/01/27 (c) 12,308,969 12,137,978
Pool #66414, 7.329%, Due 9/01/28 (c) 9,634,782 9,806,418
Pool #70018, 8.375%, Due 10/01/18 2,691,071 2,776,081
Pool #70279, 7.732%, Due 4/01/19 741,099 748,508
Pool #70843, 7.295%, Due 4/01/20 1,450,006 1,443,523
Pool #92068, 8.053%, Due 1/01/18 599,837 611,291
Pool #110238, 7.182%, Due 1/01/16 3,230,352 3,213,154
Pool #124013, 8.201%, Due 10/01/21 1,001,168 1,024,952
Pool #176367, 7.907%, Due 4/01/15 1,465,264 1,482,605
Pool #181826, 8.287%, Due 10/01/22 586,770 601,574
Pool #201427, 7.938%, Due 1/01/23 1,096,086 1,127,760
Pool #323127, 7.03%, Due 8/01/15 (c) 14,738,991 14,603,167
Pool #457277, 7.358%, Due 10/01/27 (c) 19,413,876 19,589,972
Pool #530074, 6.889%, Due 3/01/30 4,937,870 4,854,975
Pool #534738, 8.062%, Due 5/01/27 (c) 5,451,355 5,593,955
Series 1996-M6, Class A, 7.3943%, Due 8/17/03 135,688 135,412
Series 1997-M4, Class C, 7.2964%,
Due 8/17/18 (c) $ 5,683,000 $ 5,693,145
Series 1999-W6, Class A, 9.0956%,
Due 9/25/28 (c) 9,745,451 10,110,905
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Mortgage
Securities, 6.604%, Due 3/01/18 2,291,424 2,268,918
FNMA Medium-Term Notes:
5.75%, Due 2/03/04 4,050,000 3,951,038
6.05%, Due 4/17/03 4,812,000 4,754,116
FNMA Notes:
6.375%, Due 10/15/02 (c) 32,300,000 32,268,831
7.00%, Due 7/15/05 (c) 34,835,000 35,502,160
FNMA Stripped Mortgage-Backed Securities:
Series B, Class B-1, 6.00%, Due 5/01/09 1,840,156 1,776,753
Series C, Class C-1, 6.00%, Due 5/01/09 1,583,982 1,529,145
Series K, Class K-1, 6.00%, Due 11/01/08 9,045,939 8,874,202
FNMA Stripped Mortgage-Backed Securities,
Interest Only Custodial Receipts, Series 161,
Class 2, 8.50%, Due 7/25/22 2,617,718 697,851
Federal Agricultural Mortgage Corporation
Guaranteed Mortgage Variable Rate
Pass-Thru Certificates:
Series BA-1001, Class 1, 7.013%, Due 1/25/03 2,695,466 2,685,358
Series CS-1004, Class 1, 7.11%, Due 1/25/02 (c) 4,477,272 4,467,467
Series CS-1010, Class 1, 7.434%, Due 7/25/02 (c) 6,710,567 6,700,098
Series GS-1001, Class 1, 7.023%, Due 1/25/08 1,178,585 1,171,218
Series GS-1002, Class 1, 6.71%, Due 7/25/08 415,911 406,944
GNMA Guaranteed Pass-Thru Certificates:
7.50%, Due 10/15/29 (e) 65,660,000 65,906,225
8.00%, Due 12/25/29 (e) 76,675,000 77,928,969
8.35%, Due 4/15/20 14,637,286 15,068,832
8.40%, Due 5/15/20 7,948,765 8,197,105
9.00%, Due 12/15/06 thru 12/15/09 6,523,599 6,692,459
12.50%, Due 4/15/19 1,904,815 2,132,947
13.00%, Due 12/15/10 thru 11/15/14 272,749 306,948
13.50%, Due 7/15/10 thru 10/15/12 70,252 79,889
14.00%, Due 4/15/12 thru 9/20/14 61,785 70,425
14.50%, Due 9/15/12 thru 11/15/12 179,288 204,205
15.00%, Due 1/15/12 thru 9/15/12 86,563 101,089
16.00%, Due 4/15/12 9,109 10,593
GNMA Guaranteed Variable Rate
Pass-Thru Certificates:
Pool #8333, 7.375%, Due 3/20/18 821,897 829,353
Pool #8489, 7.375%, Due 4/20/19 201,532 203,337
Pool #8678, 6.75%, Due 8/20/20 (c) 6,309,221 6,379,629
Pool #8714, 7.125%, Due 11/20/20 4,705,349 4,747,093
HHS Project Loan, 7.83%, Due 11/01/01 697,410 700,897
Small Business Administration Guaranteed
Loan Interest Only Custodial Receipts:
Series 1992-6A, 2.47%, Due 10/15/17 19,081,055 834,796
Series 1993-1A, 2.531%, Due 2/15/18 17,646,040 761,074
Student Loan Marketing Association Student
Loan Trust Floating Rate Securities:
Series 1995-1, Class A1, 6.919%, Due 4/25/04 844,394 843,275
Series 1996-1, Class A1, 6.904%, Due 7/26/04 7,399,756 7,387,435
Series 1996-3, Class A1, 6.834%, Due 10/25/04 8,218,670 8,187,727
Series 1996-4, Class A1, 6.824%, Due 7/25/04 7,217,165 7,189,920
Series 1997-1, Class A1, 6.804%, Due 10/25/05 4,471,308 4,452,327
Series 1997-3, Class A1, 6.944%, Due 4/25/06 25,805,264 25,729,009
Series 1998-1, Class A1, 7.054%,
Due 1/25/07 (c) 22,821,749 22,839,436
Series 1998-2, Class A1, 7.024%, Due 4/25/07 8,328,371 8,308,758
Series 1999-2, Class A1L, 6.84%, Due 7/25/04 2,965,085 2,967,679
Series 1999-3, Class A1, 6.84%, Due 1/25/07 22,086,183 22,106,392
Series 2000-1, Class A1L, 6.85%, Due 10/27/08 6,454,851 6,461,661
Series 2000-4, Class A1, 6.81%, Due 7/25/08 39,179,838 39,173,570
</TABLE>
22
<PAGE>
-------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
-------------------------------------------------------------------------------
<S> <C> <C>
USGI FHA Insured Project Pool #2040,
3.025%, Due 11/01/06 $ 4,244,156 $ 3,854,882
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 11,910,808
Series 1995-1, Class 3I, 8.00%, Due 4/15/06 10,000,000 10,157,150
Series 1995-1, Class 4, 8.8514%, Due 2/15/25 5,603,071 5,849,242
Series 1995-2C, Class 3A,
8.7925%, Due 6/15/25 (c) 13,131,699 13,773,774
United States Treasury Bonds:
6.00%, Due 2/15/26 23,655,000 23,715,013
6.125%, Due 8/15/29 24,795,000 25,686,083
6.25%, Due 5/15/30 2,000,000 2,130,938
6.75%, Due 8/15/26 26,300,000 28,954,669
6.875%, Due 8/15/25 (c) 15,300,000 17,046,128
7.125%, Due 2/15/23 12,065,000 13,727,473
7.625%, Due 11/15/22 12,290,000 14,714,313
8.75%, Due 5/15/17 21,300,000 27,372,907
9.875%, Due 11/15/15 (c) 7,550,000 10,420,027
11.75%, Due 2/15/10 (c) 8,900,000 10,801,574
United States Treasury Notes:
3.625%, Due 7/15/02 26,784,450 26,843,053
5.75%, Due 8/15/10 15,320,000 15,310,440
6.50%, Due 10/15/06 50,000 51,578
-------------------------------------------------------------------------------
Total United States Government &
Agency Issues (Cost $1,364,637,983) 1,359,476,243
-------------------------------------------------------------------------------
Corporate Bonds 2.8%
AT&T Corporation Notes, 6.00%, Due 3/15/09 10,000,000 8,790,260
General Motors Acceptance Corporation
Notes, 7.625%, Due 6/15/04 7,000,000 7,088,578
International Bank for Reconstruction and
Development Unsubordinated Yankee Notes,
7.00%, Due 1/27/05 (c) 8,300,000 8,445,092
Riggs Capital Trust Preferred Securities,
Series A, 8.625%, Due 12/31/26 3,175,000 2,279,066
US Airways Pass-Thru Trust Mortgage
Pass-Thru Certificates, Series 2000-3G,
7.89%, Due 9/01/19 10,000,000 10,035,300
-------------------------------------------------------------------------------
Total Corporate Bonds (Cost $37,378,215) 36,638,296
-------------------------------------------------------------------------------
Municipal Bonds 0.3%
Arkansas Development Finance Authority GNMA
Guaranteed Bonds, 9.75%, Due 11/15/14 (c) 3,100,000 3,563,853
-------------------------------------------------------------------------------
Total Municipal Bonds (Cost $3,740,967) 3,563,853
-------------------------------------------------------------------------------
Non-Agency Mortgage &
Asset-Backed Securities 3.2%
ABN-AMRO Mortgage Corporation Mortgage
Pass-Thru Certificates:
Series 1999-6, Class B-2, 7.00%, Due 9/25/29 1,781,197 1,573,964
Series 1999-8, Class B-2, 7.75%, Due 12/25/29 1,179,396 1,101,810
Bank of America Mortgage Securities, Inc.
Mortgage Pass-Thru Certificates:
Series 1999-12, Class B3, 7.50%, Due 11/25/29 1,004,831 925,796
Series 2000-1, Class B3, 7.50%, Due 2/25/30 1,453,476 1,334,989
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 2000-S6,
Class B2, 7.75%, Due 8/25/30 948,866 887,526
Citicorp Mortgage Securities, Inc. Pass-Thru
Certificates, Series 2000-1, Class B2,
7.00%, Due 1/25/30 907,725 803,841
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1999-3, Class B2,
6.50%, Due 5/25/29 1,333,979 1,237,738
Community Program Loan Trust Bonds,
Series 1987-A, Class A5, 4.50%, Due 4/01/29 2,480,000 1,827,834
GE Capital Mortgage Services, Inc. Mortgage
Pass-Thru Certificates:
Series 1999-3, Class B2, 6.50%, Due 5/25/29 2,211,352 1,885,874
Series 1999-20, Class B2, 7.25%, Due 12/25/29 1,533,359 1,383,327
Norwest Asset Securities Corporation Mortgage
Pass-Thru Certificates:
Series 1999-18, Class B3, 6.50%, Due 7/25/29 2,936,394 2,496,449
Series 1999-20, Class B3, 6.75%, Due 8/25/29 2,519,655 2,182,236
Series 1999-23, Class B3, 7.00%, Due 10/25/29 1,116,009 985,754
Series 1999-26, Class B3, 7.25%, Due 12/25/29 1,138,109 1,025,112
PNC Mortgage Securities Corporation
Variable Rate Mortgage Pass-Thru Certificates:
Series 2000-1, Class I-B-3, 7.46%, Due 2/25/30 1,238,042 1,108,048
Series 2000-2, Class B-3, 7.63%, Due 4/25/30 1,649,133 1,492,465
Series 2000-C2, Class A-2, 7.30%, Due 9/12/10 12,000,000 12,095,640
Residential Funding Mortgage Securities I, Inc.
Mortgage Pass-Thru Certificates:
Series 1999-S18, Class M3, 7.00%, Due 8/25/29 1,641,723 1,451,702
Series 1999-S23, Class M3, 7.25%, Due 11/25/29 1,530,503 1,380,705
Series 1999-S24, Class M3, 7.50%, Due 12/25/29 1,170,454 1,075,442
Series 2000-S1, Class M3, 7.50%, Due 1/25/30 1,410,335 1,294,032
Series 2000-S2, Class M3, 7.50%, Due 2/25/30 1,464,943 1,343,697
Series 2000-S6, Class M3, 7.75%, Due 5/25/30 1,407,281 1,315,688
-------------------------------------------------- ----------------------------
Total Non-Agency Mortgage &
Asset-Backed Securities (Cost $41,963,061) 42,209,669
-------------------------------------------------- ----------------------------
Options 0.0%
MCI Worldcom, Inc. Call Options: (Strike
price is $100. Expiration date is 6/20/03.) 25,000,000 187,500
United States Treasury Bonds Call Options: (Strie
Price is $103. Expiration date is 12/15/00.) 100,000 3,125
United States Treasury Bonds Put Options: (Strik
Price is $99. Expiration date is 12/15/00.) 250,000 7,813
-------------------------------------------------- ----------------------------
Total Options (Cost $629,675) 198,438
-------------------------------------------------- ----------------------------
Short-Term Investments (a) 7.8%
Commercial Paper 0.4%
Interest Bearing, Due Upon Demand
Firstar Bank, N.A., 6.29% $ 2,932,400 2,932,400
Sara Lee Corporation, 6.22% 850,200 850,200
Wisconsin Electric Power Company, 6.22% 676,700 676,700
--------------
4,459,300
Repurchase Agreements 5.1%
Barclays Capital, Inc. (Dated 10/31/00), 6.53%,
Due 11/01/00 (Repurchase proceeds
$67,012,153); Collateralized by:
United States Treasury Bonds (d) 67,000,000 67,000,000
United States Government Issues 2.3%
FHLMC Participation Certificates,
11.25%, Due 1/01/01 500 500
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
8.305%, Due 4/01/01 (c) 5,270,304 5,255,877
8.43%, Due 4/01/01 (c) 10,177,766 10,150,955
Federal Agricultural Mortgage Corporation
Guaranteed Mortgage Variable Rate Pass-
Thru Certificates, Series CS-1001, Class 1,
7.185%, Due 7/25/01 2,840,028 2,818,728
Federal Home Loan Banks Consolidated Bonds,
5.19%, Due 3/01/01 (c) 10,000,000 9,951,420
</TABLE>
23
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31,2000
--------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUNDS (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
United States Treasury Bills, Due 1/04/01
thru 1/18/01 (c) $ 1,315,000 $ 1,300,385
----------------
29,477,865
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $101,031,088) 100,937,165
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities
(Cost $1,549,380,989) 118.4% 1,543,023,664
Other Assets and Liabilities, Net (18.4%) (239,749,768)
--------------------------------------------------------------------------------
Net Assets 100.0% $ 1,303,273,896
================================================================================
</TABLE>
<TABLE>
<CAPTION>
FUTURES
--------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Appreciation
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchased:
473 Five-Year U.S. Treasury Notes 12/00 $ 47,625,188 $ 66,943
130 Ten-Year U.S. Agency Notes 12/00 12,368,281 58,354
415 Ten-Year U.S. Treasury Notes 12/00 41,791,797 168,080
125 Two-Year U.S. Treasury Notes 12/00 25,015,625 52,203
Sold:
118 U.S. Treasury Bonds 12/00 11,781,563 117,498
</TABLE>
<TABLE>
<CAPTION>
SWAPS
--------------------------------------------------------------------------------
Open Swap contracts at October 31, 2000 consisted of the following:
--------------------------------------------------------------------------------
Unrealized
Notional Termination Interest Index Appreciation/
Amount Date Sold Bought (Depreciation)
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 Month USD ERISA Eligible
LIBOR - 30 basis Lehman
$50,000,000 8/01/01 points CMBS* $ 165,630
3 Month USD
50,000,000 9/19/02 LIBOR 6.77% 84,000
3 Month USD
22,000,000 9/19/05 6.865% LIBOR (104,500)
</TABLE>
* Lehman Brothers Investment Grade Index - ERISA Eligible Sub Index
Collateralized Mortgage-Backed Securities Index Total Return Swap
<TABLE>
<CAPTION>
WRITTEN OPTIONS ACTIVITY
--------------------------------------------------------------------------------
Contracts Premiums
--------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at beginning of year 52,950 $ 199,088
Options written during year 15,941 3,709,240
Options closed (60,991) (3,322,841)
Options expired (7,600) (421,162)
Options exercised -- --
------- ------------
Options outstanding at ending of year 300 $ 164,325
======= ============
</TABLE>
Closed and expired options resulted in a capital gain of $454,621
<TABLE>
<CAPTION>
WRITTEN OPTIONS DETAIL
--------------------------------------------------------------------------------
Contracts
(1000 shares Value
per contract) (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
United States Treasury Bond Futures Options:
Calls: (Strike price is $104. Expiration date is
12/15/00. Premium received is $114,775.) 200 ($81,250)
Puts: (Strike price is $97. Expiration date is
12/15/00. Premium received is $49,550.) 100 (10,938)
--- -------
300 ($92,188)
=== =======
</TABLE>
--------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds 53.2%
Allstate Corporation Notes,
7.875%, Due 5/01/05 $ 3,000,000 $ 3,077,145
Anixter, Inc. Guaranteed Notes,
8.00%, Due 9/15/03 2,000,000 1,981,502
Beaver Valley Funding Corporation
Debentures, 8.625%, Due 6/01/07 (c) 9,860,000 9,749,075
CMS Energy Corporation Senior Notes,
8.375%, Due 7/01/13 (Remarketing
Date 7/01/03) (c) 10,000,000 9,673,890
CSC Holdings, Inc. Senior Subordinated Debentures:
9.875%, Due 2/15/13 3,275,000 3,340,500
9.875%, Due 4/01/23 8,875,000 9,008,125
CSC Holdings, Inc. Senior Subordinated
Notes, 9.25%, Due 11/01/05 6,350,000 6,413,500
Calpine Corporation Senior Notes,
8.25%, Due 8/15/05 15,000,000 14,951,460
Cendant Corporation Notes,
7.75%, Due 12/01/03 (c) 16,540,000 16,053,641
Custom Repackaged Asset Vehicle Trusts -
Wal-Mart Credit-Linked Trust Certificates,
Series 1996-401, 7.35%, Due 7/17/06 (b) 3,440,587 3,424,520
Custom Repackaged Asset Vehicle Trusts -
Walt Disney Credit-Linked Trust Certificates,
Series 1996-403, 7.20%, Due 1/10/07 (b) 3,345,409 3,325,387
Delta Air Lines, Inc. Pass-Thru Certificates:
Series 1992-B1, 9.375%, Due 9/11/07 10,325,729 10,722,495
Series 1993-A1, 9.875%, Due 4/30/08 13,070,862 13,944,976
Duke Energy Field Services LLC Notes,
7.50%, Due 8/16/05 10,000,000 10,100,140
ESAT Telecom Group PLC Senior Yankee
Notes, Series B, 11.875%, Due 12/01/08 10,240,000 12,134,400
Enron Credit Linked Notes Trust Notes,
8.00%, Due 8/15/05 (b) 7,000,000 7,118,734
First Industrial LP Notes, 6.50%, Due 4/05/11
(Remarketing Date 3/15/01) (c) 10,000,000 9,958,670
GS Escrow Corporation Floating Rate Senior
Notes, 7.7113%, Due 8/01/03 5,000,000 4,852,545
General Electric Capital Corporation Medium-
Term Notes, Series A, 7.25%, Due 5/03/04 2,250,000 2,286,965
Global Crossing Holdings, Ltd. Senior Notes,
9.125%, Due 11/15/06 5,000,000 4,793,750
HCA-The Healthcare Company Medium-Term
Notes:
Tranche 00004, 8.12%, Due 8/04/03 1,625,000 1,608,963
Tranche 00013, 6.73%, Due 7/15/45 3,300,000 3,166,433
Homeside International, Inc. Senior Secured
Second Priority Notes, Series B,
11.25%, Due 5/15/03 (c) 28,924,000 31,201,765
Huntington Capital I Variable Rate Capital
Income Securities, 7.4575%, Due 2/01/27 16,500,000 15,280,073
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 825,000 676,731
Lilly Del Mar, Inc. Floating Rate Capital
Securities, 7.9138%, Due 8/05/29 (b) (c) 15,000,000 14,864,925
MetroNet Communications Corporation
Senior Discount Yankee Notes:
Zero %, Due 11/01/07 (Rate Reset
Effective 11/01/02) 5,730,000 4,999,780
Zero %, Due 6/15/08 (Rate Reset
Effective 6/15/03) 10,500,000 8,526,095
MetroNet Communications Corporation
Senior Yankee Notes:
10.625%, Due 11/01/08 (c) 22,000,000 24,276,340
12.00%, Due 8/15/07 18,225,000 20,292,936
MidAmerican Energy Company Medium-Term
Notes, Tranche 00002, 7.375%, Due 8/01/02 10,000,000 10,030,150
</TABLE>
24
<PAGE>
--------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
<TABLE>
<CAPTION>
Shares of
Principle Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
NWA Trust Structured Enhanced Return
Trusts 1998, 9.67%, Due 4/15/11 (b) $12,500,000 $11,593,750
News Corporation, Ltd. Senior
Subordinated Notes, 8.75%, Due 2/15/06 10,754,000 10,552,363
Northern Trust Company Medium-Term Bank
Notes, Tranche 00047, 7.50%, Due 2/11/05 3,000,000 3,053,052
Northrop Grumman Corporation Notes,
8.625%, Due 10/15/04 6,400,000 6,672,237
Occidental Petroleum Corporation Senior
Notes, 6.40%, Due 4/01/13 (Remarketing
Date 4/01/03) 4,000,000 3,897,056
PSEG Energy Holdings, Inc. Senior Notes,
9.125%, Due 2/10/04 5,500,000 5,568,750
Petroleos Mexicanos Guaranteed Notes,
8.85%, Due 9/15/07 2,500,000 2,425,000
Pinnacle One Partners LP/Pinnacle One, Inc.
Senior Secured Notes, 8.83%, Due 8/15/04 (b) 14,000,000 14,153,398
Qwest Communications International, Inc.
Senior Notes, Series B, 10.875%, Due 4/01/07 13,609,741 14,793,870
R&B Falcon Corporation Senior Notes, Series B:
6.50%, Due 4/15/03 9,000,000 8,595,000
9.125%, Due 12/15/03 3,300,000 3,366,000
Raytheon Company Notes, 7.90%, Due 3/01/03 9,000,000 9,141,750
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Yankee Debentures,
10.125%, Due 9/01/12 6,575,000 6,887,313
Saks, Inc. Guaranteed Notes, 7.00%, Due 7/15/04 2,000,000 1,350,000
Saks, Inc. Notes, 7.25%, Due 12/01/04 3,000,000 1,965,000
Shoppers Food Warehouse Corporation Senior
Notes, 9.75%, Due 6/15/04 12,000,000 12,632,208
Spintab AB Floating Rate Subordinated Yankee
Notes, 7.28%, Due 12/29/49 (b) (c) 30,000,000 29,852,910
Sprint Capital Corporation Medium-Term
Notes, Tranche 00003, 7.625%, Due 6/10/02 10,000,000 10,073,300
Sprint Spectrum LP/Sprint Spectrum Finance
Corporation Senior Notes, 11.00%, Due 8/15/06 16,557,000 17,801,259
Star Capital Trust I Floating Rate Securities,
7.425%, Due 6/15/27 10,000,000 9,591,390
Stop & Shop Companies, Inc. Senior
Subordinated Notes, 9.75%, Due 2/01/02 4,750,000 4,842,369
Swedbank Floating Rate Debt Unit (Medium-
Term Structured Enhanced Return Trusts
1996, Series R-35), 7.54%, Due 11/10/02 (b) (c) 10,000,000 9,650,000
Tenet Healthcare Corporation Senior Notes:
7.875%, Due 1/15/03 12,000,000 11,880,000
8.625%, Due 12/01/03 16,800,000 16,930,301
Tricon Global Restaurants, Inc. Senior Notes,
7.45%, Due 5/15/05 10,770,000 10,233,880
Triumph Capital CBO I, Ltd./Triumph Capital
CBO I, Inc. Senior Secured Floating Rate
Notes, Class A-2, 7.69%, Due 6/15/11 (b) 18,000,000 18,082,800
Ultramar Credit Corporation Guaranteed
Notes, 8.625%, Due 7/01/02 5,000,000 5,104,940
United States Tobacco Term Loan, 9.30%, Due
2/16/05 (Acquired 10/05/00; Cost $1,497,750) (b) 1,500,000 1,511,250
Univision Network Holding LP Subordinated
Accretion Notes, 7.00%, Due 12/17/02 19,730,000 27,424,700
WMX Technologies, Inc. Notes:
6.375%, Due 12/01/03 8,000,000 7,561,664
7.10%, Due 8/01/26 5,485,000 5,295,087
Waste Management, Inc. Notes,
6.625%, Due 7/15/02 10,625,000 10,299,110
Williams Communications Group, Inc. Senior
Notes, 11.875%, Due 8/01/10 (b) 5,000,000 4,462,500
YPF Sociedad Anonima Yankee Notes,
8.00%, Due 2/15/04 10,000,000 9,853,000
--------------------------------------------------------------------------------
Total Corporate Bonds (Cost $627,632,299) 618,932,818
--------------------------------------------------------------------------------
Non-Agency Mortgage &
Asset-Backed Securities 19.6%
Asset Securitization Corporation Commercial
Mortgage Pass-Thru Certificates:
Series 1995-MD4, Class A-1, 7.10%, Due 8/13/29 17,649,124 17,726,163
Series 1996-MD6, Class A-1A,
6.72%, Due 11/13/26 2,848,002 2,841,741
BCF LLC Mortgage Pass-Thru Certificates,
Series 1997-R2, Class 3-A1,
7.00%, Due 12/25/35 (b) 515,672 513,365
Bear Stearns Structured Products, Inc. Principal
Only Notes, Series 2000-3, Class A,
Due 12/28/28 (b) 14,705,977 12,734,493
Blackstone Hotel Acquisitions Company Debt
Unit (Medium-Term Structured Enhanced
Return Trusts 1998), Series R-38,
7.57%, Due 6/30/03 (Acquired 7/30/98;
Cost $13,585,400) (b) 13,585,400 13,500,491
CS First Boston Mortgage Securities
Corporation Mortgage-Backed Certificates,
7.25%, Due 8/25/27 696,240 692,936
Chase Mortgage Finance Corporation,
7.8745%, Due 12/25/23 1,181,441 1,176,278
Chase Mortgage Finance Corporation Mortgage
Pass-Thru Certificates, Series 1990-G,
Class A-Z1, 9.50%, Due 12/25/21 387,780 387,901
Chase Mortgage Finance Corporation Variable
Rate Mortgage Pass-Thru Certificates,
Series 1992-2, Class B2, 7.9986%, Due 8/28/23 (b 1,717,767 1,709,126
Cit Rv Trust Asset-Backed Notes, Series 1997-A,
Class A-6, 6.35%, Due 4/15/11 8,055,000 7,988,860
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Pass-Thru
Certificates, Series 1993-3, Class B1,
7.00%, Due 3/25/08 (b) 1,388,697 1,369,526
Citicorp Mortgage Securities, Inc. Real Estate
Mortgage Investment Conduit Variable Rate
Pass-Thru Certificates, Series 1988-8, Class A-1
7.7013%, Due 6/25/18 2,691,430 2,687,541
Collateralized Mortgage Obligation Trust 47,
Class E, Principal Only, Due 9/01/18 560,536 358,283
Collateralized Mortgage Obligation Trust Inverse
Floating Rate Collateralized Mortgage Obligation
Series 13, Class Q, 13.2481%, Due 1/20/03 168,994 170,792
ContiMortgage Home Equity Loan Trust Interest
Only Senior Strip Certificates, Series 1996-2,
Class A, 0.784%, Due 7/15/27 55,682,552 731,112
ContiSecurities Residual Corporation
ContiMortgage Net Interest Margin Notes,
Series 1997-A, 7.23%, Due 7/16/28 (Acquired
9/18/97; Cost $2,027,568) (b) 2,027,568 709,649
Countrywide Mortgage-Backed Securities, Inc.
Variable Rate Mortgage Pass-Thru Certificates,
Series 1994-D, Class A6, 2.6995%, Due 3/25/24 2,994,454 2,833,644
DLJ Mortgage Acceptance Corporation Variable
Rate Interest Only Multi-Family Mortgage
Pass-Thru Certificates, Series 1993-MF10,
Class A-1, 0.80%, Due 7/15/03 21,015,491 2
Drexel Burnham Lambert Collateralized
Mortgage Obligation Trust, Series T, Class
T-4, 8.45%, Due 9/20/19 6,600,000 6,668,649
FirstPlus Global Issuance Corporation
Interest Only Asset-Backed Notes, Series 1998-4,
Class A, 6.10%, Due 9/10/24 52,379,000 8,381
</TABLE>
25
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
<TABLE>
<CAPTION>
Shares of
Principle Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
GMBS, Inc. Countrywide Funding Certificates,
Series 1990-1, Class Z, 9.25%, Due 1/28/20 $ 842,327 $ 838,229
GS Mortgage Securities Corporation II
Commercial Mortgage Interest Only
Pass-Thru Certificates, Series 1999-C1, Class X,
0.767%, Due 11/18/30 117,831,348 6,266,648
GS Mortgage Securities Corporation Variable Rate
Mortgage Participation Securities, Series 1998-1,
Class A, 8.00%, Due 9/20/27 (b) 6,211,678 6,314,785
Greenwich Capital Acceptance, Inc. Mortgage
Securities, Series 1993-P01, Class E, Principal
Only, Due 11/26/17 4,316,442 3,050,516
Greenwich Capital Acceptance, Inc. Variable Rate
Mortgage Pass-Thru Certificates, Series 1991-1,
Class A, 7.374%, Due 2/25/21 (b) 3,762,010 3,736,165
Kmart CMBS Financing, Inc. Floating Rate
Commercial Mortgage Pass-Thru Certificates,
Series 1997-1, Class D, 7.72%, Due 3/01/07 (b) 4,500,000 4,486,702
Merrill Lynch Mortgage Investors, Inc. Senior
Subordinated Pass-Thru Certificates, Series
1994-A, Class A-5, 7.035%, Due 2/15/24 11,323,002 11,022,999
Mid-State Trust II Mortgage-Backed Notes,
Class A4, 9.625%, Due 4/01/03 3,717,500 3,772,909
Morgan Stanley Capital I, Inc. Variable Rate
Commercial Mortgage Pass-Thru Certificates:
Series 1997-RR, Class A,
6.8484%, Due 4/30/39 (b) 2,051,131 2,030,620
Series 1999-WF1, Class X, Interest Only,
0.8351%, Due 10/15/18 (b) 95,212,303 4,312,289
National City Credit Card Master Trust Floating
Rate Asset-Backed Certificates, Series 2000-1,
Class A, 6.77%, Due 8/15/07 500,000 500,640
Option One Mortgage Securities Corporation Net
Interest Margin Trust, Series 1999-2,
9.66%, Due 6/26/29 (b) 3,900,131 3,822,128
Paine Webber Mortgage Acceptance Corporation
IV Mortgage Pass-Thru Certificates, Series
1995-M1, Class B, 6.95%, Due 1/15/07 (b) 13,000,000 12,976,925
Prudential Home Mortgage Securities Company
Mortgage Pass-Thru Certificates, Series 1992-26,
Class A-18, 7.50%, Due 8/25/07 1,277,286 1,282,076
Railcar Leasing LLC Senior Secured Notes, Series 1,
Class A-1, 6.75%, Due 7/15/06 20,162,410 20,057,263
Residential Funding Mortgage Securities I, Inc.
Mortgage Pass-Thru Certificates, Series
1993-M23, Class A-1, 6.97%, Due 8/28/23 430,911 426,441
Resolution Trust Corporation Mortgage Pass-Thru
Securities, Inc. Commercial Certificates:
Series 1994-C2, Class E, 8.00%, Due 4/25/25 10,936,230 10,864,812
Series 1995-C2, Class D, 7.00%, Due 5/25/27 4,839,058 4,787,563
Resolution Trust Corporation Mortgage Pass-Thru
Securities, Inc. Variable Rate Certificates, Serie
1991-11, Class 1-L, 8.625%, Due 10/25/21 5,021,553 5,001,592
Rural Housing Trust 1987-1 Senior Mortgage
Pass-Thru Certificates, Series 1, Class D,
6.33%, Due 4/01/26 254,304 251,704
Rural Housing Trust 1987-1 Senior Mortgage
Pass-Thru Subordinated Certificates, Class 3B,
7.33%, Due 4/01/26 6,677,796 6,682,303
Ryland Mortgage Securities Corporation III
Variable Rate Collateralized Mortgage Bonds,
Series 1992-C, Class 3-A, 11.6247%, Due 11/25/30 126,240 125,711
Ryland Mortgage Securities Corporation IV
Variable Rate Collateralized Mortgage Bonds,
Series 2, Class 3-A, 11.9694%, Due 6/25/23 $ 733,134 $ 740,117
SL Commercial Mortgage Trust Mortgage
Pass-Thru Certificates, Series 1997-C1, Class A,
6.875%, Due 7/25/04 (b) 16,727,846 16,690,993
SWP Mortgage Securities Trust Mortgage
Pass-Thru Certificates Series 1993-1, Class A,
6.54%, Due 12/15/02 (b) 2,379,729 2,373,780
Salomon Brothers Mortgage Securities VI, Inc.
Stripped Coupon Mortgage Pass-Thru
Certificates, Series 1987-3, Class A, Principal
Only, Due 10/23/17 881,400 715,905
Sequoia Mortgage Trust Adjustable Rate
Asset-Backed Certificates, Series 3, Class M-1,
6.85%, Due 6/25/28 11,127,300 11,021,504
Shearson Lehman Pass-Thru Securities, Inc. Asset
Trust Variable Rate Pass-Thru Certificates,
Series 88-3, 8.0145%, Due 9/15/18 3,125,195 3,104,277
Structured Mortgage Asset Residential Trust
Pass-Thru Certificates, Series 1992-5,
Class BO, Principal Only, Due 6/25/23 388,731 303,931
Structured Mortgage Trust Commercial
Mortgage-Backed Securities, Series 1997-2,
Class A, 7.95%, Due 1/30/06 (Acquired 5/12/98;
Cost $5,324,123) (b) 5,384,213 5,059,491
--------------------------------------------------------------------------------
Total Non-Agency Mortgage &
Asset-Backed Securities (Cost $227,897,225) 227,429,951
--------------------------------------------------------------------------------
United States Government &
Agency Issues 17.3%
FHLMC Participation Certificates:
6.50%, Due 5/01/04 821,029 809,486
8.50%, Due 6/01/02 thru 1/01/05 85,197 86,135
9.00%, Due 5/01/06 thru 8/01/18 5,580,290 5,793,501
9.50%, Due 3/01/11 thru 12/01/22 (e) 9,600,115 10,221,295
9.75%, Due 8/01/02 586,567 599,979
10.25%, Due 7/01/09 thru 1/01/10 369,376 392,392
10.50%, Due 1/01/16 thru 7/01/19 6,150,177 6,631,029
10.75%, Due 9/01/09 thru 10/01/17 303,482 325,843
11.25%, Due 11/01/09 315,885 344,191
FHLMC Variable Rate Participation Certificates,
7.56%, Due 5/01/26 3,955,928 4,033,651
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Pass-Thru Certificates:
8.00%, Due 12/01/13 thru 9/01/23 20,782,489 21,189,210
8.50%, Due 4/01/08 thru 2/01/23 15,043,254 15,482,695
9.00%, Due 11/01/24 1,887,077 1,962,063
9.40%, Due 10/25/19 6,566,346 6,856,231
9.50%, Due 2/01/11 thru 2/15/11 5,490,578 5,760,896
10.00%, Due 7/01/04 thru 6/25/19 7,668,847 8,088,648
11.00%, Due 10/15/20 14,352,155 15,564,348
12.00%, Due 3/01/17 2,649,578 2,957,470
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 7,864 4,325
FNMA Guaranteed Real Estate Mortgage
Investment Conduit Variable Rate Interest
Only Pass-Thru Certificates, Series 1995-G2,
Class IO, 9.7757%, Due 5/25/20 5,853,158 1,464,807
FNMA Stripped Mortgage-Backed Securities:
Series 1993-M1, Class N, Interest Only,
0.84%, Due 4/25/20 2,501,403 775
Series 107, Class 1, Principal Only, Due 10/25/06 967,173 841,371
</TABLE>
26
<PAGE>
--------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
GNMA Guaranteed Pass-Thru Certificates:
7.50%, Due 12/15/07 $ 3,561,878 $ 3,587,055
8.00%, Due 12/15/08 1,253,272 1,281,878
8.50%, Due 5/15/10 947,044 974,329
9.00%, Due 11/15/24 1,172,737 1,227,288
9.75%, Due 9/15/05 thru 11/15/05 887,425 930,750
10.00%, Due 2/20/18 267,099 279,947
11.50%, Due 4/15/13 38,392 41,953
12.50%, Due 4/15/19 13,308,620 14,902,534
Small Business Administration Guaranteed Loan
Group 0190 Variable Rate Interest Only
Certificates, 3.11%, Due 7/30/18 12,640,425 429,774
USGI FHA Insured Project Pool Banco 85,
7.44%, Due 11/24/19 2,380,984 2,363,674
United States Treasury Notes:
5.25%, Due 8/15/03 5,375,000 5,287,775
5.75%, Due 8/15/03 5,000,000 4,982,815
6.00%, Due 9/30/02 25,000,000 25,034,150
6.50%, Due 3/31/02 14,900,000 14,974,634
6.75%, Due 5/15/05 15,150,000 15,711,035
------------------------------------------------------------------------------
Total United States Government &
Agency Issues (Cost $201,700,420) 201,419,932
------------------------------------------------------------------------------
Preferred Stocks 3.0%
Caisse National De Credit Agricole Sponsored
ADR 10.375% Series A
(Acquired 11/15/96 - 12/08/99;
Cost $19,637,271) (b) 699,479 17,880,782
Parmalat Capital Finance 8.9225% Series B 300,000 6,750,000
Webster Capital Corporation 7.375% Series A 10,000 9,981,200
------------------------------------------------------------------------------
Total Preferred Stocks (Cost $37,177,004) 34,611,982
------------------------------------------------------------------------------
Short-Term Investments (a) 7.0%
Commercial Paper 0.2%
Interest Bearing, Due Upon Demand
Firstar Bank, N.A., 6.29% $ 2,764,100 2,764,100
Wisconsin Electric Power Company, 6.22% 100 100
--------------
2,764,200
Corporate Bonds 4.0%
GS Escrow Corporation Senior Notes,
6.75%, Due 8/01/01 (c) 22,500,000 22,216,770
ITT Corporation Notes, 6.25%, Due 11/15/00 (c) 5,500,000 5,496,969
Tosco Corporation Floating Rate Notes, 7.1375%,
Due 5/16/01 15,000,000 14,999,055
Waste Management, Inc. Senior Notes,
6.125%, Due 7/15/01 4,110,000 4,031,084
--------------
46,743,878
Non-Agency Mortgage & Asset-Backed Securities 0.8%
Greenwich Capital Markets, Inc. Commercial
Mortgage Loan Facility Variable Rate Funding
Certificates, Series 1998 SFT-1, Class B, 9.25%
Due 3/31/01 (Acquired 7/30/99 - 8/30/00;
Cost $5,525,810) (b) 5,525,810 5,511,995
NPF XI, Inc. Health Care Receivables Program
97-1 Notes, Class A, 6.815%, Due 7/01/01 (b) 3,650,394 3,645,831
--------------
9,157,826
Repurchase Agreements 1.9%
ABN-AMRO Inc. (Dated 10/31/00), 6.56%, Due
11/01/00 (Repurchase proceeds $22,004,009);
Collateralized by: United States Government &
Agency Issues (d) 22,000,000 22,000,000
United States Government & Agency Issues 0.1%
FHLMC Participation Certificates:
8.50%, Due 4/01/01 thru 7/01/01 $ 34,635 $ 34,668
8.75%, Due 10/01/01 177,004 177,608
United States Treasury Bills, Due 11/09/00 thru
12/14/00 (c) 870,000 865,169
--------------
1,077,445
------------------------------------------------------------------------------
Total Short-Term Investments (Cost $81,981,534) 81,743,349
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Total Investments in Securities (Cost $1,176,388,482) 100.1% 1,164,138,032
Other Assets and Liabilities, Net (0.1%) (1,320,815)
------------------------------------------------------------------------------
Net Assets 100.0% $1,162,817,217
==============================================================================
</TABLE>
<TABLE>
<CAPTION>
FUTURES
------------------------------------------------------------------------------
Underlying
Expiration Face Amount Unrealized
Date at Value Depreciation
------------------------------------------------------------------------------
<S> <C> <C> <C>
Sold:
501 Five-Year U.S. Treasury Notes 12/00 $ 50,444,437 $ 462,035
237 Ten-Year U.S. Treasury Notes 12/00 23,866,641 213,054
10 Two-Year U.S. Treasury Notes 12/00 2,001,250 10,808
</TABLE>
<TABLE>
<CAPTION>
SWAPS
------------------------------------------------------------------------------
Open Credit Swap contracts at October 31, 2000 consisted of the following:
------------------------------------------------------------------------------
Unrealized
Notional Termination Interest Interest Appreciation/
Amount Date Sold Bought (Depreciation)
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$5,000,000 10/12/05 1.70% -- $ 7,500
5,000,000 10/12/05 1.90% -- (15,000)
</TABLE>
--------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds 85.5%
@Entertainment, Inc. Senior Discount Notes,
Series B:
Zero %, Due 7/15/08 (Rate Reset Effective
7/15/03) $ 17,350,000 $ 10,496,750
Zero %, Due 2/01/09 (Rate Reset Effective
2/01/04) (b) 22,050,000 12,237,750
AES Corporation Senior Notes,
9.375%, Due 9/15/10 6,390,000 6,517,800
AMFM Operating, Inc. Senior Subordinated
Exchange Debentures, 12.625%, Due 10/31/06 2,828,100 3,181,612
AP Holdings, Inc. Senior Discount Notes, Zero %,
Due 3/15/08 (Rate Reset Effective 3/15/03) 8,200,000 625,250
APCOA/Standard Parking, Inc. Senior
Subordinated Notes, 9.25%, Due 3/15/08 11,210,000 3,993,563
Adelphia Communications Corporation Senior
Notes, 10.875%, Due 10/01/10 15,030,000 14,128,200
Airgate PCS, Inc. Senior Subordinated Discount
Notes, Zero %, Due 10/01/09 (Rate Reset
Effective 10/01/04) 7,000,000 4,042,500
Aladdin Gaming Holdings LLC/Aladdin Capital
Corporation Senior Discount Notes, Zero %,
Due 3/01/10 (Rate Reset Effective 3/01/03) 13,115,000 6,229,625
Allegiance Telecom, Inc. Senior Discount Notes,
Zero %, Due 2/15/08 (Rate Reset
Effective 2/15/03) 11,000,000 7,645,000
Allied Waste North America, Inc. Senior
Subordinated Notes, 10.00%, Due 8/01/09 8,300,000 7,138,000
</TABLE>
27
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
American Lawyer Media, Inc. Senior Subordinated
Notes, Series B, 9.75%, Due 12/15/07 $ 7,170,000 $ 6,524,700
Anchor Gaming Senior Subordinated Notes,
9.875%, Due 10/15/08 (b) 7,000,000 7,113,750
Anchor Glass Container Corporation First
Mortgage Notes, 11.25%, Due 4/01/05 9,500,000 7,172,500
Anthony Crane Rental Holdings LP/Anthony
Crane Holdings Capital Corporation Senior
Discount Debentures, Zero %, Due 8/01/09
(Rate Reset Effective 8/01/03) 8,400,000 882,000
Argosy Gaming Company Senior Subordinated
Notes, 10.75%, Due 6/01/09 4,000,000 4,200,000
Asia Global Crossing, Ltd. Senior Yankee Notes,
13.375%, Due 10/15/10 (b) 14,000,000 13,020,000
Avencia Group PLC Yankee Notes,
11.00%, Due 7/01/09 8,650,000 8,347,250
BankUnited Capital Trust Preferred Securities,
Series A, 10.25%, Due 12/31/26 4,300,000 3,321,750
Callahan Nordrhein-Westfalen GmbH
Yankee Notes, 14.00%, Due 7/15/10 (b) 4,585,000 4,401,600
William Carter Senior Subordinated Notes,
Series A, 10.375%, Due 12/01/06 8,000,000 7,640,000
Chattem, Inc. Senior Subordinated Notes,
8.875%, Due 4/01/08 5,800,000 3,683,000
Chesapeake Energy Corporation Senior Notes,
9.125%, Due 4/15/06 2,500,000 2,437,500
Covad Communications Group, Inc. Senior Notes,
Series B, 12.00%, Due 2/15/10 1,500,000 746,250
Echostar Broadband Corporation Senior Notes,
10.375%, Due 10/01/07 (b) 15,030,000 15,142,725
ekabel Hessen GmbH Senior Yankee Notes,
14.50%, Due 9/01/10 (b) 18,720,000 17,784,000
Exodus Communications, Inc. Senior Notes,
11.625%, Due 7/15/10 (b) 3,005,000 2,794,650
Fairpoint Communications, Inc. Senior
Subordinated Notes, 12.50%, Due 5/01/10 3,000,000 2,715,000
Fox Family Worldwide, Inc. Senior Discount
Notes, Zero %, Due 11/01/07 (Rate Reset
Effective 11/01/02) 4,000,000 2,900,000
Fresenius Medical Care Capital Trust II
Guaranteed Preferred Securities,
7.875%, Due 2/01/08 5,305,000 4,946,913
GT Group Telecom, Inc. Senior Yankee Discount
Notes, Zero %, Due 2/01/10 (Rate Reset
Effective 2/01/05) 16,500,000 6,105,000
General Binding Corporation Senior Subordinated
Notes, 9.375%, Due 6/01/08 6,395,000 5,211,925
Global Crossing Holdings, Ltd. Senior Notes,
9.125%, Due 11/15/06 6,000,000 5,752,500
Golden Sky DBS, Inc. Senior Discount Notes,
Series B, Zero %, Due 3/01/07 (Rate Reset
Effective 3/01/04) 2,000,000 1,410,000
Golden Sky Systems, Inc. Senior Subordinated
Notes, Series B, 12.375%, Due 8/01/06 4,750,000 5,153,750
Graham Packaging Holdings Company/GPC
Capital Corporation II Senior Discount Notes,
Zero %, Due 1/15/09 (Rate Reset
Effective 1/15/03) 13,140,000 5,256,000
HCA-The Healthcare Company Notes,
8.75%, Due 9/01/10 8,360,000 8,448,925
Hollywood Casino Corporation, Senior Secured
Notes, 11.25%, Due 5/01/07 10,310,000 10,645,075
Horizon PCS, Inc. Units, Zero %, Due 10/01/10
(Rate Reset Effective 10/01/05) (b) 7,000,000 3,360,000
Horseshoe Gaming Holding Corporation Senior
Subordinated Notes, Series B,
8.625%, Due 5/15/09 $ 3,340,000 $ 3,239,800
IPCS, Inc. Senior Discount Notes, Zero %,
Due 7/15/10 (Rate Reset
Effective 7/15/05) (b) 1,500,000 652,500
Imperial Capital Trust I Guaranteed Capital
Securities, 9.98%, Due 12/31/26 1,000,000 820,280
International Game Technology Senior Notes,
8.375%, Due 5/15/09 7,750,000 7,595,000
Jazz Casino Company LLC Senior Subordinated
Notes, 6.046%, Due 11/15/09
(Defaulted Effective 12/05/00) 2,727,448 477,303
Jostens, Inc. Senior Subordinated Notes,
12.75%, Due 5/01/10 (b) 12,450,000 12,076,500
Key Energy Services, Inc. Senior Subordinated
Notes, 14.00%, Due 1/15/09 4,000,000 4,540,000
La Petite Academy, Inc./LPA Holding Corporation
Senior Notes, Series B, 10.00%, Due 5/15/08 6,300,000 3,811,500
Leap Wireless International, Inc. Senior Discount
Notes, Zero %, Due 4/15/10 (Rate Reset
Effective 4/15/05) 10,000,000 2,850,000
Level 3 Communications, Inc. Senior Notes,
11.00%, Due 3/15/08 8,450,000 7,647,250
Lyondell Chemical Company Senior Secured
Notes, Series B, 9.875%, Due 5/01/07 8,900,000 8,699,750
MJD Communications, Inc. Senior Subordinated
Notes, 9.50%, Due 5/01/08 3,000,000 2,445,000
Mandalay Resort Group Senior Notes,
9.50%, Due 8/01/08 6,550,000 6,721,938
Mandalay Resort Group Senior Subordinated
Notes, 10.25%, Due 8/01/07 (b) 2,565,000 2,635,538
Mediacom LLC/Mediacom Capital Corporation
Senior Notes:
7.875%, Due 2/15/11 2,400,000 2,082,000
Series B, 8.50%, Due 4/15/08 6,000,000 5,565,000
Metromedia Fiber Network, Inc. Senior Notes:
10.00%, Due 12/15/09 750,000 669,375
Series B, 10.00%, Due 11/15/08 10,000,000 8,900,000
Millicom International SA Senior Subordinated
Discount Yankee Notes, Zero %, Due 6/01/06
(Rate Reset Effective 6/01/01) 5,000,000 4,075,000
Motors and Gears, Inc. Senior Notes, Series C,
10.75%, Due 11/15/06 9,400,000 9,165,000
NATG Holdings LLC/Orius Capital Corporation
Senior Subordinated Notes, Series B,
12.75%, Due 2/01/10 6,000,000 5,670,000
Nextlink Communications, Inc. Senior Discount
Notes, Zero %, Due 6/01/09 (Rate Reset
Effective 6/01/04) 8,000,000 4,220,000
Nextlink Communications, Inc. Senior Notes:
10.50%, Due 12/01/09 6,000,000 5,220,000
10.75%, Due 11/15/08 2,000,000 1,760,000
10.75%, Due 6/01/09 1,100,000 970,750
Northpoint Communications Group, Inc. Senior
Notes, 12.875%, Due 2/15/10 10,000,000 9,350,000
Ono Finance PLC Yankee Notes,
13.00%, Due 5/01/09 8,530,000 6,610,750
Orbital Imaging Corporation Senior Notes:
Series B, 11.625%, Due 3/01/05 3,500,000 822,500
Series D, 11.625%, Due 3/01/05 3,000,000 705,000
Park Place Entertainment Corporation Senior
Subordinated Notes, 8.875%, Due 9/15/08 4,000,000 3,940,000
Perry Ellis International, Inc. Senior Subordinated
Notes, 12.25%, Due 4/01/06 3,500,000 2,695,000
</TABLE>
28
<PAGE>
--------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pogo Producing Company Senior Subordinated
Notes, 10.375%, Due 2/15/09 $ 4,815,000 $ 5,031,675
Premier International Foods PLC Senior Yankee
Notes, 12.00%, Due 9/01/09 9,050,000 7,059,000
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 2,820,000
Repap New Brunswick Senior Yankee Notes,
10.625%, Due 4/15/05 12,085,000 12,477,762
Rhythms NetConnections, Inc. Senior Notes:
12.75%, Due 4/15/09 4,500,000 2,115,000
Series B, 14.00%, Due 2/15/10 3,500,000 1,697,500
Riverwood International Corporation Senior
Subordinated Notes, 10.875%, Due 4/01/08 8,000,000 7,260,000
Sabreliner Corporation Senior Notes,
11.00%, Due 6/15/08 (b) 3,000,000 2,475,000
Simmons Company Senior Subordinated Notes,
Series B, 10.25%, Due 3/15/09 5,700,000 5,329,500
Sirius Satellite Radio, Inc. Senior Secured Notes,
14.50%, Due 5/15/09 3,500,000 2,975,000
Spanish Broadcasting System, Inc. Senior
Subordinated Notes, 9.625%, Due 11/01/09 7,500,000 7,293,750
Spectrasite Holdings, Inc. Senior Discount Notes:
Zero %, 4/15/09 (Rate Reset Effective 4/15/04) 7,500,000 3,909,375
Zero %, 3/15/10 (Rate Reset Effective 3/15/05) 19,705,000 9,655,450
Steel Heddle Manufacturing Company Senior
Subordinated Notes, 10.625%, Due 6/01/08
(Defaulted Effective 12/05/00) 5,000,000 1,762,500
Superior National Capital Trust I Notes,
10.75%, Due 12/01/17 (Defaulted
Effective 7/28/00) 5,405,000 283,762
Tekni-Plex, Inc. Senior Subordinated Notes,
Series B, 12.75%, Due 6/15/10 1,500,000 1,372,500
TeleCorp PCS, Inc. Senior Subordinated Notes,
10.625%, Due 7/15/10 2,000,000 2,005,000
Telemundo Holdings, Inc. Senior Discount Notes,
Zero %, Due 8/15/08 (Rate Reset Effective
8/15/03) 5,300,000 3,869,000
Teligent, Inc. Senior Notes, 11.50%, Due 12/01/07 12,500,000 5,437,500
Tenet Healthcare Corporation Senior Notes,
Series B, 9.25%, Due 9/01/10 11,200,000 11,788,000
Terra Industries, Inc. Senior Notes, Series B,
10.50%, Due 6/15/05 5,246,000 3,278,750
Time Warner Telecom LLC Senior Notes,
9.75%, Due 7/15/08 5,000,000 4,450,000
Town Sports International, Inc. Senior Notes,
Series B, 9.75%, Due 10/15/04 10,200,000 9,741,000
Transwestern Publishing Company LP/TWP
Capital Corporation II Senior Subordinated
Notes, Series D, 9.625%, Due 11/15/07 6,950,000 6,932,625
Tri-State Outdoor Media Group, Inc. Senior
Notes, 11.00%, Due 5/15/08 7,700,000 6,699,000
Triarc Consumer Products Group LLC/Triarc
Beverage Holdings Corporation Senior
Subordinated Notes, 10.25%, Due 2/15/09 6,130,000 7,064,273
Triton Energy, Ltd. Senior Notes,
8.875%, Due 10/01/07 (b) 12,210,000 12,286,313
Triton PCS, Inc. Senior Subordinated Discount
Notes, Zero %, Due 5/01/08 (Rate Reset
Effective 5/01/03) 11,000,000 8,387,500
Ubiquitel Operating Company Senior
Subordinated Discount Notes, Zero %, Due
4/15/10 (Rate Reset Effective 4/15/05) 1,500,000 682,500
United Industries Corporation Senior
Subordinated Notes, Series B,
9.875%, Due 4/01/09 7,250,000 3,190,000
United International Holdings, Inc. Senior
Secured Discount Notes, Series B, Zero %,
Due 2/15/08 (Rate Reset Effective 2/15/03) 15,675,000 9,640,125
Universal Compression, Inc. Senior Discount
Notes, Zero %, Due 2/15/08 (Rate Reset
Effective 2/15/03) 11,175,000 9,107,625
Venetian Casino Resort LLC/Las Vegas Sands, Inc.
Secured Mortgage Notes, 12.25%, Due 11/15/04 5,000,000 5,087,500
Venetian Casino Resort LLC/Las Vegas Sands, Inc.
Senior Subordinated Notes, 14.25%, Due 11/15/05 5,000,000 5,087,500
Versatel Telecom BV Senior Yankee Notes,
13.25%, Due 5/15/08 3,000,000 2,295,000
Versatel Telecom International NV Senior Yankee
Notes, 11.875%, Due 7/15/09 3,000,000 2,205,000
Viatel, Inc. Senior Notes, 11.50%, Due 3/15/09 5,000,000 2,525,000
Voicestream Wireless Corporation/Voicestream
Wireless Holdings Corporation Senior
Discount Notes, Zero %, Due 11/15/09 (Rate
Reset Effective 11/15/04) 11,935,000 8,682,713
Voicestream Wireless Corporation/Voicestream
Wireless Holdings Corporation Senior Notes,
10.375%, Due 11/15/09 6,760,000 7,267,000
Williams Communications Group, Inc. Senior Notes:
11.70%, Due 8/01/08 (b) 10,000,000 8,975,000
11.875%, Due 8/01/10 (b) 2,825,000 2,521,312
Winstar Communications, Inc. Senior Discount
Notes, Zero %, Due 4/15/10 (Rate Reset
Effective 4/15/05) 13,472,000 4,378,400
Winstar Communications, Inc. Senior Notes,
12.75%, Due 4/15/10 (b) 4,999,000 3,549,290
XM Satellite Radio, Inc. Senior Secured Notes,
14.00%, Due 3/15/10 (b) 2,500,000 1,737,500
---------------------------------------------------------------------------------------------------------------------
Total Corporate Bonds (Cost $701,215,628) 612,373,747
---------------------------------------------------------------------------------------------------------------------
Convertible Bonds 0.9%
Exide Corporation Senior Subordinated Notes,
2.90%, Due 12/15/05 (b) 1,865,000 801,950
NTL, Inc. Subordinated Notes,
5.75%, Due 12/15/09 5,000,000 3,181,250
Total Renal Care Holdings, Inc. Subordinated
Notes, 5.625%, Due 7/15/06 3,000,000 2,276,250
---------------------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Cost $7,254,243) 6,259,450
---------------------------------------------------------------------------------------------------------------------
Non-Agency Mortgage &
Asset-Backed Securities 1.3%
Aircraft Lease Portfolio Securitization Pass-Thru
Trust Certificates, Series 1996-1, Class D,
12.75%, Due 6/15/06 4,298,934 3,955,019
First Boston Mortgage Securities Corporation
Interest Only Mortgage Pass-Thru Certificates,
Series 1992-4, Class A5, 0.625%, Due 10/25/22 6,564,779 65,648
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Thru Certificates, Series 1997-A,
Class B3, 7.3887%, Due 10/01/25 (b) 2,868,832 2,301,807
Sutter CBO, Ltd./Sutter CBO Corporation Notes,
Series 1999-1, Class B2, 13.442%, Due 11/30/14
(Acquired 10/05/99; Cost $3,000,000) (b) 3,000,000 2,940,000
---------------------------------------------------------------------------------------------------------------------
Total Non-Agency Mortgage &
Asset-Backed Securities (Cost $10,012,891) 9,262,474
---------------------------------------------------------------------------------------------------------------------
Preferred Stocks 8.5%
Dobson Communications Corporation 12.25%
Senior Exchangeable 2,923 2,594,163
Global Crossing Holdings, Ltd. 10.50% Senior
Exchangeable 40,000 3,850,000
</TABLE>
29
<PAGE>
SCHEDULE OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Intermedia Communications, Inc. 13.50% Series B
Exchangeable 10,594 $ 9,004,900
NTL, Inc. 13.00% Series B Senior Exchangeable 8,228 7,508,125
Nextel Communications, Inc. 13.00% Series D
Exchangeable 7,812 7,831,425
R&B Falcon Corporation 13.875% Senior 13,493 17,406,255
Rural Cellular Corporation 12.25% Junior
Exchangeable 12,366 9,893,175
XO Communications, Inc. 14.00% Senior
Exchangeable 62,603 2,551,057
---------------------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Cost $65,216,544) 60,639,100
---------------------------------------------------------------------------------------------------------------------
Common Stocks 0.2%
Key Energy Services, Inc. (f) 43,468 391,212
NTL, Inc. (f) 5,937 260,857
OpTel, Inc. Non-Voting (Acquired 2/07/97 -
5/07/98; Cost $603,030) (b) (f) 17,325 86,625
Powertel, Inc. (f) 3,494 304,852
RCN Corporation (f) 2,923 51,883
Versatel Telecom International NV Sponsored
ADR (f) 32,374 647,480
---------------------------------------------------------------------------------------------------------------------
Total Common Stocks (Cost $1,169,004) 1,742,909
---------------------------------------------------------------------------------------------------------------------
Warrants 1.1%
Aladdin Gaming Enterprises, Inc., Expire
3/01/10 (b) 131,150 1,312
e.spire Communications, Inc., Expire 11/01/05 1,500 75,000
GT Group Telecom, Inc., Expire 2/01/10
(Acquired 5/26/00 - 7/14/00; Cost $790,515) (b) 16,500 833,250
IPCS, Inc., Expire 6/15/10 (b) 4,000 100,000
Jostens, Inc., Expire 5/01/10 12,450 249,000
Leap Wireless International, Inc., Expire 4/15/10 (b) 10,000 48,750
MetroNet Communications Corporation, Expire
8/15/07 (b) 3,000 270,000
Ono Finance PLC, Expire 5/31/09 (b) 3,000 216,750
Orbital Imaging Corporation, Expire 3/01/05
(Acquired 2/20/98 - 5/04/98; Cost $1) (b) 6,500 45,500
R&B Falcon Corporation, Expire 5/01/09 (b) 7,100 4,615,000
Sirius Satellite Radio, Inc., Expire 5/15/09 (b) 10,500 1,155,000
Ubiquitel, Inc., Expire 4/15/10 (b) 5,000 150,625
XM Satellite Radio, Inc., Expire 3/15/10 2,500 300,312
---------------------------------------------------------------------------------------------------------------------
Total Warrants (Cost $2,397,169) 8,060,499
---------------------------------------------------------------------------------------------------------------------
Short-Term Investments (a) 0.9%
Commercial Paper 0.2%
Interest Bearing, Due Upon Demand
Firstar Bank, N.A., 6.29% $ 1,426,300 1,426,300
Sara Lee Corporation, 6.22% 100,000 100,000
Wisconsin Electric Power Company, 6.22% 110,000 110,000
---------------
1,636,300
Repurchase Agreements 0.7%
ABN-AMRO Inc. (Dated 10/31/00), 6.56%,
Due 11/01/00 (Repurchase proceeds $5,100,929);
Collateralized by: United States Government &
Agency Issues (d) 5,100,000 5,100,000
---------------------------------------------------------------------------------------------------------------------
Total Short-Term Investments (Cost $6,736,300) 6,736,300
---------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------
Total Investments in Securities (Cost $794,001,779) 98.4% 705,074,479
Other Assets and Liabilities, Net 1.6% 11,649,550
---------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $ 716,724,029
=====================================================================================================================
</TABLE>
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD BOND FUND
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Corporate Bonds 80.8%
AMFM Operating, Inc. Senior Subordinated
Exchange Debentures, 12.625%, Due 10/31/06 $ 4,060,700 $ 4,568,288
Acetex Corporation Senior Secured Notes,
9.75%, Due 10/01/03 6,100,000 5,734,000
Adelphia Business Solutions, Inc. Senior Discount
Notes, Zero %, Due 4/15/03 (Rate Reset Effective
4/15/01) 6,100,000 4,910,500
Allegiance Telecom, Inc. Senior Notes,
12.875%, Due 5/15/08 1,000,000 995,000
Allied Waste North America, Inc. Senior Notes,
7.375%, Due 1/01/04 2,189,000 2,035,770
Atlas Air, Inc. Senior Notes, 10.75%, Due 8/01/05 5,500,000 5,692,500
Boyd Gaming Corporation Senior Notes,
9.25%, Due 10/01/03 300,000 294,000
Browning Ferris Industries, Inc. Notes,
6.10%, Due 1/15/03 2,750,000 2,487,169
CMS Energy Corporation Notes,
8.125%, Due 5/15/02 1,500,000 1,468,077
CSC Holdings, Inc. Senior Subordinated Notes,
9.875%, Due 5/15/06 2,500,000 2,550,000
Century Communications Corporation Senior
Discount Notes, Zero %, Due 3/15/03 4,000,000 3,030,000
Chattem, Inc. Senior Subordinated Notes, Series B,
12.75%, Due 6/15/04 1,850,000 1,776,000
Chesapeake Energy Corporation Senior Notes,
7.875%, Due 3/15/04 600,000 573,000
Clearnet Communications, Inc. Senior Discount
Yankee Notes, Zero %, Due 12/15/05 (Rate Reset
Effective 12/15/00) 5,700,000 6,070,500
Coinmach Corporation Senior Notes, Series D,
11.75%, Due 11/15/05 2,000,000 1,990,000
Del Monte Corporation Senior Subordinated
Notes, 12.25%, Due 4/15/07 2,600,000 2,743,000
ESAT Telecom Group PLC Senior Yankee
Notes, Series B, 11.875%, Due 12/01/08 1,500,000 1,777,500
FrontierVision Operating Partners LP/FrontierVision
Capital Corporation Senior Subordinated Notes,
11.00%, Due 10/15/06 2,500,000 2,412,500
GS Escrow Corporation Senior Notes,
7.00%, Due 8/01/03 4,000,000 3,832,864
Giant Industries, Inc. Senior Subordinated Notes,
9.75%, Due 11/15/03 854,000 845,460
Graham Packaging Company/GPC Capital
Corporation I Floating Rate Notes,
10.5388%, Due 1/15/08 1,000,000 670,000
Guess, Inc. Senior Subordinated Notes, Series B,
9.50%, Due 8/15/03 2,500,000 2,462,500
Gulf Canada Resources, Ltd. Senior Subordinated
Debentures, 9.25%, Due 1/15/04 2,275,000 2,309,125
HCA-The Healthcare Company Medium-Term
Notes, Tranche 00012, 6.63%, Due 7/15/45 500,000 487,796
Intermedia Communications, Inc. Senior Discount
Notes, Zero %, Due 5/15/06 (Rate Reset
Effective 5/15/01) 3,000,000 2,850,000
Interpool, Inc. Notes, 6.625%, Due 3/01/03 5,000,000 4,391,335
Keebler Corporation Senior Subordinated Notes,
10.75%, Due 7/01/06 5,000,000 5,287,945
Lear Corporation Subordinated Notes,
8.25%, Due 2/01/02 840,000 831,600
MJD Communications, Inc. Floating Rate Notes,
10.80%, Due 5/01/08 5,000,000 4,719,950
</TABLE>
30
<PAGE>
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Mandalay Resort Group Debentures,
6.70%, Due 11/15/96 $ 2,000,000 $ 1,888,472
MetroNet Communications Corporation Senior
Yankee Notes, 12.00%, Due 8/15/07 4,000,000 4,453,868
Microcell Telecommunications, Inc. Senior
Discount Yankee Notes, Series B, Zero %,
Due 6/01/06 (Rate Reset Effective 12/01/01) 3,000,000 2,902,500
NL Industries Senior Secured Notes,
11.75%, Due 10/15/03 5,355,000 5,408,550
NS Group, Inc. Senior Notes, 13.50%, Due 7/15/03 1,458,000 1,501,740
NTL, Inc. Senior Notes, Series A,
12.75%, Due 4/15/05 4,500,000 4,410,000
Nextlink Communications LLC Senior Notes,
12.50%, Due 4/15/06 10,000,000 9,450,000
Olympus Communications LP/Olympus Capital
Corporation Senior Notes, 10.625%, Due 11/15/06 1,000,000 945,000
Paxson Communications Corporation Senior
Subordinated Notes, 11.625%, Due 10/01/02 3,000,000 3,082,500
Pegasus Media & Communications, Inc. Senior
Subordinated Notes, Series B,
12.50%, Due 7/01/05 5,000,000 5,275,000
Pierce Leahy Corporation Senior Subordinated
Notes, 11.125%, Due 7/15/06 2,594,000 2,707,487
Playtex Family Products Corporation Senior
Subordinated Notes, 9.00%, Due 12/15/03 2,000,000 1,940,000
Price Communications Wireless, Inc. Senior
Subordinated Notes, 11.75%, Due 7/15/07 5,000,000 5,350,000
Qwest Communications International, Inc. Senior
Notes, Series B, 10.875%, Due 4/01/07 3,250,000 3,532,769
R&B Falcon Corporation Senior Notes, Series B,
6.50%, Due 4/15/03 7,200,000 6,876,000
Radio One, Inc. Senior Subordinated Notes,
Series B, 12.00%, Due 5/15/04 6,000,000 6,240,000
Repap New Brunswick, Inc. First Priority Senior
Secured Notes, 9.00%, Due 6/01/04 3,000,000 3,112,500
Rogers Cablesystems, Ltd. Senior Secured Second
Priority Notes, 9.625%, Due 8/01/02 1,625,000 1,673,750
SC International Services, Inc. Senior Subordinated
Notes, 9.25%, Due 9/01/07 4,500,000 4,398,750
S.D. Warren Company Debentures,
14.00%, Due 12/15/06 6,532,207 7,169,097
Selmer Company, Inc. Senior Subordinated Notes,
11.00%, Due 5/15/05 6,319,000 6,508,570
Shoppers Food Warehouse Corporation Senior
Notes, 9.75%, Due 6/15/04 5,000,000 5,263,420
Snyder Oil Corporation Senior Subordinated
Notes, 8.75%, Due 6/15/07 3,565,000 3,671,950
Sprint Spectrum LP/Sprint Spectrum Finance
Corporation Senior Notes, 11.00%, Due 8/15/06 3,945,000 4,241,467
Statia Terminals International/Statia Terminals
Canada, Inc. First Mortgage Notes, Series B,
11.75%, Due 11/15/03 6,435,000 6,515,438
Stone Container Corporation First Mortgage Notes,
10.75%, Due 10/01/02 1,900,000 1,938,000
Telewest PLC Senior Discount Debentures,
11.00%, Due 10/01/07 3,000,000 2,625,000
Tenet Healthcare Corporation Senior Notes,
8.625%, Due 12/01/03 2,500,000 2,519,390
Triarc Consumer Products Group LLC/Triarc
Beverage Holdings Corporation Senior
Subordinated Notes, 10.25%, Due 2/15/09 6,000,000 6,914,460
Triton Energy, Ltd./Triton Energy Corporation
Senior Notes:
8.75%, Due 4/15/02 8,725,000 9,065,275
9.25%, Due 4/15/05 1,000,000 1,017,500
Univision Network Holding LP Subordinated
Accretion Notes, 7.00%, Due 12/17/02 $ 6,000,000 $ 8,340,000
Venetian Casino Resort LLC/Las Vegas Sands, Inc.
Secured Mortgage Notes, 12.25%, Due 11/15/04 500,000 508,750
Voicestream Wireless Corporation/Voicestream
Wireless Holdings Corporation Senior Notes,
10.375%, Due 11/15/09 983,000 1,056,725
Waste Management, Inc. Notes,
6.625%, Due 7/15/02 2,500,000 2,423,320
Waste Management, Inc. Senior Notes,
6.50%, Due 12/15/02 2,500,000 2,412,592
Western Resources, Inc. Term Loan, Tranche B,
9.41%, Due 3/17/03 1,500,000 1,515,000
Young Broadcasting, Inc. Senior Subordinated
Notes, 11.75%, Due 11/15/04 2,700,000 2,767,500
--------------------------------------------------------------------------------
Total Corporate Bonds (Cost $235,706,212) 231,418,719
--------------------------------------------------------------------------------
Non-Agency Mortgage &
Asset-Backed Securities 3.1%
Lehman Relocation Mortgage Trust Subordinated
Variable Rate Mortgage-Backed Certificates,
Series 1997-2, Class B1, 7.1263%, Due 6/28/26 (b) 2,370,379 1,731,870
Mellon Residential Funding Corporation Variable
Rate Mortgage Pass-Thru Certificates, Series
1999-TBC3:
Class B-4, 7.3348%, Due 10/20/29 (b) 1,029,000 812,910
Class B-5, 7.3348%, Due 10/20/29 (b) 617,000 478,175
Merrill Lynch Mortgage Investors, Inc. Variable
Rate Mortgage Pass-Thru Certificates, Series
1994-M1, Class E, 8.4901%, Due 6/25/22
(Acquired 11/19/98; Cost $2,910,000) (b) 3,000,000 2,997,735
Resolution Trust Corporation Mortgage Pass-Thru
Securities, Inc. Commercial Certificates, Series
1995-C2, Class E, 7.00%, Due 5/25/27 (e) 1,443,057 1,422,809
Salomon Brothers Mortgage Securities VII, Inc.
Mortgage Pass-Thru Certificates, Series 1994-5,
Class B2, 8.7986%, Due 4/25/24 1,495,823 1,521,564
--------------------------------------------------------------------------------
Total Non-Agency Mortgage &
Asset-Backed Securities (Cost $9,370,790) 8,965,063
--------------------------------------------------------------------------------
Preferred Stocks 5.7%
CSC Holdings, Inc. 11.125% Series M 74,823 7,987,355
NTL, Inc. 13.00% Series B Senior Exchangeable 8,950 8,166,654
--------------------------------------------------------------------------------
Total Preferred Stocks (Cost $17,812,460) 16,154,009
--------------------------------------------------------------------------------
Short-Term Investments (a) 9.3%
Commercial Paper 0.7%
Interest Bearing, Due Upon Demand
Firstar Bank, N.A., 6.29% $ 1,019,100 1,019,100
Sara Lee Corporation, 6.22% 778,300 778,300
Wisconsin Electric Power Company, 6.22% 100,000 100,000
------------
1,897,400
Corporate Bonds 7.0%
GS Escrow Corporation Senior Notes,
6.75%, Due 8/01/01 1,500,000 1,481,118
ITT Corporation Notes, 6.25%, Due 11/15/00 7,000,000 6,996,143
Lyondell Chemical Company Debentures,
9.90%, Due 11/01/00 5,000,000 5,000,000
US Air, Inc. Senior Notes, 9.625%, Due 2/01/01 2,660,000 2,652,523
Viacom International, Inc. Senior Subordinated
Notes, 10.25%, Due 9/15/01 (c) 2,000,000 2,051,292
Waste Management Inc. Senior Notes,
6.125%, Due 7/15/01 2,000,000 1,961,598
------------
20,142,674
</TABLE>
31
<PAGE>
SCHEDULES OF INVESTMENTS IN SECURITIES (continued) October 31, 2000
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD BOND FUND (continued)
<TABLE>
<CAPTION>
Shares or
Principal Value
Amount (Note 2)
--------------------------------------------------------------------------------
<S> <C> <C>
Repurchase Agreements 1.6%
ABN-AMRO Inc. (Dated 10/31/00), 6.56%,
Due 11/01/00 (Repurchase proceeds
$4,700,856); Collateralized by: United States
Government & Agency Issues (d) $ 4,700,000 $ 4,700,000
--------------------------------------------------------------------------------
Total Short-Term Investments (Cost $26,738,861) 26,740,074
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Total Investments in Securities (Cost $289,628,323) 98.9% 283,277,865
Other Assets and Liabilities, Net 1.1% 3,042,130
--------------------------------------------------------------------------------
Net Assets 100.0% $ 286,319,995
================================================================================
</TABLE>
--------------------------------------------------------------------------------
LEGEND
--------------------------------------------------------------------------------
(a) Short-term investments include any security which has a maturity of less
than one year.
(b) Restricted security.
(c) All or a portion of security pledged or segregated to cover margin
requirements for futures contracts, written options, or when-issued
securities.
(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
--------------------------------------------------------------------------------
EUR -- Euro
GBP -- British Pound
USD -- United States Dollar
See Notes to Financial Statements.
32
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
October 31, 2000
<TABLE>
<CAPTION>
(In Thousands, Except As Noted)
Strong Bond Strong Corporate Strong Government Strong Short-Term
Fund Bond Fund Securities Fund Bond Fund
------------ ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Assets:
Investments in Securities, at Value
(Cost of $323,284, $958,359,
$1,549,381 and $1,176,388, respectively) $ 318,661 $ 929,652 $ 1,543,024 $ 1,164,138
Receivable for Securities and Forward
Foreign Currency Contracts Sold 9,502 17,923 11,254 14,486
Receivable for Fund Shares Sold 22 278 686 --
Interest and Dividends Receivable 4,534 16,990 11,761 18,594
Paydown Receivable 188 13 798 497
Variation Margin Receivable 25 63 -- 86
Other Assets 33 9 175 31
------------ ------------- --------------- ----------------
Total Assets 332,965 964,928 1,567,698 1,197,832
Liabilities:
Payable for Securities Purchased 43,578 23,177 257,831 24,774
Written Options, at Value
(Premiums Received of $0, $0, $164 and $0, respectively) -- -- 92 --
Payable for Fund Shares Redeemed -- 158 482 1,720
Dividends Payable 1,724 5,631 5,698 6,713
Variation Margin Payable -- -- 15 --
Accrued Operating Expenses and Other Liabilities 239 707 306 1,808
------------ ------------- --------------- ----------------
Total Liabilities 45,541 29,673 264,424 35,015
------------ ------------- --------------- ----------------
Net Assets $ 287,424 $ 935,255 $ 1,303,274 $ 1,162,817
============ ============= =============== ================
Net Assets Consist of:
Capital Stock (par value and paid-in capital) $ 293,755 $ 1,007,030 $ 1,344,765 $ 1,292,909
Accumulated Net Investment Income (Loss) (724) 159 175 141
Accumulated Net Realized Loss (1,593) (42,696) (35,988) (117,289)
Net Unrealized Depreciation (4,014) (29,238) (5,678) (12,944)
------------ ------------- --------------- ----------------
Net Assets $ 287,424 $ 935,255 $ 1,303,274 $ 1,162,817
============ ============= =============== ================
Investor Class ($ and shares in full)
Net Assets $ 25,795,728 $921,587,068 $1,282,640,916 $ 1,138,001,552
Capital Shares Outstanding (Unlimited Number Authorized) 2,418,316 88,382,046 124,183,471 121,860,407
Net Asset Value Per Share $ 10.67 $ 10.43 $ 10.33 $ 9.34
============= ============= =============== ================
Institutional Class ($ and shares in full)
Net Assets $ 261,498,376 $ 6,529,798 $ 20,546,993 $ 24,799,698
Capital Shares Outstanding (Unlimited Number Authorized) 24,547,842 626,826 1,987,876 2,653,088
Net Asset Value Per Share $ 10.65 $ 10.42 $ 10.34 $ 9.35
============= ============= =============== ================
Advisor Class ($ and shares in full)
Net Assets $ 130,137 $ 7,138,293 $ 85,987 $ 15,967
Capital Shares Outstanding (Unlimited Number Authorized) 12,210 684,770 8,327 1,709
Net Asset Value Per Share $ 10.66 $ 10.42 $ 10.33 $ 9.34
============= ============= =============== ================
</TABLE>
See Notes to Financial Statements
33
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES (continued)
--------------------------------------------------------------------------------
October 31, 2000
<TABLE>
<CAPTION>
(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 $794,002 and $289,628, respectively) $ 705,074 $ 283,278
Receivable for Securities Sold 5,601 --
Receivable for Fund Shares Sold 231 214
Interest and Dividends Receivable 17,733 6,094
Paydown Receivable -- 14
Other Assets 12 8
--------------------- ---------------------
Total Assets 728,651 289,608
Liabilities:
Payable for Securities Purchased 3,758 1,415
Payable for Fund Shares Redeemed 285 38
Dividends Payable 7,684 1,788
Accrued Operating Expenses and Other Liabilities 200 47
--------------------- ---------------------
Total Liabilities 11,927 3,288
--------------------- ---------------------
Net Assets $ 716,724 $ 286,320
===================== =====================
Net Assets Consist of:
Capital Stock (par value and paid-in capital) $ 830,608 $ 299,416
Accumulated Net Realized Loss (24,957) (6,746)
Net Unrealized Depreciation (88,927) (6,350)
--------------------- ---------------------
Net Assets $ 716,724 $ 286,320
===================== =====================
Investor Class ($ and shares in full)
Net Assets $ 716,601,218 $ 286,274,176
Capital Shares Outstanding (Unlimited Number Authorized) 73,993,509 28,987,008
Net Asset Value Per Share $ 9.68 $ 9.88
===================== =====================
Advisor Class ($ and shares in full)
Net Assets $ 122,811 $ 45,819
Capital Shares Outstanding (Unlimited Number Authorized) 12,694 4,639
Net Asset Value Per Share $ 9.67 $ 9.88
===================== =====================
</TABLE>
See Notes to Financial Statements
34
<PAGE>
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
For the Year Ended October 31, 2000
<TABLE>
<CAPTION>
(In Thousands)
Strong Strong Corporate Strong Government Strong Short-Term
Bond Fund Bond Fund Securities Fund Bond Fund
--------- ---------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Income:
Interest $ 15,755 $ 69,416 $ 83,200 $ 86,225
Dividends (net of withholding taxes of $0, $10, $0 and
$3, respectively) 403 3,113 1,190 4,334
-------- -------- -------- --------
Total Income 16,158 72,529 84,390 90,559
Expenses:
Investment Advisory Fees 482 3,283 4,433 4,459
Administrative Fees - Investor Class 18 2,168 3,136 2,924
Administrative Fees - Institutional Class 40 1 2 4
Administrative Fees - Advisor Class -- 13 -- --
Custodian Fees 23 36 58 42
Shareholder Servicing Costs - Investor Class 9 2,074 3,060 2,075
Shareholder Servicing Costs - Institutional Class 30 -- 2 3
Shareholder Servicing Costs - Advisor Class -- 10 -- --
Reports to Shareholders - Investor Class 2 278 264 439
Reports to Shareholders - Institutional Class 11 -- 1 --
Reports to Shareholders - Advisor Class -- 2 -- --
12b-1 Fees - Advisor Class -- 13 -- --
Federal and State Registration Fees 107 115 89 82
Other 46 79 112 132
-------- -------- -------- --------
Total Expenses before Waivers, Absorptions and Fees Paid
Indirectly by Advisor 768 8,072 11,157 10,160
Voluntary and Involuntary Expense Waivers and
Absorptions by Advisor -- (2) -- --
Fees Paid Indirectly by Advisor - Investor Class -- (34) (33) (3)
Fees Paid Indirectly by Advisor - Advisor Class -- (1) -- --
-------- -------- -------- --------
Expenses, Net 768 8,035 11,124 10,157
-------- -------- -------- --------
Net Investment Income 15,390 64,494 73,266 80,402
Realized and Unrealized Gain (Loss):
Net Realized Gain (Loss) on:
Investments 1,585 (15,967) (1,159) (15,750)
Futures Contracts, Options and Forward Foreign
Currency Contracts 593 (221) (787) (2,529)
Foreign Currencies (12) (118) -- --
-------- -------- -------- --------
Net Realized Gain (Loss) 2,166 (16,306) (1,946) (18,279)
Net Change in Unrealized Appreciation/Depreciation on:
Investments (2,878) 678 11,089 8,061
Futures Contracts, Options and Forward Foreign
Currency Contracts 860 (250) 2,323 151
Foreign Currencies (7) -- -- --
-------- -------- -------- --------
Net Change in Unrealized Appreciation/Depreciation (2,025) 428 13,412 8,212
-------- -------- -------- --------
Net Gain (Loss) on Investments 141 (15,878) 11,466 (10,067)
-------- -------- -------- --------
Net Increase in Net Assets Resulting from Operations $ 15,531 $ 48,616 $ 84,732 $ 70,335
======== ======== ======== ========
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
STATEMENTS OF OPERATIONS (continued)
--------------------------------------------------------------------------------
For the Year Ended October 31, 2000
<TABLE>
<CAPTION>
(In Thousands)
Strong High-Yield Strong Short-Term
Bond Fund High Yield Bond Fund
------------------ --------------------
<S> <C> <C>
Income:
Interest $ 75,490 $ 21,671
Dividends 7,554 1,735
-------- --------
Total Income 83,044 23,406
Expenses:
Investment Advisory Fees 2,628 986
Administrative Fees - Investor Class 1,752 658
Custodian Fees 23 9
Shareholder Servicing Costs - Investor Class 1,243 345
Reports to Shareholders - Investor Class 185 61
Transfer Agency Banking Charges - Investor Class -- 8
Other 206 96
-------- --------
Total Expenses before Fees Paid Indirectly by Advisor 6,037 2,163
Fees Paid Indirectly by Advisor - Investor Class (17) --
-------- --------
Expenses, Net 6,020 2,163
-------- --------
Net Investment Income 77,024 21,243
Realized and Unrealized Gain (Loss):
Net Realized Loss on Investments (10,078) (6,746)
Net Change in Unrealized Appreciation/Depreciation on Investments (59,512) (2,301)
-------- --------
Net Loss on Investments (69,590) (9,047)
-------- --------
Net Increase in Net Assets Resulting from Operations $ 7,434 $ 12,196
======== ========
</TABLE>
See Notes to Financial Statements.
36
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In Thousands)
Strong Bond Fund Strong Corporate Bond Fund
------------------------------------------- -----------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Oct. 31, 2000 Oct. 31, 1999 Feb. 28, 1999 Oct. 31, 2000 Oct. 31, 1999
------------- ------------- ------------- ------------- -------------
(Note 1)
<S> <C> <C> <C> <C> <C>
Operations:
Net Investment Income $ 15,390 $ 6,858 $ 5,136 $ 64,494 $ 58,297
Net Realized Gain (Loss) 2,166 (3,704) 1,556 (16,306) (20,215)
Net Change in Unrealized
Appreciation/Depreciation (2,025) (1,937) (825) 428 (19,954)
--------- --------- --------- --------- ---------
Net Increase in Net Assets Resulting
from Operations 15,531 1,217 5,867 48,616 18,128
Distributions:
From Net Investment Income:
Investor Class (519) (1) -- (62,418) (58,058)
Institutional Class (15,405) (6,898) (5,167) (250) (3)
Advisor Class (3) -- -- (357) --
From Net Realized Gains - Institutional Class -- (732) (1,721) -- --
--------- --------- --------- --------- ---------
Total Distributions (15,927) (7,631) (6,888) (63,025) (58,061)
Capital Share Transactions (Note 4):
Net Increase in Net Assets from Capital
Share Transactions 121,949 37,569 79,173 80,595 90,355
--------- --------- --------- --------- ---------
Total Increase in Net Assets 121,553 31,155 78,152 66,186 50,422
Net Assets:
Beginning of Year 165,871 134,716 56,564 869,069 818,647
--------- --------- --------- --------- ---------
End of Year $ 287,424 $ 165,871 $ 134,716 $ 935,255 $ 869,069
========= ========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
37
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS (continued)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(In thousands)
Strong Government
Securities Fund Strong Short-Term Bond Fund
-------------------------------- -------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 2000 Oct. 31, 1999 Oct. 31, 2000 Oct. 31, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Net Investment Income $ 73,266 $ 73,567 $ 80,402 $ 85,378
Net Realized Loss (1,946) (31,092) (18,279) (3)
Net Change in Unrealized Appreciation/Depreciation 13,412 (43,774) 8,212 (23,050)
----------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets Resulting
from Operations 84,732 (1,299) 70,335 62,325
Distributions:
From Net Investment Income:
Investor Class (72,618) (73,567) (78,738) (84,060)
Institutional Class (752) (1) (1,405) (27)
Advisor Class (3) -- (1) --
From Net Realized Gains - Investor Class -- (27,673) -- --
----------- ----------- ----------- -----------
Total Distributions (73,373) (101,241) (80,144) (84,087)
Capital Share Transactions (Note 4):
Net Increase (Decrease) in Net Assets from
Capital Share Transactions (48,147) 133,700 (112,926) (21,821)
----------- ----------- ----------- -----------
Total Increase (Decrease) in Net Assets (36,788) 31,160 (122,735) (43,583)
Net Assets:
Beginning of Year 1,340,062 1,308,902 1,285,552 1,329,135
----------- ----------- ----------- -----------
End of Year $ 1,303,274 $ 1,340,062 $ 1,162,817 $ 1,285,552
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION> Strong High-Yield Strong Short-Term
Bond Fund High Yield Bond Fund
------------------------------ -----------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 2000 Oct. 31, 1999 Oct. 31, 2000 Oct. 31, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Net Investment Income $ 77,024 $ 58,548 $ 21,243 $ 15,322
Net Realized Gain (Loss) (10,078) (13,400) (6,746) 354
Net Change in Unrealized Appreciation/Depreciation (59,512) 6,755 (2,301) (1,822)
--------- --------- --------- ---------
Net Increase in Net Assets Resulting from Operations 7,434 51,903 12,196 13,854
Distributions:
From Net Investment Income:
Investor Class (76,983) (58,243) (21,242) (15,322)
Advisor Class (4) -- (1) --
From Net Realized Gains - Investor Class -- (4,243) (53) (632)
--------- --------- --------- ---------
Total Distributions (76,987) (62,486) (21,296) (15,954)
Capital Share Transactions (Note 4):
Net Increase in Net Assets from Capital Share Transactions 191,080 143,280 42,922 148,364
--------- --------- --------- ---------
Total Increase in Net Assets 121,527 132,697 33,822 146,264
Net Assets:
Beginning of Year 595,197 462,500 252,498 106,234
--------- --------- --------- ---------
End of Year $ 716,724 $ 595,197 $ 286,320 $ 252,498
========= ========= ========= =========
</TABLE>
See Notes to Financial Statements.
38
<PAGE>
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
October 31, 2000
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)/)
- 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.
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. Effective March 1, 2000, the Strong High-Yield
Bond Fund and Strong Short-Term High Yield Bond Fund issued two classes of
shares: Investor 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. Effective November 30, 2000,
Strong Bond Fund changed its name to Strong Advisor Bond Fund and
introduced four new classes of shares for distribution.
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 restricted
securities held at October 31, 2000 which are either Section 4(2)
commercial paper or are eligible for resale pursuant to Rule 144A
under the Securities Act of 1933 and have been determined to be
illiquid by the Advisor based upon guidelines established by the
Funds' Board of Directors were as follows:
<TABLE>
<CAPTION>
Aggregate Aggregate Percent of
Cost Fair Value Net Assets
--------- ---------- ----------
<S> <C> <C> <C>
Strong Bond Fund $ 3,075,492 $ 2,911,910 1.0%
Strong Corporate Bond Fund 13,001,400 12,235,200 1.3%
Strong Short-Term Bond Fund 47,597,922 44,173,658 3.8%
Strong High-Yield Bond Fund 4,393,546 3,905,375 0.5%
Strong Short-Term High Yield Bond Fund 2,910,000 2,997,735 1.0%
</TABLE>
(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.
39
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
October 31, 2000
(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 Funds' 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 investments 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. Changes between the initial
premiums received and the current market value of the options are
recorded as unrealized gains or losses. 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.
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 daily 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, which approximates fair
value. 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 accounting principles generally accepted in the United
States of America 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.
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.
40
<PAGE>
--------------------------------------------------------------------------------
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 and
administrative 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 Investor Class Institutional Class Advisor Class
Nov. 1, 1999- Nov. 1, 1999- Nov. 1, 1999- Nov. 1, 1999-
Oct. 31, 2000 Oct. 31, 2000 Oct. 31, 2000 Oct. 31, 2000
------------- -------------- ------------------- -------------
<S> <C> <C> <C> <C>
Strong Bond Fund 0.23% 0.25% 0.02% 0.25%
Strong Corporate Bond Fund 0.375% 0.25% 0.02% 0.25%
Strong Government Securities Fund 0.35% 0.25% 0.02% 0.25%
Strong Short-Term Bond Fund 0.375% 0.25% 0.02% 0.25%
Strong High-Yield Bond Fund 0.375% 0.25% * 0.25%**
Strong Short-Term High Yield Bond Fund 0.375% 0.25% * 0.25%**
</TABLE>
* The Strong High-Yield Bond Fund and the Strong Short-Term High Yield
Bond Fund do not offer Institutional Class shares.
** Effective March 1, 2000.
Based on the terms of the advisory and administrative agreements, advisory
fees, administrative fees and other expenses will be waived or absorbed 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. For the year ended
October 31, 2000, the Advisor involuntarily waived expenses of $114 for
Strong Short-Term Bond Fund -Advisor Class. Shareholder recordkeeping and
related service fees for the Investor Class are based on contractually
established rates for each open and closed shareholder account. Shareholder
recordkeeping and related service fees for the Institutional and Advisor
Classes are paid at an annual rate of 0.015% and 0.20%, respectively, of
the average daily net asset value of each respective class. The Advisor
also allocates to each Fund certain charges or credits resulting from
transfer agency banking activities based on each Fund's level of
subscription and redemption activity. Charges allocated to the Funds by the
Advisor are included in Other Expenses in the Funds' Statement of
Operations. Credits allocated by the Advisor serve to reduce the
shareholder servicing expenses incurred by the Funds and are reported as
Fees Paid Indirectly by Advisor in the Funds' Statement of Operations. The
Advisor is also compensated for certain other services related to costs
incurred for reports to shareholders.
The Funds 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. For the year
ended October 31, 2000, 12b-1 fees incurred by Strong Bond Fund, Strong
Corporate Bond Fund, Strong Government Securities Fund, Strong Short-Term
Bond Fund, Strong High-Yield Bond Fund and Strong Short-Term High Yield
Bond Fund were $109, $12,861, $147, $31, $87 and $41, respectively.
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, excluding the
effect of waivers and absorptions, for the year ended October 31, 2000 is
as follows:
<TABLE>
<CAPTION>
Payable to Shareholder Servicing Transfer Agency Unaffiliated
Advisor at and Other Expenses Banking Directors'
Oct. 31, 2000 Paid to Advisor Charges/(Credits) Fees
------------- --------------------- ----------------- -------------
<S> <C> <C> <C> <C>
Strong Bond Fund $ 15,430 $ 39,077 ($ 318) $ 3,296
Strong Corporate Bond Fund 170,257 2,086,656 (34,854) 14,745
Strong Government Securities Fund 247,514 3,063,881 (33,237) 22,503
Strong Short-Term Bond Fund 169,151 2,082,021 (3,207) 21,553
Strong High-Yield Bond Fund 124,507 1,244,255 (16,623) 11,210
Strong Short-Term High Yield Bond Fund 33,194 345,886 7,854 4,922
</TABLE>
The Advisor owns 12%, 19%, 100%, 11% and 32% of the outstanding Advisor Class
shares of the Strong Bond Fund, Strong Government Securities Fund, Strong Short-
Term Bond Fund, Strong High-Yield Bond Fund, and Strong Short-Term High Yield
Bond Fund, respectively. One shareholder owns 68% of the outstanding Advisor
Class shares of the Strong Short-Term High Yield Bond Fund.
41
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
October 31, 2000
4. Capital Share Transactions
<TABLE>
<CAPTION>
Strong Bond Fund
---------------------------------------------------------------
Year Ended Year Ended Year Ended
Oct. 31, 2000 Oct. 31, 1999 Feb. 28, 1999
------------- ------------- -------------
(Note 1)
<S> <C> <C> <C>
Capital Share Transactions of Each Class of
Shares of the Funds Were as Follows:
INVESTOR CLASS
Proceeds from Shares Sold $ 28,163,335 $ 50,909 $ --
Proceeds from Reinvestment of Distributions 345,643 29 --
Payment for Shares Redeemed (2,693,663) (26,443) --
------------- -------------- ------------
Net Increase in Net Assets from
Capital Share Transactions 25,815,315 24,495 --
INSTITUTIONAL CLASS
Proceeds from Shares Sold 137,944,538 46,264,460 86,338,180
Proceeds from Reinvestment of Distributions 14,507,360 7,303,493 6,064,592
Payment for Shares Redeemed (56,447,324) (16,024,859) (13,230,237)
------------- -------------- ------------
Net Increase in Net Assets from
Capital Share Transactions 96,004,574 37,543,094 79,172,535
ADVISOR CLASS
Proceeds from Shares Sold 127,336 1,000 --
Proceeds from Reinvestment of Distributions 1,596 -- --
Payment for Shares Redeemed -- -- --
------------- -------------- ------------
Net Increase in Net Assets from
Capital Share Transactions 128,932 1,000 --
------------- -------------- ------------
Net Increase in Net Assets from
Capital Share Transactions $ 121,948,821 $ 37,568,589 $ 79,172,535
============= ============== ============
Transactions in Shares of Each Class of
the Funds Were as Follows:
INVESTOR CLASS
Sold 2,635,855 4,755 --
Issued in Reinvestment of Distributions 32,386 3 --
Redeemed (252,193) (2,490) --
------------- -------------- ------------
Net Increase in Shares 2,416,048 2,268 --
INSTITUTIONAL CLASS
Sold 12,956,433 4,218,165 7,695,552
Issued in Reinvestment of Distributions 1,363,758 669,679 542,552
Redeemed (5,308,468) (1,470,954) (1,180,209)
------------- -------------- ------------
Net Increase in Shares 9,011,723 3,416,890 7,057,895
ADVISOR CLASS
Sold 11,967 94 --
Issued in Reinvestment of Distributions 149 -- --
Redeemed -- -- --
------------- -------------- ------------
Net Increase in Shares 12,116 94 --
------------- -------------- ------------
Net Increase in Shares of the Fund 11,439,887 3,419,252 7,057,895
============= ============== ============
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
Strong Corporate Strong Government
Bond Fund Securities Fund
----------------------------- ------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 2000 Oct. 31, 1999 Oct. 31, 2000 Oct. 31, 1999
------------- ------------- ------------- -------------
(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 $ 383,368,814 $ 429,535,815 $ 540,777,102 $ 755,357,728
Proceeds from Reinvestment of Distributions 48,920,466 49,946,788 65,964,876 91,843,389
Payment for Shares Redeemed (364,656,185) (389,860,325) (674,931,766) (713,679,897)
------------- ------------- ------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions 67,633,095 89,622,278 (68,189,788) 133,521,220
INSTITUTIONAL CLASS
Proceeds from Shares Sold 5,786,281 731,831 21,298,045 177,782
Proceeds from Reinvestment of Distributions 209,922 -- 627,299 --
Payment for Shares Redeemed (189,794) -- (1,965,859) --
------------- ------------- ------------- -------------
Net Increase in Net Assets from
Capital Share Transactions 5,806,409 731,831 19,959,485 177,782
ADVISOR CLASS
Proceeds from Shares Sold 8,502,063 1,000 80,475 1,000
Proceeds from Reinvestment of Distributions 317,306 -- 2,509 --
Payment for Shares Redeemed (1,664,103) -- -- --
------------- ------------- ------------- -------------
Net Increase in Net Assets from
Capital Share Transactions 7,155,266 1,000 82,984 1,000
------------- ------------- ------------- -------------
Net Increase (Decrease) in Net Assets from
Capital Share Transactions $ 80,594,770 $ 90,355,109 ($ 48,147,319) $ 133,700,002
============= ============= ============= =============
Transactions in Shares of Each Class of
the Funds Were as Follows:
INVESTOR CLASS
Sold 36,641,900 39,176,996 53,263,241 71,553,931
Issued in Reinvestment of Distributions 4,676,897 4,551,881 6,503,926 8,657,453
Redeemed (34,863,679) (35,637,373) (66,605,565) (67,792,818)
------------- ------------- ------------- -------------
Net Increase (Decrease) in Shares 6,455,118 8,091,504 (6,838,398) 12,418,566
INSTITUTIONAL CLASS
Sold 555,025 69,830 2,102,418 17,429
Issued in Reinvestment of Distributions 20,115 -- 61,774 --
Redeemed (18,144) -- (193,745) --
------------- ------------- ------------- -------------
Net Increase in Shares 556,996 69,830 1,970,447 17,429
ADVISOR CLASS
Sold 813,918 95 7,982 98
Proceeds from Reinvestment of Distributions 30,442 -- 247 --
Redeemed (159,685) -- -- --
------------- ------------- ------------- -------------
Net Increase in Shares 684,675 95 8,229 98
------------- ------------- ------------- -------------
Net Increase (Decrease) in Shares of the Fund 7,696,789 8,161,429 (4,859,722) 12,436,093
============= ============= ============= =============
</TABLE>
43
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
October 31, 2000
<TABLE>
<CAPTION>
Strong Short-Term Bond Fund
------------------------------
Year Ended Year Ended
Oct. 31, 2000 Oct. 31, 1999
------------- -------------
(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 $ 348,850,986 $ 508,980,681
Proceeds from Reinvestment of Distributions 65,610,487 71,427,426
Payment for Shares Redeemed (538,925,303) (615,610,523)
------------- -------------
Net Decrease in Net Assets from
Capital Share Transactions (124,463,830) (35,202,416)
INSTITUTIONAL CLASS
Proceeds from Shares Sold 12,419,635 13,380,825
Proceeds from Reinvestment of Distributions 1,241,158 --
Payment for Shares Redeemed (2,137,686) --
------------- -------------
Net Increase in Net Assets from
Capital Share Transactions 11,523,107 13,380,825
ADVISOR CLASS
Proceeds from Shares Sold 15,000 1,000
Proceeds from Reinvestment of Distributions -- --
Payment for Shares Redeemed -- --
------------- -------------
Net Increase in Net Assets from
Capital Share Transactions 15,000 1,000
------------- -------------
Net Decrease in Net Assets from
Capital Share Transactions ($112,925,723) ($ 21,820,591)
============= =============
Transactions in Shares of Each Class of
the Funds Were as Follows:
INVESTOR CLASS
Sold 37,335,508 53,341,059
Issued in Reinvestment of Distributions 7,022,735 7,487,998
Redeemed (57,664,706) (64,563,131)
------------- -------------
Net Decrease in Shares (13,306,463) (3,734,074)
INSTITUTIONAL CLASS
Sold 1,325,279 1,423,492
Issued in Reinvestment of Distributions 132,826 --
Redeemed (228,509) --
------------- -------------
Net Increase in Shares 1,229,596 1,423,492
ADVISOR CLASS
Sold 1,603 106
Issued in Reinvestment of Distributions -- --
Redeemed -- --
------------- -------------
Net Increase in Shares 1,603 106
------------- -------------
Net Decrease in Shares of the Fund (12,075,264) (2,310,476)
============= =============
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
Strong High-Yield Strong Short-Term
Bond Fund High Yield Bond Fund
------------------------------ ------------------------------
Year Ended Year Ended Year Ended Year Ended
Oct. 31, 2000 Oct. 31, 1999 Oct. 31, 2000 Oct. 31, 1999
------------- ------------- ------------- -------------
(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 $ 462,800,582 $ 521,184,654 $ 259,561,673 $ 301,740,464
Proceeds from Reinvestment of Distributions 53,218,579 47,980,853 18,329,572 12,650,126
Payment for Shares Redeemed (326,787,790) (425,885,389) (235,015,162) (166,026,909)
Net Proceeds from Acquisition (Note 8) 1,718,687 -- -- --
------------- ------------- ------------- -------------
Net Increase in Net Assets from
Capital Share Transactions 190,950,058 143,280,118 42,876,083 148,363,681
ADVISOR CLASS
Proceeds from Shares Sold 127,792 -- 46,025 --
Proceeds from Reinvestment of Distributions 1,764 -- 301 --
Payment for Shares Redeemed (69) -- (25) --
------------- ------------- ------------- -------------
Net Increase in Net Assets from
Capital Share Transactions 129,487 -- 46,301 --
------------- ------------- ------------- -------------
Net Increase in Net Assets from
Capital Share Transactions $ 191,079,545 $ 143,280,118 $ 42,922,384 $ 148,363,681
============= ============= ============= =============
Transactions in Shares of Each Class of
the Funds Were as Follows:
INVESTOR CLASS
Sold 43,889,380 47,126,183 25,885,883 29,118,632
Issued in Reinvestment of Distributions 5,102,426 4,349,203 1,830,884 1,223,033
Redeemed (31,320,397) (38,435,669) (23,448,500) (16,039,459)
Issued to Effect Acquisition (Note 8) 170,167 -- -- --
------------- ------------- ------------- -------------
Net Increase in Shares 17,841,576 13,039,717 4,268,267 14,302,206
ADVISOR CLASS
Sold 12,528 -- 4,611 --
Issued in Reinvestment of Distributions 173 -- 30 --
Redeemed (7) -- (2) --
------------- ------------- ------------- -------------
Net Increase in Shares 12,694 -- 4,639 --
------------- ------------- ------------- -------------
Net Increase in Shares of the Fund 17,854,270 13,039,717 4,272,906 14,302,206
============= ============= ============= =============
</TABLE>
45
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
--------------------------------------------------------------------------------
October 31, 2000
5. 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 LOC. For an individual Fund, borrowings under the LOC are limited
to either the lesser of 15% of the market value of the Fund's total assets
or any explicit borrowing limits in the Funds' prospectus. Principal and
interest on each borrowing under the LOC are due not more than 60 days
after the date of the borrowing. Borrowings under the LOC bear interest
based on prevailing market rates as defined in the LOC. A commitment fee of
0.09% per annum is incurred on the unused portion of the LOC and is
allocated to all participating Strong Funds. At October 31, 2000, there
were no borrowings by the Funds under the LOC.
6. Investment Transactions
The aggregate purchases and sales of long-term securities for the year
ended October 31, 2000 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 $ 594,155,787 $ 512,476,455 $ 542,987,235 $ 425,973,719
Strong Corporate Bond Fund 753,607,356 1,827,907,648 736,257,065 1,790,186,659
Strong Government Securities Fund 4,665,287,051 559,314,008 4,466,982,237 597,970,893
Strong Short-Term Bond Fund 316,659,943 783,676,977 337,523,574 877,594,248
Strong High-Yield Bond Fund -- 859,022,852 -- 695,712,090
Strong Short-Term High Yield Bond Fund -- 213,439,707 -- 167,788,238
</TABLE>
7. Income Tax Information
At October 31, 2000, the investment cost, gross unrealized appreciation and
depreciation on investments and capital loss carryovers (expiring in
varying amounts through 2008) 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 $ 323,434,844 $ 2,887,551 $ 7,661,270 $ 4,773,719 $ 4,545,760
Strong Corporate Bond Fund 959,003,671 7,061,907 36,413,238 29,351,331 42,062,754
Strong Government Securities Fund 1,551,156,580 5,438,635 13,571,551 8,132,916 33,733,720
Strong Short-Term Bond Fund 1,186,382,372 712,466 22,956,806 22,244,340 107,963,543
Strong High-Yield Bond Fund 794,877,523 21,347,332 111,150,376 89,803,044 23,012,878
Strong Short-Term High Yield Bond Fund 289,629,036 2,275,111 8,626,282 6,351,171 6,497,976
</TABLE>
For corporate shareholders in the Funds, the percentages of dividend income
distributed for the year ended October 31, 2000, which is designated as
qualifying for the dividends-received deduction, is as follows (unaudited):
Strong Bond Fund 1.2%, Strong Corporate Bond Fund 1.0%, Strong Government
Securities Fund 0.0%, Strong High-Yield Bond Fund 9.8%, Strong Short-Term
Bond Fund 2.3%, and Strong Short-Term High Yield Bond Fund 8.2%.
8. Acquisition Information
Effective September 29, 2000, the Strong High-Yield Bond Fund acquired,
through a non-taxable exchange, substantially all of the net assets of
Strong Global High-Yield Bond Fund. Strong High-Yield Bond Fund issued
170,167 shares (valued at $1,718,687) for the 194,141 shares of Strong
Global High-Yield Bond Fund outstanding at September 29, 2000. The net
assets of $1,718,687 of Strong Global High-Yield Bond Fund included net
unrealized depreciation on investments of $57,321 and accumulated net
realized losses of $422,640. The Strong Global High-Yield Bond Fund also
incurred capital loss carryovers of $413,797, which were combined with
those of Strong High-Yield Bond Fund. Strong High-Yield Bond Fund utilized
$2,907 of these capital loss carryforwards in 2000. Strong High-Yield Bond
Fund's Statement of Operations for the year ended October 31, 2000 does not
include preacquisition activity of Strong Global High-Yield Bond Fund.
46
<PAGE>
--------------------------------------------------------------------------------
9. Special Meeting of Shareholders
A special meeting of the shareholders of Strong Global High-Yield Bond Fund
was held on September 6, 2000 in Menomonee Falls, Wisconsin. Shareholders
elected to approve an Agreement and Plan of Reorganization on behalf of
Strong Global High-Yield Bond Fund and Strong High-Yield Bond Fund, and to
approve an amendment to the Articles of Incorporation of the Strong
International Income Funds, Inc. to reflect the reorganization. Results of
the shareholder vote, calculated as a percentage of total shares voted
(114,116), are as follows:
Proposals Affirmative Withhold Abstain
--------- ----------- -------- -------
Approve Agreement and Plan of 96.33% 2.61% 1.06%
Reorganization, approve cancellation
and conversion of Global High-Yield
Bond Fund Shares and approve
elimination of fund within series
47
<PAGE>
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
STRONG BOND FUND-- INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
--------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(b)/
------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.69 $10.68
Income From Investment Operations:
Net Investment Income 0.47 0.12
Net Realized and Unrealized Gains on Investments 0.28 0.01
------------------------------------------------------------------------------------------
Total from Investment Operations 0.75 0.13
Less Distributions:
From Net Investment Income (0.77) (0.12)
------------------------------------------------------------------------------------------
Total Distributions (0.77) (0.12)
------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.67 $10.69
==========================================================================================
Ratios and Supplemental Data
------------------------------------------------------------------------------------------
Total Return +7.3% +1.2%
Net Assets, End of Period (In Millions) $ 26 $ 0/(c)/
Ratio of Expenses to Average Net Assets without
Fees Paid Indirectly by Advisor 0.7% 0.6%*
Ratio of Expenses to Average Net Assets 0.7% 0.6%*
Ratio of Net Investment Income (Loss) to Average Net Assets (2.9%) 7.7%*
Portfolio Turnover Rate/(d)/ 448.6% 250.7%
</TABLE>
STRONG BOND FUND-- INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------------
Oct. 31, Oct. 31, Feb. 28, Feb. 28, Dec. 31,
Selected Per-Share Data/(a)/ 2000 1999/(e)/ 1999 1998/(f)/ 1997
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.67 $11.12 $11.18 $11.06 $10.00
Income From Investment Operations:
Net Investment Income 0.82 0.48 0.67 0.11 0.66
Net Realized and Unrealized Gains (Losses) on Investments (0.03) (0.39) 0.19 0.12 1.18
---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.79 0.09 0.86 0.23 1.84
Less Distributions:
From Net Investment Income (0.81) (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 (0.81) (0.54) (0.92) (0.11) (0.78)
---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.65 $10.67 $11.12 $11.18 $11.06
=================================================================================================================================
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Total Return +7.7% +0.9% +7.9% +2.1% +18.9%
Net Assets, End of Period (In Millions) $ 261 $ 166 $ 135 $ 57 $ 52
Ratio of Expenses to Average Net Assets without
Waivers, Absorptions or Fees Paid Indirectly by Advisor 0.4% 0.4%* 0.4% 0.4%* 0.7%
Ratio of Expenses to Average Net Assets 0.4% 0.4%* 0.4% 0.4%* 0.4%
Ratio of Net Investment Income to Average Net Assets 7.7% 6.6%* 6.0% 6.2%* 6.3%
Portfolio Turnover Rate/(d)/ 448.6% 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.
(c) Amount calculated 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.
(f) In 1997, the Fund changed its fiscal year-end from December to February.
(g) Amount calculated is less than $0.01.
See Notes to Financial Statements.
48
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG BOND FUND-- ADVISOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
-----------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(b)/
----------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.68 $10.68
Income From Investment Operations:
Net Investment Income 0.72 0.11
Net Realized and Unrealized Losses on Investments (0.02) --
----------------------------------------------------------------------------------------
Total from Investment Operations 0.70 0.11
Less Distributions:
From Net Investment Income (0.72) (0.11)
----------------------------------------------------------------------------------------
Total Distributions (0.72) (0.11)
----------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.66 $10.68
========================================================================================
Ratios and Supplemental Data
----------------------------------------------------------------------------------------
Total Return +6.8% +1.0%
Net Assets, End of Period (In Millions) 0/(c)/ $ 0/(c)/
Ratio of Expenses to Average Net Assets without
Fees Paid Indirectly by Advisor 1.1% 1.3%*
Ratio of Expenses to Average Net Assets 1.1% 1.3%*
Ratio of Net Investment Income to Average Net Assets 7.0% 6.2%*
Portfolio Turnover Rate/(d)/ 448.6% 250.7%
</TABLE>
STRONG CORPORATE BOND FUND-- INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.60 $11.09 $11.08 $10.64 $10.56
Income From Investment Operations:
Net Investment Income 0.77 0.73 0.73 0.74 0.73
Net Realized and Unrealized Gains (Losses) on Investments (0.19) (0.49) 0.02 0.44 0.08
-----------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.58 0.24 0.75 1.18 0.81
Less Distributions:
From Net Investment Income (0.75) (0.73) (0.73) (0.74) (0.73)
In Excess of Net Investment Income -- -- (0.01) -- --
-----------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.75) (0.73) (0.74) (0.74) (0.73)
-----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.43 $10.60 $11.09 $11.08 $10.64
=============================================================================================================================
Ratios and Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Total Return +5.7% +2.2% +6.8% +11.5% +8.0%
Net Assets, End of Period (In Millions) $ 921 $ 868 $ 819 $ 492 $ 298
Ratio of Expenses to Average Net Assets without
Fees Paid Indirectly by Advisor 0.9% 0.8% 0.9% 1.0% 1.0%
Ratio of Expenses to Average Net Assets 0.9% 0.8% 0.9% 1.0% 1.0%
Ratio of Net Investment Income to Average Net Assets 7.3% 6.7% 6.5% 6.8% 7.0%
Portfolio Turnover Rate/(d)/ 293.9% 403.2% 366.9% 542.4% 672.8%
</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.
(c) Amount calculated is less than $500,000.
(d) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
See Notes to Financial Statements.
49
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG CORPORATE BOND FUND -- INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
-------------------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(b)/
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.59 $10.58
Income From Investment Operations:
Net Investment Income 0.80 0.13
Net Realized and Unrealized Gains (Losses) on Investments (0.17) 0.01
-----------------------------------------------------------------------------------------------
Total from Investment Operations 0.63 0.14
Less Distributions:
From Net Investment Income (0.80) (0.13)
-----------------------------------------------------------------------------------------------
Total Distributions (0.80) (0.13)
-----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.42 $10.59
===============================================================================================
Ratios and Supplemental Data
-----------------------------------------------------------------------------------------------
Total Return +6.2% +1.4%
Net Assets, End of Period (In Millions) $ 7 $ 1
Ratio of Expenses to Average Net Assets 0.4% 0.4%*
Ratio of Net Investment Income to Average Net Assets 7.7% 6.9%*
Portfolio Turnover Rate/(c)/ 293.9% 403.2%
</TABLE>
STRONG CORPORATE BOND FUND -- ADVISOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
-------------------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(b)/
-----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.59 $10.58
Income From Investment Operations:
Net Investment Income 0.73 0.12
Net Realized and Unrealized Gains (Losses) on Investments (0.17) 0.01
-----------------------------------------------------------------------------------------------
Total from Investment Operations 0.56 0.13
Less Distributions:
From Net Investment Income (0.73) (0.12)
-----------------------------------------------------------------------------------------------
Total Distributions (0.73) (0.12)
-----------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.42 $10.59
===============================================================================================
Ratios and Supplemental Data
-----------------------------------------------------------------------------------------------
Total Return +5.5% +1.2%
Net Assets, End of Period (In Millions) $ 7 $ 0/(d)/
Ratio of Expenses to Average Net Assets without Waivers,
Absorptions or Fees Paid Indirectly by Advisor 1.1% 1.2%*
Ratio of Expenses to Average Net Assets 1.1% 1.2%*
Ratio of Net Investment Income to Average Net Assets 6.9% 6.8%*
Portfolio Turnover Rate/(c)/ 293.9% 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.
(c) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(d) Amount calculated is less than $500,000.
See Notes to Financial Statements.
50
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND -- INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
-------------------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.23 $ 11.04 $ 10.70 $ 10.44 $ 10.60
Income From Investment Operations:
Net Investment Income 0.59 0.58 0.60 0.65 0.63
Net Realized and Unrealized Gains (Losses) on Investments 0.10 (0.58) 0.34 0.26 (0.16)
---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.69 (0.00) 0.94 0.91 0.47
Less Distributions:
From Net Investment Income (0.59) (0.58) (0.60) (0.65) (0.63)
From Net Realized Gains -- (0.23) -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.59) (0.81) (0.60) (0.65) (0.63)
---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 10.33 $ 10.23 $ 11.04 $ 10.70 $ 10.44
=================================================================================================================================
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Total Return +7.0% 0.0%/(b)/ +9.1% +9.1% +4.6%
Net Assets, End of Period (In Millions) $ 1,283 $ 1,340 $ 1,309 $ 843 $ 638
Ratio of Expenses to Average Net Assets without
Fees Paid Indirectly by Advisor 0.9% 0.8% 0.8% 0.8% 0.9%
Ratio of Expenses to Average Net Assets 0.9% 0.8% 0.8% 0.8% 0.9%
Ratio of Net Investment Income to Average Net Assets 5.8% 5.5% 5.5% 6.2% 6.0%
Portfolio Turnover Rate/(c)/ 373.3% 185.3% 284.1% 474.9% 457.6%
</TABLE>
STRONG GOVERNMENT SECURITIES FUND -- INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
-------------------------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(d)/
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $10.22 $10.21
Income From Investment Operations:
Net Investment Income 0.64 0.11
Net Realized and Unrealized Gains on Investments 0.12 0.01
---------------------------------------------------------------------------------------------------
Total from Investment Operations 0.76 0.12
Less Distributions:
From Net Investment Income (0.64) (0.11)
---------------------------------------------------------------------------------------------------
Total Distributions (0.64) (0.11)
---------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $10.34 $10.22
===================================================================================================
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------
Total Return +7.7% +1.1%
Net Assets, End of Period (In Millions) $ 21 $ 0/(e)/
Ratio of Expenses to Average Net Assets 0.4% 0.4%*
Ratio of Net Investment Income to Average Net Assets 6.2% 5.9%*
Portfolio Turnover Rate/(c)/ 373.3% 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) Amount calculated is less than 0.1%.
(c) Calculated on the basis of the Fund as a whole without distinguishing
between the classes of shares issued.
(d) For the period from September 1, 1999 (Commencement of Class) to October
31, 1999.
(e) Amount is less than $500,000.
See Notes to Financial Statements.
51
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG GOVERNMENT SECURITIES FUND- ADVISOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
--------------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(b)/
-------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 10.22 $ 10.21
Income From Investment Operations:
Net Investment Income 0.56 0.09
Net Realized and Unrealized Gains on Investments 0.11 0.01
-------------------------------------------------------------------------------------------
Total from Investment Operations 0.67 0.10
Less Distributions:
From Net Investment Income (0.56) (0.09)
-------------------------------------------------------------------------------------------
Total Distributions (0.56) (0.09)
-------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 10.33 $ 10.22
===========================================================================================
Ratios and Supplemental Data
-------------------------------------------------------------------------------------------
Total Return +6.8% +1.0%
Net Assets, End of Period (In Millions) $ 0/(c)/ $ 0/(c)/
Ratio of Expenses to Average Net Assets without
Fees Paid Indirectly by Advisor 1.9% 1.2%*
Ratio of Expenses to Average Net Assets 1.1% 1.2%*
Ratio of Net Investment Income to Average Net Assets 5.5% 5.4%*
Portfolio Turnover Rate/(d)/ 373.3% 185.3%
</TABLE>
STRONG SHORT-TERM BOND FUND-- INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.41 $ 9.57 $ 9.78 $ 9.75 $ 9.77
Income From Investment Operations:
Net Investment Income 0.63 0.62 0.66 0.69 0.69
Net Realized and Unrealized Gains (Losses) on Investments (0.07) (0.17) (0.21) 0.03 (0.02)
------------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.56 0.45 0.45 0.72 0.67
Less Distributions:
From Net Investment Income (0.63) (0.61) (0.66) (0.69) (0.69)
In Excess of Net Investment Income -- -- (0.00)/(e)/ -- --
------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.63) (0.61) (0.66) (0.69) (0.69)
------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.34 $ 9.41 $ 9.57 $ 9.78 $ 9.75
====================================================================================================================================
Ratios and Supplemental Data
------------------------------------------------------------------------------------------------------------------------------------
Total Return +6.2% +4.8% +4.7% +7.6% +7.1%
Net Assets, End of Period (In Millions) $ 1,138 $ 1,272 $ 1,329 $ 1,310 $ 1,148
Ratio of Expenses to Average Net Assets without
Fees Paid Indirectly by Advisor 0.9% 0.8% 0.8% 0.9% 0.9%
Ratio of Expenses to Average Net Assets 0.9% 0.8% 0.8% 0.9% 0.9%
Ratio of Net Investment Income to Average Net Assets 6.7% 6.5% 6.7% 7.0% 7.1%
Portfolio Turnover Rate/(d)/ 94.1% 124.2% 138.3% 193.8% 191.5%
</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.
(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) Amount calculated is less than $0.01.
See Notes to Financial Statements.
52
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG SHORT-TERM BOND FUND-- INSTITUTIONAL CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
--------------------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(b)/
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.42 $ 9.42
Income From Investment Operations:
Net Investment Income 0.67 0.11
Net Realized and Unrealized Losses on Investments (0.07) --
---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.60 0.11
Less Distributions:
From Net Investment Income (0.67) (0.11)
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.67) (0.11)
---------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.35 $ 9.42
---------------------------------------------------------------------------------------------------------------
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------
Total Return +6.6% +1.2%
Net Assets, End of Period (In Millions) $ 25 $ 13
Ratio of Expenses to Average Net Assets 0.4% 0.4%*
Ratio of Net Investment Income to Average Net Assets 7.2% 6.8%*
Portfolio Turnover Rate/(c)/ 94.1% 124.2%
</TABLE>
STRONG SHORT-TERM BOND FUND-- ADVISOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
--------------------------------
Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999/(b)/
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period $ 9.41 $ 9.42
Income From Investment Operations:
Net Investment Income 0.60 0.10
Net Realized and Unrealized Losses on Investments (0.07) (0.01)
---------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.53 0.09
Less Distributions:
From Net Investment Income (0.60) (0.10)
---------------------------------------------------------------------------------------------------------------
Total Distributions (0.60) (0.10)
Net Asset Value, End of Period $ 9.34 $ 9.41
===============================================================================================================
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------
Total Return +5.8% +0.9%
Net Assets, End of Period (In Millions) $ 0/(d)/ $ 0/(d)/
Ratio of Expenses to Average Net Assets without Waivers,
Absorptions or Fees Paid Indirectly by Advisor 2.0% 1.2%*
Ratio of Expenses to Average Net Assets 1.1% 1.2%*
Ratio of Net Investment Income to Average Net Assets 6.5% 6.3%*
Portfolio Turnover Rate/(c)/ 94.1% 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.
(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.
53
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG HIGH-YIELD BOND FUND--INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31, Oct. 31,
Selected Per-Share Data/(a)/ 2000 1999 1998 1997 1996/(b)/
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.60 $ 10.73 $ 11.94 $ 11.26 $ 10.00
Income From Investment Operations:
Net Investment Income 1.14 1.09 1.05 1.05 0.84
Net Realized and Unrealized Gains
(Losses) on Investments (0.92) (0.05) (0.89) 0.81 1.26
---------------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.22 1.04 0.16 1.86 2.10
Less Distributions:
From Net Investment Income (1.14) (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 (1.14) (1.17) (1.37) (1.18) (0.84)
---------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.68 $ 10.60 $ 10.73 $ 11.94 $ 11.26
=================================================================================================================================
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------------------------
Total Return +1.9% +9.8% +0.9% +17.3% +21.7%
Net Assets, End of Period (In Millions) $ 717 $ 595 $ 462 $ 510 $ 217
Ratio of Expenses to Average Net Assets Without Waivers,
Absorptions or Fees Paid Indirectly by Advisor 0.9% 0.8% 0.8% 0.8% 1.0%*
Ratio of Expenses to Average Net Assets 0.9% 0.8% 0.8% 0.6% 0.0%*
Ratio of Net Investment Income to Average Net Assets 11.0% 9.8% 8.8% 8.9% 9.6%*
Portfolio Turnover Rate/(c)/ 103.8% 144.7% 224.4% 409.3% 390.8%
</TABLE>
STRONG HIGH-YIELD BOND FUND-- ADVISOR CLASS
-------------------------------------------------------------------------------
Year Ended
-------------
Oct. 31,
Selected Per-Share Data/(a)/ 2000/(d)/
-------------------------------------------------------------------------------
Net Asset Value, Beginning of Period $ 10.78
Income From Investment Operations:
Net Investment Income 0.75
Net Realized and Unrealized Losses on Investments (1.11)
-------------------------------------------------------------------------------
Total from Investment Operation (0.36)
Less Distributions:
From Net Investment Income (0.75)
-------------------------------------------------------------------------------
Total Distributions (0.75)
-------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.67
===============================================================================
Ratios and Supplemental Data
-------------------------------------------------------------------------------
Total Return -3.4%
Net Assets, End of Period (In Millions) $ 0/(e)/
Ratio of Expenses to Average Net Assets Without Waivers
and Absorptions 1.2%*
Ratio of Expenses to Average Net Assets 1.1%*
Ratio of Net Investment Income to Average Net Assets 10.7%*
Portfolio Turnover Rate/(c)/ 103.8%
* Calculated on an annualized basis.
/(a)/ Information presented relates to a share of capital stock of
the Fund outstanding for the entire period.
/(b)/ For the period from January 1, 1996 (Commencement of
Operations) to October 31, 1996.
/(c)/ Calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
/(d)/ For the period from March 1, 2000 (Commencement of Class) to
October 31, 2000 (Note 1).
/(e)/ Amount is less than $500,000.
See Notes to Financial Statements.
54
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
--------------------------------------------------------------------------------
STRONG SHORT-TERM HIGH YIELD BOND FUND-- INVESTOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
---------------------------------------------------------
Oct. 31, Oct. 31, Oct. 31, Oct. 31
Selected Per-Share Data/(a)/ 2000 1999 1998 1997/(b)/
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.21 $ 10.20 $ 10.24 $ 10.00
Income From Investment Operations:
Net Investment Income 0.81 0.79 0.77 0.25
Net Realized and Unrealized Gains (Losses) on Investments (0.33) 0.06 0.01 0.24
---------------------------------------------------------------------------------------------------------------------------
Total from Investment Operations 0.48 0.85 0.78 0.49
Less Distributions:
From Net Investment Income (0.81) (0.79) (0.77) (0.25)
From Net Realized Gains (0.00)/(c)/ (0.05) (0.05) --
---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.81) (0.84) (0.82) (0.25)
---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.88 $ 10.21 $ 10.20 $ 10.24
===========================================================================================================================
Ratios and Supplemental Data
---------------------------------------------------------------------------------------------------------------------------
Total Return +4.9% +8.5% +7.7% +4.9%
Net Assets, End of Period (In Millions) $ 286 $ 252 $ 106 $ 45
Ratio of Expenses to Average Net Assets 0.8% 0.8% 0.9% 1.0%*
Ratio of Net Investment Income to Average Net Assets 8.1% 7.6% 7.4% 7.7%*
Portfolio Turnover Rate(d) 66.8% 60.1% 190.1% 96.2%
</TABLE>
STRONG SHORT-TERM HIGH YIELD BOND FUND-- ADVISOR CLASS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
----------
Oct. 31,
Selected Per-Share Data/(a)/ 2000/(e)/
-----------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period $ 10.05
Income From Investment Operations:
Net Investment Income 0.51
Net Realized and Unrealized Losses on Investments (0.17)
-----------------------------------------------------------------------------
Total from Investment Operations 0.34
Less Distributions:
From Net Investment Income (0.51)
-----------------------------------------------------------------------------
Total Distributions (0.51)
-----------------------------------------------------------------------------
Net Asset Value, End of Period $ 9.88
=============================================================================
Ratios and Supplemental Data
-----------------------------------------------------------------------------
Total Return +4.3%
Net Assets, End of Period (In Millions) $ 0/(f)/
Ratio of Expenses to Average Net Assets without Waivers and
Absorptions 1.2%*
Ratio of Expenses to Average Net Assets 1.1%*
Ratio of Net Investment Income to Average Net Assets 7.6%*
Portfolio Turnover Rate/(d)/ 66.8%
</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 June 30, 1997 (Inception) to October 31, 1997.
/(c)/ Amount calculated is less than $0.01.
/(d)/ Calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
/(e)/ For the period from March 1, 2000 (Commencement of Class) to
October 31, 2000.
/(f)/ Amount is less than $500,000.
See Notes to Financial Statements.
55
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
--------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
Strong Income Funds
In our opinion, the accompanying statements of assets and liabilities, including
the schedule of investments in securities, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all materials respect, the financial position of the 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 Fund, Inc.), Strong Corporate Bond Fund, Inc., Strong Government
Securities Fund, Inc., and Strong Short Term Bond Fund, Inc. (all six
collectively referred to herein as the "Strong Income Funds ") at October 31,
2000, the result of each of their operations, the changes in each of their net
assets and their financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Strong Income Fund's
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 auditing standards generally accepted in the
United States of America which require that we plan and perform the audits 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, 2000 by
correspondence with custodian and brokers, provided reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 5, 2000
56
<PAGE>
Directors
Richard S. Strong
Willie D. Davis
Stanley Kritzik
Neal Malicky
Marvin E. Nevins
William F. Vogt
Officers
Richard S. Strong, Chairman of the Board
Elizabeth N. Cohernour, Vice President and Secretary
Cathleen A. Ebacher, Vice President and Assistant Secretary
Susan A. Hollister, Vice President and Assistant Secretary
Dennis A. Wallestad, Vice President
Thomas M. Zoeller, 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, 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. RT8695-1200
Strong Investments
P.O. Box 2936 | Milwaukee, WI 53201
www.eStrong.com
--------------------------------------------------------------------------------
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
Visit our web site at
www.eStrong.com
[LOGO HERE] STRONG
